ASGN Incorporated (ASGN) Q4 2012 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the On Assignment Fourth Quarter 2012 Earnings Call. [Operator Instructions] I would now like to turn the call over to Ed Pierce, Chief Financial Officer. Please go ahead.

Thank you. Before we begin, I'd like to remind everyone 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 risk 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'd now like to introduce Peter Dameris, our CEO and President, who will provide an overview of our fourth quarter results. Peter?

Thank you, Ed. Good afternoon. I would like to welcome everyone to the On Assignment 2012 Fourth Quarter Earnings Conference Call. With Ed and me today is Rand Blazer, President of Apex Systems; and Mike McGowan, Chief Operating Officer of On Assignment and President of Oxford Global Resources, our high-end IT-skill staffing group. During the call, I will give a review of the markets we serve and operational highlights, followed by a discussion of the performance of our operating segments by Rand and Michael. I will then turn the call over to Ed for a more detailed review and discussion of our fourth quarter financial performance and our estimates for the first quarter of 2013 as well as for the full year of 2013. We will then open the call up for questions. Today, we announced the sale of our Nurse Travel division. Details on the transaction are set forth in our earnings release and we will not be discussing that division's results or the details of that transaction on this call. Should anyone have any questions regarding the Nurse Travel group's performance or the transaction, you may place yourself in queue and ask questions during the Q&A portion of the call. Now onto our fourth quarter results. All markets we serve, including Allied Healthcare and Physician Staffing, remained productive and stable during and exiting the quarter. All of our division showed positive momentum exiting the fourth quarter as well. Once again we saw a particularly strong growth and strength in the IT end markets. Our Healthcare groups continue to make solid progress in improving their operating performance. And in the fourth quarter, we saw solid execution in our Physician Staffing and Allied Healthcare groups. In the Physician group, Physician days sold increased 23.8% in the fourth quarter over last…

Great. Thank you, Peter. While the overall scope of requisitions that were presented to Apex in the fourth quarter were seasonally down from Q3, we did see a year-over-year increase in those requisitions set in the fourth quarter. We did a very good job of turning that flow into revenue -- to the revenue for the quarter of $207.6 million. This was an all-time high for the Apex Systems group and up 14.1% from the same period in prior year on an adjusted basis, and up 2.4% sequentially over the prior quarter. We are pleased to report positive sequential revenue growth in each of our 7 industry verticals. We experience our highest growth in telecommunications, financial, and consumer and industrial industry accounts. Gross margins for the quarter were 27.3%, which is down sequentially from the prior quarter by 75 basis points. We attribute this decrease in the gross margins primarily to effective non-billable holiday hours in certain clients and 16 basis point decrease in permanent placement revenue as a percent of our total revenue. Our average bill rate was down slightly to $58.74 from the third quarter's $59.11. This movement was more based on the skill set mix of requirements from our clients and the placements we made therein rather than any specific pressures we faced in the marketplace. We continued our high rate of conversion of gross margins to the bottom line during the fourth quarter. Our gross profit for staffing was $82,000, while a very strong number, was down slightly on a sequential basis given one less billing day in the quarter. Combined productivity of our sales and delivery teams continue to contribute to increasing operating profit margins in what we consider to be best-in-class gross margin to operating margin conversion rates. As we ended Q4 leading into the first month of the first quarter of 2013, we've seen very positive retention in our consultant headcount. The opportunities we see from our client portfolio are solid in all our industry verticals and we continue to be optimistic about demand trends within the IT staffing services market. I will now turn the call over to Mike McGowan, Chief Operating Officer of On Assignment, President of Oxford Global Resources, who will review the operations for our legacy business.

Thanks, Rand. Let me first address Oxford Global Resources. 2012 was another great year for Oxford, with full year revenue growth of over 29%. Our fourth quarter was also strong, growing 2.6% sequentially and 26.9% over the fourth quarter of 2011. The fourth quarter of 2012 was also our most productive fourth quarter in our history in terms of actual assignments per day. Demand for our services remains strong in all of our operating units, resulting in consultants on assignment reaching an all-time company high during the fourth quarter. Bill rates have been steadily increasing since the middle of 2010 and we anticipate they will surpass prerecession levels within the next few quarters. Gross margins have remained stable, helped slightly by our increased placement fees in our Centerpoint unit. We made investments in staff in 2012 and even with these additional investments, our branch contribution has grown at a significantly higher rate than our corresponding growth in sales and gross profits. We also believe these investments will ensure our continued growth into 2013 and beyond. As we have been reporting for several quarters, our Healthcare IT business unit was the fastest growing and continues to be into 2013. Followed by our Engineering units, specifically within our regulatory and compliance skill areas. From a first quarter of 2013 perspective, consultants on assignment increased through January and into early February. In addition, the Oxford Index, our forward-looking quarterly survey improved slightly in Quarter 1 suggesting continued strong demand in the first quarter. Moving on to our Allied Healthcare division, our results for the fourth quarter exceeded expectations and resulted in a new record in quarterly revenue in spite of fewer billable days. Allied grew revenues year-over-year 28.8% and the fourth quarter marked the eighth consecutive quarter of revenue growth for that division.…

