Robert Half International
Annual Report 2019

Plain-text annual report

ANNUAL REPORT 2 0 1 9 Accountemps® Robert Half® Finance & Accounting Robert Half® Management Resources Robert Half® Technology OfficeTeam® Robert Half® Legal The Creative Group® Protiviti® About Us Founded in 1948, Robert Half is the world’s first and largest specialized staffing firm and a recognized leader in professional consulting and staffing services. Robert Half is a company with a purpose. We provide job seekers with meaningful employment, and we assist businesses in locating the talent they need to succeed and expand. Our staffing professionals have deep knowledge of the local labor market and use artificial intelligence that’s trained using the millions of placements we’ve made over seven decades in business. This combination of personal service and technology guides us in finding the right fit for both employers and job candidates. Our staffing divisions serve the finance and accounting, technology, administrative, legal, and creative and marketing fields. We have more than 300 staffing locations worldwide, including 87 offices in 17 countries outside the United States. Robert Half also is the parent company of Protiviti, a global consulting firm that delivers deep expertise, objective insights, a tailored approach and unparalleled collaboration to help leaders confidently face the future. Protiviti and its independently and locally owned Member Firms serve clients through a network of more than 85 locations in over 27 countries. Selected Financial Data (in millions, except per share amounts) YEARS ENDED DEC. 31 2019 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 INCOME STATEMENT DATA Service revenues $ 6,074.4 $ 5,800.3 $ 5,266.8 $ 5,250.4 $ 5,094.9 $ 4,695.0 $ 4,245.9 $ 4,111.2 $ 3,777.0 $ 3,175.1 $ 3,036.5 Operating income $ 621.8 $ 588.9 $ 517.3 $ 554.5 $ 580.7 $ 497.2 $ 398.3 $ 343.4 $ 249.4 $ 115.0 $ 66.8 Net income $ 454.4 $ 434.3 $ 290.6 $ 343.4 $ 357.8 $ 305.9 $ 252.2 $ 209.9 $ 149.9 $ 66.1 $ 37.3 Diluted net income per share, as reported Diluted net income per share, non-GAAP* $ 3.90 $ 3.57 $ 2.33 $ 2.67 $ 2.69 $ 2.26 $ 1.83 $ 1.50 $ 1.04 $ 0.44 $ 0.24 $ 3.61 $ 2.60 Diluted shares 116.4 121.6 124.9 128.8 132.9 135.5 137.6 139.4 141.8 144.0 146.6 Dividends declared per share CASH FLOW DATA Net cash flows provided by operating activities $ 1.24 $ 1.12 $ .96 $ .88 $ .80 $ .72 $ .64 $ .60 $ .56 $ .52 $ .48 $ 519.6 $ 572.3 $ 453.0 $ 442.1 $ 438.2 $ 340.7 $ 309.2 $ 289.2 $ 256.3 $ 175.9 $ 240.2 Capital expenditures $ 59.5 $ 42.5 $ 40.8 $ 83.0 $ 75.1 $ 62.8 $ 53.7 $ 50.1 $ 56.5 $ 35.1 $ 41.2 BALANCE SHEET DATA AT YEAR-END Total assets $ 2,311.4 $ 1,903.1 $ 1,867.5 $ 1,778.0 $ 1,671.0 $ 1,620.8 $ 1,497.7 $ 1,367.0 $ 1,297.4 $ 1,272.6 $ 1,283.5 Debt financing $ 0.5 $ 0.7 $ 0.8 $ 1.0 $ 1.2 $ 1.3 $ 1.4 $ 1.5 $ 1.7 $ 1.8 $ 1.9 Stockholders’ equity $ 1,143.7 $ 1,063.2 $ 1,105.3 $ 1,086.6 $ 1,003.8 $ 979.9 $ 919.6 $ 842.0 $ 800.5 $ 834.4 $ 899.8 * See Appendix A to the Company’s Proxy Statement mailed to stockholders in April 2020 for a reconciliation of the non-GAAP measures to the most comparable GAAP measures: https://www.roberthalf.com/investor-center/sec-filings/definitive-14a. 1 2019 ANNUAL REPORT | ROBERT HALF To Our Stockholders As we write this letter to our shareholders, we are in the midst of a global pandemic crisis. An increasing number of people are affected each day by the coronavirus, whether medically or by unprecedented changes in how we all work and live. Most of what appears on the following pages reflects Robert Half’s performance in 2019. We are sensitive to the fact that the current environment has greater uncertainty, although we are confident we are well-positioned to manage through these challenging times. 2019. Protiviti continued to expand its consulting solutions and strengthen its client base. Its revenues of $1.1 billion increased 18 percent over the prior year and exceeded $1 billion for the first time in its 18-year history. It now represents 19 percent of total revenues. 2019 Service Revenues $6.1 Billion Operating Income $622 Million Companywide operating income grew to a record $622 million, up 6 percent from the previous year. Net income was $454 million, 5 percent higher than in the year- ago period. Diluted net income per share was $3.90, compared to $3.57 in 2018, a 9 percent increase. The net income per share comparison benefited from 4 percent fewer shares outstanding in 2019. Return on Invested Capital 41% Robert Half turned in another solid performance in 2019. We reported record levels of revenues, net income, diluted earnings per share and cash dividends declared. Full-year global revenues for the company were $6.1 billion, up 5 percent from $5.8 billion in 2018. U.S. revenues increased 6 percent, while international revenues were essentially flat. International revenues represent 22 percent of the company total. Our staffing operations performed well throughout the year, particularly in the United States, where demand benefited from unprecedented labor shortages, especially in our specialty areas. Our non-U.S. staffing operations were challenged by slower economic growth and global trade uncertainties. Notwithstanding these headwinds, we were generally pleased with how our non-U.S. staffing operations performed. While the non-U.S. growth rate moderated in most countries we serve, we still fared better than our industry, largely because of our professional sector and small and midsize client focus. Protiviti, our internal audit and consulting subsidiary, enjoyed double-digit percent- age growth rates in every quarter in We continue to regard return on invested capital (ROIC) as a key measure of our financial performance. 2019 ROIC of 41 percent compared favorably with our past experience and with levels commonly achieved in corporate America. We believe our superior ROIC is rooted in our ability to generate industry-leading profitability on a judiciously employed capital base, including growth achieved primarily by organic means. Harold M. Messmer, Jr. Executive Chairman M. Keith Waddell President and Chief Executive Officer 2 2019 ANNUAL REPORT | ROBERT HALF Record Financial Results in 2019 5-YEAR HISTORY SERVICE REVENUES (in millions) NET INCOME (in millions) $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $500 $400 $300 $200 $100 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 DILUTED NET INCOME PER SHARE DIVIDENDS DECLARED PER SHARE $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $1.40 $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 2015 2016 2017 (as reported) 2017 (non-GAAP*) 2018 2019 2015 2016 2017 2018 2019 * See Appendix A to the Company’s Proxy Statement mailed to stockholders in April 2020 for a reconciliation of the non-GAAP measures to the most comparable GAAP measures: https://www.roberthalf.com/investor-center/sec-filings/definitive-14a. 3 2019 ANNUAL REPORT | ROBERT HALF CONTINUED DEMAND FOR PROFESSIONAL STAFFING SERVICES In 2019, our staffing operations benefited from global labor shortages and the resulting high demand for skilled talent, particularly in the United States. The hiring environment for U.S. employers is the most challenging it has been in decades. In September, the U.S. unemployment rate fell to 3.5 percent, a 50-year low, and held close to that level for the remainder of the year. Notably, 2019 was the ninth consecutive year the United States added more than 2 million jobs. The U.S. jobs growth cycle in recent years has been unlike any we have seen before. Small to midsize businesses (SMBs) dominate Robert Half’s staffing client base; we have a long history of serving these companies. Finding workers is TRENDS WE SAW DURING 2019 Skill shortages still widespread — most pronounced in professional occupations More positions requiring better digital skills Candidates showing more confidence in salary negotiations Interim workers playing larger role at companies a serious problem for small-business owners when unemployment is as low as it has been. According to a December 2019 report from the National Federation of Independent Business (NFIB), 53 percent of business owners polled said they were hiring or trying to exclusive to Robert Half. We believe our matching technology and unique data insights differentiate us in our industry. Our ability to rapidly provide professionals who closely match our clients’ requirements is invaluable in a tight labor market. Small to midsize businesses dominate Robert Half ’s staffing client base; we have a long history of serving these companies. hire, and 50 percent reported few or no qualified applicants for the positions they need to fill. PROTIVITI CROSSES BILLION-DOLLAR MARK SMBs are a key driver of the U.S. economy. According to the Q4 2019 Vistage CEO Confidence Index, this sector creates 75 percent of all new jobs, yet our research tells us the majority of these companies have never employed a staffing firm. Our decades-long experience in identifying and serving SMBs by understanding how their needs differ from those of larger companies is difficult to duplicate. SMBs continue to constitute a vast, yet largely underserved, market opportunity. While the well-documented shortages of global skills boost demand for our services, they also constrain the candidate supply. To increase our own reserve of talent, we have been focused on developing a proprietary matching technology using machine learning. Its artificial intelligence (AI) is informed by decades of candidate placement data Revenues for Protiviti, our global consulting subsidiary, were $1.1 billion in 2019. At year-end, Protiviti had achieved seven straight quarters of year-over-year double-digit percentage growth. Its diverse practices range from internal audit to an array of business, risk and technology consulting solutions. Protiviti has grown to be an important part of our business. It has significantly expanded its offerings since its launch in 2002, when the great majority of Protiviti revenues came from internal audit and internal controls, to a diversified range of services. In addition to internal audit, including IT audit, Protiviti has developed robust offerings in areas including: • Managed solutions (finance/ accounting and technology) • Artificial intelligence • Machine learning 4 2019 ANNUAL REPORT | ROBERT HALF • Advanced analytics and model development/validation • RPA (robotic process automation) • Business process and performance improvement • IPO (initial public offering) readiness • Finance function transformation • Technology strategy and applications • Cybersecurity and privacy • Cloud solutions • Risk and regulatory compliance solutions • Emerging technologies As Protiviti continues to service larger, multinational clients and help companies solve increasingly complex business problems, it is often combining a variety of competencies, such as data, analytics, controls and process capabilities, to increase the value provided. OUR ENTERPRISE-WIDE SERVICE CONTINUUM During 2019, we made excellent progress in two important areas — establishing a full spectrum of specialized staffing and consulting solutions and expanding our digital presence. Both are helping us further build out our continuum of service. Our Full Complement of Solutions The traditional labor model is evolving. It used to be that the great majority of labor functions were provided exclusively by full-time, permanent employees. Today, full-time staff remain the core workforce, but they comprise a smaller part of the whole. The changes are being driven by companies’ need to access more skills, many of which are new and technical in nature. The broader range of skills comes from a variety of labor sources suited to different-size projects deployed on a scalable basis. The model now includes contingent and gig workers, the human cloud, and more. Robert Half is embracing these changes by combining our offerings of a uniquely flexible talent pool and deep consulting capability through our staffing and Protiviti units, respectively. Flexibility is a critical element in the new paradigm. We have long had the ability to identify professionals whose skills are tailored to meet an employer’s specific needs. We are expanding this core capability to include entire cross-functional teams and managed services offerings. We now offer companies a full complement of staffing and consulting solutions, from transactional engagements with our temporary staffing divisions at one end of the spectrum to pure consulting solutions through Protiviti at the other end. With our blended solutions, we can offer clients a combination of consultants from Protiviti along with engagement professionals from our staffing divisions. This advantage makes us a formidable competitor to larger consulting firms that lack this access to a virtually limitless talent network. Likewise, no other major staffing firm can deliver the project solutions of Protiviti. The ability for Protiviti and our staffing businesses to call on each other’s expertise and resources also provides us with internal advantages. Protiviti, for example, routinely draws on Robert Half’s staffing units to augment its conventional consulting teams. Protiviti has access to our entire talent database. One of the goals of our technology and digital innovation efforts is to make it faster and easier for customers to hire or be hired. We believe this provides an important competitive advantage since it reduces Protiviti’s need to seek outside labor. The distinctive synergy between Protiviti and our staffing units makes us unique in our industry. We believe we have just scratched the surface when it comes to the business potential of this opportunity. Our Technology Our investment in technology is growing. It includes enhancements to our website, personalized job and candidate recommendations, a proprietary matching engine, and our own mobile app. We are committed to meeting our customers’ increasing expectations by offering more choices in how and when they work with us. These technical innovations, combined with the expertise of our staffing specialists, provide both employers and job seekers greater flexibility, whether they engage with us online or in person. 5 2019 ANNUAL REPORT | ROBERT HALF One of the goals of our technology and digital innovation efforts is to make it faster and easier for customers to hire or be hired. A few years ago, we moved the entire organization onto the Salesforce customer relationship management (CRM) system to put all of our global teams on to one platform. That move has paid off with increased efficiencies in managing our vast databases and improved collaboration among our global workforce. Our technology enables us to be proactive in candidate recruiting. When we get a job order, we immediately match it to our candidate database. We invite all candidates who are identified to apply in real time, rather than waiting for a more limited number of candidates to self-identify opportunities, then apply. Likewise, we alert clients when a candidate in our database matches their needs. We launched our candidate mobile app in July 2019. In less than a year’s time, we have received more than 100,000 job applications through this path. The app has shown itself to be an effective way to attract and engage job seekers. The Robert Half mobile app and our own websites have proven to be productive sources of talent, making us far less reliant on third-party sources for candidates. There are hiring managers who traditionally have not used staffing firms. They prefer to source and hire on their own. We recently created Robert Half Direct, a hiring platform meant to serve this segment. By using this service, which is now available in all U.S. markets, clients have immediate access to a short list of candidates through a direct-hiring A SUPERIOR MATCHING ENGINE We have developed the technology we use internally to help our staffing professionals become even better at finding the right fit between job seeker and employer. Our proprietary AI-based matching technology incorporates performance data from our most successful candidate placements in professional sectors. No one else in our industry has this capability because no one else can draw on the millions of successful candidate placements we’ve made over seven decades in staffing. Using data only we have, we can evaluate how well our candidates align with job openings based on how past candidates have performed. We recently compared Robert Half’s matching technology to that of several of our competitors in a head-to-head test of performance. The matching engine we built outperformed them all. Our staffing and recruiting specialists are already the best in the business, but these tools extend their ability to make rapid yet solid matches. Our Personal Service No amount of technology can replace a genuine understanding of a client’s or candidate’s needs. Robert Half has developed a level of personal service that is well-known and highly regarded. We work with companies on all aspects of the hiring process. Anyone who has ever hired for an open position knows the real work begins after you’ve identified people who may be a skills-match for that job. It is time-consuming but critical that candidates’ interpersonal attributes are also assessed to ensure a good fit with the organization’s culture. Further work must then be done in salary negotiation and persuading top picks to choose one employer’s offer over others. Employers and candidates also need personal contacts to help them address the bigger picture — their staffing and career strategies. Employers increasingly need a workforce with new skills, fueled by rapidly changing technology, and they need advice on how to find these skills cost-effectively. Candidates need counsel on how to acquire the most marketable current and future skills. They will want more than online assistance in these cases. OUR STABILITY platform. Clients control the process and interact directly with job candidates to arrange interviews and make hiring decisions. This gives them access to our proprietary technology and data insights and our extensive candidate database powered by over 10,000 active recruiters. Early results show that Robert Half Direct is reaching a new segment of the market for us. Robert Half has an enviable history of financial and managerial stability. We have produced decades of mainly organic growth that has extended a profitable presence throughout the United States and select overseas markets. Our asset- lite business model produces generous amounts of cash in both good and bad economic conditions. We operate with an extremely solid balance sheet, which 6 2019 ANNUAL REPORT | ROBERT HALF A MESSAGE FROM MAX MESSMER I have been honored to serve as Robert Half’s CEO since the business was acquired from Bob Half in 1986. In December, I made the decision to transition from Chairman and CEO to Executive Chairman. I will, of course, be involved with the growth strategy of the company, and I am extremely pleased to see Keith Waddell, who has been my partner and collaborator from virtually the beginning, succeed me as CEO. Keith provides a sense of continuity, and with his vision and history of innovation, he also is absolutely the right person to lead Robert Half into the future. — Harold M. Messmer, Jr. events unfold. Our digital investments give us the ability to quickly find the right professionals for companies with rapidly changing needs. These firms will also need a talent pipeline when markets recover, and Robert Half will be there for them as they rebuild. Businesses will have many and varied needs as they face the future. It has long been our vision to complete the full spectrum of specialized staffing and consulting solutions we offer these customers, and this vision has just recently become a reality. It gives us access to new clients beyond our traditional staffing base of SMBs, especially when you consider our blended solutions, where Protiviti works with our staffing business. Our industry has entered an age of multiple staffing sources to serve an evolving labor market. The new model is both beneficial and more complex for companies and workers. Clients and job seekers need help as they enter unfamiliar territory, and we can provide it. We would like to thank our board of directors for the strategic counsel they provided during 2019, and you, our stockholders, for your continued support of our business. Respectfully submitted, Harold M. Messmer, Jr. Executive Chairman M. Keith Waddell President and Chief Executive Officer March 18, 2020 March 18, 2020 is dominated by current assets, most of which are highly liquid. After allocating cash to operate and grow the business, we return much of the cash produced to stockholders through share buybacks and cash dividends. We have repurchased shares yearly since 1997 for a total of $3.7 billion and 115.5 million shares, all from internally generated cash flow. Our initial cash dividend was made in 2004. Since then, we have paid uninterrupted quarterly cash dividends. Cash dividends have grown at a compound average annual rate of 11.2 percent. LOOKING AHEAD We are optimistic about how Robert Half is positioned right now, but we also recognize the uncertainty surrounding the COVID-19 pandemic, which as of this writing is having a very real impact on global economies. Like all businesses, we are watching carefully to see how the situation evolves and we are responding accordingly. The labor shortages we have been seeing have been building for some time, but the current climate makes it difficult to assess even near-term trends. Whether markets improve relatively soon or take longer to recover, our experience navigating in uncertain times through the years should guide us well through these uncharted waters. Robert Half has a very strong balance sheet, no debt and decades of proven business experience. At times like this, the drive and tenure of our leadership team become our greatest asset. And as in the past, there may be opportunities presented by major economic shifts. Like perhaps never before, businesses will need the ability to staff up and down flexibly as 7 2019 ANNUAL REPORT | ROBERT HALF Corporate Responsibility From the inside out, we are a people business. Every day, we find our candidates rewarding work, giving them the means to support their families and a source of dignity and self-respect. We also connect company leaders with the skilled talent they need to grow. This keen focus on people extends to our impact on society at large. We strive to deliver value to all of our stakeholders, including shareholders, customers, employees, suppliers and communities. Our environmental, social and governance (ESG) mission statement underpins our commitment to address various aspects of corporate responsibility. Our ESG approach also allows us to more effectively assess our policies, programs and performance across a wide range of issues, not only to manage risks but also to help ensure we have a positive impact. We prioritize the ESG issues that matter most to our stakeholders and have a material impact on our business. For this reason, we are working to expand our ESG disclosures in accordance with the Sustainability Accounting Standards Board (SASB) recommendations for the Professional and Commercial Services industry. Industry Recognition ROB ERT HALF PROTIVITI World’s Most Admired Companies FORTUNE Bloomberg Gender-Equality Index The Best Employers for Diversity Forbes Best Places to Work for LGBTQ Equality Human Rights Campaign Foundation 100 Most Sustainable Companies Barron’s CSR Program of the Year (Silver Stevie Winner) American Business Awards Best of the Best Top Supplier Diversity Programs Black EOE Journal HISPANIC Network Magazine Professional Woman’s Magazine U.S. Veterans Magazine 100 Best Companies to Work For FORTUNE 100 Best Companies Working Mother Best Workplaces for Diversity FORTUNE 9 2019 ANNUAL REPORT | ROBERT HALF Corporate Responsibility Focus Areas – Our – WORKFORCE – Our – COMMUNITIES – Our – ENVIRONMENT OUR COMMUNITIES Robert Half’s and Protiviti’s global volunteer and philanthropy programs, Leading by Example and iCare, respectively, are central to our social responsibility efforts. In addition to the corporate contributions we make to our national, global and local nonprofit partners, our employees play a key role in our matching gifts and volunteering programs, as well as Robert Half’s and Protiviti’s respective signature outreach programs. In 2019, employees helped create a record- breaking year of community impact. 10 2019 ANNUAL REPORT | ROBERT HALF M ATCH ING GIF TS 3,000 employees participated in North America, raising $1.4 million for local nonprofits through employee donations and the company match. VOLU NTE E R I NG 1,800 North American employees collectively volunteered 14,000 hours for 570 nonprofits. i ON H U NG E R Protiviti donated a total of 2.7 million meals to communities in need, reaching a total of over 10.3 million meals since 2014. WE E K OF SE RV ICE 800 Corporate Services employees participated, volunteering 2,000 hours for 32 nonprofits. SU IT DR I V E 48,600 interview-appropriate clothing items were donated in North America, bringing our total to over 400,000 items since 2002. HOLIDAY GI V I NG 125 offices in North America collected more than 5,800 toys and games, bringing our total to over 147,000 items since 2006. OUR WORKFORCE E M PLOYE E DE V E LOPM E NT Our employees are our most valuable asset. We make every effort to provide a great work environment that connects them with opportunities to grow and thrive. We are committed to supporting human rights and providing equal opportunity and advancement to all employees and stakeholders across our entire value chain, which includes our supply chain and customers. In 2019, we strengthened our programs focused on employee engagement, professional development, inclusion and diversity, and health and safety. • Robert Half and Protiviti employees completed 365,988 skills-based trainings through our online learning tool. • 864 Robert Half employees participated in our RH United Leadership Exchange mentorship program. E M PLOYE E E NGAG E M E NT • We expanded both Robert Half’s and Protiviti’s employee experience surveys globally. • Senior leaders and our Employee Experience Ambassadors used results to prioritize focus areas for next year. I NCLUSION A N D DI V E RSIT Y • We supported women’s advancement: 58 percent of new hires and 61 percent of employees promoted at Robert Half were women. • Additionally, 56 percent of Robert Half’s senior managers are women. H E A LTH A N D SA FE T Y • We approved a new Global Human Rights Policy. • We expanded and updated our sexual harassment training. OUR ENVIRONMENT E N V I RON M E NTA L COM M IT TE E We are committed to decreasing our environmental impact. And in 2019, we took steps to better quantify, reduce and report our environmental footprint. This included submitting our first Communication on Progress to the United Nations Global Compact, which outlined the actions we’ve taken to work more efficiently and increase environmental oversight, and our first public report to CDP. • We strengthened environmental oversight by launching a committee made up of key executives and operational leads. PR I NT CE NTE R R E TROFIT • Building on our lighting retrofit projects from 2018, we replaced our old lighting with compact LED fixtures at our printing center in Ankeny, Iowa. We estimate that this will reduce energy use by 65,877 kWh per year. M E ASU R I NG E M ISSIONS • For the first time, we publicly reported emissions data to CDP, an initiative that helped us increase our capacity to monitor and evaluate our performance and identify areas for further improvement. 11 2019 ANNUAL REPORT | ROBERT HALF 12 2019 ANNUAL REPORT | ROBERT HALF UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ☐ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 __________________________________________ Commission file number 1-10427 ROBERT HALF INTERNATIONAL INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 2884 Sand Hill Road, Menlo Park, California (Address of principal executive offices) 94-1648752 (I.R.S. Employer Identification No.) 94025 (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 Common Stock, Par Value $.001 per Share Trading Symbol(s) Name of each exchange on which registered RHI New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None __________________________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒ 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 pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒ 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. ☐ Yes ☒ No As of June 30, 2019, the aggregate market value of the Common Stock held by non-affiliates of the registrant was approximately $6,518,872,985 based on the closing sale price on that date. This amount excludes the market value of 3,315,944 shares of Common Stock directly or indirectly held by registrant’s directors and officers and their affiliates. As of January 31, 2020, there were 115,120,403 outstanding shares of the registrant’s Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s Proxy Statement to be mailed to stockholders in connection with the registrant’s annual meeting of stockholders, scheduled to be held in May 2020, are incorporated by reference in Part III of this report. Except as expressly incorporated by reference, the registrant’s Proxy Statement shall not be deemed to be part of this report. 2019 ANNUAL REPORT | ROBERT HALF This Page Intentionally Left Blank RHI 10K 2015 FINAL.CG2.indd 64 3/14/16 9:45 AM 2019 ANNUAL REPORT | ROBERT HALF Item 1. Business Item 1. Business PART I PART I Robert Half International Inc. (the “Company”) provides specialized staffing and risk consulting services through such 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® 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, 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 the world’s largest specialized Robert Half Finance & Accounting, and Robert Half Management Resources divisions, is the world’s largest specialized provider of temporary, full-time, and project professionals in the fields of accounting and finance. OfficeTeam specializes in provider of temporary, full-time, and project professionals in the fields of accounting and finance. OfficeTeam specializes in highly skilled temporary administrative support personnel. Robert Half Technology provides information technology highly skilled temporary administrative support personnel. Robert Half Technology provides information technology professionals. Robert Half Legal provides temporary, project, and full-time staffing of attorneys and specialized support professionals. Robert Half Legal provides temporary, project, and full-time staffing of attorneys and specialized support personnel within law firms and corporate legal departments. The Creative Group provides project staffing in the digital, personnel within law firms and corporate legal departments. The Creative Group provides project staffing in the digital, marketing, and creative fields. Protiviti, which began operations in 2002, is a global business consulting and internal audit firm. marketing, and creative fields. Protiviti, which began operations in 2002, is a global business consulting and internal audit firm. Protiviti, which primarily employs professionals specializing in risk, advisory and transactional services, is a wholly owned Protiviti, which primarily employs professionals specializing in risk, advisory and transactional services, is a wholly owned subsidiary of the Company. subsidiary of the Company. The Company’s business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor, under The Company’s business was originally founded in 1948. Prior to 1986, the Company was primarily a franchisor, under the names Accountemps and Robert Half (now called Robert Half Finance & Accounting), of offices providing temporary and the names Accountemps and Robert Half (now called Robert Half Finance & Accounting), of offices providing temporary and full-time professionals in the fields of accounting and finance. Beginning in 1986, the Company and its current management full-time professionals in the fields of accounting and finance. Beginning in 1986, the Company and its current management embarked on a strategy of acquiring franchised locations. All of the franchises have been acquired. The Company believes that embarked on a strategy of acquiring franchised locations. All of the franchises have been acquired. The Company believes that direct ownership of offices allows it to better monitor and protect the image of its trade names, promotes a more consistent and direct ownership of offices allows it to better monitor and protect the image of its trade names, promotes a more consistent and higher level of quality and service throughout its network of offices and improves profitability by centralizing many of its higher level of quality and service throughout its network of offices and improves profitability by centralizing many of its administrative functions. Since 1986, the Company has significantly expanded operations at many of the acquired locations, administrative functions. Since 1986, the Company has significantly expanded operations at many of the acquired locations, opened many new locations and acquired other local or regional providers of specialized temporary service personnel. The opened many new locations and acquired other local or regional providers of specialized temporary service personnel. The Company has also expanded the scope of its services by launching the new product lines OfficeTeam, Robert Half Technology, Company has also expanded the scope of its services by launching the new product lines OfficeTeam, Robert Half Technology, Robert Half Management Resources, Robert Half Legal and The Creative Group. Robert Half Management Resources, Robert Half Legal and The Creative Group. In 2002, the Company hired more than 700 professionals who had been affiliated with the internal audit and business and In 2002, the Company hired more than 700 professionals who had been affiliated with the internal audit and business and technology risk consulting practice of Arthur Andersen LLP, including more than 50 individuals who had been partners of that technology risk consulting practice of Arthur Andersen LLP, including more than 50 individuals who had been partners of that firm. These professionals formed the base of the Company’s Protiviti Inc. subsidiary. Protiviti has enabled the Company to firm. These professionals formed the base of the Company’s Protiviti Inc. subsidiary. Protiviti has enabled the Company to enter the market for business consulting and internal audit services, which market the Company believes offers synergies with enter the market for business consulting and internal audit services, which market the Company believes offers synergies with its traditional lines of business. its traditional lines of business. Accountemps Accountemps The Accountemps temporary services division offers customers a reliable and economical means of dealing with uneven The Accountemps temporary services division offers customers a reliable and economical means of dealing with uneven or peak workloads for accounting, finance, and bookkeeping personnel caused by such predictable events as vacations, taking or peak workloads for accounting, finance, and bookkeeping personnel caused by such predictable events as vacations, taking inventories, tax work, month-end activities and special projects, and such unpredictable events as illness and emergencies. inventories, tax work, month-end activities and special projects, and such unpredictable events as illness and emergencies. Businesses view the use of temporary employees as a means of controlling personnel costs and converting such costs from Businesses view the use of temporary employees as a means of controlling personnel costs and converting such costs from fixed to variable. The cost and inconvenience to clients of hiring and firing regular employees are eliminated by the use of fixed to variable. The cost and inconvenience to clients of hiring and firing regular employees are eliminated by the use of Accountemps temporaries. The temporary workers are employees of Accountemps and are paid by Accountemps. The customer Accountemps temporaries. The temporary workers are employees of Accountemps and are paid by Accountemps. The customer pays a fixed rate only for hours worked. pays a fixed rate only for hours worked. Accountemps clients may fill their regular employment needs by using an Accountemps employee on a trial basis and, if Accountemps clients may fill their regular employment needs by using an Accountemps employee on a trial basis and, if so desired, “converting” the temporary position to a regular position. The client typically pays a one-time fee for such so desired, “converting” the temporary position to a regular position. The client typically pays a one-time fee for such conversions. conversions. OfficeTeam OfficeTeam The Company’s OfficeTeam division, which commenced operations in 1991, places temporary and full-time office and The Company’s OfficeTeam division, which commenced operations in 1991, places temporary and full-time office and administrative personnel, ranging from executive and administrative assistants to receptionists and customer service administrative personnel, ranging from executive and administrative assistants to receptionists and customer service representatives. OfficeTeam operates in much the same fashion as the Accountemps division. representatives. OfficeTeam operates in much the same fashion as the Accountemps division. Robert Half Finance & Accounting Robert Half Finance & Accounting Established in 1948, the Company’s first division and specialized recruitment pioneer Robert Half Finance & Accounting Established in 1948, the Company’s first division and specialized recruitment pioneer Robert Half Finance & Accounting specializes in the placement of full-time accounting, financial, tax and accounting operations personnel. Fees for successful specializes in the placement of full-time accounting, financial, tax and accounting operations personnel. Fees for successful placements are paid only by the employer and are generally a percentage of the new employee’s annual compensation. No fee placements are paid only by the employer and are generally a percentage of the new employee’s annual compensation. No fee for placement services is charged to employment candidates. for placement services is charged to employment candidates. 1 1 2019 ANNUAL REPORT | ROBERT HALF Robert Half Technology Robert Half Technology The Company’s Robert Half Technology division, which commenced operations in 1994, specializes in providing The Company’s Robert Half Technology division, which commenced operations in 1994, specializes in providing information technology contract consultants, placing full-time employees, and offering managed services in areas ranging from information technology contract consultants, placing full-time employees, and offering managed services in areas ranging from multiple platform systems integration to end-user technical and desktop support, including specialists in application multiple platform systems integration to end-user technical and desktop support, including specialists in application development (including mobile, cloud and enterprise applications), networking, systems integration and deployment, database development (including mobile, cloud and enterprise applications), networking, systems integration and deployment, database design and administration, and security and business continuity. design and administration, and security and business continuity. Robert Half Legal Robert Half Legal Since 1992, the Company has been placing temporary and full-time employees in attorney, paralegal, legal administrative Since 1992, the Company has been placing temporary and full-time employees in attorney, paralegal, legal administrative and legal secretarial positions through its Robert Half Legal division. The legal profession’s requirements (the need for and legal secretarial positions through its Robert Half Legal division. The legal profession’s requirements (the need for confidentiality, accuracy and reliability, a strong drive toward cost-effectiveness, and frequent peak caseload periods) are confidentiality, accuracy and reliability, a strong drive toward cost-effectiveness, and frequent peak caseload periods) are similar to the demands of the clients of the Accountemps division. Robert Half Legal offers a full suite of legal staffing and similar to the demands of the clients of the Accountemps division. Robert Half Legal offers a full suite of legal staffing and consulting services to help organizations manage constantly changing workloads and access expertise across in-demand legal consulting services to help organizations manage constantly changing workloads and access expertise across in-demand legal practice areas. practice areas. Robert Half Management Resources Robert Half Management Resources The Company’s Robert Half Management Resources division, which commenced operations in 1997, specializes in The Company’s Robert Half Management Resources division, which commenced operations in 1997, specializes in providing senior level project professionals in the accounting and finance fields, including chief financial officers, controllers, providing senior level project professionals in the accounting and finance fields, including chief financial officers, controllers, senior financial analysts, internal auditors, and business systems analysts for such tasks as financial systems conversions, senior financial analysts, internal auditors, and business systems analysts for such tasks as financial systems conversions, expansion into new markets, business process reengineering, business systems performance improvement, and post-merger expansion into new markets, business process reengineering, business systems performance improvement, and post-merger financial consolidation. financial consolidation. The Creative Group The Creative Group The Creative Group division commenced operations in 1999 and specializes in identifying for its clients creative The Creative Group division commenced operations in 1999 and specializes in identifying for its clients creative professionals in the areas of interactive media, design, marketing, advertising and public relations. The division places freelance professionals in the areas of interactive media, design, marketing, advertising and public relations. The division places freelance and project consultants in a variety of positions such as creative directors, graphics designers, web content developers, web and project consultants in a variety of positions such as creative directors, graphics designers, web content developers, web designers, media buyers, brand managers, and public relations specialists. designers, media buyers, brand managers, and public relations specialists. Protiviti Protiviti Protiviti is a global consulting firm that delivers an expanding set of services across its defined solution offerings of Protiviti is a global consulting firm that delivers an expanding set of services across its defined solution offerings of Business Performance Improvement, Internal Audit, Managed Solutions, Risk and Compliance and Technology Consulting. Business Performance Improvement, Internal Audit, Managed Solutions, Risk and Compliance and Technology Consulting. Protiviti and its independently owned member firms works collaboratively with its clients in over 25 countries to help them Protiviti and its independently owned member firms works collaboratively with its clients in over 25 countries to help them achieve their business objectives and delivers confidence in an ever-evolving dynamic business world. Clients range from achieve their business objectives and delivers confidence in an ever-evolving dynamic business world. Clients range from high-growth, pre-public/transactional established start-ups to the largest global companies, across seven focused industries. high-growth, pre-public/transactional established start-ups to the largest global companies, across seven focused industries. Marketing and Recruiting Marketing and Recruiting The Company markets its staffing services to clients and employment candidates via both national and local advertising The Company markets its staffing services to clients and employment candidates via both national and local advertising activities. Advertising consists of client- and employment candidate-facing buys in radio, digital display, search engine activities. Advertising consists of client- and employment candidate-facing buys in radio, digital display, search engine marketing, social media, trade publications, job boards and events. The Company also markets its services, as well as hiring and marketing, social media, trade publications, job boards and events. The Company also markets its services, as well as hiring and career management advice and thought leadership, via its website, e-mail marketing program, social media and blog. Direct career management advice and thought leadership, via its website, e-mail marketing program, social media and blog. Direct marketing via telephone solicitation is a significant portion of the Company’s total marketing efforts. Additionally, the marketing via telephone solicitation is a significant portion of the Company’s total marketing efforts. Additionally, the Company has expanded its use of job boards and aggregators in all aspects of sales and recruitment. Joint marketing Company has expanded its use of job boards and aggregators in all aspects of sales and recruitment. Joint marketing arrangements have been entered into with major software manufacturers and typically provide for the development of arrangements have been entered into with major software manufacturers and typically provide for the development of proprietary skills tests, cooperative advertising, joint campaigns, and similar promotional activities. The Company also actively proprietary skills tests, cooperative advertising, joint campaigns, and similar promotional activities. The Company also actively seeks endorsements and affiliations with professional organizations in the accounting and finance, technology, legal, and seeks endorsements and affiliations with professional organizations in the accounting and finance, technology, legal, and creative and marketing fields. In addition, the Company conducts public relations activities designed to enhance public creative and marketing fields. In addition, the Company conducts public relations activities designed to enhance public recognition of the Company and its services. This includes outreach to journalists, bloggers and social media influencers, and recognition of the Company and its services. This includes outreach to journalists, bloggers and social media influencers, and the distribution of print, digital, and video thought leadership. Robert Half staffing and recruiting professionals are encouraged the distribution of print, digital, and video thought leadership. Robert Half staffing and recruiting professionals are encouraged to be active in civic organizations and industry trade groups in their local communities. to be active in civic organizations and industry trade groups in their local communities. Protiviti markets its business consulting and internal audit services to a variety of clients in a range of industries. Industry Protiviti markets its business consulting and internal audit services to a variety of clients in a range of industries. Industry and competency teams conduct targeted marketing efforts, locally, nationally and globally, including print advertising, and competency teams conduct targeted marketing efforts, locally, nationally and globally, including print advertising, production of thought leadership, and branded speaking events. National advertising conducted by Protiviti consists primarily production of thought leadership, and branded speaking events. National advertising conducted by Protiviti consists primarily 2 2 2019 ANNUAL REPORT | ROBERT HALF of print advertisements in magazines and selected trade journals. Protiviti regularly conducts a variety of programs to share its of print advertisements in magazines and selected trade journals. Protiviti regularly conducts a variety of programs to share its insights with clients on current topics such as risk, technology, corporate governance, and industry challenges. It conducts insights with clients on current topics such as risk, technology, corporate governance, and industry challenges. It conducts public relations activities, such as distributing press releases, white papers, case studies and newsletters, designed to enhance public relations activities, such as distributing press releases, white papers, case studies and newsletters, designed to enhance recognition for the Protiviti brand, establish its expertise in key issues surrounding its business and promote its services. recognition for the Protiviti brand, establish its expertise in key issues surrounding its business and promote its services. Protiviti plans to expand both the services and value added content on the Protiviti.com website and increase traffic through Protiviti plans to expand both the services and value added content on the Protiviti.com website and increase traffic through targeted Internet advertising. Local employees are encouraged to be active in relevant social media communities, civic targeted Internet advertising. Local employees are encouraged to be active in relevant social media communities, civic organizations and industry trade groups. organizations and industry trade groups. The Company and its subsidiaries own many trademarks, service marks and tradenames, including the Robert Half® The Company and its subsidiaries own many trademarks, service marks and tradenames, including the Robert Half® Finance & Accounting, Accountemps®, OfficeTeam®, Robert Half® Technology, Robert Half® Management Resources, Robert Finance & Accounting, Accountemps®, OfficeTeam®, Robert Half® Technology, Robert Half® Management Resources, Robert Half® Legal, The Creative Group® and Protiviti® marks, which are registered in the United States and in a number of foreign Half® Legal, The Creative Group® and Protiviti® marks, which are registered in the United States and in a number of foreign countries. countries. Organization Organization Management of the Company’s staffing operations is coordinated from its headquarters facilities in Menlo Park and San Management of the Company’s staffing operations is coordinated from its headquarters facilities in Menlo Park and San Ramon, California. The Company’s headquarters provides support and centralized services to its offices in the administrative, Ramon, California. The Company’s headquarters provides support and centralized services to its offices in the administrative, marketing, public relations, accounting, information technology, training and legal areas, particularly as it relates to the marketing, public relations, accounting, information technology, training and legal areas, particularly as it relates to the standardization of the operating procedures of its offices. As of December 31, 2019, the Company conducted its staffing standardization of the operating procedures of its offices. As of December 31, 2019, the Company conducted its staffing services operations through 326 offices in 42 states, the District of Columbia and 17 foreign countries. Office managers are services operations through 326 offices in 42 states, the District of Columbia and 17 foreign countries. Office managers are responsible for most activities of their offices, including sales, local advertising and marketing and recruitment. responsible for most activities of their offices, including sales, local advertising and marketing and recruitment. The day-to-day operations of Protiviti are managed by a chief executive officer and a senior management team with The day-to-day operations of Protiviti are managed by a chief executive officer and a senior management team with operational and administrative support provided by individuals located in San Ramon and Menlo Park, California. As of operational and administrative support provided by individuals located in San Ramon and Menlo Park, California. As of December 31, 2019, Protiviti had 62 offices in 23 states and 11 foreign countries. December 31, 2019, Protiviti had 62 offices in 23 states and 11 foreign countries. Competition Competition The Company’s staffing services face competition in attracting clients as well as skilled specialized employment The Company’s staffing services face competition in attracting clients as well as skilled specialized employment candidates. The staffing business is highly competitive, with a number of firms offering services similar to those provided by candidates. The staffing business is highly competitive, with a number of firms offering services similar to those provided by the Company on a national, regional or local basis. In many areas the local companies are the strongest competitors. The most the Company on a national, regional or local basis. In many areas the local companies are the strongest competitors. The most significant competitive factors in the staffing business are price and the reliability of service, both of which are often a function significant competitive factors in the staffing business are price and the reliability of service, both of which are often a function of the availability and quality of personnel. The Company believes it derives a competitive advantage from its long experience of the availability and quality of personnel. The Company believes it derives a competitive advantage from its long experience with and commitment to the specialized employment market, its national presence, and its various marketing activities. with and commitment to the specialized employment market, its national presence, and its various marketing activities. Protiviti faces competition in its efforts to attract clients, expand relationships with existing clients and win proposal Protiviti faces competition in its efforts to attract clients, expand relationships with existing clients and win proposal presentations. The global professional service business is highly competitive with a dynamic regulatory environment, disruptive presentations. The global professional service business is highly competitive with a dynamic regulatory environment, disruptive new technologies, security and privacy concerns and high demand for skilled professionals all driving significant opportunities. new technologies, security and privacy concerns and high demand for skilled professionals all driving significant opportunities. The principal competitors of Protiviti remain the “big four” accounting firms. Significant competitive factors include The principal competitors of Protiviti remain the “big four” accounting firms. Significant competitive factors include reputation, technology, tools, project methodologies, price of services and depth of skills of personnel. Protiviti believes its reputation, technology, tools, project methodologies, price of services and depth of skills of personnel. Protiviti believes its competitive strengths lie in the collaborative approach they take to working with clients which drive knowledge transfer, competitive strengths lie in the collaborative approach they take to working with clients which drive knowledge transfer, understanding of client issues and value creation. This is coupled with a “configure-to-fit” resourcing model to create blended understanding of client issues and value creation. This is coupled with a “configure-to-fit” resourcing model to create blended teams of full-time Protiviti professionals and engagement professionals from Robert Half’s network of specialized talent to teams of full-time Protiviti professionals and engagement professionals from Robert Half’s network of specialized talent to precisely match expertise, approach and people to the changing global needs of clients on consulting and managed solutions precisely match expertise, approach and people to the changing global needs of clients on consulting and managed solutions projects. projects. Employees Employees The Company has approximately 16,000 full-time internal staff, including approximately 4,500 employees engaged The Company has approximately 16,000 full-time internal staff, including approximately 4,500 employees engaged directly in Protiviti operations. In addition, the Company placed approximately 205,600 engagement professionals on directly in Protiviti operations. In addition, the Company placed approximately 205,600 engagement professionals on assignments with clients during 2019. In 2018, the Company had approximately 15,200 full-time internal staff, including assignments with clients during 2019. In 2018, the Company had approximately 15,200 full-time internal staff, including approximately 4,000 employees engaged directly in Protiviti operations. In 2018, the Company placed approximately 216,500 approximately 4,000 employees engaged directly in Protiviti operations. In 2018, the Company placed approximately 216,500 engagement professionals on assignments with clients. The substantial majority of engagement professionals placed on engagement professionals on assignments with clients. 