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 ~~June 30, 2020~~March 31, 2021


☐			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 ~~July~~March 31, ~~2020:~~2021:

~~114,635,133~~112,780,592 shares of $.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)


		June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	501,485	$	270,478	Cash and cash equivalents	$	497,930	$	574,426
Accounts receivable, net	Accounts receivable, net	665,409		832,797		Accounts receivable, net	799,673		714,163
Employee deferred compensation trust assets						Employee deferred compensation trust assets	424,037		406,634
Other current assets	Other current assets	553,254		525,574		Other current assets	152,280		147,515
Total current assets	Total current assets	1,720,148		1,628,849		Total current assets	1,873,920		1,842,738
Property and equipment, net	Property and equipment, net	120,958		128,385		Property and equipment, net	103,701		109,817
Right-of-use assets	Right-of-use assets	245,292		241,029		Right-of-use assets	248,612		262,688
Other intangible assets, net	Other intangible assets, net	1,080		1,752		Other intangible assets, net	4,997		5,594
Goodwill	Goodwill	209,830		210,364		Goodwill	223,046		223,055
Noncurrent deferred income taxes	Noncurrent deferred income taxes	105,069		101,029		Noncurrent deferred income taxes	110,893		113,532
Total assets	Total assets	$	2,402,377	$	2,311,408	Total assets	$	2,565,169	$	2,557,424
LIABILITIES	LIABILITIES					LIABILITIES
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	142,492	$	123,841	Accounts payable and accrued expenses	$	121,686	$	130,770
Accrued payroll and benefit costs	Accrued payroll and benefit costs	714,912		743,602		Accrued payroll and benefit costs	407,844		397,877
Employee deferred compensation plan obligations						Employee deferred compensation plan obligations	437,707		435,121
Income taxes payable	Income taxes payable	44,439		1,623		Income taxes payable	29,957		4,015
Notes payable, current		228		218
Notes payable						Notes payable	181		239
Current operating lease liabilities	Current operating lease liabilities	75,096		71,408		Current operating lease liabilities	79,211		78,604
Total current liabilities	Total current liabilities	977,167		940,692		Total current liabilities	1,076,586		1,046,626
Notes payable, less current portion		122		239

Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	205,281		201,961		Noncurrent operating lease liabilities	208,194		223,869
Other liabilities	Other liabilities	63,101		24,833		Other liabilities	82,690		81,640
Total liabilities	Total liabilities	1,245,671		1,167,725		Total liabilities	1,367,470		1,352,135
Commitments and Contingencies (Note I)
Commitments and Contingencies (Note J)						Commitments and Contingencies (Note J)	0		0
STOCKHOLDERS’ EQUITY	STOCKHOLDERS’ EQUITY					STOCKHOLDERS’ EQUITY
Preferred stock, $.001 par value; authorized 5,000,000 shares; NaN issued		—		—
Common stock, $.001 par value; authorized 260,000,000 shares; issued and outstanding 114,635,134 shares and 115,120,404 shares		115		115
Preferred stock, $0.001 par value; authorized 5,000,000 shares; NaN issued						Preferred stock, $0.001 par value; authorized 5,000,000 shares; NaN issued	0		0
Common stock, $0.001 par value; authorized 260,000,000 shares; issued and outstanding 112,681,758 shares and 113,127,501 shares						Common stock, $0.001 par value; authorized 260,000,000 shares; issued and outstanding 112,681,758 shares and 113,127,501 shares	113		113
Additional paid-in capital	Additional paid-in capital	1,154,046		1,127,487		Additional paid-in capital	1,194,153		1,179,972
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(27,152)		(19,986)		Accumulated other comprehensive income (loss)	(13,529)		(4,732)
Retained earnings	Retained earnings	29,697		36,067		Retained earnings	16,962		29,936
Total stockholders’ equity	Total stockholders’ equity	1,156,706		1,143,683		Total stockholders’ equity	1,197,699		1,205,289
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,402,377	$	2,311,408	Total liabilities and stockholders’ equity	$	2,565,169	$	2,557,424

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

are an integral part of these financial statements.

ROBERT HALF INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

Service revenues	Service revenues	$	1,108,326	$	1,516,385	$	2,615,017	$	2,984,915	Service revenues	$	1,398,380	$	1,506,691
Costs of services	Costs of services	685,249		878,844		1,581,223		1,739,786		Costs of services	836,669		892,303
Gross margin	Gross margin	423,077		637,541		1,033,794		1,245,129		Gross margin	561,711		614,388
Selling, general and administrative expenses	Selling, general and administrative expenses	364,828		478,139		844,401		939,498		Selling, general and administrative expenses	423,062		442,868
(Income) loss from investments held in employee deferred compensation trusts (which is completely offset by related costs and expenses - Notes A & I)										(Income) loss from investments held in employee deferred compensation trusts (which is completely offset by related costs and expenses - Notes A & I)	(11,988)		40,376
Amortization of intangible assets	Amortization of intangible assets	330		341		668		683		Amortization of intangible assets	576		338
Interest income, net	Interest income, net	(105)		(1,042)		(1,062)		(2,538)		Interest income, net	(45)		(957)
Income before income taxes	Income before income taxes	58,024		160,103		189,787		307,486		Income before income taxes	150,106		131,763
Provision for income taxes	Provision for income taxes	11,828		45,491		53,676		83,076		Provision for income taxes	39,508		41,848
Net income	Net income	$	46,196	$	114,612	$	136,111	$	224,410	Net income	$	110,598	$	89,915

Net income per share:	Net income per share:									Net income per share:
Basic	Basic	$	.41	$	.98	$	1.20	$	1.92	Basic	$	.99	$	.79
Diluted	Diluted	$	.41	$	.98	$	1.20	$	1.91	Diluted	$	.98	$	.79

Shares:	Shares:									Shares:
Basic	Basic	112,865		116,381		113,026		116,722		Basic	111,424		113,187
Diluted	Diluted	113,121		116,988		113,489		117,475		Diluted	112,496		113,858
Dividends declared per share	Dividends declared per share	$	.34	$	.31	$	.68	$	.62	Dividends declared per share	$	.38	$	.34

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

are an integral part of these financial statements.

ROBERT HALF INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
COMPREHENSIVE INCOME (LOSS):	COMPREHENSIVE INCOME (LOSS):									COMPREHENSIVE INCOME (LOSS):
Net income	Net income	$	46,196	$	114,612	$	136,111	$	224,410	Net income	$	110,598	$	89,915
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	6,534		2,146		(7,166)		249		Foreign currency translation adjustments, net of tax	(8,837)		(13,700)

Foreign defined benefit plans, net of tax										Foreign defined benefit plans, net of tax	40		0
Total other comprehensive income (loss)										Total other comprehensive income (loss)	(8,797)		(13,700)
Total comprehensive income (loss)	Total comprehensive income (loss)	$	52,730	$	116,758	$	128,945	$	224,659	Total comprehensive income (loss)	$	101,801	$	76,215

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

are an integral part of these financial statements.

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, 2019 115,120 $ 115 $ 1,127,487 $ (19,986) $ 36,067 $ 1,143,683
Net income — — — — 89,915 89,915
Adoption of accounting pronouncement — — — — (558) (558)
Other comprehensive income (loss) — — — (13,700) — (13,700)
Dividends declared ($.34 per share) — — — — (39,441) (39,441)
Net issuances of restricted stock 745 1 (1) — — —
Stock-based compensation — — 13,525 — — 13,525
Repurchases of common stock (1,263) (1) — — (63,498) (63,499)
Balance at March 31, 2020 114,602 $ 115 $ 1,141,011 $ (33,686) $ 22,485 $ 1,129,925
Net income — — — — 46,196 46,196
Other comprehensive income (loss) — — — 6,534 — 6,534
Dividends declared ($.34 per share) — — — — (38,975) (38,975)
Net issuances of restricted stock 33 — — — — —
Stock-based compensation — — 13,035 — — 13,035
Repurchases of common stock 0 0 — — (9) (9)
Balance at June 30, 2020 114,635 $ 115 $ 1,154,046 $ (27,152) $ 29,697 $ 1,156,706


	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 ($.38 per share)	—	—		—		—		(43,300)		(43,300)
Net issuances of restricted stock	602	1		(1)		—		—		0
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

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total
Shares Par Value
Balance at December 31, 2018 119,078 $ 119 $ 1,079,188 $ (16,109) $ — $ 1,063,198
Net income — — — — 109,798 109,798
Other comprehensive income (loss) — — — (1,897) — (1,897)
Dividends declared ($.31 per share) — — — — (36,998) (36,998)
Net issuances of restricted stock 281 — — — — —
Stock-based compensation — — 11,244 — — 11,244
Repurchases of common stock (1,038) (1) — — (68,315) (68,316)
Balance at March 31, 2019 118,321 $ 118 $ 1,090,432 $ (18,006) $ 4,485 $ 1,077,029
Net income — — — — 114,612 114,612
Other comprehensive income (loss) — — — 2,146 — 2,146
Dividends declared ($.31 per share) — — — — (36,597) (36,597)
Net issuances of restricted stock 271 1 (1) — — —
Stock-based compensation — — 11,670 — — 11,670
Repurchases of common stock (1,031) (1) — — (59,632) (59,633)
Balance at June 30, 2019 117,561 $ 118 $ 1,102,101 $ (15,860) $ 22,868 $ 1,109,227


	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Total
	Shares	Par Value
Balance at December 31, 2019	115,120	$	115	$	1,127,487	$	(19,986)	$	36,067	$	1,143,683
Net income	—	—		—		—		89,915		89,915
Adoption of accounting pronouncement	—	—		—		—		(558)		(558)
Other comprehensive income (loss)	—	—		—		(13,700)		—		(13,700)
Dividends declared ($.34 per share)	—	—		—		—		(39,441)		(39,441)
Net issuances of restricted stock	745	1		(1)		—		—		0
Stock-based compensation	—	—		13,525		—		—		13,525
Repurchases of common stock	(1,263)	(1)		—		—		(63,498)		(63,499)
Balance at March 31, 2020	114,602	$	115	$	1,141,011	$	(33,686)	$	22,485	$	1,129,925

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

are an integral part of these financial statements.

