October 29, 2009

Research Associate: Vinita Gupta, M. Fin. Zacks Research Digest

Editor: Sweta Killa, M. Fin.

Sr. Ed.: Ian Madsen, CFA: [email protected]; 1-800-767-3771 x9417

www.zackspro.com 111 N. Canal Street, Suite 1101 Chicago, IL 60606 Robert Half International (RHI-NYSE) $23.84*

Note: This report contains substantially new material. Subsequent reports will have changes highlighted.

Reason for Report: 3Q09 Earnings Update

Prev. Ed.: October 12, 2009; Coverage Initiated by One Broker (broker material considered till October 5, 2009)

Brokers’ Recommendations: Negative: 46.7% (7 firms); Positive: 40.0% (6); Neutral: 13.3% (2) Prev. Ed.: 7, 6, 2

Brokers’ Target Price: $25.96 (↑ $2.38 from the last edition; 12 firms) Brokers’ Avg. Expected Return: 8.9%

*Note: Though dated October 29, 2009, broker material and share price are as of October 28, 2009.

NOTE: A Flash Update was done on October 21, 2009 3Q09 Earnings Update; beats expectations

Note: The tables below (Revenue, Margins, Earnings per Share, and Balance sheet) contain less broker material than the broker material used in the Valuation table. The extra figures in the Valuation table come from reports that did not have accompanying spreadsheet models.

Portfolio Manager Executive Summary

Robert Half International (RHI or the Company) is the world's largest provider of specialized temporary and permanent personnel. The Company's service areas include accounting, finance, information technology, office administration and legal support. The Company operates through 270 offices worldwide.

Approximately 40.0% (6 of the 15) of the Digest group provided positive ratings and 13.3% (2 of the 15) of the firms gave neutral ratings. The remaining 46.7% (7 of the 15) had a negative stance on the Company. Ten of the twelve firms providing target prices gave valuation methodologies. Most of the firms used P/E multiples and DCF method to value the shares.

Bulls (Buy or equivalent outlook) – six firms or 40.0% - Target Prices in the $28.00-$35.00 range: As economy rebounds, these firms observe that demand for the Company’s experienced accountants, audit, and risk management professionals will likely accelerate which will continue to stimulate topline growth. These firms maintain that RHI is one of the best-managed, premier brand names and best- positioned companies in a growth-cyclical industry. RHI has an outstanding business model (19% ROE on overcapitalized balance sheet), generates a strong FCF, has a strong balance sheet, excellent long- term growth opportunities, and strong franchise. The Company also continues to return cash to

© Copyright 2009, Zacks Investment Research. All Rights Reserved. shareholders, repurchasing approximately 1 million of its outstanding shares during 3Q09, in addition to its current dividend payment of $0.12 per share. Given the Company’s relatively low valuation, the firms recommend long term investors to build positions since the Company has the highest long-term growth potential among its peers and possesses the greatest profitability among its staffing peers during an economic expansion due to its focus on middle-market clients and professional staffing.

Cautious (Neutral or equivalent outlook) – two firms or 13.3% - Only one firm gave a target price of $28.00: These firms believe that a Neutral rating reflects a balanced risk/reward profile. They are bullish about RHI’s growth-focused management philosophy; market leading specialty staffing business; its middle-market focus; strong brand and network to attract talent; and its well-established financial model. However, they are skeptical about the weak visibility in the U.S. staffing market, concerned about the overall direction of the U.S. economy, and a lack of earnings leverage or multiple expansions in the near term.

Bear (Sell or equivalent outlook) - seven firms or 46.7% - Target prices in the $19.00-$23.50 range: These firms believe that RHI continues to face a challenging global economic environment that should pressure near-term results. They believe that RHI should benefit from moderating sequential revenue declines (before turning to relatively flattish growth for several quarters thereafter) and aggressive cost reduction efforts limiting margin contraction; although U.S. and European job growth is needed for sustainable profit recovery, not easing job losses. The firms continue to expect a lackluster U.S. employment recovery in which strong employment gains lag economic recovery by at least several quarters. At these levels, the firms believe the stock already prices in a strong employment rebound and rapid return to mid-cycle profitability. If employment remains sluggish, the firms point out that risk to the downside exists as investors become impatient with the lack of significant profit growth and do not expect RHI to exceed its prior peak earnings level until 2013. While they are hopeful about the Company’s long-term prospects (and believe that those with a 3-4 year time horizon will do well with the stock), they are less positive on its near-term prospects. The firms also point out that challenging macroeconomic conditions continue to negatively impact top and bottom line growth.

The firms state the following additional factors should also be taken into consideration for investing in the stock:

 RHI is the world's largest specialized staffing service, and the seventh largest staffing company in the world by revenue.

 The firms believe that RHI will likely gain share as the downturn progresses and smaller competitors exit the industry. Some of its main competitors are Adecco, Manpower, and Randstad Holding.

 During 3Q09, RHI spent about $7.0 million in capital expenditures, resulting in about $60.0 million in free cash flow. According to the brokerage firms, capital expenditures and free cash flow are expected to decrease at a three-year (2008-2011) CAGR of 14.5% and 21.2%, respectively .

 During 3Q09, the Company repurchased approximately 1.2 million shares for $32.0 million at an average price per share of approximately $27.0. According to the brokerage firms, shares outstanding are expected to decrease 5.2% y/y, 0.4% y/y, and remain flat y/y respectively, at a three-year (2008-2011) CAGR of -1.9%.