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 assignment by the Company are the Company’s legal employees while they are working on assignments. The Company pays the related costs of employment, such as workers’ compensation insurance, state and federal unemployment taxes, social the related costs of employment, such as workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. The Company provides access to voluntary health insurance coverage to interested security and certain fringe benefits. The Company provides access to voluntary health insurance coverage to interested employees. employees. 3 3 2019 ANNUAL REPORT | ROBERT HALF Other Information Other Information The Company is not dependent upon a single customer or a limited number of customers. The Company’s staffing The Company is not dependent upon a single customer or a limited number of customers. The Company’s staffing services operations are generally more active in the first and fourth quarters of a calendar year. Protiviti is generally more active services operations are generally more active in the first and fourth quarters of a calendar year. Protiviti is generally more active in the third and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company’s staffing services in the third and fourth quarters of a calendar year. Order backlog is not a material aspect of the Company’s staffing services business. While backlog is of greater importance to Protiviti, the Company does not believe, based upon the length of time of business. While backlog is of greater importance to Protiviti, the Company does not believe, based upon the length of time of the average Protiviti engagement, that backlog is a material aspect of the Protiviti business. No material portion of the the average Protiviti engagement, that backlog is a material aspect of the Protiviti business. No material portion of the Company’s business is subject to government contracts. Company’s business is subject to government contracts. Available Information Available Information The Company’s Internet address is www.roberthalf.com. The Company makes available, free of charge, through its The Company’s Internet address is www.roberthalf.com. The Company makes available, free of charge, through its website, its Annual Reports on Form 10-K, proxy statements for its annual meetings of stockholders, its Quarterly Reports on website, its Annual Reports on Form 10-K, proxy statements for its annual meetings of stockholders, its Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and any amendments to those reports, as soon as is reasonably practicable after Form 10-Q, and Current Reports on Form 8-K, and any amendments to those reports, as soon as is reasonably practicable after such reports are filed with or furnished to the Securities and Exchange Commission. Also available on the Company’s website such reports are filed with or furnished to the Securities and Exchange Commission. Also available on the Company’s website are its Corporate Governance Guidelines, its Code of Business Conduct and Ethics, and the charters for its Audit Committee, are its Corporate Governance Guidelines, its Code of Business Conduct and Ethics, and the charters for its Audit Committee, Compensation Committee and Nominating and Governance Committee, each of which is available in print to any stockholder Compensation Committee and Nominating and Governance Committee, each of which is available in print to any stockholder who makes a request to Robert Half International Inc., 2884 Sand Hill Road, Menlo Park, CA 94025, Attn: Corporate who makes a request to Robert Half International Inc., 2884 Sand Hill Road, Menlo Park, CA 94025, Attn: Corporate Secretary. The Company’s Code of Business Conduct and Ethics is the Code of Ethics required by Item 406 of Securities and Secretary. The Company’s Code of Business Conduct and Ethics is the Code of Ethics required by Item 406 of Securities and Exchange Commission Regulation S-K. The Company intends to satisfy any disclosure obligations under Item 5.05 of Form 8- Exchange Commission Regulation S-K. The Company intends to satisfy any disclosure obligations under Item 5.05 of Form 8- K regarding any amendment or waiver relating to its Code of Business Conduct and Ethics by posting such information on its K regarding any amendment or waiver relating to its Code of Business Conduct and Ethics by posting such information on its website. website. Item 1A. Risk Factors Item 1A. Risk Factors The Company’s business prospects are subject to various risks and uncertainties that impact its business. The most The Company’s business prospects are subject to various risks and uncertainties that impact its business. The most important of these risks and uncertainties are as follows: important of these risks and uncertainties are as follows: Risks Related to the Company’s Business Environment Risks Related to the Company’s Business Environment Any reduction in global economic activity may harm the Company’s business and financial condition. The demand for the Any reduction in global economic activity may harm the Company’s business and financial condition. The demand for the Company’s services, in particular its staffing services, is highly dependent upon the state of the economy and upon the staffing Company’s services, in particular its staffing services, is highly dependent upon the state of the economy and upon the staffing needs of the Company’s clients. Certain of the Company’s markets have recently experienced economic uncertainty needs of the Company’s clients. Certain of the Company’s markets have recently experienced economic uncertainty characterized by increasing unemployment, limited availability of credit and decreased consumer and business spending. In characterized by increasing unemployment, limited availability of credit and decreased consumer and business spending. In addition, certain geopolitical events, including ongoing trade negotiations and the ongoing negotiation of the United Kingdom’s addition, certain geopolitical events, including ongoing trade negotiations and the ongoing negotiation of the United Kingdom’s withdrawal from the European Union (“Brexit”), have caused significant economic, market, political and regulatory uncertainty withdrawal from the European Union (“Brexit”), have caused significant economic, market, political and regulatory uncertainty in some of the Company’s markets. Any decline in the economic condition or employment levels of the U.S. or of any of the in some of the Company’s markets. Any decline in the economic condition or employment levels of the U.S. or of any of the foreign countries in which the Company does business, or in the economic condition of any region of any of the foregoing, or in foreign countries in which the Company does business, or in the economic condition of any region of any of the foregoing, or in any specific industry may severely reduce the demand for the Company’s services and thereby significantly decrease the any specific industry may severely reduce the demand for the Company’s services and thereby significantly decrease the Company’s revenues and profits. Further, continued or intensifying economic, political or regulatory uncertainty in the Company’s revenues and profits. Further, continued or intensifying economic, political or regulatory uncertainty in the Company’s markets could reduce demand for the Company’s services. Company’s markets could reduce demand for the Company’s services. The Company’s business depends on a strong reputation and anything that harms its reputation will likely harm its The Company’s business depends on a strong reputation and anything that harms its reputation will likely harm its results. As a provider of temporary and permanent staffing solutions as well as consultant services, the Company’s reputation is results. As a provider of temporary and permanent staffing solutions as well as consultant services, the Company’s reputation is dependent upon the performance of the employees it places with its clients and the services rendered by its consultants. The dependent upon the performance of the employees it places with its clients and the services rendered by its consultants. The Company depends on its reputation and name recognition to secure engagements and to hire qualified employees and Company depends on its reputation and name recognition to secure engagements and to hire qualified employees and consultants. If the Company’s clients become dissatisfied with the performance of those employees or consultants or if any of consultants. If the Company’s clients become dissatisfied with the performance of those employees or consultants or if any of those employees or consultants engage in or are believed to have engaged in conduct that is harmful to the Company’s clients, those employees or consultants engage in or are believed to have engaged in conduct that is harmful to the Company’s clients, the Company’s ability to maintain or expand its client base may be harmed. the Company’s ability to maintain or expand its client base may be harmed. The Company faces risks in operating internationally. The Company depends on operations in international markets for a The Company faces risks in operating internationally. The Company depends on operations in international markets for a significant portion of its business. These international operations are subject to a number of risks, including general political significant portion of its business. These international operations are subject to a number of risks, including general political and economic conditions in those foreign countries, the burden of complying with various foreign laws and technical standards and economic conditions in those foreign countries, the burden of complying with various foreign laws and technical standards and unpredictable changes in foreign regulations, U.S. legal requirements governing U.S. companies operating in foreign and unpredictable changes in foreign regulations, U.S. legal requirements governing U.S. companies operating in foreign countries, legal and cultural differences in the conduct of business, potential adverse tax consequences and difficulty in staffing countries, legal and cultural differences in the conduct of business, potential adverse tax consequences and difficulty in staffing and managing international operations. In addition, the Company’s business may be affected by foreign currency exchange and managing international operations. In addition, the Company’s business may be affected by foreign currency exchange fluctuations. In particular, the Company is subject to risk in translating its results in foreign currencies into the U.S. dollar. If fluctuations. In particular, the Company is subject to risk in translating its results in foreign currencies into the U.S. dollar. If the value of the U.S. dollar strengthens relative to other currencies, the Company’s reported income from these operations could the value of the U.S. dollar strengthens relative to other currencies, the Company’s reported income from these operations could decrease. The value of the U.S. dollar has recently strengthened considerably against a number of major foreign currencies, and decrease. The value of the U.S. dollar has recently strengthened considerably against a number of major foreign currencies, and 4 4 2019 ANNUAL REPORT | ROBERT HALF a continuation or extension of this strength relative to these other currencies could adversely impact the Company’s reported a continuation or extension of this strength relative to these other currencies could adversely impact the Company’s reported income from its international markets and cause its revenue in such markets, when translated into U.S. dollars, to decline. income from its international markets and cause its revenue in such markets, when translated into U.S. dollars, to decline. Significant U.K. or European developments stemming from the U.K.’s decision to withdraw from the European Union Significant U.K. or European developments stemming from the U.K.’s decision to withdraw from the European Union could have a material adverse effect on the Company. In the past several years, the European market experienced economic could have a material adverse effect on the Company. In the past several years, the European market experienced economic uncertainty, which adversely affected, and the return of which may in the future adversely affect, the Company’s operations in uncertainty, which adversely affected, and the return of which may in the future adversely affect, the Company’s operations in Europe. In particular, Brexit has contributed to, and may continue to contribute to, European economic, market and regulatory Europe. In particular, Brexit has contributed to, and may continue to contribute to, European economic, market and regulatory uncertainty and could adversely affect European or worldwide economic, market, regulatory, or political conditions. To the uncertainty and could adversely affect European or worldwide economic, market, regulatory, or political conditions. To the extent that adverse economic conditions and uncertainty in Europe (related to Brexit or otherwise) worsen, demand for the extent that adverse economic conditions and uncertainty in Europe (related to Brexit or otherwise) worsen, demand for the Company’s services may decline, which could significantly harm its business and results of operations. Company’s services may decline, which could significantly harm its business and results of operations. Natural disasters and unusual weather conditions, pandemic outbreaks, terrorist acts, global political events and other Natural disasters and unusual weather conditions, pandemic outbreaks, terrorist acts, global political events and other serious catastrophic events could disrupt business and otherwise materially adversely affect our business and financial serious catastrophic events could disrupt business and otherwise materially adversely affect our business and financial condition. With operations in many states and multiple foreign countries, we are subject to numerous risks outside of our condition. With operations in many states and multiple foreign countries, we are subject to numerous risks outside of our control, including risks arising from natural disasters, such as fires, earthquakes, hurricanes, floods, tornadoes, unusual weather control, including risks arising from natural disasters, such as fires, earthquakes, hurricanes, floods, tornadoes, unusual weather conditions, pandemic outbreaks and other global health emergencies, terrorist acts or disruptive global political events, or conditions, pandemic outbreaks and other global health emergencies, terrorist acts or disruptive global political events, or similar disruptions that could materially adversely affect our business and financial performance. For example, the Company’s similar disruptions that could materially adversely affect our business and financial performance. For example, the Company’s operations are heavily dependent on the ability of employees and consultants to travel from business to business and from operations are heavily dependent on the ability of employees and consultants to travel from business to business and from location to location. Any public health emergencies, including a real or potential global pandemic such as those caused by the location to location. Any public health emergencies, including a real or potential global pandemic such as those caused by the avian flu, SARS, Ebola, Coronavirus, or even a particularly virulent flu, could decrease demand for our services and our ability avian flu, SARS, Ebola, Coronavirus, or even a particularly virulent flu, could decrease demand for our services and our ability to offer them. Uncharacteristic or significant weather conditions can affect travel and the ability of businesses to remain open, to offer them. Uncharacteristic or significant weather conditions can affect travel and the ability of businesses to remain open, which could lead to decreased ability to offer our services and materially adversely affect our short-term results of operations. which could lead to decreased ability to offer our services and materially adversely affect our short-term results of operations. In addition, these events could result in delays in placing employees and consultants, the temporary disruption in the transport In addition, these events could result in delays in placing employees and consultants, the temporary disruption in the transport of employees and consultants overseas and domestically, the inability of employees and consultants to reach or have of employees and consultants overseas and domestically, the inability of employees and consultants to reach or have transportation to clients directly affected by such events and disruption to our information systems. Although it is not possible transportation to clients directly affected by such events and disruption to our information systems. Although it is not possible to predict such events or their consequences, these events could materially adversely affect our reputation, business and to predict such events or their consequences, these events could materially adversely affect our reputation, business and financial condition. financial condition. Risks Related to the Company’s Operations Risks Related to the Company’s Operations The Company may be unable to find sufficient candidates for its staffing business. The Company’s staffing services The Company may be unable to find sufficient candidates for its staffing business. The Company’s staffing services business consists of the placement of individuals seeking employment. There can be no assurance that candidates for business consists of the placement of individuals seeking employment. There can be no assurance that candidates for employment will continue to seek employment through the Company. Candidates generally seek temporary or regular positions employment will continue to seek employment through the Company. Candidates generally seek temporary or regular positions through multiple sources, including the Company and its competitors. Unemployment in the United States has been low in the through multiple sources, including the Company and its competitors. Unemployment in the United States has been low in the past couple of years and has recently decreased further; some economists have speculated that in certain markets, the U.S. could past couple of years and has recently decreased further; some economists have speculated that in certain markets, the U.S. could be at or near full employment. This phenomenon has made finding sufficient eligible candidates to meet employers’ demands be at or near full employment. This phenomenon has made finding sufficient eligible candidates to meet employers’ demands more challenging and further decreases in the employment rates could compound these difficulties. Any shortage of candidates more challenging and further decreases in the employment rates could compound these difficulties. Any shortage of candidates could materially adversely affect the Company. could materially adversely affect the Company. The Company operates in a highly competitive business and may be unable to retain clients or market share. The staffing The Company operates in a highly competitive business and may be unable to retain clients or market share. The staffing services business is highly competitive and, because it is a service business, the barriers to entry are quite low. There are many services business is highly competitive and, because it is a service business, the barriers to entry are quite low. There are many competitors, some of which have greater resources than the Company, and new competitors are entering the market all the time. competitors, some of which have greater resources than the Company, and new competitors are entering the market all the time. In addition, long-term contracts form a negligible portion of the Company’s revenue. Therefore, there can be no assurance that In addition, long-term contracts form a negligible portion of the Company’s revenue. Therefore, there can be no assurance that the Company will be able to retain clients or market share in the future. Nor can there be any assurance that the Company will, the Company will be able to retain clients or market share in the future. Nor can there be any assurance that the Company will, in light of competitive pressures, be able to remain profitable or, if profitable, maintain its current profit margins. in light of competitive pressures, be able to remain profitable or, if profitable, maintain its current profit margins. The Company may incur potential liability to employees and clients. The Company’s temporary services business entails The Company may incur potential liability to employees and clients. The Company’s temporary services business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. The Company’s ability to employing individuals on a temporary basis and placing such individuals in clients’ workplaces. The Company’s ability to control the workplace environment is limited. As the employer of record of its temporary employees, the Company incurs a risk control the workplace environment is limited. As the employer of record of its temporary employees, the Company incurs a risk of liability to its temporary employees for various workplace events, including claims of physical injury, discrimination, of liability to its temporary employees for various workplace events, including claims of physical injury, discrimination, harassment or failure to protect confidential personal information. While such claims have not historically had a material harassment or failure to protect confidential personal information. While such claims have not historically had a material adverse effect upon the Company, there can be no assurance that such claims in the future will not result in adverse publicity or adverse effect upon the Company, there can be no assurance that such claims in the future will not result in adverse publicity or have a material adverse effect upon the Company. The Company also incurs a risk of liability to its clients resulting from have a material adverse effect upon the Company. The Company also incurs a risk of liability to its clients resulting from allegations of errors, omissions or theft by its temporary employees, or allegations of misuse of client confidential information. allegations of errors, omissions or theft by its temporary employees, or allegations of misuse of client confidential information. In many cases, the Company has agreed to indemnify its clients in respect of these types of claims. The Company maintains In many cases, the Company has agreed to indemnify its clients in respect of these types of claims. The Company maintains insurance with respect to many of such claims. While such claims have not historically had a material adverse effect upon the insurance with respect to many of such claims. While such claims have not historically had a material adverse effect upon the Company, there can be no assurance that the Company will continue to be able to obtain insurance at a cost that does not have a Company, there can be no assurance that the Company will continue to be able to obtain insurance at a cost that does not have a material adverse effect upon the Company or that such claims (whether by reason of the Company not having sufficient material adverse effect upon the Company or that such claims (whether by reason of the Company not having sufficient 5 5 2019 ANNUAL REPORT | ROBERT HALF insurance or by reason of such claims being outside the scope of the Company’s insurance) will not have a material adverse insurance or by reason of such claims being outside the scope of the Company’s insurance) will not have a material adverse effect upon the Company. effect upon the Company. The Company is dependent on its management personnel and employees and a failure to attract and retain such The Company is dependent on its management personnel and employees and a failure to attract and retain such personnel could harm its business. The Company is engaged in the services business. As such, its success or failure is highly personnel could harm its business. The Company is engaged in the services business. As such, its success or failure is highly dependent upon the performance of its management personnel and employees, rather than upon technology or upon tangible dependent upon the performance of its management personnel and employees, rather than upon technology or upon tangible assets (of which the Company has few). There can be no assurance that the Company will be able to attract and retain the assets (of which the Company has few). There can be no assurance that the Company will be able to attract and retain the personnel that are essential to its success. personnel that are essential to its success. The Company’s results of operations and ability to grow could be materially negatively affected if it cannot successfully The Company’s results of operations and ability to grow could be materially negatively affected if it cannot successfully keep pace with technological changes impacting the development and implementation of its services and the evolving needs of keep pace with technological changes impacting the development and implementation of its services and the evolving needs of its clients. The Company’s success depends on its ability to keep pace with rapid technological changes affecting both the its clients. The Company’s success depends on its ability to keep pace with rapid technological changes affecting both the development and implementation of its services and the staffing needs of its clients. Technological advances such as artificial development and implementation of its services and the staffing needs of its clients. Technological advances such as artificial intelligence, machine learning, and automation are impacting industries served by all our lines of business. In addition, the intelligence, machine learning, and automation are impacting industries served by all our lines of business. In addition, the Company’s business relies on a variety of technologies, including those that support hiring and tracking, order management, Company’s business relies on a variety of technologies, including those that support hiring and tracking, order management, billing, and client data analytics. If the Company does not sufficiently invest in new technology and industry developments, billing, and client data analytics. If the Company does not sufficiently invest in new technology and industry developments, appropriately implement new technologies, or evolve its business at sufficient speed and scale in response to such appropriately implement new technologies, or evolve its business at sufficient speed and scale in response to such developments, or if it does not make the right strategic investments to respond to these developments, the Company’s services, developments, or if it does not make the right strategic investments to respond to these developments, the Company’s services, results of operations, and ability to develop and maintain its business could be negatively affected. results of operations, and ability to develop and maintain its business could be negatively affected. The demand for the Company’s services related to Sarbanes-Oxley or other regulatory compliance may decline. The The demand for the Company’s services related to Sarbanes-Oxley or other regulatory compliance may decline. The operations of both the staffing services business and Protiviti include services related to Sarbanes-Oxley and other regulatory operations of both the staffing services business and Protiviti include services related to Sarbanes-Oxley and other regulatory compliance. There can be no assurance that there will be ongoing demand for these services. For example, the Jumpstart Our compliance. There can be no assurance that there will be ongoing demand for these services. For example, the Jumpstart Our Business Startup (“JOBS”) Act signed into law in April of 2012 allows most companies going public in the U.S. to defer Business Startup (“JOBS”) Act signed into law in April of 2012 allows most companies going public in the U.S. to defer implementation of some of the provisions of Sarbanes-Oxley for up to five years after their initial public offering. Similarly implementation of some of the provisions of Sarbanes-Oxley for up to five years after their initial public offering. Similarly there are a number of proposals currently being considered by the U.S. Congress to further delay or, in some cases, remove the there are a number of proposals currently being considered by the U.S. Congress to further delay or, in some cases, remove the requirements of Sarbanes-Oxley for a number of public companies. Further, many analysts are expecting the U.S. Congress and requirements of Sarbanes-Oxley for a number of public companies. Further, many analysts are expecting the U.S. Congress and President Trump to seek to repeal or modify legislation that is viewed as having over-regulated certain sectors of the U.S. President Trump to seek to repeal or modify legislation that is viewed as having over-regulated certain sectors of the U.S. economy and decreased the incentive for U.S. companies to go public and their ability to effectively compete with foreign economy and decreased the incentive for U.S. companies to go public and their ability to effectively compete with foreign competition. These or other similar modifications of the regulatory requirements could decrease demand for Protiviti’s services. competition. These or other similar modifications of the regulatory requirements could decrease demand for Protiviti’s services. Long-term contracts do not comprise a significant portion of the Company’s revenue. Because long-term contracts are not Long-term contracts do not comprise a significant portion of the Company’s revenue. Because long-term contracts are not a significant part of the Company’s staffing services business, future results cannot be reliably predicted by considering past a significant part of the Company’s staffing services business, future results cannot be reliably predicted by considering past trends or extrapolating past results. Additionally, the Company’s clients will frequently enter into non-exclusive arrangements trends or extrapolating past results. Additionally, the Company’s clients will frequently enter into non-exclusive arrangements with several firms, which the client is generally able to terminate on short notice and without penalty. The nature of these with several firms, which the client is generally able to terminate on short notice and without penalty. The nature of these arrangements further exacerbates the difficulty in predicting our future results. arrangements further exacerbates the difficulty in predicting our future results. Protiviti may be unable to attract and retain key personnel. Protiviti is a services business, and is dependent upon its Protiviti may be unable to attract and retain key personnel. Protiviti is a services business, and is dependent upon its ability to attract and retain qualified, skilled personnel. While Protiviti has retained its key personnel to date, there can be no ability to attract and retain qualified, skilled personnel. While Protiviti has retained its key personnel to date, there can be no assurance that it will continue to be able to do so. assurance that it will continue to be able to do so. Protiviti operates in a highly competitive business and faces competitors who are significantly larger and have more Protiviti operates in a highly competitive business and faces competitors who are significantly larger and have more established reputations. Protiviti operates in a highly competitive business. As with the Company’s staffing services business, established reputations. Protiviti operates in a highly competitive business. As with the Company’s staffing services business, the barriers to entry are quite low. There are many competitors, some of which have greater resources than Protiviti and many the barriers to entry are quite low. There are many competitors, some of which have greater resources than Protiviti and many of which have been in operation far longer than Protiviti. In particular, Protiviti faces competition from the “big four” of which have been in operation far longer than Protiviti. In particular, Protiviti faces competition from the “big four” accounting firms, which have been in operation for a considerable period of time and have established reputations and client accounting firms, which have been in operation for a considerable period of time and have established reputations and client bases. Because the principal factors upon which competition is based are reputation, technology, tools, project methodologies, bases. Because the principal factors upon which competition is based are reputation, technology, tools, project methodologies, price of services and depth of skills of personnel, there can be no assurance that Protiviti will be successful in attracting and price of services and depth of skills of personnel, there can be no assurance that Protiviti will be successful in attracting and retaining clients or be able to maintain the technology, personnel and other requirements to successfully compete. retaining clients or be able to maintain the technology, personnel and other requirements to successfully compete. Protiviti’s operations could subject it to liability. The business of Protiviti consists of providing business consulting and Protiviti’s operations could subject it to liability. The business of Protiviti consists of providing business consulting and internal audit services. Liability could be incurred, or litigation could be instituted against the Company or Protiviti for claims internal audit services. Liability could be incurred, or litigation could be instituted against the Company or Protiviti for claims related to these activities or to prior transactions or activities. There can be no assurance that such liability or litigation will not related to these activities or to prior transactions or activities. There can be no assurance that such liability or litigation will not have a material adverse impact on Protiviti or the Company. have a material adverse impact on Protiviti or the Company. 6 6 2019 ANNUAL REPORT | ROBERT HALF Legal and Regulatory Risks Legal and Regulatory Risks The Company and certain subsidiaries are defendants in several lawsuits that could cause the Company to incur The Company and certain subsidiaries are defendants in several lawsuits that could cause the Company to incur substantial liabilities. The Company and certain subsidiaries are defendants in several actual or asserted class and representative substantial liabilities. The Company and certain subsidiaries are defendants in several actual or asserted class and representative action lawsuits brought by or on behalf of the Company’s current and former employees alleging violations of federal and state action lawsuits brought by or on behalf of the Company’s current and former employees alleging violations of federal and state law with respect to certain wage and hour related matters, as well as claims challenging the Company’s compliance with the law with respect to certain wage and hour related matters, as well as claims challenging the Company’s compliance with the Fair Credit Reporting Act. The various claims made in one or more of such lawsuits include, among other things, the Fair Credit Reporting Act. The various claims made in one or more of such lawsuits include, among other things, the misclassification of certain employees as exempt employees under applicable law, failure to comply with wage statement misclassification of certain employees as exempt employees under applicable law, failure to comply with wage statement requirements, failure to compensate certain employees for time spent performing activities related to the interviewing process, requirements, failure to compensate certain employees for time spent performing activities related to the interviewing process, and other related wage and hour violations. Such suits seek, as applicable, unspecified amounts for unpaid overtime and other related wage and hour violations. Such suits seek, as applicable, unspecified amounts for unpaid overtime compensation, penalties, and other damages, as well as attorneys’ fees. It is not possible to predict the outcome of these compensation, penalties, and other damages, as well as attorneys’ fees. It is not possible to predict the outcome of these lawsuits. However, these lawsuits may consume substantial amounts of the Company’s financial and managerial resources and lawsuits. However, these lawsuits may consume substantial amounts of the Company’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome of the lawsuits. In addition, the Company and its might result in adverse publicity, regardless of the ultimate outcome of the lawsuits. In addition, the Company and its subsidiaries may become subject to similar lawsuits in the same or other jurisdictions, or to various other claims, disputes, and subsidiaries may become subject to similar lawsuits in the same or other jurisdictions, or to various other claims, disputes, and legal or regulatory proceedings that arise in the ordinary course of business. An unfavorable outcome with respect to these legal or regulatory proceedings that arise in the ordinary course of business. An unfavorable outcome with respect to these lawsuits and any future lawsuits or regulatory proceedings could, individually or in the aggregate, cause the Company to incur lawsuits and any future lawsuits or regulatory proceedings could, individually or in the aggregate, cause the Company to incur substantial liabilities or impact its operations in such a way that may have a material adverse effect upon the Company’s substantial liabilities or impact its operations in such a way that may have a material adverse effect upon the Company’s business, financial condition or results of operations. Furthermore, any future lawsuits, claims, disputes, or legal or regulatory business, financial condition or results of operations. Furthermore, any future lawsuits, claims, disputes, or legal or regulatory proceedings may also consume substantial amounts of the Company’s financial and managerial resources and might result in proceedings may also consume substantial amounts of the Company’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome. In addition, an unfavorable outcome in one or more of these cases could adverse publicity, regardless of the ultimate outcome. In addition, an unfavorable outcome in one or more of these cases could cause the Company to change its compensation plans for its employees, which could have a material adverse effect upon the cause the Company to change its compensation plans for its employees, which could have a material adverse effect upon the Company’s business. Company’s business. Government regulations may result in prohibition or restriction of certain types of employment services or the imposition Government regulations may result in prohibition or restriction of certain types of employment services or the imposition of additional licensing or tax requirements that may reduce the Company’s future earnings. In many jurisdictions in which the of additional licensing or tax requirements that may reduce the Company’s future earnings. In many jurisdictions in which the Company operates, the employment services industry is heavily regulated. For example, governmental regulations in some Company operates, the employment services industry is heavily regulated. For example, governmental regulations in some countries restrict the length of contracts and the industries in which the Company’s employees may be used. In other countries, countries restrict the length of contracts and the industries in which the Company’s employees may be used. In other countries, special taxes, fees or costs are imposed in connection with the use of its employees. Additionally, trade unions in some special taxes, fees or costs are imposed in connection with the use of its employees. Additionally, trade unions in some countries have used the political process to target the industry, in an effort to increase the regulatory burden and expense countries have used the political process to target the industry, in an effort to increase the regulatory burden and expense associated with offering or utilizing temporary staffing solutions. associated with offering or utilizing temporary staffing solutions. The countries in which we operate may, among other things: The countries in which we operate may, among other things: • • • • • • • • create additional regulations that prohibit or restrict the types of employment services that the Company currently create additional regulations that prohibit or restrict the types of employment services that the Company currently provides; provides; require new or additional benefits be paid to the Company’s employees; require new or additional benefits be paid to the Company’s employees; require the Company to obtain additional licensing to provide employment services; or require the Company to obtain additional licensing to provide employment services; or increase taxes, such as sales or value-added taxes, payable by the providers of temporary workers. increase taxes, such as sales or value-added taxes, payable by the providers of temporary workers. Any future regulations may have a material adverse effect on the Company’s business and financial results because they Any future regulations may have a material adverse effect on the Company’s business and financial results because they may make it more difficult or expensive for the Company to continue to provide employment services. Additionally, as the may make it more difficult or expensive for the Company to continue to provide employment services. Additionally, as the Company expands existing service offerings, adds new service offerings, or enters new markets, it may become subject to Company expands existing service offerings, adds new service offerings, or enters new markets, it may become subject to additional restrictions and regulations which may impede its business, increase costs and impact profitability. additional restrictions and regulations which may impede its business, increase costs and impact profitability. The Company’s business is subject to extensive government regulation and a failure to comply with regulations could The Company’s business is subject to extensive government regulation and a failure to comply with regulations could harm its business. The Company’s business is subject to regulation or licensing in many states in the U.S. and in certain foreign harm its business. The Company’s business is subject to regulation or licensing in many states in the U.S. and in certain foreign countries. While the Company has had no material difficulty complying with regulations in the past, there can be no assurance countries. While the Company has had no material difficulty complying with regulations in the past, there can be no assurance that the Company will be able to continue to obtain all necessary licenses or approvals or that the cost of compliance will not that the Company will be able to continue to obtain all necessary licenses or approvals or that the cost of compliance will not prove to be material. Any inability of the Company to comply with government regulation or licensing requirements could prove to be material. Any inability of the Company to comply with government regulation or licensing requirements could materially adversely affect the Company. Further, changes to existing regulation or licensing requirements could impose materially adversely affect the Company. Further, changes to existing regulation or licensing requirements could impose additional costs and other burdens or limitations on the Company’s operations. In addition, the Company’s temporary services additional costs