Hello, and welcome to the Robert Half International Third Quarter 2011 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.

Hello, everyone and thank you for joining us on the call today. Before we review our third quarter results, I would like to remind you that comments made 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 have described some of these risks and uncertainties in today's press release and in our SEC filings, including our 10-Ks, 10-Qs and 8-K. We assume no obligation to update the statements made on this conference call. Now let's discuss the third quarter. Company-wide revenues were $985 million, a 20% increase from the third quarter of 2010. Income per share was $0.31, up 121% from last year's third quarter amount of $0.14 per share. Cash flow from operations in the third quarter was $72 million, capital expenditures were $13 million. We paid our stockholders a cash dividend of $0.14 per share during the quarter, at a cost of $20 million. We also repurchased 2.1 million RHI shares during the third quarter, at a total cost of $48 million. Approximately 6.4 million shares remain available under our board approved stock repurchase plan. We saw a broad-based demand for our professional services throughout the third quarter resulting in double digit year-over-year revenue growth rates for the fifth consecutive quarter. All of our divisions performed well, led by our Technology Staffing division. In addition, we were particularly pleased with the continuing expansion of our gross margins across our Temporary Staffing divisions. Keith Waddell will now provide you with a closer look at our third quarter financial results.

Thank you, Max. As you noted, third quarter revenues for the company were $985 million, an increase of 20% from a year ago, and an increase of 4% sequentially, on a same-day basis. There were 64 billing days in the third quarter, the same as last year's third quarter, and up one day sequentially. The current quarter has 61 billing days. Accountemps had third quarter revenues of $367 million, up 17% from a year ago and up 5% sequentially on a same-day basis. Accountemps is our largest staffing division and has 352 offices worldwide. It accounts for 37% of company revenues. Third quarter revenues for OfficeTeam were $196 million, up 20% from the third quarter of last year and up 3% from the second quarter of this year, on a same-day basis. Established in 1991, OfficeTeam is our high-end Administrative Staffing division. It has 315 locations worldwide and represents 20% of company-wide revenues. Robert Half Management Resources had revenues of $118 million in the third quarter, up 20% from a year ago and up 3% sequentially on a same-day basis. Robert Half Management Resources, which was introduced in 1997, places senior-level accounting finance professionals on a project basis. It has 151 locations worldwide and makes up 12% of company-wide revenues. Third quarter revenues for Robert Half Technology were $114 million, up 30% from the third quarter of last year and up 7% sequentially on a same-day basis. Robert Half Technology was introduced in 1994 and places information technology professionals on a project and full-time basis. This business operates on 113 locations worldwide and accounts for 12% of company-wide revenues. Third quarter revenues for Robert Half Finance & Accounting, or Permanent Placement Division, were $79 million, up 38% from last year's third quarter and down 3% sequentially, on a same-day basis.…

Thank you, Keith. We had another strong quarter with double-digit revenue growth rates across all lines of business on a year-over-year basis. Technology Staffing continued to perform well and we also saw a nice year-over-year and sequential growth in our other Temporary and Consulting Staffing divisions during the quarter. Our Permanent Placement business saw some seasonal sequential flattening but remained very strong overall. Revenues for Robert Half Finance & Accounting were up 38% year-over-year in the third quarter. This continues to be among the fastest post downturn recoveries we have seen in our business. Company-wide revenues have grown faster following the last recession than in periods following other downturns. In our Staffing divisions, there has been a tightening labor supply in some specialties, particularly for Information Technology positions. Within the professional disciplines we serve, the unemployment rate is much lower than the overall U.S. rate, and this has contributed to a stronger pricing environment. Our internal headcount investments in Technology Staffing services have been productive, which has demonstrated by our third quarter revenue for Robert Half Technology, as well as its performance over the last several quarters. We see continued opportunities, both in the near and long-term in Technology Staffing and in our core Accounting and Finance Staffing businesses. We were pleased to also see higher demand for Protiviti's Consulting and Internal Audit Services during the quarter, particularly in the United States. The need was most pronounced for information technology-related services, as well as consulting solutions offered to the financial services industry. At this time, Keith and I are happy to respond to your questions. [Operator Instructions]