ROBERT HALF INTERNATIONAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


		Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019			2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	136,111	$	224,410	Net income	$	110,598	$	89,915
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Allowance for credit losses	Allowance for credit losses	6,713		3,535		Allowance for credit losses	3,157		4,690
Depreciation	Depreciation	31,509		31,740		Depreciation	13,962		15,913
Amortization of cloud computing implementation costs	Amortization of cloud computing implementation costs	7,569		372		Amortization of cloud computing implementation costs	9,957		3,288
Amortization of intangible assets	Amortization of intangible assets	668		683		Amortization of intangible assets	576		338
Realized and unrealized (gains) losses from investments held in employee deferred compensation trusts						Realized and unrealized (gains) losses from investments held in employee deferred compensation trusts	(11,694)		40,781
Stock-based compensation	Stock-based compensation	26,560		22,914		Stock-based compensation	14,182		13,525
Deferred income taxes	Deferred income taxes	(4,289)		(2,015)		Deferred income taxes	2,584		12,022
Changes in assets and liabilities:
Changes in operating assets and liabilities:						Changes in operating assets and liabilities:
Accounts receivable	Accounts receivable	153,913		(50,943)		Accounts receivable	(95,024)		(36,700)
Capitalized cloud computing implementation costs	Capitalized cloud computing implementation costs	(18,846)		(11,914)		Capitalized cloud computing implementation costs	(8,488)		(10,379)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	23,095		(15,047)		Accounts payable and accrued expenses	(6,603)		18,193
Accrued payroll and benefit cost	Accrued payroll and benefit cost	12,461		32,144		Accrued payroll and benefit cost	13,009		2,978
Employee deferred compensation plan obligations						Employee deferred compensation plan obligations	2,586		(48,155)
Income taxes payable	Income taxes payable	43,723		4,702		Income taxes payable	25,409		20,124
Other assets and liabilities, net	Other assets and liabilities, net	6,755		7,246		Other assets and liabilities, net	(6,155)		(1,607)
Net cash flows provided by operating activities	Net cash flows provided by operating activities	425,942		247,827		Net cash flows provided by operating activities	68,056		124,926

CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	Capital expenditures	(22,264)		(28,625)		Capital expenditures	(9,739)		(14,276)
Payments for employee deferred compensation plans		(49,098)		(40,336)
Redemptions from employee deferred compensation plans		28,347		21,232

Investments in employee deferred compensation trusts						Investments in employee deferred compensation trusts	(28,509)		(37,061)
Proceeds from employee deferred compensation trust redemptions						Proceeds from employee deferred compensation trust redemptions	22,799		22,987
Net cash flows used in investing activities	Net cash flows used in investing activities	(43,015)		(47,729)		Net cash flows used in investing activities	(15,449)		(28,350)

CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable	Repayment of notes payable	(107)		(98)		Repayment of notes payable	(58)		(53)
Repurchases of common stock	Repurchases of common stock	(69,977)		(133,617)		Repurchases of common stock	(79,465)		(69,968)
Dividends paid	Dividends paid	(78,916)		(73,960)		Dividends paid	(44,277)		(40,476)
Net cash flows used in financing activities	Net cash flows used in financing activities	(149,000)		(207,675)		Net cash flows used in financing activities	(123,800)		(110,497)
Effect of exchange rate fluctuations	Effect of exchange rate fluctuations	(2,920)		438		Effect of exchange rate fluctuations	(5,303)		(6,643)
Change in cash and cash equivalents	Change in cash and cash equivalents	231,007		(7,139)		Change in cash and cash equivalents	(76,496)		(20,564)
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	270,478		276,579		Cash and cash equivalents at beginning of period	574,426		270,478
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	501,485	$	269,440	Cash and cash equivalents at end of period	$	497,930	$	249,914

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Non-cash items:	Non-cash items:					Non-cash items:
Stock repurchases awaiting settlement	Stock repurchases awaiting settlement	$	—	$	5,691	Stock repurchases awaiting settlement	$	3,912	$	0
Fund exchanges within employee deferred compensation trusts						Fund exchanges within employee deferred compensation trusts	$	37,661	$	138,633

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

are an integral part of these financial statements.

ROBERT HALF INTERNATIONAL INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~June 30, 2020~~March 31, 2021

Note A—Summary of Significant Accounting Policies

Nature of Operations. Robert Half International Inc. (the “Company”) provides specialized staffing and risk consulting services through such divisions as Accountemps^®, Robert Half^® Finance & Accounting, OfficeTeam^®, Robert Half^® Technology, Robert Half^® Management Resources, Robert Half^® Legal, The Creative Group^®, and Protiviti^®. The Company, through its Accountemps, Robert Half Finance & Accounting, and Robert Half Management Resources divisions, is a specialized provider of ~~temporary,~~contract, full-time, and senior-level project professionals in the fields of accounting and finance. OfficeTeam specializes in highly skilled ~~temporary~~contract, administrative support professionals. Robert Half Technology provides project and full-time technology professionals. Robert Half Legal provides ~~temporary,~~contract, project, and full-time staffing of lawyers, paralegals and legal support personnel. The Creative Group provides creative, digital, marketing, advertising and public relations professionals. Protiviti is a global consulting firm that helps companies solve problems in finance, technology, operations, data, analytics, governance, risk and internal audit, and is a wholly-owned subsidiary of the Company. Revenues are predominantly derived from specialized staffing services. 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”). ~~Certain reclassifications have been made to prior year’s condensed consolidated financial statements to conform to the 2020 presentation.~~ 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, ~~2019,~~2020, 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 2021 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 ~~June 30, 2020,~~March 31, 2021, such estimates include allowances for credit losses, variable consideration, workers’ compensation losses, income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock grants subject to market conditions.

~~In March 2020,~~We continue to monitor the ~~World Health Organization announced that~~significant global economic uncertainty as a ~~novel strain~~result of coronavirus (“COVID-19”) ~~had become pandemic. The subsequent global stay-at-home orders resulted in significant travel restrictions and business closures. These actions have led~~ to ~~global economic disruptions. We are continuing to monitor~~assess the ~~efforts to mitigate the spread of COVID-19, including uncertainty around the duration and extent of the stay-at-home orders and the effect~~impact on the Company’s results of operations, financial condition, and liquidity. In light of the ongoing economic disruption, we continue to face a greater degree of uncertainty than normal in making the judgments and estimates needed to apply the Company’s significant accounting policies. As the situation continues to develop, we may make changes to these estimates and judgments over time, which could result in meaningful impacts to the Company’s financial statements in future periods. Actual results and outcomes may differ from management’s estimates and assumptions.

~~ROBERT HALF INTERNATIONAL INC.~~

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

~~June 30, 2020~~

Service Revenues.The Company derives its revenues from 3 segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or services are delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. See Note C for further discussion of the revenue recognition accounting policy.

Costs of Services.Direct costs of temporary and consultant staffing consist of payroll, payroll taxes and benefit costs for the Company’s engagement professionals, as well as reimbursable expenses. Direct costs of permanent placement staffing

ROBERT HALF INTERNATIONAL INC.

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

March 31, 2021

services consist of reimbursable expenses. Risk consulting and internal audit direct costs of services include professional staff payroll, contract labor payroll, payroll taxes and benefit costs, as well as reimbursable expenses.

Advertising Costs.The Company expenses all advertising costs as incurred. Advertising costs were ~~$6.7~~$8.4 million and ~~$21.2~~$14.5 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~respectively,~~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 ~~$15.0 million~~the Company invests amounts held in the associated investment trusts consistent with these directions. As realized and ~~$27.8 million~~unrealized investment gains and losses occur, the Company’s deferred compensation obligation to employees changes accordingly. Changes in the Company’s deferred compensation obligations remain in selling, general and administrative expenses or, in the case of risk consulting and internal audit services, 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 from investments held in employee deferred compensation trusts consists primarily of unrealized and realized gains and losses and dividend income from trust investments.

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


	Three Months Ended March 31,
		2021		2020
Dividend income		$	(294)	$	(405)
Realized and unrealized (gains) losses		(11,694)		40,781
(Income) loss from investments held in employee deferred compensation trusts		$	(11,988)	$	40,376

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 ~~three~~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 ~~six months ended June 30, 2019, respectively.~~assumptions that market participants would use in pricing the asset or liability

The carrying value of cash and cash equivalents, accounts receivable, 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).

ROBERT HALF INTERNATIONAL INC.

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

March 31, 2021

The following table sets forth the composition of the underlying assets which comprise the Company’s deferred compensation trust assets (in thousands):


	Fair Value Measurements Using
	Balance at March 31, 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	$	64,655	$	64,655	0	0
Mutual funds - bond	28,719		28,719		0	0
Mutual funds - stock	250,163		250,163		0	0
Mutual funds - blend	80,500		80,500		0	0
	$	424,037	$	424,037	0	0

	Fair Value Measurements Using
	Balance at December 31, 2020		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	$	69,681	$	69,681	0	0
Mutual funds - bond	27,282		27,282		0	0
Mutual funds - stock	234,667		234,667		0	0
Mutual funds - blend	75,004		75,004		0	0
	$	406,634	$	406,634	0	0

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, current business conditions and macro-economic trends. The Company considers risk characteristics of trade receivables based on asset type, size, term, 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.

ROBERT HALF INTERNATIONAL INC.

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

March 31, 2021

The following table sets forth the activity in the allowance for credit losses from December 31, 2019, through ~~June 30, 2020~~March 31, 2021 (in

thousands):


	Allowance for Credit ~~Loss~~ Losses
Balance as of December 31, 2019	$	22,885
Adoption of accounting pronouncement	558
Balance as of January 1, 2020	$	23,443
Charges to expense	~~6,713~~4,200
Deductions	~~(4,101)~~(7,906)
Other, including translation adjustments	~~(1,018)~~(120)
Balance as of ~~June 30,~~December 31, 2020	$	~~25,037~~19,617
Charges to expense	3,157
Deductions	(1,482)
Other, including translation adjustments	(973)
Balance as of March 31, 2021	$	20,319

Internal-use Software. The Company capitalizes direct costs incurred in the development of internal-use software. Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other assets. All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment on the unaudited Condensed Consolidated Statements of Financial Position. Capitalized internal-use software development costs were $10.4 million and $13.0 million for the three months ended March 31, 2021 and 2020, respectively.

Goodwill and Intangible Assets. Goodwill and intangible assets primarily consist of the cost of acquired companies in excess of the fair market value of their net tangible assets at the date of acquisition. Identifiable intangible assets are amortized over their lives, typically ranging from two to five years. Goodwill is not amortized, but is tested at least annually for impairment, or on an as needed interim basis.

~~Internal-use Software.~~ The Company capitalizes direct costs incurred in the development of internal-use software. Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other current assets. All other internal-use software development costs are capitalized and reported as a component of computer software within property and equipment on the unaudited Condensed Consolidated Statement of Financial Position. Capitalized internal-use software development costs were $9.9 million and $22.9 million for the three and six months ended June 30, 2020, respectively, and $7.9 million and $12.9 million for the three and six months ended June 30, 2019, respectively.

~~ROBERT HALF INTERNATIONAL INC.~~

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

~~June 30, 2020~~

Note B—New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

~~Current Expected Credit Losses Model.~~ In June 2016, the FASB issued authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019. The Company has adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.

~~Simplifying the Test for Goodwill Impairment.~~ In January 2017, the FASB issued authoritative guidance to simplify the goodwill impairment testing process. The new standard eliminates Step 2 of the goodwill impairment test. If a company determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an impairment in that amount should be recorded to the income statement, rather than proceeding to Step 2. The new guidance is effective for the Company for fiscal years beginning after December 15, 2019, although early adoption is permitted. The Company has adopted the new guidance prospectively as of January 1, 2020, and the impact of adoption was not material to its financial statements.

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

Reference Rate Reform. In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference ~~London Interbank Offered Rate (“LIBOR”)~~LIBOR or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The ~~Company believes~~application of this guidance ~~will~~did not have a material impact on ~~its~~the Company's financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

None.

ROBERT HALF INTERNATIONAL INC.

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

March 31, 2021

Note C—Revenue Recognition

The Company derives its revenues from 3 segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. 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.