and other burdens or limitations on the Company’s operations. In addition, the Company’s temporary services business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. Increased business entails employing individuals on a temporary basis and placing such individuals in clients’ workplaces. Increased government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings government regulation of the workplace or of the employer-employee relationship, or judicial or administrative proceedings related to such regulation, could materially adversely affect the Company. In addition, to the extent that government regulation related to such regulation, could materially adversely affect the Company. In addition, to the extent that government regulation imposes increased costs upon the Company, such as unemployment insurance taxes, there can be no assurance that such costs imposes increased costs upon the Company, such as unemployment insurance taxes, there can be no assurance that such costs will not adversely impact the Company’s profit margins. Further, lawsuits or other proceedings related to the Company’s will not adversely impact the Company’s profit margins. Further, lawsuits or other proceedings related to the Company’s compliance with government regulations or licensing requirements could materially adversely affect the Company. For compliance with government regulations or licensing requirements could materially adversely affect the Company. For example, the Company is currently named as a defendant in litigation challenging its compliance with the Fair Credit Reporting example, the Company is currently named as a defendant in litigation challenging its compliance with the Fair Credit Reporting Act. It is not possible to predict the outcome of such litigation; however, such litigation or any future lawsuits or proceedings Act. It is not possible to predict the outcome of such litigation; however, such litigation or any future lawsuits or proceedings related to the Company’s compliance with government regulation or licensing requirements could consume substantial amounts related to the Company’s compliance with government regulation or licensing requirements could consume substantial amounts 7 7 2019 ANNUAL REPORT | ROBERT HALF of the Company’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome of the Company’s financial and managerial resources and might result in adverse publicity, regardless of the ultimate outcome of any such lawsuits or other proceedings. An unfavorable outcome with respect to such litigation or any future lawsuits or of any such lawsuits or other proceedings. An unfavorable outcome with respect to such litigation or any future lawsuits or proceedings could, individually or in the aggregate, cause the Company to incur substantial liabilities that may have a material proceedings could, individually or in the aggregate, cause the Company to incur substantial liabilities that may have a material adverse effect upon the Company’s business, financial condition or results of operations. adverse effect upon the Company’s business, financial condition or results of operations. The Company’s compliance policies and controls may not prevent violations that could result in significant fines and The Company’s compliance policies and controls may not prevent violations that could result in significant fines and penalties. The Company could also be exposed to fines and penalties under U.S. or local jurisdiction trade sanctions and penalties. The Company could also be exposed to fines and penalties under U.S. or local jurisdiction trade sanctions and controls as well as laws prohibiting corrupt payments to governmental officials including the Foreign Corrupt Practices Act and controls as well as laws prohibiting corrupt payments to governmental officials including the Foreign Corrupt Practices Act and similar laws that prohibit payments to foreign officials. Failure to comply with local laws in a particular market may result in similar laws that prohibit payments to foreign officials. Failure to comply with local laws in a particular market may result in substantial liability and could have a significant and negative effect not only on our business in that market but also on our substantial liability and could have a significant and negative effect not only on our business in that market but also on our reputation generally. Although the Company has implemented policies and procedures designed to ensure compliance with reputation generally. Although the Company has implemented policies and procedures designed to ensure compliance with these laws, it cannot be sure that its employees, contractors or agents will not violate such policies. Any such violations could these laws, it cannot be sure that its employees, contractors or agents will not violate such policies. Any such violations could materially damage the Company’s reputation, brand, business and operating results. materially damage the Company’s reputation, brand, business and operating results. Further, changes in U.S. laws and policies governing foreign trade or investment and use of foreign operations or Further, changes in U.S. laws and policies governing foreign trade or investment and use of foreign operations or workers, and any negative sentiments towards the United States as a result of such changes, could adversely affect the workers, and any negative sentiments towards the United States as a result of such changes, could adversely affect the Company’s operations. Company’s operations. Health care reform could increase the costs of the Company’s temporary staffing operations. In March 2010, the Patient Health care reform could increase the costs of the Company’s temporary staffing operations. In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the “PPACA”) was signed Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the “PPACA”) was signed into law in the United States. In 2015, the Company redesigned its employee benefits to offer health insurance coverage to its into law in the United States. In 2015, the Company redesigned its employee benefits to offer health insurance coverage to its temporary candidates in order to meet the requirements of the PPACA’s employer mandate. temporary candidates in order to meet the requirements of the PPACA’s employer mandate. President Trump and the U.S. Congress have and likely will continue to seek to modify, repeal, or otherwise invalidate President Trump and the U.S. Congress have and likely will continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the PPACA. The U.S. Congress has made several attempts to repeal or modify the PPACA and in all, or certain provisions of, the PPACA. The U.S. Congress has made several attempts to repeal or modify the PPACA and in 2019, the U.S. Court of Appeals for the Fifth Circuit invalidated significant portions of the PPACA. In 2020, the U.S. House of 2019, the U.S. Court of Appeals for the Fifth Circuit invalidated significant portions of the PPACA. In 2020, the U.S. House of Representatives petitioned the U.S. Supreme Court to review the Fifth Circuit’s decision. It is unclear at this point what the Representatives petitioned the U.S. Supreme Court to review the Fifth Circuit’s decision. It is unclear at this point what the scope of any future such legislation will be and when it will become effective. Because of the uncertainty surrounding this scope of any future such legislation will be and when it will become effective. Because of the uncertainty surrounding this replacement health care reform legislation, we cannot predict with any certainty the likely impact of the PPACA’s repeal or the replacement health care reform legislation, we cannot predict with any certainty the likely impact of the PPACA’s repeal or the adoption of any other health care reform legislation on the Company’s financial condition or operating results. Whether or not adoption of any other health care reform legislation on the Company’s financial condition or operating results. Whether or not there is alternative health care legislation enacted in the U.S., there is likely to be significant disruption to the health care market there is alternative health care legislation enacted in the U.S., there is likely to be significant disruption to the health care market in the coming months and years and the costs of the Company’s health care expenditures may increase. in the coming months and years and the costs of the Company’s health care expenditures may increase. U.S. federal tax regulations and interpretations could adversely affect the Company. On December 22, 2017, the Tax U.S. federal tax regulations and interpretations could adversely affect the Company. On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. Notwithstanding the reduction in the corporate income tax rate, the Cuts and Jobs Act (the “TCJA”) was signed into law. Notwithstanding the reduction in the corporate income tax rate, the overall impact of these changes on the Company’s results of operations will likely evolve as new regulations and interpretations overall impact of these changes on the Company’s results of operations will likely evolve as new regulations and interpretations relating to the TCJA are implemented. In addition, various political figures have pledged their support to overturning or relating to the TCJA are implemented. In addition, various political figures have pledged their support to overturning or modifying key aspects of the TCJA which could further increase the uncertainty relating to the impact of this or any future tax modifying key aspects of the TCJA which could further increase the uncertainty relating to the impact of this or any future tax legislation on the Company’s results of operations. legislation on the Company’s results of operations. Risks Related to the Company’s Information Technology, Cybersecurity and Data Protection Risks Related to the Company’s Information Technology, Cybersecurity and Data Protection The Company’s computer and communications hardware and software systems are vulnerable to damage and The Company’s computer and communications hardware and software systems are vulnerable to damage and interruption. The Company’s ability to manage its operations successfully is critical to its success and largely depends upon the interruption. The Company’s ability to manage its operations successfully is critical to its success and largely depends upon the efficient and uninterrupted operation of its computer and communications hardware and software systems, some of which are efficient and uninterrupted operation of its computer and communications hardware and software systems, some of which are managed by third-party vendors. The Company’s primary computer systems and operations are vulnerable to damage or managed by third-party vendors. The Company’s primary computer systems and operations are vulnerable to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, catastrophic events and errors in usage by the Company’s employees and those of the Company’s vendors. events and errors in usage by the Company’s employees and those of the Company’s vendors. The Company’s employees or vendors may have access or exposure to personally identifiable or otherwise confidential The Company’s employees or vendors may have access or exposure to personally identifiable or otherwise confidential information and customer data and systems, the misuse of which could result in legal liability. Cyber-attacks, including attacks information and customer data and systems, the misuse of which could result in legal liability. Cyber-attacks, including attacks motivated by grievances against the business services industry in general or against the Company in particular, may disable or motivated by grievances against the business services industry in general or against the Company in particular, may disable or damage its systems. It is possible that the Company’s security controls or those of its third-party vendors over personal and damage its systems. It is possible that the Company’s security controls or those of its third-party vendors over personal and other data and other practices it follows may not prevent the improper access to or disclosure of personally identifiable or other data and other practices it follows may not prevent the improper access to or disclosure of personally identifiable or otherwise confidential information. Such disclosure or damage to the Company’s systems could harm its reputation and subject otherwise confidential information. Such disclosure or damage to the Company’s systems could harm its reputation and subject it to government sanctions and liability under its contracts and laws that protect personal data and confidential information, it to government sanctions and liability under its contracts and laws that protect personal data and confidential information, resulting in increased costs or loss of revenue. The potential risk of security breaches and cyber-attacks may increase as the resulting in increased costs or loss of revenue. The potential risk of security breaches and cyber-attacks may increase as the Company introduces new service offerings. Company introduces new service offerings. 8 8 2019 ANNUAL REPORT | ROBERT HALF Changes in data privacy and protection laws and regulations in respect of control of personal information could increase Changes in data privacy and protection laws and regulations in respect of control of personal information could increase the Company’s costs or otherwise adversely impact its operations. In the ordinary course of business, the Company collects, the Company’s costs or otherwise adversely impact its operations. In the ordinary course of business, the Company collects, uses, and retains personal information from its employees, employment candidates, and contractors, including, without uses, and retains personal information from its employees, employment candidates, and contractors, including, without limitation, full names, government-issued identification numbers, addresses, birth dates, and payroll-related information. The limitation, full names, government-issued identification numbers, addresses, birth dates, and payroll-related information. The possession and use of personal information in conducting the Company’s business subjects it to a variety of complex and possession and use of personal information in conducting the Company’s business subjects it to a variety of complex and evolving domestic and foreign laws and regulations regarding data privacy, protection and security, which, in many cases, evolving domestic and foreign laws and regulations regarding data privacy, protection and security, which, in many cases, apply not only to third-party transactions, but also to transfers of information among the Company and its subsidiaries. For apply not only to third-party transactions, but also to transfers of information among the Company and its subsidiaries. For example, the European Union’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, imposes example, the European Union’s General Data Protection Regulation (“GDPR”), which became effective in May 2018, imposes stringent operational requirements for entities processing personal information, such as strong safeguards for data transfers to stringent operational requirements for entities processing personal information, such as strong safeguards for data transfers to countries outside the European Union and strong enforcement authorities and mechanisms. Complying with the enhanced countries outside the European Union and strong enforcement authorities and mechanisms. Complying with the enhanced obligations imposed by the GDPR and other current and future laws and regulations relating to data transfer, residency, privacy obligations imposed by the GDPR and other current and future laws and regulations relating to data transfer, residency, privacy and protection has increased and may continue to increase the Company’s operating costs and require significant management and protection has increased and may continue to increase the Company’s operating costs and require significant management time and attention, while any failure by the Company or its subsidiaries to comply with applicable laws could result in time and attention, while any failure by the Company or its subsidiaries to comply with applicable laws could result in governmental enforcement actions, fines, and other penalties that could potentially have an adverse effect on the Company’s governmental enforcement actions, fines, and other penalties that could potentially have an adverse effect on the Company’s operations and reputation. operations and reputation. Risks Related to the Company’s Internal Controls and Accounting Policies Risks Related to the Company’s Internal Controls and Accounting Policies Failure to maintain adequate financial and management processes and controls could lead to errors in the Company’s Failure to maintain adequate financial and management processes and controls could lead to errors in the Company’s financial reporting. Failure to maintain adequate financial and management processes and controls could lead to errors in the financial reporting. Failure to maintain adequate financial and management processes and controls could lead to errors in the Company’s financial reporting. If the Company’s management is unable to certify the effectiveness of its internal controls or if Company’s financial reporting. If the Company’s management is unable to certify the effectiveness of its internal controls or if its independent registered public accounting firm cannot render an opinion on the effectiveness of its internal control over its independent registered public accounting firm cannot render an opinion on the effectiveness of its internal control over financial reporting, or if material weaknesses in the Company’s internal controls are identified, the Company could be subject financial reporting, or if material weaknesses in the Company’s internal controls are identified, the Company could be subject to regulatory scrutiny and a loss of public confidence. In addition, if the Company does not maintain adequate financial and to regulatory scrutiny and a loss of public confidence. In addition, if the Company does not maintain adequate financial and management personnel, processes and controls, it may not be able to accurately report its financial performance on a timely management personnel, processes and controls, it may not be able to accurately report its financial performance on a timely basis, which could cause its stock price to fall. basis, which could cause its stock price to fall. Failure to identify and respond to risk issues in a timely manner could have a material adverse effect on our business. Failure to identify and respond to risk issues in a timely manner could have a material adverse effect on our business. Although we have processes in place to attempt to identify and respond to risk issues in a timely manner, our efforts may not be Although we have processes in place to attempt to identify and respond to risk issues in a timely manner, our efforts may not be sufficient. sufficient. The Company’s culture may not sufficiently encourage timely identification and escalation of significant risk issues. The The Company’s culture may not sufficiently encourage timely identification and escalation of significant risk issues. The collective impact of the tone at the top, tone in the middle and tone at the bottom on risk management, compliance and collective impact of the tone at the top, tone in the middle and tone at the bottom on risk management, compliance and responsible business behavior has a huge effect on timely escalation of risk issues, particularly those affecting core operations. responsible business behavior has a huge effect on timely escalation of risk issues, particularly those affecting core operations. Item 1B. Unresolved Staff Comments. Item 1B. Unresolved Staff Comments. Not applicable. Not applicable. Item 2. Properties Item 2. Properties The Company’s headquarters operations are located in Menlo Park and San Ramon, California. As of December 31, The Company’s headquarters operations are located in Menlo Park and San Ramon, California. As of December 31, 2019, placement activities were conducted through 326 offices located in the United States, Canada, the United Kingdom, 2019, placement activities were conducted through 326 offices located in the United States, Canada, the United Kingdom, Belgium, Brazil, France, the Netherlands, Germany, Luxembourg, Switzerland, Japan, China, Singapore, Australia, New Belgium, Brazil, France, the Netherlands, Germany, Luxembourg, Switzerland, Japan, China, Singapore, Australia, New Zealand, Austria, the United Arab Emirates, and Chile. As of December 31, 2019, Protiviti had 62 offices in the United States, Zealand, Austria, the United Arab Emirates, and Chile. As of December 31, 2019, Protiviti had 62 offices in the United States, Canada, Australia, China, France, Germany, Italy, the Netherlands, Japan, Singapore, India and the United Kingdom. All of the Canada, Australia, China, France, Germany, Italy, the Netherlands, Japan, Singapore, India and the United Kingdom. All of the offices are leased. offices are leased. Item 3. Legal Proceedings Item 3. Legal Proceedings On March 23, 2015, Plaintiff Jessica Gentry, on her own behalf and on behalf of a putative class of allegedly similarly 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 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 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 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 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 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 compensation. Gentry also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and 9 9 2019 ANNUAL REPORT | ROBERT HALF the putative class with accurate wage statements. Gentry also seeks an unspecified amount of other damages, attorneys’ fees, 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 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 statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by California’s Labor Code Private Attorneys General Act (“PAGA”). On January 4, 2016, the Court denied a motion by the Company to compel all of Private Attorneys 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 Gentry’s claims, except the PAGA claim, to individual arbitration. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company 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. 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 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 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 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 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 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 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 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 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 behalf of herself and other allegedly “aggrieved employees” as defined by PAGA. At this stage of the litigation, it is not feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the 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. 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 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 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. position or cash flows, litigation is subject to certain inherent uncertainties. Item 4. Mine Safety Disclosure Item 4. Mine Safety Disclosure Not applicable. Not applicable. 10 10 2019 ANNUAL REPORT | ROBERT HALF Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity PART II PART II Securities Securities Market Price, Dividends and Related Matters Market Price, Dividends and Related Matters The Company’s Common Stock is listed for trading on the New York Stock Exchange under the symbol “RHI”. On The Company’s Common Stock is listed for trading on the New York Stock Exchange under the symbol “RHI”. On January 31, 2019, there were 1,210 holders of record of the Common Stock. January 31, 2019, there were 1,210 holders of record of the Common Stock. Issuer Purchases of Equity Securities Issuer Purchases of Equity Securities October 1, 2019 to October 31, 2019 . . . . . . . . . . . . . . . . . . . . October 1, 2019 to October 31, 2019 . . . . . . . . . . . . . . . . . . . . November 1, 2019 to November 30, 2019 . . . . . . . . . . . . . . . . November 1, 2019 to November 30, 2019 . . . . . . . . . . . . . . . . December 1, 2019 to December 31, 2019 . . . . . . . . . . . . . . . . December 1, 2019 to December 31, 2019 . . . . . . . . . . . . . . . . Total October 1, 2019 to December 31, 2019 . . . . . . . . . . . . . Total October 1, 2019 to December 31, 2019 . . . . . . . . . . . . . Total Total Number of Number of Shares Shares Purchased Purchased — — 425,242 425,242 Average Average Price Paid Price Paid Per Share Per Share $ $ $ $ — — 57.85 57.85 649,526 (a) $ 649,526 (a) $ 61.39 61.39 1,074,768 1,074,768 Total Total Number of Number of Shares Shares Purchased Purchased as Part of as Part of Publicly Publicly Announced Announced Plans Plans — — 425,242 425,242 562,436 562,436 987,678 987,678 Maximum Maximum Number of Number of Shares that May Shares that May Yet Be Yet Be Purchased Purchased Under Publicly Under Publicly Announced Announced Plans (b) Plans (b) 3,441,444 3,441,444 3,016,202 3,016,202 2,453,766 2,453,766 (a) (a) (b) (b) Includes 87,090 shares repurchased in connection with employee stock plans, whereby Company shares were tendered Includes 87,090 shares repurchased in connection with employee stock plans, whereby Company shares were tendered by employees for the payment of applicable withholding taxes. by employees for the payment of applicable withholding taxes. Commencing in October 1997, the Company’s Board of Directors has, at various times, authorized the repurchase, from Commencing in October 1997, the Company’s Board of Directors has, at various times, authorized the repurchase, from time to time, of the Company’s common stock on the open market or in privately negotiated transactions depending on time to time, of the Company’s common stock on the open market or in privately negotiated transactions depending on market conditions. Since plan inception, a total of 118,000,000 shares have been authorized for repurchase of which market conditions. Since plan inception, a total of 118,000,000 shares have been authorized for repurchase of which 115,546,234 shares have been repurchased as of December 31, 2019. 115,546,234 shares have been repurchased as of December 31, 2019. Equity Compensation Plan Information Equity Compensation Plan Information Plan Category Plan Category Equity compensation plans approved by security Equity compensation plans approved by security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equity compensation plans not approved by Equity compensation plans not approved by security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . security holders . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Number of securities Number of securities to be issued upon to be issued upon exercise of exercise of outstanding options, outstanding options, warrants and rights warrants and rights A A Weighted average Weighted average exercise price of exercise price of outstanding options, outstanding options, warrants and rights warrants and rights B B Number of securities Number of securities remaining available for remaining available for future issuance under future issuance under equity compensation plans equity compensation plans (excluding securities (excluding securities reflected in column A) reflected in column A) C C — — — — — — — — — — — — 4,823,372 4,823,372 — — 4,823,372 4,823,372 Since May 2005, all grants have been made pursuant to the Stock Incentive Plan, which was approved by stockholders in Since May 2005, all grants have been made pursuant to the Stock Incentive Plan, which was approved by stockholders in May 2005 and re-approved in May 2008, May 2011, May 2013, May 2014, and May 2019. Such plan authorizes the issuance of May 2005 and re-approved in May 2008, May 2011, May 2013, May 2014, and May 2019. Such plan authorizes the issuance of stock options, restricted stock, stock units and stock appreciation rights to directors, executive officers and employees. stock options, restricted stock, stock units and stock appreciation rights to directors, executive officers and employees. 11 11 2019 ANNUAL REPORT | ROBERT HALF Stock Performance Graph Stock Performance Graph The following graph compares, through December 31, 2019, the cumulative total return of the Company’s Common The following graph compares, through December 31, 2019, the cumulative total return of the Company’s Common Stock, an index of certain publicly traded employment services companies, and the S&P 500. The graph assumes the Stock, an index of certain publicly traded employment services companies, and the S&P 500. The graph assumes the investment of $100 at the beginning of the period depicted in the chart and reinvestment of all dividends. The peer companies investment of $100 at the beginning of the period depicted in the chart and reinvestment of all dividends. The peer companies are weighted by their respective market caps at the beginning of each period. The information presented in the graph was are weighted by their respective market caps at the beginning of each period. The information presented in the graph was obtained by the Company from outside sources it considers to be reliable but has not been independently verified by the obtained by the Company from outside sources it considers to be reliable but has not been independently verified by the Company. Company. $200 $200 $150 $150 $100 $100 $50 $50 $0 $0 1 / 2 1 / 2 4 4 1 1 0 0 2 / 3 2 / 3 1 1 5 5 1 1 0 0 1 / 2 1 / 2 2 / 3 2 / 3 1 1 6 6 1 1 0 0 1 / 2 1 / 2 2 / 3 2 / 3 1 1 7 7 1 1 0 0 1 / 2 1 / 2 2 / 3 2 / 3 1 1 8 8 1 1 0 0 1 / 2 1 / 2 2 / 3 2 / 3 1 1 9 9 1 1 0 0 1 / 2 1 / 2 2 / 3 2 / 3 1 1 Robert Half International Inc. Robert Half International Inc. Peer Group(a) Peer Group(a) S&P 500 Index S&P 500 Index (a) (a) This index represents the cumulative total return of the Company and the following corporations providing temporary This index represents the cumulative total return of the Company and the following corporations providing temporary or permanent employment services: Kelly Services, Inc.; Kforce Inc.; ManpowerGroup; and Resources Connection Inc. or permanent employment services: Kelly Services, Inc.; Kforce Inc.; ManpowerGroup; and Resources Connection Inc. 12 12 2019 ANNUAL REPORT | ROBERT HALF Item 6. Selected Financial Data Item 6. Selected Financial Data The selected five-year financial data presented below should be read in conjunction with the information contained in The selected five-year financial data presented below should be read in conjunction with the information contained in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Company’s Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the Company’s Consolidated Financial Statements and the Notes thereto contained in Item 8. Financial Statements and Supplementary Data. Consolidated Financial Statements and the Notes thereto contained in Item 8. Financial Statements and Supplementary Data. 2019 2019 2018 2018 2017 2017 2016 2016 2015 2015 Years Ended December 31, Years Ended December 31, (in thousands) (in thousands) Income Statement Data: Income Statement Data: Service revenues . . . . . . . . . . . . . . . . . . . . $6,074,432 Service revenues . . . . . . . . . . . . . . . . . . . . $6,074,432 $5,800,271 $5,800,271 $5,266,789 $5,266,789 $5,250,399 $5,250,399 $5,094,933 $5,094,933 Costs of services . . . . . . . . . . . . . . . . . . . . Costs of services . . . . . . . . . . . . . . . . . . . . 3,543,913 3,543,913 Gross margin . . . . . . . . . . . . . . . . . . . . . . . Gross margin . . . . . . . . . . . . . . . . . . . . . . . Selling, general and administrative Selling, general and administrative 2,530,519 2,530,519 3,390,257 3,390,257 2,410,014 2,410,014 3,102,977 3,102,977 2,163,812 2,163,812 3,089,723 3,089,723 2,160,676 2,160,676 2,980,462 2,980,462 2,114,471 2,114,471 expenses . . . . . . . . . . . . . . . . . . . . . . . . . expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,908,768 1,908,768 1,821,089 1,821,089 1,646,532 1,646,532 1,606,217 1,606,217 1,533,799 1,533,799 Amortization of intangible assets . . . . . . . Amortization of intangible assets . . . . . . . Interest income, net . . . . . . . . . . . . . . . . . . Interest income, net . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . Income before income taxes . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . 1,361 1,361 (5,125) (5,125) 625,515 625,515 171,082 171,082 1,705 1,705 (4,382) (4,382) 591,602 591,602 157,314 157,314 1,563 1,563 (1,799) (1,799) 517,516 517,516 226,932 226,932 1,237 1,237 (888) (888) 554,110 554,110 210,721 210,721 192 192 (550) (550) 581,030 581,030 223,234 223,234 Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 454,433 Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 454,433 $ 434,288 $ 434,288 $ 290,584 $ 290,584 $ 343,389 $ 343,389 $ 357,796 $ 357,796 Years Ended December 31, Years Ended December 31, 2019 2019 2018 2018 2017 2017 2016 2016 2015 2015 (in thousands, except per share amounts) (in thousands, except per share amounts) Net Income Per Share: Net Income Per Share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . $ Basic . . . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . $ Diluted . . . . . . . . . . . . . . . . . . . . . . . . $ 3.93 3.93 3.90 3.90 $ $ $ $ 3.60 3.60 3.57 3.57 $ $ $ $ 2.34 2.34 2.33 2.33 $ $ $ $ 2.68 2.68 2.67 2.67 $ $ $ $ 2.72 2.72 2.69 2.69 Shares: Shares: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . Basic . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . 115,656 115,656 116,411 116,411 120,513 120,513 121,602 121,602 124,152 124,152 124,892 124,892 127,991 127,991 128,766 128,766 131,749 131,749 132,930 132,930 Dividends Declared Per Share . . . . . . . . . $ Dividends Declared Per Share . . . . . . . . . $ 1.24 1.24 $ $ 1.12 1.12 $ $ .96 .96 $ $ .88 .88 $ $ .80 .80 2019 2019 2018 2018 2017 2017 2016 2016 2015 2015 (in thousands) (in thousands) December 31, December 31, Balance Sheet Data: Balance Sheet Data: Total assets . . . . . . . . . . . . . . . . . . . . . . . . $2,311,408 Total assets . . . . . . . . . . . . . . . . . . . . . . . . $2,311,408 $1,903,097 $1,903,097 $1,867,454 $1,867,454 $1,777,971 $1,777,971 $1,671,044 $1,671,044 Notes payable, less current portion . . . . . . $ Notes payable, less current portion . . . . . . $ 239 239 $ $ 457 457 $ $ 657 657 $ $ 840 840 $ $ 1,007 1,007 Stockholders’ equity . . . . . . . . . . . . . . . . . $1,143,683 Stockholders’ equity . . . . . . . . . . . . . . . . . $1,143,683 $1,063,198 $1,063,198 $1,105,265 $1,105,265 $1,086,599 $1,086,599 $1,003,781 $1,003,781 13 13 2019 ANNUAL REPORT | ROBERT HALF Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 7. 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 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 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”, 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- “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 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 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; changes in levels of unemployment and of U.S. or international tax regulations; the global financial and economic situation; 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 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 employment or the Company’s ability to attract candidates; or industries; reduction in the supply of candidates for temporary 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 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 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 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 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 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, 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 training, and retaining qualified management personnel and other staff employees and in managing the recently announced leadership transition; the Company’s ability to comply with governmental regulations affecting personnel services businesses in leadership transition; 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 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; 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 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 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 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 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 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 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 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 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 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 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 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 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. Further information business, future results cannot be reliably predicted by considering past trends or extrapolating past results. Further information regarding these and other risks and uncertainties is contained in Item 1A. “Risk Factors.” regarding these and other risks and uncertainties is contained in Item 1A. “Risk Factors.” Executive Overview Executive Overview Demand for the Company’s temporary and consultant staffing, permanent placement staffing and risk consulting and Demand for the Company’s temporary and 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. Annual internal audit services is largely dependent upon general economic and labor trends both domestically and abroad. Annual service revenues reached $6.07 billion in 2019, an increase of 5% from the prior year. Full-year 2019 net income increased to service revenues reached $6.07 billion in 2019, an increase of 5% from the prior year. Full-year 2019 net income increased to $454 million and diluted net income per share increased to $3.90. All three of the Company’s reportable segments experienced $454 million and diluted net income per share increased to $3.90. All three of the Company’s reportable segments experienced revenue growth, led by risk consulting and internal audit services which increased 18% in 2019 compared to last year. revenue growth, led by risk consulting and internal audit services which increased 18% in 2019 compared to last year. We believe that the Company is well positioned in the current macroeconomic environment. The United States economic We believe that the Company is well positioned in the current macroeconomic environment. The United States economic backdrop during 2019 was conducive to growth for the Company as real gross domestic product (“GDP”) grew an estimated backdrop during 2019 was conducive to growth for the Company as real gross domestic product (“GDP”) grew an estimated 2.3%, while the unemployment rate declined from 3.9% in December 2018 to 3.5% in December 2019. In the United States, the 2.3%, while the unemployment rate declined from 3.9% in December 2018 to 3.5% in December 2019. In the United States, the number of job openings has exceeded the number of hires since February 2015, creating competition for skilled talent that number of job openings has exceeded the number of hires since February 2015, 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 talent shortages increases the Company’s value to clients. The U.S. labor market remains robust, with significant demand due to talent shortages across our professional disciplines, where unemployment remains near a 50-year low. across our professional disciplines, where unemployment remains near a 50-year low. Demand for Protiviti’s services was broad-based across all of its consulting and internal audit solutions. Protiviti Demand for Protiviti’s services was broad-based across all of its consulting and internal audit solutions. Protiviti continues to nurture and grow a loyal client base. continues to nurture and grow a loyal client base. We monitor various economic indicators and business trends in all of the countries in which we operate to anticipate 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 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 personnel, which will best position the Company for success in the current and future global macroeconomic environment. The 14 14 2019 ANNUAL REPORT | ROBERT HALF Company’s investments in headcount are typically structured to proactively support and align with expected revenue growth Company’s investments in headcount are typically structured to proactively support and align with expected revenue growth trends. As such, during 2019, we added headcount in all of our lines of business compared to prior year-end levels. trends. As such, during 2019, we added headcount in all of our lines of business compared to prior year-end levels. We have limited visibility into future revenues not only due to the dependence on macroeconomic conditions noted above, 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 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. That said, based on current trends and conditions, we expect headcount and other investments on at least a quarterly basis. That said, based on current trends and conditions, we expect headcount levels for our full-time staff to remain relatively flat for each of our reporting segments throughout the first quarter of headcount levels for our full-time staff to remain relatively flat for each of our reporting segments throughout the first quarter of 2020. 2020. Capital expenditures, including $30 million related to cloud computing implementations, in 2019, totaled $90 million, Capital expenditures, including $30 million related to cloud computing implementations, in 2019, totaled $90 million, approximately 62% of which represented investments in software initiatives and technology infrastructure, both of which are approximately 62% of which represented investments in software initiatives and technology infrastructure, both of which are important to the Company’s future growth opportunities. Capital expenditures for cloud computing implementation costs are important to the Company’s future growth opportunities. Capital expenditures for cloud computing implementation costs are included in cash flows from operating activities on the Company’s Condensed Consolidated Statements of Cash Flows. Capital 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 expenditures also included amounts spent on tenant improvements and furniture and equipment in the Company’s leased offices. We currently expect that 2020 capitalized expenditures will range from $100 million to $110 million, of which $50 offices. We currently expect that 2020 capitalized expenditures will range from $100 million to $110 million, of which $50 million to $60 million relates to software initiatives and technology infrastructure, including capitalized costs relating to the million to $60 million relates to software initiatives and technology infrastructure, including capitalized costs relating to the implementation of cloud computing arrangements. implementation of cloud computing arrangements. Critical Accounting Policies and Estimates Critical Accounting Policies and Estimates As described below, the Company’s most critical accounting policies and estimates are those that involve subjective As described below, the Company’s most critical accounting policies and estimates are those that involve subjective decisions or assessments. decisions or assessments. Service Revenues. The Company derives its revenues from three segments: temporary and consultant staffing, Service Revenues. The Company derives its revenues from three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or 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 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—“Revenue Recognition” to the Company’s Consolidated Financial exchange for those goods or services. See Note C—“Revenue Recognition” to the Company’s Consolidated Financial Statements included under Part II—Item 8 of this report. Statements included under Part II—Item 8 of this report. Income Taxes. The Company’s operations are subject to U.S. federal, state and local, and foreign income taxes. In Income Taxes. The Company’s operations are subject to U.S. federal, state and local, and foreign income taxes. In establishing its deferred income tax assets and liabilities and its provision for income taxes, the Company makes judgments and establishing its deferred income tax assets and liabilities and its provision for income taxes, the Company makes judgments and interpretations based on the enacted tax laws that are applicable to its operations in various jurisdictions. Deferred tax assets and interpretations based on the enacted tax laws that are applicable to its operations in various jurisdictions. Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, which the Company expects will apply to taxable income liabilities are measured and recorded using current enacted tax rates, which the Company expects will apply to taxable income in the years in which those temporary differences are recovered or settled. The likelihood of a material change in the in the years in which those temporary differences are recovered or settled. The likelihood of a material change in the Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of its tax Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of its tax planning in the various relevant jurisdictions. planning in the various relevant jurisdictions. The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be realized. When appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may realized. When appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may not be realized. Valuation allowances of $21.6 million and $23.1 million were recorded as of December 31, 2019 and 2018, not be realized. Valuation allowances of $21.6 million and $23.1 million were recorded as of December 31, 2019 and 2018, respectively. The valuation allowances recorded relate primarily to net operating losses in certain foreign operations. If such respectively. The valuation allowances recorded relate primarily to net operating losses in certain foreign operations. If such losses are ultimately utilized to offset future operating income, the Company will recognize a tax benefit up to the full amount losses are ultimately utilized to offset future operating income, the Company will recognize a tax benefit up to the full amount of the related valuation reserve. of the related valuation reserve. While management believes that its judgments and interpretations regarding income taxes are appropriate, significant While management believes that its judgments and interpretations regarding income taxes are appropriate, significant differences in actual experience may materially affect the future financial results of the Company. differences in actual experience may materially affect the future financial results of the Company. Recent Accounting Pronouncements Recent Accounting Pronouncements See Note B—“New Accounting Pronouncements” to the Company’s Consolidated Financial Statements included under See Note B—“New Accounting Pronouncements” to the Company’s Consolidated Financial Statements included under Part II—Item 8 of this report. Part II—Item 8 of this report. Results of Operations Results of Operations Demand for the Company’s temporary and consultant staffing, permanent placement staffing and risk consulting and Demand for the Company’s temporary and 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. 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 and the absence of material long-term contracts in any of the Because of the inherent difficulty in predicting economic trends and the absence of material long-term contracts in any of the Company’s business units, future demand for the Company’s services cannot be forecasted with certainty. We believe the Company’s business units, future demand for the Company’s services cannot be forecasted with certainty. We believe the Company is well positioned in the current macroeconomic environment. Company is well positioned in the current macroeconomic environment. 15 15 2019 ANNUAL REPORT | ROBERT HALF The Company’s temporary and permanent staffing business conducts placement activities through 326 offices in The Company’s temporary and permanent staffing business conducts placement activities through 326 offices in 42 states, the District of Columbia and 17 foreign countries, while Protiviti has 62 offices in 23 states and 11 foreign countries. 