Earnings Labs

ASGN Incorporated (ASGN)

Q3 2015 Earnings Call· Wed, Oct 28, 2015

$19.68

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Transcript

Operator

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the On Assignment Third Quarter 2015 Earnings Call. At this time, all lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given at that time. And as a reminder, this conference is being recorded. I'll now turn the conference over to Ed Pierce, Chief Financial Officer. Please go ahead, sir. Edward L. Pierce - Chief Financial Officer & Executive Vice President: Thank you. Good afternoon and thank you for your time today. Before we get started, I'd like to remind everyone that our presentation contains forward-looking statements representing our current judgment of what the future holds. Although we believe these statements are reasonable, they are subject to risk and uncertainties and our actual results could differ materially from those statements. Some of the risks and uncertainties are described in today's press release and in our SEC filings. We do not assume the obligation to update statements made on this call. Please note that on this call we'll be making references to pro forma and constant currency information. Pro forma data assume the businesses we acquired in the second quarter of 2015 were purchased at the beginning of 2014. Constant currency data were calculated using the foreign exchange rates in effect during the third quarter of 2014. I would now like to introduce Peter Dameris, our CEO and President, who will provide an overview of our results for the quarter. Peter? Peter T. Dameris - President, Chief Executive Officer & Director: Thank you, Ed. I'd like to welcome everyone to the On Assignment 2015 third quarter earnings conference call. With Ed and me today are Rand Blazer, President of Apex Systems; and Mike McGowan, COO of On Assignment and President…

Randolph C. Blazer - President, Apex Systems, Inc., On Assignment, Inc.

Management

Great. Thank you, Peter. The Apex Segment, which consist of Apex Systems, Lab Support and Creative Circle, reported strong results for the quarter. Revenues for this segment were at $421.1 million, up 15.2% year-over-year on a pro forma basis or 5.4 percentage points above the pro forma growth rate of 9.8% in Q2. Revenues from Apex Systems, which accounts for 74% of the segments revenues, were up 14.8% year-over-year, more than double its growth rate in Q2. This performance reflects, among other things, higher demand in our end markets, as Peter suggested, improved productivity from our tenured sales consultants, and the contribution from head count added during the hiring surge. Lab Support's results were generally in line with our estimates. Creative Circle, which was acquired on June 5, 2015, reported revenues of $73 million, which exceeded our revenue target by $3 million for the quarter. On a pro forma basis, Creative's growth rate for the quarter was 22.8%. Gross margin for this segment was 30.6%, which was in line with our estimates for the same – and the same as a pro forma gross margin for the preceding quarter. Our segments contribution in terms of divisional EBITDA was very strong, with solid conversion of the segment – in the segment despite the surge in field head count added in the business over the past year. With respect to Apex Systems, our IT staffing division, revenue growth was propelled by a number of factors, including: first, double-digit Q3 revenue growth on a year-over-year basis in our accounts in six of the seven industry verticals we service. Only the government industry set of accounts didn't grow on a year-over-year basis, but did achieve sequential growth from Q2 to Q3. Second, Apex local branch midmarket business momentum continued in this quarter, with increasing double-digit revenue growth rates again in Q3. Third, sales force productivity grew in the quarter with the surge hires now firmly in their assigned markets and producing sales at higher levels. Fourth, growth in our top accounts showed revenue acceleration in the quarter, although a number of top accounts in the financial services, oil and gas, and government industry verticals continue to lag behind in revenue growth on a year-over-year basis. Overall, the Apex Segment had a solid quarter with quarterly revenue growth accelerating on a year-over-year basis, stable gross margins and conversion of gross profit to divisional EBITDA remaining solid. With that, I'll turn it over to Mike.

Michael J. McGowan - Chief Operating Officer, President, Oxford Global Resources

Management

Thanks, Rand.

Randolph C. Blazer - President, Apex Systems, Inc., On Assignment, Inc.

Management

The Oxford Segment, yeah.

