Robert Half(RHI) - 2021 Q4 - Annual Report

PART I Item 1. Business The company provides specialized staffing and risk consulting services through its various divisions and global operations - Robert Half International Inc provides specialized staffing and risk consulting services through divisions such as Accountemps, Robert Half Finance & Accounting, OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal, The Creative Group, and Protiviti[10] - Protiviti, a global consulting firm, was established in 2002 and offers services in internal audit, technology consulting, risk and compliance consulting, and business performance improvement[11][21] - The company operates 321 staffing offices in 42 states and 17 foreign countries, and Protiviti has 64 offices in 24 states and 12 foreign countries as of December 31, 2021[24][25] - The expanded acceptance of remote work creates significant opportunities, strengthening the company's competitive position by leveraging its global brand, office network, candidate database, and AI-driven technologies for out-of-market recruitment[26] - As of December 31, 2021, approximately 55% of the Company's global workforce was female, and 47% of managerial and leadership roles were held by women[32] - Approximately 33% of the U.S. workforce was from underrepresented groups[32] Human Capital Overview (2021 vs. 2020) | Category | 2021 | 2020 | | :-------------------------------- | :----- | :----- | | Full-time internal staff | 14,600 | 13,000 | | Protiviti operations staff | 5,700 | 5,000 | | Engagement professionals placed | 177,000 | 150,500 | Item 1A. Risk Factors The company's business is exposed to risks from economic downturns, competition, regulations, and cybersecurity threats - Demand for the Company's services is highly dependent on global economic activity and employment levels; any reduction could significantly decrease revenues and profits[41] - The Company's reputation is critical, and client dissatisfaction or employee misconduct could harm its ability to attract and retain clients and candidates[42] - International operations are subject to risks such as political and economic conditions, foreign laws, U.S legal requirements for foreign operations, cultural differences, adverse tax consequences, and foreign currency exchange fluctuations[43][44] - The COVID-19 pandemic has created significant uncertainty, impacting demand for services, disrupting operations, and increasing vulnerability to cybersecurity risks due to remote work[46][47][48][49][50] - The Company faces intense competition in the staffing services business due to low barriers to entry and the presence of numerous national, regional, and local firms[54] - Potential liabilities include claims from temporary employees for workplace events and claims from clients for errors, omissions, theft, or misuse of confidential information by temporary employees[55] - Success is highly dependent on attracting and retaining qualified management personnel and employees, as the Company is a services business[56] - Failure to keep pace with rapid technological changes, including AI, machine learning, and automation, could negatively affect services, operations, and growth[57][58] - The Company and its subsidiaries are defendants in several class and representative action lawsuits alleging wage and hour violations and non-compliance with the Fair Credit Reporting Act[65][66] - Government-imposed vaccine mandates could lead to employee attrition or resistance to returning to onsite work, materially affecting business and results of operations[67] - The Company's computer and communications systems are vulnerable to damage, interruption, and cyberattacks, which could lead to security breaches and disclosure of confidential information[78][79] - Changes in data privacy and protection laws (e.g., GDPR) could increase operating costs and lead to governmental enforcement actions or fines for non-compliance[80] - Failure to maintain adequate financial and management processes and controls could lead to errors in financial reporting, regulatory scrutiny, and loss of public confidence[81] Item 1B. Unresolved Staff Comments This section states that there are no unresolved staff comments - Not applicable[85] Item 2. Properties The company operates from leased offices globally, with headquarters in California - Company headquarters are located in Menlo Park and San Ramon, California[86] - As of December 31, 2021, staffing services operated through 321 leased offices in 42 states, the District of Columbia, and 17 foreign countries[86] - As of December 31, 2021, Protiviti had 64 leased offices in 24 states and 12 foreign countries[86] Item 3. Legal Proceedings The company is involved in several legal proceedings, including class action lawsuits and a significant claim against Protiviti - Jessica Gentry filed a class action lawsuit in California alleging denial of compensation for interview time and inaccurate wage statements, seeking unspecified damages and penalties[87] - Shari Dorff filed a class action lawsuit in California alleging misclassification of salaried recruiters as exempt, failure to provide meal/rest breaks, untimely wage payments, and improper denial of expense reimbursement, seeking unspecified damages and penalties[88] - Protiviti Inc is a defendant in a lawsuit seeking over $500 million, filed by the Pennsylvania Insurance Commissioner, related to its role and performance of procedures regarding certain investments of Senior Health Insurance Company of Pennsylvania[89] - The Company believes it has meritorious defenses and intends to vigorously defend against all litigations, with legal costs expensed as incurred[87][88][89][91] Item 4. Mine Safety Disclosure This section states that mine safety disclosure is not applicable to the Company - Not applicable[92] PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details the company's common stock trading, shareholder information, and equity repurchase programs - The Company's Common Stock is listed on the New York Stock Exchange under the symbol 'RHI'[95] - Since October 1997, the Board of Directors has authorized repurchases of common stock, totaling 128,000,000 shares authorized and 120,848,307 shares repurchased as of December 31, 2021[96] Common Stock Information | Metric | Value | | :-------------------------------- | :---------------- | | Holders of record (Jan 31, 2022) | 1,185 | | Outstanding shares (Jan 31, 2022) | 110,685,988 | | Market value (non-affiliates, Jun 30, 2021) | ~$9.68 billion | Issuer Purchases of Equity Securities (Q4 2021) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Publicly Announced Plans | Maximum Shares Remaining Under Publicly Announced Plans | | :-------------------------------- | :--------------------- | :--------------------------- | :--------------------------------------------------- | :------------------------------------------------------ | | Oct 1, 2021 to Oct 31, 2021 | — | $ — | — | 7,694,176 | | Nov 1, 2021 to Nov 30, 2021 | 259,591 | $ 116.02 | 259,591 | 7,434,585 | | Dec 1, 2021 to Dec 31, 2021 | 376,471 | $ 108.61 | 282,892 | 7,151,693 | | Total Q4 2021 | 636,062 | | 542,483 | | Equity Compensation Plan Information (Dec 31, 2021) | Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans | | :------------------------------------------------ | :------------------------------------------------------------------------ | :------------------------------------------------------------------------ | :------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | — | — | 3,945,882 | | Equity compensation plans not approved by security holders | — | — | — | | Total | — | — | 3,945,882 | Item 6. Reserved This item is reserved and contains no information - Item 6 is reserved[100] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The company achieved record revenues and net income in 2021, driven by strong global demand and economic recovery - The Company's growth in 2021 was driven by a broad-based, global acceleration in demand for its staffing and business consulting services, surpassing pre-pandemic levels[102][115] - The expanded acceptance of remote work creates significant opportunities, leveraging the Company's global brand, office network, candidate database, and AI-driven technologies for out-of-market recruitment[103] - Protiviti continues to be a strong differentiator, showing consecutive growth across internal audit, technology consulting (especially cybersecurity), risk and compliance, and business performance improvement[104] - The U.S economic backdrop in 2021 was conducive to growth, with real GDP increasing 5.7% and the unemployment rate declining from 6.7% to 3.9%[105] - The Company's liquidity is strong, with $619 million in cash and cash equivalents and $985 million in accounts receivable as of December 31, 2021[146][147][152] - Operating activities provided $603 million in cash in 2021[146][147][152] - In 2021, the Company used $288 million for common stock repurchases and paid $171 million in dividends[150][151][154] - The $100 million unsecured revolving credit facility was extended to May 2024, with no borrowings outstanding[150][151][154] Key Financial Highlights (2021 vs. 2020) | Metric | 2021 | 2020 | Change (%) | | :-------------------- | :----------- | :----------- | :--------- | | Service Revenues | $6.46 billion | $5.11 billion | +26.5% | | Net Income | $599 million | $306 million | +95.5% | | Diluted EPS | $5.36 | $2.70 | +98.5% | Service Revenue Growth by Segment (2021 vs. 2020) | Segment | 2021 Revenue | YoY Growth (As Reported) | | :------------------------------------ | :------------- | :----------------------- | | Temporary and consultant staffing | $4.04 billion | +16.1% | | Permanent placement staffing | $570 million | +54.0% | | Risk consulting and internal audit services | $1.85 billion | +46.9% | Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure stems from foreign currency fluctuations due to its international operations - The Company is exposed to foreign currency fluctuations, as approximately 22.5% of its 2021 revenues were generated outside the United States[161][162] - In 2021, the general weakening of the U.S dollar increased reported service revenues by $56.9 million (1.1%), but this was largely offset by increased operating expenses in foreign operations[163] - Reported net income was $3.4 million (1.1%) higher in 2021 due to currency exchange rates[163] - Fluctuations in currency exchange rates impact the U.S dollar amount of stockholders' equity but generally do not affect cash flow or result in actual economic gains or losses[165] Item 8. Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements, supplementary data, and the independent auditor's report - The consolidated financial statements include the Statements of Financial Position, Operations, Comprehensive Income (Loss), Stockholders' Equity, and Cash Flows for the years ended December 31, 2021, 2020, and 2019[166][168][171][174][177] - Notes to Consolidated Financial Statements provide detailed information on significant accounting policies, revenue recognition, assets, liabilities, equity, and other financial disclosures[179] - PricewaterhouseCoopers LLP issued an unqualified opinion on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021[288][289] - A critical audit matter identified was income taxes, due to significant management judgment and estimation in assessing tax laws and the realizability of deferred tax assets[297][298] Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This section states there have been no changes in or disagreements with accountants on accounting and financial disclosure - None[303] Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of December 31, 2021[304] - No material changes in internal control over financial reporting were identified during the fourth quarter of 2021[305] - Management assessed and concluded that the Company maintained effective internal control over financial reporting as of December 31, 2021, a conclusion audited by PricewaterhouseCoopers LLP[306][308] Item 9B. Other Information This section states that there is no other information to report - None[309] PART III This part incorporates information by reference from the company's Definitive Proxy Statement for director and executive matters - Information for Items 10 through 14 of Part III is incorporated by reference from Item 1 of this report and the registrant's Definitive Proxy Statement[312] - The Proxy Statement, scheduled for mailing in May 2022, will cover topics such as director nominations, beneficial stock ownership, compensation discussion and analysis, corporate governance, and the independent registered public accounting firm[312] PART IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed with the report - The section includes a list of consolidated financial statements found in Item 8, such as Statements of Financial Position, Operations, Comprehensive Income (Loss), Stockholders' Equity, and Cash Flows, along with their notes and the auditor's report[315] - Financial Statement Schedule II, 'Valuation and Qualifying Accounts,' is provided for the years ended December 31, 2021, 2020, and 2019[316] - A comprehensive list of exhibits, including organizational documents, employment agreements, compensation plans, credit agreements, and certifications, is provided[317] Item 16. Form 10-K Summary This section indicates that there is no Form 10-K Summary provided - None[321] SIGNATURES The report is duly signed by the company's executive officers and directors as of February 14, 2022 - The report is signed by Michael C Buckley, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)[325][326] - Key signatories also include Harold M Messmer, Jr (Executive Chairman of the Board) and M Keith Waddell (President, Chief Executive Officer and Principal Executive Officer)[326] - Additional directors who signed the report include Julia L Coronado, Dirk A Kempthorne, Marc H Morial, Barbara J Novogradac, Robert J Pace, and Frederick A Richman[326] - All signatures are dated February 14, 2022[325][326]