Thanks, Mike. As Peter mentioned, net income for the quarter was $11.3 million, or $0.21 per share, on record revenues of $401.7 million. Net income was lower than our previously announced estimates due to an $8.4 million increase in amortization of intangible assets and a higher than expected effective tax rate. Excluding the after-tax effects of the increase in amortization and using the effective tax rate for the full year of 43.1% as opposed to the Q4 rate of 45.4%, net income was $16.9 million, or $0.32 per share on a diluted basis. I'll have more to say about these 2 items later. The improvement in our operating and financial results was mainly driven by the inclusion of Apex Systems and 20% year-over-year revenue growth in our other business units. That translates to 16.8% without Nurse Travel. In Q4, Apex accounted for $207.6 million, or 51.7% of total revenues, and grew approximately 14% year-over-year after converting Apex's 2011 results from a 53-week year to a calendar year reporting basis. Excluding Nurse Travel from our results, revenues for the quarter were $380.4 million, up 1.6% sequentially. As announced in our press release, we completed the sale of our Nurse Travel division earlier this week. This division, which was not core to our business, accounted for only 4.1% of pro forma 2012 revenues and 3.4% of pro forma gross profit. This division will be reported as discontinued operations in our Q1 2013 earnings release and first quarter 10-Q. There were approximately 61.3 billing days in the quarter, 1.5 fewer days than the preceding quarter. Our consolidated average bill rate and consolidated bill pay spreads were flat sequentially but down year-over-year due to the inclusion of Apex Systems. Conversion and direct hire revenues for the quarter were $6.8 million, or 1.7% of total…

Thanks, Ed. We believe that we are well-positioned to continue to take advantage of what we believe will be a historic secular and cyclical growth for the entire staffing industry over the next 3 to 5 years. While the entire On Assignment team is very proud of our performance, we remain focused on continuing to profitably grow our business. We'd like to once again thank our many loyal, dedicated and talented employees, whose efforts have allowed us to progress to where we are today. I would like to now open the call up to participants for questions. Operator?

[Operator Instructions] Our first question comes from the line of AJ Rice.

A couple of questions, if I could ask. First of all, just maybe on the strategic review that you are undertaking. Can you just give us a little more flavor? I know it's in front of you but how broad is the -- are the questions that you're looking at? I mean, does it -- it gets to the point of whether the company should be independent or not? Or is it more where you should make investments within the line of businesses that you're currently operating in? Give us some flavor of that, if possible.

Yes, most of it is to grow the business, AJ. Sometimes people talk about a strategic review. This is strategic planning. And this is for us to assess the markets we are, what size we are. Our profitability margins, our gross margins, what drives stock-price performance, what areas to further integrate, things like that. This is planning.

Okay, all right. And then maybe broadly, I'm sure you'll have all these specific questions, but on Apex and Oxford, it looks like you're forecasting 10% to 15% growth and then going through what you're seeing in some of the areas, I think, that you'd expressed some caution about the last quarter, like financial, you sound like you see some strength there. Is a 10% to 15% growth target a conservative starting point? Because it seems like it may be a little more cautious than where you were 6 months ago? Or is that through trajectory you're on at this point?

No. AJ, I think that, that's a good number. I would tell you that the staffing industry analysts have predicted 8% for the full year for the entire IT staffing industry. So if you take the low end of our guidance, that 10%, we're taking market share at 200 basis points. And if you take the high end, it's 700 basis points of market share taken from competitors.

Okay. And then just lastly on the Nurse Travel piece. As you pull that out, can you just give us some flavor -- and maybe I'm missing it here, but are you saying how much EBITDA headwind that presents before you take that out of the continuing ops? And whether it's -- you're assuming it's dilutive effectively for 2013 until you redeploy the capital? Can you give us some flavor for that?

