On Assignment, Inc. (ASGN)

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On Assignment, Inc. (ASGN)

Q3 2009 Earnings Call Transcript

November 2, 2009 at 4:30 pm ET


Peter T. Dameris - President, Chief Executive Officer, Director

James L. Brill - Chief Financial Officer, Senior Vice President

Mark S. Brouse - President of VISTA Staffing Solutions, Inc.


James Janesky - Stifel Nicolaus

Andrew Fones - UBS

Jeffrey Silber - BMO Capital Markets

Analyst for Tobey Sommer - SunTrust Robertson



Good afternoon, my name is Stephanie and I will be your conference operator today. At this time I would like to welcome everyone to the On Assignment third quarter 2009 earnings conference call.

(Operator Instructions)

I would now like to turn the conference over to Jim Brill, Chief Financial Officer of On Assignment. Please go ahead sir.

James L. Brill

Before I 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 in similar expressions. We believe these remarks to be reasonable, that they are subject to risks and uncertainty 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 presume the obligation to update statements made in this conference call.

I would now like to introduce Peter Dameris, our CEO and President, will provide an overview of third quarter results. Peter?

Peter T. Dameris

I would like to welcome everyone to the On Assignment 2009 third 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 the performance of our operating segments by me and Mark. I will then turn the call over to Jim for a more detailed review and discussion of our third quarter financial performance, and our financial guidance for the fourth quarter of 2009. We will then open the call up for questions.

During the third quarter the markets we served remained constrained but were more productive than during the second quarter. Although revenues were down third quarter over second quarter, the majority of the decline was attributed to our Nurse Travel Division. Excluding our Nurse Travel Division revenues, revenues would have been down less than 0.5% versus 3.7%.

Currently the Nurse Travel industry remains the most challenged end market in the entire staffing industry. This segment makes up only 11% of On Assignments total gross revenues, and carries our lowest gross margin. As shown by our third quarter results, we have remained focused on our primary operating objectives, and gross operating and adjusted EBITDA margins have continued to trend at or better than we have forecasted.

The trend of stabilization that we observed towards the end of the second quarter of 2009, continue to strengthen into the third quarter because of recent growth in billable consultants, we believe revenues per billable day will grow fourth quarter over third quarter 2009.

In the nursing division, we continue to see a severe constraint in purchasing from hospitals. However we still believe that the reduction and demand in our Nurse Travel group is not due to loss of market share but rather hospitals’ current mindset to conserve cash until the credit crisis eases, and a temporary flood of nurses available for full-time employment recedes. In addition all of the uncertainty regarding health care reform has really put a pall over the industry.

In the IT group we have seen growth and billable head count and expect to grow fourth over third quarter. Our physician business remain strong, although demand has softened recently due to the uncertainty surrounding health care reform, and finally our Life Science and Allied Healthcare businesses are improving.

Although revenue trends have stabilized, we are starting to grow again for most of our divisions, our consolidated fourth quarter revenues will most likely be slightly lower than the revenues we have reported today.

The primary driver of this revenue forecast is that once again, in our nursing group we will have lower revenues in the fourth quarter as compared to the just completed quarter. As most of you who have followed our Company know, the fourth quarter typically is more seasonally impacted due to holidays and research facility shutdowns, i.e. fewer billable days, than other quarters.

Despite there being fewer billable days and more research facilities shutdown in the fourth quarter, because of the recent growth and the number of contract professionals out On Assignment, we believe that our consolidated revenues will grow on a billable day basis fourth quarter over third quarter and some of our divisions will grow on an absolute revenue basis. In addition, the third quarter is the first quarter since the third quarter of last year that billable head count On Assignment at the end of the quarter will exceed billable head count On Assignment at the beginning of the completed pool.

The results released today remain consistent with our operating focus for 2009 of concentrating on gross margins, EBITDA, and cash generation. In this current economic environment, we continue to elect, not to accept or pursue low-margin business or business cannot be collected timely. Our focus on credit quality and collections has permitted us to enhance our cash generation.

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