Robert Half(US:RHI)2020-08-03 20:26markdown [FORM 10-Q Cover Page](index=1&type=section&id=FORM%2010-Q) [Registrant Information](index=1&type=section&id=Registrant%20Information) This section provides key identification details for Robert Half International Inc.'s Form 10-Q filing and filer status - Registrant: **ROBERT HALF INTERNATIONAL INC.**[2](index=2&type=chunk) - Quarterly Period Ended: June 30, 2020[2](index=2&type=chunk) - Commission File Number: 1-10427[2](index=2&type=chunk) - Common Stock Trading Symbol: **RHI** on New York Stock Exchange[4](index=4&type=chunk) - Filer Status: **Large accelerated filer**[4](index=4&type=chunk) - Shares Outstanding as of July 31, 2020: **114,635,133 shares** of $.001 par value Common Stock[4](index=4&type=chunk) [PART I—FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Robert Half International Inc.'s unaudited condensed consolidated financial statements and detailed notes for the period ended June 30, 2020 [Condensed Consolidated Statements of Financial Position (Unaudited)](index=2&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20FINANCIAL%20POSITION%20(UNAUDITED)) | Metric (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $501,485 | $270,478 | | Accounts receivable, net | $665,409 | $832,797 | | Total current assets | $1,720,148 | $1,628,849 | | Total assets | $2,402,377 | $2,311,408 | | Total current liabilities | $977,167 | $940,692 | | Total liabilities | $1,245,671 | $1,167,725 | | Total stockholders' equity | $1,156,706 | $1,143,683 | [Condensed Consolidated Statements of Operations (Unaudited)](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(UNAUDITED)) | Metric (in thousands, except per share) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenues | $1,108,326 | $1,516,385 | $2,615,017 | $2,984,915 | | Gross margin | $423,077 | $637,541 | $1,033,794 | $1,245,129 | | Income before income taxes | $58,024 | $160,103 | $189,787 | $307,486 | | Net income | $46,196 | $114,612 | $136,111 | $224,410 | | Diluted Net income per share | $0.41 | $0.98 | $1.20 | $1.91 | | Dividends declared per share | $0.34 | $0.31 | $0.68 | $0.62 | [Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20COMPREHENSIVE%20INCOME%20(LOSS)%20(UNAUDITED)) | Metric (in thousands) | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $46,196 | $114,612 | $136,111 | $224,410 | | Foreign currency translation adjustments, net of tax | $6,534 | $2,146 | $(7,166) | $249 | | Total comprehensive income (loss) | $52,730 | $116,758 | $128,945 | $224,659 | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(UNAUDITED)) Balance at Dec 31, 2019 vs. Balance at Jun 30, 2020 (in thousands) | Metric (in thousands) | Balance at Dec 31, 2019 | Balance at Jun 30, 2020 | | :-------------------- | :---------------------- | :---------------------- | | Common Stock (Shares) | 115,120 | 114,635 | | Common Stock (Par Value) | $115 | $115 | | Additional Paid-In Capital | $1,127,487 | $1,154,046 | | Accumulated Other Comprehensive Income (Loss) | $(19,986) | $(27,152) | | Retained Earnings | $36,067 | $29,697 | | Total Stockholders' Equity | $1,143,683 | $1,156,706 | - Net income for the six months ended June 30, 2020, contributed **$136,111 thousand** to retained earnings[8](index=8&type=chunk)[14](index=14&type=chunk) - Dividends declared for the six months ended June 30, 2020, totaled **$0.68 per share**, reducing retained earnings by **$78,416 thousand**[8](index=8&type=chunk)[14](index=14&type=chunk) - Repurchases of common stock for the six months ended June 30, 2020, reduced total stockholders' equity by **$63,508 thousand**[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) | Metric (in thousands) | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :-------------------- | :----------------------------- | :----------------------------- | | Net cash flows provided by operating activities | $425,942 | $247,827 | | Net cash flows used in investing activities | $(43,015) | $(47,729) | | Net cash flows used in financing activities | $(149,000) | $(207,675) | | Change in cash and cash equivalents | $231,007 | $(7,139) | | Cash and cash equivalents at end of period | $501,485 | $269,440 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) [Note A—Summary of Significant Accounting