[Operator Instructions] And your first question comes from the line of Mark Marcon from Robert W. Baird. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I was wondering if you could talk about 2 things. First, can you just give us a little bit of a fill in with regards to the guidance just in terms of how you would assume gross margins and SG&A leverage is going to progress? And then secondly, I'm wondering if you can talk a little bit more about the strong progress that you've achieved in RH technology. And specifically, what are you seeing there in terms of how quickly you can ramp your people up. Obviously, it was a strong performance, but just how quickly you can ramp the folks up. How much runway and what is -- is there any constraint that you're seeing from a supply side that would limit the growth?

Okay. So let's first talk about guidance. So first, let's remember that on our guidance, our revenue guidance, the fourth quarter has 3 fewer billing days than the quarter that just ended. Protiviti has 5 fewer billing days because of the holiday impact. At the high end of our range, we're assuming that per billing day revenues get a traditional seasonal lift in the fourth quarter, which we see in Accounting, with budgets in yearend, which we see in OfficeTeam, with holiday customer service and fill in demand. Our gross margins, as we discussed a bit during our formal remarks, were quite good in the third quarter. We expect that momentum to continue into the fourth quarter. On the SG&A front, we do plan to continue to hire, albeit at somewhat lower rates. On the Temp side, we added low single-digits in terms of number of heads during the third quarter. We plan to continue that into the fourth. On the Perm side, we added in the high single-digit rates and that will probably bring back into the low single-digits. From the guidance for Protiviti, our fourth quarter guidance assumes in the U.S., we continue very strong. We were quite pleased with our performance in Protiviti in the third quarter. We think that rolls into the fourth, adjusted for 5 fewer billing days. In the non-U.S., we assume that, that's going to be down modest sequentially. We continue to be challenged particularly in Japan, and a couple of the EU countries. In Protiviti, we would expect operating income to be down modestly versus the third quarter and versus last year, a year ago. But generally speaking, overall, we've got fewer billing days to overcome, which is not new for the fourth quarter. We've got the December Perm uncertainty, which is not new for the fourth quarter. But given those parameters, we feel pretty good about where we are and our guidance reflects that. On the second part of your question, RH Technology, 30% year-over-year growth. We've seen a nice payback on the investment hiring we've done so far. As to how much runway and whether there’s a supply limitation in our growth, clearly, technology is in the area that is the tightest in supply as it relates to the candidate side of the business. That said, we remain very optimistic that we can continue to have outsized growth rates in technology, both on the technology development side, as well as on the administrative or the production side of technology. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And then you always say you're not macroeconomist but I'm wondering what you're seeing out in the field. Is there -- your guidance is relatively clear, but just in terms of -- are there any signs that you're seeing anywhere in terms of softening from your perspective?

Well, let me answer the question this way. Let's talk about our start for the quarter versus the quarter just ended. So Perm, we started the quarter up 66%, which at fate, sounds wonderful. We would caution a bit that the comps a year ago were on the easier side. So while we had a really good start, it wasn't quite that good. On the Temp side, 15% out of the gate versus 20% we just reported, 3 points of that difference frankly, is currency so the differential isn't as great as it might otherwise look. And we remain optimistic there in the United States. Pretty much across the board, divisions and geographies, we feel very good about how we started the quarter. Outside the United States, it's a little more even -- uneven. We're quite strong in Germany and France. We're not quite as strong in Belgium and in the U.K. Plus we've got some places like Australia that are coming out against monster comps that make our year-over-year growth rate look lower but still they're doing quite well.

You're next question comes from the line of Tim McHugh from William Blair & Company. Timothy McHugh - William Blair & Company L.L.C., Research Division: Just wanted to drill down on your comment about the gross margin in Temp and how you expect that to improve further, I think -- or the momentum continuing into the fourth quarter. Can you give us some of the details around the bill pay or the actual growth rates in the bill and pay rates. And are you expecting gross margin to be up further in the fourth quarter?