 The Company pays a quarterly cash dividend of $0.12 per share, representing a dividend yield of 2.01%. According to the brokerage firms, the dividend is expected to increase 4.6%, 5.4% and 2.5% for FY09, FY10 and FY11, respectively, at a three-year (2008-2011) CAGR of 4.2%.

Zacks Investment Research Page 2 www.zackspro.com General Outlook

The U.S. employment has fallen in 18 consecutive months, and the European economic activity and employment have been equally challenged, if not aggravated, in the recent months. Firms maintain that the US labor market does have some positives. Initial unemployment claims continue to decline indicating that employers are slowing the pace of layoffs. The US lost 0.8 million jobs in 3Q09, better than the 1.3 million lost in 2Q09 and 2.1 million lost in 1Q09.

RHI is a well positioned, well managed company in a growth cyclical industry with industry leading operating margins and solid ROIC over the course of a cycle. While the current environment remains challenging, demand is stabilizing broadly and RHI continues to do an excellent job of managing gross margin and SG&A expense, driving modest bottomline growth. Longer term, firms believe the Company's earnings power is significant and RHI will likely gain share as the downturn progresses and smaller competitors exit the industry (this should ultimately lead to enhanced earnings power). Looking forward to 4Q09, RHI anticipates that revenue will decline 27-32% on a y/y basis. Revenue declines are expected to be driven by continued softness in the labor market on a y/y basis as well as due to calendar issues as there will be less billing days due to the timing of the holiday season.

According to the Zacks Digest model, revenue is expected to decrease 34.7% and 3.0% y/y in FY09 and FY10, respectively, and increase 10.2% y/y in FY11 with a three-year CAGR (2008-2011) decline of 11.3%. EPS is expected to decrease 87.6% y/y for FY09, and increase 45.8% y/y in FY10 and 116.0% y/y in FY11, with a three-year CAGR (2008-2011) decline of 26.9%. According to the Zacks Digest model, cash flow from operating activities is expected to decrease by 39.0% and 48.6%, while increase by 67.8% y/y in FY09, FY10 and FY11, respectively, with a three-year CAGR (2008-2011) decline of 19.3%. October 28, 2009

Recent Events

On October 21, 2009, RHI reported its 3Q09 earnings results. Highlights are as follows:

 3Q09 total revenue decreased 37.4% y/y to $725.9 million from $1,160.1 million in 3Q08.  3Q09 operating profit was down 84.0% y/y to $17.5 million from $109.5 million in 3Q08.  3Q09 EPS was $0.06, down 85.7% y/y from $0.42 in 3Q08.

On September 15, 2009, the Board of Directors paid a quarterly cash dividend of $0.12 per share to all shareholders of record as of August 25, 2009, as announced on July 28, 2009.

On August 5, 2009, RHI and Upwardly Mobile (UpMo) announced a strategic alliance. Both the companies recognize that job losses stemming from economic instability have displaced many outstanding professionals. This collaboration is designed to help job seekers by combining the wealth of content and personal touch experience from RHI’s long history of staffing and placement services with Upwardly Mobile's innovative tools, technology and resources to help highly skilled professionals manage and succeed in their career.

Overview

Zacks Investment Research Page 3 www.zackspro.com Robert Half International (RHI or the Company), based in Menlo Park, CA, introduced specialized outplacement staffing services in 1948. RHI is the world’s leading vendor of professional staffing services and the Company operates more than 400 offices worldwide. It provides accounting, high-end financial, legal, information technology, skilled administrative and creative/web professionals on both an interim and permanent basis. The Company has one of the most established and innovative management teams in the industry. RHI has six divisions: 1) Accountemps (temporary staffing, 38.0% of 2008 revenues), 2) OfficeTeam (high-end administrative staffing, 18.0% of 2008 revenue), 3) Robert Half Management Resources (senior-level accounting and finance project professionals, 14.0% of 2008 revenue), 4) Robert Half Technology (IT consultants and full-time professionals, 10.0% of 2008 revenue), 5) Robert Half Finance & Accounting (permanent placement, 9% of 2008 revenue) and 6) Protiviti (risk consulting and internal audit services, 12% of 2008 revenue). Though the Company has international operations in Canada, Mexico, Europe, Asia, Australia, and New Zealand, the bulk of net service revenue is in the United States.

Analysts identified the following factors for evaluating the investment merits of RHI:

Key Positive Arguments Key Negative Arguments  Leader in Professional Staffing: RHI is the world’s  Economic Sensitivity: Staffing usage is generally largest provider of flexible staffing for financial reduced during periods of slower economic growth, professionals and practices on the higher-end of making a portion of the Company's revenue administrative, legal, creative, and IT staffing. particularly responsive to changes in the general  Strong Balance Sheet and Healthy Cash Flow: economy. RHI has one of the strongest B/S in the industry with  Sarbanes-Oxley Exposure: Over the past few approximately $310.0 million in cash and essentially quarters, less than 10.0% of revenue has been no debt, which provides the opportunity to finance generated from Sarbanes-Oxley 404 compliance new service lines, fund dividends and repurchase work. Reduced client spending could have an stock. adverse impact on RHI’s results.  Middle Market Focus: With the majority of its  Competition: RHI faces significant competition revenue earned from middle-market clients, RHI is the from other players in temporary and permanent only major staffing Company worldwide; focused on placement staffing industries. this lucrative market, which usually offers substantial  Saturated U.S. Market: The U.S. market has pricing flexibility. become saturated and RHI’s competitors (notably  Strong Market Demand: Increased compliance Manpower) have large operations in Europe, with regulations, clients’ need for flexibility, and the result that RHI will not benefit from a recovery in proliferation of new financial systems have been that region. driving increased demand for high-end finance and accounting professionals supplied by RHI.