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

The Company records temporary and consultant staffing revenue on a gross basis as a principal versus on a net basis as an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and

~~ROBERT HALF INTERNATIONAL INC.~~

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

~~June 30, 2020~~

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 staffing revenues. Permanent placement staffing revenues from contracts with customers are primarily recognized when employment candidates accept offers of permanent employment. The Company has a substantial history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90-day guarantee period. These amounts are established based primarily on historical data and are recorded as contract liabilities. Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent placement services are charged to employment candidates.

Risk consulting and internal audit services revenues. Risk consulting and internal audit 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. Risk consulting and internal audit 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.

ROBERT HALF INTERNATIONAL INC.

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

March 31, 2021

The following table presents the Company’s service revenues disaggregated by line of business (in thousands):


	Three Months Ended March 31,
	2021		2020
Accountemps	$	417,116	$	489,884
OfficeTeam	220,467		239,979
Robert Half Technology	172,239		196,652
Robert Half Management Resources	183,271		211,878
Elimination of intersegment revenues (a)	(103,818)		(46,273)
Temporary and consultant staffing	889,275		1,092,120
Permanent placement staffing	111,703		120,489
Risk consulting and internal audit services	397,402		294,082
Service revenues	$	1,398,380	$	1,506,691

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Accountemps $ 322,596 $ 486,992 $ 803,037 $ 970,465
OfficeTeam 132,730 261,034 371,766 513,069
Robert Half Technology 151,542 179,375 334,965 351,303
Robert Half Management Resources 146,518 175,311 335,738 352,502
Temporary and consulting staffing 753,386 1,102,712 1,845,506 2,187,339
Permanent placement staffing 71,030 140,894 191,519 272,456
Risk consulting and internal audit services 283,910 272,779 577,992 525,120
Service revenues $ 1,108,326 $ 1,516,385 $ 2,615,017 $ 2,984,915

(a) Service revenues for Accountemps, OfficeTeam, Robert Half Technology and Robert Half Management Resources include intersegment revenues, which represent revenues from services provided to the Company’s risk consulting and internal audit services segment in connection with the Company’s blended business solutions. Intersegment revenues for each line of business are aggregated and then eliminated as a single line.

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

Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract value is allocated based on relative stand-alone selling values of the services and products in the arrangement. As of ~~June 30,~~March 31, 2021, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was $170.0 million. Of this amount, $157.3 million is expected to be recognized within the next twelve months. As of March 31, 2020, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was $132.6 million. Of this amount, $122.3 million is expected to be recognized within the next twelve months. As of June 30, 2019, aggregate transaction price allocated to the performance obligations that are unsatisfied for contracts with an expected duration of greater than one year was $94.5$112.0 million.

~~ROBERT HALF INTERNATIONAL INC.~~

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

~~June 30, 2020~~

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 ~~Statement~~Statements of Financial Position. The following table sets forth the activity in contract liabilities from December 31, ~~2018,~~2019, through ~~June 30, 2020~~March 31, 2021 (in thousands):

Contract Liabilities

Balance as of December 31, ~~2018~~2019

~~12,997~~12,948

Payments in advance of satisfaction of performance obligations

~~13,030~~25,614

Revenue recognized

~~(12,072)~~(20,687)

Other, including translation adjustments

~~(1,007)~~377

Balance as of December 31, ~~2019~~2020

~~12,948~~18,252

Payments in advance of satisfaction of performance obligations

~~11,847~~12,888

Revenue recognized

~~(13,509)~~(16,510)

Other, including translation adjustments

~~548~~717

Balance as of ~~June 30, 2020~~March 31, 2021

~~11,834~~15,347

~~Note D—Other Current Assets~~

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

June 30,
2020 December 31, 2019
Deferred compensation plans $ 418,074 $ 398,442
Prepaid expenses 87,597 84,364
Other 47,583 42,768
Other current assets $ 553,254 $ 525,574

~~Note E—Property and Equipment, Net~~

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

June 30,
2020 December 31, 2019
Computer hardware $ 164,131 $ 164,547
Computer software 294,143 291,681
Furniture and equipment 90,083 88,136
Leasehold improvements 154,592 150,644
Property and equipment, cost 702,949 695,008
Accumulated depreciation (581,991) (566,623)
Property and equipment, net $ 120,958 $ 128,385

1112

ROBERT HALF INTERNATIONAL INC.

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

~~June 30, 2020~~March 31, 2021

Note D—Other Current Assets

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


	March 31, 2021		December 31, 2020
Prepaid expenses	101,846		97,674
Other	50,434		49,841
Other current assets	$	152,280	$	147,515

Note E—Property and Equipment, Net

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


	March 31, 2021		December 31, 2020
Computer hardware	$	160,685	$	159,180
Computer software	251,477		250,585
Furniture and equipment	91,345		91,112
Leasehold improvements	163,090		164,807

Property and equipment, cost	666,597		665,684
Accumulated depreciation	(562,896)		(555,867)
Property and equipment, net	$	103,701	$	109,817

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~~month to 109 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 $20.0 million and $39.9 million~~ for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~respectively, $17.9~~were $21.5 million and ~~$35.9~~$19.9 million, ~~for the three and six months ended June 30, 2019,~~ respectively.

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

Six Months Ended
June 30,
2020 2019
Cash paid for operating lease liabilities $ 41,539 $ 39,291
Right-of-use assets obtained in exchange for new operating lease liabilities $ 18,134 $ 19,823


	Three Months Ended March 31,
	2021		2020
Cash paid for operating lease liabilities	$	22,225	$	20,554
Right-of-use assets obtained in exchange for new operating lease liabilities	$	3,501	$	14,547

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

June 30,
2020 December 31,
2019
Weighted average remaining lease term for operating leases 4.6 years 4.8 years
Weighted average discount rate for operating leases 2.8 % 3.0 %


	March 31, 2021		December 31, 2020
Weighted average remaining lease term for operating leases	4.4 years		4.5 years
Weighted average discount rate for operating leases	2.6	%	2.6	%

ROBERT HALF INTERNATIONAL INC.

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

March 31, 2021

Future minimum lease payments under non-cancellable leases as of ~~June 30, 2020,~~March 31, 2021, were as follows (in thousands):


2021 (excluding the three months ended March 31, 2021)	$	65,666
2022	73,205
2023	59,476
2024	47,524
2025	29,095
Thereafter	29,371
Less: Imputed interest	(16,932)
Present value of operating lease liabilities (a)	$	287,405

2020 (excluding the six months ended June 30, 2020) $ 41,605
2021 75,031
2022 57,790
2023 47,709
2024 37,314
Thereafter 39,474
Less: Imputed interest (18,546)
Present value of operating lease liabilities (a) $ 280,377

(a) Includes current portion of ~~$75.1~~$79.2 million for operating leases.

As of ~~June 30, 2020,~~March 31, 2021, the Company had additional future minimum lease obligations totaling ~~$16.1~~$4.0 million under operating leases that had not yet commenced. These operating leases include agreements for corporate and field office facilities with lease terms of ~~5 years~~1 to 8 years.

Note G—Goodwill

The following table sets forth the activity in goodwill from December 31, 2020, through March 31, 2021 (in thousands):


	Goodwill
	Temporary and consultant staffing		Permanent placement staffing		Risk consulting and internal audit services		Total
Balance as of December 31, 2020	$	134,511	$	26,180	$	62,364	$	223,055

Foreign currency translation adjustments	(46)		(14)		51		(9)
Balance as of March 31, 2021	$	134,465	$	26,166	$	62,415	$	223,046

Note H—Accrued Payroll and Benefit Costs

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


	March 31, 2021		December 31, 2020
Payroll and benefits	306,178		311,169
Payroll taxes	81,742		67,712
Workers’ compensation	19,924		18,996
Accrued payroll and benefit costs	$	407,844	$	397,877

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $102.2 million of applicable payroll taxes as of March 31, 2021, of which $51.1 million is expected to be paid during the next 12 months and is included in accrued payroll and benefit costs and the remaining $51.1 million is included in other liabilities on the unaudited Condensed Consolidated Statements of Financial Position.

1214

ROBERT HALF INTERNATIONAL INC.

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

~~June 30, 2020~~March 31, 2021

Note ~~G—Goodwill~~

~~The following table sets forth the activity in goodwill from December 31, 2019, through June 30, 2020 (in thousands):~~

Goodwill

Temporary and consultant staffing Permanent placement staffing Risk consulting and internal audit services Total
Balance as of December 31, 2019 $ 134,210 $ 26,097 $ 50,057 $ 210,364
Foreign currency translation adjustments (245) (66) (223) (534)
Balance as of June 30, 2020 $ 133,965 $ 26,031 $ 49,834 $ 209,830
I—Employee Deferred Compensation Plan Obligations

The Company completed its annual assessment of the recoverability of goodwill as of June 30, 2020, 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 H—Accrued Payroll and Benefit Costs~~

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

June 30,
2020 December 31, 2019
Employee deferred compensation plans $ 428,683 $ 421,198
Payroll and benefits 257,190 280,918
Payroll taxes 7,816 21,831
Workers’ compensation 21,223 19,655
Accrued payroll and benefit costs $ 714,912 $ 743,602

The Company, under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, deferred paying $37.5 million of applicable payroll taxes as of June 30, 2020, which is included in other liabilities in the unaudited Condensed Consolidated Statements of Financial Position.

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 not eligible for the qualified plans. These plans include provisions for salary deferrals and Company matching and discretionary contributions. The asset value of the nonqualified plans was ~~$418.1~~$424.0 million and ~~$398.4~~$406.6 million as of ~~June 30, 2020~~March 31, 2021, and December 31, ~~2019, respectively, and is included in other current~~2020, respectively. The Company holds these assets into satisfy the ~~unaudited Condensed Consolidated Statements of Financial Position.~~ Company’s liabilities under its deferred compensation plans.

The liability value for the nonqualified plans was ~~$428.7~~$437.7 million and ~~$421.2~~$435.1 million as of ~~June 30, 2020~~March 31, 2021, and December 31, 2019, respectively, and is included in current accrued payroll and benefit costs in the unaudited Condensed Consolidated Statements of Financial Position. Deferred compensation plan and other benefits related to2020, respectively.

The following table presents the Company’s executive chairman were $88.3 million and $91.8 million as of June 30, 2020 and December 31, 2019, respectively, and are included in the liability value for the nonqualified plans. Net unrealized gains and (losses) on these nonqualified plan assets and liabilities were $47.8 million and $(1.0) million for the three and six months ended June 30, 2020, respectively, and $6.4 million and $30.1 million for the three and six months ended June 30, 2019, respectively.

~~The Company’s contribution~~compensation expense ~~for~~related to its qualified defined contribution plans and nonqualified ~~benefits~~ plans totaled $6.7 million and $12.3 million for the three and six months ended June 30, 2020, respectively, and $4.8 million and $8.4 million for the three and six months ended June 30, 2019, respectively.(in thousands):


	Three Months Ended March 31,
	2021		2020
Contribution expense	$	9,554	$	8,485
Increase (decrease) in employee deferred compensation expense related to changes in the fair value of trust assets	11,988		(40,376)
	$	21,542	$	(31,891)

The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material.

~~ROBERT HALF INTERNATIONAL INC.~~

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

~~June 30, 2020~~

Note I—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, 0no 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

ROBERT HALF INTERNATIONAL INC.

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

March 31, 2021

feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, 0 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.