Michael J. McGowan - Chief Operating Officer, President, Oxford Global Resources

Management

The Oxford Segment includes Oxford Core, CyberCoders, our perm placement business and Life Sciences Europe. The Segment had revenues of $151.1 million for the third quarter of 2015, up 10.7% year-over-year and up 3% sequentially. On a constant currency basis, revenues would have been $4.4 million higher and our growth rate would have been 14%. Our permanent placement service revenues grew 19.7% year-over-year to $22.2 million. CyberCoders accounted for 93% of the total permanent placement service revenues, and was up 19.6% compared with the third quarter of 2014. The Oxford Segment's European revenues were $23.2 million in the third quarter of 2015 up 14.3% over the third quarter of 2014 or 36% on a constant currency basis. Revenues for the third quarter of 2015 include $2.7 million revenues from our second quarter acquisition. The Oxford Segment's consolidated revenue growth on a constant currency basis was the result of a strong year-over-year growth in all of our business units: 12.2% for Oxford Core, 16.8% for CyberCoders, which included 19.6% growth in its perm revenues, and 26.1% for Life Sciences Europe. Oxford Core has realized year-over-year and sequential growth throughout 2015 in both of its operating divisions and across the majority of our skill disciplines. This improvement was driven by growth in our key accounts, continued sharp focus on assigning consultants within our targeted skilled disciplines, increased demand for EMR implementations, upgrades and optimization projects, and ongoing demand for coating and consulting services. CyberCoders perm revenue growth has been driven by increases in sales staff and newly implemented training programs for new and experienced staff. CyberCoders has continued to invest in new technology to more efficiently identify and match relevant candidates to our open job orders. Our gross margin for the segment was 41.5%, which was in line with our estimates and…

Operator

Operator

Thank you. Our first question will come from Kevin McVeigh with Macquarie. Please go ahead. Kevin McVeigh - Macquarie Capital (USA), Inc.: Great. Thanks and congratulations on just a great outcome. Hey Peter, if I have the math right, it sounds likes the net additions including the incremental 100 is 240. And was the 50% kind of at production, was at a total 240 of the initial 140 that you hired? Peter T. Dameris - President, Chief Executive Officer & Director: That 50% number is an average and it's on the original hiring surge people. So the new people are a drag that we're not getting any productivity out of them, they're just barely in the training classes right now. Kevin McVeigh - Macquarie Capital (USA), Inc.: Okay. Peter T. Dameris - President, Chief Executive Officer & Director: But it's just giving up jump on 2016. Kevin McVeigh - Macquarie Capital (USA), Inc.: Got it. And is the split – I know you said before it was about 70% Apex, 30% the rest of business. Is that a good way to think about it? Peter T. Dameris - President, Chief Executive Officer & Director: It's very similar to those splits. Kevin McVeigh - Macquarie Capital (USA), Inc.: Okay. And then just on the direct hires, I mean just really nice outcome there at almost 60% of revenue overall. What's driving that? Is it just kind of scarcity of talented people, you're starting to some bring in-house or is there other dynamics in terms of the way you're recruiting? Peter T. Dameris - President, Chief Executive Officer & Director: No, I think, Kevin, it's all of the above. I would tell you that we're having better luck with matching the right people quicker than others because we really are using some unique tools to do some predictive analytics. The market is tight for technology, especially on some of the newer technologies and in the digital world. And so over all of 2015, credit to the management team, we've hired I think at Cyber alone over 250 people since we acquired that business and they really are gaining a lot of productivity. What I would tell you is, as you know, normal seasonality, fourth quarter it's harder to get people to leave jobs and start new ones because of bonus risk and stuff like that. But we continue to see a robust market for perm services. Kevin McVeigh - Macquarie Capital (USA), Inc.: Awesome. I'll get back in. Thanks.

Operator

Operator

Thank you. Our next question will come from Edward Caso with Wells Fargo. Please go ahead.

Edward S. Caso - Wells Fargo Securities LLC

Management

Hi. Good afternoon and congrats. Last quarter you talked about pricing maybe in the context of, I think, with the (21:44) flexibility. What are you seeing on this pricing or flexibility front now? Is it eased up at all? Peter T. Dameris - President, Chief Executive Officer & Director: Well, I'm parsing your words, Ed, but eased up, what I would tell you is, as we told you we would do at the right time, we have elected not to take certain work from certain customers as the ebb and flow moves more in our direction. So margins are pretty stable. We're seeing a bigger flow of more attractively bid work than we did even six months ago. So we're not as flexible about agreeing to work on certain customers' business. It's not that it's a difficult negotiation. Some of the work that we took was just offered up at a certain rate and it was kind of a 'take it or leave it' situation, and that's not how most of our business works. So the pricing environment is rational and it's productive for both sides.