More information on the Company is available at www.rhi.com.

RHI’s Fiscal Year ends on December 31. October 28, 2009

Revenue

3Q09 Digest total revenue was down 37.4% y/y and 3.2% q/q to $725.9 million, in line with the Company’s press release and within management’s guidance of $700-$750 million. On a constant- currency basis, revenue declined by 36.0% y/y, unchanged from the y/y decline experienced in 2Q09.

There were 64 billing days in 3Q09, compared with 64 in 3Q08 and 63 in 2Q09. Firms maintain that topline results stabilized as RHI’s temporary staffing business began experiencing sequential

Zacks Investment Research Page 4 www.zackspro.com improvements during the month of September 2009 (relative to August and July) and the Company’s Protivti unit benefited from increased internal audit, consulting, and Sarbanes-Oxley project work.

Provided below is the summary of revenue as compiled by Zacks Research Digest:

Total Revenue ($M) 3Q08A 2008A 2Q09A 3Q09A 4Q09E 2009E 2010E 2011E Zacks Consensus $735.0 $3,034.0↓ $3,024.0↑ Digest Average $1,160.1 $4,600.6 $749.9 $725.9 $703.8 $3,002.9↓ $2,913.8↓ $3,209.9↓ Digest High $1,160.1 $4,600.6 $749.9 $725.9 $707.5 $3,006.6↓ $3,106.5↑ $3,332.6↓ Digest Low $1,160.1 $4,600.4 $749.9 $725.9 $696.9 $2,996.0↑ $2,762.6↑ $3,011.3↓ YOY Growth -1.6% -1.0% -38.8% -37.4% -28.9% -34.7%↓ -3.0%↑ 10.2%↓ Sequential Growth -5.3% -8.9% -3.2% -3.0%

Management provided the components of its non-US business as follows: 40% Europe, 25% UK, 25% Canada and 10% Asia-Pacific. In addition, within Europe, its largest exposures are in Belgium, and closely followed by Germany and France.

RHI generated approximately, 29.0% of its total 3Q09 revenues outside the US. International revenues decreased 38.0% y/y. The US segment was down approximately, 37.0% y/y.

Segment Results

Temporary staffing (80.7% of 3Q09 revenue)

The Temporary Staffing and Consultant division provides specialized staffing in the accounting and finance, administrative and office, information technology, legal, advertising, marketing, and web design fields. The division comprises Accountemps, OfficeTeam, Robert Half Technology, and Robert Half Management Resources.

In 3Q09, Digest segment revenue was down 35.8% y/y and 4.9% q/q to $586.0 million, in line with the Company’s press release. Firms believe that the decrease in revenue was attributable to fewer assignments (volumes) and lower bill rates. Assignment levels continue to be down 30.0% and average billing rate (pricing) on a y/y basis contracted approximately, 6.1%.

Performances of the four temporary staffing divisions as reported by the Company in 3Q09 are as follows.

 Accountemps (financial and accounting staffing) revenue decreased 33.7% to $286.8 million from $432.7 million in 3Q08. The decline was driven largely by RHI exiting low-margin mortgage refinancing business it has taken in prior quarters.

 OfficeTeam (skilled administrative staffing) revenue decreased 35.7% to $134.4 million from $209.1 million in 3Q08.

 Robert Half Technology (IT staffing) revenue decreased 33.6% to $74.6 million from $112.3 million in 3Q08.

 Robert Half Management Resources (higher-end financial and accounting staffing) revenue decreased 42.2% to $90.3 million from $156.1 million in 3Q08.

One firm (Stifel Nicolaus) expects revenue declines across the board during 4Q09 due to a combination of seasonal trends.

Zacks Investment Research Page 5 www.zackspro.com One firm (William Blair) is encouraged by the rate of volume decline in the Company’s temporary- staffing operations which has been relatively consistent during the past few quarters, after decreasing significantly throughout late 2008 and early 2009.

Permanent staffing (5.9% of 3Q09 revenue)

Composed of Robert Half Finance & Accounting, the Permanent Placement segment offers full-time personnel in the accounting, finance, administrative and office, and information technology fields, including specialists in programming, networking, systems integration, database design, and help desk support, chief financial officers, controllers, and senior financial analysts. A significantly higher percentage of the Company's international revenue is derived from permanent (i.e. >25-30% of international revenue is from permanent) placement.

3Q09 Digest segment revenue was down 60.4% y/y and 1.2% q/q to $43.0 million, in line with the Company’s press release. Revenues for this business were weaker in July, but improved in August and September. Firms believe that results in October are also trending in an upward trajectory.

During 3Q09, revenue growth in the Company’s international staffing operations decreased 39.0% y/y but increased 1.0% sequentially to $184.0 million. All of the sequential improvement in international revenue was driven by more favorable currency trends. On a constant-currency basis, international staffing revenue decreased 35.0% y/y and 5.0% sequentially during 3Q09. Management stated that hiring demand is already returning in some markets.