In May 2020, the Company entered into a new $100 million unsecured revolving credit facility (the “364-Day Credit Agreement”). Borrowings under the 364-Day Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the LIBOR plus an applicable margin. The 364-Day Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of ~~June 30, 2020.~~March 31, 2021. There were 0 borrowings under the 364-Day Credit Agreement as of ~~June 30, 2020.~~March 31, 2021.

~~ROBERT HALF INTERNATIONAL INC.~~

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

~~June 30, 2020~~

Note J—K—Stockholders’ Equity

Stock Repurchase Program. As of ~~June 30, 2020,~~March 31, 2021, the Company is authorized to repurchase, from time to time, up to ~~1.5~~9.2 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 ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ are reflected in the following table (in thousands):


		Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019			2021		2020
Common stock repurchased (in shares)	Common stock repurchased (in shares)	983		1,812		Common stock repurchased (in shares)	797		983
Common stock repurchased	Common stock repurchased	$	51,477	$	111,228	Common stock repurchased	$	60,860	$	51,477

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 repurchases related to employee stock plans made during the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ are reflected in the following table (in thousands):

Six Months Ended
June 30,
2020 2019
Repurchases related to employee stock plans (in shares) 280 257
Repurchases related to employee stock plans $ 12,031 $ 16,721


	Three Months Ended March 31,
	2021		2020
Repurchases related to employee stock plans (in shares)	251		280
Repurchases related to employee stock plans	$	19,413	$	12,022

The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for using the cost method. Repurchase activity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ 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.

1516

ROBERT HALF INTERNATIONAL INC.

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

~~June 30, 2020~~March 31, 2021

Note K—L—Net Income Per Share

The calculation of net income per share for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ is reflected in the following table (in thousands, except per share amounts):

Three Months Ended
June 30, Six Months Ended
June 30,
2020 2019 2020 2019
Net income $ 46,196 $ 114,612 $ 136,111 $ 224,410
Basic:
Weighted average shares 112,865 116,381 113,026 116,722
Diluted:
Weighted average shares 112,865 116,381 113,026 116,722
Dilutive effect of potential common shares 256 607 463 753
Diluted weighted average shares 113,121 116,988 113,489 117,475
Net income per share:
Basic $ .41 $ .98 $ 1.20 $ 1.92
Diluted $ .41 $ .98 $ 1.20 $ 1.91


	Three Months Ended March 31,
	2021		2020

Net income	$	110,598	$	89,915
Basic:
Weighted average shares	111,424		113,187

Diluted:
Weighted average shares	111,424		113,187
Dilutive effect of potential common shares	1,072		671
Diluted weighted average shares	112,496		113,858

Net income per share:
Basic	$	.99	$	.79
Diluted	$	.98	$	.79

Note L—M—Business Segments

The Company has 3 reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. 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 temporary and consultant staffing segment provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing and web design fields. The permanent placement staffing segment provides full-time personnel in the accounting, finance, administrative and office, and information technology fields. The risk consulting and internal audit services 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, ~~2019.~~2020. The Company evaluates performance based on income ~~from operations~~ before net interest income, intangible ~~asset~~assets amortization expense, and income taxes.

1617

ROBERT HALF INTERNATIONAL INC.

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

~~June 30, 2020~~March 31, 2021

The following table provides a reconciliation of ~~revenue~~service revenues and ~~operating~~segment income by reportable segment to consolidated results for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Service revenues	Service revenues									Service revenues
Temporary and consultant staffing	Temporary and consultant staffing	$	753,386	$	1,102,712	$	1,845,506	$	2,187,339	Temporary and consultant staffing	$	889,275	$	1,092,120
Permanent placement staffing	Permanent placement staffing	71,030		140,894		191,519		272,456		Permanent placement staffing	111,703		120,489
Risk consulting and internal audit services	Risk consulting and internal audit services	283,910		272,779		577,992		525,120		Risk consulting and internal audit services	397,402		294,082
		$	1,108,326	$	1,516,385	$	2,615,017	$	2,984,915		$	1,398,380	$	1,506,691
Operating income
Segment income										Segment income
Temporary and consultant staffing	Temporary and consultant staffing	$	28,390	$	105,238	$	122,154	$	211,256	Temporary and consultant staffing	$	75,535	$	93,764
Permanent placement staffing	Permanent placement staffing	(248)		25,344		10,663		46,901		Permanent placement staffing	17,780		10,911
Risk consulting and internal audit services	Risk consulting and internal audit services	30,107		28,820		56,576		47,474		Risk consulting and internal audit services	57,322		26,469
Combined segment income										Combined segment income	150,637		131,144
		58,249		159,402		189,393		305,631
Amortization of intangible assets	Amortization of intangible assets	330		341		668		683		Amortization of intangible assets	576		338
Interest income, net	Interest income, net	(105)		(1,042)		(1,062)		(2,538)		Interest income, net	(45)		(957)
Income before income taxes	Income before income taxes	$	58,024	$	160,103	$	189,787	$	307,486	Income before income taxes	$	150,106	$	131,763

Service revenues presented above are shown net of eliminations of intersegment revenues. Intersegment revenues

between temporary and consultant staffing segment and risk consulting and internal audit services segment were $103.8 million

and $46.3 million for the three months ended March 31, 2021 and 2020, respectively.

Note M—N—Subsequent Events

On ~~July 30, 2020,~~April 29, 2021, the Company announced the following:


Quarterly dividend per share			$~~.34~~.38
Declaration date			~~July 30, 2020~~April 29, 2021
Record date			~~August~~May 25, ~~2020~~2021
Payment date			~~September~~June 15, ~~2020~~2021

1718

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain information contained in Management’s Discussion and Analysis and in other parts of this report may be deemed forward-looking statements regarding events and financial trends that may affect the Company’s future operating results or financial positions. These statements may be identified by words such as “estimate”, “forecast”, “project”, “plan”, “intend”, “believe”, “expect”, “anticipate”, or variations or negatives thereof or by similar or comparable words or phrases. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in the statements. These risks and uncertainties include, but are not limited to, the following: changes to or new interpretations of U.S. or international tax regulations, the global financial and economic situation; the duration and impact of the COVID-19 pandemic and efforts to mitigate its spread; changes in levels of unemployment and other economic conditions in the United States or foreign countries where the Company does business, or in particular regions or industries; reduction in the supply of candidates for ~~temporary~~contract employment or the Company’s ability to attract candidates; the entry of new competitors into the marketplace or expansion by existing competitors; the ability of the Company to maintain existing client relationships and attract new clients in the context of changing economic or competitive conditions; the impact of competitive pressures, including any change in the demand for the Company’s services, on the Company’s ability to maintain its margins; the possibility of the Company incurring liability for its activities, including the activities of its engagement professionals, or for events impacting its engagement professionals on clients’ premises; the possibility that adverse publicity could impact the Company’s ability to attract and retain clients and candidates; the success of the Company in attracting, training, and retaining qualified management personnel and other staff ~~employees and in managing the recently announced leadership transition;~~employees; the Company’s ability to comply with governmental regulations affecting personnel services businesses in particular or employer/employee relationships in general; whether there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; the Company’s reliance on short-term contracts for a significant percentage of its business; litigation relating to prior or current transactions or activities, including litigation that may be disclosed from time to time in the Company’s Securities and Exchange Commission (“SEC”) filings; the ability of the Company to manage its international operations and comply with foreign laws and regulations; the impact of fluctuations in foreign currency exchange rates; the possibility that the additional costs the Company will incur as a result of health care reform legislation may adversely affect the Company’s profit margins or the demand for the Company’s services; the possibility that the Company’s computer and communications hardware and software systems could be damaged or their service interrupted or the Company could experience a cybersecurity breach; and the possibility that the Company may fail to maintain adequate financial and management controls and as a result suffer errors in its financial reporting. Additionally, with respect to Protiviti, other risks and uncertainties include the fact that future success will depend on its ability to retain employees and attract clients; there can be no assurance that there will be ongoing demand for Sarbanes-Oxley or other regulatory compliance services; failure to produce projected revenues could adversely affect financial results; and there is the possibility of involvement in litigation relating to prior or current transactions or activities. Because long-term contracts are not a significant part of the Company’s business, future results cannot be reliably predicted by considering past trends or extrapolating past results.

Executive Overview

The ~~global outbreak~~Company’s financial results during the first quarter of 2021 reflect continued early-cycle recovery from the coronavirus disease 2019 (“COVID-19”) was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government in March 2020. The subsequent global stay-at-home orders resulted in significant travel restrictions and business closures. These actions have led to global economic disruptions. The Company has prioritized the health and safety of its employees, and virtually all global staffing and Protiviti employees have been working remotely. The Company has maintained full operations even where physical locations have remained closed. Given the magnitude ofcrisis resulting from the COVID-19 ~~impact on~~pandemic, with accelerating growth during the quarter in the Company’s staffing business. Our investments in advanced AI technologies and retention of our tenured employees has allowed us to adapt quickly to a new marketplace, where remote and hybrid work has become commonplace. During the first quarter of 2021, service revenues were $1.40 billion, a decrease of 7.2% from the prior year. Net income for the quarter was $111 million and diluted net income per share was $.98.

The Company's staffing operations significantly outperformed their historical sequential trends, led by small and medium-size businesses and permanent placement, which grew 22% sequentially. Protiviti's revenues grew 35% year-on-year, reflecting continued momentum across its wide array of service offerings, including very strong demand for managed solutions with staffing. This is Protiviti's 14th consecutive quarter of year-on-year revenue gains. The Company’s blended solutions, complementing Protiviti's offerings with contract talent, allow the Company to be extremely nimble and cost effective in response to client needs, and we expect this offering to be an increasing part of our business ~~we have worked to effectively manage our costs and pursue revenue-generation opportunities.~~going forward.

Demand for the Company’s temporary and ~~consulting~~consultant staffing, permanent placement staffing, and risk consulting and internal audit services is largely dependent upon general economic and labor trends both domestically and abroad. The extent of the economic disruption on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related actions takenabroad, which may continue to be impacted by ~~the U.S. government, state and local government officials, and international governments to prevent disease spread, all of which are uncertain and cannot be predicted.~~

The Company’s financial results for the first half of 2020 were clearly affected by the economic crisis resulting from the COVID-19 pandemic, most acutely in the Company’s staffing business. During the first half of 2020 net service revenues were $2.62 billion, a decrease of 12% from the prior year. Net income for the first half of 2020 was $136 million and diluted net income per share was $1.20. Risk consulting and internal audit services experienced strong revenue growth increasing by 10%, offset by declines in temporary and consultant staffing of 16% and permanent placement staffing of 30% during the first half of 2020, compared to the first half of 2019. The Company’s staffing clients, most of whom are small and midsize businesses, are feeling the crisis, and the downstream effect is a much tougher business climate for the Company.

Demand for Protiviti’s services was broad-based across its diversified service offerings, including internal audit, technology consulting and regulatory compliance consulting. Protiviti had a strong first half of 2020 and continues to benefit from strong solutions offerings and pipeline.COVID-19.