Policies](index=7&type=section&id=Note%20A%E2%80%94Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's core business, accounting policies, and the impact of the COVID-19 pandemic on financial estimates - The Company provides specialized staffing and risk consulting services through divisions like Accountemps, Robert Half Finance & Accounting, OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal, The Creative Group, and Protiviti[17](index=17&type=chunk) - Revenues are predominantly derived from specialized staffing services, and the Company operates globally across North America, South America, Europe, Asia, and Australia[17](index=17&type=chunk) - The COVID-19 pandemic has introduced a greater degree of uncertainty in making judgments and estimates for financial statements, with potential meaningful impacts in future periods[21](index=21&type=chunk) Allowance for Credit Losses Activity (in thousands) | Period | Amount | | :------------------------ | :----- | | Balance as of Dec 31, 2019 | $22,885 | | Adoption of accounting pronouncement | $558 | | Balance as of Jan 1, 2020 | $23,443 | | Charges to expense | $6,713 | | Deductions | $(4,101) | | Other, including translation adjustments | $(1,018) | | Balance as of Jun 30, 2020 | $25,037 | - Capitalized internal-use software development costs were **$22.9 million** for the six months ended June 30, 2020, up from **$12.9 million** in the prior year period[28](index=28&type=chunk) [Note B—New Accounting Pronouncements](index=9&type=section&id=Note%20B%E2%80%94New%20Accounting%20Pronouncements) This note details the adoption of new accounting pronouncements, including CECL and Goodwill Impairment Test, with immaterial impacts - The Company adopted the Current Expected Credit Losses Model (CECL) as of January 1, 2020, with an **immaterial impact** on financial statements[30](index=30&type=chunk) - The Company adopted the simplified Goodwill Impairment Test as of January 1, 2020, with an **immaterial impact** on financial statements[31](index=31&type=chunk) - ASU 2020-04, "Reference Rate Reform," providing optional guidance for LIBOR transition, is not expected to have a **material impact** on the Company's financial statements[32](index=32&type=chunk) [Note C—Revenue Recognition](index=9&type=section&id=Note%20C%E2%80%94Revenue%20Recognition) This note describes the Company's revenue recognition policies across its three segments and provides a disaggregated view of service revenues - Revenues are derived from three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services[33](index=33&type=chunk) - Temporary and consultant staffing revenues are recognized on a gross basis when services are rendered, as the Company acts as a principal[34](index=34&type=chunk)[35](index=35&type=chunk) - Permanent placement staffing revenues are primarily recognized when employment candidates accept offers of permanent employment, with historical data used to estimate guarantee period impacts[39](index=39&type=chunk) - Risk consulting and internal audit services revenues are recognized over time using a proportional performance method, based on costs incurred relative to total estimated costs[40](index=40&type=chunk) Service Revenues Disaggregated by Line of Business (in thousands) | Line of Business | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 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** | Contract Liabilities Activity (in thousands) | Period | Contract Liabilities | | :------------------------------------ | :------------------- | | Balance as of December 31, 2018 | $12,997 | | Payments in advance of satisfaction of performance obligations | $13,030 | | Revenue recognized | $(12,072) | | Other, including translation adjustments | $(1,007) | | Balance as of December 31, 2019 | $12,948 | | Payments in advance of satisfaction of performance obligations | $11,847 | | Revenue recognized | $(13,509) | | Other, including translation adjustments | $548 | | Balance as of June 30, 2020 | $11,834 | [Note D—Other Current Assets](index=11&type=section&id=Note%20D%E2%80%94Other%20Current%20Assets) This note provides a breakdown of the Company's other current assets, including deferred compensation plans and prepaid expenses Other Current Assets (in thousands) | Category | June 30, 2020 | December 31, 2019 | | :------- | :------------ | :---------------- | | Deferred