Edward S. Caso - Wells Fargo Securities LLC

Management

There was a recent press release indicating you're opening an onshore or near-shore facility in Dallas. Is that a change in strategy here? Peter T. Dameris - President, Chief Executive Officer & Director: No. What I'm going to do is I'm going to turn it over to Rand, but that is for – I'm not going to name – I generically will name it's an airline, and we're helping them with some specific matters on the reservation system. Rand, will you give him the strategic reasoning why we did that for the customer?

Randolph C. Blazer - President, Apex Systems, Inc., On Assignment, Inc.

Management

Yeah. No, I mean, I think it's consistent, Ed, with the what we call value-added services to our clients. So it's not just providing arms and legs in technical IT talent, but it's also putting that in a package where we can help manage that workforce and locate, in this case, the client needed it to be housed somewhere and we offered that and it was an opportunity for us to show that we can do that. So it's a win-win.

Edward S. Caso - Wells Fargo Securities LLC

Management

Let me sneak in one more for Mike. ICD-9 to ICD-10, is that done at this point, and how big a factor was it in the last quarter?

Michael J. McGowan - Chief Operating Officer, President, Oxford Global Resources

Management

Well, Ed, as we even talked last time, it continues to increase. The date has come and gone, no reported issues. So in terms of the revenue certainly that we saw in the quarter, it was certainly part of what we experienced. Peter T. Dameris - President, Chief Executive Officer & Director: Ed, what I'd add to that is, it's very much like Sarbanes-Oxley. There was the surge to get compliant, and then there's an ongoing obligation to comply. So now that we're all over to the ICD-10, that's how things get coded and built. So we still see a big demand for that.

Edward S. Caso - Wells Fargo Securities LLC

Management

Great. Thank you. Congrats. Peter T. Dameris - President, Chief Executive Officer & Director: Thanks.

Operator

Operator

Thank you. We now have a question from Tim McHugh with William Blair & Company. Go ahead, please. Timothy McHugh - William Blair & Co. LLC: Yes. Just want to reconcile, I guess, the comment that you're being more selective now that you've got faster growth with the kind of the 33% gross margin at the midpoint versus 33.5%. Is that mix in terms of perm or fewer days? Can you just, I guess, kind of reconcile that? Peter T. Dameris - President, Chief Executive Officer & Director: So you're referring to the fourth quarter? Timothy McHugh - William Blair & Co. LLC: Yes, yes, sir. Peter T. Dameris - President, Chief Executive Officer & Director: And as I've previously mentioned, there is less perm contribution typically in the fourth quarter than in the third quarter. And as we look at our numbers on our spreadsheets on contract gross margin alone, it's pretty stable to what we reported. And save and except wholesale dramatic increases by some of the divisions that may have a lower margin, we have stable to slightly expanding gross margins. Timothy McHugh - William Blair & Co. LLC: Okay. And then you had talked – it was announced, a large, I guess, DoD contract, where you're one of the named, I guess, supporters or I don't think it's subcontractor, but whatever the right term is, what can we expect in terms of the contribution? I assume that's not helping you yet, but will that be a meaningful factor as we think towards 2016? Peter T. Dameris - President, Chief Executive Officer & Director: Right. So I'll let Rand answer that. We'll give you a qualitative answer, but we're not giving any quantitative guidance as to how much we're going to get and when we're going to get it. Rand?

Randolph C. Blazer - President, Apex Systems, Inc., On Assignment, Inc.

Management

So, yes, not a factor, Tim. As Ed would know from his work in the government side, takes a while for the government to get going in the contracts. So at this point there, it's a pretty big large roll-out and implementation of new systems. So we are a subcontractor on the team and I suspect it'll come. It's not impacting our business yet in terms of performance. When will it start impacting depends on the timeline the government lays out, which they're still laying out that roadmap. So I don't think it's something we assume will happen in the near-term. Timothy McHugh - William Blair & Co. LLC: Okay. Thank you.