The United States economic backdrop as we ended the first ~~half~~quarter of ~~2020 was one~~2021 showed early signs of ~~slowdown and uncertainty~~economic recovery as real gross domestic product (“GDP”) ~~decreased 5.0% and 32.9% for the first and second quarter, respectively,~~increased 6.4%, while the unemployment rate ~~increased~~decreased from ~~3.5%~~6.7% in December ~~2019~~2020 to ~~11.1%~~6.0% at the end of the ~~second~~first quarter of ~~2020, respectively.~~2021. In ~~one quarter’s time, we have shifted from operating in a candidate-constrained~~the United States, the number of job openings exceeded the number of hires at the end of February 2021, creating competition for skilled talent that increases the Company's value to clients. The U.S. labor market remains robust, with significant demand due to ~~a labor market with unprecedented unemployment levels.~~talent shortages across our professional disciplines.

We monitor various economic indicators and business trends in all of the countries in which we operate to anticipate demand for the Company’s services. We evaluate these trends to determine the appropriate level of investment, including personnel, which will best position the Company for success in the current and future global macroeconomic environment. The Company’s investments in headcount are typically structured to proactively support and align with expected revenue growth ~~trends.~~trends and productivity metrics. We have limited visibility into future revenues not only due to the dependence on macroeconomic conditions noted above, but also because of the relatively short duration of the Company’s client engagements. Accordingly, we typically assess headcount and other investments on at least a quarterly basis. ~~As such, during~~We continue to focus on the productivity levels of tenured staff and believe we have aligned staffing levels to drive increased profitability. During the first ~~half~~quarter of ~~2020, we took actions~~2021, headcount remained relatively flat in all three business segments, when compared to reduce operating costs including laying off the Company’s less experienced and lower performing staff. Impacted corporate staff were furloughed with paid benefits, awaiting a return to higher activityprior year-end levels.

Capital expenditures, including $8$8.5 million for cloud computing arrangements, for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, totaled ~~$16~~$18.2 million, approximately ~~71%~~89% 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 ~~also~~ included amounts spent on tenant improvements and furniture and equipment in the Company’s leased offices. We currently expect that ~~2020~~2021 capital expenditures will range from ~~$75~~$85 million to ~~$85~~$95 million, of which $45 million to $55 million relates to software initiatives and technology infrastructure, including capitalized costs related to implementation of cloud computing arrangements.

Critical Accounting Policies and Estimates

The Company’s most critical accounting policies and estimates are those that involve subjective decisions or assessments and are included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. There were no material changes to the Company’s critical accounting policies or estimates for the ~~six~~three months ended ~~June 30, 2020.~~March 31, 2021.

Recent Accounting Pronouncements

See Note B—“New Accounting Pronouncements” to the Company’s Condensed Consolidated Financial Statements included under Part I—Item 1 of this report.

Results of Operations

Demand for the Company’s temporary and ~~consulting~~consultant staffing, permanent placement staffing and risk consulting and internal audit services is largely dependent upon general economic and labor market conditions both domestically and abroad. Because of the inherent difficulty in predicting economic trends, future demand for the Company’s services cannot be forecast with certainty. The Company's technology investments have facilitated remote working models internally and, with the Company's advanced AI-driven capabilities, are providing clients with real-time choices of candidates across broader resource pools. While uncertainty remains in the overall economic environment, we are excited about our current momentum and the Company’s ~~investments in technology have allowed its internal staff to remain fully functional during this pandemic. We have found innovative ways to maintain connections with candidates~~prospects for the balance of 2021 and ~~clients in a remote environment and we believe the Company is well positioned to meet the demand of our customers.~~

~~The Company’s second-quarter results were clearly affected~~beyond, buoyed by the economic crisis resulting from the COVID-19 pandemic, most acutely in our staffing business. Protiviti had an outstanding quarter and continues to benefit from strong solutions offerings and pipeline. We are encouraged by recent signs of week-on-week sequential growth in our staffing operations at the endstrengths of the ~~second quarter. Although significant uncertainty continues, we approach the third quarter with optimism.~~Company’s brands, people, technology and professional business model.

The Company’s temporary and permanent placement staffing business has ~~326~~322 offices in 4243 states, the District of Columbia and 17 foreign countries, while Protiviti has 63 offices in 2324 states and 12 foreign countries.

1920

Non-GAAP Financial Measures

The financial results of ~~the Company~~Robert Half International Inc. (the “Company”) are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the ~~SEC.~~U.S. Securities and Exchange Commission (“SEC”). To help readers understand the Company’s financial performance, the Company supplements its GAAP financial results with the following non-GAAP measures: as adjusted revenue growth ~~rates derived from non-GAAP revenue amounts.~~rates; adjusted gross margin; adjusted selling, general and administrative expense; segment income and combined segment income.

Variations in the Company’s financial results include the impact of changes in foreign currency exchange rates, billing days, and ~~billing days.~~certain intercompany adjustments. The Company provides “as adjusted” revenue growth calculations to remove the impact of these items. These calculations show the year-over-year revenue growth rates for the Company’s ~~reportable segments~~lines of business on both a reported basis and also on an ~~as adjusted~~as-adjusted basis for global, U.S., and international operations. This information is presented for each of the six most recent quarters. The Company has provided this data because it focuses on the Company’s revenue growth rates attributable to operating activities and aids in evaluating revenue trends over time. The Company expresses year-over-year revenue changes as calculated percentages using the same number of billing days, ~~and~~ constant currency exchange ~~rates.~~rates, and certain intercompany adjustments.

~~In order~~The following measures: adjusted gross margin; adjusted selling, general and administrative expense; and segment income include gains and losses on investments held to ~~calculate constant currency revenue growth rates, as reported amounts~~fund the Company’s obligations under employee deferred compensation plans. The Company provides these measures because they are ~~retranslated using foreign currency exchange rates from the prior year’s comparable period. Management then calculates a global, weighted-average number~~used by management to review its operational results.

Combined segment income is income before income taxes adjusted for interest income and amortization of ~~billing days for each reporting period based upon input from all countries and all lines of business. In order to remove the fluctuations caused by comparable periods having different billing days,~~intangible assets. The Company provides combined segment income because it is how the Company calculates same billing day revenue growth rates by dividing each comparative period’s reported revenues by the calculated number of billing days for that period to arrive at a per billing day amount. Same billing day growth rates are then calculated based upon the per billing day amounts. The term “as adjusted” means that the impact of different billing days and constant currency fluctuations are removed from the revenue growth rate calculation.evaluates segment performance.

The non-GAAP financial measures provided herein may not provide information that is directly comparable to that provided by other companies in the Company’s industry, as other companies may calculate such financial results differently. The Company’s non-GAAP financial measures are not measurements of financial performance under GAAP and should not be considered as alternatives to ~~actual revenue growth derived from revenue~~ amounts presented in accordance with GAAP. The Company does not consider these non-GAAP financial measures to be a substitute for, or superior to, the information provided by GAAP financial results. A reconciliation of the ~~as adjusted revenue growth rates~~non-GAAP financial measures to the ~~reported revenue growth rates~~most directly comparable GAAP financial measures is provided ~~herein.~~on the following pages.

Refer to Item 3. “Quantitative and Qualitative Disclosures About Market Risk” for further discussion of the impact of foreign currency exchange rates on the Company’s results of operations and financial condition.

Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

Revenues. The Company’s revenues were ~~$1.11~~$1.40 billion for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing by ~~26.9%~~7.2% compared to ~~$1.52~~$1.51 billion for the three months ended ~~June 30, 2019.~~March 31, 2020. Revenues from foreign operations represented 23% of total revenues for the three months ended March 31, 2021, up from 22% of total revenues for ~~both~~ the three months ended ~~June 30, 2020 and 2019.~~March 31, 2020. The Company analyzes its revenues for three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. For the three months ended June 30, 2020, risk consulting and internal audit services continued to post solid growth rates, compared to the same period in 2019. The Company’s revenues for the three months ended June 30, 2020 were impacted by the global stay-at-home orders, significant travel restrictions, and business closures which resulted in global economic disruptions. Contributing factors for each reportable segment are discussed below in further detail.

Temporary and consultant staffing revenues were ~~$753~~$889 million for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing by ~~31.7%~~18.6% compared to revenues of ~~$1.10~~$1.09 billion for the three months ended ~~June 30, 2019.~~March 31, 2020. Key drivers of temporary and consultant staffing revenues include average hourly bill rates and the number of hours worked by the Company’s engagement professionals on client engagements. ~~The Company’s temporary and consultant staffing revenue in the second quarter of 2020 reflected the economic circumstances present in the quarter.~~ On an as adjusted basis, temporary and consultant staffing revenues decreased ~~31.2%~~18.9% for the ~~second~~first quarter of 2021, compared to the first quarter of 2020, ~~compared~~due primarily to the second quarter of 2019. In the U.S., revenues in the second quarter of 2020 decreased 31.7% on both an as reported basis and on an as adjusted basis, compared to the second quarter of 2019. For the Company’s international operations, 2020 second quarter revenues decreased 31.8% on an as reported basis and decreased 28.9% on an as adjusted basis, compared to the second quarter of 2019. The decreases ultimately resulted from fewer hours worked by the Company’s engagement professionals on client engagements. In the U.S., revenues in the first quarter of 2021 decreased 20.3% on an as reported basis and 19.4% on an as adjusted basis, compared to the first quarter of 2020. For the Company’s international operations, revenues for the first quarter of 2021 decreased 12.3% on an as reported basis and decreased 17.0% on an as adjusted basis, compared to the first quarter of 2020.

2021

Permanent placement staffing revenues were ~~$71~~$112 million for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing by ~~49.6%~~7.3% compared to revenues of ~~$141~~$120 million for the three months ended ~~June 30, 2019.~~March 31, 2020. Key drivers of permanent placement staffing revenues consist of the number of candidate placements and average fees earned per placement. ~~Permanent placement staffing revenues in the second quarter of 2020, reflected the economic circumstances present in the quarter.~~ On an as adjusted basis, permanent placement staffing revenues decreased ~~49.1%~~8.1% for the ~~second~~first quarter of ~~2020~~2021, compared to the ~~second~~first quarter of ~~2019,~~2020, driven by a decrease in number of ~~placements, partially offset by an increase in average fees earned per placement.~~placements. In the U.S., revenues for the ~~second~~first quarter of ~~2020~~2021 decreased ~~51.6%~~12.4% on ~~both~~ an as reported basis and 11.4% on an as adjusted basis, compared to the ~~second~~first quarter of ~~2019.~~2020. For the Company’s international operations, revenues for the ~~second~~first quarter of ~~2020 decreased 45.0%~~2021 increased 5.2% on an as reported basis and ~~decreased 43.2%~~0.3% on an as adjusted basis, compared to the ~~second~~first quarter of ~~2019. Demand~~2020. Historically, demand for permanent placement staffing is even more sensitive to economic and labor market conditions than demand for temporary and consultant staffing ~~as demonstrated by the results in the current economic environment.~~and this is expected to continue.