42 states, the District of Columbia and 17 foreign countries, while Protiviti has 62 offices in 23 states and 11 foreign countries. Non-GAAP Financial Measures Non-GAAP Financial Measures The financial results of the Company are prepared in conformity with accounting principles generally accepted in the The financial results of the Company are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the SEC. To help readers understand the Company’s financial United States of America (“GAAP”) and the rules of the SEC. To help readers understand the Company’s financial performance, the Company supplements its GAAP financial results with revenue growth rates derived from non-GAAP revenue performance, the Company supplements its GAAP financial results with revenue growth rates derived from non-GAAP revenue amounts. amounts. Variations in the Company’s financial results include the impact of changes in foreign currency exchange rates, billing Variations in the Company’s financial results include the impact of changes in foreign currency exchange rates, billing days, and certain intercompany adjustments. The Company provides “as adjusted” revenue growth calculations to remove the days, and 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 impact of these items. These calculations show the year-over-year revenue growth rates for the Company’s reportable segments on both a reported basis and also on an as adjusted basis for global, U.S. and international operations. The Company has on both a reported basis and also on an as adjusted basis for global, U.S. and international operations. The Company has provided this data because it focuses on the Company’s revenue growth rates attributable to operating activities and aids in 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 evaluating revenue trends over time. The Company expresses year-over-year revenue changes as calculated percentages using the same number of billing days, constant currency exchange rates, and certain intercompany adjustments. the same number of billing days, constant currency exchange rates, and certain intercompany adjustments. In order to calculate constant currency revenue growth rates, as reported amounts are retranslated using foreign currency In order to calculate constant currency revenue growth rates, as reported amounts are retranslated using foreign currency exchange rates from the prior year’s comparable period. Management then calculates a global, weighted-average number of exchange rates from the prior year’s comparable period. Management then calculates a global, weighted-average number of billing days for each reporting period based upon input from all countries and all lines of business. In order to remove the 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, the Company calculates same billing day revenue fluctuations caused by comparable periods having different billing days, 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 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. to arrive at a per billing day amount. Same billing day growth rates are then calculated based upon the per billing day amounts. In order to remove the fluctuations caused by the impact of certain intercompany adjustments, applicable comparative period In order to remove the fluctuations caused by the impact of certain intercompany adjustments, applicable comparative period revenues are reclassified to conform with the current period presentation. The term “as adjusted” means that the impact of revenues are reclassified to conform with the current period presentation. The term “as adjusted” means that the impact of different billing days, constant currency fluctuations, and certain intercompany adjustments are removed from the revenue different billing days, constant currency fluctuations, and certain intercompany adjustments are removed from the revenue growth rate calculation. growth rate calculation. The non-GAAP financial measures provided herein may not provide information that is directly comparable to that 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. 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 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 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 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 to the reported revenue growth rates is by GAAP financial results. A reconciliation of the as adjusted revenue growth rates to the reported revenue growth rates is provided herein. provided herein. Refer to Item 7a. “Quantitative and Qualitative Disclosures About Market Risk” for further discussion of the impact of Refer to Item 7a. “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. foreign currency exchange rates on the Company’s results of operations and financial condition. Years ended December 31, 2019 and 2018 Years ended December 31, 2019 and 2018 Revenues. The Company’s revenues were $6.07 billion for the year ended December 31, 2019, increasing by 4.7% Revenues. The Company’s revenues were $6.07 billion for the year ended December 31, 2019, increasing by 4.7% compared to $5.80 billion for the year ended December 31, 2018. Revenues from foreign operations represented 22% and 24% compared to $5.80 billion for the year ended December 31, 2018. Revenues from foreign operations represented 22% and 24% of total revenues for the years ended December 31, 2019 and 2018, respectively. The Company analyzes its revenues for three of total revenues for the years ended December 31, 2019 and 2018, respectively. The Company analyzes its revenues for three reportable segments: temporary and consultant staffing, permanent placement staffing and risk consulting and internal audit reportable segments: temporary and consultant staffing, permanent placement staffing and risk consulting and internal audit services. In 2019, revenues for all three of the Company’s reportable segments were up compared to 2018. Revenue growth was services. In 2019, revenues for all three of the Company’s reportable segments were up compared to 2018. Revenue growth was strongest domestically. Risk consulting and internal audit services continued to post strong growth rates. Contributing factors strongest domestically. Risk consulting and internal audit services continued to post strong growth rates. Contributing factors for each reportable segment are discussed below in further detail. for each reportable segment are discussed below in further detail. Temporary and consultant staffing revenues were $4.41 billion for the year ended December 31, 2019, increasing by Temporary and consultant staffing revenues were $4.41 billion for the year ended December 31, 2019, increasing by 1.9% compared to revenues of $4.33 billion for the year ended December 31, 2018. Key drivers of temporary and consultant 1.9% compared to revenues of $4.33 billion for the year ended December 31, 2018. Key drivers of temporary and consultant staffing revenues include average hourly bill rates and the number of hours worked by the Company’s engagement 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 increased 3.8% for professionals on client engagements. On an as adjusted basis, temporary and consultant staffing revenues increased 3.8% for 2019, compared to 2018, due primarily to a 5.2% increase in average bill rates, partially offset by fewer hours worked by the 2019, compared to 2018, due primarily to a 5.2% increase in average bill rates, partially offset by fewer hours worked by the Company’s engagement professionals. In the U.S., 2019 revenues increased 3.9% on an as reported basis and 4.1% on an as Company’s engagement professionals. In the U.S., 2019 revenues increased 3.9% on an as reported basis and 4.1% on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues decreased 4.8% on an as reported adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues decreased 4.8% on an as reported basis and increased 2.8% on an as adjusted basis, compared to 2018. basis and increased 2.8% on an as adjusted basis, compared to 2018. Permanent placement staffing revenues were $533 million for the year ended December 31, 2019, increasing by 4.2% Permanent placement staffing revenues were $533 million for the year ended December 31, 2019, increasing by 4.2% compared to revenues of $512 million for the year ended December 31, 2018. Key drivers of permanent placement staffing compared to revenues of $512 million for the year ended December 31, 2018. 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, revenues consist of the number of candidate placements and average fees earned per placement. On an as adjusted basis, 16 16 2019 ANNUAL REPORT | ROBERT HALF permanent placement staffing revenues increased 5.6% for 2019 compared to 2018, driven by increases in number of permanent placement staffing revenues increased 5.6% for 2019 compared to 2018, driven by increases in number of placements and average fees earned per placement. In the U.S., 2019 revenues increased 6.5% on an as reported basis and 6.7% placements and average fees earned per placement. In the U.S., 2019 revenues increased 6.5% on an as reported basis and 6.7% on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues decreased 0.8% on an as on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues decreased 0.8% on an as reported basis, and increased 2.9% on an as adjusted basis, compared to 2018. Historically, demand for permanent placement reported basis, and increased 2.9% on an as adjusted basis, compared to 2018. Historically, demand for permanent placement services is even more sensitive to economic and labor market conditions than demand for temporary and consulting staffing and services is even more sensitive to economic and labor market conditions than demand for temporary and consulting staffing and this is expected to continue. this is expected to continue. Risk consulting and internal audit services revenues were $1.13 billion for the year ended December 31, 2019, increasing Risk consulting and internal audit services revenues were $1.13 billion for the year ended December 31, 2019, increasing by 17.9% compared to revenues of $958 million for the year ended December 31, 2018. Key drivers of risk consulting and by 17.9% compared to revenues of $958 million for the year ended December 31, 2018. Key drivers of risk consulting and internal audit services revenues are the billable hours worked by consultants on client engagements and average hourly bill 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 15.0% for 2019 compared to 2018, rates. On an as adjusted basis, risk consulting and internal audit services revenues increased 15.0% for 2019 compared to 2018, driven primarily by an increase in billable hours. In the U.S., 2019 revenues increased 16.2% on an as reported basis, or 16.5% driven primarily by an increase in billable hours. In the U.S., 2019 revenues increased 16.2% on an as reported basis, or 16.5% on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues increased 24.1% on an on an as adjusted basis, compared to 2018. For the Company’s international operations, 2019 revenues increased 24.1% on an as reported basis, or 10.1% on an as adjusted basis, compared to 2018. as reported basis, or 10.1% on an as adjusted basis, compared to 2018. A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth A reconciliation of the non-GAAP year-over-year revenue growth rates to the as reported year-over-year revenue growth rates for the year ended December 31, 2019, is presented in the following table: rates for the year ended December 31, 2019, is presented in the following table: Global Global United States United States International International Temporary and consultant staffing Temporary and consultant staffing As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9% 1.9% Billing Days Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Billing Days Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing Permanent placement staffing As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Billing Days Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Billing Days Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk consulting and internal audit services Risk consulting and internal audit services — — 1.1% 1.1% 0.8% 0.8% 3.8% 3.8% 4.2% 4.2% 0.1% 0.1% 1.3% 1.3% 5.6% 5.6% As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.9% 17.9% Billing Days Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Billing Days Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Currency Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Currency Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Intercompany Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . As Adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0% 1.0% -3.9% -3.9% 15.0% 15.0% 3.9% 3.9% 0.2% 0.2% — — — — 4.1% 4.1% 6.5% 6.5% 0.2% 0.2% — — 6.7% 6.7% 16.2% 16.2% 0.3% 0.3% — — — — 16.5% 16.5% -4.8% -4.8% -0.5% -0.5% 4.8% 4.8% 3.3% 3.3% 2.8% 2.8% -0.8% -0.8% -0.5% -0.5% 4.2% 4.2% 2.9% 2.9% 24.1% 24.1% -0.6% -0.6% 4.0% 4.0% -17.4% -17.4% 10.1% 10.1% Gross Margin. The Company’s gross margin dollars were $2.53 billion for the year ended December 31, 2019, up 5.0% Gross Margin. The Company’s gross margin dollars were $2.53 billion for the year ended December 31, 2019, up 5.0% from $2.41 billion for the year ended December 31, 2018. Contributing factors for each reportable segment are discussed below from $2.41 billion for the year ended December 31, 2018. Contributing factors for each reportable segment are discussed below in further detail. in further detail. Gross margin dollars for temporary and consultant staffing represent revenues less costs of services, which consist of Gross margin dollars for temporary and consultant staffing represent revenues less costs of services, which consist of payroll, payroll taxes and benefit costs for engagement professionals, and reimbursable expenses. The key drivers of gross 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 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 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 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 $1.68 with the Company’s client. Gross margin dollars for the Company’s temporary and consultant staffing division were $1.68 billion for the year ended December 31, 2019, up 2.9% from $1.63 billion for the year ended December 31, 2018. As a billion for the year ended December 31, 2019, up 2.9% from $1.63 billion for the year ended December 31, 2018. As a percentage of revenues, gross margin dollars for temporary and consultant staffing were 38.0% in 2019, up from 37.6% in percentage of revenues, gross margin dollars for temporary and consultant staffing were 38.0% in 2019, up from 37.6% in 2018. This year-over-year improvement in gross margin percentage was primarily attributable to higher pay-bill spreads. 2018. This year-over-year improvement in gross margin percentage was primarily attributable to higher pay-bill spreads. Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses. Gross margin Gross margin dollars for permanent placement staffing represent revenues less reimbursable expenses. Gross margin dollars for the Company’s permanent placement staffing division were $532 million for the year ended December 31, 2019, up dollars for the Company’s permanent placement staffing division were $532 million for the year ended December 31, 2019, up 4.2% from $511 million for the year ended December 31, 2018. Because reimbursable expenses for permanent placement 4.2% from $511 million for the year ended December 31, 2018. Because reimbursable expenses for permanent placement staffing services are de minimis, the increase in gross margin dollars is substantially explained by the increase in revenues staffing services are de minimis, the increase in gross margin dollars is substantially explained by the increase in revenues previously discussed. previously discussed. 17 17 2019 ANNUAL REPORT | ROBERT HALF Gross margin dollars for risk consulting and internal audit services represent revenues less costs of services, which Gross margin dollars for risk consulting and internal audit services represent revenues less costs of services, which consist primarily of professional staff payroll, payroll taxes, benefit costs and reimbursable expenses. The primary drivers of 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 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 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 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 $321 million for the year ended December 31, 2019, up for the Company’s risk consulting and internal audit division were $321 million for the year ended December 31, 2019, up 19.0% from $269 million for the year ended December 31, 2018. As a percentage of revenues, gross margin dollars for risk 19.0% from $269 million for the year ended December 31, 2018. As a percentage of revenues, gross margin dollars for risk consulting and internal audit services were 28.4% in 2019, up from 28.1% in 2018. The year-over-year improvement in gross consulting and internal audit services were 28.4% in 2019, up from 28.1% in 2018. The year-over-year improvement in gross margin percentage was due primarily to improved staff utilization. margin percentage was due primarily to improved staff utilization. Selling, General and Administrative Expenses. The Company’s selling, general and administrative expenses consist 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, primarily of staff compensation, advertising, variable overhead, depreciation and occupancy costs. The Company’s selling, general and administrative expenses were $1.91 billion for the year ended December 31, 2019, up 4.8% from $1.82 billion for general and administrative expenses were $1.91 billion for the year ended December 31, 2019, up 4.8% from $1.82 billion for the year ended December 31, 2018. As a percentage of revenues, the Company’s selling, general and administrative expenses the year ended December 31, 2018. As a percentage of revenues, the Company’s selling, general and administrative expenses were 31.4% for both the years ended December 31, 2019, and 2018. Contributing factors for each reportable segment are were 31.4% for both the years ended December 31, 2019, and 2018. Contributing factors for each reportable segment are discussed below in further detail. discussed below in further detail. Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were $1.27 Selling, general and administrative expenses for the Company’s temporary and consultant staffing division were $1.27 billion for the year ended December 31, 2019, increasing by 3.5% from $1.22 billion for the year ended December 31, 2018. As billion for the year ended December 31, 2019, increasing by 3.5% from $1.22 billion for the year ended December 31, 2018. As a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were 28.7% in a percentage of revenues, selling, general and administrative expenses for temporary and consultant staffing were 28.7% in 2019, up from 28.3% in 2018 due primarily to negative leverage resulting from the Company’s international operations. 2019, up from 28.3% in 2018 due primarily to negative leverage resulting from the Company’s international operations. Selling, general and administrative expenses for the Company’s permanent placement staffing division were $449 million Selling, general and administrative expenses for the Company’s permanent placement staffing division were $449 million for the year ended December 31, 2019, increasing by 6.7% from $420 million for the year ended December 31, 2018. As a for the year ended December 31, 2019, increasing by 6.7% from $420 million for the year ended December 31, 2018. As a percentage of revenues, selling, general and administrative expenses for permanent placement staffing services were 84.1% in percentage of revenues, selling, general and administrative expenses for permanent placement staffing services were 84.1% in 2019, up from 82.1% in 2018 due primarily to negative leverage resulting from the Company’s international operations. 2019, up from 82.1% in 2018 due primarily to negative leverage resulting from the Company’s international operations. Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were Selling, general and administrative expenses for the Company’s risk consulting and internal audit services division were $193 million for the year ended December 31, 2019, increasing by 9.6% from $176 million for the year ended December 31, $193 million for the year ended December 31, 2019, increasing by 9.6% from $176 million for the year ended December 31, 2018. As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services 2018. As a percentage of revenues, selling, general and administrative expenses for risk consulting and internal audit services were 17.1% in 2019, down from 18.4% in 2018. The decrease in selling, general and administrative expenses as a percentage of were 17.1% in 2019, down from 18.4% in 2018. The decrease in selling, general and administrative expenses as a percentage of revenue is primarily due to positive operating leverage resulting from increased revenue. revenue is primarily due to positive operating leverage resulting from increased revenue. Operating Income. The Company’s total operating income was $622 million, or 10.2% of revenues, for the year ended Operating Income. The Company’s total operating income was $622 million, or 10.2% of revenues, for the year ended December 31, 2019, up 5.6% from $589 million, or 10.2% of revenues, for the year ended December 31, 2018. For the December 31, 2019, up 5.6% from $589 million, or 10.2% of revenues, for the year ended December 31, 2018. For the Company’s temporary and consultant staffing division, operating income was $410 million, or 9.3% of applicable revenues, up Company’s temporary and consultant staffing division, operating income was $410 million, or 9.3% of applicable revenues, up 1.3% from $405 million, or 9.3% of applicable revenues, in 2018. For the Company’s permanent placement staffing division, 1.3% from $405 million, or 9.3% of applicable revenues, in 2018. For the Company’s permanent placement staffing division, operating income was $84 million, or 15.7% of applicable revenues, down 7.6% from operating income of $91 million, or operating income was $84 million, or 15.7% of applicable revenues, down 7.6% from operating income of $91 million, or 17.7% of applicable revenues, in 2018. For the Company’s risk consulting and internal audit services division, operating 17.7% of applicable revenues, in 2018. For the Company’s risk consulting and internal audit services division, operating income was $128 million, or 11.3% of applicable revenues, up 36.8% from operating income of $93 million, or 9.7% of income was $128 million, or 11.3% of applicable revenues, up 36.8% from operating income of $93 million, or 9.7% of applicable revenues, in 2018. applicable revenues, in 2018. Provision for income taxes. The provision for income taxes was 27.4% and 26.6% for the years ended December 31, Provision for income taxes. The provision for income taxes was 27.4% and 26.6% for the years ended December 31, 2019 and 2018, respectively. The higher tax rate in 2019 is primarily due to an increase in permanent non-deductible expenses 2019 and 2018, respectively. The higher tax rate in 2019 is primarily due to an increase in permanent non-deductible expenses and a return-to-provision tax rate benefit from changes the Company made in connection with the Tax Cuts and Jobs Act in and a return-to-provision tax rate benefit from changes the Company made in connection with the Tax Cuts and Jobs Act in 2018. 2018. Years ended December 31, 2018 and 2017 Years ended December 31, 2018 and 2017 A discussion of changes regarding our financial condition and results of operations for the year ended December 31, A discussion of changes regarding our financial condition and results of operations for the year ended December 31, 2018, compared to the year ended December 31, 2017, can be found in “Management’s Discussion and Analysis of Financial 2018, compared to the year ended December 31, 2017, can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on February 15, 2019, which is available free of charge on the SEC’s website at ended December 31, 2018, filed with the SEC on February 15, 2019, which is available free of charge on the SEC’s website at www.sec.gov and at www.roberthalf.com/investor-center. www.sec.gov and at www.roberthalf.com/investor-center. Liquidity and Capital Resources Liquidity and Capital Resources The change in the Company’s liquidity during the years ended December 31, 2019 and 2018, is primarily the net effect of The change in the Company’s liquidity during the years ended December 31, 2019 and 2018, is primarily the net effect of funds generated by operations and the funds used for capital expenditures, payments for employee deferred compensation plans, funds generated by operations and the funds used for capital expenditures, payments for employee deferred compensation plans, repurchases of common stock, and payment of dividends. repurchases of common stock, and payment of dividends. 18 18 2019 ANNUAL REPORT | ROBERT HALF Cash and cash equivalents were $270 million and $277 million at December 31, 2019 and 2018, respectively. Operating Cash and cash equivalents were $270 million and $277 million at December 31, 2019 and 2018, respectively. Operating activities provided $520 million during the year ended December 31, 2019, offset by $102 million and $423 million of net cash activities provided $520 million during the year ended December 31, 2019, offset by $102 million and $423 million of net cash used in investing activities and financing activities, respectively. Operating activities provided $572 million during the year used in investing activities and financing activities, respectively. Operating activities provided $572 million during the year ended December 31, 2018, offset by $89 million and $490 million of net cash used in investing activities and financing ended December 31, 2018, offset by $89 million and $490 million of net cash used in investing activities and financing activities, respectively. activities, respectively. Operating activities—Net cash provided by operating activities for the year ended December 31, 2019, was $520 million. Operating activities—Net cash provided by operating activities for the year ended December 31, 2019, was $520 million. This was composed of net income of $454 million adjusted upward for non-cash items of $118 million, offset by changes in This was composed of net income of $454 million adjusted upward for non-cash items of $118 million, offset by changes in working capital of $52 million. Net cash provided by operating activities for the year ended December 31, 2018, was $572 working capital of $52 million. Net cash provided by operating activities for the year ended December 31, 2018, was $572 million. This was composed of net income of $434 million adjusted upward for non-cash items of $107 million and net cash million. This was composed of net income of $434 million adjusted upward for non-cash items of $107 million and net cash provided by changes in working capital of $31 million. provided by changes in working capital of $31 million. Investing activities—Cash used in investing activities for the year ended December 31, 2019, was $102 million. This was Investing activities—Cash used in investing activities for the year ended December 31, 2019, was $102 million. This was composed of capital expenditures of $59 million and net payments for employee deferred compensation plans of $43 million. composed of capital expenditures of $59 million and net payments for employee deferred compensation plans of $43 million. Cash used in investing activities for the year ended December 31, 2018, was $89 million. This was primarily composed of Cash used in investing activities for the year ended December 31, 2018, was $89 million. This was primarily composed of capital expenditures of $43 million and net payments for employee deferred compensation plans of $46 million. capital expenditures of $43 million and net payments for employee deferred compensation plans of $46 million. Financing activities—Cash used in financing activities for the year ended December 31, 2019, was $423 million. This Financing activities—Cash used in financing activities for the year ended December 31, 2019, was $423 million. This included repurchases of $277 million in common stock and $146 million in dividends paid to stockholders. Cash used in included repurchases of $277 million in common stock and $146 million in dividends paid to stockholders. Cash used in financing activities for the year ended December 31, 2018, was $490 million. This included repurchases of $354 million in financing activities for the year ended December 31, 2018, was $490 million. This included repurchases of $354 million in common stock and $136 million in dividends paid to stockholders. common stock and $136 million in dividends paid to stockholders. As of December 31, 2019, the Company is authorized to repurchase, from time to time, up to 2.5 million additional shares As of December 31, 2019, the Company is authorized to repurchase, from time to time, up to 2.5 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. of the Company’s common stock on the open market or in privately negotiated transactions, depending on market conditions. During the years ended December 31, 2019 and 2018, the Company repurchased approximately 4.3 million shares and During the years ended December 31, 2019 and 2018, the Company repurchased approximately 4.3 million shares and 5.6 million shares of common stock on the open market for a total cost of $250 million and $351 million, respectively. 5.6 million shares of common stock on the open market for a total cost of $250 million and $351 million, respectively. Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were tendered by 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. During the years ended December 31, 2019 and 2018, employees for the payment of applicable statutory withholding taxes. During the years ended December 31, 2019 and 2018, such repurchases totaled approximately 0.4 million shares and 0.2 million shares at a cost of $22 million and $14 million, such repurchases totaled approximately 0.4 million shares and 0.2 million shares at a cost of $22 million and $14 million, respectively. Repurchases of shares have been funded with cash generated from operations. respectively. Repurchases of shares have been funded with cash generated from operations. The Company’s working capital at December 31, 2019, included $270 million in cash and cash equivalents. The The Company’s working capital at December 31, 2019, included $270 million in cash and cash equivalents. The Company expects that internally generated cash will be sufficient to support the working capital needs of the Company, 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. Company’s fixed payments, dividends, and other obligations on both a short-term and long-term basis. In March 2019, the Company entered into an uncommitted credit facility (the “Credit Agreement”) of up to $100 million. In March 2019, the Company entered into an uncommitted credit facility (the “Credit Agreement”) of up to $100 million. The Company may request borrowings under the Credit Agreement that are denominated in U.S. dollars and each request is The Company may request borrowings under the Credit Agreement that are denominated in U.S. dollars and each request is subject to approval by the lender. The Company must repay the aggregate principal amount of loans outstanding under the subject to approval by the lender. The Company must repay the aggregate principal amount of loans outstanding under the Credit Agreement on the termination date of each borrowing. Borrowings under the Credit Agreement will bear interest in Credit Agreement on the termination date of each borrowing. Borrowings under the Credit Agreement will bear interest in accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate plus an applicable margin. There were no borrowings under the Credit Agreement as of December 31, 2019. The Company plus an applicable margin. There were no borrowings under the Credit Agreement as of December 31, 2019. The Company intends to renew this facility prior to its March 19, 2020, expiration. intends to renew this facility prior to its March 19, 2020, expiration. On February 12, 2020, the Company announced a quarterly dividend of $.34 per share to be paid to all shareholders of On February 12, 2020, the Company announced a quarterly dividend of $.34 per share to be paid to all shareholders of record on February 25, 2020. The dividend will be paid on March 16, 2020. record on February 25, 2020. The dividend will be paid on March 16, 2020. The Company’s cash flows generated from operations are also the primary source for funding various contractual The Company’s cash flows generated from operations are also the primary source for funding various contractual obligations. The table below summarizes the Company’s major commitments as of December 31, 2019 (in thousands): obligations. The table below summarizes the Company’s major commitments as of December 31, 2019 (in thousands): Contractual Obligations Contractual Obligations Long-term debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Long-term debt obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments due by period Payments due by period 2020 2020 2021 and 2021 and 2022 2022 2023 and 2023 and 2024 2024 Thereafter Thereafter Total Total $ $ 252 252 $ $ 252 252 $ $ — $ — $ — $ — $ 504 504 Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,025 82,025 76,783 76,783 1,528 1,528 125,715 125,715 86,046 86,046 45,458 45,458 339,244 339,244 54,942 54,942 1,461 1,461 6,643 6,643 1,212 1,212 7,659 7,659 5,535 5,535 146,027 146,027 9,736 9,736 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $160,588 $160,588 $182,370 $182,370 $ 93,901 $ 93,901 $ 58,652 $ 58,652 $495,511 $495,511 19 19 2019 ANNUAL REPORT | ROBERT HALF Long-term debt obligations consist of promissory notes and related interest as well as other forms of indebtedness issued Long-term debt obligations consist of promissory notes and related interest as well as other forms of indebtedness issued in connection with certain acquisitions and other payment obligations. Operating lease obligations consist of undiscounted in connection with certain acquisitions and other payment obligations. Operating lease obligations consist of undiscounted minimum rental commitments for 2020 and thereafter under non-cancelable lease contracts executed as of December 31, 2019. minimum rental commitments for 2020 and thereafter under non-cancelable lease contracts executed as of December 31, 2019. Purchase obligations consist of purchase commitments primarily related to telecom service agreements, software subscriptions, Purchase obligations consist of purchase commitments primarily related to telecom service agreements, software subscriptions, and computer hardware and software maintenance agreements. Other liabilities consist of asset retirement and deferred and computer hardware and software maintenance agreements. Other liabilities consist of asset retirement and deferred compensation obligations. compensation obligations. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 7A. 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 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 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 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. the Company’s reported revenues, expenses, earnings, assets and liabilities. For the year ended December 31, 2019, approximately 22% of the Company’s revenues were generated outside of the For the year ended December 31, 2019, approximately 22% 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 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, 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 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 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 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. Company’s reported results vary. During 2019, the U.S. dollar fluctuated, but generally strengthened, against the primary currencies in which the Company During 2019, the U.S. dollar fluctuated, but generally strengthened, against the primary currencies in which the Company conducts business, compared to one year ago. Currency exchange rates had the effect of decreasing reported service revenues conducts business, compared to one year ago. Currency exchange rates had the effect of decreasing reported service revenues by $62.8 million, or 1.1%, in 2019 compared to prior year. The general strengthening of the U.S. dollar also affected the by $62.8 million, or 1.1%, in 2019 compared to prior year. The general strengthening of the U.S. dollar also affected the reported level of expenses incurred in the Company’s foreign operations. Because substantially all of the Company’s foreign reported level of expenses incurred in the Company’s foreign operations. Because substantially all of the Company’s foreign operations generated revenues and incurred expenses within the same country and currency, the effect of lower reported operations generated revenues and incurred expenses within the same country and currency, the effect of lower reported revenues is largely offset by the decrease in reported operating expenses. Reported net income was $2.5 million, or 0.6%, lower revenues is largely offset by the decrease in reported operating expenses. Reported net income was $2.5 million, or 0.6%, lower in the year ended December 31, 2019, compared to prior year due to the effect of currency exchange rates. in the year ended December 31, 2019, compared to prior year due to the effect of currency exchange rates. For the one month ended January 31, 2020, the U.S. dollar has strengthened against the Euro, British pound, Canadian For the one month ended January 31, 2020, the U.S. dollar has strengthened against the Euro, British pound, Canadian dollar, and Australian dollar since December 31, 2019. If currency exchange rates were to remain at January 2020 levels dollar, and Australian dollar since December 31, 2019. If currency exchange rates were to remain at January 2020 levels throughout 2020, the Company’s 2020 full-year reported revenues would be impacted unfavorably, mostly offset by a favorable throughout 2020, the Company’s 2020 full-year reported revenues would be impacted unfavorably, mostly offset by a favorable impact to operating expenses. Thus, the impact to reported net income would likely be immaterial. impact to operating expenses. Thus, the impact to reported net income would likely be immaterial. Fluctuations in currency exchange rates impact the U.S. dollar amount of the Company’s stockholders’ equity. The assets 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 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 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 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 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 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. between the U.S. and the Company’s foreign subsidiaries, and dividends from the Company’s foreign subsidiaries. 20 20 2019 ANNUAL REPORT | ROBERT HALF Item 8. Financial Statements and Supplementary Data Item 8. Financial Statements and Supplementary Data ROBERT HALF INTERNATIONAL INC. ROBERT HALF INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF FINANCIAL POSITION CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (in thousands, except share amounts) (in thousands, except share amounts) December 31, December 31, 2018 2018 2019 2019 ASSETS ASSETS Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,478 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 270,478 832,797 Accounts receivable, less allowances of $28,756 and $27,678 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832,797 Accounts receivable, less allowances of $28,756 and $27,678 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,574 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 525,574 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,628,849 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,628,849 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,385 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,385 Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,029 Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241,029 Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,752 Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,752 Other intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,364 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,364 Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,029 Noncurrent deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,029 Noncurrent deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,311,408 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,311,408 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123,841 Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 123,841 743,602 Accrued payroll and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743,602 Accrued payroll and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,623 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,623 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 Notes payable, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 Notes payable, current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,408 Current operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,408 Current operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940,692 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 940,692 Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 Notes payable, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 Notes payable, less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,961 Noncurrent operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,961 Noncurrent operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,833 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,833 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,167,725 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,167,725 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Commitments and Contingencies (Note K) Commitments and Contingencies (Note K) LIABILITIES LIABILITIES $ 276,579 $ 276,579 794,446 794,446 402,585 402,585 1,473,610 1,473,610 125,176 125,176 — — 3,149 3,149 209,958 209,958 91,204 91,204 $1,903,097 $1,903,097 $ 168,031 $ 168,031 638,769 638,769 12,536 12,536 200 200 — — 819,536 819,536 457 457 — — 19,906 19,906 839,899 839,899 STOCKHOLDERS’ EQUITY STOCKHOLDERS’ EQUITY Preferred stock, $.001 par value; authorized 5,000,000 shares; none issued . . . . . . . . . . . . . . . . . . . Preferred stock, $.001 par value; authorized 5,000,000 shares; none issued . . . . . . . . . . . . . . . . . . . Common stock, $.001 par value; authorized 260,000,000 shares; issued and outstanding 115,120,404 and 119,078,491 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock, $.001 par value; authorized 260,000,000 shares; issued and outstanding 115,120,404 and 119,078,491 shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 115 115 1,127,487 1,127,487 (19,986) (19,986) 36,067 36,067 1,143,683 1,143,683 $2,311,408 $2,311,408 — — 119 119 1,079,188 1,079,188 (16,109) (16,109) — — 1,063,198 1,063,198 $1,903,097 $1,903,097 The accompanying Notes to Consolidated Financial Statements The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. are an integral part of these financial statements. 21 21 2019 ANNUAL REPORT | ROBERT HALF ROBERT HALF INTERNATIONAL INC. ROBERT HALF INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (in thousands, except per share amounts) 2019 2019 $6,074,432 Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,074,432 Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,543,913 Costs of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,543,913 Costs of services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,530,519 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,530,519 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,908,768 Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,908,768 Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,361 Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,361 Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,125) Interest income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,125) Interest income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,515 Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,515 171,082 Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,082 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 454,433 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 454,433 Net income per share: Net income per share: Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.93 3.93 3.90 3.90 $ $ $ $ Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dividends declared per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,656 115,656 116,411 116,411 1.24 1.24 $ $ Shares: Shares: Years Ended December 31, Years Ended December 31, 2018 2018 $5,800,271 $5,800,271 3,390,257 3,390,257 2,410,014 2,410,014 1,821,089 1,821,089 1,705 1,705 (4,382) (4,382) 591,602 591,602 157,314 157,314 $ 434,288 $ 434,288 2017 2017 $5,266,789 $5,266,789 3,102,977 3,102,977 2,163,812 2,163,812 1,646,532 1,646,532 1,563 1,563 (1,799) (1,799) 517,516 517,516 226,932 226,932 $ 290,584 $ 290,584 $ $ $ $ $ $ 3.60 3.60 3.57 3.57 120,513 120,513 121,602 121,602 1.12 1.12 $ $ $ $ $ $ 2.34 2.34 2.33 2.33 124,152 124,152 124,892 124,892 .96 .96 The accompanying Notes to Consolidated Financial Statements The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. are an integral part of these financial statements. 22 22 2019 ANNUAL REPORT | ROBERT HALF ROBERT HALF INTERNATIONAL INC. ROBERT HALF INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (in thousands) COMPREHENSIVE INCOME (LOSS): COMPREHENSIVE INCOME (LOSS): Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss): Other comprehensive income (loss): Foreign currency translation adjustments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustments, net of tax . . . . . . . . . . . . . . . . . . . . . . . . Foreign defined benefit plans, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign defined benefit plans, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,553) (1,553) (2,324) (2,324) (3,877) (3,877) Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $450,556 Total comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $450,556 (19,616) (19,616) — — (19,616) (19,616) $414,672 $414,672 24,009 24,009 — — 24,009 24,009 $314,593 $314,593 Years Ended December 31, Years Ended December 31, 2018 2018 2017 2017 2019 2019 $454,433 $454,433 $434,288 $434,288 $290,584 $290,584 The accompanying Notes to Consolidated Financial Statements The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. are an integral part of these financial statements. 23 23 2019 ANNUAL REPORT | ROBERT HALF  ROBERT HALF INTERNATIONAL INC. ROBERT HALF INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands, except per share amounts) (in thousands, except per share amounts) Common Stock Common Stock Par Value Par Value Additional Paid-In Additional Capital Paid-In Capital Accumulated Other Comprehensive Accumulated Other Income (Loss) Comprehensive Income (Loss) Retained Earnings Retained Earnings Balance at December 31, 2016 . . . . . . . Balance at December 31, 2016 . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . Other comprehensive income (loss) . . . Dividends declared ($.96 per share) . . . Dividends declared ($.96 per share) . . . Net issuances of restricted stock . . . . . . Net issuances of restricted stock . . . . . . Stock-based compensation . . . . . . . . . . . Stock-based compensation . . . . . . . . . . . Repurchases of common stock . . . . . . . Repurchases of common stock . . . . . . . Balance at December 31, 2017 . . . . . . . Balance at December 31, 2017 . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . Other comprehensive income (loss) . . . Dividends declared ($1.12 per share) . . Dividends declared ($1.12 per share) . . Net issuances of restricted stock . . . . . . Net issuances of restricted stock . . . . . . Stock-based compensation . . . . . . . . . . . Stock-based compensation . . . . . . . . . . . Repurchases of common stock . . . . . . . Repurchases of common stock . . . . . . . Balance at December 31, 2018 . . . . . . . Balance at December 31, 2018 . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . Other comprehensive income (loss) . . . Other comprehensive income (loss) . . . Dividends declared ($1.24 per share) . . Dividends declared ($1.24 per share) . . Net issuances of restricted stock . . . . . . Net issuances of restricted stock . . . . . . Stock-based compensation . . . . . . . . . . . Stock-based compensation . . . . . . . . . . . Repurchases of common stock . . . . . . . Repurchases of common stock . . . . . . . Balance at December 31, 2019 . . . . . . . Balance at December 31, 2019 . . . . . . . Shares Shares 127,797 $ 127,797 $ — — — — — — 918 918 — — (4,454) (4,454) 124,261 $ 124,261 $ — — — — — — 666 666 — — (5,849) (5,849) 119,078 $ 119,078 $ — — — — — — 647 647 — — (4,605) (4,605) 115,120 $ 115,120 $ 128 $ 1,022,411 $ 128 $ 1,022,411 $ — — — — — — 1 1 — — (5) (5) 124 $ 1,064,601 $ 124 $ 1,064,601 $ — — — — — — (1) (1) 42,191 42,191 — — — — — — (30,365) (30,365) (1) (1) 44,953 44,953 — — — — — — — — 1 1 — — (6) (6) 119 $ 1,079,188 $ 119 $ 1,079,188 $ — — — — — — 1 1 — — (5) (5) 115 $ 1,127,487 $ 115 $ 1,127,487 $ — — — — — — (1) (1) 48,300 48,300 — — 3,507 $ 3,507 $ — — (19,616) (19,616) (20,502) $ (20,502) $ — — 24,009 24,009 Total Total 84,562 $ 1,086,599 84,562 $ 1,086,599 290,584 290,584 290,584 290,584 24,009 — 24,009 — (121,082) — (121,082) (121,082) — (121,082) — — — — — — 42,191 — — 42,191 — — (217,036) — (217,031) (217,036) — (217,031) 37,033 $ 1,105,265 37,033 $ 1,105,265 434,288 434,288 434,288 434,288 (19,616) — (19,616) — (136,824) — (106,459) (136,824) — (106,459) — — — — — — 44,953 — — 44,953 — — (364,868) — (364,862) (364,868) — (364,862) — $ 1,063,198 — $ 1,063,198 454,433 454,433 (3,877) (3,877) (145,726) (145,726) — — 48,300 48,300 (272,645) (272,645) 36,067 $ 1,143,683 36,067 $ 1,143,683 454,433 454,433 — — — (145,726) — (145,726) — — — — — — — — — (272,640) — (272,640) (16,109) $ (16,109) $ — — (3,877) (3,877) (19,986) $ (19,986) $ The accompanying Notes to Consolidated Financial Statements The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. are an integral part of these financial statements. 24 24 2019 ANNUAL REPORT | ROBERT HALF ROBERT HALF INTERNATIONAL INC. ROBERT HALF INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (in thousands) Years Ended December 31, Years Ended December 31, 2018 2018 2017 2017 2019 2019 $454,433 $454,433 $434,288 $434,288 $290,584 $290,584 CASH FLOWS FROM OPERATING ACTIVITIES: CASH FLOWS FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Adjustments to reconcile net income to net cash provided by operating activities: Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of cloud computing implementation costs . . . . . . . . . . . . . . . . . . . . Amortization of cloud computing implementation costs . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Changes in operating assets and liabilities, net of effects of acquisitions: Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized cloud computing implementation costs . . . . . . . . . . . . . . . . . . . . . . . . Capitalized cloud computing implementation costs . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued payroll and benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued payroll and benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other assets and liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CASH FLOWS FROM INVESTING ACTIVITIES: CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for employee deferred compensation plans . . . . . . . . . . . . . . . . . . . . . . Payments for employee deferred compensation plans . . . . . . . . . . . . . . . . . . . . . . Redemptions from employee deferred compensation plans . . . . . . . . . . . . . . . . . . Redemptions from employee deferred compensation plans . . . . . . . . . . . . . . . . . . Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . CASH FLOWS FROM FINANCING ACTIVITIES: CASH FLOWS FROM FINANCING ACTIVITIES: 9,868 9,868 64,264 64,264 3,624 3,624 1,361 1,361 48,300 48,300 (9,473) (9,473) (48,461) (48,461) (30,338) (30,338) (9,204) (9,204) 60,883 60,883 (18,798) (18,798) (6,830) (6,830) 519,629 519,629 (59,464) (59,464) (71,432) (71,432) 28,758 28,758 — — (102,138) (102,138) (200) Repayment of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200) Repayment of notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (277,535) Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (277,535) Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (145,631) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (145,631) Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (423,366) Net cash flows used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (423,366) Net cash flows used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (226) Effect of exchange rate fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (226) Effect of exchange rate fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,101) Change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,101) 276,579 Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276,579 Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270,478 Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $270,478 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for: Cash paid during the year for: Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income taxes, net of refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 $ $ 232 $191,522 $191,522 Non-cash items: Non-cash items: 11,914 11,914 64,244 64,244 — — 1,705 1,705 44,953 44,953 (15,885) (15,885) (86,217) (86,217) — — 32,428 32,428 57,287 57,287 28,900 28,900 (1,295) (1,295) 572,322 572,322 (42,484) (42,484) (69,716) (69,716) 23,691 23,691 — — (88,509) (88,509) 8,022 8,022 63,930 63,930 — — 1,563 1,563 42,191 42,191 44,091 44,091 (17,039) (17,039) — — 1,328 1,328 46,504 46,504 (9,655) (9,655) (18,528) (18,528) 452,991 452,991 (40,753) (40,753) (56,924) (56,924) 20,340 20,340 (1,160) (1,160) (78,497) (78,497) (183) (183) (353,509) (353,509) (136,423) (136,423) (490,115) (490,115) (11,872) (11,872) (18,174) (18,174) 294,753 294,753 $276,579 $276,579 (167) (167) (231,724) (231,724) (121,000) (121,000) (352,891) (352,891) 12,949 12,949 34,552 34,552 260,201 260,201 $294,753 $294,753 233 $ $ 233 $137,147 $137,147 278 $ $ 278 $190,954 $190,954 Stock repurchases awaiting settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stock repurchases awaiting settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 6,469 6,469 $ 11,359 $ 11,359 $ $ — — The accompanying Notes to Consolidated Financial Statements The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. are an integral part of these financial statements. 25 25 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note A—Summary of Significant Accounting Policies NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Nature of Operations. Robert Half International Inc. (the “Company”) provides specialized staffing and risk consulting Nature of Operations. Robert Half International Inc. (the “Company”) provides specialized staffing and risk consulting Note A—Summary of Significant Accounting Policies 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, services through such divisions as Accountemps®, Robert Half® Finance & Accounting, OfficeTeam®, Robert Half® through its Accountemps, Robert Half Finance & Accounting, and Robert Half Management Resources divisions, is a Technology, Robert Half® Management Resources, Robert Half® Legal, The Creative Group®, and Protiviti®. The Company, specialized provider of temporary, full-time, and senior-level project professionals in the fields of accounting and finance. OfficeTeam specializes in highly skilled temporary administrative support professionals. Robert Half Technology provides through its Accountemps, Robert Half Finance & Accounting, and Robert Half Management Resources divisions, is a project and full-time technology professionals. Robert Half Legal provides temporary, project, and full-time staffing of lawyers, specialized provider of temporary, full-time, and senior-level project professionals in the fields of accounting and finance. paralegals and legal support personnel. The Creative Group provides interactive, design, marketing, advertising and public OfficeTeam specializes in highly skilled temporary administrative support professionals. Robert Half Technology provides relations professionals. Protiviti is a global consulting firm that helps companies solve problems in finance, technology, project and full-time technology professionals. Robert Half Legal provides temporary, project, and full-time staffing of lawyers, operations, data, analytics, governance, risk and internal audit. Revenues are predominantly derived from specialized staffing paralegals and legal support personnel. The Creative Group provides interactive, design, marketing, advertising and public services. The Company operates in North America, South America, Europe, Asia and Australia. The Company is a Delaware relations professionals. Protiviti is a global consulting firm that helps companies solve problems in finance, technology, corporation. operations, data, analytics, governance, risk and internal audit. 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. 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 years’ consolidated financial statements to conform to the 2019 presentation. 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 years’ consolidated financial Principles of Consolidation. The Financial Statements include the accounts of the Company and its subsidiaries, all of statements to conform to the 2019 presentation. which are wholly owned. All intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation. The Consolidated Financial Statements (“Financial Statements”) of the Company are prepared in Basis of Presentation. The Consolidated Financial Statements (“Financial Statements”) of the Company are prepared in Principles of Consolidation. The Financial Statements include the accounts of the Company and its subsidiaries, all of Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make which are wholly owned. All intercompany balances and transactions have been eliminated in consolidation. 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. Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make Such estimates include allowances for uncollectible accounts receivable, variable consideration, workers’ compensation losses, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and income and other taxes, and assumptions used in the Company’s goodwill impairment assessment and in the valuation of stock liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. grants subject to market conditions. Actual results and outcomes may differ from management’s estimates and assumptions. Such estimates include allowances for uncollectible accounts receivable, 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 Service Revenues. The Company derives its revenues from three segments: temporary and consultant staffing, grants subject to market conditions. Actual results and outcomes may differ from management’s estimates and assumptions. 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 Service Revenues. The Company derives its revenues from three segments: temporary and consultant staffing, exchange for those goods or services. See Note C for further discussion of the revenue recognition accounting policy. 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. the Company’s engagement professionals, as well as reimbursable expenses. Direct costs of permanent placement staffing services consist of reimbursable expenses. Risk consulting and internal audit direct costs of services include professional staff payroll, payroll taxes and benefit costs, as well as reimbursable expenses. the Company’s engagement professionals, as well as reimbursable expenses. Direct costs of permanent placement staffing services consist of reimbursable expenses. Risk consulting and internal audit direct costs of services include professional staff Advertising Costs. The Company expenses all advertising costs as incurred. Advertising costs were $54.3 million, payroll, payroll taxes and benefit costs, as well as reimbursable expenses. $52.5 million, and $49.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Costs of Services. Direct costs of temporary and consultant staffing consist of payroll, payroll taxes and benefit costs for Costs of Services. Direct costs of temporary and consultant staffing consist of payroll, payroll taxes and benefit costs for Advertising Costs. The Company expenses all advertising costs as incurred. Advertising costs were $54.3 million, Comprehensive Income. Comprehensive income includes net income and certain other items that are recorded directly $52.5 million, and $49.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. to stockholders’ equity. The Company’s only sources of other comprehensive income are foreign currency translation and defined benefit plan adjustments. to stockholders’ equity. The Company’s only sources of other comprehensive income are foreign currency translation and defined benefit plan adjustments. Comprehensive Income. Comprehensive income includes net income and certain other items that are recorded directly 26 26 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses 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 Fair Value of Financial Instruments. Assets and liabilities recorded at fair value are measured and classified in value, summarized as follows: accordance with a three-tier fair value hierarchy based on the observability of the inputs available in the market to measure fair value, summarized as follows: Level 1: observable inputs for identical assets or liabilities, such as quoted prices in active markets Level 2: inputs other than the quoted prices in active markets that are observable either directly or indirectly Level 1: observable inputs for identical assets or liabilities, such as quoted prices in active markets Level 3: unobservable inputs in which there is little or no market data, which requires management’s best Level 2: inputs other than the quoted prices in active markets that are observable either directly or indirectly estimates and assumptions that market participants would use in pricing the asset or liability Level 3: unobservable inputs in which there is little or no market data, which requires management’s best estimates and assumptions that market participants would use in pricing the asset or liability approximates fair value because of their short-term nature. The Company holds mutual funds and other securities classified as The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses trading to support its deferred compensation plans, which are carried at fair value based on quoted market prices in active approximates fair value because of their short-term nature. The Company holds mutual funds and other securities classified as markets for identical assets (level 1). trading to support its deferred compensation plans, which are carried at fair value based on quoted market prices in active markets for identical assets (level 1). 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 basis. The Company determines the fair value of these items using level 3 inputs. There are inherent limitations when would be realized in current market transactions. estimating the fair value of financial instruments, and the fair values reported are not necessarily indicative of the amounts that Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity at the date of would be realized in current market transactions. purchase of three months or less as cash equivalents. Certain items such as goodwill and other intangible assets are recognized or disclosed at fair value on a non-recurring Certain items such as goodwill and other intangible assets are recognized or disclosed at fair value on a non-recurring Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity at the date of Accounts Receivable Allowances. The Company maintains allowances for estimated losses resulting from the inability purchase of three months or less as cash equivalents. of its customers to make required payments. The Company establishes these allowances based on its review of customers’ Accounts Receivable Allowances. The Company maintains allowances for estimated losses resulting from the inability credit profiles, historical loss statistics and current trends. The adequacy of these allowances is reviewed each reporting period. of its customers to make required payments. The Company establishes these allowances based on its review of customers’ Historically, the Company’s actual losses have been consistent with these allowances. credit profiles, historical loss statistics and current trends. The adequacy of these allowances is reviewed each reporting period. Leases. The Company determines if a contractual arrangement is a lease at inception. Operating leases are included in Historically, the Company’s actual losses have been consistent with these allowances. operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Leases. The Company determines if a contractual arrangement is a lease at inception. Operating leases are included in Company’s Condensed Consolidated Statement of Financial Position. The Company does not currently have finance leases. operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s Condensed Consolidated Statement of Financial Position. The Company does not currently have finance leases. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The lease the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are payments included in the present value are fixed lease payments and index-based variable lease payments. As most of the recognized at the commencement date of the lease based on the present value of lease payments over the lease term. The lease Company’s leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based payments included in the present value are fixed lease payments and index-based variable lease payments. As most of the on information available at the commencement date, in determining the present value of lease payments. The Company applies Company’s leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based the portfolio approach in applying discount rates to its classes of leases. The operating lease ROU assets include any payments on information available at the commencement date, in determining the present value of lease payments. The Company applies made before the commencement date and exclude lease incentives. Lease expense for lease payments is recognized on a the portfolio approach in applying discount rates to its classes of leases. The operating lease ROU assets include any payments straight-line basis over the lease term. The Company does not currently have subleases. The Company does not currently have made before the commencement date and exclude lease incentives. Lease expense for lease payments is recognized on a residual value guarantees or restrictive covenants in its leases. The Company has contracts with lease and non-lease straight-line basis over the lease term. The Company does not currently have subleases. The Company does not currently have components, which are accounted for on a combined basis. residual value guarantees or restrictive covenants in its leases. The Company has contracts with lease and non-lease components, which are accounted for on a combined basis. 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 in excess of the fair market value of their net tangible assets at the date of acquisition. Identifiable intangible assets are impairment. The Company completed its annual goodwill impairment assessment as of June 30 in each of the years ended amortized over their lives, typically ranging from two to five years. Goodwill is not amortized, but is tested at least annually for December 31, 2019, 2018, and 2017, and determined that no adjustment to the carrying value of goodwill was required. There impairment. The Company completed its annual goodwill impairment assessment as of June 30 in each of the years ended were no events or changes in circumstances during the six months ended December 31, 2019, that caused the Company to December 31, 2019, 2018, and 2017, and determined that no adjustment to the carrying value of goodwill was required. There perform an interim impairment assessment. were no events or changes in circumstances during the six months ended December 31, 2019, that caused the Company to Income Taxes. The Company’s operations are subject to U.S. federal, state and local, and foreign income taxes. In perform an interim impairment assessment. establishing its deferred income tax assets and liabilities and its provision for income taxes, the Company makes judgments and Income Taxes. The Company’s operations are subject to U.S. federal, state and local, and foreign income taxes. In interpretations based on the enacted tax laws that are applicable to its operations in various jurisdictions. Deferred tax assets and establishing its deferred income tax assets and liabilities and its provision for income taxes, the Company makes judgments and liabilities are measured and recorded using current enacted tax rates, which the Company expects will apply to taxable income interpretations based on the enacted tax laws that are applicable to its operations in various jurisdictions. Deferred tax assets and in the years in which those temporary differences are recovered or settled. The likelihood of a material change in the liabilities are measured and recorded using current enacted tax rates, which the Company expects will apply to taxable income in the years in which those temporary differences are recovered or settled. The likelihood of a material change in the Goodwill and Intangible Assets. Goodwill and intangible assets primarily consist of the cost of acquired companies Goodwill and Intangible Assets. Goodwill and intangible assets primarily consist of the cost of acquired companies 27 27 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of its tax planning strategies in the various relevant jurisdictions. Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of its tax planning strategies in the various relevant jurisdictions. Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including The Company also evaluates the need for valuation allowances to reduce the deferred tax assets to realizable amounts. operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be Management evaluates all positive and negative evidence and uses judgment regarding past and future events, including realized. When appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may operating results, to help determine when it is more likely than not that all or some portion of the deferred tax assets may not be not be realized. Valuation allowances of $21.6 million and $23.1 million were recorded as of December 31, 2019 and 2018, realized. When appropriate, a valuation allowance is recorded against deferred tax assets to offset future tax benefits that may respectively. The valuation allowances recorded related primarily to net operating losses in certain foreign operations. If such not be realized. Valuation allowances of $21.6 million and $23.1 million were recorded as of December 31, 2019 and 2018, losses are ultimately utilized to offset future operating income, the Company will recognize a tax benefit up to the full amount respectively. The valuation allowances recorded related primarily to net operating losses in certain foreign operations. If such of the valuation reserve. losses are ultimately utilized to offset future operating income, the Company will recognize a tax benefit up to the full amount Workers’ Compensation. Except for states which require participation in state-operated insurance funds, the Company of the valuation reserve. retains the economic burden for the first $0.5 million per occurrence in workers’ compensation claims. Workers’ compensation Workers’ Compensation. Except for states which require participation in state-operated insurance funds, the Company includes ongoing healthcare and indemnity coverage for claims and may be paid over numerous years following the date of retains the economic burden for the first $0.5 million per occurrence in workers’ compensation claims. Workers’ compensation injury. Claims in excess of $0.5 million are insured. Workers’ compensation expense includes the insurance premiums for includes ongoing healthcare and indemnity coverage for claims and may be paid over numerous years following the date of claims in excess of $0.5 million, claims administration fees charged by the Company’s workers’ compensation administrator, injury. Claims in excess of $0.5 million are insured. Workers’ compensation expense includes the insurance premiums for premiums paid to state-operated insurance funds, and an estimate for the Company’s liability for Incurred But Not Reported claims in excess of $0.5 million, claims administration fees charged by the Company’s workers’ compensation administrator, (“IBNR”) claims and for the ongoing development of existing claims. premiums paid to state-operated insurance funds, and an estimate for the Company’s liability for Incurred But Not Reported (“IBNR”) claims and for the ongoing development of existing claims. estimates. The Company has established reserves for workers’ compensation claims using loss development rates which are The reserves for IBNR claims and for the ongoing development of existing claims in each reporting period includes estimated using periodic third party actuarial valuations based upon historical loss statistics which include the Company’s estimates. The Company has established reserves for workers’ compensation claims using loss development rates which are historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. While management estimated using periodic third party actuarial valuations based upon historical loss statistics which include the Company’s believes that its assumptions and estimates are appropriate, significant differences in actual experience or significant changes in historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. While management assumptions may materially affect the Company’s future results. believes that its assumptions and estimates are appropriate, significant differences in actual experience or significant changes in Foreign Currency Translation. The reporting currency of the Company and its subsidiaries is the U.S. dollar. The assumptions may materially affect the Company’s future results. functional currency of the Company’s foreign subsidiaries is their local currency. The results of operations of the Company’s Foreign Currency Translation. The reporting currency of the Company and its subsidiaries is the U.S. dollar. The foreign subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of functional currency of the Company’s foreign subsidiaries is their local currency. The results of operations of the Company’s the Company’s foreign subsidiaries is translated at the current exchange rates at the end of the period, and the related translation foreign subsidiaries are translated at the monthly average exchange rates prevailing during the period. The financial position of adjustments are recorded as a component of accumulated other comprehensive income within Stockholders’ Equity. Gains and the Company’s foreign subsidiaries is translated at the current exchange rates at the end of the period, and the related translation losses resulting from foreign currency transactions are included as a component of selling, general and administrative expenses adjustments are recorded as a component of accumulated other comprehensive income within Stockholders’ Equity. Gains and in the Consolidated Statements of Operations, and have not been material for all periods presented. losses resulting from foreign currency transactions are included as a component of selling, general and administrative expenses Stock-based Compensation. Under various stock plans, officers, employees and outside directors have received or may in the Consolidated Statements of Operations, and have not been material for all periods presented. receive grants of restricted stock, stock units, stock appreciation rights or options to purchase common stock. The reserves for IBNR claims and for the ongoing development of existing claims in each reporting period includes Stock-based Compensation. Under various stock plans, officers, employees and outside directors have received or may The Company recognizes compensation expense equal to the grant-date fair value for all stock-based payment awards receive grants of restricted stock, stock units, stock appreciation rights or options to purchase common stock. that are expected to vest. This expense is recorded on a straight-line basis over the requisite service period of the entire award, The Company recognizes compensation expense equal to the grant-date fair value for all stock-based payment awards unless the awards are subject to performance conditions, in which case the Company recognizes compensation expense over the that are expected to vest. This expense is recorded on a straight-line basis over the requisite service period of the entire award, requisite service period of each separate vesting tranche. The Company determines the grant-date fair value of its restricted unless the awards are subject to performance conditions, in which case the Company recognizes compensation expense over the stock and stock unit awards using the fair market value of its stock on the grant date, unless the awards are subject to market requisite service period of each separate vesting tranche. The Company determines the grant-date fair value of its restricted conditions, in which case the Company utilizes a binomial-lattice model (i.e., Monte Carlo simulation model). The Monte Carlo stock and stock unit awards using the fair market value of its stock on the grant date, unless the awards are subject to market simulation model utilizes multiple input variables to determine the stock-based compensation expense. conditions, in which case the Company utilizes a binomial-lattice model (i.e., Monte Carlo simulation model). The Monte Carlo No stock appreciation rights have been granted under the Company’s existing stock plans. The Company has not granted simulation model utilizes multiple input variables to determine the stock-based compensation expense. any options to purchase common stock since 2006. No stock appreciation rights have been granted under the Company’s existing stock plans. The Company has not granted Property and Equipment. Property and equipment are recorded at cost. Depreciation is computed using the straight-line any options to purchase common stock since 2006. method over the following useful lives: Property and Equipment. Property and equipment are recorded at cost. Depreciation is computed using the straight-line Computer hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 3 years method over the following useful lives: Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 5 years Computer hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 3 years Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 5 years Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 5 years Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term of lease Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 to 5 years Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Term of lease 28 28 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 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 Internal-use Software. The Company capitalizes direct costs incurred in the development of internal-use software. assets. All other internal-use software development costs are capitalized and reported as a component of computer software Cloud computing implementation costs incurred in hosting arrangements are capitalized and reported as a component of other within property and equipment on the Condensed Consolidated Statements of Financial Position. Capitalized internal-use assets. All other internal-use software development costs are capitalized and reported as a component of computer software software development costs were $35.6 million, $3.3 million, and $9.0 million for the years ended December 31, 2019, 2018 within property and equipment on the Condensed Consolidated Statements of Financial Position. Capitalized internal-use and 2017, respectively. software development costs were $35.6 million, $3.3 million, and $9.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. Note B—New Accounting Pronouncements Recently Adopted Accounting Pronouncements Note B—New Accounting Pronouncements Recently Adopted Accounting Pronouncements Lease Accounting. In February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance Internal-use Software—Cloud Computing. In August 2018, the FASB issued authoritative guidance which aligns the Lease Accounting. In February 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance which changes financial reporting as it relates to leasing transactions. Under the new guidance, lessees are required to recognize a lease liability, measured on a discounted basis; and a right-of-use asset, for the lease term. The Company adopted this which changes financial reporting as it relates to leasing transactions. Under the new guidance, lessees are required to recognize guidance as of January 1, 2019, using the transition method that allowed it to initially apply the guidance as of the adoption a lease liability, measured on a discounted basis; and a right-of-use asset, for the lease term. The Company adopted this date. The Company elected the package of practical expedients available under the new standard, which allowed the Company guidance as of January 1, 2019, using the transition method that allowed it to initially apply the guidance as of the adoption to forgo a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any date. The Company elected the package of practical expedients available under the new standard, which allowed the Company expired or existing leases, and (3) the initial direct costs for any existing leases. The adoption of this guidance had a material to forgo a reassessment of (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any impact on the Company’s Condensed Consolidated Statement of Financial Position beginning January 1, 2019. Prior periods expired or existing leases, and (3) the initial direct costs for any existing leases. The adoption of this guidance had a material were not restated. See Note F for further discussion of leases. impact on the Company’s Condensed Consolidated Statement of Financial Position beginning January 1, 2019. Prior periods were not restated. See Note F for further discussion of leases. requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the Internal-use Software—Cloud Computing. In August 2018, the FASB issued authoritative guidance which aligns the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Entities are required to requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the present the expense related to capitalized implementation costs in the same line item in the statement of operations as the fees requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Entities are required to associated with the hosting elements of the arrangement and classify the payments for the capitalized implementation costs in present the expense related to capitalized implementation costs in the same line item in the statement of operations as the fees the statement of cash flows in the same manner as payments made for fees associated with the hosting element. Entities are also associated with the hosting elements of the arrangement and classify the payments for the capitalized implementation costs in required to present the capitalized implementation costs in the statement of financial position in the same line item that a the statement of cash flows in the same manner as payments made for fees associated with the hosting element. Entities are also prepayment of the fees of the associated hosting arrangement would be presented. The new guidance is effective for annual and required to present the capitalized implementation costs in the statement of financial position in the same line item that a interim periods beginning after December 15, 2019, although early adoption is permitted. The Company adopted the new prepayment of the fees of the associated hosting arrangement would be presented. The new guidance is effective for annual and guidance prospectively as of January 1, 2019. interim periods beginning after December 15, 2019, although early adoption is permitted. The Company adopted the new guidance prospectively as of January 1, 2019. Recently Issued Accounting Pronouncements Not Yet Adopted Current Expected Credit Losses Model. In June 2016, the FASB issued authoritative guidance amending how entities will Recently Issued Accounting Pronouncements Not Yet Adopted Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued authoritative guidance to simplify the measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net Current Expected Credit Losses Model. In June 2016, the FASB issued authoritative guidance amending how entities will income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019, income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based with early adoption permitted. The Company believes the adoption of this guidance will not have a material impact on its on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2019, financial statements. with early adoption permitted. The Company believes the adoption of this guidance will not have a material impact on its financial statements. goodwill impairment testing process. The new standard eliminates Step 2 of the goodwill impairment test. If a company Simplifying the Test for Goodwill Impairment. In January 2017, the FASB issued authoritative guidance to simplify the determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an goodwill impairment testing process. The new standard eliminates Step 2 of the goodwill impairment test. If a company impairment in that amount should be recorded to the income statement, rather than proceeding to Step 2. The new guidance is determines in Step 1 of the goodwill impairment test that the carrying value of goodwill is greater than the fair value, an effective for the Company for fiscal years beginning after December 15, 2019, although early adoption is permitted. The impairment in that amount should be recorded to the income statement, rather than proceeding to Step 2. The new guidance is Company believes the adoption of this guidance will not have a material impact on its financial statements. effective for the Company for fiscal years beginning after December 15, 2019, although early adoption is permitted. The Company believes the adoption of this guidance will not have a material impact on its financial statements. 29 29 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note C—Revenue Recognition NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note C—Revenue Recognition The Company derives its revenues from three segments: temporary and consultant staffing, permanent placement staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or services are The Company derives its revenues from three segments: temporary and consultant staffing, permanent placement delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those staffing, and risk consulting and internal audit services. Revenues are recognized when promised goods or services are goods or services. Service revenues as presented on the Consolidated Statements of Operations represent services rendered to delivered to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those customers less variable consideration, such as sales adjustments and allowances. Reimbursements, including those related to goods or services. Service revenues as presented on the Consolidated Statements of Operations represent services rendered to travel and out-of-pocket expenses, are also included in service revenues, and equivalent amounts of reimbursable expenses are customers less variable consideration, such as sales adjustments and allowances. Reimbursements, including those related to included in costs of services. 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 Temporary and consultant staffing revenues. Temporary and consultant staffing revenues from contracts with customers engagement professionals. The substantial majority of engagement professionals placed on assignment by the Company are the are recognized in the amount to which the Company has a right to invoice, when the services are rendered by the Company’s Company’s legal employees while they are working on assignments. The Company pays all related costs of employment, engagement professionals. The substantial majority of engagement professionals placed on assignment by the Company are the including workers’ compensation insurance, state and federal unemployment taxes, social security and certain fringe benefits. Company’s legal employees while they are working on assignments. The Company pays all related costs of employment, The Company assumes the risk of acceptability of its employees to its customers. 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 records temporary and consultant staffing revenue on a gross basis as a principal versus on a net basis as the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and an agent in the presentation of revenues and expenses. The Company has concluded that gross reporting is appropriate because establish their price and duties and (iii) bears the risk for services that are not fully paid for by customers. Fees paid to Time the Company (i) has the risk of identifying and hiring qualified employees, (ii) has the discretion to select the employees and Management or Vendor Management service providers selected by clients are recorded as a reduction of revenues, as the establish their price and duties and (iii) bears the risk for services that are not fully paid for by customers. Fees paid to Time Company is not the primary obligor with respect to those services. 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 Permanent placement staffing revenues. Permanent placement staffing revenues from contracts with customers are history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90- primarily recognized when employment candidates accept offers of permanent employment. The Company has a substantial day guarantee period. These amounts are established based primarily on historical data and are recorded as contract liabilities. history of estimating the financial impact of permanent placement candidates who do not remain with its clients through the 90- Fees to clients are generally calculated as a percentage of the new employee’s annual compensation. No fees for permanent day guarantee period. These amounts are established based primarily on historical data and are recorded as contract liabilities. placement services are charged to employment candidates. 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. 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 a time-and-material basis or fixed-fee basis. Revenues earned under time-and-material arrangements and fixed-fee total estimated cost for the engagement to measure progress towards satisfying the Company’s performance obligations. Cost arrangements are recognized using a proportional performance method. Revenue is measured using cost incurred relative to incurred represents work performed and thereby best depicts the transfer of control to the customer. Risk consulting and total estimated cost for the engagement to measure progress towards satisfying the Company’s performance obligations. Cost internal audit services generally contain one or more performance obligation(s) which are satisfied over a period of time. incurred represents work performed and thereby best depicts the transfer of control to the customer. Risk consulting and Revenues are recognized over time as the performance obligations are satisfied, because the services provided do not have any internal audit services generally contain one or more performance obligation(s) which are satisfied over a period of time. alternative use to the Company, and contracts generally include language giving the Company an enforceable right to payment Revenues are recognized over time as the performance obligations are satisfied, because the services provided do not have any for services provided to date. alternative use to the Company, and contracts generally include language giving the Company an enforceable right to payment The Company periodically evaluates the need to provide for any losses on these projects, and losses are recognized when for services provided to date. it is probable that a loss will be incurred. Risk consulting and internal audit services revenues. Risk consulting and internal audit services are generally provided on Risk consulting and internal audit services revenues. Risk consulting and internal audit services are generally provided on 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. 30 30 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table presents the Company’s revenues disaggregated by line of business (in thousands): NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2019 Accountemps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The following table presents the Company’s revenues disaggregated by line of business (in thousands): 2018 Years Ended December 31, $1,915,054 2018 1,063,238 $1,915,054 682,889 1,063,238 669,385 682,889 4,330,566 669,385 511,989 4,330,566 957,716 511,989 $5,800,271 957,716 OfficeTeam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accountemps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robert Half Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OfficeTeam . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robert Half Management Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robert Half Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Temporary and consulting staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Robert Half Management Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Temporary and consulting staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk consulting and internal audit services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk consulting and internal audit services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,946,404 2019 1,037,341 $1,946,404 722,535 1,037,341 705,845 722,535 4,412,125 705,845 533,432 4,412,125 1,128,875 533,432 $6,074,432 1,128,875 $1,765,666 2017 984,873 $1,765,666 629,278 984,873 631,225 629,278 4,011,042 631,225 439,214 4,011,042 816,533 439,214 $5,266,789 816,533 2017 Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,266,789 Payment terms in our contracts vary by the type and location of our customer and the services offered. The term between $6,074,432 $5,800,271 invoicing and when payment is due is not significant. Payment terms in our contracts vary by the type and location of our customer and the services offered. The term between Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract Contracts with multiple performance obligations are recognized as performance obligations are delivered, and contract invoicing and when payment is due is not significant. value is allocated based on relative stand-alone selling values of the services and products in the arrangement. As of December 31, 2019, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with value is allocated based on relative stand-alone selling values of the services and products in the arrangement. As of an expected duration of greater than one year was $81.7 million. Of this amount, $77.1 million is expected to be recognized December 31, 2019, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with within the next twelve months. As of December 31, 2018, aggregate transaction price allocated to the performance obligations an expected duration of greater than one year was $81.7 million. Of this amount, $77.1 million is expected to be recognized that were unsatisfied for contracts with an expected duration of greater than one year was $58.8 million. within the next twelve months. As of December 31, 2018, aggregate transaction price allocated to the performance obligations that were unsatisfied for contracts with an expected duration of greater than one year was $58.8 million. Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in accounts payable and accrued expenses on the Consolidated Statements of Financial Position. The following table sets forth the activity in contract liabilities from January 1, 2018 through December 31, 2019 (in thousands): accounts payable and accrued expenses on the Consolidated Statements of Financial Position. The following table sets forth the activity in contract liabilities from January 1, 2018 through December 31, 2019 (in thousands): Contract liabilities are recorded when cash payments are received or due in advance of performance and are reflected in Contract Balance as of January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Payments in advance of satisfaction of performance obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of January 1, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Revenue recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments in advance of satisfaction of performance obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, including translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revenue recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Other, including translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments in advance of satisfaction of performance obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Revenue recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payments in advance of satisfaction of performance obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, including translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Revenue recognized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Other, including translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Liabilities 12,170 9,003 (10,542) 12,170 2,366 (10,542) 12,997 2,366 13,030 12,997 (12,072) 13,030 (1,007) (12,072) 12,948 (1,007) Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,948 Note D—Other Current Assets Other current assets consisted of the following (in thousands): Note D—Other Current Assets Other current assets consisted of the following (in thousands): December 31, 2019 2018 Deferred compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $398,442 2019 84,364 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $398,442 Deferred compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,768 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,364 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $525,574 42,768 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $525,574 $311,708 2018 52,887 $311,708 37,990 52,887 $402,585 37,990 $402,585 December 31, 31 31 Liabilities Contract 9,003 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note E—Property and Equipment, Net NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Property and equipment consisted of the following (in thousands): Note E—Property and Equipment, Net Property and equipment consisted of the following (in thousands): Computer hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Computer software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . December 31, 2019 2018 December 31, $164,547 2019 291,681 $164,547 88,136 291,681 150,644 88,136 695,008 150,644 (566,623) 695,008 $128,385 (566,623) $177,237 2018 378,734 $177,237 117,740 378,734 160,521 117,740 834,232 160,521 (709,056) 834,232 $125,176 (709,056) Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $128,385 $125,176 Note F—Leases The Company has operating leases for corporate and field offices, and certain equipment. The Company’s leases have Note F—Leases remaining lease terms of 1 year to 10 years, some of which include options to extend the leases for up to 7 years, and some of The Company has operating leases for corporate and field offices, and certain equipment. The Company’s leases have which include options to terminate the leases within 1 year. Operating lease expense for the year ended December 31, 2019, remaining lease terms of 1 year to 10 years, some of which include options to extend the leases for up to 7 years, and some of was $77.7 million. Rental expense, primarily for offices premises, was $89.4 million and $87.5 million for the years ended which include options to terminate the leases within 1 year. Operating lease expense for the year ended December 31, 2019, December 31, 2018 and 2017, respectively. was $77.7 million. Rental expense, primarily for offices premises, was $89.4 million and $87.5 million for the years ended December 31, 2018 and 2017, respectively. Supplemental cash flow information related to leases consisted of the following (in thousands): Supplemental cash flow information related to leases consisted of the following (in thousands): Cash paid for operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Right-of-use assets obtained in exchange for new operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Cash paid for operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Right-of-use assets obtained in exchange for new operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Supplemental balance sheet information related to leases consisted of the following: Supplemental balance sheet information related to leases consisted of the following: Year Ended December 31, 2019 Year Ended 78,152 December 31, 2019 32,170 78,152 32,170 December 31, 2019 Weighted average remaining lease term for operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average discount rate for operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average remaining lease term for operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 years December 31, 2019 3.0% 4.8 years 3.0% Future minimum lease payments under non-cancellable leases as of December 31, 2019, were as follows (in thousands): Weighted average discount rate for operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Future minimum lease payments under non-cancellable leases as of December 31, 2019, were as follows (in thousands): 77,813 63,534 77,813 49,737 63,534 40,811 49,737 31,178 40,811 30,674 31,178 (20,378) 30,674 273,369 (20,378) 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Less: Imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Present value of operating lease liabilities (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Less: Imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (a) Includes current portion of $71.4 million for operating leases. Present value of operating lease liabilities (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 273,369 (a) Includes current portion of $71.4 million for operating leases. 