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Unlocking The Mystery Behind Staffing Firm Valuations

October 2013

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Section I Staffing Industry Overview• Market Sizes• Growth Rates• Industry Cycles

Section II Healthcare Staffing Overview

Section III Staffing Public Company Analysis and M&A Update

Section IV Valuation Drivers & Exit Alternatives

Table of Contents

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Staffing Industry Overview

SECTION I

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The U.S. staffing industry is forecast to grow 5.0% consecutively in 2013 and 2014, to reach a totalmarket size of $137.1 billion in 2014Actual Projected2011 2012 2013P 2014PC/LI $43.2 $45.8 $48.0 $49.5IT 20.6 22.7 24.2 25.9Engineering/Design 7.2 7.5 7.9 8.3Healthcare 8.8 9.5 9.8 10.5Finance/Accounting 5.7 6.2 6.3 6.6Other Professional 3.3 2.0 2.1 2.3Clinical/Scientific 1.8 2.0 2.0 2.1Education/Library NA 1.5 1.6 1.7Marketing/Creative 0.8 0.9 1.0 1.0Legal 1.1 0.9 0.9 0.9

Total Temporary $92.5 $99.0 $103.9 $108.9Place & Search 12.9 13.6 14.5 15.6PEO 9.4 10.2 11.0 11.7Outplacement 0.9 0.9 0.9 0.9Total Staffing Industry $115.7 $123.8 $130.3 $137.1

Staffing Industry Market Size

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2013P U.S. Temp Staffing Industry Revenue % by Sector

2011-2014P U.S. Temp Staffing Revenues by Sector

Source: Staffing Industry Analysts

From 1995 to 2013, the staffing industry isprojected to have grown approximately $75.0billion In 2013, the largest segment, C/LI is projectedto account for 46.2% ($48.0 billion) of totaltemporary revenues in the U.S. ($130.3 billion)

($ in billions)

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Illustrated below, there is a clear deceleration of growth rates across all segments Professional segments generally are outpacing C/LI and with a few exceptions expecting growth of 2%-7% in 2013 While down significantly from the growth rates seen in 2011, current rates are consistent with average growth rates for professional segments since 1995 Temporary healthcare is projected to grow slightly less than the overall industry in 2013, and conversely is projected to be an industry leader in 2014 with a revenue growth forecast of 7.0%

Staffing Industry Revenue Growth Rates

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Temporary Growth Rates By Sector2011/2010 2012/2011 2013P/2012 2014P/2013PIT 15.0% IT 10.0% IT 7.0% IT 7.0%Clinical/Scientific 14.0% Marketing/Creative 10.0% Marketing/Creative 7.0% Marketing/Creative 7.0%C/LI 13.0% Clinical/Scientific 10.0% Education/Library 7.0% Education/Library 7.0%Engineering/Design 13.0% Education/Library 8.0% C/LI 5.0% Healthcare 7.0%

Total Temporary 13.0% Healthcare 8.0% Engineering/Design 5.0% C/LI 5.0%Finance/Accounting 12.0% Finance/Accounting 8.0% Other Professional 5.0% Engineering/Design 5.0%Healthcare 11.0% Total Temporary 7.0% Total Temporary 5.0% Other Professional 5.0%Other Professional 9.0% C/LI 6.0% Healthcare 4.0% Clinical/Scientific 5.0%Marketing/Creative 8.0% Other Professional 6.0% Clinical/Scientific 3.0% Finance/Accounting 5.0%Legal (3.0%) Engineering/Design 5.0% Finance/Accounting 2.0% Total Temporary 5.0%Education/Library NA Legal (13.0%) Legal (5.0%) Legal 0.0%Source: Staffing Industry Analysts

Confidential The U.S. staffing industry size is near its historical peak size, based both on the U.S. temporary penetration rate (1.99%)and on its total revenue size (adjusting for inflation) The American Staffing Association's (ASA) staffing index increased 24.8% in 2012 and 5.8% YTD in 2013 Investors that expect slower growth should keep an eye on key metrics such as wages, hours, housing prices and headlineCPI numbers In a slower growth environment, certain sectors perform better than others (i.e. healthcare, technology and onlinecompanies) We see the staffing sector as a long-term growth sector as clients use staffing as a strategic “shock absorber” and as moreprofessionals exert their independence

