On Assignment Inc. (ASGN)
Q3 2008 Earnings Call
October 30, 2008 9:00 am ET
Peter T. Dameris – Chief Executive Officer, President
James L. Brill – Chief Financial Officer
Michael McGowan – President, Oxford Global Resources, Inc.
James Janesky – Stifel Nicolaus & Company, Inc.
Tobey Sommer – Suntrust Robinson Humphrey
Jeffrey Silber – BMO Capital Markets
Andrew Fones – UBS
Josh Vogel – Sidoti & Company
Previous Statements by ASGN
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Before I begin I’d like to remind everyone as we do each quarter that our presentation contains predictions, estimates and other forward looking statements representing our current judgment of what the future holds. These include words such as forecast, estimate, project, expect, believe and similar expressions. We believe these remarks to be reasonable but they are subject to risks and uncertainties that could cause actual results to differ materially from the forward looking statements.
We describe some of these risks and uncertainties in today’s press release and in our filings with the Securities and Exchange Commission. We do not assume the obligation to update statements made in this conference call.
And now I’d like to introduce Peter Dameris, our CEO and President, who will provide an overview of our third quarter results.
I would like to welcome everyone to the On Assignment 2008 third quarter earnings conference call. With me today are Jim Brill Senior Vice President, Chief Financial Officer, and by telephone Mike McGowan President of our IT Engineering Group.
During our call today I will give a review of the markets we serve and our operational highlights, followed by a discussion of the performance of our operating segments by myself and Mike. I will then turn the call over to Jim for more detailed review and discussion of our third quarter financial performance and our financial guidance for the fourth quarter of 2008. We’ll then open the call up for questions.
As we have suggested over the last five quarters, the strength of our business model has us well positioned to perform in most economic environments. Although the US economy has meaningfully weakened, we still believe that our performance demonstrates that we are not as closely correlated to GDP and or labor market growth as others.
The strength of our business model continues to be based on one, our lack of any significant contribution from permanent placement and conversion fees, 2% in the third quarter of 2008. Two, our diverse client base, our top 10 clients on a consolidated basis in the third quarter represented 6.9% of our revenues and by segment, 14% in life sciences, 19.5% in healthcare, 23.5% in physician staffing and 11.7% in the IT and engineering group.
Three, the relative strength of the end markets we serve i.e., life sciences, healthcare, IT and engineering. Four the specialized skill sets we recruit for in each of the end markets we serve. And finally that professional staffing continues to be the strongest sector in the staffing industry and white collar unemployment is under 3%.
The key indicators of demand we monitor weekly i.e., the amount of permanent placement and conversion fees earned, the number of assignments and or terminations, our bill pay expansion or compression, the amount of time it takes for a customer to make a hiring decision on a qualified candidate and the number of hours worked or being worked by a billable employee each week have weakened but not to such a level that does not permit us to grow.
As we evaluate near term growth opportunities for each of our operating segments demand still exists; however, external economic and industry forces are causing growth to slow. In our life sciences segment, spending by our large pharmaceutical clients continues to be constrained.
However, throughout the quarter we continue to see material sciences, chemical and biotech clients provide a beneficial lift to the life sciences group to partially offset the slowdown in spending from our pharmaceutical customers. We continue to be confident that we are managing this segment appropriately for both the short and the long term.
In our IT and engineering group demand continues to flatten and new orders have slowed, but we are still performing well and expect to grow in the fourth quarter over last year. Finally our healthcare and physician staffing segments appear not to be affected as severely by the current economic slowdown as other groups. And these groups are gaining share in the markets they serve.
Specific operational accomplishments in the quarter included, our physician staffing division expanded their year-over-year quarterly growth rate to 23.4% versus 15.5% in the third quarter of ’07. Two, our nurse travel group grew 8.5% year-over-year and expanded its gross margins to 22.8% from 22.3%. Three, our Allied Healthcare Group grew 6.2% year-over-year and finally our IT engineering group grew 11.5% year-over-year.
With regard to SG&A we continue to monitor the markets we serve and the levels of investments we have or are making for future growth. Recently we have slowed investment in new personnel to support future growth. Should economic circumstances dictate we will further manage our SG&A to generate appropriate levels of cash flow.