Operator

Operator

Thank you. We'll go next to Paul Ginocchio with Deutsche Bank. Please go ahead.

Ato Garrett - Deutsche Bank Securities, Inc.

Management

Hi. Good afternoon. This is Ato Garrett on for Paul. Just you guys spoke earlier to your end market performance and, specifically, when you're looking at your top accounts, you said the financial services and some other verticals were lagging behind. But can you give a little more detail about how the financial services end market is trending? Is that getting any better or worse or staying about the same? Peter T. Dameris - President, Chief Executive Officer & Director: It depends on the account. We've had a couple of important customers that have kind of reengaged and we have one of our top four bank customers that has disengaged more so than they previously had. So it's really an account-by-account basis. But the good news for us is our larger financial services customers are spending a little bit more than they had in the first part of the year.

Ato Garrett - Deutsche Bank Securities, Inc.

Management

Great. And also just looking again into that fourth quarter, I know you've spoken a little bit to the fact that you're getting a little bit less perm contribution in the fourth quarter, so that's going to play into gross margins. But is there anything else there that's happening about that can, I guess, help reconcile the faster implied revenue growth and gross margin growth when you're looking at fourth guidance? For example, is there anything you're doing about targeted growth initiatives relating to pricing? Peter T. Dameris - President, Chief Executive Officer & Director: What I want to leave you with is the thought that contract gross margins are quite stable and that on a consolidated reported basis it has to do with contribution from perm and conversion fees and if Apex grows, the Apex division within the Apex Segment, or Lab Support, if it grows a little bit faster than Oxford or Europe or Creative Circle, then that would have a impact on the consolidated number. But if you look at it on an individual case-by-case basis, they're pretty much stable.

Ato Garrett - Deutsche Bank Securities, Inc.

Management

Great. Thank you very much.

Operator

Operator

Thank you. We now have a question from Sara Gubins with Bank of America Merrill Lynch. Go ahead please.

Sara Rebecca Gubins - BofA Merrill Lynch

Management

Hi. Thank you. So I might be beating a dead horse, but just to check on the pricing environment and the bill pay spread being down year-over-year. As you ease up on taking less than some of the lower priced work, should we expect to see an improvement in the bill pay spread? Peter T. Dameris - President, Chief Executive Officer & Director: Yeah, it depends on the skill sets, the particular skills that we're placing and that we have opportunity to fill, but yes, typically that is the case.

Sara Rebecca Gubins - BofA Merrill Lynch

Management

Okay. Peter T. Dameris - President, Chief Executive Officer & Director: So, again I will try to state, we think that we have a stable to slightly expanding contract gross margin.

Sara Rebecca Gubins - BofA Merrill Lynch

Management

Okay. And then on the cost side, have you now hired all of the people that you're planning to hire? And can we use the fourth quarter as a run rate for employee cost as we try to think about beginning to model early 2016? Peter T. Dameris - President, Chief Executive Officer & Director: It's a fair question, but I'd hope that we would get compliments for being good deployers of capital. I mean we hired an enormous number of people that have us in an incredible position for the start of 2016, and we've reported a 13.1% adjusted EBITDA margin. So I don't know if we're done. It depends what the market is telling us. And if we see pockets of strength, where we can accelerate and get a return, we'll do it. But I think as it relates to the fourth quarter that the number we gave you for SG&A is the right number. And we're in the midst of budgeting for 2016 and taking into consideration all the people we hired in 2015. That's the most direct guidance I can give you at this point.

Sara Rebecca Gubins - BofA Merrill Lynch

Management

Okay. Thank you.