Temporary Penetration Rate

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Today’s Penetration Rate

Source: U.S. Bureau of Labor StatisticsNote: Shaded green boxes represent recessionary periodsChart last updated: September 2013

1.00%1.25%1.50%1.75%2.00%2.25%

1,0001,5002,0002,5003,000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Temp penetration rateTe

mp

Wor

kers

(000

's)

Confidential The Staffing Cycle

In a typical cycle, C/LI staffing usually leads the staffing cycle upturn, followed by Professional Staffing and Permanent Placement, which is last to peak The chart and key below illustrate the typical characteristics of the staffing cycle Industry analysts believe that we are currently between point B and C

7Source: Staffing Industry Analysts as of September 2013

Permanent Em

ployment/Pay

roll

Time

Healthcare

A

BC

GDP Growth

YearEconomic Cycle

DE

1 2 3 4 5 6 7Prime Time

ABCDE Stop hiring permanent placement employees Begins to impact contingent search companies Economy begins to slow Layoff contractors and temps Economy flattens out Staffing at equilibrium Economy begins to grow Hire contractors and temps Economy continues to recover Hire permanent employees

The consensus is that the current cycle is elongated and the industry will see a few additional years of growth before contraction

B

C

D

E

A

B

D

E

C

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SECTION II

Healthcare Staffing Overview

Confidential Healthcare Staffing Overview

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Healthcare staffing revenues are forecasted to be $9.8 billion in 2013

U.S. Healthcare Staffing Industry Revenue Growth (year-over-year % change)

Demand for healthcare staffing services is expected to be driven by:‒ An aging U.S. population‒ Rapid advances in medical procedures and technologies‒ Continuous shift by healthcare organizations to increaseoutsourcing‒ Flexible business models‒ An acute shortage of physicians, nurses and other healthcareprofessionals in the long-term

Industry Highlights

$ in billions

2013E Healthcare Staffing Revenue by Sector

Source: Staffing Industry Analysts

Travel Nursing$1.616%

Per Diem Nursing$2.828%Locum Tenens$2.424%

Allied$3.232%

Confidential Healthcare Staffing Overview

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U.S. Healthcare Staffing Revenue Growth by Sector

Following substantial revenue declines in 2009, there is renewed demand for healthcare staffing, particularly in travel nursing, the division of healthcare staffing that retracted the most in 2009-2011- Health information management is one market within allied that is surging

Travel nursing & locum revenues are expected to grow at 8% in both 2013 and 2014 Allied revenues are projected to decrease slightly in 2013 and grow 5% in 2014 Per diem growth is expected to be approximately 5% in 2013 and 7% in 2014

Source: Staffing Industry Analysts

2007 2008 2009 2010 2011 2012 2013P 2014PTravel Nursing 3.5% 1.5% (50.0%) (25.0%) 25.0% 15.0% 8.0% 8.0%Per Diem Nursing 0.0% (8.0%) (30.0%) (6.0%) 6.0% 0.0% 5.0% 7.0%Locum Tenens 16.0% 13.5% (1.0%) (1.0%) 9.0% 11.0% 8.0% 8.0%Allied 10.5% 7.0% (25.0%) (4.0%) 11.0% 10.0% (3.0%) 5.0%(60.0%)(50.0%)(40.0%)(30.0%)(20.0%)(10.0%)0.0%10.0%20.0%30.0%

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Section III

Staffing Public Company Analysis and M&A Update

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Staffing Public Company Analysis