Well, so first of all, the statistics are our bill rates were up 7.2% year-over-year for the quarter and they were up 1.1% sequentially. Our pay rates were up less than that. Our field team did an excellent job with pricing, with being very disciplined in the gross margin side. Our guidance assumes we continue the third quarter rates into the fourth quarter. We hope that's conservative. We know of no reason that they would go down. But our guidance doesn't necessarily assume they would rise either. But we feel great about gross margins. To me, it was one of the absolute bright spots for the quarter and our people did just an outstanding job with the discipline on pricing. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then on Protiviti, there seems to be a growing divergence between the U.S. performance and international. Can you give us a sense how profitable are you in the U.S., and – or what's the delta between the profitability between the 2? And then, what you can do to, I guess, bring that closer together or boost the overall Protiviti margins?

So you are correct. We had an excellent quarter in the U.S. It was quite profitable. We were slightly unprofitable outside the U.S., led by Japan. Japan has been quite challenged since the earthquake, tsunami. We're working hard to improve that. We don't expect that to turn around overnight. But we feel wonderful about the U.S. We feel we're making progress outside the U.S. We're also making progress converting some of our non-U.S. operations from owned, to member firm or franchise as well, which would also take some pressure off the P&L. Timothy McHugh - William Blair & Company L.L.C., Research Division: But it will take time, it's fair to assume, for some of those things to have an impact?

Well, they won't happen overnight. But we're not taking years either. I mean, we hope to quarter-by-quarter, chip away at both the profitability or the lack thereof, in some of the non-U.S. operations, as well as in the conversion from owned to member firm. Look, we don't have the critical mass in many of the non-U.S. locations, which shows itself most prominently in -- it doesn't have the diversification of revenue sources that we have in the U.S. In the U.S., financial services and technology have led the day. In some/many of our non-U.S. operations, we don't have that kind of revenue diversification, which is what we're working on.

Your next question comes from the line of Andrew Steinerman from JPMorgan. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: When you talk about the hiring in Perm that you'll continue in the fourth quarter by a less rapid rate, do you feel like operating margins will remain at these sort of sub-10% levels or should revenue growth push operating margins higher comparing the third quarter to the fourth quarter guided?

We expect a little revenue growth sequentially in the fourth quarter. And from that, we do expect some expansion of our operating margins in Perm. Having said that, we did do a lot of hiring in the third quarter. Those people aren't totally up to speed. We're going to add to that, albeit at a smaller rate. So the margins still will be depressed relative to mid-cycle margins. But they should be better than the third quarter just reported. Andrew C. Steinerman - JP Morgan Chase & Co, Research Division: Well, having a quick comment on conversions. I heard you say steady percentage year-over-year in the third quarter. How far are we away from kind of a normal percentage of conversions?

We're still a long way away, Andrew. So the normal range is 3% to 5% of revenue. In this downcycle, we went below the 3% and frankly, we're back up to 3%. So we returned to the low end of the traditional range, which to us says, there's a lot of upside there.

Your next question comes from line of Paul Ginocchio from Deutsche Bank.

This is actually Ato Garrett in for Paul. My first question, it relates to the growth -- drivers of growth for Accountemps. As we think about the growth coming from price versus new clients versus existing clients taking on more temps, could you talk about how those 3 factors have contributed and how that's changed over the last few quarters? And my second question relates to larger clients. As far as you think of some of the clients that may have walked away due to pricing increases, has scarcity forced them or caused them to invite you guys back to bid for work?