Risk consulting and internal audit services revenues were ~~$284~~$397 million for the three months ended ~~June 30, 2020,~~March 31, 2021, increasing by ~~4.1%~~35.1% compared to revenues of ~~$273~~$294 million for the three months ended ~~June 30, 2019.~~March 31, 2020. Key drivers of risk consulting and internal audit services revenues are the billable hours worked by consultants on client engagements and average hourly bill rates. On an as adjusted basis, risk consulting and internal audit services revenues increased ~~4.5%~~34.7% for the ~~second~~first quarter of 2021, compared to the first quarter of 2020, ~~compared to the second quarter of 2019,~~due primarily ~~due~~ to an increase in billable hours. In the U.S., revenues in the ~~second~~first quarter of ~~2020~~2021 increased ~~6.4%~~35.5% on an as reported basis and ~~6.3%~~37.1% on an as adjusted basis, compared to the ~~second~~first quarter of ~~2019. Contributing to the U.S. increase were services related to business performance improvement, technology consulting, and internal audit and financial advisory practice areas.~~2020. The Company’s risk consulting and internal audit services revenues for the first quarter of 2021 from international operations ~~decreased 3.9%~~increased 33.8% on an as reported basis and ~~1.5%~~26.1% on an as adjusted basis, ~~for the second quarter of 2020~~ compared to the ~~second~~first quarter of ~~2019.~~2020.

A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the three months ended ~~June 30, 2020,~~March 31, 2021, is presented in the following table:

Global United States International
Temporary and consultant staffing
As Reported -31.7 % -31.7 % -31.8 %
Billing Days Impact -0.1 % 0.0 % 0.0 %
Currency Impact 0.6 % ― 2.9 %
As Adjusted -31.2 % -31.7 % -28.9 %
Permanent placement staffing
As Reported -49.6 % -51.6 % -45.0 %
Billing Days Impact -0.1 % 0.0 % -0.1 %
Currency Impact 0.6 % ― 1.9 %
As Adjusted -49.1 % -51.6 % -43.2 %
Risk consulting and internal audit services
As Reported 4.1 % 6.4 % -3.9 %
Billing Days Impact -0.1 % -0.1 % 0.0 %
Currency Impact 0.5 % ― 2.4 %
As Adjusted 4.5 % 6.3 % -1.5 %


	Global		United States		International
Temporary and consultant staffing
As Reported	-18.6	%	-20.3	%	-12.3	%
Billing Days Impact	1.0	%	0.9	%	1.4	%
Currency Impact	-1.3	%	―		-6.1	%
As Adjusted	-18.9	%	-19.4	%	-17.0	%
Permanent placement staffing
As Reported	-7.3	%	-12.4	%	5.2	%
Billing Days Impact	1.1	%	1.0	%	1.7	%
Currency Impact	-1.9	%	―		-6.6	%
As Adjusted	-8.1	%	-11.4	%	0.3	%
Risk consulting and internal audit services
As Reported	35.1	%	35.5	%	33.8	%
Billing Days Impact	1.6	%	1.6	%	2.1	%
Currency Impact	-2.0	%	―		-9.8	%
As Adjusted	34.7	%	37.1	%	26.1	%

Gross Margin. The Company’s gross margin dollars were ~~$423~~$562 million for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing by ~~33.6%~~8.6% compared to ~~$638~~$614 million for the three months ended ~~June 30, 2019.~~March 31, 2020. Contributing factors for each reportable segment are discussed below in further detail.

Gross margin dollars for temporary and consultant staffing represent revenues less ~~direct~~ 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 for temporary and consultant staffing employees; and iii) conversion revenues, which are earned when a temporary position converts to a permanent position with the Company’s client. Gross margin dollars for the Company’s temporary and consultant staffing division were ~~$279~~$345 million for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing ~~33.6%~~16.5% compared to ~~$421~~$413 million for the three months ended ~~June 30, 2019.~~March 31, 2020. As a percentage of revenues, gross margin for temporary and consultant staffing was ~~37.1% in~~38.8% for the ~~second~~three months ended March 31, 2021, up from 37.8% for the three months ended March 31, 2020.

2122

~~quarter of 2020, down from 38.2% in the second quarter of 2019. This year-over-year decline in gross margin percentage was primarily attributable to lower conversion revenues.~~

Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses. Gross margin dollars for the Company’s permanent placement staffing division were ~~$71~~$111 million for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing ~~49.6%~~7.3% from ~~$141~~$120 million for the three months ended ~~June 30, 2019.~~March 31, 2020. Because reimbursable expenses for permanent placement staffing are de minimis, gross margin dollars are substantially explained by revenues previously discussed.

Gross margin dollars for risk consulting and internal audit services represent revenues less ~~direct~~ costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs and reimbursable expenses. The primary drivers of risk consulting and internal audit services 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 risk consulting and internal audit services staff. Gross margin dollars for the Company’s risk consulting and internal audit division were ~~$73~~$105 million for the three months ended ~~June 30, 2020, decreasing 4.2%~~March 31, 2021, increasing 29.8% compared to ~~$76~~$81 million for the three months ended ~~June 30, 2019.~~March 31, 2020. As a percentage of revenues, reported gross margin for risk consulting and internal audit services in the ~~second~~first quarter of ~~2020~~2021 was ~~25.7%~~26.5%, down from ~~27.9%~~27.6% in the ~~second~~first quarter of ~~2019.~~2020. As a percentage of revenues, adjusted gross margin dollars for risk consulting and internal audit services were 26.9% the first quarter of 2021, up from 26.3% in the first quarter of 2020. The year-over-year ~~decline~~increase in adjusted gross margin percentage was due primarily to ~~lower~~higher staff utilization rates.

Selling, General and Administrative Expenses. The Company’s selling, general and administrative expenses consist primarily of staff compensation, advertising, variable overhead, depreciation, and occupancy costs. The Company’s selling, general and administrative expenses were ~~$365~~$423 million for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing ~~23.7%~~4.5% from ~~$478~~$443 million for the three months ended ~~June 30, 2019. Despite the significant reduction in selling, general and administrative cost during the quarter, as~~March 31, 2020. As a percentage of revenues, the Company’s reported selling, general and administrative expenses were ~~32.9%~~30.3% for the ~~second~~first quarter of ~~2020,~~2021, up from ~~31.5% in~~29.4% the ~~second~~first quarter of ~~2019. The increase in~~2020. As a percentage of revenues, the Company’s adjusted selling, general and administrative expenses ~~as a percentage~~were 29.5% in the first quarter of ~~revenues was significantly impacted by negative leverage as revenues decreased. The timing~~2021 compared to 31.8% in the first quarter of ~~our cost-reduction actions, including compensation-related costs associated with employee terminations, impacted total selling, general and administrative costs for the quarter.~~2020. Contributing factors for each reportable segment are discussed below in further detail.

Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were ~~$251~~$279 million for the three months ended ~~June 30, 2020,~~March 31, 2021, decreasing ~~20.5%~~2.7% from ~~$316~~$286 million for the three months ended ~~June 30, 2019.~~March 31, 2020. As a percentage of revenues, reported selling, general and administrative expenses for temporary and consultant staffing were ~~33.3%~~31.3% in the ~~second~~first quarter of ~~2020,~~2021, up from ~~28.6%~~26.2% in the ~~second~~first quarter of ~~2019 due primarily to negative leverage as revenues decreased as a result of financial conditions during the quarter.~~

Selling, general and administrative expenses for the Company’s permanent placement staffing division were $71 million for the three months ended June 30, 2020, decreasing by 38.3% compared to $115 million for the three months ended June 30, 2019.2020. As a percentage of revenues, selling, general and administrative expenses for permanent placement staffing were 100.2% in the second quarter of 2020, up from 81.8% in the second quarter of 2019 due primarily to negative leverage as revenues decreased in response to the COVID-19 pandemic.

Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $43 million for the three months ended June 30, 2020, decreasing by 9.5% compared to $47 million for the three months ended June 30, 2019. As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 15.1% in the second quarter of 2020, down from 17.3% in the second quarter of 2019 due primarily to a decrease in variable overhead costs.

~~Operating Income.~~ The Company’s total operating income was $58 million, or 5.3% of revenues, for the three months ended June 30, 2020, down from $159 million, or 10.5% of revenues, for the three months ended June 30, 2019. For the Company’s temporary and consultant staffing division, operating income was $28 million, or 3.8% of applicable revenues, down from $105 million, or 9.5% of applicable revenues, in the second quarter of 2019. For the Company’s permanent placement staffing division, operating loss was less than a million, or (0.3)% of applicable revenues, compared to an operating income of $25 million, or 18.0% of applicable revenues, in the second quarter of 2019. For the Company’s risk consulting and internal audit services division, operating income was $30 million, or 10.6% of applicable revenues, compared to an operating income of $29 million, or 10.6% of applicable revenues, in the second quarter of 2019.

~~Provision for income taxes~~. The provision for income taxes was 20.4% and 28.4% for the three months ended June 30, 2020 and 2019, respectively. The relatively low second quarter tax rate in 2020 is a consequence of a lower anticipated full-year tax rate compared to the full-year estimate in the first quarter.

~~Six Months EndedJune 30, 2020 and 2019~~

~~Revenues.~~ The Company’s revenues were $2.62 billion for the six months ended June 30, 2020, decreasing by 12.4% compared to $2.98 billion for the six months ended June 30, 2019. Revenues from foreign operations represented 22% of total revenues for the six months ended June 30, 2020, down from 23% of total revenues for the six months ended June 30, 2019. The Company analyzes its revenues for three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Risk consulting and internal audit services increased, offset by decreases in temporary and consulting staffing and permanent placement staffing ~~Contributing factors for each reportable segment are discussed below in further detail.~~

Temporary and consultant staffing revenues were $1.85 billion for the six months ended June 30, 2020, decreasing by 15.6% compared to revenues of $2.19 billion for the six months ended June 30, 2019. Key drivers of temporary and consultant staffing revenues include average hourly bill rates and the number of hours worked by the Company’s engagement professionals on client engagements. On an as adjusted basis, temporary and consultant staffing revenues decreased 15.6% for the first half of 2020 compared to the first half of 2019. In the U.S., revenues in the first half of 2020 decreased 15.1% on an as reported basis and 15.7% on an as adjusted basis, compared to the first half of 2019. For the Company’s international operations, revenues for the first half of 2020 decreased 17.6% on an as reported basis and decreased 15.1% on an as adjusted basis, compared to the first half of 2019. The decreases ultimately resulted from fewer hours worked by the Company’s engagement professionals on client engagements.

Permanent placement staffing revenues were $192 million for the six months ended June 30, 2020, decreasing by 29.7% compared to revenues of $272 million for the six months ended June 30, 2019. Key drivers of permanent placement staffing revenues consist of the number of candidate placements and average fees earned per placement. On an as adjusted basis, permanent placement staffing revenues decreased 29.6% for the first half of 2020 compared to the first half of 2019, driven by a decrease in number of placements, partially offset by an increase in average fees earned per placement. In the U.S., revenues for the first half of 2020 decreased 29.3% on an as reported basis and 29.8% on an as adjusted basis, compared to the first half of 2019. For the Company’s international operations, revenues for the first half of 2020 decreased 30.6% on an as reported basis and 29.0% on an as adjusted basis, compared to the first half of 2019. Historically, demand for permanent placement staffing is even more sensitive to economic and labor market conditions than demand for temporary and consultant staffing and this is expected to continue.

