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Executives

Max Messmer - Chairman of the Board & CEO

Keith Waddell - Vice Chairman of the Board, President & CFO

Analysts

Mark Marcon - R. W. Baird

Andrew Steinerman - JPMorgan

Kelly Flynn - Credit Suisse

Jeffrey Silber - BMO Capital Markets

Tim McHugh - William Blair & Company

Sara Gubins - Bank of America Merrill Lynch

Tobey Sommer - SunTrust

Ashwin Shirvaikar - Citigroup

Paul Ginocchio - Deutsche Bank

Gary Bisbee - Barclays Capital

Kevin McVeigh - Macquarie

John Healy - Northcoast Research

Robert Half International Inc. (RHI) Q3 2010 Earnings Call October 20, 2010 5:00 PM ET

Operator

Hello and welcome to the Robert Half International Third Quarter 2010 Conference Call. Our hosts for today's call are Mr. Max Messmer, Chairman and CEO of Robert Half International; and Mr. Keith Waddell, Vice Chairman, President and Chief Financial Officer.

Mr. Messmer, you may begin.

Max Messmer

Thank you, and hello, everyone. Thank you for joining the call today. As is our custom, I would like to remind everyone that comments on this call contain predictions, estimates, and other forward-looking statements. These statements represent our current judgment of what the future holds, and include words such as 'forecast,' 'estimate,' 'project,' 'expect,' ' believe,' 'guidance,' and similar expressions. We believe these remarks to be reasonable, but would remind you that they are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. We've described some of these risks and uncertainties in today's press release and in our SEC filings, including our 10-Ks, 10-Qs, and today's 8-K. We assume no obligation to update the statements made on this call.

Now let's review the third quarter. Third quarter revenues were $817 million, up 13% from the third quarter of 2009, and up 6% sequentially from the second quarter. Income per share for the third quarter was $0.14, up 130% from the $0.06 reported in the third quarter of 2009, and up 74% from the $0.08 reported in the second quarter of this year.

Cash flow from operations during the third quarter was $50 million with capital expenditures of $8 million. We paid a cash dividend to shareholders of $0.13 per share during the quarter for a total of $19 million. We also spent $11 million to repurchase 500,000 shares of RHI common stock during the quarter, approximately 2.1 million shares remain available for repurchase under our Board approved stock repurchase plan. We were pleased to see broad-based increases in demand throughout our operations, each of our staffing divisions and Protiviti reported both year-over-year and sequential revenue gains during the third quarter.

I'll turn the call over to Keith for a more detailed look at the third quarter results.

Keith Waddell

Thank you, Max. I'll start with companywide revenues. As Max indicated, third quarter revenues were $817 million, up 13% from the third quarter of 2009 and up 6% sequentially. The year-over-year and sequential growth rates were 14% and 6% respectively on a constant currency basis. There were 64 billing days in the third quarter, the same as the third quarter of last year. There were 63 billing days last quarter, and the current fourth quarter has 62 billing days.

Accountemps revenues were $313 million in the third quarter, up 9% from this time last year, and up 4% sequentially on a same day basis. Accountemps is our largest staffing division and accounts for 38% of company revenues. There are 355 Accountemps locations worldwide. OfficeTeam had third quarter revenues of $163 million, an increase of 22% from the third quarter of 2009, and an increase of 7% sequentially on a same day basis. OfficeTeam is our hired administrative staffing division, and represents 20% of company revenues. There are 321 OfficeTeam locations worldwide. Third quarter revenues for our Robert Half Management Resources division were $98 million. This is an increase of 9% from a year ago and an increase of 4% sequentially on a same day basis.

Robert Half Management Resources places senior level accounting and finance professionals on a project basis. It has 153 locations worldwide, and makes up 12% of company revenues. Robert Half Technology had third quarter revenues of $87 million, up 17% from the third quarter of 2009, and up 5% from the second quarter of this year on a same day basis. Robert Half Technology places IT professionals on a consulting and full time basis. It operates in 117 locations worldwide, and accounts for 11% of company revenues. Robert Half Finance & Accounting, our perm placement division had third quarter revenues of $57 million. This is a 33% increase from the third quarter of last year, and a 2% increase sequentially. This business was established in 1948 and it operates in 355 locations worldwide. Our perm placement division accounts for 7% of companywide revenues.