Operator

Operator

Thank you. Our next question is from George Tong with Piper Jaffray. Please go ahead. George K. F. Tong - Piper Jaffray & Co (Broker): Thanks. Good afternoon. Peter, can you discuss how much additional improvement you would need to see in financial services and government, in order to continue to deliver accelerating growth in the business? Peter T. Dameris - President, Chief Executive Officer & Director: My qualitative answer to that is zero. We just don't need it to hurt us, just stay flat, because the numbers that we reported this quarter had an improvement in certain accounts within financial services, but not across the board. And as our prepared remarks reflect, it was a broad-based expansion of demand across multiple industries. George K. F. Tong - Piper Jaffray & Co (Broker): Yep. And can you talk a bit about trends you're seeing in ERP spend, whether there could be a new catalyst for a wave of ERP upgrades that might drive increasing spend? Peter T. Dameris - President, Chief Executive Officer & Director: Well, let me try to address it this way and then Mike, if you want to – or Rand, if you want to add anything, please do. We see IT service spend as stable and we're taking market share based on employment model and we're also seeing the benefits of the secular change of shared resources versus full-time resources. We are seeing people doing some more strategic thinking around their ERP systems and how they're using their data, but there hasn't been some sort of dynamic bolt-on module that is driving insatiable demand, this pretty steady state. Mike or Rand, do you want to add anything?

Michael J. McGowan - Chief Operating Officer, President, Oxford Global Resources

Management

No, I would agree with that, Peter. I think, as always, on the Oxford side of the business, we have ebb and flows within disciplines as you said, ERP is one, the others. So we see that constant ebb and flow. So it's a stable environment from our perspective as well. George K. F. Tong - Piper Jaffray & Co (Broker): Okay. And then lastly, could talk about how much cross-pollination you're seeing between Creative Circle and Apex and how that's tracking versus your earlier expectations? Peter T. Dameris - President, Chief Executive Officer & Director: Well, it's not a matter of if, it's when. And when you're growing at Creative at 22.6%, you're not looking for a lot of cross revenue synergy. So there's been an enormous amount of coordination and targeting of which customers we want to address. We're actually seeing that maybe the flow towards Apex, which hasn't occurred yet, what I'm saying now is not reflected in any of our forecast or our historical results, but we are seeing a lot of opportunities coming from the Creative customers into the Apex line of business. And as we look to introduce Creative into the Apex customers, it's a matter of how deeply penetrated into the customer we're prepared to go on the creative/digital side, as you know because Creative's more two, four, six people per account, Apex is much larger. So we're working out the rules of engagement. There hasn't been sales channel complex. We continue to confirm to ourselves our pre-acquisition analysis that there is revenue synergies amongst the various organizations. George K. F. Tong - Piper Jaffray & Co (Broker): Great. Thank you.

Operator

Operator

Thank you. We now have a question from Jeff Silber with BMO. Please go ahead.

Henry Chien - BMO Capital Markets

United States

Hi. Good afternoon. It's Henry Chien on for Jeff. I was curious about the staffing consultants that you added in the quarter. Were there any trends in terms of end markets that are growing faster than others, or any color you can add there? Peter T. Dameris - President, Chief Executive Officer & Director: Well, they went into predominantly IT, a little bit into Lab Support and then a little bit more into the Creative Group. And I would tell you, as far as internal employees go, we have as hard a time hiring and identifying talented people as our customers do, but we're continuing to chip away at it, but it's mostly in the technology world.

Henry Chien - BMO Capital Markets

United States

And for your 4Q guidance, would you be able to provide an organic rate that's embedded in that. Edward L. Pierce - Chief Financial Officer & Executive Vice President: We did. Organic. Of course, the way we're looking at is on a pro forma basis and we said 12% growth.

Henry Chien - BMO Capital Markets

United States

So that pro forma basis, does that include Creative Circle or no? Edward L. Pierce - Chief Financial Officer & Executive Vice President: Yes.

Henry Chien - BMO Capital Markets

United States

It does? Edward L. Pierce - Chief Financial Officer & Executive Vice President: It assumes the acquisitions we made in the second quarter of 2015 were actually made at the beginning of 2014.

Henry Chien - BMO Capital Markets

United States

Got it. And would you be able to provide a number excluding acquisitions? Edward L. Pierce - Chief Financial Officer & Executive Vice President: I don't have that off the top of my head.

Henry Chien - BMO Capital Markets

United States

Okay, all right. Thanks so much. Peter T. Dameris - President, Chief Executive Officer & Director: It's not much different. Edward L. Pierce - Chief Financial Officer & Executive Vice President: No, it's not going to be that much different.

Henry Chien - BMO Capital Markets

United States

Got it. Okay. Thanks.

Operator

Operator

Thank you. We now have a question from Randy Reece with Avondale Partners. Go ahead please.