International revenues equaled approximately 29.0% of total staffing revenues, and the Company now has 110 international offices located in 20 countries outside the US.

One firm (Stifel Nicolaus) expects continued moderation in revenue declines going forward and a muted pick-up in the back half of 2010. Structural shifts in the labor market and elimination of back-office redundancies, including finance/accounting positions could make the recovery outlook optimistic.

Protiviti revenue (13.4% of 3Q09 revenue)

The Risk Consulting and Internal Audit services (Protiviti) segment aids companies with positions in the fields of business and technology risk consulting and internal audit services. The Company also assists clients in identifying, assessing, measuring, and managing financial, operational, and technology- related risks encountered in their industries. This segment conducts internal audit functions.

3Q09 Digest segment revenue was down 30.5% y/y and increased 7.8% q/q to $97.0 million, in line with the Company’s press release. Firms believe that the sequentially increase in revenue was attributable to strength in internal control reviews, corporate restructuring, and credit risk assessments reflecting a significantly stronger performance than competitors. Protiviti revenues declined 30% y/y on international basis, improving from 40% y/y declines in 2Q09.

Firms believe that increased demand for Protiviti solutions was a result of both increased demand domestically and internationally for internal audit, internal controls, and Sarbanes-Oxley work.

Zacks Investment Research Page 6 www.zackspro.com Provided below is the summary of revenue segments as compiled by Zacks Research Digest:

Revenue Segments ($M) 3Q08A 2008A 2Q09A 3Q09A 4Q09E 2009E 2010E 2011E Temporary Staffing $912.2 $3,626.2 $616.3 $586.0 $570.4 $2,445.3↓ $2,363.2↑ $2,568.6↓ Permanent Staffing $108.5 $427.5 $43.5 $43.0 $40.0 $176.4↑ $170.0↑ $224.1↓ Protiviti $139.5 $546.9 $90.0 $97.0 $93.5 $381.3↑ $380.7↑ $415.8↑ Total Revenue $1,160.1 $4,600.6 $749.9 $725.9 $703.8 $3,002.9↓ $2,913.8↓ $3,209.9↓

Provided below is a graphical analysis reflecting segmental revenue, as compiled by Zacks Digest:

2008A Segment Revenue 2009E Segment Revenue

Temporary Temporary 12% Staffing 13% Staffing 9% 6% Permanent Permanent Staffing Staffing

Protiviti Protiviti

79% 81%

2010E Segment Revenue 2011E Segment Revenue

Temporary 13% 13% Temporary Staffing Staffing 6% 7% Permanent Permanent Staffing Staffing Protiviti Protiviti 81% 80%

Conclusion: Given current trends, firms on an average expect revenue from Temporary Staffing to increase from 79.0% in FY08 to 80.0% in FY11 with a three-year (2008-2011) CAGR of -10.9%. The firms expect revenue contribution from Permanent Staffing and Risk Consulting (Protiviti) to decrease at three-year CAGRs of 19.4% and 8.7%, respectively.

Management gave 4Q09 revenue guidance of $675.0 million to $725.0 million, which represented a (32) % to (27) % y/y change in revenues or (7) % to 0% sequentially.

Zacks Investment Research Page 7 www.zackspro.com Going forward, one firm (Northcoast) is optimistic that RHI will continue to make progress toward demonstrating sequential improvements in terms of revenue growth in each of its business units.

RHI has been expanding its international branch network (including Protiviti branches) and currently has 110 offices in 20 countries outside the U.S. which account for 28.0% of the Company's revenue. One firm (R W. Baird) believes that the Company is capable of strong revenue growth during expansionary economic environments over the intermediate term as it further expands its branch network and existing branches mature.

One firm (Stifel Nicolaus) believes that seasonal-driven pressure, which is expected to drive sequential revenue declines across the board, could be exaggerated by market conditions and lead to further deterioration in underlying demand trends, particularly in temporary staffing and permanent placement.

Please refer to the Zacks Research Digest RHI spreadsheet for detailed sales breakdown and future estimates.

Margins

3Q09 Digest gross profit was down 44.9 % y/y and increased 0.5% q/q to $266.4 million, in line with the Company’s press release. Gross margin was down 500 bps y/y and increased 140 bps q/q to 36.7%. Firms believe that q/q improvement in gross margin was driven by RHI exiting lower margin mortgage-related business, passing along corresponding pay rate reductions to offset bill rate pressure, and increased revenue/consultant utilization in Protiviti.

3Q09 Digest operating profit was down 84.0% y/y and increased 77.4% q/q to $17.4 million. 3Q09 Digest operating margin declined 700 bps y/y but increased 110 bps q/q to 2.4%.

RHI closed 2 branches in 3Q09, compared with two closures in 2Q09, 2 in 1Q09 and 1 in 4Q08, bringing the 3Q09 total to 368 branches versus 374 in FY08. Management states it still has room to reduce costs via headcount and other cost reductions, without the need to close branches. In 3Q09, Digest SG&A expense as a percentage of revenue was 34.3% versus 32.3% in 3Q08 and 34.0% in 2Q09. SG&A costs are down on a constant currency basis by 32.0% y/y, while branch count is down just over 1.0 y/y %. This has significantly reduced employees per office but allowed RHI to maintain its geographic footprint.