compensation plans | $418,074 | $398,442 | | Prepaid expenses | $87,597 | $84,364 | | Other | $47,583 | $42,768 | | **Total Other current assets** | **$553,254** | **$525,574** | [Note E—Property and Equipment, Net](index=11&type=section&id=Note%20E%E2%80%94Property%20and%20Equipment,%20Net) This note details the composition of the Company's property and equipment, net of accumulated depreciation Property and Equipment, Net (in thousands) | Category | 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** | [Note F—Leases](index=12&type=section&id=Note%20F%E2%80%94Leases) This note provides information on the Company's operating leases, including expenses, terms, and future minimum payments - Operating lease expenses were **$20.0 million** for the three months ended June 30, 2020, and **$39.9 million** for the six months ended June 30, 2020[51](index=51&type=chunk) Supplemental Lease Information | Metric | 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 % | Future Minimum Lease Payments (in thousands) as of June 30, 2020 | Year | Amount | | :--- | :----- | | 2020 (excluding 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** | **$280,377** | - As of June 30, 2020, the Company had additional future minimum lease obligations of **$16.1 million** for operating leases that had not yet commenced[53](index=53&type=chunk) [Note G—Goodwill](index=13&type=section&id=Note%20G%E2%80%94Goodwill) This note presents goodwill activity by segment and confirms no impairment was identified in the annual assessment Goodwill Activity (in thousands) | Segment | Balance as of Dec 31, 2019 | Foreign currency translation adjustments | Balance as of Jun 30, 2020 | | :---------------------------- | :------------------------- | :------------------------------------- | :------------------------- | | Temporary and consultant staffing | $134,210 | $(245) | $133,965 | | Permanent placement staffing | $26,097 | $(66) | $26,031 | | Risk consulting and internal audit services | $50,057 | $(223) | $49,834 | | **Total Goodwill** | **$210,364** | **$(534)** | **$209,830** | - The Company's annual goodwill impairment assessment as of June 30, 2020, determined **no impairment** events or circumstances[56](index=56&type=chunk) [Note H—Accrued Payroll and Benefit Costs](index=13&type=section&id=Note%20H%E2%80%94Accrued%20Payroll%20and%20Benefit%20Costs) This note details accrued payroll and benefit costs, including deferred compensation and CARES Act payroll tax deferrals Accrued Payroll and Benefit Costs (in thousands) | Category | 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 | | **Total Accrued payroll and benefit costs** | **$714,912** | **$743,602** | - The Company deferred paying **$37.5 million** of applicable payroll taxes as of June 30, 2020, under the CARES Act, included in other liabilities[57](index=57&type=chunk) - The asset value of nonqualified deferred compensation plans was **$418.1 million** as of June 30, 2020, and the corresponding liability was **$428.7 million**[58](index=58&type=chunk) - Company contribution expense for qualified and nonqualified plans totaled **$12.3 million** for the six months ended June 30, 2020, up from **$8.4 million** in the prior year period[59](index=59&type=chunk) [Note I—Commitments and Contingencies](index=15&type=section&id=Note%20I%E2%80%94Commitments%20and%20Contingencies) This note discloses ongoing legal proceedings, including class-action lawsuits, and a new $100 million revolving credit facility - The Company is involved in two class-action lawsuits (Gentry and Dorff) alleging unpaid compensation, wage statement issues, and employee misclassification in California[61](index=61&type=chunk)[62](index=62&type=chunk) - The outcome or range of loss for these legal proceedings is **not feasible to predict**, and no amounts have been provided in the financial statements[61](index=61&type=chunk)[62](index=62&type=chunk) - In May 2020, the Company entered into a new **$100 million** unsecured revolving credit facility, with **no borrowings outstanding** as of June 30, 2020[65](index=65&type=chunk) [Note J—Stockholders' Equity](index=16&type=section&id=Note%20J%E2%80%94Stockholders'%20Equity) This note details the Company's stock repurchase program, including shares and cost of common stock repurchased - As