On Assignment, Inc. (ASGN)

ASGN 
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On Assignment, Inc. (ASGN)

Q4 2009 Earnings Call

February 19, 2010 4:30 pm ET

Executives

Jim Brill - Chief Financial Officer

Peter Dameris - Chief Executive Officer

Michael McGowan - President of IT and Engineering Group

Analysts

Jim Janesky - Stifel Nicolaus

Tobey Sommer - SunTrust Robinson

Jeff Silber - BMO Capital Markets

Presentation

Operator

Good afternoon. My name is Christine and I will be your conference operator today. At this time I would like to welcome everyone to the On Assignment fourth quarter 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Jim Brill, Chief Financial Officer; please go ahead sir.

Jim Brill

Thank you, Christine. 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 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.

I would now like to introduce Peter Dameris, our CEO and President, who’ll provide an overview of fourth quarter results. Peter.

Peter Dameris

Thank you, Jim. Good afternoon. I would like to welcome everyone to the On Assignment 2009 fourth quarter earnings conference call. With Jim and me today is Michael McGowan, President of IT and Engineering 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 myself and Mike. 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 2010. We will then open the call up for questions.

The market we serve remain constrained in the fourth quarter, but where much more productive than any other quarter of 2009. Despite there being approximately three fewer billable days in the fourth quarter, consolidated revenues grew $1.9 on an absolute basis over the third quarter of 2009 and approximately 6% on a same number of billable day basis. Our absolute basis divisional sequential revenue growth in the fourth quarter was 11.7% for our IT Group, 1.6% for our Life Sciences Group and 14.8% for our Allied Healthcare Group.

During the fourth quarter, Nurse Travel contracted 11% on an absolute basis and our physician group contracted 11.2% on an absolute basis. The severe economic downturn that occurred in 2009 affected all staffing firms differently, ironically those staffing firm with healthcare exposure were the most adversely affected. In addition, companies with the greater exposure to small and medium size businesses were more severally impacted as well.

On Assignment, small and medium size businesses and the healthcare industry are important components of our business. Although, these components of our business are currently headwind to growth, albeit at a much smaller level we firmly believe as the economy continues to stabilize that each of these markets will be points of strength for our company.

As we reflect back on 2009, we take great pride that our gross margins are at record levels. We generated $42.8 million in cash flow from operations before debt reduction and earn out payments. We reduced our term loan by $48 million. We payout the remaining $9.8 million due on our earn out obligations, we did not report a net income loss or take any restructuring charges, our adjusted EBITDA margin for the full year was 7.7% and finally our talented team remained intact.

We firmly believe that by having preserved our gross margins, during this economic crisis, we will return to peak EBITDA levels more quickly than others. As we have often said, our main challenge in 2009 has been a macro economy issue.

Going forward, what were once challenges to growth should be contributors to growth, much attention is and will be given to helping small and medium size businesses grow. Healthcare and biotech will not disappear in this country and the short term decisions made by many of our healthcare customers, out of necessity will not sustainable in 2010 and beyond.

Looking more broadly, contract labor should perform very well in what appears to be a slower than normal economic and labor market recovery. This belief is based on the assumption that so many of the decisions that corporate America was forced to make in 2009 cannot be sustained long term.

Employee staffing and productivity levels are at record low and high levels respectively and the average age of many employees is much higher than in prior periods. In addition, the payment challenges experienced by corporate America in 2009 will not be forgotten quickly and that mindset should be a big positive for the staffing industry.

Of the 8.6 million jobs loss since the beginning of the recession, a good many were temporary. Our industry worked at the level to permit businesses to ramp employee headcount down quickly. The industry should now also work to permit businesses to ramp employee headcount quickly.

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