Risk consulting and internal audit services revenues were $578 million for the six months ended June 30, 2020, increasing by 10.1% compared to revenues of $525 million for the six months ended June 30, 2019. Key drivers of risk consulting and internal audit services revenues are the billable hours worked by consultants on client engagements and average hourly bill rates. For the six months ended June 30, 2020, risk consulting and internal audit services continued to post strong growth rates, compared to the same period in 2019. On an as adjusted basis, risk consulting and internal audit services revenues increased 9.8% for the first half of 2020 compared to the first half of 2019, due primarily to an increase in billable hours. In the U.S., revenues in the first half of 2020 increased 13.5% on an as reported basis and 12.6% on an as adjusted basis, compared to the first half of 2019. The Company’s risk consulting and internal audit services revenues for the first half of 2020 from international operations decreased 1.3% on an as reported basis and increased 0.4% on an as adjusted basis, compared to the first half of 2019.

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, 2020, is presented in the following table:

Global United States International
Temporary and consultant staffing
As Reported -15.6 % -15.1 % -17.6 %
Billing Days Impact -0.7 % -0.6 % -0.5 %
Currency Impact 0.7 % — 3.0 %
As Adjusted -15.6 % -15.7 % -15.1 %
Permanent placement staffing
As Reported -29.7 % -29.3 % -30.6 %
Billing Days Impact -0.5 % -0.5 % -0.5 %
Currency Impact 0.6 % — 2.1 %
As Adjusted -29.6 % -29.8 % -29.0 %
Risk consulting and internal audit services
As Reported 10.1 % 13.5 % -1.3 %
Billing Days Impact -0.9 % -0.9 % -0.7 %
Currency Impact 0.6 % — 2.4 %
As Adjusted 9.8 % 12.6 % 0.4 %

~~Gross Margin.~~ The Company’s gross margin dollars were $1.03 billion for the six months ended June 30, 2020, decreasing by 17% compared to $1.25 billion for the six months ended June 30, 2019. Contributing factors for each reportable segment are discussed below in further detail.

Gross margin dollars for temporary and consultant staffing represent revenues less direct 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 for temporary and consultant staffing employees; and iii) conversion revenues, which are earned when a temporary position converts to a permanent position with the Company’s client. Gross margin dollars for the Company’s temporary and consultant staffing division were $692 million for the six months ended June 30, 2020, decreasing 16.9% compared to $833 million for the six months ended June 30, 2019. As a percentage of revenues, gross margin for temporary and consultant staffing was 37.5% for the six months ended June 30, 2020, down from 38.1% for the six months ended June 30, 2019. This year-over-year decline in gross margin percentage was primarily attributable to lower conversion revenues.

Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses. Gross margin dollars for the Company’s permanent placement staffing division were $191 million for the six months ended June 30, 2020, decreasing 29.7% from $272 million for the six months ended June 30, 2019. Because reimbursable expenses for permanent placement staffing are de minimis, gross margin dollars are substantially explained by revenues previously discussed.

Gross margin dollars for risk consulting and internal audit services represent revenues less direct costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs and reimbursable expenses. The primary drivers of risk consulting and internal audit services 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 risk consulting and internal audit services staff. Gross margin dollars for the Company’s risk consulting and internal audit division were $150 million for the six months ended June 30, 2020, increasing 7.5% compared to $140 million for the six months ended June 30, 2019. As a percentage of revenues, gross margin for risk consulting and internal audit services in the first half of 2020 was 26.0%, down from 26.6% in the first half of 2019. The year-over-year decline in gross margin percentage was due primarily to slightly lower staff utilization rates.

~~Selling, General and Administrative Expenses.~~ The Company’s selling, general and administrative expenses consist primarily of staff compensation, advertising, variable overhead, depreciation, and occupancy costs. The Company’s selling, general and administrative expenses were $844 million for the six months ended June 30, 2020, decreasing 10.1% from $939 million for the six months ended June 30, 2019. As a percentage of revenues, the Company’s selling, general and administrative

~~expenses were 32.3% for the first half of 2020, up from 31.5% the first half of 2019. Contributing factors for each reportable segment are discussed below in further detail.~~

Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were $570 million for the six months ended June 30, 2020, decreasing 8.3% from $622 million for the six months ended June 30, 2019. As a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were ~~30.9%~~30.3% in the first ~~half~~quarter of ~~2020,~~2021, up from ~~28.4%~~29.2% in the first ~~half~~quarter of ~~2019~~2020 due primarily to negative leverage as revenues decreased in response to the COVID-19 pandemic.

Selling, general and administrative expenses for the Company’s permanent placement staffing division were ~~$180~~$95 million for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, decreasing by ~~19.8%~~10.3% compared to ~~$225~~$106 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. As a percentage of revenues, reported selling, general and administrative expenses for permanent placement staffing were ~~94.3%~~84.9% in the first ~~half~~quarter of ~~2020, up~~2021, down from ~~82.6%~~87.7% in the first ~~half~~quarter of ~~2019~~2020. As a percentage of revenues, adjusted selling, general and administrative expenses for permanent placement staffing was 83.9% in the first quarter of 2021, down from 90.8% in the first quarter of 2020 due primarily to ~~negative~~positive leverage as the decrease in expenses exceeded the decrease in revenues ~~decreased in response to the COVID-19 pandemic.~~as a result of cost curtailing initiatives implemented during 2020.

Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were ~~$94~~$50 million for the ~~six~~three months ended ~~June 30, 2020, increasing~~March 31, 2021, decreasing by ~~1.4%~~2.6% compared to ~~$92~~$51 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were ~~16.2%~~12.5% in the first ~~half~~quarter of ~~2020,~~2021, down from ~~17.6%~~17.3% in the first ~~half~~quarter of ~~2019~~2020 due primarily to ~~a decrease~~positive leverage from an increase in ~~variable overhead costs.~~revenues.

~~Operating~~

A reconciliation of the non-GAAP adjusted summary of operations to the reported summary of operations, for the three months ended March 31, 2021 and 2020 is presented in the following table (in thousands):


	Quarter Ended March 31,												Relationships
	2021						2020						2021		2020		2021		2020
	Reported		Adjustments		Adjusted (1)		Reported		Adjustments		Adjusted (1)		Reported				Adjusted
SERVICE REVENUES:
Accountemps	$	417,116			$	417,116	$	489,884			$	489,884	29.8	%	32.5	%	29.8	%	32.5	%
OfficeTeam	220,467				220,467		239,979				239,979		15.8	%	15.9	%	15.8	%	15.9	%
Robert Half Technology	172,239				172,239		196,652				196,652		12.3	%	13.1	%	12.3	%	13.1	%
Robert Half Management Resources	183,271				183,271		211,878				211,878		13.1	%	14.1	%	13.1	%	14.1	%
Elimination of intersegment revenues	(103,818)				(103,818)		(46,273)				(46,273)		(7.4	%)	(3.1	%)	(7.4	%)	(3.1	%)
Temporary and consultant staffing	889,275				889,275		1,092,120				1,092,120		63.6	%	72.5	%	63.6	%	72.5	%
Permanent placement staffing	111,703				111,703		120,489				120,489		8.0	%	8.0	%	8.0	%	8.0	%
Protiviti	397,402				397,402		294,082				294,082		28.4	%	19.5	%	28.4	%	19.5	%
Total	$	1,398,380			$	1,398,380	$	1,506,691			$	1,506,691	100.0	%	100.0	%	100.0	%	100.0	%

GROSS MARGIN:
Temporary and consultant staffing	$	344,931			$	344,931	$	412,996			$	412,996	38.8	%	37.8	%	38.8	%	37.8	%
Permanent placement staffing	111,498				111,498		120,280				120,280		99.8	%	99.8	%	99.8	%	99.8	%
Protiviti	105,282		1,688		106,970		81,112		(3,671)		77,441		26.5	%	27.6	%	26.9	%	26.3	%
Total	$	561,711	$	1,688	$	563,399	$	614,388	$	(3,671)	$	610,717	40.2	%	40.8	%	40.3	%	40.5	%

SELLING GENERAL AND ADMINISTRATIVE EXPENSE:
Temporary and consultant staffing	$	278,547	$	(9,151)	$	269,396	$	286,174	$	33,058	$	319,232	31.3	%	26.2	%	30.3	%	29.2	%
Permanent placement staffing	94,867		(1,149)		93,718		105,722		3,647		109,369		84.9	%	87.7	%	83.9	%	90.8	%
Protiviti	49,648		—		49,648		50,972		—		50,972		12.5	%	17.3	%	12.5	%	17.3	%
Total	$	423,062	$	(10,300)	$	412,762	$	442,868	$	36,705	$	479,573	30.3	%	29.4	%	29.5	%	31.8	%

OPERATING/SEGMENT INCOME:
Temporary and consultant staffing	$	66,384	$	9,151	$	75,535	$	126,822	$	(33,058)	$	93,764	7.5	%	11.6	%	8.5	%	8.6	%
Permanent placement staffing	16,631		1,149		17,780		14,558		(3,647)		10,911		14.9	%	12.1	%	15.9	%	9.1	%
Protiviti	55,634		1,688		57,322		30,140		(3,671)		26,469		14.0	%	10.2	%	14.4	%	9.0	%
Total	$	138,649	$	11,988	$	150,637	$	171,520	$	(40,376)	$	131,144	9.9	%	11.4	%	10.8	%	8.7	%
Amortization of intangible assets	576		—		576		338		—		338		0.1	%	0.1	%	0.1	%	0.1	%
(Income) loss from investments held in employee deferred compensation trusts	(11,988)		11,988		—		40,376		(40,376)		—		0.9	%	(2.7	%)	0.0	%	0.0	%
Interest income, net	(45)		—		(45)		(957)		—		(957)		0.0	%	0.1	%	0.0	%	0.1	%
Income before income taxes	$	150,106	$	—	$	150,106	$	131,763	$	—	$	131,763	10.7	%	8.7	%	10.7	%	8.7	%

(1) Changes in the Company’s deferred compensation obligations are included in selling, general and administrative expense or, in the case of Protiviti, costs of services, while the related investment income is presented separately. The non-GAAP financial measures shown in the table above are adjusted to reclassify investment income from investments held in employee deferred compensation trusts to the same line item which includes the corresponding change in obligation. These adjustments have no impact to 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 obligation to employees changes accordingly. Changes in the Company’s deferred compensation obligations noted above remain in selling, general and administrative or in the case of the Company’s risk consulting and internal audit services division, 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. The Company’s income/loss from investments held in employee deferred compensation trusts was an income of $12 million for the three months ended March 31, 2021 whereas it had a loss of $40 million for the three months ended March 31, 2020. The increase in income from trust investments was due to positive market returns in 2021.

Income Before Income Taxes and Segment Income. The Company’s total ~~operating~~ income before income taxes was ~~$189~~$150 million, or ~~7.2%~~10.7% of revenues, for the ~~six~~three months ended ~~June 30, 2020, down~~March 31, 2021, up from ~~$306~~$132 million or ~~10.2%~~8.7% of revenues, for the ~~six~~three months ended ~~June 30, 2019.~~ March 31, 2020. Combined segment income was $151 million, or 10.8% of revenues, for the three months ended March 31, 2021, up from $131 million or 8.7% of revenues, for the three months ended March 31, 2020.