International staffing operations had revenues of $204 million during the third quarter, up 11% from the third quarter of 2009, and up 8% sequentially. On a constant currency basis, revenues for international staffing operations were up 15% compared to the third quarter of last year and up 7% sequentially. We have staffing operations in 100 locations in 18 countries outside the US International staffing operations represent 28% of total staffing revenues.

Protiviti revenues were $99 million during the third quarter, up 2% from a year ago, and up 8% from the second quarter of this year on a same day basis. Formed in 2002 Protiviti is a global business consulting and internal audit firm providing risk, advisory and transaction services. It has 60 locations in 16 countries, and accounts for 12% of total RHI revenues. Protiviti’s international operations represent 25% of total Protiviti revenues.

Turning to gross margin, gross margin in our temporary and consulting staffing operations was $225 million in the third quarter or 34.1% of applicable revenues. This is up from 33.5% one year ago, and unchanged from the 34.1% reported last quarter. Overall staffing gross margin during the third quarter was $282 million or 39.3% of staffing revenues. This compares to 38.1% of revenues one year ago, and 39.6% of revenues in the second quarter of this year. The mix of permanent placement revenues directly impacts overall gross margin and represents 8%, 8.3% and 6.8% of revenues for the third quarter of 2010, the second quarter of 2010, and the third quarter of 2009 respectively.

Protiviti gross margin was $27 million in the third quarter or 27% of Protiviti revenues. This compares to 24% of its revenues in the second quarter of this year. The increase is due primarily to higher chargeability. Staffing SG&A cost during the quarter were $245 million or 34.2% of staffing revenues. This compares to $223 million or 35.4% of revenues for the third quarter of last year, and $238 million or 35.3% of revenues for the second quarter of this year. The decline as a percent of revenues relates to the absence of litigation costs, which were expensed last quarter. SG&A cost for Protiviti during the quarter were $27 million or 26.9% of revenues. This compares to $26 million or 26.8% of revenues for the third quarter of last year, and $29 million or 31.2% of revenues for the second quarter of this year. This decline as a percentage of revenue also relates to the absence of prior quarter litigation cost.

Turning to operating income, third quarter operating income for our staffing divisions was $37 million or 5.2% of staffing revenues. The temporary and consulting divisions contributed $32 million of this amount or 4.8% of applicable revenues. Third quarter operating income for our permanent placement division was $5 million or 8.9% of applicable revenues. Operating income was $113,000 for Protiviti in the third quarter compared to an operating loss of $6.8 million in the second quarter of this year. The improvement relates primarily to the $5.7 million increase in Protiviti revenues during the quarter. Turning to accounts receivable, at the end of the third quarter, accounts receivable were $428 million with implied days sales outstanding of 47.6 days compared to 45.7 days at the end of last year's third quarter.

Now guidance, we observed the following business trends during the third quarter and the first weeks of October. On a same day sequential basis, revenues from our temporary and consulting divisions increased in July, increased in August, and increased again in September. Revenues for our permanent placement operations decreased in July, increased in August, and increased again in September. During the first two weeks of October, revenues from our temporary and consulting businesses were up 13% compared to the same period last year.

For the first three weeks of October, revenues from our permanent placement division were up 10% compared to the same period last year. As we said before, we would caution against reading too much into perm trends over these short time periods.

Taking into account these trends, we offer the following fourth quarter guidance, revenues, $800 million to $850 million; income per share, $0.12 to $0.18. As we've noted in the past, our guidance does not include any amounts for the possible settlement of outstanding legal claims.

As you know, we limit our guidance to one quarter. The estimates we provided on this call are subject to the risks mentioned in today’s press release. Max?