32 32 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2019, the Company had additional future minimum lease obligations totaling $45.5 million under NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) As of December 31, 2019, the Company had additional future minimum lease obligations totaling $45.5 million under executed operating lease contracts that had not yet commenced. These operating leases include agreements for corporate and field office facilities with lease terms of 1 to 8 years. executed operating lease contracts that had not yet commenced. These operating leases include agreements for corporate and field office facilities with lease terms of 1 to 8 years. Note G—Goodwill The following table sets forth the activity in goodwill from December 31, 2017, through December 31, 2019 (in Note G—Goodwill thousands): The following table sets forth the activity in goodwill from December 31, 2017, through December 31, 2019 (in thousands): Goodwill Temporary and consultant Temporary staffing and Balance as of December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,488 consultant staffing (421) Balance as of December 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,488 Balance as of December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,067 (421) 143 Balance as of December 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,067 Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,210 143 Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing Permanent $ 26,159 placement staffing (101) $ 26,159 $ 26,058 (101) 39 $ 26,058 $ 26,097 39 Goodwill Risk consulting and Risk internal consulting audit and services internal $ 50,238 audit services (405) $ 50,238 $ 49,833 (405) 224 $ 49,833 $ 50,057 224 Total $210,885 Total (927) $210,885 $209,958 (927) 406 $209,958 $210,364 406 Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $134,210 $ 26,097 $ 50,057 $210,364 Note H—Accrued Payroll and Benefit Costs Note H—Accrued Payroll and Benefit Costs Accrued payroll and benefit costs consisted of the following (in thousands): Accrued payroll and benefit costs consisted of the following (in thousands): December 31, 2019 2018 December 31, Employee deferred compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $333,528 2018 263,072 $333,528 23,918 263,072 18,251 23,918 $638,769 18,251 The Company provides various qualified defined contribution 401(k) plans covering eligible employees. The plans offer $638,769 $421,198 2019 Payroll and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,918 Employee deferred compensation plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $421,198 Payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,831 Payroll and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,918 Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,655 Payroll taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,831 Accrued payroll and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $743,602 Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,655 Accrued payroll and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $743,602 a savings feature with the Company matching employee contributions. Assets of this plan are held by an independent trustee for The Company provides various qualified defined contribution 401(k) plans covering eligible employees. The plans offer the sole benefit of participating employees. Nonqualified plans are provided for employees not eligible for the qualified plans. a savings feature with the Company matching employee contributions. Assets of this plan are held by an independent trustee for These plans include provisions for salary deferrals and Company matching and discretionary contributions. The asset value of the sole benefit of participating employees. Nonqualified plans are provided for employees not eligible for the qualified plans. the nonqualified plans was $398.4 million and $311.7 million as of December 31, 2019 and 2018, respectively, and is included These plans include provisions for salary deferrals and Company matching and discretionary contributions. The asset value of in other current assets in the Consolidated Statements of Financial Position. The liability value for the nonqualified plans was the nonqualified plans was $398.4 million and $311.7 million as of December 31, 2019 and 2018, respectively, and is included $421.2 million and $333.5 million as of December 31, 2019 and 2018, respectively, and is included in current accrued payroll in other current assets in the Consolidated Statements of Financial Position. The liability value for the nonqualified plans was and benefit costs in the Consolidated Statements of Financial Position. Deferred compensation plan and other benefits related to $421.2 million and $333.5 million as of December 31, 2019 and 2018, respectively, and is included in current accrued payroll the Company’s executive chairman were $91.8 million and $89.2 million as of December 31, 2019 and 2018, respectively, and and benefit costs in the Consolidated Statements of Financial Position. Deferred compensation plan and other benefits related to are included in the liability value for the nonqualified plans. Net unrealized gains and (losses) on these nonqualified plan assets the Company’s executive chairman were $91.8 million and $89.2 million as of December 31, 2019 and 2018, respectively, and and liabilities were $44.2 million, ($26.6) million, and $19.4 million for the years ended December 31, 2019, 2018 and 2017, are included in the liability value for the nonqualified plans. Net unrealized gains and (losses) on these nonqualified plan assets respectively. and liabilities were $44.2 million, ($26.6) million, and $19.4 million for the years ended December 31, 2019, 2018 and 2017, The Company’s contribution expense for its qualified defined contribution plans and nonqualified benefits plans totaled respectively. $26.1 million, $24.2 million, and $21.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company’s contribution expense for its qualified defined contribution plans and nonqualified benefits plans totaled The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material. $26.1 million, $24.2 million, and $21.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company has statutory defined contribution plans and defined benefit plans outside the U.S., which are not material. 33 33 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note I—Notes Payable NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The Company issued promissory notes in connection with certain acquisitions and other payment obligations. These Note I—Notes Payable notes are due in varying installments and, in aggregate, amounted to $0.5 million at December 31, 2019, and $0.7 million at The Company issued promissory notes in connection with certain acquisitions and other payment obligations. These December 31, 2018. At December 31, 2019, $0.5 million of the notes were collateralized by a standby letter of credit. The notes are due in varying installments and, in aggregate, amounted to $0.5 million at December 31, 2019, and $0.7 million at following table shows the schedule of maturities for notes payable at December 31, 2019 (in thousands): December 31, 2018. At December 31, 2019, $0.5 million of the notes were collateralized by a standby letter of credit. The 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ following table shows the schedule of maturities for notes payable at December 31, 2019 (in thousands): 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218 239 218 457 239 At December 31, 2019, the notes carried fixed rates and the weighted average interest rate for the above was 9.0% for $ 457 each of the years ended December 31, 2019, 2018 and 2017. At December 31, 2019, the notes carried fixed rates and the weighted average interest rate for the above was 9.0% for The Company has an uncommitted letter of credit facility (the “facility”) of up to $35.0 million, which is available to each of the years ended December 31, 2019, 2018 and 2017. cover the issuance of debt support standby letters of credit. The Company had used $16.8 million in debt support standby letters The Company has an uncommitted letter of credit facility (the “facility”) of up to $35.0 million, which is available to of credit as of December 31, 2019, and $14.4 million as of December 31, 2018. Of the debt support standby letters of credit cover the issuance of debt support standby letters of credit. The Company had used $16.8 million in debt support standby letters outstanding, $16.3 million as of December 31, 2019, and $13.7 million as of December 31, 2018, satisfies workers’ of credit as of December 31, 2019, and $14.4 million as of December 31, 2018. Of the debt support standby letters of credit compensation insurer’s collateral requirements. There is a service fee of 1.125% on the used portion of the facility. The facility outstanding, $16.3 million as of December 31, 2019, and $13.7 million as of December 31, 2018, satisfies workers’ is subject to certain financial covenants and expires on August 31, 2020. The Company was in compliance with these covenants compensation insurer’s collateral requirements. There is a service fee of 1.125% on the used portion of the facility. The facility as of December 31, 2019. The Company intends to renew this facility prior to its August 31, 2020 expiration. is subject to certain financial covenants and expires on August 31, 2020. The Company was in compliance with these covenants In March 2019, the Company entered into an uncommitted credit facility (the “Credit Agreement”) of up to $100 million. as of December 31, 2019. The Company intends to renew this facility prior to its August 31, 2020 expiration. The Company may request borrowings under the Credit Agreement that are denominated in U.S. dollars and each request is subject to approval by the lender. The Company must repay the aggregate principal amount of loans outstanding under the The Company may request borrowings under the Credit Agreement that are denominated in U.S. dollars and each request is Credit Agreement on the termination date of each borrowing. Borrowings under the Credit Agreement will bear interest in subject to approval by the lender. The Company must repay the aggregate principal amount of loans outstanding under the accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate Credit Agreement on the termination date of each borrowing. Borrowings under the Credit Agreement will bear interest in plus an applicable margin. There were no borrowings under the Credit Agreement as of December 31, 2019. The Company accordance with the terms of the borrowing, which typically will be calculated according to the London Interbank Offered Rate intends to renew this facility prior to its March 19, 2020, expiration. plus an applicable margin. There were no borrowings under the Credit Agreement as of December 31, 2019. The Company intends to renew this facility prior to its March 19, 2020, expiration. Note J—Income Taxes In March 2019, the Company entered into an uncommitted credit facility (the “Credit Agreement”) of up to $100 million. The provision (benefit) for income taxes for the years ended December 31, 2019, 2018 and 2017, consisted of the Note J—Income Taxes following (in thousands): The provision (benefit) for income taxes for the years ended December 31, 2019, 2018 and 2017, consisted of the Years Ended December 31, following (in thousands): Current: Current: Deferred: Deferred: 2019 2018 Years Ended December 31, 2017 2019 2018 $ 99,830 2017 $133,097 38,356 $ 99,830 35,007 38,356 24,944 $133,097 27,079 24,944 95 1,087 (9,959) $ (15,849) $ 41,717 $226,932 95 $157,314 (30) $171,082 1,087 (30) $171,082 $157,314 $226,932 Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $107,699 39,028 State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $107,699 33,227 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,028 State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,227 27,079 35,007 (9,959) $ (15,849) $ 41,717 Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal and state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before the provision for income taxes for the years ended December 31, 2019, 2018 and 2017, consisted of the following (in thousands): Income before the provision for income taxes for the years ended December 31, 2019, 2018 and 2017, consisted of the Years Ended December 31, following (in thousands): Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 2019 2018 Years Ended December 31, $485,489 2018 106,113 $485,489 $591,602 106,113 $445,418 2017 72,098 $445,418 $517,516 72,098 $545,695 2019 79,820 $545,695 $625,515 79,820 $625,515 $591,602 $517,516 34 34 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The income taxes shown above varied from the statutory federal income tax rates for these periods as follows: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2019 2018 Years Ended December 31, 2017 The income taxes shown above varied from the statutory federal income tax rates for these periods as follows: Federal U.S. income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State income taxes, net of federal tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal U.S. income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent book/tax differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . State income taxes, net of federal tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-U.S. income taxed at different rates, net of foreign tax credits . . . . . . . . . . . . . . . . . . . Permanent book/tax differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Non-U.S. income taxed at different rates, net of foreign tax credits . . . . . . . . . . . . . . . . . . . Tax impact of uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Federal tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effects of TCJA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax impact of uncertain tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effects of TCJA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.0% 2019 4.9 21.0% 1.1 4.9 2.1 1.1 (1.4) 2.1 0.2 (1.4) — 0.2 (0.5) — 27.4% (0.5) 21.0% 2018 4.7 21.0% 0.6 4.7 2.0 0.6 (1.7) 2.0 0.8 (1.7) 0.4 0.8 (1.2) 0.4 26.6% (1.2) 35.0% 2017 3.7 35.0% 0.4 3.7 — 0.4 (1.3) — 0.2 (1.3) 6.5 0.2 (0.6) 6.5 43.9% (0.6) Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.4% 26.6% 43.9% The deferred portion of the tax (benefit) provision consisted of the following (in thousands): The deferred portion of the tax (benefit) provision consisted of the following (in thousands): Years Ended December 31, Accrued expenses, deducted for tax when paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized costs for books, deducted for tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Accrued expenses, deducted for tax when paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Capitalized costs for books, deducted for tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effects of TCJA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tax effects of TCJA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 2019 2019 3,246 2018 Years Ended December 31, $ (17,797) $ (21,884) $ 15,213 2018 (4,832) 2017 (5,790) $ (17,797) $ (21,884) $ 15,213 (4,079) (5,790) 34,633 (4,079) 1,835 34,633 $ (8,872) $ (15,879) $ 41,812 1,835 10,071 (4,832) — 10,071 766 — 3,526 3,246 — 3,526 2,153 — 2,153 766 $ (8,872) $ (15,879) $ 41,812 35 35 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The components of the deferred income tax amounts at December 31, 2019 and 2018, were as follows (in thousands): The components of the deferred income tax amounts at December 31, 2019 and 2018, were as follows (in thousands): December 31, Deferred Income Tax Assets 2019 2018 December 31, Deferred compensation and other benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105,096 2019 Deferred Income Tax Assets 25,130 Credits and net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred compensation and other benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $105,096 7,805 Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,130 Credits and net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,944 Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,805 Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,929 Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,944 Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,932 Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,929 Workers’ compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,256 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,932 Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,092 Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,256 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2018 $ 87,513 31,169 $ 87,513 9,535 31,169 7,891 9,535 3,580 7,891 — 3,580 14,959 — 154,647 14,959 Deferred Income Tax Liabilities Deferred Income Tax Liabilities Total deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212,092 (22,009) 154,647 (21,210) Property and equipment basis differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment basis differences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,981) (22,009) (44,448) (16,981) (7,278) (44,448) (90,716) (7,278) (21,618) (90,716) Total deferred income tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,758 Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,618) (9,761) (21,210) — (9,761) (10,319) — (41,290) (10,319) (23,072) (41,290) $ 90,285 (23,072) Credits and net operating loss carryforwards primarily include net operating losses in foreign countries of $21.7 million $ 90,285 Total deferred income tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99,758 that expire in 2020 and later; and California enterprise zone tax credits of $3.0 million that expire in 2023. Of the $3.0 million Credits and net operating loss carryforwards primarily include net operating losses in foreign countries of $21.7 million of California enterprise zone tax credits, the Company expects that it will utilize $1.2 million of these credits prior to expiration. that expire in 2020 and later; and California enterprise zone tax credits of $3.0 million that expire in 2023. Of the $3.0 million Valuation allowances of $19.9 million have been maintained against net operating loss carryforwards and other deferred items of California enterprise zone tax credits, the Company expects that it will utilize $1.2 million of these credits prior to expiration. in foreign countries. In addition, a valuation allowance of $1.8 million has been maintained against California enterprise zone Valuation allowances of $19.9 million have been maintained against net operating loss carryforwards and other deferred items tax credits. in foreign countries. In addition, a valuation allowance of $1.8 million has been maintained against California enterprise zone As of December 31, 2019, the Company’s consolidated financial statements provide for any related U.S. tax liability on tax credits. earnings of foreign subsidiaries that may be repatriated. As of December 31, 2019, the Company’s consolidated financial statements provide for any related U.S. tax liability on The following table reconciles the total amounts of gross unrecognized tax benefits from January 1, 2017 to earnings of foreign subsidiaries that may be repatriated. December 31, 2019 (in thousands): The following table reconciles the total amounts of gross unrecognized tax benefits from January 1, 2017 to December 31, 2019 (in thousands): 2019 8,418 2019 Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2017 1,503 Gross increases—tax positions in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 731 (257) Gross decreases—tax positions in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,503 Gross increases—tax positions in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 956 Gross increases—tax positions in current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (257) Gross decreases—tax positions in prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 956 Gross increases—tax positions in current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,886 Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Lapse of statute of limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $9.3 million, $8.3 2,886 — 8,418 (760) — 1,703 (760) (4) 1,703 (3) (4) 9,354 (3) Balance at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ million and $2.8 million for 2019, 2018 and 2017, respectively. 9,354 8,418 $ $ $ $ The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is $9.3 million, $8.3 The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax million and $2.8 million for 2019, 2018 and 2017, respectively. expense. The total amount of interest and penalties accrued as of December 31, 2019 is $0.5 million, including a $0.2 million The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax increase recorded in income tax expense during the year. The total amount of interest and penalties accrued as of December 31, expense. The total amount of interest and penalties accrued as of December 31, 2019 is $0.5 million, including a $0.2 million 36 increase recorded in income tax expense during the year. The total amount of interest and penalties accrued as of December 31, 36 December 31, $ 2018 December 31, 2,886 $ 2018 3,259 2,886 (8) 3,259 2,284 (8) — 2,284 (3) — 8,418 (3) $ 2017 $ 731 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2018 was $0.3 million, including a $0.2 million increase recorded in income tax expense during the year. The total amount of interest and penalties accrued as of December 31, 2017, was $0.1 million. 2018 was $0.3 million, including a $0.2 million increase recorded in income tax expense during the year. The total amount of interest and penalties accrued as of December 31, 2017, was $0.1 million. twelve months. The Company does not believe it is reasonably possible that the settlement of tax uncertainties will occur within the next The Company does not believe it is reasonably possible that the settlement of tax uncertainties will occur within the next The Company’s major income tax jurisdictions are the United States, Australia, Belgium, Canada, France, Germany and twelve months. the United Kingdom. For U.S. federal income tax, the Company remains subject to examination for 2016 and subsequent years. The Company’s major income tax jurisdictions are the United States, Australia, Belgium, Canada, France, Germany and For major U.S. states, with few exceptions, the Company remains subject to examination for 2015 and subsequent years. the United Kingdom. For U.S. federal income tax, the Company remains subject to examination for 2016 and subsequent years. Generally, for foreign countries, the Company remains subject to examination for 2012 and subsequent years. For major U.S. states, with few exceptions, the Company remains subject to examination for 2015 and subsequent years. Generally, for foreign countries, the Company remains subject to examination for 2012 and subsequent years. Note K—Commitments and Contingencies On April 6, 2018, Plaintiff Shari Dorff, on her own behalf and on behalf of a putative class of allegedly similarly situated On March 23, 2015, Plaintiff Jessica Gentry, on her own behalf and on behalf of a putative class of allegedly similarly Note K—Commitments and Contingencies situated individuals, filed a complaint against the Company in the Superior Court of California, San Francisco County, which On March 23, 2015, Plaintiff Jessica Gentry, on her own behalf and on behalf of a putative class of allegedly similarly was subsequently amended on October 23, 2015. The complaint alleges that a putative class of current and former employees of situated individuals, filed a complaint against the Company in the Superior Court of California, San Francisco County, which the Company working in California since March 13, 2010 were denied compensation for the time they spent interviewing “for was subsequently amended on October 23, 2015. The complaint alleges that a putative class of current and former employees of temporary and permanent employment opportunities” as well as performing activities related to the interview process. Gentry the Company working in California since March 13, 2010 were denied compensation for the time they spent interviewing “for seeks recovery on her own behalf and on behalf of the putative class in an unspecified amount for this allegedly unpaid temporary and permanent employment opportunities” as well as performing activities related to the interview process. Gentry compensation. Gentry also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and seeks recovery on her own behalf and on behalf of the putative class in an unspecified amount for this allegedly unpaid the putative class with accurate wage statements. Gentry also seeks an unspecified amount of other damages, attorneys’ fees, compensation. Gentry also seeks recovery of an unspecified amount for the alleged failure of the Company to provide her and and statutory penalties, including penalties for allegedly not paying all wages due upon separation to former employees and the putative class with accurate wage statements. Gentry also seeks an unspecified amount of other damages, attorneys’ fees, statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by California’s Labor Code and statutory penalties, including penalties for allegedly not paying all wages due upon separation to former employees and Private Attorney General Act (“PAGA”). On January 4, 2016, the Court denied a motion by the Company to compel all of statutory penalties on behalf of herself and other allegedly “aggrieved employees” as defined by California’s Labor Code Gentry’s claims, except the PAGA claim, to individual arbitration. At this stage of the litigation, it is not feasible to predict the Private Attorney General Act (“PAGA”). On January 4, 2016, the Court denied a motion by the Company to compel all of outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the Gentry’s claims, except the PAGA claim, to individual arbitration. At this stage of the litigation, it is not feasible to predict the Company’s Financial Statements. The Company believes it has meritorious defenses to the allegations and the Company outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts have been provided in the intends to continue to vigorously defend against the litigation. 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. 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 individuals, filed a complaint against the Company in the Superior Court of California, County of Los Angeles. In addition to misclassified as exempt employees and seeks an unspecified amount for: unpaid wages resulting from such alleged certain claims individual to Plaintiff Dorff, the complaint alleges that salaried recruiters based in California have been misclassification; alleged failure to provide a reasonable opportunity to take meal periods and rest breaks; alleged failure to pay misclassified as exempt employees and seeks an unspecified amount for: unpaid wages resulting from such alleged wages on a timely basis both during employment and upon separation; alleged failure to comply with California requirements misclassification; alleged failure to provide a reasonable opportunity to take meal periods and rest breaks; alleged failure to pay regarding wage statements and record-keeping; and alleged improper denial of expense reimbursement. Plaintiff Dorff also wages on a timely basis both during employment and upon separation; alleged failure to comply with California requirements seeks an unspecified amount of other damages, attorneys’ fees, and penalties, including but not limited to statutory penalties on regarding wage statements and record-keeping; and alleged improper denial of expense reimbursement. Plaintiff Dorff also behalf of herself and other allegedly “aggrieved employees” as defined by PAGA. At this stage of the litigation, it is not seeks an unspecified amount of other damages, attorneys’ fees, and penalties, including but not limited to statutory penalties on feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts behalf of herself and other allegedly “aggrieved employees” as defined by PAGA. At this stage of the litigation, it is not have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the feasible to predict the outcome of or a range of loss, should a loss occur, from this proceeding and, accordingly, no amounts allegations and the Company intends to continue to vigorously defend against the litigation. have been provided in the Company’s Financial Statements. The Company believes it has meritorious defenses to the The Company is involved in a number of other lawsuits arising in the ordinary course of business. While management allegations and the Company intends to continue to vigorously defend against the litigation. does not expect any of these other matters to have a material adverse effect on the Company’s results of operations, financial The Company is involved in a number of other lawsuits arising in the ordinary course of business. While management position or cash flows, litigation is subject to certain inherent uncertainties. does not expect any of these other matters to have a material adverse effect on the Company’s results of operations, financial Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred. position or cash flows, litigation is subject to certain inherent uncertainties. On April 6, 2018, Plaintiff Shari Dorff, on her own behalf and on behalf of a putative class of allegedly similarly situated Legal costs associated with the resolution of claims, lawsuits and other contingencies are expensed as incurred. 37 37 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note L—Stockholders’ Equity NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Stock Repurchase Program. As of December 31, 2019, the Company is authorized to repurchase, from time to time, up Stock Repurchase Program. As of December 31, 2019, the Company is authorized to repurchase, from time to time, up Note L—Stockholders’ Equity to 2.5 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 years ended to 2.5 million additional shares of the Company’s common stock on the open market or in privately negotiated transactions, December 31, 2019, 2018 and 2017, are reflected in the following table (in thousands): depending on market conditions. The number and the cost of common stock shares repurchased during the years ended December 31, 2019, 2018 and 2017, are reflected in the following table (in thousands): Years Ended December 31, Common stock repurchased (in shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Common stock repurchased (in shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 2018 Years Ended December 31, 2017 4,253 2019 $250,154 4,253 5,614 2018 $351,194 5,614 4,046 2017 $196,645 4,046 Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were $196,645 Common stock repurchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . tendered by employees for the payment of applicable statutory withholding taxes. The number and the cost of employee stock Additional stock repurchases were made in connection with employee stock plans, whereby Company shares were plan repurchases made during the years ended December 31, 2019, 2018 and 2017, are reflected in the following table (in tendered by employees for the payment of applicable statutory withholding taxes. The number and the cost of employee stock thousands): plan repurchases made during the years ended December 31, 2019, 2018 and 2017, are reflected in the following table (in thousands): Years Ended December 31, $250,154 $351,194 Repurchases related to employee stock plans (in shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 2018 Years Ended December 31, 352 235 2017 408 Repurchases related to employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Repurchases related to employee stock plans (in shares) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2017 $ 20,391 408 The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for $ 20,391 Repurchases related to employee stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . using the cost method. Treasury stock activity for each of the three years ended December 31, 2019, 2018 and 2017 (consisting The repurchased shares are held in treasury and are presented as if constructively retired. Treasury stock is accounted for of purchase of shares for the treasury) is presented in the Consolidated Statements of Stockholders’ Equity. using the cost method. Treasury stock activity for each of the three years ended December 31, 2019, 2018 and 2017 (consisting Dividends. The Company’s Board of Directors may at their discretion declare and pay cash dividends upon the shares of of purchase of shares for the treasury) is presented in the Consolidated Statements of Stockholders’ Equity. the Company’s stock either out of the Company’s retained earnings or additional paid-in capital. The dividends declared per share were $1.24, $1.12, and $.96 during the years ended December 31, 2019, 2018 and 2017, respectively. the Company’s stock either out of the Company’s retained earnings or additional paid-in capital. The dividends declared per Repurchases of shares and issuances of dividends are applied first to the extent of retained earnings and any remaining share were $1.24, $1.12, and $.96 during the years ended December 31, 2019, 2018 and 2017, respectively. amounts are applied to additional paid-in capital. Dividends. The Company’s Board of Directors may at their discretion declare and pay cash dividends upon the shares of 2019 $ 22,491 352 2018 $ 13,674 235 $ 22,491 $ 13,674 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. Note M—Stock Plans Under various stock plans, officers, employees, and outside directors have received or may receive grants of restricted Note M—Stock Plans stock, stock units, stock appreciation rights or options to purchase common stock. Grants have been made at the discretion of Under various stock plans, officers, employees, and outside directors have received or may receive grants of restricted the Committees of the Board of Directors. Grants generally vest either on a straight-line basis over four years or on a cliff basis stock, stock units, stock appreciation rights or options to purchase common stock. Grants have been made at the discretion of over three years. Shares offered under the plan are authorized but unissued shares. the Committees of the Board of Directors. Grants generally vest either on a straight-line basis over four years or on a cliff basis Recipients of restricted stock do not pay any cash consideration to the Company for the shares and have the right to vote over three years. Shares offered under the plan are authorized but unissued shares. all shares subject to such grant. Restricted stock grants contain forfeitable rights to dividends. Dividends for these grants are Recipients of restricted stock do not pay any cash consideration to the Company for the shares and have the right to vote accrued on the dividend payment dates but are not paid until the shares vest, and dividends accrued for shares that ultimately do all shares subject to such grant. Restricted stock grants contain forfeitable rights to dividends. Dividends for these grants are not vest are forfeited. Recipients of stock units do not pay any cash consideration for the units, do not have the right to vote, and accrued on the dividend payment dates but are not paid until the shares vest, and dividends accrued for shares that ultimately do do not receive dividends with respect to such units. not vest are forfeited. Recipients of stock units do not pay any cash consideration for the units, do not have the right to vote, and During the year ended December 31, 2019, the Company granted performance shares to its executives in the form of do not receive dividends with respect to such units. restricted stock. The shares granted contain (1) a performance condition based on Return on Invested Capital (“ROIC”), and During the year ended December 31, 2019, the Company granted performance shares to its executives in the form of (2) a market condition based on Total Shareholder Return (“TSR”). The ROIC performance condition and the TSR market restricted stock. The shares granted contain (1) a performance condition based on Return on Invested Capital (“ROIC”), and condition measure the Company’s performance against a peer group. Shares will be delivered at the end of a three year vesting, (2) a market condition based on Total Shareholder Return (“TSR”). The ROIC performance condition and the TSR market TSR and ROIC performance period based on the Company’s actual performance compared to the peer group. The ROIC condition measure the Company’s performance against a peer group. Shares will be delivered at the end of a three year vesting, performance condition is calculated first and has a range of possible outcomes of zero percent (0%) to one hundred fifty percent TSR and ROIC performance period based on the Company’s actual performance compared to the peer group. The ROIC (150%). The TSR condition is considered a modifier of the ROIC performance condition. The range for the TSR condition is performance condition is calculated first and has a range of possible outcomes of zero percent (0%) to one hundred fifty percent seventy-five percent (75%) to one hundred twenty-five percent (125%). The result calculated by multiplying the ROIC (150%). The TSR condition is considered a modifier of the ROIC performance condition. The range for the TSR condition is percentage by the TSR percentage is used to calculate the actual number of shares earned. The fair value of this award was seventy-five percent (75%) to one hundred twenty-five percent (125%). The result calculated by multiplying the ROIC determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 26.20%, a 0% dividend percentage by the TSR percentage is used to calculate the actual number of shares earned. The fair value of this award was yield, and a risk-free interest rate of 2.36%. The historical volatility was based on the most recent 2.71-year period for the determined using a Monte Carlo simulation with the following assumptions: a historical volatility of 26.20%, a 0% dividend yield, and a risk-free interest rate of 2.36%. The historical volatility was based on the most recent 2.71-year period for the 38 38 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Company and the components of the peer group. The stock price movements have been modeled such that the dividends are incorporated in the returns of each company’s stock, therefore the Monte Carlo simulation reflects a 0% dividend yield for each Company and the components of the peer group. The stock price movements have been modeled such that the dividends are stock. The use of a 0% dividend yield is mathematically equivalent to including the dividends in the calculation of TSR. The incorporated in the returns of each company’s stock, therefore the Monte Carlo simulation reflects a 0% dividend yield for each risk-free interest rate is equal to the yield, as of the valuation date, of the zero-coupon U.S. Treasury bill that is commensurate stock. The use of a 0% dividend yield is mathematically equivalent to including the dividends in the calculation of TSR. The with the remaining performance period. risk-free interest rate is equal to the yield, as of the valuation date, of the zero-coupon U.S. Treasury bill that is commensurate Unrecognized compensation cost is expected to be recognized over the next four years. Total unrecognized compensation with the remaining performance period. cost, net of estimated forfeitures, for restricted stock and stock units was $71.6 million, $65.6 million, and $62.7 million for the Unrecognized compensation cost is expected to be recognized over the next four years. Total unrecognized compensation years ended December 31, 2019, 2018 and 2017, respectively. cost, net of estimated forfeitures, for restricted stock and stock units was $71.6 million, $65.6 million, and $62.7 million for the The following table reflects activity under all stock plans from December 31, 2016 through December 31, 2019, and the years ended December 31, 2019, 2018 and 2017, respectively. weighted average exercise prices (in thousands, except per share amounts): The following table reflects activity under all stock plans from December 31, 2016 through December 31, 2019, and the weighted average exercise prices (in thousands, except per share amounts): Time Based Awards Weighted Number Time Based Awards Average of Grant Date Shares/ Weighted Number Fair Value Units Average of $43.78 1,243 Shares/ Grant Date Fair Value Units $48.10 574 $43.78 1,243 $44.09 (616) $48.10 574 $43.68 (41) $44.09 (616) $45.75 1,160 (41) $43.68 $57.16 533 $45.75 1,160 $47.62 (568) $57.16 533 $49.10 (40) (568) $47.62 $50.24 1,085 $49.10 (40) $66.66 434 $50.24 1,085 $50.29 (557) 434 $66.66 $53.85 (15) $50.29 (557) $57.67 947 (15) $53.85 Performance Based Awards with Market Conditions Performance Based Awards with Market Weighted Number Conditions Average of Grant Date Shares/ Weighted Number Fair Value Units Average of $54.42 950 Shares/ Grant Date Fair Value Units $50.09 50 $54.42 950 $50.09 (384) $50.09 50 — — $50.09 (384) $56.76 616 — — — — $56.76 616 $71.86 (129) — — $71.86 (129) (129) $71.86 $45.93 358 $71.86 (129) $74.01 236 $45.93 358 $45.93 (338) 236 $74.01 $45.93 (20) $45.93 (338) $74.01 236 (20) $45.93 Performance Based Awards without Market Conditions Performance Based Awards without Weighted Number Market Conditions Average of Grant Date Shares/ Weighted Number Fair Value Units Average of — — Shares/ Grant Date Fair Value Units $47.45 330 — — — — $47.45 330 — — — — $47.45 330 — — $56.83 278 $47.45 330 — — $56.83 278 — — — — $51.74 608 — — — — $51.74 608 — — — — — — — — $51.74 608 — — Total Awards with Performance Condition Total Awards with Performance Weighted Condition Average Grant Date Weighted Fair Value Average $54.42 Grant Date Fair Value $47.80 $54.42 $50.09 $47.80 — $50.09 $53.51 — $56.83 $53.51 $71.86 $56.83 $71.86 $71.86 $49.58 $71.86 $74.01 $49.58 $45.93 $74.01 $45.93 $45.93 $57.97 $45.93 Number of Shares/ Number Units of 950 Shares/ Units 380 950 (384) 380 — (384) 946 — 278 946 (129) 278 (129) (129) 966 (129) 236 966 (338) 236 (20) (338) 844 (20) Outstanding, December 31, 2016 . . . . Granted . . . . . . . . . . . . . . . . . . . . . . Outstanding, December 31, 2016 . . . . Restrictions lapsed . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . Restrictions lapsed . . . . . . . . . . . . . Outstanding, December 31, 2017 . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . Outstanding, December 31, 2017 . . . . Restrictions lapsed . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . Restrictions lapsed . . . . . . . . . . . . . Outstanding, December 31, 2018 . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . Outstanding, December 31, 2018 . . . . Restrictions lapsed . . . . . . . . . . . . . Granted . . . . . . . . . . . . . . . . . . . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . Restrictions lapsed . . . . . . . . . . . . . Outstanding, December 31, 2019 . . . . Forfeited . . . . . . . . . . . . . . . . . . . . . The total fair value of shares vested was $57.0 million, $40.6 million, and $50.4 million for the years ended 844 $57.67 $74.01 $51.74 236 608 947 Outstanding, December 31, 2019 . . . . December 31, 2019, 2018 and 2017, respectively. $57.97 The total fair value of shares vested was $57.0 million, $40.6 million, and $50.4 million for the years ended At December 31, 2019, the total number of available shares to grant under the plans (consisting of either restricted stock, December 31, 2019, 2018 and 2017, respectively. stock units, stock appreciation rights or options to purchase common stock) was approximately 4.8 million. At December 31, 2019, the total number of available shares to grant under the plans (consisting of either restricted stock, stock units, stock appreciation rights or options to purchase common stock) was approximately 4.8 million. 39 39 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note N—Net Income Per Share NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The calculation of net income per share for the three years ended December 31, 2019, 2018 and 2017, are reflected in the Note N—Net Income Per Share following table (in thousands, except per share amounts): The calculation of net income per share for the three years ended December 31, 2019, 2018 and 2017, are reflected in the following table (in thousands, except per share amounts): Years Ended December 31, Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 $454,433 2018 $434,288 2017 $290,584 2019 2018 Years Ended December 31, 2017 Diluted: Diluted: Basic: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic: Weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $454,433 115,656 $434,288 120,513 $290,584 124,152 115,656 115,656 120,513 120,513 124,152 124,152 Dilutive effect of potential common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dilutive effect of potential common shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net income per share: Diluted weighted average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Net income per share: Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Potential common shares include the dilutive effect of unvested performance-based restricted stock, restricted stock Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,089 120,513 121,602 1,089 755 115,656 116,411 755 121,602 3.60 116,411 3.93 3.90 3.93 3.57 3.60 3.90 3.57 $ $ $ $ $ $ $ $ 740 124,152 124,892 740 124,892 2.34 2.33 2.34 2.33 which contains forfeitable rights to dividends, and stock units. Potential common shares include the dilutive effect of unvested performance-based restricted stock, restricted stock which contains forfeitable rights to dividends, and stock units. Note O—Business Segments The Company has three reportable segments: temporary and consultant staffing, permanent placement staffing, and risk The Company has three 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 Note O—Business Segments 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, consulting and internal audit services. Operating segments are defined as components of the Company for which separate administrative and office, information technology, legal, advertising, marketing and web design fields. The permanent financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and placement staffing segment provides full-time personnel in the accounting, finance, administrative and office, and information assess performance. The temporary and consultant staffing segment provides specialized staffing in the accounting and finance, technology fields. The risk consulting and internal audit services segment provides business and technology risk consulting and administrative and office, information technology, legal, advertising, marketing and web design fields. The permanent internal audit services. 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 The accounting policies of the segments are set forth in Note A—Summary of Significant Accounting Policies. The internal audit services. Company evaluates performance based on income from operations before net interest income, intangible amortization expense, The accounting policies of the segments are set forth in Note A—Summary of Significant Accounting Policies. The and income taxes. Company evaluates performance based on income from operations before net interest income, intangible amortization expense, and income taxes. 