of June 30, 2020, the Company is authorized to repurchase up to **1.5 million** additional **shares** of common stock[67](index=67&type=chunk) Common Stock Repurchases (in thousands) | Type of Repurchase | Six Months Ended June 30, 2020 (Shares) | Six Months Ended June 30, 2020 (Cost) | Six Months Ended June 30, 2019 (Shares) | Six Months Ended June 30, 2019 (Cost) | | :----------------- | :-------------------------------------- | :------------------------------------ | :-------------------------------------- | :------------------------------------ | | Open market | 983 | $51,477 | 1,812 | $111,228 | | Employee stock plans | 280 | $12,031 | 257 | $16,721 | [Note K—Net Income Per Share](index=17&type=section&id=Note%20K%E2%80%94Net%20Income%20Per%20Share) This note provides the detailed calculation of basic and diluted net income per share Net Income Per Share Calculation (in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 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 | 113,121 | 116,988 | 113,489 | 117,475 | | Basic Net income per share | $0.41 | $0.98 | $1.20 | $1.92 | | Diluted Net income per share | $0.41 | $0.98 | $1.20 | $1.91 | [Note L—Business Segments](index=17&type=section&id=Note%20L%E2%80%94Business%20Segments) This note defines the Company's three reportable segments, their performance evaluation, and provides revenue and operating income reconciliation - The Company operates in three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services[72](index=72&type=chunk) - Performance is evaluated based on income from operations before net interest income, intangible asset amortization expense, and income taxes[73](index=73&type=chunk) Service Revenues by Reportable Segment (in thousands) | Segment | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Temporary and consultant 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 | | **Total Service revenues** | **$1,108,326** | **$1,516,385** | **$2,615,017** | **$2,984,915** | Operating Income by Reportable Segment (in thousands) | Segment | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Temporary and consultant staffing | $28,390 | $105,238 | $122,154 | $211,256 | | Permanent placement staffing | $(248) | $25,344 | $10,663 | $46,901 | | Risk consulting and internal audit services | $30,107 | $28,820 | $56,576 | $47,474 | | **Total Operating income** | **$58,249** | **$159,402** | **$189,393** | **$305,631** | [Note M—Subsequent Events](index=18&type=section&id=Note%20M%E2%80%94Subsequent%20Events) This note discloses the subsequent declaration of a quarterly dividend of $0.34 per share - On July 30, 2020, the Company announced a quarterly dividend of **$0.34 per share**, payable on September 15, 2020, to shareholders of record as of August 25, 2020[77](index=77&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial performance and condition, highlighting the significant impact of the COVID-19 pandemic on operations, particularly the staffing business. It discusses revenue trends, cost management actions, liquidity, and capital resources, along with forward-looking statements and economic indicators [Executive Overview](index=19&type=section&id=Executive%20Overview) This overview discusses the COVID-19 pandemic's impact on operations, staffing revenue decline, and Protiviti's strong growth - The COVID-19 pandemic caused global economic disruptions, significantly impacting the Company's staffing business[79](index=79&type=chunk)[81](index=81&type=chunk) - Net service revenues for the first half of 2020 decreased by **12%** to **$2.62 billion**, with net income of **$136 million** and diluted EPS of **$1.20**[81](index=81&type=chunk) - Risk consulting and internal audit services (Protiviti) experienced strong revenue growth of **10%** in the first half of 2020, offsetting declines in temporary and permanent placement staffing[81](index=81&type=chunk)[82](index=82&type=chunk) - The U.S. unemployment rate increased from **3.5%** in December 2019 to **11.1%** at the end of Q2 2020, shifting from a candidate-constrained to a high-unemployment labor market[83](index=83&type=chunk) - The Company reduced operating costs, including layoffs of less experienced staff and furloughs of corporate staff, and expects 2020 capital expenditures to range from **$75 million** to **$85 