Max Messmer

Thank you, Keith. As I noted earlier on the call, we were pleased to see broad based improvement throughout our operations. We saw higher demand for our services and higher revenues in all of our staffing divisions and Protiviti both on a year-over-year basis and sequentially. Unemployment rates in United States remain high, but it has been our experience that companies do appear to be more open to hiring on both the temporary and full time basis. As business demand grows, the first course of action for many companies is often to bring in temporary workers, which keeps their labor cost variable. We have seen this pattern for several quarters now. For companies that made deeper personnel cuts and we believe many companies made severe cuts last year, their teams are now too lean in some cases. This makes them more likely to hire full time personnel at the first sign of improving business conditions and we have witnessed this in our permanent placement division.

Hiring demand has improved here and outside the United States, as Keith indicated, revenues for our non-US staffing operations were up 11% from the third quarter of 2009, and up 8% sequentially from the second quarter. We have emerged strongly from past recessions and we believe we are well positioned today. Our field teams are eager to take advantage of more favorable business conditions. We also were pleased to see higher revenues in Protiviti. Protiviti has continued to diversify its service offerings and clients are responding favorably. We see business opportunities in helping companies navigate the various financial reform measures that have either been introduced or are in process around the world in response to the global financial crisis.

We also see potential in Protiviti’s information technology practice, which is working with companies in areas such as IT security and privacy, IT applications controls, and infrastructure management. Protiviti and our staffing brands also are working together more frequently on joint projects for clients and bringing a full suite of staffing and consulting services to those clients.

At this time Keith and I will be happy to respond to your questions. We ask that you please limit yourself as is usual to one question and a single follow-up as needed. If you have additional question we will certainly try to return to you later in the call. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions) And your first question will come from the line of Mark Marcon with R. W. Baird. Your line is now open.

Mark Marcon - R. W. Baird

I was wondering if you could talk a little bit about the outlook for Protiviti. Nice progress here in terms of the sequential revenue growth. Can you give us a little bit of a sense of if things continue and I guess what's embedded first of all in your overall guidance for Protiviti for the fourth quarter, and then if things continue, how should we think about the profitability levels of Protiviti as we go out one or two years?

Max Messmer

Well, Mark, regarding what's embedded into the guidance for Protiviti. Remember that there'll be three fewer billing days in the fourth quarter than in the third. Protiviti is more impacted by the holidays as their clients, many of them, are shutdown between Christmas and New Years, and because if they're not open, our staff can't work. So for that reason our guidance would be that the revenues would be a little lighter, not a lot lighter, but a little lighter in the fourth quarter than in the third, but you also get some payroll relief for those same reasons. Our guidance would say that the operating income from Protiviti would be about the same, maybe a little higher. Clearly, there has been a lot of improvement from the first half of the year both in the US and outside the US

As to profitability, Protiviti had solid double digit margins in their past. Clearly the objective is to get back to double digit operating margins. Given where we've come, it's nice to be in the black again. It's nice to be forecasting that we'll stay in the black. The challenge will be the seasonal slowness that typically happens in the first quarter, and we're already working hard with our cost structure which is more variable as we speak to try to deal with that, but the improvement we've seen for several quarters now in Protiviti continued into this quarter and is expected to continue into the quarter we're in.

Mark Marcon - R. W. Baird

So, can you talk a little bit about the timing of some of these initiatives that could come through in terms of financial reform, as well as potentially some fallout from the mortgage mess that the banks are experiencing?

Max Messmer

Well, the financial services is Protiviti's largest industry group, so they are quite well represented there. There are lots of laws and regulations yet to be defined with the Frank-Dodd Act. So that I'm not sure there is a huge amount of real specific meat on that bone as we speak. That said, they are very active in the regulatory environment, anti-money laundering comes to the mind, but we believe Protiviti is very well positioned in financial services and will get more than its share of that business as those opportunities arise.

Operator

Your next question comes from the line of Andrew Steinerman with JPMorgan. Your line is now open.

Andrew Steinerman - JPMorgan

Could you talk a little bit about temp gross margins here? Do you feel like all the strength here, or relative strength is coming on the wage side, or do you feel like you are starting to get some pricing power now that volumes have returned pretty much in all your businesses and what would temp gross margin be implied in the fourth quarter guidance?