40 40 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results (in thousands): The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated Years Ended December 31, results (in thousands): Service revenues Service revenues Temporary and consultant staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Temporary and consultant staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk consulting and internal audit services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk consulting and internal audit services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income Temporary and consultant staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Operating income 2019 2018 Years Ended December 31, 2017 2019 $4,412,125 2018 $4,330,566 2017 $4,011,042 533,432 $4,412,125 1,128,875 533,432 $6,074,432 1,128,875 511,989 $4,330,566 957,716 511,989 $5,800,271 957,716 439,214 $4,011,042 816,533 439,214 $5,266,789 816,533 $6,074,432 $ 410,153 $5,800,271 $ 404,800 $5,266,789 $ 355,700 Risk consulting and internal audit services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Temporary and consultant staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Risk consulting and internal audit services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Permanent placement staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,673 $ 355,700 83,907 77,673 517,280 83,907 1,563 517,280 (1,799) 1,563 $ 517,516 (1,799) Assets by reportable segment are not presented as the Company does not allocate assets to its reportable segments, nor is $ 517,516 Interest income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Interest income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,801 $ 404,800 93,324 90,801 588,925 93,324 1,705 588,925 (4,382) 1,705 $ 591,602 (4,382) 83,885 $ 410,153 127,713 83,885 621,751 127,713 1,361 621,751 (5,125) 1,361 $ 625,515 (5,125) Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . such information used by management for purposes of assessing performance or allocating resources. $ 625,515 $ 591,602 Assets by reportable segment are not presented as the Company does not allocate assets to its reportable segments, nor is The Company operates internationally, with operations in North America, South America, Europe, Asia and Australia. such information used by management for purposes of assessing performance or allocating resources. The following tables represent revenues and long-lived assets by geographic location (in thousands): The Company operates internationally, with operations in North America, South America, Europe, Asia and Australia. The following tables represent revenues and long-lived assets by geographic location (in thousands): Years Ended December 31, Service revenues (a) 2019 2018 Years Ended December 31, 2017 Service revenues (a) Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,708,715 2019 1,365,717 Foreign (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,708,715 $6,074,432 1,365,717 Foreign (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Property and equipment, net $6,074,432 2019 2018 $4,433,767 2017 $4,121,701 1,366,504 $4,433,767 $5,800,271 1,366,504 $5,800,271 December 31, 2018 December 31, 1,145,088 $4,121,701 $5,266,789 1,145,088 $5,266,789 2017 Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Property and equipment, net Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2019 99,365 $ 2018 96,169 2017 $ 113,069 29,020 99,365 $ 128,385 29,020 29,007 $ 96,169 $ 125,176 29,007 31,818 $ 113,069 $ 144,887 31,818 $ 144,887 (a) There were no customers that accounted for more than 10% of the Company’s total service revenues in any year presented. (b) No individual country represented more than 10% of revenues in any year presented. (a) There were no customers that accounted for more than 10% of the Company’s total service revenues in any year presented. (b) No individual country represented more than 10% of revenues in any year presented. $ 128,385 $ 125,176 41 41 2019 ANNUAL REPORT | ROBERT HALF NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note P—Quarterly Financial Data (Unaudited) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) The following tabulation shows certain quarterly financial data for 2019 and 2018 (in thousands, except per share Note P—Quarterly Financial Data (Unaudited) amounts): The following tabulation shows certain quarterly financial data for 2019 and 2018 (in thousands, except per share amounts): 2019 Quarter 1 2 3 4 Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,468,530 2019 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 607,588 Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,468,530 Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,383 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 607,588 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,798 Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 147,383 .94 Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 109,798 .93 Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .94 Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 Quarter $1,516,385 2 $ 637,541 $1,516,385 $ 160,103 $ 637,541 $ 114,612 $ 160,103 .98 $ $ 114,612 .98 $ .98 $ $1,552,132 3 $ 646,446 $1,552,132 $ 163,782 $ 646,446 $ 117,181 $ 163,782 1.02 $ $ 117,181 1.01 $ 1.02 $ $1,537,385 4 $ 638,944 $1,537,385 $ 154,247 $ 638,944 $ 112,842 $ 154,247 .99 $ $ 112,842 .98 $ .99 $ Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .93 $ $ .98 Quarter 1.01 $ .98 2018 1 2 3 4 Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,395,333 2018 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 572,366 Service revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,395,333 Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 134,639 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 572,366 96,167 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 134,639 .79 Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,167 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .78 Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .79 Basic net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 Quarter $1,457,054 2 $ 607,118 $1,457,054 $ 150,075 $ 607,118 $ 109,315 $ 150,075 .90 $ $ 109,315 .89 $ .90 $ $1,466,226 3 $ 610,468 $1,466,226 $ 151,905 $ 610,468 $ 115,242 $ 151,905 .96 $ $ 115,242 .95 $ .96 $ $1,481,658 4 $ 620,062 $1,481,658 $ 154,983 $ 620,062 $ 113,564 $ 154,983 .96 $ $ 113,564 .95 $ .96 $ Diluted net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .78 $ .89 $ .95 $ .95 Note Q—Subsequent Events On February 12, 2020, the Company announced the following: Note Q—Subsequent Events Quarterly dividend per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . On February 12, 2020, the Company announced the following: Declaration date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Quarterly dividend per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Record date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Declaration date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Record date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Payment date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $.34 February 12, 2020 $.34 February 25, 2020 February 12, 2020 March 16, 2020 February 25, 2020 March 16, 2020 42 42 2019 ANNUAL REPORT | ROBERT HALF REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Robert Half International Inc. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Robert Half International Inc. Opinions on the Financial Statements and Internal Control over Financial Reporting Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the consolidated financial statements, including the related notes as listed in the index appearing under Item 15(a)(1) and the financial statement schedule listed in the index appearing under Item 15(a)(2), of Robert Half International We have audited the consolidated financial statements, including the related notes as listed in the index appearing under Item Inc. and its subsidiaries (the “Company”) (collectively referred to as the “consolidated financial statements”). We also have 15(a)(1) and the financial statement schedule listed in the index appearing under Item 15(a)(2), of Robert Half International audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Inc. and its subsidiaries (the “Company”) (collectively referred to as the “consolidated financial statements”). We also have Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Commission (COSO). Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over issued by the COSO. financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO. Basis for Opinions Basis for Opinions The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, respects. whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based circumstances. We believe that our audits provide a reasonable basis for our opinions. on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control over Financial Reporting Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit 43 43 2019 ANNUAL REPORT | ROBERT HALF preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and disposition of the company’s assets that could have a material effect on the financial statements. expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, disposition of the company’s assets that could have a material effect on the financial statements. projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matters Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or opinion on the critical audit matter or on the accounts or disclosures to which it relates. complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate Income taxes opinion on the critical audit matter or on the accounts or disclosures to which it relates. As described in Notes A and J to the consolidated financial statements, the Company’s operations are subject to U.S. federal, Income taxes state and local, and foreign income taxes. In establishing its deferred income tax assets and liabilities and its provision for income taxes, management makes judgments and interpretations based on the enacted tax laws that are applicable to its As described in Notes A and J to the consolidated financial statements, the Company’s operations are subject to U.S. federal, operations in various jurisdictions. Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, state and local, and foreign income taxes. In establishing its deferred income tax assets and liabilities and its provision for which management expects will apply to taxable income in the years in which those temporary differences are recovered or income taxes, management makes judgments and interpretations based on the enacted tax laws that are applicable to its settled. Management also evaluates the need for valuation allowances to reduce deferred tax assets to realizable amounts. In operations in various jurisdictions. Deferred tax assets and liabilities are measured and recorded using current enacted tax rates, determining the realizability of its deferred tax assets, management evaluates all positive and negative evidence and uses which management expects will apply to taxable income in the years in which those temporary differences are recovered or judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all settled. Management also evaluates the need for valuation allowances to reduce deferred tax assets to realizable amounts. In or some portion of the deferred tax assets may not be realized. As disclosed by management, the likelihood of a material change determining the realizability of its deferred tax assets, management evaluates all positive and negative evidence and uses in the Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of judgment regarding past and future events, including operating results, to help determine when it is more likely than not that all its tax planning strategies in the various relevant jurisdictions. The Company recorded a provision for income taxes of $171 or some portion of the deferred tax assets may not be realized. As disclosed by management, the likelihood of a material change million for the year ended December 31, 2019 and net deferred income tax assets of $100 million including a valuation in the Company’s expected realization of its deferred tax assets is dependent on future taxable income and the effectiveness of allowance of $22 million as of December 31, 2019. its tax planning strategies in the various relevant jurisdictions. The Company recorded a provision for income taxes of $171 million for the year ended December 31, 2019 and net deferred income tax assets of $100 million including a valuation The principal considerations for our determination that performing procedures relating to income taxes is a critical audit matter allowance of $22 million as of December 31, 2019. are there was significant judgment and estimation by management when assessing current enacted tax laws and published tax guidance as it relates to determining the provision for income taxes as well as in assessing the realizability of its deferred The principal considerations for our determination that performing procedures relating to income taxes is a critical audit matter income tax assets, specifically related to evaluating positive and negative evidence regarding past and future events, including are there was significant judgment and estimation by management when assessing current enacted tax laws and published tax operating results. This resulted in significant audit effort, judgment, and subjectivity in performing procedures and evaluating guidance as it relates to determining the provision for income taxes as well as in assessing the realizability of its deferred audit evidence over income taxes. The audit effort involved the use of professionals with specialized skill and knowledge to income tax assets, specifically related to evaluating positive and negative evidence regarding past and future events, including assist in performing procedures and evaluating the audit evidence obtained from these procedures. operating results. This resulted in significant audit effort, judgment, and subjectivity in performing procedures and evaluating audit evidence over income taxes. The audit effort involved the use of professionals with specialized skill and knowledge to Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall assist in performing procedures and evaluating the audit evidence obtained from these procedures. opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to income taxes, including management’s controls over the application of current enacted tax laws and published tax guidance and Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall their impact to the current year provision, the establishment of deferred tax assets and liabilities, and the evaluation of the opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to realizability of deferred tax assets. These procedures also included, among others, (i) testing the provision for income taxes and income taxes, including management’s controls over the application of current enacted tax laws and published tax guidance and the application of current enacted tax laws and published tax guidance, including the effective tax rate reconciliation, return to their impact to the current year provision, the establishment of deferred tax assets and liabilities, and the evaluation of the provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and realizability of deferred tax assets. These procedures also included, among others, (i) testing the provision for income taxes and measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax the application of current enacted tax laws and published tax guidance, including the effective tax rate reconciliation, return to assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future provision adjustments, and permanent and temporary differences, (ii) testing the underlying data used in establishing and events, including operating results and the related expected utilization of deferred tax assets. Professionals with specialized skill measuring deferred tax assets and liabilities, and (iii) evaluating management’s assessment of the realizability of deferred tax assets by evaluating factors used in management’s assessment of positive and negative evidence regarding past and future events, including operating results and the related expected utilization of deferred tax assets. Professionals with specialized skill 44 44 2019 ANNUAL REPORT | ROBERT HALF and knowledge were used to assist in the evaluation of the calculations, including application of relevant tax laws and published tax guidance. and knowledge were used to assist in the evaluation of the calculations, including application of relevant tax laws and published tax guidance. /s/ PricewaterhouseCoopers LLP San Francisco, California /s/ PricewaterhouseCoopers LLP February 14, 2020 San Francisco, California February 14, 2020 We have served as the Company’s auditor since 2002. We have served as the Company’s auditor since 2002. 45 45 2019 ANNUAL REPORT | ROBERT HALF Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 46 46 2019 ANNUAL REPORT | ROBERT HALF Item 9A. Controls and Procedures Disclosure Controls and Procedures. Management, including the Company’s President and Chief Executive Officer and Changes in Internal Control over Financial Reporting. There have been no changes in the Company’s internal controls Changes in Internal Control over Financial Reporting. There have been no changes in the Company’s internal controls Item 9A. Controls and Procedures the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and Disclosure Controls and Procedures. Management, including the Company’s President and Chief Executive Officer and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that accumulated and communicated to the Company’s management, including its principal executive and principal financial information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is officers, as appropriate to allow timely decisions regarding required disclosure. 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. over financial reporting identified in connection with the evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934 that occurred during the Company’s fourth quarter that has materially affected, or is reasonably likely to materially affect, over financial reporting identified in connection with the evaluation required by Rule 13a-15 of the Securities Exchange Act of the Company’s internal control over financial reporting. 1934 that occurred during the Company’s fourth quarter that has materially affected, or is reasonably likely to materially affect, Management’s Report on Internal Control over Financial Reporting. Management is responsible for establishing and the Company’s internal control over financial reporting. maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act Management’s Report on Internal Control over Financial Reporting. Management is responsible for establishing and of 1934, as amended). Management assessed the effectiveness of the Company’s internal control over financial reporting as of maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act December 31, 2019, using criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of of 1934, as amended). Management assessed the effectiveness of the Company’s internal control over financial reporting as of Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal December 31, 2019, using criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of control over financial reporting as of December 31, 2019. Sponsoring Organizations of the Treadway Commission (COSO) and concluded that the Company maintained effective internal Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. control over financial reporting as of December 31, 2019. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, has been audited inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included The effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, has been audited herein. by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein. Item 9B. Other Information None. Item 9B. Other Information None. 47 47 2019 ANNUAL REPORT | ROBERT HALF PART III Except as provided below in this Part III, the information required by Items 10 through 14 of Part III is incorporated by PART III reference from Item 1 of this Report and from the registrant’s Proxy Statement, under the captions “Nomination and Election of Except as provided below in this Part III, the information required by Items 10 through 14 of Part III is incorporated by Directors,” “Beneficial Stock Ownership,” “Compensation Discussion and Analysis,” “Compensation Tables,” “Corporate reference from Item 1 of this Report and from the registrant’s Proxy Statement, under the captions “Nomination and Election of Governance,” “The Board and Committees” and “Independent Registered Public Accounting Firm” which Proxy Statement Directors,” “Beneficial Stock Ownership,” “Compensation Discussion and Analysis,” “Compensation Tables,” “Corporate will be mailed to stockholders in connection with the registrant’s annual meeting of stockholders which is scheduled to be held Governance,” “The Board and Committees” and “Independent Registered Public Accounting Firm” which Proxy Statement in May 2020. will be mailed to stockholders in connection with the registrant’s annual meeting of stockholders which is scheduled to be held in May 2020. 48 48 2019 ANNUAL REPORT | ROBERT HALF Item 15. Exhibits and Financial Statement Schedules Item 15. Exhibits and Financial Statement Schedules (a) 1. Financial Statements PART IV (a) 1. Financial Statements The following consolidated financial statements of the Company and its subsidiaries are included in Item 8 of this report: The following consolidated financial statements of the Company and its subsidiaries are included in Item 8 of this report: Consolidated statements of financial position at December 31, 2019 and 2018.............................................. Page(s) 21 Page(s) Consolidated statements of operations for the years ended December 31, 2019, 2018, and 2017.................. Consolidated statements of financial position at December 31, 2019 and 2018.............................................. Consolidated statements of comprehensive income (loss) for the years ended December 31, 2019, 2018, Consolidated statements of operations for the years ended December 31, 2019, 2018, and 2017.................. and 2017........................................................................................................................................................... Consolidated statements of comprehensive income (loss) for the years ended December 31, 2019, 2018, Consolidated statements of stockholders’ equity for the years ended December 31, 2019, 2018, and 2017.. and 2017........................................................................................................................................................... Consolidated statements of cash flows for the years ended December 31, 2019, 2018, and 2017................. Consolidated statements of stockholders’ equity for the years ended December 31, 2019, 2018, and 2017.. Notes to consolidated financial statements...................................................................................................... Consolidated statements of cash flows for the years ended December 31, 2019, 2018, and 2017................. Report of independent registered public accounting firm................................................................................ Notes to consolidated financial statements...................................................................................................... Selected quarterly financial data for the years ended December 31, 2019 and 2018 are set forth in Note P Report of independent registered public accounting firm................................................................................ —Quarterly Financial Data (Unaudited) included in Item 8 of this report...................................................... Selected quarterly financial data for the years ended December 31, 2019 and 2018 are set forth in Note P —Quarterly Financial Data (Unaudited) included in Item 8 of this report...................................................... 2. Financial Statement Schedules Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018, and 2017 2. Financial Statement Schedules Schedules I, III, IV and V have been omitted as they are not applicable......................................................... Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2019, 2018, and 2017 Schedules I, III, IV and V have been omitted as they are not applicable......................................................... 22 21 22 23 24 23 25 24 26-42 25 43-45 26-42 43-45 42 42 54 54 49 49 2019 ANNUAL REPORT | ROBERT HALF 3. Exhibits 3. Exhibits Exhibit No. 3.1 Exhibit No. 3.1 3.2 3.2 4.1 *10.1 4.1 *10.1 *10.2 *10.2 *10.3 *10.3 *10.4 *10.4 *10.5 *10.5 *10.6 *10.6 *10.7 *10.7 *10.8 *10.8 *10.9 *10.9 *10.10 *10.10 Exhibit Exhibit 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. Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to Registrant’s Amended and Restated By-Laws, incorporated by reference to Exhibit 3.2 to Registrant’s Current Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2009. Report on Form 8-K dated February 13, 2020. Amended and Restated By-Laws, incorporated by reference to Exhibit 3.2 to Registrant’s Current Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. Report on Form 8-K dated February 13, 2020. Form of Power of Attorney and Indemnification Agreement, incorporated by reference to Exhibit 10.1 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934. to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002. Form of Power of Attorney and Indemnification Agreement, incorporated by reference to Exhibit 10.1 Employment Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002. reference to (i) Exhibit 10.(c) to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1985(P), (ii) Exhibit 10.2(b) to Registrant’s Registration Statement on Form S-1 Employment Agreement between the Registrant and Harold M. Messmer, Jr., incorporated by (No. 33-15171)(P), (iii) Exhibit 10.2(c) to the Registrant’s Annual Report on Form 10-K for the fiscal reference to (i) Exhibit 10.(c) to the Registrant’s Annual Report on Form 10-K for the fiscal year year ended December 31, 1987(P), (iv) Exhibit 10.2(d) to the Registrant’s Annual Report on Form ended December 31, 1985(P), (ii) Exhibit 10.2(b) to Registrant’s Registration Statement on Form S-1 10-K for the fiscal year ended December 31, 1988(P), (v) Exhibit 28.1 to the Registrant’s Quarterly (No. 33-15171)(P), (iii) Exhibit 10.2(c) to the Registrant’s Annual Report on Form 10-K for the fiscal Report on Form 10-Q for the fiscal quarter ended March 31, 1990(P), (vi) Exhibit 10.8 to the year ended December 31, 1987(P), (iv) Exhibit 10.2(d) to the Registrant’s Annual Report on Form Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991(P), (vii) 10-K for the fiscal year ended December 31, 1988(P), (v) Exhibit 28.1 to the Registrant’s Quarterly Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, Report on Form 10-Q for the fiscal quarter ended March 31, 1990(P), (vi) Exhibit 10.8 to the 1993(P), (viii) Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1991(P), (vii) December 31, 1993, (ix) Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for 1993(P), (viii) Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended the fiscal year ended December 31, 1995, (xi) Exhibit 10.2 to the Registrant’s Annual Report on Form December 31, 1993, (ix) Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal 10-K for the fiscal year ended December 31, 1996, (xii) Exhibit 10.2 to the Registrant’s Annual quarter ended March 31, 1995, (x) Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for Report on Form 10-K for the fiscal year ended December 31, 1997, (xiii) Exhibit 10.2 to the the fiscal year ended December 31, 1995, (xi) Exhibit 10.2 to the Registrant’s Annual Report on Form Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, (xiv) Exhibit 10-K for the fiscal year ended December 31, 1996, (xii) Exhibit 10.2 to the Registrant’s Annual 10.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, Report on Form 10-K for the fiscal year ended December 31, 1997, (xiii) Exhibit 10.2 to the (xv) Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, (xiv) Exhibit March 31, 2004, (xvi) Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal 10.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, quarter ended June 30, 2008, (xvii) Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for (xv) Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended the fiscal year ended December 31, 2010, and (xviii) Exhibit 10.1 to the Registrant's Current Report March 31, 2004, (xvi) Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal on Form 8-K dated November 7, 2019. quarter ended June 30, 2008, (xvii) Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and (xviii) Exhibit 10.1 to the Registrant's Current Report Amended and Restated Deferred Compensation Plan, incorporated by reference to Exhibit 10.4 to the on Form 8-K dated November 7, 2019. Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008. Amended and Restated Deferred Compensation Plan, incorporated by reference to Exhibit 10.4 to the Amended and Restated Severance Agreement dated as of February 9, 2011, between Registrant and Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2008. Paul F. Gentzkow, incorporated by reference to Exhibit 10.8 to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. Amended and Restated Severance Agreement dated as of February 9, 2011, between Registrant and Paul F. Gentzkow, incorporated by reference to Exhibit 10.8 to Registrant’s Annual Report on Form Agreement dated as of July 31, 1995, between Registrant and Paul F. Gentzkow, incorporated by 10-K for the fiscal year ended December 31, 2010. reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000. Agreement dated as of July 31, 1995, between Registrant and Paul F. Gentzkow, incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended Form of Amended and Restated Severance Agreement, incorporated by reference to Exhibit 10.10 to September 30, 2000. Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. Form of Amended and Restated Severance Agreement, incorporated by reference to Exhibit 10.10 to Form of Indemnification Agreement for Directors of the Registrant, incorporated by reference to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010. Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1989(P). Form of Indemnification Agreement for Directors of the Registrant, incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, Form of Indemnification Agreement for Executive Officers of Registrant, incorporated by reference 1989(P). to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2000. Form of Indemnification Agreement for Executive Officers of Registrant, incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended Senior Executive Retirement Plan, as amended and restated December 15, 2019. September 30, 2000. Senior Executive Retirement Plan, as amended and restated December 15, 2019. Form of Part-Time Employment Agreement, as amended and restated, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014. Form of Part-Time Employment Agreement, as amended and restated, incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014. 50 50 2019 ANNUAL REPORT | ROBERT HALF Exhibit No. *10.11 Exhibit No. *10.11 *10.12 *10.12 *10.13 *10.13 *10.14 *10.14 *10.15 *10.15 *10.16 *10.16 *10.17 *10.17 *10.18 *10.18 21.1 23.1 21.1 31.1 23.1 31.2 31.1 32.1 31.2 32.2 32.1 101.INS 32.2 101.SCH 101.INS 101.CAL 101.SCH 101.DEF 101.CAL 101.LAB 101.DEF 101.PRE 101.LAB 104 101.PRE Exhibit Exhibit Annual Performance Bonus Plan, as amended and restated, incorporated by reference to Exhibit 99.1 to Registrant’s Current Report on Form 8-K dated May 23, 2013. Annual Performance Bonus Plan, as amended and restated, incorporated by reference to Exhibit 99.1 Summary of Outside Director Cash Remuneration, incorporated by reference to Exhibit 10.2 to the to Registrant’s Current Report on Form 8-K dated May 23, 2013. Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010. Summary of Outside Director Cash Remuneration, incorporated by reference to Exhibit 10.2 to the Stock Incentive Plan, as amended and restated, incorporated by reference to Exhibit 99.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010. Registrant’s Current RepStock Incentive Plan, as amended and restated, incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated May 22, 2019rt on Form 8-K Stock Incentive Plan, as amended and restated, incorporated by reference to Exhibit 99.1 to the dated May 22, 2019. Registrant’s Current RepStock Incentive Plan, as amended and restated, incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated May 22, 2019rt on Form 8-K Stock Incentive Plan—Form of Restricted Share Agreement for Executive Officers effective through dated May 22, 2019. February 11, 2020, incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2013. Stock Incentive Plan—Form of Restricted Share Agreement for Executive Officers effective through February 11, 2020, incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Stock Incentive Plan—Form of Stock Option Agreement for Executive Officers, incorporated by Form 10-Q for the fiscal quarter ended March 31, 2013. reference to Exhibit 99.4 to Registrant’s Current Report on Form 8-K dated May 3, 2005. Stock Incentive Plan—Form of Stock Option Agreement for Executive Officers, incorporated by Stock Incentive Plan—Form of Restricted Share Agreement for Outside Directors, incorporated by reference to Exhibit 99.4 to Registrant’s Current Report on Form 8-K dated May 3, 2005. reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2006. Stock Incentive Plan—Form of Restricted Share Agreement for Outside Directors, incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended Stock Incentive Plan—Form of Stock Option Agreement for Outside Directors, incorporated by March 31, 2006. reference to Exhibit 99.6 to Registrant’s Current Report on Form 8-K dated May 3, 2005. Stock Incentive Plan—Form of Stock Option Agreement for Outside Directors, incorporated by Stock Incentive Plan—Form of Restricted Share Agreement for Executive Officers effective February reference to Exhibit 99.6 to Registrant’s Current Report on Form 8-K dated May 3, 2005. 12, 2020. Stock Incentive Plan—Form of Restricted Share Agreement for Executive Officers effective February Subsidiaries of the Registrant 12, 2020. Independent Registered Public Accounting Firm’s Consent. Subsidiaries of the Registrant Rule 13a-14(a) Certification of Chief Rule 13a-14(a) Certification of Chief Executive Officer. Independent Registered Public Accounting Firm’s Consent. Rule 13a-14(a) Certification of Chief Financial Officer. Rule 13a-14(a) Certification of Chief Rule 13a-14(a) Certification of Chief Executive Officer. Rule 1350 Certification of Chief Executive Officer. Rule 13a-14(a) Certification of Chief Financial Officer. Rule 1350 Certification of Chief Rule 1350 Certification of Chief Financial Officer. Rule 1350 Certification of Chief Executive Officer. Inline XBRL Instance Document Rule 1350 Certification of Chief Rule 1350 Certification of Chief Financial Officer. Inline XBRL Taxonomy Extension Schema Document Inline XBRL Instance Document Inline XBRL Taxonomy Extension Calculation Linkbase Document Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Extension Definition Linkbase Document Inline XBRL Taxonomy Extension Calculation Linkbase Document Inline XBRL Taxonomy Extension Label Linkbase Document Inline XBRL Taxonomy Extension Definition Linkbase Document Inline XBRL Taxonomy Extension Presentation Linkbase Document Inline XBRL Taxonomy Extension Label Linkbase Document Cover Page Interactive Data File (embedded within the Inline XBRL document) Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Management contract or compensatory plan. (P) This Exhibit was originally filed in paper format. Accordingly, a hyperlink has not been provided. * Management contract or compensatory plan. (P) This Exhibit was originally filed in paper format. Accordingly, a hyperlink has not been provided. 51 51 2019 ANNUAL REPORT | ROBERT HALF Item 16. Form 10-K Summary None. Item 16. Form 10-K Summary None. 52 52 2019 ANNUAL REPORT | ROBERT HALF SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused SIGNATURES this report to be signed on its behalf by the undersigned, thereunto duly authorized. Pursuant to the requirements of Section 13 or 15(d) 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) Date: February 14, 2020 Date: February 14, 2020 ROBERT HALF INTERNATIONAL INC. By: By: /s/ MICHAEL C. BUCKLEY (Registrant) Michael C. Buckley /s/ MICHAEL C. BUCKLEY Executive Vice President, Chief Financial Officer Michael C. Buckley (Principal Financial Officer) Executive Vice President, Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 14, 2020 By: /s/ HAROLD M. MESSMER, JR. Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 Date: February 14, 2020 /s/ HAROLD M. MESSMER, JR. Harold M. Messmer, Jr. Executive Chairman of the Board, and a Director Harold M. Messmer, Jr. Executive Chairman of the Board, and a Director /s/ M. KEITH WADDELL M. Keith Waddell /s/ M. KEITH WADDELL President M. Keith Waddell Chief Executive Officer and a Director President (Principal Executive Officer) Chief Executive Officer and a Director (Principal Executive Officer) /s/ JULIA L. CORONADO Julia L. Coronado, Director /s/ JULIA L. CORONADO Julia L. Coronado, Director /s/ DIRK A. KEMPTHORNE Dirk A. Kempthorne, Director /s/ DIRK A. KEMPTHORNE /s/ MARC H. MORIAL Dirk A. Kempthorne, Director Marc H. Morial, Director /s/ MARC H. MORIAL /s/ BARBARA J. NOVOGRADAC Marc H. Morial, Director Barbara J. Novogradac, Director /s/ BARBARA J. NOVOGRADAC /s/ ROBERT J. PACE Barbara J. Novogradac, Director Robert J. Pace, Director /s/ ROBERT J. PACE /s/ FREDERICK A. RICHMAN Robert J. Pace, Director Frederick A. Richman, Director /s/ FREDERICK A. RICHMAN /s/ MICHAEL C. BUCKLEY Frederick A. Richman, Director Michael C. Buckley /s/ MICHAEL C. BUCKLEY Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Michael C. Buckley Officer) Executive Vice President, Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) By: By: By: By: By: By: By: By: By: By: By: By: By: By: By: By: By: 53 53 2019 ANNUAL REPORT | ROBERT HALF Schedule II—Valuation and Qualifying Accounts (in thousands) Schedule II—Valuation and Qualifying Accounts (in thousands) Balance at Beginning of Period Balance at Beginning of Period Charged to Expenses Deductions Translation Adjustments Balance at End of Period Charged to Expenses Deductions Translation Adjustments Balance at End of Period $ $ $ $ $ $ $ $ $ 33,133 18,907 33,133 18,907 23,682 (a) 20,178 23,682 (a) 20,178 27,678 8,022 1,411 8,022 1,411 11,914 5,683 11,914 5,683 9,868 (8,751) (1,275) (8,751) (1,275) (8,690) (2,599) (8,690) (2,599) (8,687) 777 1,135 777 1,135 772 $ $ $ $ $ (190) $ 772 $ (190) $ (103) $ 33,181 20,178 33,181 20,178 27,678 23,072 27,678 23,072 28,756 Year Ended December 31, 2017 Year Ended December 31, 2018 Year Ended December 31, 2018 Year Ended December 31, 2017 Allowance for doubtful accounts receivable Allowance for doubtful accounts Deferred tax valuation allowance receivable Deferred tax valuation allowance Allowance for doubtful accounts receivable Allowance for doubtful accounts Deferred tax valuation allowance receivable Deferred tax valuation allowance Allowance for doubtful accounts receivable Allowance for doubtful accounts Deferred tax valuation allowance receivable Year Ended December 31, 2019 Year Ended December 31, 2019 Deferred tax valuation allowance 21,618 28,756 21,618 In accordance with its adoption of ASC 606 Revenue from Contracts with Customers, on January 1, 2018, the Company reclassified certain allowances that are now reflected as liabilities in the amount of $9.5 million. In accordance with its adoption of ASC 606 Revenue from Contracts with Customers, on January 1, 2018, the Company reclassified certain allowances that are now reflected as liabilities in the amount of $9.5 million. (19) $ (103) $ (19) $ (2,154) (8,687) (2,154) 23,072 27,678 23,072 719 9,868 719 $ $ $ (a) (a) 54 54 2019 ANNUAL REPORT | ROBERT HALF EXHIBIT 4.1 Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 Description of Capital Stock As of December 31, 2019, Robert Half International Inc., a Delaware corporation (the “Company”), had one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: Common Stock, par value $.001 per share (the “Common Stock”). The following summary includes a brief description of the Common Stock, as well as certain related additional information. The summary is not complete and is qualified in its entirety by reference to the Company’s Restated Certificate of Incorporation (the “Certificate of Incorporation”) and By-Laws, as amended and restated (the “By-Laws”), which are filed as exhibits to this Annual Report on Form 10- K. Authorized Shares Pursuant to the Certificate of Incorporation, the total number of shares of stock that the Company has authority to issue is 265,000,000 shares, consisting of 260,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, par value $.001 per share (the “Preferred Stock”). The Company’s Board of Directors is authorized to issue Preferred Stock in one or more series, with such voting powers, or without voting powers, and with such designations, preferences, rights, and qualifications, limitations or restrictions thereon as the Board of Directors may determine, and as are not stated and expressed in the Certificate of Incorporation, or any amendment thereto, which could affect the relative voting power or other rights of the holders of Common Stock. Voting Rights Each share of Common Stock entitles the holder to one vote on each matter voted on by stockholders. Under Section 5 of Article II of the Company’s By-Laws, except where other provision is made by law, by the Certificate of Incorporation or by the By-Laws, all matters shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote on that matter. Except as provided in Section 5 of Article III of the Company’s By-Laws or as otherwise required by law or by the Certificate of Incorporation, each director shall be elected by the vote of the majority of the votes cast with respect to the director at any meeting for the election of directors at which a quorum is present, provided that if on the record date for such meeting or the advance notice date for nominations at such meeting, the number of nominees exceeds the number of directors to be elected, the directors shall be elected by the vote of a plurality of the shares represented in person or by proxy at any such meeting and entitled to vote on the election of directors. There is no cumulative voting. Dividend Rights The holders of shares of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors. Liquidation Rights In the event of voluntary or involuntary liquidation of the Company, the holders of shares of Common Stock shall be entitled to receive pro rata all of the remaining assets of the Company available for distribution to its stockholders after all amounts to which the holders of shares of Preferred Stock are entitled have been paid or set aside in cash for payment. Other Rights 2019 ANNUAL REPORT | ROBERT HALF The Company’s Common Stock has no conversion rights, sinking fund provisions, redemption provisions or preemptive rights. Stock Exchange Listing The Company’s Common Stock is listed on the New York Stock Exchange under the ticker symbol “RHI.” Transfer Agent and Registrar The transfer agent and registrar for the Company’s Common Stock is Computershare Investor Services. Potential Anti-Takeover Effects of the Preferred Stock Certain provisions of the Delaware General Corporation Law (“DGCL”), the Certificate of Incorporation and the By-Laws summarized in the paragraphs above and in the following paragraphs may have an anti-takeover effect. In other words, they could delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interests, including those attempts that might result in a premium over the market price for the shares held by such stockholder. Certain Provisions of the Certificate of Incorporation and the By-Laws Under the By-Laws, a special meeting of the stockholders for any purpose or purposes, unless otherwise prescribed by statute, may only be called by the Chairman of the Board, the Vice Chairman of the Board or the Chief Executive Officer or by order of the Board of Directors. The By-Laws sets forth advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the Board of Directors or a committee of the Board of Directors. Under the Certificate of Incorporation, the Board of Directors has the ability to authorize undesignated preferred stock which make it possible for the Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of the Company. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of the Company. Certain Provisions of Delaware Law The Company is subject to Section 203 of the DGCL. Section 203 of the DGCL prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly-held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock and a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the Company’s Board of Directors, such as discouraging takeover attempts that might result in a premium over the market price of the Company’s Common Stock. 2019 ANNUAL REPORT | ROBERT HALF EXHIBIT 10.9 EXHIBIT 10.9 ROBERT HALF INTERNATIONAL INC. SENIOR EXECUTIVE RETIREMENT PLAN ROBERT HALF INTERNATIONAL INC. (As Amended and Restated Effective December 15, 2019) SENIOR EXECUTIVE RETIREMENT PLAN (As Amended and Restated Effective December 15, 2019) 1. INTRODUCTION. This Plan was adopted by the Company to provide retirement benefits to those individuals, other than any individual holding the office of Chief Executive 1. INTRODUCTION. This Plan was adopted by the Company to provide retirement Officer prior to December 15, 2019, who participated in the Company’s Deferred Compensation benefits to those individuals, other than any individual holding the office of Chief Executive Plan and, with respect to those individuals, this Plan shall supersede the Deferred Compensation Officer prior to December 15, 2019, who participated in the Company’s Deferred Compensation Plan. The Administrator or the Chief Executive Officer may also select other Participants to be Plan and, with respect to those individuals, this Plan shall supersede the Deferred Compensation eligible for benefits hereunder in accordance with the other provisions of the Plan. It is amended Plan. The Administrator or the Chief Executive Officer may also select other Participants to be and restated effective December 15, 2019. eligible for benefits hereunder in accordance with the other provisions of the Plan. It is amended and restated effective December 15, 2019. 2. DEFINITIONS. As used in this Plan, the following terms have the meanings set forth 2. DEFINITIONS. As used in this Plan, the following terms have the meanings set forth below: below: ADMINISTRATOR means the Compensation Committee of the Board. ADMINISTRATOR means the Compensation Committee of the Board. BOARD means the Board of Directors of the Company. BOARD means the Board of Directors of the Company. CHANGE IN CONTROL shall have the meaning specified in the Company’s Stock CHANGE IN CONTROL shall have the meaning specified in the Company’s Stock Incentive Plan as in effect on the date hereof and as such plan may be subsequently amended. Incentive Plan as in effect on the date hereof and as such plan may be subsequently amended. COMPANY means Robert Half International Inc., a Delaware corporation. COMPANY means Robert Half International Inc., a Delaware corporation. EARLIEST PAYMENT DATE shall mean six months following Separation from Service or such alternate date as future modifications or amendments to Section 409A and the rules and EARLIEST PAYMENT DATE shall mean six months following Separation from Service regulations thereunder may specify as the earliest permitted date for a payment to be made, or, if or such alternate date as future modifications or amendments to Section 409A and the rules and earlier the date of Employee’s death. regulations thereunder may specify as the earliest permitted date for a payment to be made, or, if earlier the date of Employee’s death. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. EXCHANGE ACT means the Securities Exchange Act of 1934, as amended. OFFER means a tender offer or an exchange offer for shares of the Company’s Stock. OFFER means a tender offer or an exchange offer for shares of the Company’s Stock. PARTICIPANT means any elected executive officer or any key executive, other than any individual who held the office of Chief Executive Officer prior to December 15, 2019 (hereafter PARTICIPANT means any elected executive officer or any key executive, other than any “Predecessor CEO”), approved by the Administrator or the Chief Executive Officer for individual who held the office of Chief Executive Officer prior to December 15, 2019 (hereafter participation in the Plan. Notwithstanding for foregoing, the participation by any individual who “Predecessor CEO”), approved by the Administrator or the Chief Executive Officer for holds the office of Chief Executive Officer on or after December 15, 2019 must be approved participation in the Plan. Notwithstanding for foregoing, the participation by any individual who solely by the Administrator. The benefits of individuals (other than any Predecessor CEO ) who holds the office of Chief Executive Officer on or after December 15, 2019 must be approved had accounts (whether or not vested) under the Deferred Compensation Plan shall be transferred solely by the Administrator. The benefits of individuals (other than any Predecessor CEO ) who to this Plan, effective December 31, 1995, with interest for 1995 credited at the rate and as had accounts (whether or not vested) under the Deferred Compensation Plan shall be transferred provided in Section 7 hereof instead of at the rate and as provided in the Deferred Compensation to this Plan, effective December 31, 1995, with interest for 1995 credited at the rate and as Plan. With respect to the year ended December 31, 1995 those individuals will thereafter be provided in Section 7 hereof instead of at the rate and as provided in the Deferred Compensation Participants hereunder and will no longer participate in the Deferred Compensation Plan. Plan. With respect to the year ended December 31, 1995 those individuals will thereafter be Participants hereunder and will no longer participate in the Deferred Compensation Plan. 1 1 2019 ANNUAL REPORT | ROBERT HALF PLAN means the Senior Executive Retirement Plan. PLAN means the Senior Executive Retirement Plan. SECTION 409A means Section 409A of the Internal Revenue Code. SECTION 409A means Section 409A of the Internal Revenue Code. SEPARATION FROM SERVICE shall have the meaning specified by Section 409A and the rules and regulations thereunder, as such meaning may be modified or amended from time to SEPARATION FROM SERVICE shall have the meaning specified by Section 409A and time. the rules and regulations thereunder, as such meaning may be modified or amended from time to time. SPECIFIED EMPLOYEE shall have the meaning specified by Section 409A and the rules and regulations thereunder, as such meaning may be modified or amended from time to SPECIFIED EMPLOYEE shall have the meaning specified by Section 409A and the time. rules and regulations thereunder, as such meaning may be modified or amended from time to time. VOTING SHARES means the outstanding shares of the Company entitled to vote for the VOTING SHARES means the outstanding shares of the Company entitled to vote for the election of directors. election of directors. 3. PURPOSE OF THE PLAN. The purpose of the Plan is to attract, retain and reward 3. PURPOSE OF THE PLAN. The purpose of the Plan is to attract, retain and reward Participants by providing them with supplemental income for use after their retirement. The Plan is designed to qualify as an unfunded ERISA “top-hat” plan for a select group of management or Participants by providing them with supplemental income for use after their retirement. The Plan highly compensated employees of the Company and its subsidiaries designated by the is designed to qualify as an unfunded ERISA “top-hat” plan for a select group of management or Administrator. The Plan is intended to satisfy the requirements of, and shall be implemented and highly compensated employees of the Company and its subsidiaries designated by the administered in a manner consistent with, Section 409A of the Internal Revenue Code of 1986, Administrator. The Plan is intended to satisfy the requirements of, and shall be implemented and as amended (the “Section 409A”). administered in a manner consistent with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Section 409A”). 4. ADMINISTRATION. The Administrator shall have full power to interpret, construe and administer the Plan, except as otherwise provided in the Plan. The expense of administering 4. ADMINISTRATION. The Administrator shall have full power to interpret, construe the Plan shall be borne by the Company and shall not be charged against benefits payable and administer the Plan, except as otherwise provided in the Plan. The expense of administering hereunder. the Plan shall be borne by the Company and shall not be charged against benefits payable hereunder. 