Provided below is the summary of margins as compiled by Zacks Research Digest:

Margins 3Q08A 2008A 2Q09A 3Q09A 4Q09E 2009E 2010E 2011E Gross Margin 41.7% 41.6% 35.3% 36.7% 36.4% 36.0%↑ 36.6%↑ 38.1%↓ Operating Margin 9.4% 9.0% 1.3% 2.4% 2.0% 1.9%↑ 2.8%↑ 4.9% Pre-Tax Margin 9.5% 9.1% 1.4% 2.4% 2.1% 2.0%↑ 2.9%↑ 5.1%↑ Net Margin 5.7% 5.4% 0.7% 1.3% 1.1% 1.0%↑ 1.6%↑ 2.8%↓

The segment’s results as per Zacks Research Digest in 3Q09 are as follows:

Temporary staffing

The segment’s gross profit was down 41.2% y/y and gross margin decreased 170 bps y/y. The segment’s operating profit was down 80.8% y/y to $17.3 million. Operating margin was 3.0% in 3Q09 versus 9.9% in 3Q08.

Zacks Investment Research Page 8 www.zackspro.com One firm (Northcoast) believes that RHI has been successful in managing bill rate compression by lowering pay rates, which has allowed the Company to minimize gross margin compression.

Given revenue pressure, one firm (Barclays Capital) expects temp operating margins to contract to 2.7% in 4Q09.

Permanent staffing

The segment carries 100.0% gross margin; therefore, the segment’s gross profit was down 60.4% y/y to $42.9 million (same as revenue). The segment’s operating profit was down 105.1% y/y to a loss of $0.8 million. Operating margin was (1.8%) in 3Q09 versus 14.1% in 3Q08.

One firm (Barclays Capital) believes that despite management’s efforts in trimming SG&A expense (via headcount reduction) to right size costs for lower revenue levels, the firm expects RHI to grow revenue to begin generating profits from the Perm business

Protiviti

The segment’s gross profit was down 33.8% y/y to $27.0 million. Gross margin increased 20 bps y/y to 3.7%. The segment’s operating profit was $1.1 million in 3Q09 versus a profit of $4.0 million in 3Q08. Operating margin was 1.1% versus 2.9% in 3Q08. Both U.S. and international posted strong results due to improved staff utilization rates (both in the U.S. and internationally) and reduction in direct costs (down $5.0 million sequentially).

Management also continued to reduce the company’s selling, general, and administrative expenses during the quarter. Further, management expects Protiviti to realize cost saving of an additional $4.0 million in 4Q09, which will likely lead to a low-mid single-digit operating profit margin.

One firm (Stifel Nicolaus) believes that the segment’s profitability trends could be short-lived due to seasonality in 4Q09 and the winding down of year-end related projects through year-end and into 1Q10. Following that period, run rates could settle at a lower level as replacement business could prove difficult in the current spending environment, which could drive a return to unprofitability, although not to levels seen during 1H09.

Provided below is the summary of segmental operating profit as compiled by Zacks Research Digest:

Segmental Operating Profit ($ in millions) 3Q08A 2008A 2Q09A 3Q09A 4Q09E 2009E 2010E 2011E Temporary Staffing $90.1 $349.0 $25.2 $17.3 $11.7 $94.0↓ $72.0↓ $112.9↑ Permanent Staffing $15.3 $60.5 ($2.0) ($0.8) ($0.2) ($7.1)↑ $5.2↑ $31.5↓ Protiviti $4.0 $7.3 ($13.2) $1.1 $4.7 ($26.4)↑ $14.0↑ $30.4↑ Total Operating Profit $108.8 $414.8 $9.8 $17.4 $14.3 $57.5↑ $81.3 ↑ $158.4↓

Provided below is a graphical analysis reflecting segmental operating profits, as compiled by Zacks Digest:

Zacks Investment Research Page 9 www.zackspro.com 2008A Segmental Operating Profit

2% 15% Temporary Staffing

Permanent Staffing

Protiviti 83%

2009E Segmental Operating Profit

Temporary 21% Staffing

Permanent 6% Staffing

Protiviti 73%

Zacks Investment Research Page 10 www.zackspro.com 2010E Segmental Operating Profit

15% Temporary Staffing 6% Permanent Staffing

Protiviti 79%

2011E Segmental Operating Profit

Temporary 17% Staffing

Permanent Staffing 18% Protiviti 65%

Conclusion: Given current trends, the firms on an average expect operating profit contribution from Temporary Staffing to decline to 83.0% y/y in FY08 to 65.0% y/y in FY11. Permanent Staffing contribution is expected to increase from 15.0% y/y in FY08 to 18.0% in FY11. The Risk Consulting (Protiviti) segment is expected to increase from 2.0% y/y to 17.0% y/y in FY11.

The firms expect a three-year CAGR (2008-2011) decline at Temporary Staffing Operating Profit to be 31.4% and Permanent Staffing Operating Profit to be 19.6%. Risk Consulting (Protiviti) Operating Profit is expected to grow at a three-year CAGR (2008-2011) of 60.9%.

RHI management reiterated its confidence that going forward the Company can demonstrate prior peak margins not only in the staffing business but return Protiviti to double -digit operating margins.

One firm (Northcoast) believes that cost reduction efforts at RHI continue to take hold, especially in the Company’s Protiviti unit. The firm also remains optimistic that RHI has already experienced the worst in terms of profit declines.