Randle Glenn Reece - Avondale Partners LLC

Management

Afternoon. My first question has to do with what surprised you the most versus your guidance in the third quarter? Peter T. Dameris - President, Chief Executive Officer & Director: Right. Great question. Randy, I think it was the reacceleration at both Apex and Oxford gained steam throughout the quarter. There wasn't any sort of a plateauing and the hard work and the timing of our investments paid off.

Randle Glenn Reece - Avondale Partners LLC

Management

You have competition, you have minimal competition, you just went out there and took market share. I don't see that you're necessarily saying that the market growth rate itself steered your results that much. Is that correct? Peter T. Dameris - President, Chief Executive Officer & Director: Well, I don't think that we are saying that the overall market rapidly expanded. I think it remained stable and robust. What I would tell you is we did with more feet on the street, gained greater accounts. But more importantly, specific to us, some of the ebb and flow that occurred in some of our accounts worked to our advantage versus our disadvantage within the quarter.

Randle Glenn Reece - Avondale Partners LLC

Management

Your commentary about companies turning to agency contractors over independent contractors, that's been a phenomenon for quite a while. It's been kind of hard to tell how much of an influence it has had over the staffing industry. But why in particular did you bring that up this quarter? Peter T. Dameris - President, Chief Executive Officer & Director: You know, as we do more and more work and there's more and more discussion, Randy, about the shared economy or the gig economy and Uber being sued for misclassification and everybody doing new apps and this and that, it's just a true realization as you said of what we've been seeing for a number of years, specifically in the IT world. I will tell you in the Creative world, our strategic analysis, pre-acquisition and post-acquisition, shows that about $8 billion is spent annually on non-full-time labor and currently only $2 billion of that $8 billion runs through staffing up these W2 employees. And that's partially because of the uniqueness that customers may feel certain creative, digital, graphic type people have. And if the person only is willing to work as a 1099, then they're going to look the other way. Partially, it's because of the size and sophistication of the end customer, but we're seeing that trend change dramatically too. So as I've said often publicly, the largest single source of incremental revenue for the federal government is not raising taxes. It's eliminating the misclassification of employees. And as more and more of these web companies try to tout that you can go online and work independent, not as a W2 employee, the government's going to come down harder and harder to prohibit that.

Randle Glenn Reece - Avondale Partners LLC

Management

I promised no questions about gross margin. Good quarter. Thanks a lot. Peter T. Dameris - President, Chief Executive Officer & Director: Thank you.

Operator

Operator

Thank you. Our next question is from Gary Bisbee with RBC Capital Markets. Go ahead, please.

Gary E. Bisbee - RBC Capital Markets LLC

Management

Hey, guys. Good afternoon. The improvement was pretty stark and across, sounds like, on virtually every business, but government and some of the big banks. Can you help us sort of frame what was the most important and least important of the various things you mentioned? I mean it sounds like the surge hire is becoming profitable, it's a big contributor. It also sounds like at Apex you saw acceleration in a few of the verticals that maybe hadn't been quite as strong. And then you talked about top accounts also getting somewhat stronger. Is the surge hiring the key and these other ones also were modest positives or is it a more balanced contribution? Peter T. Dameris - President, Chief Executive Officer & Director: It's more balanced. I mean, we're building a business for the long haul and there can be some changes quarter-to-quarter. We admitted that maybe we got a little bit light on the hiring in the first half of 2014 and we suffered the consequences of that and then we got back on the right side of the hiring in the second half of 2014 and now we're seeing the benefits of that. I will tell you if my numbers are correct, the financial services sector – industry sector for us instead of shrinking year-over-year grew 7.6%. Not every account within financial services grew, but some grew enough to offset the shrinkage in other accounts. And on a consolidated basis, we grew 7.6%. So that helped to unmask the momentum and the growth that we had outside of financial services, Gary.

Gary E. Bisbee - RBC Capital Markets LLC

Management

Okay. Peter T. Dameris - President, Chief Executive Officer & Director: The rest of it was just hard, nose blocking, tackling, daily revenue generating activity in a market that is receptive.

