On Assignment Inc. (ASGN)
Q4 2008 Earnings Call
February 19, 2009 4:30 pm ET
Peter T. Dameris – Chief Executive Officer, President
James L. Brill – Chief Financial Officer
Mark Brouse – President of Physician Staffing Group
Andrew Fones – UBS
Tobey Sommer – Suntrust Robinson Humphrey
Ruthanne Roussel – The Robins Group
Paul Condra – BMO Capital Markets
Josh Vogel – Sidoti & Company
Previous Statements by ASGN
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James L. Brill
Before we begin, I would 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 described 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.
I’d now like to introduce Peter Dameris, our CEO and President who will provide an overview of our fourth quarter results.
Peter T. Dameris
I would like to welcome everyone to the On Assignment 2008 fourth quarter earnings conference call. With me today are Jim Brill our Senior Vice President and Chief Financial Officer, and Mark Brouse President of our Physician Staffing 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 Mark. I will then turn the call over to Jim for a more detailed review and discussion of our fourth quarter financial performance and our financial guidance for the first quarter of ’09. We will then open the call up for questions.
As we have demonstrated over the last six quarters, the strength of our business model has us well positioned to perform in most economic environments. While the current economic environment is worse than anyone could have projected and prohibited us from growing our revenues year-over-year for the quarter, our fourth quarter performance once again demonstrated our ability to remain attractively profitable.
Specifically, despite a loss of 1.600 million jobs in the United States in the last three months, according to the Bureau of Labor Statistics, and a decline of $4.4 million in our revenues year-over-year, our adjusted EBITDA grew $804,000 over the same period last year.
The strength of our business model continues to be based on several factors. First, we do not rely on any significant contribution from perm placement or conversion fees, 2% in the fourth quarter of 2008. Next, we enjoy a diverse client base. Our top ten clients on a consolidated basis in the fourth quarter represented 7.7% of our revenues and by segment, 15.8% in Life Sciences, 20.9% in Healthcare, 28.1% in Physician Staffing and 11.2% in IT and Engineering.
We also benefit from the relative strength of the end markets we serve, i.e. Life Sciences, Healthcare, IT and Engineering, which we believe have not been as impacted by the economic slowdown as much as insurance, real estate, lending and financial services sectors.
Additionally, we focus on recruiting specialized skill sets in each of the end markets we serve, such as physicians, nurses and scientists. And finally, we note that professional staffing remains the strongest sector in the staffing industry.
Not withstanding the strength of our business model, the key indicators of demand that we monitor weekly, i.e. the amount of permanent placement and conversion fees earned, the number of new assignments and/or terminations, our bill/pay expansion or compression, the amount of time it takes a customer to make a hiring decision on a qualified candidate, and the number of hours being worked by a billable employ each week significantly weakened in late November and have continued to weaken today.
October was a record month for the company on revenues, gross margin and adjusted EBITDA. However, starting in mid-November demand for our services weakened considerably. When we set our guidance for the fourth quarter, we did not contemplate nor did we see in our daily or weekly production reports the significant weakness that developed in mid-November.
As we evaluate near-term growth opportunities for each of our operating segments, we believe that demand still exists. However, external economic and industry forces currently will not permit year-over-year growth in consolidated revenues.
In our Life Science segment, spending by our large pharmaceutical clients continues to be constrained and venture back biotech companies have recently become much more cautious. We continue to be confident and we are managing this segment appropriately for both the short and longer term.
In our IT and Engineering group, demand as measured by new orders slowed dramatically in November. This group’s performance in the fourth quarter was well below our expectations and the projections we used to establish fourth quarter revenue guidance.
In our Healthcare segment, demand slowed significantly and we believe fewer surgeries are being performed. It appears that in this economic environment people are medicating instead of operating. Finally, our Physician Staffing segment appears not to be affected as severely by the current economic slowdown and this group, again, gained share in the markets it serves.