We did not give specifics. What we did tell you is that was de minimis and that it was 4% of our total revenue, 3% of our gross profit. It was a profitable division, AJ, but it's a rounding error. So we also tried to give you a level set on what our focus is for 2012 as far as financial planning, so that you can determine kind of growth rates. I think Ed Pierce is going to add something to that.

Yes. Let me try to fill in the gap here. I think it's probably important for you to have an appreciation for, generally speaking, what the EBITDA contribution was from Nurse Travel so you can sort of adjust your baselines. But for Q4, they generated $3.5 million of adjusted EBITDA.

Which was a higher -- don't annualize that because that's a higher than normal profit contribution because they had more than normal strike revenue.

Yes. And for the full year, it's $8.3 million.

AJ, again, that includes historically high strike revenue contribution.

Our next question comes from the line of Sara Gubins.

Could you give us any sense of what the proceeds were for the Nurse Travel business?

It was $31 million.

$31 million in proceeds?

Yes.

And then your guidance excludes any acquisition-related costs in 2013. Are there any lingering acquisition-related costs that we should contemplate or was that more of just kind of a blanket, if there are other acquisitions that come through?

Sara, we don't think there are any specific ones that are significant, but you just never know when someone is going to ask you to do a valuation or some sort of study to support a valuation for accounting purposes so there's always something that trickles in and out, but we don't know of anything that is significantly large that is hanging out there.

Okay. Any sense of how much you are planning to spend on the strategic review? Is this a couple of million dollars?

It's less than that.

Okay. And then, the amortization of intangibles, the $21 million in 2013 that you're expecting, is that higher than what you had previously contemplated?

Yes. And that's the result of this -- finalizing the purchase accounting adjustments to Apex, which resulted in a fairly significant increase in amortization. On the ship -- on the front.

Yes. On the front. So the breakeven, internally, I don't we ever share this information with you -- with the public. But, I think the breakpoint is 2015. The annual amortization is about the same as what we had first contemplated.

Yes, and when we talked about on an accelerated basis, we're talking about 25%. So it's significant amortization in the early years. And then in the later years, after year 5, it becomes positive again.

Yes.

Well, relative to -- if you were to compare it, say, with a straight line method.

Yes. Good point.

Okay. So $21 million in '13 and then that should remain at flat levels in 2014 or begin to come down?

No, it's going to continue to decline because it's a 25% decline curve.

Our next question comes from Tobey Sommer.

Start out with a numerical question, if I could. You gave a percentage of pro forma revenues. There could be a couple different ways to pro forma the 2012 revenue so I can calculate what the Nurse business represented. Could you rather give me the dollar value for the revenue that you're applying the percentage to?

Let me ask the question this way. You're trying to figure out what we're extracting from the Nurse Travel revenue?

Yes, I'm trying to figure out how big it was in 2012, whether you're including Apex revenues as though it had been part of the company for all of 2012 or excluding it.

Let me give you a couple numbers that I think might be helpful. For the full year, Nurse Travel generated roughly $62.2 million in revenues. Okay? And if you exclude Nurse Travel from our pro forma 2012 results, revenues would be $1,460,000,000. Does that help?

Okay. That is helpful. That will allow me to figure out the growth rates that you forecasted as well. I want to ask a question about the financial services, about the large IT customers that they represent. Could you describe what you're hearing from them because historically, when they kind of get going again, the projects can be fairly long and help enhance visibility. Any color you could offer would be great.

Right. So, Rand, would you like to answer that?

Well, sure. I think, overall, in the second half of last year, 2012, we saw a pickup in our financial services business in both Q3 and Q4. So, if you will, we hit the bottom in the end of Q2. So it's been on a steady increase. Most of our clients in that sector are taking on projects. I wouldn't say it's aggressive but I would say that they're slowly coming back online. I think we see good performance so far this year. As I mentioned earlier, that we saw sequential growth in financial services and among the best sequential growth. So I think generally speaking, they're absolutely positive about their projects. They're rolling them out. They're also very sensitive to the labor markets and what they need to pay for those. So I wouldn't say it's peaked like it used to be many, many years ago, but it's certainly not an upswing.