Keith Waddell

During the quarter, our temp to hire conversions were actually up 19 basis points versus the second quarter. That offset, the absence of the workers’ comp credit that we had last quarter, which didn’t repeat, and our pay bill spreads were slightly smaller this quarter than last, but the conversion increase offset the other two such that they were flat. It would be our hope in the fourth quarter that we’d stay in that flat range again, but understand that conversions are somewhat volatile, so there could be some variability there.

Andrew Steinerman - JPMorgan

Could you talk a little about pricing power?

Keith Waddell

Year-over-year, our bill rates were down 3.9%, but sequentially they were only down 0.4%. We are actually beginning to see increases in tech and to a lesser extent office administration, which are the earlier participants in the up cycle for us. So we’re cautiously optimistic on gross margins. We felt like we’ve managed them reasonably well including absorbing the higher state unemployment cost at this point, and conversions are still very much at the low end of historical range, so we hope there is upside as well there.

Andrew Steinerman - JPMorgan

So price should follow volume?

Keith Waddell

Price should follow volume. I think, one can make a case that one of the impacts of the high unemployment rate might be that prices lag more than traditionally, but that said that same phenomenon impacts pay rates and it's the differentials that's more important than the absolute.

Operator

Your next question comes from the line of Kelly Flynn with Credit Suisse. Your line is now open.

Kelly Flynn - Credit Suisse

Could you give us the tax rate that you expect for Q4 and just give a little color about what's going on there given that's it's been moving around? And then also just on perm, can you give a little more color on what your Q4 guidance implies for perm, and specifically address how you're thinking about the tougher comps?

Keith Waddell

Well, on the tax rate as we've talked about for a few quarters now, the global composition of our income and some of the foreign locations, we still have small losses, all impact our weighted average tax rate. So 42% to 45% for the near term probably isn't a bad estimate, and again there is more volatility to that than there traditionally would be because of the relative importance of foreign operations earnings or lack thereof.

As to perm and guidance, the fourth quarter seasonally is always a little bit softer in perm than the other quarters. Companies run out of hiring budget. Companies begin to work on their following year hiring budget and throttle back a bit on their full time hiring. There is the December effect and we've lived through over 20 Decembers and Decembers are particularly hard to predict in perm. We've had great ones; we've had some not so great ones. So there is probably more uncertainty with our perm component of our guidance than any other one line of business. But that said, our people remain bullish on perm. It's just the typical fourth quarter jitters.

Operator

Your next question comes from Jeff Silber with BMO Capital Markets. Your line is now open.

Jeffrey Silber - BMO Capital Markets

Just to keep the focus on perm. If I look at second quarter 2010 versus third quarter 2010, your perm revenues increased slightly, but your operating profit fell a little bit. Were there extra investments that you made this quarter, and if so, if we can get a little bit more color on that?

Keith Waddell

You are exactly right. What happened during the quarter, Jeff, was for our more tenured and productive people, we actually modified the milestone component to their compensation plans to reward them for their tenure and productivity such that we had higher compensation cost in the quarter than would be typical. We wouldn’t expect that to repeat to the same extent in the coming quarter.

Max Messmer

To some extent, Jeff, it was a reward for their tenacity during the recession as a whole that we felt they had earned some extra compensation.

Jeffrey Silber - BMO Capital Markets

Just going back on modeling operating margins probably 2Q is more normalized than 3Q?

Keith Waddell

Well, and we hope over time that Q2 we grow above that obviously, but Q3 did have this somewhat non-recurring compensation charge that depressed what would otherwise have been recorded.

Jeffrey Silber - BMO Capital Markets

I haven’t asked this question in a while, but I want our focus on DSOs, it ticked up a little bit in the quarter, on a year-over-year basis. Is there anything going on that we should be aware of?

Keith Waddell

I’d say a couple of things. Seasonally, DSOs always stretch out a little bit during these months as our clients' accounts payable departments aren’t as available as they are on holiday. Further our revenues were particularly back-loaded this quarter. September was particularly strong. If you just do the math, if you’ve got the revenues that are back ended that has the impact, and that’s a good thing to impact your DSO.

Operator

Your next question comes from the line of Tim McHugh with Williams Blair & Company. Your line is now open.