As to drivers of growth, we gave you that pricing was up 7.2% year-over-year, the rest being units. And that's split between the addition of new clients, as well as growth in existing accounts. We've always focused in both places, and I'd say there's a nice mix of that this quarter as well. As to larger clients coming back because they walked away due to pricing, I mean, frankly, that's not something that was meaningfully experienced during this past downturn. And as you know, the majority of our clients were small to middle-sized businesses and we've -- during the downturn, we've attempted very much to be competitive. Our pricing did go down during the downturn but it's coming back. The market is clearly stronger and candidate supply is certainly tightening. And for those reasons, we're doing a better job with our pricing. I thought it was interesting in this most recent JOLTS report that's put out by the BLS, that reports job openings by industry. And professional and business services has the single largest number of job openings of any category reported, which is yet another indication of the strength of professional and business services relative to the market overall.

I'm glad you referred to that Keith, I was going to mention it. The other observation I would make on pricing is that you have to remember, what's expensive is hiring the wrong person. And so to the extent you're doing a good job and have a good reputation for quality, these are really nominal cost to the client.

Your next question comes from the line of Giridhar Krishnan from Crédit Suisse. Giridhar Krishnan - Crédit Suisse AG, Research Division: I think you guys addressed the capacity impact. Could you address that within some of the other temps segments? Does your comment applied to all of the segments or primarily temp?

Well, we said that last quarter, we began to hire more broadly across our Temp divisions. We in fact, did that. Because of the sequential growth that we posted. And the further sequential growth that we expect, we largely absorbed those numbers. And it didn't impact margins hardly at all. So because we remain bullish, particularly in the United States, we're going to continue to add to headcount in a low single-digit way, and we think that it's appropriate given our expectations for future growth. Giridhar Krishnan - Crédit Suisse AG, Research Division: Okay. And with respect to your gross margins in Q4, should we expect the workers comp accruals to be similar to last year?

Well, you're referring to the twice a year actuarial reviews we have for our workers comp. And for many years running now, we've received credits and reduced our accruals. I think, the outlook, if anything, is for some lift in the fourth quarter for that reason, we did not bake any of that in. I think last year, the lift was $1.5 million which was less than $0.01 a share. So nice to have, but not terribly significant. Giridhar Krishnan - Crédit Suisse AG, Research Division: Okay. So it's not baked in, just to clarify, in your guidance?

We did not bake it in.

Your next question comes from the line of Jeff Silber from BMO Capital Markets.

Max, I believe it was you in your prepared remarks, talking about revenue growth being fairly strong at this point in the economic expansion relative to prior cycles. I was wondering if you can tell us how recruiter productivity compares to prior cycles at this point?

Well, on the growth front, the numbers speak for themselves about how we're doing this time versus prior recessions, Jeff, and you've been around a long time so you've seen it. I'd say the recruiter productivity is quite good. Obviously, with new hires, it takes a while to get them completely up to speed. As Keith just mentioned, in terms of our Robert Half hiring, I think technology has been a major plus for us and we work hard to use all the tools that technology provides. So I feel good about recruiter productivity and we're working hard to continually improve that productivity.

Okay, great. And then, just a couple of quick numbers question, it's more on looking at the fourth quarter. What should we be using for tax rate, share count and capital spending?

Tax rate was a little lower this quarter as we have more income. You cover better your nondeductibles, to the extent we grow fourth quarter sequentially, we would actually expect the tax rate to come down a bit, let's call it, 38-ish percent. Share count. We bought 2 million shares during the quarter. You didn't see the full benefit of that to the extent we buy more in the fourth. My guess is, you can take your share count down $0.5 million to $1 million in that category. CapEx, we spent $13 million, $14 million in the quarter, we're pretty much been on that pace for the last few. So we're probably talking $15 million plus or minus, $2 million or $3 million.

Your next question comes from the line of Jim Janesky from Avondale Partners.

My question is about Perm. Wondering what you're seeing that gives you the confidence to continue to hire there? And did those hiring plans changed as the quarter progressed? So for example, did you -- are you hearing from your clients that maybe there was pause in July and August, as they were worried about the overall economic environment but expect that to pick up again? Have orders increased going into the fourth quarter?