million**, primarily for software and technology infrastructure[84](index=84&type=chunk)[85](index=85&type=chunk) [Critical Accounting Policies and Estimates](index=20&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section states no material changes to critical accounting policies or estimates for the six months ended June 30, 2020 - **No material changes** to critical accounting policies or estimates for the six months ended June 30, 2020[86](index=86&type=chunk) [Recent Accounting Pronouncements](index=20&type=section&id=Recent%20Accounting%20Pronouncements) This section directs readers to Note B of the Condensed Consolidated Financial Statements for recent accounting pronouncements - Refer to Note B—"New Accounting Pronouncements" for details on recent accounting pronouncements[87](index=87&type=chunk) [Results of Operations](index=20&type=section&id=Results%20of%20Operations) This section analyzes financial performance, highlighting the COVID-19 pandemic's negative impact on staffing and Protiviti's resilience [Non-GAAP Financial Measures](index=21&type=section&id=Non-GAAP%20Financial%20Measures) This subsection explains the Company's use of non-GAAP financial measures to evaluate underlying operational performance - The Company uses "as adjusted" revenue growth calculations to remove the impact of foreign currency exchange rates and billing days, aiding in evaluating revenue trends attributable to operating activities[92](index=92&type=chunk)[93](index=93&type=chunk) - Non-GAAP financial measures are not substitutes for GAAP results and may not be comparable to those of other companies[94](index=94&type=chunk) [Three Months Ended June 30, 2020 and 2019](index=21&type=section&id=Three%20Months%20Ended%20June%2030,%202020%20and%202019) For Q2 2020, total revenues decreased by 26.9% to $1.11 billion due to staffing declines, while risk consulting grew by 4.1% Revenue Performance (Three Months Ended June 30, 2020 vs. 2019) | Segment | 2020 Revenue (in millions) | 2019 Revenue (in millions) | % Change (Reported) | % Change (As Adjusted) | | :---------------------------- | :------------------------- | :------------------------- | :------------------ | :--------------------- | | Total Service Revenues | $1,108.3 | $1,516.4 | -26.9% | N/A | | Temporary and consultant staffing | $753.4 | $1,102.7 | -31.7% | -31.2% | | Permanent placement staffing | $71.0 | $140.9 | -49.6% | -49.1% | | Risk consulting and internal audit services | $283.9 | $272.8 | +4.1% | +4.5% | Gross Margin Performance (Three Months Ended June 30, 2020 vs. 2019) | Segment | 2020 Gross Margin (in millions) | 2019 Gross Margin (in millions) | % Change | 2020 GM % of Revenue | 2019 GM % of Revenue | | :---------------------------- | :------------------------------ | :------------------------------ | :------- | :------------------- | :------------------- | | Total Gross Margin | $423 | $638 | -33.6% | N/A | N/A | | Temporary and consultant staffing | $279 | $421 | -33.6% | 37.1% | 38.2% | | Permanent placement staffing | $71 | $141 | -49.6% | 100.0% | 100.0% | | Risk consulting and internal audit services | $73 | $76 | -4.2% | 25.7% | 27.9% | Operating Income Performance (Three Months Ended June 30, 2020 vs. 2019) | Segment | 2020 Operating Income (in millions) | 2019 Operating Income (in millions) | 2020 Operating Margin | 2019 Operating Margin | | :---------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :-------------------- | | Total Operating Income | $58 | $159 | 5.3% | 10.5% | | Temporary and consultant staffing | $28 | $105 | 3.8% | 9.5% | | Permanent placement staffing | $(0.2) | $25 | (0.3)% | 18.0% | | Risk consulting and internal audit services | $30 | $29 | 10.6% | 10.6% | - Selling, general and administrative expenses decreased by **23.7%** to **$365 million**, but increased as a percentage of revenues to **32.9%** (from **31.5%**) due to negative leverage from decreased revenues[105](index=105&type=chunk) - The provision for income taxes was **20.4%** for the three months ended June 30, 2020, down from **28.4%** in the prior year, due to a lower anticipated full-year tax rate[110](index=110&type=chunk) [Six Months Ended June 30, 2020 and 2019](index=25&type=section&id=Six%20Months%20Ended%20June%2030,%202020%20and%202019) For H1 2020, total revenues decreased by 