5. DEFERRED COMPENSATION FORMULA. Each Participant shall receive the base salary and annual cash bonus payable to that Participant for services rendered in his capacity as 5. DEFERRED COMPENSATION FORMULA. Each Participant shall receive the base an employee of the Company or a designated subsidiary during the calendar year of participation, salary and annual cash bonus payable to that Participant for services rendered in his capacity as plus fifteen percent (15%) of such base salary and annual cash bonus as deferred compensation an employee of the Company or a designated subsidiary during the calendar year of participation, pursuant to this Plan, provided he is employed by the Company on the last day of such calendar plus fifteen percent (15%) of such base salary and annual cash bonus as deferred compensation year (December 31, 1995 for the first year). A Participant’s allocation of deferred compensation pursuant to this Plan, provided he is employed by the Company on the last day of such calendar hereunder shall be deemed to have been made, for all purposes relating to this Plan, as of the first year (December 31, 1995 for the first year). A Participant’s allocation of deferred compensation business day of the year following the year with respect to which the deferred compensation has hereunder shall be deemed to have been made, for all purposes relating to this Plan, as of the first been earned. business day of the year following the year with respect to which the deferred compensation has been earned. The Administrator or the Chief Executive Officer may at any time designate any Participant as entitled to receive a Change in Control Allocation. Notwithstanding the foregoing, The Administrator or the Chief Executive Officer may at any time designate any in the event that a Participant who holds the office of Chief Executive Officer on or after Participant as entitled to receive a Change in Control Allocation. Notwithstanding the foregoing, December 15, 2019 has not previously been designated as entitled to receive a Change in Control in the event that a Participant who holds the office of Chief Executive Officer on or after Allocation, such a designation may be made only by the Administrator. Once a Participant is so December 15, 2019 has not previously been designated as entitled to receive a Change in Control designated, such designation may not be rescinded. With respect to any Participant who has been Allocation, such a designation may be made only by the Administrator. Once a Participant is so designated, such designation may not be rescinded. With respect to any Participant who has been 2 2 2019 ANNUAL REPORT | ROBERT HALF designated as entitled to receive a Change in Control Allocation, there shall be allocated to such Participant’s account promptly following a Change in Control (if such Participant is employed by designated as entitled to receive a Change in Control Allocation, there shall be allocated to such the Company on the date of the Change in Control) an amount equal to the product of (a) the Participant’s account promptly following a Change in Control (if such Participant is employed by number of whole years remaining until the Participant attains age 62 and (b) the last annual the Company on the date of the Change in Control) an amount equal to the product of (a) the allocation made under the Plan. After such Change in Control Allocation has been made, each number of whole years remaining until the Participant attains age 62 and (b) the last annual subsequent annual allocation under the Plan for such Participant following the Change in Control allocation made under the Plan. After such Change in Control Allocation has been made, each and prior to such Participant’s 62nd birthday shall be reduced by an amount equal to the last subsequent annual allocation under the Plan for such Participant following the Change in Control annual allocation made to such Participant prior to the Change in Control. and prior to such Participant’s 62nd birthday shall be reduced by an amount equal to the last annual allocation made to such Participant prior to the Change in Control. 6. SEPARATE ACCOUNTS. The Administrator shall maintain two individual accounts under the name of each Participant entitled to allocations pursuant to the Plan. Each such account 6. SEPARATE ACCOUNTS. The Administrator shall maintain two individual accounts shall be adjusted, as described in the next paragraph, to reflect any amounts transferred from the under the name of each Participant entitled to allocations pursuant to the Plan. Each such account Deferred Compensation Plan, deferred compensation credited hereunder, interest credited on shall be adjusted, as described in the next paragraph, to reflect any amounts transferred from the such amounts and any distribution of such amounts hereunder. The establishment and Deferred Compensation Plan, deferred compensation credited hereunder, interest credited on maintenance of separate accounts for each Participant shall not be construed as giving any person such amounts and any distribution of such amounts hereunder. The establishment and any interest in any assets of the Company or any right to payment other than as provided maintenance of separate accounts for each Participant shall not be construed as giving any person hereunder or any right to participate hereunder or in future years of employment. Such accounts any interest in any assets of the Company or any right to payment other than as provided shall be unfunded and maintained only for bookkeeping convenience; provided, however, the hereunder or any right to participate hereunder or in future years of employment. Such accounts Company may establish an irrevocable grantor trust and contribute amounts to such trust to shall be unfunded and maintained only for bookkeeping convenience; provided, however, the support its obligations hereunder. Company may establish an irrevocable grantor trust and contribute amounts to such trust to support its obligations hereunder. One account for each individual (the “First Account”) shall consist of (a) all vested allocations for the individual as of December 31, 2004, and (b) all interest on such allocations, One account for each individual (the “First Account”) shall consist of (a) all vested regardless of when credited. The other account for each individual (the “Second Account”) shall allocations for the individual as of December 31, 2004, and (b) all interest on such allocations, consist of (a) all allocations earned after December 31, 2004, (b) all allocations that become regardless of when credited. The other account for each individual (the “Second Account”) shall vested after December 31, 2004, (c) all interest on such amounts and (d) any other amounts that consist of (a) all allocations earned after December 31, 2004, (b) all allocations that become may be credited to the individual hereunder from time to time. vested after December 31, 2004, (c) all interest on such amounts and (d) any other amounts that may be credited to the individual hereunder from timet ot i me. 7. INVESTMENT PERFORMANCE. Each account shall be credited on the last day of each calendar year with interest on the balance of such account as of the first day of the calendar 7. INVESTMENT PERFORMANCE. Each account shall be credited on the last day of year. Interest credited for a calendar year shall be at a rate equal to one hundred (100%) of the each calendar year with interest on the balance of such account as of the first day of the calendar Moody’s Corporate bond Yield Average reported in THE WALL STREET JOURNAL on the year. Interest credited for a calendar year shall be at a rate equal to one hundred (100%) of the last business day of the calendar year (or the valuation date selected by the Administrator Moody’s Corporate bond Yield Average reported in THE WALL STREET JOURNAL on the preceding a distribution). last business day of the calendar year (or the valuation date selected by the Administrator preceding a distribution). 8. VESTING. Each Participant’s interest under the Plan shall be forfeitable upon such Participant’s termination of employment for any reason, except to the extent it becomes vested 8. VESTING. Each Participant’s interest under the Plan shall be forfeitable upon such hereunder. Each Participant’s interest, regardless of when allocated, will be deemed unvested Participant’s termination of employment for any reason, except to the extent it becomes vested unless and until such Participant has completed ten years of service with the Company. “Years of hereunder. Each Participant’s interest, regardless of when allocated, will be deemed unvested Service” shall be based on the anniversary of the later of the Participant’s date of hire or his or unless and until such Participant has completed ten years of service with the Company. “Years of her transfer to Company headquarters. At such time as the Participant has completed ten years Service” shall be based on the anniversary of the later of the Participant’s date of hire or his or service with the Company, the amount vested at any given time shall be (a) 50%, if Participant is her transfer to Company headquarters. At such time as the Participant has completed ten years age 50 or younger, (b) the sum of (i) 50% and (ii) 4 1/6% times the difference between service with the Company, the amount vested at any given time shall be (a) 50%, if Participant is Participant’s age and 50, if Participant is between age 51 and age 62, or (c) 100%, if Participant age 50 or younger, (b) the sum of (i) 50% and (ii) 4 1/6% times the difference between is age 62 or older. In the event of a Change in Control, all amounts credited under the Plan to Participant’s age and 50, if Participant is between age 51 and age 62, or (c) 100%, if Participant is age 62 or older. In the event of a Change in Control, all amounts credited under the Plan to 3 3 2019 ANNUAL REPORT | ROBERT HALF each affected Participant shall become fully vested and nonforfeitable as a result of such event. Notwithstanding the foregoing, amounts shall vest hereunder in accordance with the terms of any each affected Participant shall become fully vested and nonforfeitable as a result of such event. severance agreement or other written arrangement between the Participant and the Company. In Notwithstanding the foregoing, amounts shall vest hereunder in accordance with the terms of any addition, and notwithstanding the foregoing, the accounts transferred to this Plan from the severance agreement or other written arrangement between the Participant and the Company. In Company’s Deferred Compensation Plan, including any and all investment performance addition, and notwithstanding the foregoing, the accounts transferred to this Plan from the hereunder, shall continue to vest under the terms of the Deferred Compensation Plan. Company’s Deferred Compensation Plan, including any and all investment performance hereunder, shall continue to vest under the terms of the Deferred Compensation Plan. 9. TIME OF DISTRIBUTION. No vested amounts shall be payable hereunder until the 9. TIME OF DISTRIBUTION. No vested amounts shall be payable hereunder until the first to occur of the following events, the first date on which any such event occurs being hereinafter referred to as the “Termination Date”: first to occur of the following events, the first date on which any such event occurs being hereinafter referred to as the “Termination Date”: (a) The date of the Participant’s complete and total disability, as determined by (a) The date of the Participant’s complete and total disability, as determined by the Administrator in its sole discretion (without regard to eligibility for benefits under any disability plan or program of the Company and/or its subsidiaries); the Administrator in its sole discretion (without regard to eligibility for benefits under any disability plan or program of the Company and/or its subsidiaries); (b) The Participant’s death; or (b) The Participant’s death; or (c) The date of the Participant’s Separation from Service with the Company and/ (c) The date of the Participant’s Separation from Service with the Company and/ or its subsidiaries for any reason. or its subsidiaries for any reason. Notwithstanding anything to the contrary, the date of a Participant’s “complete and total disability” shall be determined by the Administrator in a manner consistent with any applicable Notwithstanding anything to the contrary, the date of a Participant’s “complete and total provisions of Section 409A and the rules and regulations promulgated thereunder. disability” shall be determined by the Administrator in a manner consistent with any applicable provisions of Section 409A and the rules and regulations promulgated thereunder. Notwithstanding the foregoing, distribution may occur at an earlier date as provided in Notwithstanding the foregoing, distribution may occur at an earlier date as provided in Section 10 hereunder. Section 10 hereunder. If distribution occurs before the end of a year a Participant shall receive a pro rata amount If distribution occurs before the end of a year a Participant shall receive a pro rata amount of deferred compensation under Section 5 hereof. of deferred compensation under Section 5 hereof. All vested amounts in a Participant’s First Account shall be valued and paid within 90 All vested amounts in a Participant’s First Account shall be valued and paid within 90 days following the occurrence of any of the events referred to above in clauses (a) through (c) of this Section 9. days following the occurrence of any of the events referred to above in clauses (a) through (c) of this Section 9. In the event of a Participant’s death, all vested amounts in the Participant’s Second Account shall be valued and paid within 90 days thereafter. In the event of a Participant’s In the event of a Participant’s death, all vested amounts in the Participant’s Second Separation from Service pursuant to clauses (a) or (c) above, all vested amounts in the Account shall be valued and paid within 90 days thereafter. In the event of a Participant’s Participant’s Second Account shall be valued and paid within 90 days thereafter, provided, Separation from Service pursuant to clauses (a) or (c) above, all vested amounts in the however, that if Participant is a Specified Employee, vested amounts in the Second Account shall Participant’s Second Account shall be valued and paid within 90 days thereafter, provided, be paid no earlier than the Earliest Payment Date and no later than ten business days thereafter. however, that if Participant is a Specified Employee, vested amounts in the Second Account shall be paid no earlier than the Earliest Payment Date and no later than ten business days thereafter. 10. WITHDRAWALS. Notwithstanding Section 9, the Administrator may direct 10. WITHDRAWALS. Notwithstanding Section 9, the Administrator may direct payment of all or any portion of a Participant’s First Account, after application by the Participant. Any such application must show demonstrable financial need for distribution in payment of all or any portion of a Participant’s First Account, after application by the order to meet extraordinary medical or medically related expenses, substantial costs related to Participant. Any such application must show demonstrable financial need for distribution in order to meet extraordinary medical or medically related expenses, substantial costs related to 4 4 2019 ANNUAL REPORT | ROBERT HALF residential requirements of the Participant, family educational expenses in an amount considered by the Administrator burdensome in relation to the Participant’s other available financial residential requirements of the Participant, family educational expenses in an amount considered resources for meeting such expenses, extraordinary expenses related to an unanticipated casualty, by the Administrator burdensome in relation to the Participant’s other available financial accident or other misfortune or any other similar need approved by the Administrator. resources for meeting such expenses, extraordinary expenses related to an unanticipated casualty, accident or other misfortune or any other similar need approved by the Administrator. Any such distribution shall be made in the sole discretion of the Administrator. Any such distribution shall be made in the sole discretion of the Administrator. 11. METHOD OF DISTRIBUTION. Upon a Separation from Service, the Participant 11. METHOD OF DISTRIBUTION. Upon a Separation from Service, the Participant shall receive a lump-sum distribution of all amounts payable hereunder. shall receive a lump-sum distribution of all amounts payable hereunder. 12. DEATH OF PLAN PARTICIPANT. In the event that a Participant shall die at any 12. DEATH OF PLAN PARTICIPANT. In the event that a Participant shall die at any time prior to complete distribution of all amounts payable to him hereunder, the remaining unpaid amounts shall be paid in a lump-sum to the beneficiary or beneficiaries designated by the time prior to complete distribution of all amounts payable to him hereunder, the remaining Participant, or in the absence of any such designation, to his estate. Each Participant shall have unpaid amounts shall be paid in a lump-sum to the beneficiary or beneficiaries designated by the the right to designate a beneficiary (or beneficiaries) in the event of his death; provided that in Participant, or in the absence of any such designation, to his estate. Each Participant shall have the event that the Participant is married and designates a beneficiary other than his spouse, his the right to designate a beneficiary (or beneficiaries) in the event of his death; provided that in spouse must consent to such designation. the event that the Participant is married and designates a beneficiary other than his spouse, his spouse must consent to such designation. 13. PAYMENT IN THE EVENT OF DISABILITY. If a person entitled to any payment hereunder shall be under a legal disability, or in the sole judgment of the Administrator shall 13. PAYMENT IN THE EVENT OF DISABILITY. If a person entitled to any payment otherwise be unable to apply such payment to his own interest and advantage, the Administrator hereunder shall be under a legal disability, or in the sole judgment of the Administrator shall in the exercise of its discretion may direct the Company to make any such payment in any one otherwise be unable to apply such payment to his own interest and advantage, the Administrator (1) or more of the following ways: in the exercise of its discretion may direct the Company to make any such payment in any one (1) or more of the following ways: (a) Directly to such person; (a) Directly to such person; (b) To his legal guardian or conservator; or (b) To his legal guardian or conservator; or (c) To his spouse or to any person charged with his support; (c) To his spouse or to any person charged with his support; to be expended for the benefit of Participant. The decision of the Administrator shall in each case be final and binding upon all persons in interest. Any such payment shall completely discharge to be expended for the benefit of Participant. The decision of the Administrator shall in each case the obligations of the Administrator and Company with regard to such payment. be final and binding upon all persons in interest. Any such payment shall completely discharge the obligations of the Administrator and Company with regard to such payment. 14. ASSIGNMENT. No Participant or beneficiary of a Participant shall have any right to assign, pledge, hypothecate, anticipate or in any way create a lien upon any amounts payable 14. ASSIGNMENT. No Participant or beneficiary of a Participant shall have any right hereunder. No amounts payable hereunder shall be subject to assignment or transfer or otherwise to assign, pledge, hypothecate, anticipate or in any way create a lien upon any amounts payable be alienable, either by voluntary or involuntary act or by operation of law, or subject to hereunder. No amounts payable hereunder shall be subject to assignment or transfer or otherwise attachment, execution, garnishment, sequestration or other seizure under any legal, equitable or be alienable, either by voluntary or involuntary act or by operation of law, or subject to other process, or be liable in any way for the debts or defaults of Participants and their attachment, execution, garnishment, sequestration or other seizure under any legal, equitable or beneficiaries, except to the extent permitted by applicable law and pursuant to the other process, or be liable in any way for the debts or defaults of Participants and their Administrator’s receipt and approval of a “qualified domestic relations order.” beneficiaries, except to the extent permitted by applicable law and pursuant to the Administrator’s receipt and approval of a “qualified domestic relations order.” 15. WITHHOLDING. Any taxes required to be withheld from deferrals or payments to 15. WITHHOLDING. Any taxes required to be withheld from deferrals or payments to Participants hereunder shall be deducted and withheld by the Company. Participants hereunder shall be deducted and withheld by the Company. 5 5 2019 ANNUAL REPORT | ROBERT HALF 16. AMENDMENT AND TERMINATION. This Plan may be amended in whole or in 16. AMENDMENT AND TERMINATION. This Plan may be amended in whole or in part by action of the Administrator and may be terminated at any time by action of the Administrator; provided, however, that no such amendment or termination shall reduce any part by action of the Administrator and may be terminated at any time by action of the amount credited hereunder to the extent such amount was credited prior to the date of Administrator; provided, however, that no such amendment or termination shall reduce any amendment or termination; and provided, further, that the duties and liabilities of the members of amount credited hereunder to the extent such amount was credited prior to the date of the Administrator hereunder shall not be increased without their consent. amendment or termination; and provided, further, that the duties and liabilities of the members of the Administrator hereunder shall not be increased without their consent. 17. RIGHTS OF PARTICIPANTS. The Company’s sole obligation to Participants and their beneficiaries shall be to make payment as provided hereunder. All payments shall be made 17. RIGHTS OF PARTICIPANTS. The Company’s sole obligation to Participants and from the general assets of the Company, and no Participant shall have any right hereunder to any their beneficiaries shall be to make payment as provided hereunder. All payments shall be made specific assets of the Company or to be retained in the employment of the Company. All amounts from the general assets of the Company, and no Participant shall have any right hereunder to any of compensation allocated under this Plan, any property purchased therewith and all income specific assets of the Company or to be retained in the employment of the Company. All amounts attributable thereto shall remain the property and rights of the Company subject to the claims of of compensation allocated under this Plan, any property purchased therewith and all income the Company’s general creditors. attributable thereto shall remain the property and rights of the Company subject to the claims of the Company’s general creditors. 18. BINDING PROVISIONS. All of the provisions of this Plan shall be binding upon 18. BINDING PROVISIONS. All of the provisions of this Plan shall be binding upon all persons who shall be entitled to any benefits hereunder, and their heirs, and personal representatives. all persons who shall be entitled to any benefits hereunder, and their heirs, and personal representatives. 19. EFFECTIVE DATE. This Plan shall be effective December 31, 1995, as amended 19. EFFECTIVE DATE. This Plan shall be effective December 31, 1995, as amended and restated effective July 29, 2008. and restated effective July 29, 2008. 20. GOVERNING LAW. This Plan and all determinations made and actions taken pursuant hereto shall, to the extent not preempted by ERISA, be governed by the law of the State 20. GOVERNING LAW. This Plan and all determinations made and actions taken of California and construed accordingly. pursuant hereto shall, to the extent not preempted by ERISA, be governed by the law of the State of California and construed accordingly. 21. SEVERABILITY. If any provision of this Plan is held to be unenforceable for any 21. SEVERABILITY. If any provision of this Plan is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Plan shall be deemed valid reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the and enforceable to the full extent possible. parties to the extent possible. In any event, all other provisions of this Plan shall be deemed valid and enforceable to the full extent possible. END OF DOCUMENT END OF DOCUMENT 6 6 2019 ANNUAL REPORT | ROBERT HALF EXHIBIT 10.18 ROBERT HALF INTERNATIONAL INC. STOCK INCENTIVE PLAN RESTRICTED SHARE AGREEMENT This restricted share agreement (“Agreement”) is made and entered into as of __________, (the “Grant Date”), between Robert Half International Inc., a Delaware corporation (the “Company”), and ________. (“Participant”). Capitalized terms not defined herein shall have the meanings assigned to them in the Company’s Stock Incentive Plan (the “Plan”), a copy of which Participant represents, warrants, and acknowledges having received and reviewed. Participant also represents, warrants, and acknowledges having received and reviewed a copy of the Plan prospectus and the documents incorporated therein by reference. The Plan is incorporated by reference into this Agreement. THE PARTIES AGREE AS FOLLOWS: 1. Shares. Pursuant to the Plan, the Company hereby transfers to Participant, and Participant hereby accepts from the Company, an award initially consisting of _____________ Restricted Shares on the terms and conditions set forth herein and in the Plan (the “Restricted Share Award”). 2. Vesting. The Restricted Share Award shall vest based on the completion of continued Service as follows: _____________________, unless otherwise provided by the Plan or Section 3 hereof. The Restricted Shares are subject to Section 6(e) of the Plan to the extent they have not vested and shall be held in escrow by the Company until they have vested and the Participant has satisfied all applicable tax withholding obligations as provided in Section 6 below. In addition, any dividends paid in Shares with respect to unvested Restricted Shares by reason of Section 6(d) of the Plan or any Shares to which the Participant may be entitled by reason of application of Section 16 of the Plan to the unvested Restricted Shares shall, in each case, be subject to the same terms and conditions as are applicable to the unvested Restricted Shares under this Agreement and the Plan. 3. Accelerated Vesting. Notwithstanding Section 2 hereof, the Restricted Share Award shall vest as provided from time to time by any other agreement between Participant and the Company or as provided by Section 3(b)(xv), Section 14 or Section 15 of the Plan, and in such case, the vesting date for any portion of the Restricted Share Award that vests under such circumstances shall be the date such portion of the award vests. 4. Performance Condition. The Restricted Share Award shall be subject to the Performance Condition(s), including the adjustment provisions thereof, as determined 2019 ANNUAL REPORT | ROBERT HALF by the Compensation Committee (the “Committee”) in accordance with the Plan and by the Compensation Committee (the “Committee”) in accordance with the Plan and pursuant to the resolutions adopted by the Committee at its meetings on________. pursuant to the resolutions adopted by the Committee at its meetings on________. 5. 5. Understanding of Participant Regarding Withholding Taxes. Participant Understanding of Participant Regarding Withholding Taxes. Participant hereby represents and acknowledges that (i) on each date that the Restricted Share Award hereby represents and acknowledges that (i) on each date that the Restricted Share Award vests, minimum withholding taxes become due, (ii) payment of such minimum vests, minimum withholding taxes become due, (ii) payment of such minimum withholding taxes to the Company is the responsibility of Participant and (iii) payment of withholding taxes to the Company is the responsibility of Participant and (iii) payment of such withholding taxes may require a significant cash outlay by Participant. such withholding taxes may require a significant cash outlay by Participant. 6. 6. Payment of Taxes. The Company shall notify the Participant or, if Payment of Taxes. The Company shall notify the Participant or, if applicable, Participant’s estate, as to the amount of minimum withholding taxes required applicable, Participant’s estate, as to the amount of minimum withholding taxes required to be withheld by the Company as a result of the vesting of the Restricted Share Award. to be withheld by the Company as a result of the vesting of the Restricted Share Award. Participant shall make full payment of such minimum withholding taxes to the Company Participant shall make full payment of such minimum withholding taxes to the Company by check or in a manner permitted by Section 19(b) of the Plan. In the event that such by check or in a manner permitted by Section 19(b) of the Plan. In the event that such payment is not made, the Company shall have the right to cause such Participant’s payment is not made, the Company shall have the right to cause such Participant’s minimum withholding taxes obligation to be satisfied as specified in Section 19(a) of the minimum withholding taxes obligation to be satisfied as specified in Section 19(a) of the Plan. Plan. 7. 7. Election to Recognize Gross Income in the Year of Grant. If Election to Recognize Gross Income in the Year of Grant. If Participant properly elects within thirty (30) days of the Grant Date to include in gross Participant properly elects within thirty (30) days of the Grant Date to include in gross income for federal income tax purposes an amount equal to the fair market value income for federal income tax purposes an amount equal to the fair market value of the Restricted Share Award on the Grant Date, such Participant shall pay in cash to the of the Restricted Share Award on the Grant Date, such Participant shall pay in cash to the Company in the calendar month of such Grant Date, or make arrangements Company in the calendar month of such Grant Date, or make arrangements satisfactory to the Committee to pay to the Company, any minimum withholding satisfactory to the Committee to pay to the Company, any minimum withholding taxes required to be withheld with respect to such shares. taxes required to be withheld with respect to such shares. 8. 8. Restriction on Issuance of Shares. Restriction on Issuance of Shares. 8.1 8.1 Legality of Issuance. The Company shall not be obligated to Legality of Issuance. The Company shall not be obligated to transfer or issue any Restricted Shares pursuant to this Agreement if such transfer or transfer or issue any Restricted Shares pursuant to this Agreement if such transfer or issuance, in the opinion of the Company and the Company’s counsel, would constitute a issuance, in the opinion of the Company and the Company’s counsel, would constitute a violation by the Company of any provision of law, including without limitation the violation by the Company of any provision of law, including without limitation the provisions of the Securities Act. provisions of the Securities Act. 8.2 8.2 Registration or Qualification of Securities. The Company may, but Registration or Qualification of Securities. The Company may, but shall not be required to, register or qualify the transfer or issuance of the Restricted shall not be required to, register or qualify the transfer or issuance of the Restricted Shares under the Securities Act or any other applicable law. The Company shall not be Shares under the Securities Act or any other applicable law. The Company shall not be obligated to take any affirmative action in order to cause the transfer or issuance of the obligated to take any affirmative action in order to cause the transfer or issuance of the Restricted Shares pursuant hereto to comply with any law. Restricted Shares pursuant hereto to comply with any law. 9. 9. Restriction on Transfer. Regardless of whether the transfer or issuance of Restriction on Transfer. Regardless of whether the transfer or issuance of the Restricted Shares has been registered under the Securities Act or has been registered the Restricted Shares has been registered under the Securities Act or has been registered or qualified under the securities laws of any state, the Company may impose additional or qualified under the securities laws of any state, the Company may impose additional restrictions upon the sale, pledge, or other transfer of the Restricted Shares (including the restrictions upon the sale, pledge, or other transfer of the Restricted Shares (including the placement of appropriate legends on stock certificates and the issuance of stop-transfer placement of appropriate legends on stock certificates and the issuance of stop-transfer 2 2 2019 ANNUAL REPORT | ROBERT HALF instructions to the Company’s transfer agent) if, in the judgment of the Company and the instructions to the Company’s transfer agent) if, in the judgment of the Company and the Company’s counsel, such restrictions are necessary in order to achieve compliance with Company’s counsel, such restrictions are necessary in order to achieve compliance with the provisions of the Securities Act, the securities laws of any state, or any other law. the provisions of the Securities Act, the securities laws of any state, or any other law. 10. 10. Stock Certificate Restrictive Legends. Stock certificates (which may be in Stock Certificate Restrictive Legends. Stock certificates (which may be in electronic form) evidencing the Restricted Shares may bear such restrictive legends as the electronic form) evidencing the Restricted Shares may bear such restrictive legends as the Company and the Company’s counsel deem necessary under applicable law or pursuant Company and the Company’s counsel deem necessary under applicable law or pursuant to this Agreement. to this Agreement. 11. 11. Representations, Warranties, Covenants, and Acknowledgments of Representations, Warranties, Covenants, and Acknowledgments of Participant. Participant hereby agrees that in the event the Company and the Company’s Participant. Participant hereby agrees that in the event the Company and the Company’s counsel deem it necessary or advisable in the exercise of their discretion, the transfer or counsel deem it necessary or advisable in the exercise of their discretion, the transfer or issuance of the Restricted Shares may be conditioned upon the person receiving issuance of the Restricted Shares may be conditioned upon the person receiving Restricted Shares making certain representations, warranties, and acknowledgments Restricted Shares making certain representations, warranties, and acknowledgments relating to compliance with applicable securities laws. relating to compliance with applicable securities laws. 12. 12. Tax Advice. Participant represents, warrants, and acknowledges that the Tax Advice. Participant represents, warrants, and acknowledges that the Company has made no warranties or representations to Participant with respect to the Company has made no warranties or representations to Participant with respect to the income tax consequences of the transactions contemplated by this Agreement, and income tax consequences of the transactions contemplated by this Agreement, and Participant is in no manner relying on the Company or the Company’s representatives for Participant is in no manner relying on the Company or the Company’s representatives for an assessment of such tax consequences. an assessment of such tax consequences. 13. 13. Governing Law. This Agreement shall be governed by and construed in Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to contracts entered into accordance with the laws of the State of California applicable to contracts entered into and wholly to be performed within the State of California by California residents. The and wholly to be performed within the State of California by California residents. The parties agree that the exclusive jurisdiction and venue of any action with respect to this parties agree that the exclusive jurisdiction and venue of any action with respect to this Agreement shall be in the Superior Court for the county in which the principal executive Agreement shall be in the Superior Court for the county in which the principal executive offices of the Company are located, or the United States District Court for the district in offices of the Company are located, or the United States District Court for the district in which the principal executive offices of the Company are located, and each of the parties which the principal executive offices of the Company are located, and each of the parties hereby submits itself to the exclusive jurisdiction and venue of such courts for the hereby submits itself to the exclusive jurisdiction and venue of such courts for the purpose of such action. The parties agree that service of process in any such action may purpose of such action. The parties agree that service of process in any such action may be effected by delivery of the summons and complaint in a manner provided for delivery be effected by delivery of the summons and complaint in a manner provided for delivery of notices set forth herein. of notices set forth herein. 14. 14. Notices. All notices, communications and documents under this Notices. All notices, communications and documents under this Agreement shall be in writing. All notices, communications, and documents directed to Agreement shall be in writing. All notices, communications, and documents directed to the Company and related to the Agreement, if not delivered by hand, shall be mailed to the Company and related to the Agreement, if not delivered by hand, shall be mailed to the Company’s principal executive office, Attention: Secretary. The current address of the Company’s principal executive office, Attention: Secretary. The current address of the Company’s principal executive office is: the Company’s principal executive office is: Robert Half International Inc. Robert Half International Inc. 2884 Sand Hill Road 2884 Sand Hill Road Menlo Park, CA 94025 Menlo Park, CA 94025 3 3 2019 ANNUAL REPORT | ROBERT HALF Unless and until the Company is notified in writing to the contrary, all notices, Unless and until the Company is notified in writing to the contrary, all notices, communications, and documents intended for Participant and related to this Agreement, if communications, and documents intended for Participant and related to this Agreement, if not delivered by hand, shall be mailed to Participant’s last known address as shown on not delivered by hand, shall be mailed to Participant’s last known address as shown on the Company’s books or such other address as Participant may specify by notice the Company’s books or such other address as Participant may specify by notice complying with this section. Notices, communications, and documents not delivered by complying with this section. Notices, communications, and documents not delivered by hand shall be mailed by registered or certified mail, return receipt requested, postage hand shall be mailed by registered or certified mail, return receipt requested, postage prepaid. All mailings and deliveries related to this Agreement shall be deemed received prepaid. All mailings and deliveries related to this Agreement shall be deemed received only when actually received. only when actually received. 15. 15. Binding Effect. Subject to the limitations set forth in this Agreement, this Binding Effect. Subject to the limitations set forth in this Agreement, this Agreement shall be binding upon, and inure to the benefit of, the executors, Agreement shall be binding upon, and inure to the benefit of, the executors, administrators, heirs, legal representatives, successors, and assigns of the parties hereto. administrators, heirs, legal representatives, successors, and assigns of the parties hereto. 16. 16. Damages. Participant shall be liable to the Company for all costs and Damages. Participant shall be liable to the Company for all costs and damages, including incidental and consequential damages and attorneys’ fees, resulting damages, including incidental and consequential damages and attorneys’ fees, resulting from Participant’s breach of this Agreement. If any party to this Agreement seeks to from Participant’s breach of this Agreement. If any party to this Agreement seeks to enforce its rights under this Agreement by legal proceedings, each party shall pay its own enforce its rights under this Agreement by legal proceedings, each party shall pay its own costs and expenses including, without limitation, all attorneys’ fees. costs and expenses including, without limitation, all attorneys’ fees. 17. 17. Counterparts. This Agreement may be signed in any number of Counterparts. This Agreement may be signed in any number of counterparts with the same effect as if the signatures to each such counterpart were upon counterparts with the same effect as if the signatures to each such counterpart were upon a single instrument, and all counterparts shall be deemed an original of this Agreement. a single instrument, and all counterparts shall be deemed an original of this Agreement. 18. 18. Severability. If any provision of this Agreement is held to be Severability. If any provision of this Agreement is held to be unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order unenforceable for any reason, it shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties to the extent possible. In any event, all other to achieve the intent of the parties to the extent possible. In any event, all other provisions of this Agreement shall be deemed valid and enforceable to the full extent provisions of this Agreement shall be deemed valid and enforceable to the full extent possible. possible. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. the date first written above. ROBERT HALF INTERNATIONAL INC. ROBERT HALF INTERNATIONAL INC. By_________________________________ By_________________________________ Participant hereby accepts and agrees to be bound by all of the terms and Participant hereby accepts and agrees to be bound by all of the terms and conditions of this Agreement and the Plan. conditions of this Agreement and the Plan. _________________________________ _________________________________ 4 4 2019 ANNUAL REPORT | ROBERT HALF SUBSIDIARIES OF ROBERT HALF INTERNATIONAL INC. Name of Subsidiary Protiviti Inc. Protiviti Holdings Inc. RHHC LLC RH-TM Resources, Inc. Protiviti Government Services, Inc. Robert Half Nevada Staff, Inc. Robert Half of Pennsylvania, Inc. Protiviti Pty. Limited Robert Half Australia Pty. Limited Robert Half Austria GmbH Robert Half BVBA Robert Half Trabalho Temporário Ltda. Protiviti EOOD Robert Half Canada Inc. Robert Half Chile Sociedad por Acciones Robert Half Internacional Empresa De Servicios Transitorios Limitada Protiviti Shanghai Co. Ltd. Robert Half Human Resources Shanghai Company Limited Robert Half Hong Kong Limited Protiviti Hong Kong Co. Limited Protiviti SAS Robert Half International France SAS Robert Half SAS Protiviti GmbH Robert Half Deutschland Beteiligungsgesellschaft mbH EXHIBIT 21.1 Jurisdiction of Incorporation Delaware Delaware Delaware Delaware Maryland Nevada Pennsylvania Australia Australia Austria Belgium Brazil Bulgaria Canada Chile Chile China China China, Hong Kong SAR China, Hong Kong SAR France France France Germany Germany 2019 ANNUAL REPORT | ROBERT HALF Name of Subsidiary Robert Half Deutschland GmbH & Co. KG Protiviti Consulting Private Limited Protiviti Government Services S.r.l. Protiviti S.r.l. Robert Half S.r.l. Protiviti LLC Robert Half Japan Ltd. Robert Half Sarl Robert Half Holding Sarl Protiviti B.V. Robert Half International B.V. Robert Half Nederland B.V. Robert Half New Zealand Limited Protiviti Pte. Ltd. Robert Half International Pte. Ltd. Protiviti Switzerland GmbH Robert Half GmbH Robert Half International (Dubai) Ltd. Protiviti Limited Robert Half Holdings Limited Robert Half Limited Jurisdiction of Incorporation Germany India Italy Italy Italy Japan Japan Luxembourg Luxembourg Netherlands Netherlands Netherlands New Zealand Singapore Singapore Switzerland Switzerland United Arab Emirates United Kingdom United Kingdom United Kingdom 2019 ANNUAL REPORT | ROBERT HALF CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM EXHIBIT 23.1 We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 33-14706, 33-32622, 33-32623, 33-39187, 33-39204, 33-40795, 33-52617, 33-56639, 33-56641, 33-57763, 33-62138, 33-62140, 33-65401, 33-65403, 333-05743, 333-05745, 333-18283, 333-18339, 333-38786, 333-38820, 333-42471, 333-42573, 333-42343, 333-42269, 333-50068, 333-50094, 333-66038, 333-66042, 333-68193, 333-68135, 333-68273, 333-75694, 333-79793, 333-79829, 333-88001, 333-91173, 333-91151, 333-91167, 333-98737, 333-125044, 333-151015, 333-196291, and 333-231788) of Robert Half International Inc., of our report dated February 14, 2020, relating to the consolidated financial statements and financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PricewaterhouseCoopers LLP San Francisco, California February 14, 2020 2019 ANNUAL REPORT | ROBERT HALF EXHIBIT 31.1 Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 I, M. Keith Waddell certify that: 1. 2. 3. 4. I have reviewed this report on Form 10-K of Robert Half International Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) (b) (c) (d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) (b) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 14, 2020 /s/ M. KEITH WADDELL M. Keith Waddell President and Chief Executive Officer 2019 ANNUAL REPORT | ROBERT HALF EXHIBIT 31.2 Certification Pursuant to Rule 13a-14 under the Securities Exchange Act of 1934 I, Michael C. Buckley, certify that: 1. 2. 3. 4. I have reviewed this report on Form 10-K of Robert Half International Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) (b) (c) (d) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) (b) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: February 14, 2020 /s/ MICHAEL C. BUCKLEY Michael C. Buckley Executive Vice President, Chief Financial Officer 2019 ANNUAL REPORT | ROBERT HALF EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 of Robert Half International Inc. (the “Form 10-K”), I, M. Keith Waddell, Chief Executive Officer of Robert Half International Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Robert Half International Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Robert Half International Inc. and will be retained by Robert Half International Inc. and furnished to the Securities and Exchange Commission or its staff upon request. February 14, 2020 /s/ M. Keith Waddell M. Keith Waddell Chief Executive Officer Robert Half International Inc. 2019 ANNUAL REPORT | ROBERT HALF EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K for the fiscal year ended December 31, 2019 of Robert Half International Inc. (the “Form 10-K”), I, Michael C. Buckley, Chief Financial Officer of Robert Half International Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Form 10-K fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of Robert Half International Inc. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Robert Half International Inc. and will be retained by Robert Half International Inc. and furnished to the Securities and Exchange Commission or its staff upon request. February 14, 2020 /s/ Michael C. Buckley Michael C. Buckley Chief Financial Officer Robert Half International Inc. 2019 ANNUAL REPORT | ROBERT HALF CORPORATE DIRECTORY Robert Half Board of Directors (from left): Dirk A. Kempthorne; Robert J. Pace; Barbara J. Novogradac; M. Keith Waddell; Harold M. Messmer, Jr.; Frederick A. Richman; Julia L. Coronado; and Marc H. Morial Board of Directors Management E XEC UTIVE OFFIC E RS OFFIC E RS Harold M. Messmer, Jr. Executive Chairman of Robert Half International M. Keith Waddell President and Chief Executive Officer of Robert Half International Julia L. Coronado, Ph.D. President and Founder, MacroPolicy Perspectives LLC, an economic research consulting firm Harold M. Messmer, Jr. Executive Chairman M. Keith Waddell President and Chief Executive Officer Paul F. Gentzkow President and Chief Executive Officer — Staffing Services Evelyn Crane-Oliver Senior Vice President, Secretary and General Counsel Kenneth D. Gitlin Senior Vice President, Operational Support Stephen M. Hilton Senior Vice President, Corporate Controller and Treasurer Christopher M. Hoffmann Senior Vice President, Commercial Transactions and Law James C. Johnson Senior Vice President and Chief Technology Officer Tami A. Munns Senior Vice President, Corporate Services — Staffing Lynne C. Smith Senior Vice President, Human Resources and Compensation Reesa M. Staten Senior Vice President, Corporate Communications Michelle M. Whitman Senior Vice President and Chief Marketing Officer Dirk A. Kempthorne President of The Kempthorne Group, a private consulting firm Robert W. Glass Executive Vice President, Corporate Development Marc H. Morial President and Chief Executive Officer of the National Urban League Michael C. Buckley Executive Vice President, Chief Financial Officer Barbara J. Novogradac President of Novogradac Investment Company, a private real estate investment company Robert J. Pace Founder and Chief Executive Officer of HundredX, Inc., a privately held technology company Frederick A. Richman Consultant to Deloitte Tax LLP Corporate Headquarters 2884 Sand Hill Road Menlo Park, CA 94025 1.650.234.6000 www.roberthalf.com Registrar and Stock Transfer Agent Computershare Investor Services P.O. Box 505005 Louisville, KY 40233-5005 Private Couriers/Registered Mail: Computershare Investor Services 462 South 4th Street, Suite 1600 Louisville, KY 40202 1.800.676.0894 1.800.952.9245 (TDD for Hearing Impaired) 1.781.575.2879 (Foreign Shareholders) www.computershare.com/investor Accountemps® Robert Half® Finance & Accounting Robert Half® Management Resources Robert Half® Technology OfficeTeam® Robert Half® Legal The Creative Group® Protiviti® roberthalf.com © 2020 Robert Half International Inc. An Equal Opportunity Employer M/F/Disability/Veterans. RHI-0320 All referenced trademarks are the property of their respective owners. 

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