Gary E. Bisbee - RBC Capital Markets LLC

Management

Sounds good. Peter, you typically mention on the call that the domestic Lab Support business is the most cyclical. And from that you infer an updated comment on how you see the U.S. economy playing out. Unless I missed it, I don't think that was in your prepared remarks, but what do you guys think? Peter T. Dameris - President, Chief Executive Officer & Director: It wasn't. It grew slower than the IT divisions, but we have been doing an enormous amount of work to reposition it, to be able to more forcefully compete and service larger customers. Ted, I know you're on a cell phone, but do you want to add anything, any color about Lab? Theodore S. Hanson - CFO & President-Lab Support Division, Apex Systems, Inc.: The only other thing I'd say is we've seen stable order flow. So I think if we look at that and say, is that a marker for what we see out here in general economy, it's stable.

Gary E. Bisbee - RBC Capital Markets LLC

Management

Okay, great. And then just on SG&A, I just wanted to make sure that I heard it right. So you said the $1 million to $1.5 million would be the incremental – I think, Ed, you said that the incremental amount from those new hires you've done since the second quarter in the fourth quarter – was that the right number? Edward L. Pierce - Chief Financial Officer & Executive Vice President: I was referring to what was included in Q3 related to the incremental hire, right.

Gary E. Bisbee - RBC Capital Markets LLC

Management

Got you. Okay. Edward L. Pierce - Chief Financial Officer & Executive Vice President: It's going to be – when it's fully loaded, it's going to be closer to, say, $2 million.

Gary E. Bisbee - RBC Capital Markets LLC

Management

For the fourth quarter? Edward L. Pierce - Chief Financial Officer & Executive Vice President: For the fourth quarter, yes.

Gary E. Bisbee - RBC Capital Markets LLC

Management

Got it. So SG&A is about flat. But you said the Q3 number included $1.5 million or whatever it was from the nonrecurring stuff. So you layer that in, and that gets the head count run rate. Okay. Very good. Thank you very much.

Operator

Operator

Thank you. Our next question is from Tobey Sommer with SunTrust. Go ahead, please.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Management

Thank you. Peter, the cash paydown has occurred very rapidly. And by my math, you could be closer to 2 times levered by the end of next year. I know that's several quarters away, but how do you think about the business as you approach a historical norm in terms of leverage in the business? Peter T. Dameris - President, Chief Executive Officer & Director: Right. So I think what we've said publicly, Tobey, is we think that we can get to 2.5 times before the end of 2016 and probably think sooner than later. When we first started saying that, we thought we'd say at the end of 2016, if things continue apace the way they are right now, as far as EBITDA, growth and cash generation, we think we'd get there sooner in 2016. As we've always told you, as well as the credit rating agencies and our investors, anytime we are at 2.5 times leverage, I think the future cash generation is better served, either being returned to shareholders in the form of share repurchases or, if we can identify an attractive asset, acquiring another business. So there is a real upside to us delevering quickly. We are creating equity value. We are reducing our interest expense. But most importantly, we're positioning ourselves to retain our credibility with our stakeholders and be able to do share repurchases and acquisitions.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Management

Peter, the strategic review that you conducted a while back yield other areas, new areas that the firm could enter, you don't have to mention what those are, but just wondering if there are new segments that you would consider? Peter T. Dameris - President, Chief Executive Officer & Director: Sub segments of technology, clinical research and Creative, but we're not going to get into foreign language translation or anything like that. I would just tell you it's a sub-segments.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Management

Okay. And two other questions for me, because a lot of stuff has been asked. The one numerical one – on the staffing consultant growth, what was that as of the end of the quarter, excluding Creative Circle? I think you might have given it, but I don't think my pen was fast enough. Edward L. Pierce - Chief Financial Officer & Executive Vice President: So we gave the numbers in the prepared remarks. And let me just give you the absolute number, if I can find it. I think...

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Management

And in the meantime, while you're looking for that, Ed, you mentioned back-office integration. Is there much work to do there? And is there any kind of margin impact either negative or positive on an ongoing basis? Edward L. Pierce - Chief Financial Officer & Executive Vice President: We'll have more to say about that next year. We're winding down on a couple of things. One is an integration of our European operations and also an integration of some domestic visions into the Oxford Segment. But there is going to be some efficiencies gained and we'll have more to say about the actual effect of that on our – when we give some guidance on 2016.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Management

Okay, thank you. Edward L. Pierce - Chief Financial Officer & Executive Vice President: As it relates to the numbers that you asked for on head count, excluding Creative Circle, and this is average number for Q3, was 2,039 and that's up from 1,720 in the third quarter of 2014.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Management

Thank you very much. Edward L. Pierce - Chief Financial Officer & Executive Vice President: Okay. Sure.