RHI continued to do a good job with cost rationalization, particularly at Protiviti, which generated a small profit after substantial 1H09 losses. Despite some progress, one firm (Barclays Capital) expects several more challenging quarters and only a slow employment rebound, which are likely to delay significant revenue and profit rebound until 2011-12.

Zacks Investment Research Page 11 www.zackspro.com Another firm (BofA Merrill Lynch) believes that RHI will have high incremental operating margins when revenues grow.

One firm (Deutsche Bank) forecasts increased gross profit for Protiviti in the coming years, which offset the revenue reduction from overall weaker temp trends.

Another firm (Stifel Nicolaus) anticipates margin contraction across the board during 4Q09 due to negative leverage from revenue declines.

Another firm (J.P. Morgan) believes that since 2Q08, RHI has proactively undertaken cost management initiatives that have been helping the Company better weather this recession than in the past. The firm also remains encouraged as Protiviti has reached an inflection point and should help drive greater profitability for RHI in the future.

Brokerage firms expect revenue to decline at a faster pace versus a decline in S&G expenses in FY09 (34.7% versus 31.3%). For FY10, the firms expect revenue to decrease at a slower pace compared with a decline in S&G expenses (3.0% versus 3.7%). For FY11 the firms expect revenue to increase at a slower pace versus an increase in S&G expenses (10.2% versus 10.6%) This will lead to an increase in operating margin for FY10 but a decrease in FY09 and FY11.

Please refer to the Zacks Research Digest RHI spreadsheet for more details on margin estimate.

Earnings per Share

3Q09 diluted EPS, as per the Zacks Digest model, was down 86.0% y/y and increased 100.0% q/q to $0.06 from $0.43 in 3Q08 and $0.03 in 2Q09, approximately in line with the Company’s press release. Firms believe that q/q earnings upside during 3Q09 were attributable to management’s ability to help flex the cost structure of Protiviti.

In 3Q09, the Digest shares outstanding count was down 3.7% y/y and increased 0.1% q/q to 147.1 million shares.

Provided below is the summary of EPS as compiled by Zacks Research Digest:

EPS 3Q08A 2008A 2Q09A 3Q09A 4Q09E 2009E 2010E 2011E Zacks Consensus $0.06 $0.21↑ $0.39↓ $0.01- EPS After FAS(123) $0.06 Digest High $0.43 $1.65 $0.03 $0.06 $0.07 $0.23↑ $0.41 $0.70 Digest Low $0.43 $1.44 $0.03 $0.06 $0.02 $0.17↑ $0.18↑ $0.50↓ Digest Average $0.43 $1.62 $0.03 $0.06 $0.05 $0.20↑ $0.29↑ $0.63↓ YoY Growth -6.5% -10.8% -93.8% -86.0% -82.4% -87.6%↑ 45.8%↓ 116.0%↓ Sequential Growth -10.4% -50.0% 100.0% -23.8%

Highlights from the chart are as follows:

 4Q09 forecasts (7 firms) range from $0.02 to $0.07; the average is $0.05.  2009 forecasts (7 firms) range from $0.17 to $0.23; the average is $0.20.  2010 forecasts (6 firms) range from $0.18 to $0.41; the average is $0.29.  2011 forecasts (4 firms) range from $0.50 to $0.70; the average is $0.63.

Zacks Investment Research Page 12 www.zackspro.com For 4Q09, management gave an EPS guidance of $0.01-$0.06. Management noted that in 4Q09, relative to 3Q09, there are approximately 2.5 fewer billing days in its staffing business and approximatey 3 fewer effective billing days for Protiviti. Excluding that impact, 4Q09 revenue guidance likely would have been flat to up sequentially.

One firm (J.P. Morgan) remains encouraged by Protiviti's early signs of resurgence and appreciates the margin lift of segment, which will drive bottom line growth.

Given the early signs of stability and aggressive cost cutting at RHI, one firm (Citigroup) feels more optimistic about the directionality of forward EPS estimates.

Going forward, firms in the Zacks Digest model forecast shares outstanding to decrease 5.2%, 0.4% and remain flat y/y in FY09, FY10 and FY11, respectively. Net income is expected to decrease 87.5%, in FY09, but increase 48.6% and 95.0% in FY10 and FY11, respectively.

Please refer to the Zacks Research Digest RHI spreadsheet for more extensive EPS figures.

Target Price/Valuation

The average Zacks Digest price target, provided by the brokerage firms, is $25.96 (↑ $2.38 from the previous report and approximately 8.9% upside from the current price). The price targets range from $19.00 (↑ $4.00 from the previous report and approximately 20.3% downside from the current price) to $35.00 (↔ as the previous report and approximately 46.8% upside from the current price) with a median price target of $25.75 (↑ $2.75 from the previous report.) Most of the firms used P/E methods to value the shares.

Of the 15 firms covering the stock, 6 gave positive ratings, 2 gave neutral ratings, and 7 firms gave negative ratings.

Following the 3Q09 earnings update, six firms increased their target prices to reflect improvements in gross margin related to Protiviti.

Provided below is the summary of valuation and ratings as compiled by Zacks Research Digest:

Rating Distribution Positive 40.0% Neutral 13.3% Negative 46.7% Average Target Price $25.96↑ Digest High $35.00 Digest Low $19.00↑ Median Target $25.75↑ Upside from current 8.9% Maximum Upside from current 46.8% Minimum Downside from current 20.3% Number of Analysts providing target price/total 12/15

Zacks Investment Research Page 13 www.zackspro.com The firm (MorganStanley) with the lowest target price based the valuation on DCF analysis. The firm (Suntr. RH.) with the highest target price based the valuation on a blend of P/E multiple and EV/EBITDA multiple.