Tim McHugh - William Blair & Company

Can I first follow-up on that comment that Keith you just made. Can you give us a rough sense, what was the magnitude of the improvement in September versus maybe the rest of the quarter; was it substantially different that you saw as the quarter came to an end?

Keith Waddell

We can pick at words. I'd say it was meaningfully different, but I'm not sure I’d say it was substantially different. I don’t want to get into a month-by-month sequential growth discussion every quarter, but it was meaningfully better.

Tim McHugh - William Blair & Company

Can you give us some comment on, you talked about the perm side of SG&A and you gave some extra comp there. What are you doing on the temp side, are you at a point where you’re going to start looking at new offices and staffing up existing offices, what's kind of the investment philosophy at this point in the business?

Keith Waddell

On the temp side, we are beginning to add the headcount. I’d say we added mid-single digits to our headcount during the quarter that was tech related, first, and our smaller Accountemps operations where growth begin to kick in, where we felt like we were understaffed, so we did add to our staff during the quarter, given the results that we had. Along those lines, I would make a couple of points. This is the fastest recovery, we've ever experienced, post downturn.

Our temp business is 20% above its lows versus at the same time in the last up cycle it was still flat relative to the lows. Our perm business is 40% above the lows versus same time last cycle it was also flat versus the lows. Those things said, our temp business is still only 70% of its prior peak. Our perm business is only 50% of its prior peak and many make the case that prior peaks will well be exceeded in this cycle because of the secular shifts. I would also point out there is a lot of discussion about the late cycle or later cycle participation of accounting and finance, and we're happy to report that the lag between accounting and office administrative as an example is the shortest lag we've ever experienced.

This time around there was a four to five month lag between when OfficeTeam went year-over-year positive in revenues and when Accountemps went year-over-year positive. In the last cycle that lag was 9 to 10 months. So for all of those positive reasons, we've begun to add to headcount starting with technology and secondly backfilling the locations that we felt got a little too small in Accountemps.

Operator

Your next question comes from the line of Sara Gubins with Bank of America Merrill Lynch. Your line is now open.

Sara Gubins - Bank of America Merrill Lynch

On Protiviti, could you give us some more detail about trends in the US versus international?

Keith Waddell

I'd say the trends in the US, there's more seasonality in the US, so we got some SOX lift during the quarter, certainly not the traditional SOX lift, and SOX year-over-year was still down in Protiviti as was expected. We're seeing a lot of strength on the IT side, security, privacy, application controls, as Max talked about, so very strong in the US Outside the US, you had the Europe August impact which clearly negatively impacts their numbers and comparisons, but overall we're quite pleased with the path that Protiviti has been on that has improved quarter-over-quarter for several quarters in a row.

Sara Gubins - Bank of America Merrill Lynch

Then as a separate follow-up, last quarter, you had broken out Accountemps into two halves, where you had given us some indication on transactional accounting and staff accounting. Could you give an update for how those two halves performed during the third quarter?

Keith Waddell

Well, the accounting operations or the lower scaled part continued to perform well, but what really came on was the finance or staff accounting side which was running much harder this quarter, which includes credit and collections, professionals, budget analysts.

It's frankly a very traditional recovery to see the transactional positions pick up first and the hire level or the staff level positions pick up after that, and I would say that Management Resources follow that same trend, where we're seeing project work in accounting get traction a little later than did the accounting operations or transactional positions. But very traditional in the timing of when those kick in.

Operator

Your next question comes from the line of Tobey Sommer with SunTrust. Your line is now open.

Tobey Sommer - SunTrust

Staying on the Accountemps section, can you talk about what your view as to why the lag is four to five months this cycle versus 9 to 10 months traditionally?

Keith Waddell

I think, there is a greater awareness everywhere that you want variable labor cost. That using temporary is an effective way to do that. With unemployment rates like they are the quality of the supply of temporaries has never been better. So at the very time you want more cost variability, you have the best people available ever. And for that reason on a secular basis people are using more temporaries.

Tobey Sommer - SunTrust

Great. In terms of the international staffing, can you speak to any areas of particular strength or weakness or add any color in terms of trends there?