Commercial & Multi-Line StaffingEnterprise Value /

Company Name Stock Price % of 52 Wk

HighLTM

Revenue LTM

EBITDA Adecco S.A. $72.34 99.5% 0.6x 13.1xKelly Services, Inc. $19.74 96.5% 0.1x 8.7xManpowerGroup Inc. $76.43 98.8% 0.3x 10.7xRandstad Holding NV $56.34 99.0% 0.5x 16.2xTrueBlue, Inc. $25.38 91.4% 0.6x 12.9xAverage 97.1% 0.4x 12.3x

IT & Professional StaffingEnterprise Value /

Company Name Stock Price % of 52 Wk

HighLTM

Revenue LTM

EBITDA CDI Corp. $16.37 90.9% 0.3x 8.0xComputer Task Group Inc. $17.99 68.9% 0.7x 11.5xKforce Inc. $17.92 99.6% 0.6x 12.2xMastech Holdings, Inc. $11.56 98.6% 0.4x 9.1xOn Assignment Inc. $33.22 98.5% 1.3x 12.8xRCM Technologies Inc. $6.27 93.3% 0.4x 8.8xRobert Half International Inc. $39.56 96.5% 1.3x 12.2xAverage 92.3% 0.7x 10.6x

Healthcare StaffingEnterprise Value /

Company Name Stock Price % of 52 Wk

HighLTM

Revenue LTM

EBITDA AMN Healthcare Services Inc. $13.47 83.1% 0.8x 10.7xCross Country Healthcare, Inc. $5.99 96.1% 0.4x 30.2xAverage 89.6% 0.6x 20.5x

As of October 15, 2013,

the C/LI, IT/Professional

and Healthcare staffing

sectors traded at an

EV/ LTM EBITDA of

12.3x, 10.6x and 20.5x,

respectively

Note: As of October 15, 2013

Confidential M&A Volume by Sector

13Note: Data obtained from Capital IQ and CHILDS proprietary database as of October 7, 2013

C / LI M&A heats up early in cycle IT / Prof heats up mid / late cycle Healthcare at a low point right now

COUNT 2008 2009 2010 2011 2012 YTD OCT 2013IT / Prof 48 51 42 40 63 33C / LI 12 16 20 22 20 24Healthcare 41 24 25 15 15 15Others 48 19 38 40 52 27Total 149 110 125 117 150 99

PERCENTAGE 2008 2009 2010 2011 2012 YTD 2013IT Prof 32.2% 46.4% 33.6% 34.2% 42.0% 33.3%C / LI 8.1% 14.5% 16.0% 18.8% 13.3% 24.2%Healthcare 27.5% 21.8% 20.0% 12.8% 10.0% 15.2%Others 32.2% 17.3% 30.4% 34.2% 34.7% 27.3%Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Confidential M&A Volume by Buyer Type

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U.S. strategics drove acquisition activity 2007-2009 Foreign strategics have recently become more active PEGs look to repeat what was a very acquisitive year in 2012 with a substantial amount of dry-powder still on the sidelines

COUNT 2008 2009 2010 2011 2012 YTD OCT 2013U.S. Strategic 109 77 63 62 93 66International Strategic 33 27 41 49 37 20PEG 7 6 21 6 20 13Total 149 110 125 117 150 99

PERCENTAGE 2008 2009 2010 2011 2012 YTD 2013U.S. Strategic 73.2% 70.0% 50.4% 53.0% 62.0% 66.7%International Strategic 22.1% 24.5% 32.8% 41.9% 24.7% 20.2%PEG 4.7% 5.5% 16.8% 5.1% 13.3% 13.1%Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Note: Data obtained from Capital IQ and CHILDS proprietary database as of October 7, 2013

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Section IV

Valuation Drivers & Exit Alternatives

Confidential Business Elements Effecting Growth & Valuation

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Clients Expertise

Organizational Structure

Growth Culture and Leadership

Metrics & Process

Management

Strategy & Focus

Niche leadership and committed focus Growth model Technology

Vertical or functional expertise Intellectual capital/differentiation

Attractiveness of client base Client diversification Level of relationships within clients

Strength of management Built for growth Diversity status

Scale and overall revenue size Organic revenue growth Gross profit % EBITDA % Reviewed financials