12.4% to $2.62 billion, with staffing declines offset by 10.1% growth in risk consulting Revenue Performance (Six Months Ended June 30, 2020 vs. 2019) | Segment | 2020 Revenue (in millions) | 2019 Revenue (in millions) | % Change (Reported) | % Change (As Adjusted) | | :---------------------------- | :------------------------- | :------------------------- | :------------------ | :--------------------- | | Total Service Revenues | $2,615.0 | $2,984.9 | -12.4% | N/A | | Temporary and consultant staffing | $1,845.5 | $2,187.3 | -15.6% | -15.6% | | Permanent placement staffing | $191.5 | $272.5 | -29.7% | -29.6% | | Risk consulting and internal audit services | $578.0 | $525.1 | +10.1% | +9.8% | Gross Margin Performance (Six Months Ended June 30, 2020 vs. 2019) | Segment | 2020 Gross Margin (in millions) | 2019 Gross Margin (in millions) | % Change | 2020 GM % of Revenue | 2019 GM % of Revenue | | :---------------------------- | :------------------------------ | :------------------------------ | :------- | :------------------- | :------------------- | | Total Gross Margin | $1,030 | $1,250 | -17.0% | N/A | N/A | | Temporary and consultant staffing | $692 | $833 | -16.9% | 37.5% | 38.1% | | Permanent placement staffing | $191 | $272 | -29.7% | 100.0% | 100.0% | | Risk consulting and internal audit services | $150 | $140 | +7.5% | 26.0% | 26.6% | Operating Income Performance (Six Months Ended June 30, 2020 vs. 2019) | Segment | 2020 Operating Income (in millions) | 2019 Operating Income (in millions) | 2020 Operating Margin | 2019 Operating Margin | | :---------------------------- | :---------------------------------- | :---------------------------------- | :-------------------- | :-------------------- | | Total Operating Income | $189 | $306 | 7.2% | 10.2% | | Temporary and consultant staffing | $122 | $211 | 6.6% | 9.7% | | Permanent placement staffing | $11 | $47 | 5.6% | 17.2% | | Risk consulting and internal audit services | $57 | $48 | 9.8% | 9.0% | - Selling, general and administrative expenses decreased by **10.1%** to **$844 million**, but increased as a percentage of revenues to **32.3%** (from **31.5%**) due to negative leverage[121](index=121&type=chunk)[122](index=122&type=chunk) - The provision for income taxes was **28.3%** for the six months ended June 30, 2020, up from **27.0%** in the prior year, primarily due to the greater impact of disallowed expenses and less tax benefits from restricted stock vesting[127](index=127&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section details liquidity, highlighting increased cash to $501 million, strong operating cash flows, and a new $100 million credit facility - Cash and cash equivalents increased to **$501 million** at June 30, 2020, from **$269 million** at June 30, 2019[129](index=129&type=chunk) Cash Flow Summary (Six Months Ended June 30, in millions) | Activity | 2020 | 2019 | | :-------------------- | :--- | :--- | | Operating activities | $426 | $248 | | Investing activities | $(43) | $(48) | | Financing activities | $(149) | $(208) | - Repurchases of common stock decreased to **$70 million** (**1.0 million shares**) for the six months ended June 30, 2020, from **$134 million** (**1.8 million shares**) in the prior year, with **no open market repurchases** in Q2 2020[132](index=132&type=chunk)[133](index=133&type=chunk) - The Company entered into a new **$100 million** unsecured revolving credit facility in May 2020, with **no borrowings** as of June 30, 2020, enhancing liquidity[135](index=135&type=chunk) - Management expects internally generated cash to be **sufficient to support** working capital needs, fixed payments, dividends, and other obligations[134](index=134&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses market risks, primarily foreign currency fluctuations, and the COVID-19 pandemic's impact on financial estimates - The COVID-19 pandemic introduces greater uncertainty in financial estimates and potential impacts on operations, financial condition, and liquidity[137](index=137&type=chunk) - Approximately **22%** of the Company's revenues for the first six months of 2020 were generated outside the U.S., exposing it to foreign currency fluctuations, particularly with the Canadian dollar, British pound, Euro, and Australian dollar[138](index=138&type=chunk)[139](index=139&type=chunk) - The