Operator

Operator

Thank you. And we do have a question from Mark Marcon with RW Baird. Go ahead, please. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): Good afternoon and congrats. With regards to Creative Circle, can you talk a little bit about the performance of the organization from the perspective of just turnover; what are you seeing in terms of being part of the organization? Obviously, the revenue growth has been terrific, but just what are you seeing qualitatively? Peter T. Dameris - President, Chief Executive Officer & Director: Thank you. Mark, it's a great organization that was built by a couple of great people and they put underneath them a great second tier. So one of the enduring features of the business beyond its great margin and the great end market was they were our kind of folks, great people and they feel empowered. It's been a net positive for everyone, our shareholders, but for our new employees, they are now participants of our employee stock purchase plan, the first window just open for them. They are seeing the ability to participate in the growth of the equity of the company, and the company doesn't have to be sold to get liquidity and they are holding. A lot of the city managers and others are receiving equity awards on an annual basis. And so we've, so to speak, equitized them and they're now part of our programs. And there is no self-channel conflict. I mean, we've had a lot of events in the marketplaces and creating awareness and there is a very good esprit de corps. We have not lost anyone because of the acquisition. They have a number of employees. Have we lost some people because of relocation or want to stay-at-home? A couple, but all-in-all, it's a net positive. And the cooperation and the collaboration has been very good. And that's why you see not a deceleration in the revenue, you have continued healthy growth rate and margins. I mean, they grew 22.6%. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): Great. A question for Rand, if I may. With regards to the verticals that you're actually seeing good growth in, can you talk about the ones that you're seeing the strongest growth? And also, are you seeing any sort of signs of weakness in the industrial economy? That's a frequent topic as it relates to financial news.

Randolph C. Blazer - President, Apex Systems, Inc., On Assignment, Inc.

Management

So, Peter, go ahead and respond. We saw, as Peter said earlier, growth across the board – double-digit growth as we said in all the industries expect for government. Technology, business services were particularly strong, financial service is particularly strong, considering some of our best or top accounts were not giving us a lift. But it was pretty much across the board, I would say. In terms of industrial activity, are you talking about what consumer industrial companies, that unit also grew – not the oil and gas portion of it, but the other parts of it did grow. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): And no slowdown in that part?

Randolph C. Blazer - President, Apex Systems, Inc., On Assignment, Inc.

Management

In consumer industrial, no. No, double-digit growth. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): Excellent. With regards to the financial services sector, what do you think happens to a company that disengages? Are there other suppliers out there that are going to be willing to meet their needs? Or do you think they're just going to run short on talent? Peter T. Dameris - President, Chief Executive Officer & Director: Yeah, Mark, on that one, what we were referring to is not that a customer said, we price our business 300 basis points lower than we used to, and we say no and someone else picks it up. Without naming banks, there are couple of banks that have cut their spend with all vendors by 50%. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): So that's kind of what you're referring to? Peter T. Dameris - President, Chief Executive Officer & Director: On ebb and flow with the specific banks. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): Okay, great. And then with regards to – on the Oxford side, nice growth there. Any areas that seem to be accelerating more than usual – and I'm talking about Oxford Core. Peter T. Dameris - President, Chief Executive Officer & Director: Yeah, it's pretty broad-based. So I hate to say I'm not going to speak for competitive purposes, but I've learned the hard way. We've spawned a lot of boutiques in the sub-segments by bragging about their growth rate. So you know where we're playing and I would tell you it's pretty broad based. Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker): That's great. Super. Thank you.

Operator

Operator

Thank you. And we have no further questions. Peter T. Dameris - President, Chief Executive Officer & Director: We appreciate your time and attention. And we look forward to visiting with you again on the fourth quarter conference call and our management will be in New York for a couple of conferences in November. Thank you.

Operator

Operator

Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.