Risks to achieve the target price include overall growth or decline in GDP, as GDP growth is highly correlated and a multiplier of staffing growth. Furthermore, as the downturn continues, pricing becomes more difficult, and gross margins typically begin to fall.

Metrics detailing management effectiveness are as follows:

Metric (TTM) Value Industry S&P 500 Return on Assets (ROA) NA 0.9% 3.2% Return on Equity (ROE) NA -0.5% 7.9% Return on Invested Capital (ROI) NA 1.8% 4.4%

ROA, ROIC and ROE cannot be compared from the overall market averages (as measured by the S&P 500) of 3.2%, 4.4% and 7.9%, respectively.

Capital Structure/Solvency/Cash Flow/Governance/Other

RHI ended 3Q09 with cash and cash equivalents of $408.0 million versus $385.8 million in 2Q09, as the Company continues to produce a solid cash flow. The Company has nominal debt of approximately $2.0 million flat q/q. 3Q09 DSOs were 45.7 days down 0.3 days y/y and up 0.6 days up from 2Q09, still well below the 55-65 day industry norm.

In 3Q09, the Company generated approximately $67.0 million in cash flow from operations versus $96.0 million in 3Q08 and spent about $7.0 million in capital expenditures versus $10.2 million in 2Q09, resulting in about $60.0 million in free cash flow down from approximately $78.9 million generated in 3Q08. In addition, the Company paid a dividend in 3Q09 of approximately $18.0 million or $0.12 per share.

RHI repurchased 1.2 million shares for a total amount of $32.0 million in 3Q09 (0.8% of avg. diluted shares) at an estimated average price of $27 per share (versus 1 million in 2Q09 at an avg. price of $22). RHI has 7.1 million shares left on its current repurchase program.

One firm (William Blair) continues to believe that share repurchases will be the primary use of the Company’s free cash flow (other than the Company’s dividend). Robert Half’s balance sheet remains solid. The firm believes that RHI will continue to generate strong free cash flow despite a weaker demand environment, so RHI has ample resources to continue to repurchase stock, fund its quarterly dividend, and opportunistically pursue strategic acquisitions.

Another firm (R W. Baird) believes that RHI will continue to repurchase stock while maintaining or raising its cash dividend.

Another firm (J.P. Morgan) believes that management has a high propensity in continued share buyback and is armed with a strong cash position ($2.77 per share) and cash flow.

Provided below is the summary (abstract) of the balance sheet of RHI at the end of September 30, 2009, as compiled by Zacks Digest:

Zacks Investment Research Page 14 www.zackspro.com FY ends Dec Value ($ in million) y/y Growth Cash and Cash Equivalent $407.6 9.1 % Accounts Receivable $364.5 -37.9% Property and Equipment (Net) $128.3 -13.8% Total Assets $1,320.7 -13.3% Accounts Payable $107.0 -11.8% Total Current Liabilities $362.1 -22.5% Shareholders Equity $948.0 -8.8% Total Liabilities and Shareholders Equity $1,320.7 -13.3%

October 28, 2009

Potentially Severe Problems

There are none other than those discussed in other sections of this report.

October 28, 2009

Long-Term Growth

The lowest projected long-term growth rate is 15.0% (William Blair), while the highest projected long- term growth rate is 18.0% (Suntr. RH.), the average being 16.5%.

Firms believe that demand remains cyclically depressed, although the pace of decline has been stabilizing broadly, and RHI is well positioned for long-term growth. Over the long term, most of the firms believe that RHI has the potential to both increase its number of clients in the U.S., and increase the number of services/revenue generated per client (and bill rate deflation should turn to bill rate inflation when labor market conditions improve). Additionally, the Company continues to expand into international markets, where the market for staffing and recruiting services is significantly less penetrated (outside an aging set of Boomers hitting retirement age will create more churn and thus more demand in the labor markets).

The firms believe that RHI is one of the best-positioned and best-managed temporary staffing companies in the world, as evidenced by the Company’s track record of high organic revenue growth, industry-leading margins, focus on middle-market clients enhancing margins, strong brand names that attract high-quality clients and employees, and excellent free cash flow. The firms believe the Company competes in some of the most attractive staffing segments in terms of margins and long-term growth potential, namely, Finance & Accounting, Information Technology, and other professional segments.

One firm (Deutsche Bank) believes that long-term growth at RHI includes a strong rebound in perm placement (potentially due to Obama’s stimulus plan) or added regulatory oversight, a pickup at Protiviti due to Sarbanes-Oxley requirements at smaller companies, more extensive cost cutting than expected, or larger-than-expected share repurchases.

Most of the firms believe that non-audit work will increasingly shift away from the Big Four accounting firms toward businesses like Protiviti, which does not have conflicts of interest and may offer a better value proposition for clients. The firms believe that cash flow is strong and ROIC is quite high. As a result, the firms regard RHI as a core long-term growth holding in the business services sector.

Zacks Investment Research Page 15 www.zackspro.com The firms believe that RHI is also positioned to be a beneficiary of US GAAP-IFRS convergence, required SarbOx compliance from smaller firms, and could benefit from TARP contacts or assisting troubled financial institutions in the long-term. The firms also believe that the current financial crisis is causing significant pressure on smaller competitors but expect RHI to gain share through the downturn.