Right. So in Perm, the good news is that the order flow is still very good, very strong. The flip side is the sales cycle has gotten a little longer. Clients are asking to see more candidates before making their decision, clients are raising the bar as to the profile they'll hire. Candidates are a little more willing to accept a counteroffer from their existing employer, all of which extend the sales cycle a bit. What we're not seeing is any significant disruption of the order flow. As far as did anything changed with our hiring plans during the quarter? I'd say in the U.S., absolutely not. Non-U.S., with all the discussion of the European Credit and Sovereign Debt issues, we throttled back a little bit, non-U.S., particularly in Europe. But again, not in a major, major way.

As a follow, can you give us an idea of the relative growth rates between -- in Perm between U.S. and international? And remind us, is about half of your business internationally perm versus much smaller percent in the U.S., Keith?

Right. It is about 50-50 and we had -- during the quarter, we had very strong growth rates in the U.S. and outside the U.S.

Your next question comes from the line of Tobey Sommer from SunTrust.

On a percentage basis, how -- what's the change in same day billings, billing days available, sequentially, from a third quarter to fourth quarter in aggregate?

So the fourth quarter is 61 days. The third quarter was 64 days. This is staffing, so you'll lose 3 days due to the holidays. You've got Thanksgiving, Christmas, New Year's Eve.

Okay. And with the -- is it 4 days on the Protiviti side?

It's actually 5 days on the Protiviti side. Many of Protiviti's clients do not work the week between Christmas and New Year. Many Protiviti employees take advantage of that time and also don't work that week. And therefore, Protiviti's revenue capacity is reduced because of the, what we call, choice time off that occurs that week.

Sure. And I was wondering if you could provide some color on the Information Technology front in terms of, are the trends in the Perm business, as well as when you look at bill pay spreads for Information Technology. Are those trends exceeding the company averages?

So IT Perm is around 15% of total perm. It's outperforming Finance and Accounting Perm. Technology pricing is a bit firmer year-over-year than is the case in Accounting and Finance. So pretty much across the board, Temp Perm pricing hours, Tech is stronger than Accounting and Finance, which is strong in its own right.

Your next question comes from the line of Gary Bisbee from Barclays Capital.

If we do see some continued weak economic trends and there is some deceleration on the top line, how would we -- and this is a hypothetical, so I'll say it up front, how would we think about what level of revenue growth, sort of moderation from the recent trend could happen and still achieve the types of incremental operating margins that you've talked about in the first few years of recovery and it goes 20%, 25% in Temp and 30%, 35% in Perm. If revenues slowed from this space, is that still achievable?

Well, understand that our margins are impacted as we speak because of the hiring we do in anticipation of even more growth. So if things slowed down modestly, we could dial back the SG&A cost somewhat as a buffer for that. So you wouldn't see the negative impact that you might otherwise see and think. Having said that, it's kind of leveraging our fixed cost, our administrative compensation costs that provides a lot of the operating leverage and the absence of that would certainly impact operating income.

Okay. And then the follow-up, did you say something with Protiviti about moving to a model where the international is partner firms instead of you owning them? Could you clarify that?

We've spoken for several quarters now that we've been in the process for several of our non-U.S. locations to convert them from owned to member firm. In many countries, there's actually tax reasons, tax advantages structurally, for those countries to be member firms rather than part of our global corporation, but that's not something that's new. We've already done that in certain countries and we will continue to do that in others.

And does that have any impact on you, because I know in some countries, you've had success leading with Protiviti and then bringing in the core Robert Half brands, Temp and Perm, once that's established? Is that still the case and would this have any impact on the ability to continue to do that?

Staffing has entered virtually every market at this point, where Protiviti first had a presence. So to the extent we accelerated the early development of staffing because Protiviti was already there, that's pretty much run its course.

Your next question comes from line of James Samford from Citigroup.

Just a quick question on the competitive environment. We've heard a few competitors talk about getting more aggressive in the middle market arena. Are you seeing any signs of that or where would we see that, either in form of a pressure on bill rates or is it on the contract renewals?