Experience of 2nd tier management Clear expectations and accountability Margin Focus Hiring profile Compensation Plans

Elements Effecting Valuation

Confidential Staffing Valuation Framework

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Note: based on normalized EBITDA. Industrial and lower gross margin sectors trade at a discount

Client concentration Diversity status Small local firms Revenue <$20mm

One or two market firms with <$100mm revenue

High-volume/low-margin firms

Multi-market firms with scale, solid growth and margins (potential platform)

Best-in-class/platform At least $100mm revenue, high

margin, high growth

4x 5x 6x 7x 8x 9x 10x

Value Drivers Factors that Shift the Spectrum

Scale Revenue growth Margin profile Recurring revenue streams

The overall state of the economy- Multiples are lower as a whole in a down economy

Spectrum depends on the sector Cyclicality decreases the multiples Diversity status

Client base/diversification Management team Growth strategy

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Company A B C D E F

Company Type Best-in-Class HC Staffing Provider

HCIT Staffing Stand-Alone Locum Tenens Add-on Travel Nursing Stand-Alone < $100M

Allied HC Staffing Stand-Alone < $100M

General HC Staffing Stand-Alone < $100M

Financial Information ($mm)Revenue $500.0 $49.0 $35.0 $90.0 $37.0 $40.0Growth Rate % 7.5% 47.5% 40.0% 17.5% 12.5% 4.0%GP% 28.5% 35.0% 25.0% 27.5% 25.0% 23.5%LTM Adj. EBITDA $86.5 $7.5 $2.3 $10.8 $3.0 $2.8EBITDA% 17.3% 15.3% 6.5% 12.0% 8.0% 7.0%

Transaction InformationEnterprise Value $994.8 $60.0 $17.3 $81.0 $19.2 $16.8Revenue Multiple 2.0x 1.2x 0.5x 0.9x 0.5x 0.4xEBITDA Multiple 11.5x 8.0x 7.5x 7.5x 6.5x 6.0x

Key Value Drivers

ScaleHigh Growth High MarginNicheManagement

Healthcare Staffing Valuation Profiles

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Confidential Exit Alternatives

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Sale to Strategic- Maximum valuation possible if fit is excellent- 70%~80% cash up front plus earn-out- Synergies may drive value in the form of revenue enhancements and cost savings- Earn-outs are usually 1-3 years with varying thresholds, milestones, etc.

Equity Recap- Majority: 51% - 80% of the equity- Minority: 10% - 49% of the equity- Typically involves leverage- Provides partial liquidity now and allows for “second bite of the apple” later- PEGs may have concerns in cashing out too much of management’s share in majority deal- Minority typically valued at a discount to control transaction

Debt Recap- Able to borrow up to 3.0x EBITDA- May involve some warrant coverage- Minimizes equity give-up (“cheap equity”)- Partial liquidity with full equity retentionEmployee Stock Ownership Plan- Shareholders have flexibility to determine percentage of ownership they wish to sell- Significant tax deferral provisions for seller - Great for change of control within an organization or buyout of a current partner- Governance and disclosure requirements are important considerations

Exit Alternatives

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Pros Cons

Strategic Sale Maximum value possible with synergies Broader operational platform for growth Financial wherewithal Public buyers can stretch on price using stock currency Substantial amount of cash upfront

Loss of control Possible negative to existing management and employees Could disrupt culture Longer due diligence Complexity and integration Earn-out structure has proven to be fairly prevalent and can vary by performance

Recap with Private Equity Group (PEG)

Partial liquidity today with additional exit event later Good for existing management by maintaining decision-making and some level of control Access to growth / add-on acquisition capital Preserves brand and culture Addition of value-add equity partner and insightful Board representation

Loss of control Not a total exit Limits liquidity for management/partners Additional oversight and performance scrutiny

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Exit Alternatives- Pros and Cons

Confidential Takeaways To Company Owners

Define your differentiators and build upon them Develop a solid growth plan and know thy metrics Enhance your profitability Category leaders win big Begin with the end in mind

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