Protiviti expanded into such service lines as fraud investigation, IT security, business continuity planning, and litigation consulting. Protiviti also acquired Lender Advisory Services, which offers due diligence services in asset securitizations, financings and portfolio evaluations. In addition, Protiviti is also expanding geographically.

October 28, 2009

Upcoming Events

On December 15, 2009, the Company will pay a quarterly cash dividend of $.12 per share, to all shareholders of record as of November 25, 2009, as announced by the Board of Directors on October 27, 2009.

Individual Analyst Opinions

POSITIVE RATINGS (40.0%)

CL King – Strong Buy ($30.00 target price): 10/22/09 – The firm reiterated a Strong Buy rating with a price target of $30.00. INVESTMENT SUMMARY: The firm believes that the Company is an industry bellwether and has generated excellent returns overtime.

J.P. Morgan – Overweight ($31.00 target price): 10/22/09 – The firm reiterated an Overweight rating and increased the price target from $25.00 to $31.00. INVESTMENT SUMMARY: The firm recommends investors build position on the stock given the highest long-term growth potential among its peers and possesses the greatest profitability among its staffing peers during an economic expansion due to its focus on middle-market clients and professional staffing.

R W. Baird – Outperform ($28.00-target price): 10/22/09 – The firm maintained an Outperform rating and increased the target price from $25.00 to $28.0. INVESTMENT SUMMARY: The firm believes that RHI is a well positioned, well managed in a growth cyclical industry with industry leading operating margins and solid ROIC over the course of a cycle.

Suntr. RH. – Buy ($35.00 target price): 10/22/09 – The firm retained a Buy rating and a target price of $35.00.

UnionBankSwitz. – Buy ($30.00 target price): 10/22/09 – The firm reiterated a Buy rating and price target of $30.00. INVESTMENT SUMMARY: The firm believes that RHI should benefit from the pickup in temporary staffing demand in the US and Europe. In addition, an economic recovery should generate sufficient demand to generate strong growth in the coming quarters.

William Blair – Outperform (no target price): 10/21/09 – The firm retained an Outperform rating with no target price. INVESTMENT SUMMARY: Given the high quality of RHI, the increasing number of signs that the business is stabilizing, the firm believes that the accounting and finance segment of the

Zacks Investment Research Page 16 www.zackspro.com temporary staffing will perform well during the next economic cycle, and risk-to-reward trade-off is attractive.

NEUTRAL RATINGS (13.3%)

Northcoast – Neutral (no target price): 10/22/09 – The firm retained a Neutral rating and no target price. INVESTMENT SUMMARY: The current economic environment is having an adverse impact on RHI’s business; however, the firm favors the long-term growth prospects of the Company. As a result of the difficult economic back-drop, RHI management is managing the business very conservatively and continuing to make investments that will position the Company for strong long-term growth.

Citigroup – Hold ($28.00 target price): 10/21/09 – The firm maintained a Hold rating and a target price of $28.00. INVESTMENT SUMMARY: The firm remains bullish about RHI's ability to cut costs. However, it remains concerned about the significant cyclical risk associated with RHI's temp staffing and perm placement businesses given the limited visibility toward eventual employment growth. Also, the Protiviti business may take longer to recover given the lack of significant demand driver. Given these factors and the valuation, the firm remains on the sidelines.

NEGATIVE RATINGS (46.7%)

BMO Capital – Under Perform ($23.00 target price): 10/22/09 – The firm reiterated an Under Perform rating and increased the target price from $20.00 to $23.00 to reflect the recent run-up in valuation. INVESTMENT SUMMARY: Though the firm believes that fundamentals are near the bottom, a quick rebound is unlikely. It views that RHI’s true bottom is linked to the bottoming of its perm division, which is not expected until early 2010.

Wall Street Strategies – Sell ($23.50 target price): 10/23/09 – The firm retained a Sell rating and increased the price target from $20.00 to $23.50 to reflect improvements in gross margin related to Protiviti.

Barclays Capital – Underweight ($21.00 target price): 10/22/09 – The firm retained an Underweight rating and increased the target price from $20.50 to $21.00. INVESTMENT SUMMARY: The firm expects continued tough macro climate and sees no near term positive catalysts.

BofA Merrill Lynch – Underperform ($20.00 target price): 10/22/09 – The firm retained an Underperform rating and a price target of $20.00. INVESTMENT SUMMARY: Due to the current global recession, the firm expects RHI's revenues to steadily decline through 2009.

Deutsche Bank – Sell ($23.00 target price): 10/22/09 – The firm retained a Sell rating and increased the target price from $21.00 to $23.00 due to higher relative staffing multiples and Protiviti improvements.

MorganStanley – Underweight ($19.00 target price): 10/22/09 – The firm retained an Underweight rating and a target price of $19.00.

Stifel Nicolaus – Sell (no target price): 10/22/09 – The firm maintained a Sell rating. INVESTMENT SUMMARY: The firm remains concerned about the weak economy.

Research Associate Vinita Gupta Copy Editor Sreela Bose Content Ed. Shikha Kansal

Zacks Investment Research Page 17 www.zackspro.com No. of brokers reported/Total 15/15 brokers Reason for Update Earnings

Zacks Investment Research Page 18 www.zackspro.com