strengthening U.S. dollar in the first half of 2020 decreased reported net service revenues by **$19.2 million** (**0.6%**) and net income by **$0.7 million** (**0.3%**) compared to the prior year, though lower reported revenues were largely offset by decreased reported operating expenses[141](index=141&type=chunk) - Fluctuations in currency exchange rates generally do not affect cash flow or result in actual economic gains or losses, as foreign operations generate revenues and incur expenses in the same local currency[143](index=143&type=chunk) [ITEM 4. Controls and Procedures](index=29&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures as of June 30, 2020 - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were **effective** as of June 30, 2020[144](index=144&type=chunk) - These controls ensure that information required to be disclosed in SEC reports is recorded, processed, summarized, and reported within specified time periods[144](index=144&type=chunk) [PART II—OTHER INFORMATION](index=30&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) [ITEM 1. Legal Proceedings](index=30&type=section&id=ITEM%201.%20Legal%20Proceedings) This section states no material developments in legal proceedings since the December 31, 2019, Annual Report - **No material developments** in legal proceedings since the December 31, 2019, Annual Report on Form 10-K[147](index=147&type=chunk) [ITEM 1A. Risk Factors](index=30&type=section&id=ITEM%201A.%20Risk%20Factors) This section indicates no material changes to risk factors, except those disclosed in the March 31, 2020, Form 10-Q - **No material changes** to risk factors, except for those disclosed in the Quarterly Report on Form 10-Q for the period ended March 31, 2020[148](index=148&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=30&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's common stock repurchase program, including authorized and repurchased shares - Since inception in October 1997, **118,000,000 shares** have been authorized for repurchase, with **116,529,345 shares** repurchased as of June 30, 2020[149](index=149&type=chunk) Issuer Purchases of Equity Securities (April 1, 2020 to June 30, 2020) | Period | 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 | | :-------------------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :------------------------------------------------------------------------------ | | 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 | $51.60 | — | 1,470,655 | | **Total April 1, 2020 to June 30, 2020** | **184** | **N/A** | **—** | **N/A** | - The **184 shares** repurchased in June 2020 were in connection with employee stock plans for payment of withholding taxes[152](index=152&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=30&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) This section states no defaults upon senior securities during the reporting period - **No defaults** upon senior securities[150](index=150&type=chunk) [ITEM 4. Mine Safety Disclosure](index=30&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosure) This section indicates that mine safety disclosure is not applicable to the Company - Mine safety disclosure is **not applicable**[151](index=151&type=chunk) [ITEM 5. Other Information](index=31&type=section&id=ITEM%205.%20Other%20Information) This section states no other information to report - **No other information to report**[153](index=153&type=chunk) [ITEM 6. Exhibits](index=31&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including organizational documents and certifications - Exhibits include Restated Certificate of Incorporation, Amended and Restated By-Laws, Rule 13a-14(a) Certifications of CEO and CFO, Section 1350 Certifications of CEO and CFO, and Inline XBRL data[154](index=154&type=chunk)[155](index=155&type=chunk) [SIGNATURES](index=32&type=section&id=SIGNATURES) [Filing Signatures](index=32&type=section&id=Filing%20Signatures) This section contains the signature of the authorized signatory for Robert Half International Inc - The report is signed by Michael C. Buckley, Executive Vice President and Chief Financial Officer, as the Principal Financial Officer and duly authorized signatory[157](index=157&type=chunk) - Date of signature: August 3, 2020[157](index=157&type=chunk)