Well, I think given the gross margin expansion you've just seen, which was an upside even to our own expectations, I think that speaks volume about the competitive environment hadn't gotten worse because if so, you wouldn't have seen that kind of performance. So the short answer is, we have not seen a meaningful change in the competitive environment. Understand that most of our competitors are small to middle-sized staffing firms as well, they're not household names, they're not national, global staffing firms that you might recognize. And so it's always been fractured. And frankly, very competitive ourselves to other specialists that tend to be smaller market by market.

If I were to add to that, as long as we've been in the business, we've had questions such as you just asked. Our margins and financial performance overall, are no secret obviously, since we're public. So many people have decided that's a great area to enter. I would just say that it's more difficult than it looks. There are a lot of things that go into being very successful with small to midsize markets. It's very different than operating an office that focuses on larger contracts and so forth. And you have to develop a good reputation and we have a bit of a head start. So again, as Keith said, we feel like we're doing well. We take everybody seriously. But I would argue that we're in pretty good shape.

Your next question comes from the line of Kevin McVeigh from Macquarie Research.

Keith, I wonder, given the trends you're seeing so far on the Temp margin side, clearly, some runway to go on Temp to Perm conversions, you think about a higher kind of a peak temp margin in this next upcycle and directionally, any thoughts around that?

Well, I believe that there is a way as you call it. I do think we've got a history of recapturing lost temp margins from downturn as we move through a cycle. We're optimistic, and frankly, given the last couple of quarters, we're even more optimistic. There's clearly a dichotomy, particularly in the United States, between professional and nonprofessional as to what the unemployment rates are for college graduate, professional people, as we talked about earlier, to supply us much tighter and it's a much better environment for pricing and for us to get to margins that we've traditionally enjoyed on the Temp side. The trajectory is good. That said, we do expect further unemployment cost increases in 2012, and we're planning for that as we speak. But here again, that's not a phenomenon new to this cycle. There's always higher unemployment cost in the early years of recovery following a downturn.

Okay. And then just real quick, on the Perm hiring, Keith. Can you help us directionally, where it is in terms of IT versus and F&A, and just a quick refresher, I don't know if you'll disclose. Of the perm, how much is IT now versus F&A and the other businesses?

Sure. As we said a little earlier, IT is about 15% of our Perm businesses and while hiring is a little outsized there, relative to F&A, it isn't meaningfully outsized. So when w ‘re, when we talked about hiring in Perm, for the most part, we're talking about F&A.

Your final question comes from the line of Sara Gubins with Merrill Lynch.

Keith, just a follow up on your comment that you expect sort [ph] of increases in 2012. Is there any way to quantify that or is it too early at this point?

Well, we have some guestimates that they'll be approximately the same that they were in 2011. There's a few things going on. One, the states are beginning to charge interest on the loans they got from the federal government, that for the longest time, they weren't being charged interest on. Further, the federal government is starting to provide for reserves against states that aren't paying them back for the loans they took out for unemployment costs. So all of those things puts pressure on 2012 unemployment rates. So we think they'll be about the same to a little bit larger in 2012 versus '11, as compared to the prior year, but again, something we think that's manageable.

Okay, great. And then, on a somewhat separate -- well, separate topic. Management resources had been growing more rapidly than Accountemps. But it really seemed this quarter, like Accountemps gained a lot of traction. And so I'm wondering if you could give some more detail about demand is varying by price point?

Well, the really strong part of Accountemps were the accounting operations positions, that's accounts payable, accounts receivable, payroll, general ledger. It's the more transactionally-oriented divisions. They were quite strong in the third quarter. We saw strength beginning to form in the second quarter. But the big story for Accountemps in Q3, other than the gross margin expansion, was the strength in accounting operations.

There are no further questions. I will now turn the call back over to Mr. Messmer.

Thank you, operator. And we appreciate everyone's time today. Thank you for being with us. That will conclude today's conference.

This concludes today's teleconference. If you missed any part of the call, it will be archived in audio format in the Investors 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.