Keith Waddell

Sure, I'd say Australia was our strongest market. In Europe, we were led by Germany, but the UK, France and Belgium were solid. So overall doing well outside the US, and Australia for widely documented natural resource rich reasons is leading the group.

Operator

Your next question comes from the line of Ashwin Shirvaikar with Citigroup. Your line is now open.

Ashwin Shirvaikar - Citigroup

My first question is on, Keith, you can separate out the behavior of small business clients versus larger clients is that are small business clients beginning to unwind a bit from the downturn?

Keith Waddell

Well, given that the lion share of our clients are small to middle size businesses, I think, you can pretty much take our numbers as a proxy for their behaviors. While we do have some exposure to larger clients, it's well less than half relative to small to middle size businesses. So clearly, they are using more temporaries. Now whether they are getting more confident about their prospects, we can argue, but it’s a fact they are using more temporaries.

Ashwin Shirvaikar - Citigroup

You'd mentioned in a previous reply, pricing is relatively strong in tech and beginning to get strong in OfficeTeam or it's at least getting better. Is there a way to quantify, when you say it's positive, is it plus one, plus two, any color there?

Keith Waddell

They are very de minimis percentages, but they stick out and that they are positive relative to the declines we've seen of late in all of our divisions.

Operator

Your next question comes from Paul Ginocchio from Deutsche Bank. Your line is now open.

Paul Ginocchio - Deutsche Bank

I know it's only been three weeks since the federal government passes $30 billion small business lending bill. I'm just wondering if any clients are talking about it, and if you've ever seen anything like this before, and if you could try to think about its impact on your SME customer base?

Keith Waddell

Well, certainly it’s a net positive. We've made comments on prior calls that the credit crunch or the lack of credit availability isn't the biggest issue, our small business clients have had notwithstanding the headlines. The biggest issue was demand for other services but that said, more credit is a better thing rather than not and we haven't seen any very specific demand come from that.

Paul Ginocchio - Deutsche Bank

Is there a timeline on that or would there be based on if it started working when do you think you might see a pick of advance if there is anything help from us?

Keith Waddell

I would just be speculating.

Operator

Your next question comes from the line of Gary Bisbee with Barclays Capital. Your line is now open.

Gary Bisbee - Barclays Capital

When I look at the mix of where you've got off, it strikes me, it's sort of interesting that you have only a third as many technology offices as you do account temps or the perm business and given I think some people would argue there is better secular trends potentially impact and certainly it's doing a little better today. Is that just a legacy issue, why is that and what's the plan? Do you have any plans to accelerate adding technology into some of the existing offices?

Keith Waddell

Well, I think traditionally, where we have offices is very candidate driven and that how many do you need to cover the candidate base, how far are they willing to travel and if you look at tech firms generally, you don't need as many satellite locations as you do for some of the other service lines. So I wouldn’t expect we would ever have as many locations in technology as we do in Accountemps.

We'd certainly there is room for more than we have now and outside the US we certainly have countries that have virtually no presence in technology as we speak, so that’s Greenfield opportunity. So I am sure it’s less and it doesn’t need to be as much less as it currently is. But that said, I am not sure it will ever be the same number. You don’t need as many offices in technology, you can cover a wider area with a given office in technology than you can and as an example in OfficeTeam.

Max Messmer

That having been said, we are clearly focused on expanding our technology business in existing offices and perhaps some others. So I don’t want to leave that unsaid.

Keith Waddell

I think the other metric we would follow more closely is, whatever our staff levels, rather than how many physical offices we have. We think there is a huge upside in the staff levels we can have in the geographies where we already exist. So to me the featured fight is getting appropriately staffed to take advantage of the opportunity not necessarily having a bigger physical footprint.

Gary Bisbee - Barclays Capital

Given though, its sounds like Protiviti has got growing technology presence there and I am not sure if you are doing much of that in management resources. Can you give us any sense what maybe overall company mix of revenue would be more technology focused than either the accounting and finance or office segments? Is that getting up towards 20% and do you have any goals to have that more balanced?

Keith Waddell

I think you can quickly do research and determine that the overall technology staffing market is larger than the overall accounting and finance market. Therefore, we think there is a huge opportunity in technology. Traditionally, technology over the years has been contract programming at large Fortune 1000 companies at margin levels that are a bit challenged relative to our typical profile and so what we're getting after is how can we profitably approach the technology market and we're pretty encouraged with what we see so far.