The following table provides a reconciliation of the non-GAAP combined segment income to reported income before income taxes for the three months ended March 31, 2021 and 2020 (in thousands):


	Three Months Ended March 31,
		2021		2020

Income before income taxes		$	150,106	$	131,763
Interest income, net		(45)		(957)
Amortization of intangible assets		576		338
Combined segment income		$	150,637	$	131,144

For the Company’s temporary and consultant staffing division, ~~operating~~segment income was ~~$122~~$76 million, or ~~6.6%~~8.5% of applicable revenues, down from ~~$211~~$94 million, or ~~9.7%~~8.6% of applicable revenues, in the first ~~half~~quarter of ~~2019.~~2020. For the Company’s permanent placement staffing division, ~~operating~~segment income was $18 million, or 15.9% of applicable revenues, up from segment income of $11 million, or ~~5.6% of applicable revenues, down from an operating income of $47 million, or 17.2%~~9.1% of applicable revenues, in the first ~~half~~quarter of ~~2019.~~2020. For the Company’s risk consulting and internal audit services division, ~~operating~~segment income was $57 million, or ~~9.8%~~14.4% of applicable revenues, compared to ~~an operating~~segment income of ~~$48~~$26 million or 9.0% of applicable revenues, in the first ~~half~~quarter of ~~2019.~~2020.

Provision for income taxes. The provision for income taxes was ~~28.3%~~26.3% and ~~27.0%~~31.8% for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. The ~~higher~~2020 rate was elevated based on the estimated lower coverage of non-deductible tax ~~rate in 2020 is primarily~~items due to ~~the relatively greater impact of disallowed expenses on the full-year estimated rate and less tax benefits related to year-to-date restricted stock vesting at a~~ lower ~~price compared to the first half of 2019.~~pandemic-impacted revenues.

Liquidity and Capital Resources

The change in the Company’s liquidity during the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ is primarily the net effect of funds generated by operations and the funds used for capital expenditures, ~~payment to trusts for~~investment in employee deferred compensation ~~plans,~~trusts, net of redemptions from employee deferred compensation trusts, repurchases of common stock, and payment of dividends.

Cash and cash equivalents were ~~$501~~$498 million and ~~$269~~$250 million at ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Operating activities provided ~~$426~~$68 million during the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, offset by ~~$43~~$15 million and ~~$149~~$124 million of net cash used in investing activities and financing activities, respectively. Operating activities provided ~~$248~~$125 million during the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, offset by ~~$48~~$28 million and ~~$208~~$110 million of net cash used in investing activities and financing activities, respectively.

Operating activities—Net cash provided by operating activities for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, was composed of net income of ~~$136~~$111 million adjusted upward for non-cash items of $69 million and net cash provided by changes in working capital of $221 million. Net cash provided by operating activities for the six months ended June 30, 2019, was composed of net income of $224 million adjusted upward for non-cash items of $57$33 million, offset by net cash used in changes in working capital of ~~$33~~$76 million. Net cash provided by operating activities for the three months ended March 31, 2020, was composed of net income of $90 million adjusted upward for non-cash items of $91 million, offset by net cash used in changes in working capital of $56 million.

Investing activities—Cash used in investing activities for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, was ~~$43~~$15 million. This was composed of capital expenditures of ~~$22~~$10 million and ~~net payments for~~investment in employee deferred compensation ~~plans~~trusts of ~~$21~~$28 million, offset by proceeds from employee deferred compensation trusts redemptions of $23 million. Cash used in investing activities for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, was ~~$48~~$28 million. This was composed of capital expenditures of ~~$29~~$14 million and ~~net payments for~~investment in employee deferred compensation ~~plans~~trusts of ~~$19~~$37 million, offset by proceeds from employee deferred compensation trusts redemptions of $23 million.

Financing activities—Cash used in financing activities for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, was ~~$149~~$124 million. This included repurchases of ~~$70~~$80 million in common stock and ~~$79~~$44 million in dividends paid to stockholders. Cash used in financing activities for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, was ~~$208~~$110 million. This included repurchases of ~~$134~~$70 million in common stock and ~~$74~~$40 million in dividends paid to stockholders.

As of ~~June 30, 2020,~~March 31, 2021, the Company is authorized to repurchase, from time to time, up to ~~1.5~~9.2 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~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company repurchased 0.8 million shares, at a cost of $61 million, and 1.0 million shares, at a cost of $51 ~~million, and 1.8 million shares, at a cost of $111~~ 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~~three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ such repurchases totaled 0.3 million shares, at a cost of ~~$12~~$19 million, and 0.3 million shares, at a cost of ~~$17~~$12 million, respectively. Repurchases of shares have been funded with cash generated from operations. ~~There were no open market share repurchases during the second quarter of 2020. We anticipate repurchase activity to commence again in the third quarter of 2020, at a reduced rate.~~

The Company’s working capital at ~~June 30, 2020,~~March 31, 2021, included ~~$501~~$498 million in cash and cash equivalents and ~~$665~~$800 million in 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.

We have limited visibility into future cash flows as the Company’s revenues are dependent on macroeconomic conditions. In order to mitigate expected declines in revenue, we aggressively cut costs in the quarter. These actions have been focused on eliminating all non-essential costs such as travel and events, as well as laying off the Company’s less experienced and lower performing staff. These aggressive cost reductions, coupled with a talented and driven team that is backed by our industry-leading technology, position us to fully participate in any economic recovery. In addition, theThe Company’s variable direct costs related to its temporary and consultant staffing business will largely fluctuate in relation to its ~~revenues~~revenues.

In May 2020, the Company entered into a new $100 million unsecured revolving credit facility (the “364-Day Credit Agreement”). Borrowings under the 364-Day Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the LIBOR plus an applicable margin. The 364-Day Credit Agreement is subject to certain financial covenants and the Company was in compliance with these covenants as of ~~June 30, 2020.~~March 31, 2021. There were no borrowings under the 364-Day Credit Agreement as of ~~June 30, 2020.~~March 31, 2021.

On ~~July 30, 2020,~~April 29, 2021, the Company announced a quarterly dividend of ~~$.34~~$.38 per share to be paid to all shareholders of record as of ~~August~~May 25, ~~2020.~~2021. The dividend will be paid on ~~September~~June 15, ~~2020.~~2021.

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~~three months ended ~~June 30, 2020,~~March 31, 2021, approximately ~~22%~~23% of the Company’s revenues were generated outside of the United States. 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 Canadian dollar, British pound, Euro, and Australian dollar, 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 non-U.S. markets, the Company’s reported results vary.

During the first ~~six~~three months of ~~2020,~~2021, the U.S. dollar fluctuated, ~~but~~and generally ~~strengthened,~~weakened, against the primary currencies in which the Company conducts business, compared to one year ago. Currency exchange rates had the effect of ~~decreasing~~increasing reported net service revenues by ~~$19.2~~$22.6 million, or ~~0.6%~~1.5%, in the first ~~half~~quarter of ~~2020~~2021 compared to the same period one year ago. The general ~~strengthening~~weakening of the U.S. dollar also affected the reported level of expenses incurred in the Company’s foreign operations. Because substantially all the Company’s foreign operations generated revenues and incurred expenses within the same country and currency, the effect of ~~lower~~higher reported revenues is largely offset by the ~~decrease~~increase in reported operating expenses. Reported net income was ~~$0.7~~$0.8 million, or ~~0.3%~~0.9%, ~~lower~~higher in the first ~~half~~quarter of ~~2020~~2021 compared to the same period one year ago due to the effect of currency exchange rates.

~~For the one month ended July 31, 2020, the U.S. dollar has weakened against the Canadian dollar, Euro, Australian dollar, and British pound since June 30, 2020.~~ If currency exchange rates were to remain at ~~July 2020~~March 31, 2021 levels throughout the remainder of ~~2020,~~2021, the currency impact on the Company’s full-year reported revenues and operating expenses would be nearly flat compared to full year ~~2019~~2020 results. Should current trends continue, the impact to reported net income would be immaterial.

Fluctuations in currency exchange rates impact the U.S. dollar amount of the Company’s stockholders’ equity. The assets and liabilities of the Company’s non-U.S. 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 income. 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, except for transfers to the U.S. for payment of intercompany loans, working capital loans made between the U.S. and the Company’s foreign subsidiaries, and dividends from the Company’s foreign subsidiaries.

ITEM 4. Controls and Procedures

Management, including the Company’s President and Chief Executive Officer and the Executive Vice President and 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 President and Chief Executive Officer and the Executive Vice President and 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.

PART II—OTHER INFORMATION

ITEM 1. Legal Proceedings

There have been no material developments with regard to any of the legal proceedings previously disclosed in the Company’s annual report on Form 10-K for the fiscal year ended December 31, ~~2019.~~2020.

ITEM 1A. Risk Factors

~~Except for the modifications and additions to our risk factors appearing in our Quarterly Report on Form 10-Q for the period ended March 31, 2020, there~~There have not been any material changes with regard to the risk factors previously disclosed in ~~our Annual Report.~~the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2020.

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 (b)
April 1, 2020 to April 30, 2020 — $ — — 1,470,655
May 1, 2020 to May 31, 2020 — $ — — 1,470,655
June 1, 2020 to June 30, 2020 184 (a) $ 51.60 — 1,470,655
Total April 1, 2020 to June 30, 2020 184 —


	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)
January 1, 2021 to January 31, 2021	—		$	—	—	9,947,956
February 1, 2021 to February 28, 2021	246,623	(a)	$	76.79	178,051	9,769,905
March 1, 2021 to March 31, 2021	801,406	(b)	$	76.53	618,905	9,151,000
Total January 1, 2021 to March 31, 2021	1,048,029				796,956

(a)~~Represents~~Includes 68,572 shares repurchased in connection with employee stock plans, whereby shares were tendered by employees for the payment of applicable withholding taxes.

(b)Includes 182,501 shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes.

~~(b)~~(c)Commencing in October 1997, the ~~Company’s~~Company's Board of Directors has, at various times, authorized the repurchase, from time to time, of the ~~Company’s~~Company's common stock on the open market or in privately negotiated transactions depending on market conditions. Since plan inception, a total of ~~118,000,000~~128,000,000 shares have been authorized for repurchase of which ~~116,529,345~~118,849,000 shares have been repurchased as of ~~June 30, 2020.~~March 31, 2021.

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, incorporated by reference to Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009.

3.2			Amended and Restated By-Laws, incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K dated February 12, 2020.



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 INTERNATIONAL INC. (Registrant)

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

Date: ~~August 3, 2020~~April 30, 2021


	June 30, 2020		December 31, 2019
Deferred compensation plans	$	418,074	$	398,442
Prepaid expenses	87,597		84,364
Other	47,583		42,768
Other current assets	$	553,254	$	525,574


	June 30, 2020		December 31, 2019
Weighted average remaining lease term for operating leases	4.6 years		4.8 years
Weighted average discount rate for operating leases	2.8	%	3.0	%


2020 (excluding the six months ended June 30, 2020)	$	41,605
2021	75,031
2022	57,790
2023	47,709
2024	37,314
Thereafter	39,474
Less: Imputed interest	(18,546)
Present value of operating lease liabilities (a)	$	280,377


	June 30, 2020				December 31, 2019
Employee deferred compensation plans	$	428,683	$	421,198
Payroll and benefits	257,190		280,918
Payroll taxes	7,816		21,831
Workers’ compensation	21,223		19,655
Accrued payroll and benefit costs	$	714,912	$	743,602