Operator

(Operator Instructions) And your next question comes from the line of Kevin McVeigh with Macquarie. Your line is now open.

Kevin McVeigh - Macquarie

I wonder if you could talk a little bit about the shift on Protiviti towards more variable as opposed to fixed cost structure across the Group overall and how management resources plays into that?

Keith Waddell

The Protiviti has made tremendous progress in using contractors, consultants for management resources and frankly from all our divisions including RH Technology own its assignments. There has been a meaningful increase in the variable component of their labor cost which we're very pleased with because of the inherent seasonality that exists in Protiviti.

Second half is always going to be somewhat better than the first half and so we'd like to be in a position that have our cost flex just as our revenues do. We're not totally there yet but we've made light years of progress in the last 12 months and we now have a double digit percentage of Protiviti's total workforce represented by contractors from our staffing divisions.

Kevin McVeigh - Macquarie

Then just real quick on the buyback it seems like you scaled up back a little bit relative to the second quarter, any thoughts on that going forward?

Keith Waddell

Long term, we're committed to spend our cash flow on repurchases and dividends and even this year, year-to-date, we've done just that. Some quarters returned up the spigot, some quarters returned down the spigot but over a long period of time and in fact, if we go back five years, and you will find, we've spent almost exactly 100% of our cash flow on dividends and repurchases and we remain committed to do so.

Operator

Your last question comes from the line of John Healy with Northcoast Research. Your line is now open.

John Healy - Northcoast Research

Big picture question for you, when I look at your results as well as your peers, we can clearly see the value proposition behind temp staffing has changing. I was curious to get your thoughts if you think over the next, I don't know, if it’s the next six months or the next year or two. Do you think the value proposition of what you could do on the perm side of the business is changing and will your customer see you more as an HR partner than they saw in the past, do you think?

Keith Waddell

I understand that our traditional middle market account doesn't have an HR department and when you need an accounting manager or a controller or a business manager, you can't go to HR and tell them to hire them. They effectively outsource that to us which makes sense from them given their size. So I don't think that demand driver changes and if anything, gets stronger rather than not.

Hiring demand has improved here and outside the United States, as Keith indicated, revenues for our non-US staffing operations were up 11% from the third quarter of 2009, and up 8% sequentially from the second quarter. We have emerged strongly from past recessions and we believe we are well positioned today. Our field teams are eager to take advantage of more favorable business conditions.

We also were pleased to see higher revenues in Protiviti. Protiviti has continued to diversify its service offerings and clients are responding favorably. We see business opportunities in helping companies navigate the various financial reform measures that have either been introduced or are in process around the world in response to the global financial crisis. We also see potential in Protiviti’s information technology practice, which is working with companies in areas such as IT security and privacy, IT applications controls, and infrastructure management. Protiviti and our staffing brands also are working together more frequently on joint projects for clients and bringing a full suite of staffing and consulting services to those clients.

At this time Keith and I will be happy to respond to your questions. We ask that you please limit yourself as is usual to one question and a single follow-up as needed. If you have additional question we will certainly try to return to you later in the call. Thank you.

Max Messmer

All I'd add is that the typical small to mid-sized business person is fairly entrepreneurial. They have pretty sharp pencils, particularly in a downturn such as we've had and they understand the cost benefits of variable labor. So I think the concept of flexible staffing has been validated maybe in this recession, so I think that bodes well for the industry in general and for us in particular.

Operator

There are no further questions at this time. I'll turn the call back over to Mr. Messmer.

Max Messmer

Thank you. That’s all, the questions we have time for today. We appreciate your interest. Thank you very much.

Operator

This concludes today’s teleconference. If you missed any part of the call it will be archived in audio format in the Investor Center of Robert Half International’s website at www.rhi.com. You can also dial the conference call replay. Dial in details and the conference ID are contained in the company's press release issued earlier today. You may now disconnect.

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Source: Robert Half CEO Discusses Q3 2010 Results - Earnings Call Transcript
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