That's helpful. I was hoping you could help me square the -- if there are any particular impacts that are kind of lowering the first quarter EPS. The step down is -- seems pretty pronounced given where revenue and EBITDA looks like it's going to land and I know that the tax rate's at least a little bit higher than I modeled. But I hope there might be another moving part to that, that I'm missing.

We mentioned 2 things in particular. One is the growth margins are lower in Q1 versus Q4. And that's probably, just on the continuing business, that's roughly $4 million. Okay? And that's -- this decline that we're projecting is fairly typical, if you look at our historical trends. And the other is related to SG&A expense. Okay? And expenses, as you probably remember, were up sequentially in Q4. There was a significant build in staff to prepare for 2013 and there's additional headcount that is being added too were in Q1 to drive the growth. Those are the main drivers for the SG&A. As you're well aware of the amortization of intangible assets, it's going to be up over what we had previously expected and I think you have that information. And the tax rate is actually pretty modest because we ended the year at 43.1%, okay? And we're projecting 43% for the full year next year. So I think those are fairly good numbers.

Could you give me a sense for what the headcount growth is in sales-generating employees? I apologize if you gave that previously.

Tobey, we don't break it between sales and recruiters. But, Eddie, will you look for that consolidated -- do you have consolidated number?

Yes, it's 4.2% in Q4.

Over 1/3 or?

Yes, sequentially.

Oh, sequential? Okay.

Yes.

Yes.

And then, Pete, just from a balance sheet perspective, the deleveraging since the acquisition of Apex has been very strong and you're probably ahead of the schedule if I were to look back at the presentation you made when the deal closed. Where do you intend to operate the business, in kind of what band of leverage are you comfortable?

Right, if -- Tobey, we don't think it makes a lot of sense to delever currently below 2.5x based on the current cost of debt, which should be coming down. We hope to be able to reprice our existing facility because of our strong performance and the strong conditions in the markets. If we were to do an acquisition, we'd feel comfortable with levering back up to the levels that we did with Apex. If we weren't to do -- if we were not to do an acquisition but we're to try to return capital to our shareholders through a share repurchase, again, I think somewhere between where we are and where we were for the Apex transaction would be appropriate and would be easily serviceable.

That's helpful. My last question has to do with plans for your perm business. It was down a little bit sequentially and it's still relatively low compared to industry norm. What are your thoughts?

Mike, do you want to handle that one?

Yes, I mean, I think on the IT side within the Oxford piece, we have about 1% or so of our revenues in 2012 and if the economy continues to improve, we will see that increase. We had a very good January and we're going to have a very good, in fact, a really full first quarter within Centerpoint, so we should see that increase to more than what we certainly did in 2012. And again, really, economic dependent in terms of how far we go, but we will increase it. We'll see some increases also on the -- in the Allied side and the rest of the legacy business. They also have very good -- they're going to have very good first quarter in perm business as well.

Tobey, we've been consistent. We think we have room to grow that to somewhere between 3% and 5%, but we're never going to get this thing up to 10% of revenue as a perm placement conversion fee conversion business.

Our next question comes from the line of Paul Ginocchio.

Just a couple of follow-ups on some previous questions. Just, what are the cash proceeds like after tax on the Nurse Travel versus the 31 you sold it for?

There was a lot of tax leakage and it's about 20.

Yes.

Great. And then, is there a different tax rate on the amortization that you're assuming or should we just use the overall tax rate of the company?

Well, to give you the true impact, I'm using a marginal rate, which is 35% for the Federal plus 4% for state.

So you're using 39% on the amortization?

Exactly.

I'm just trying to true-up -- we were only looking for $14 million in amortization for acquisitions and you're coming in at $21 million so I'm just trying to true-up the difference. You're not going to give us sort of what was embedded, what would have been your Nurse Travel revenue or EBITDA in 2013, right? You're not going to?

No. We gave you the numbers for Q4 and full year of 2012. We're not going to give you what we estimated for 2013. And Peter mentioned also that Q1 was -- or Q4 was a strong quarter for them because of strike revenue. They had $6.5 million of strike revenue in Q4.

And then finally, or 2 more. Just the debt pay down, Peter, I didn't quite understand your reply then. Are you saying that you're willing to re-lever up if you -- to repurchase shares once you hit the 2.5% leverage ratio?

Perhaps. If that's the best use of our capital.

And final one, maybe it's for Rand. Rand, are you seeing any benefits in your business from the IRS' crackdown of -- on the misclassification of 1099 employees? And is that -- or is that already in the numbers or does that become even a bigger tailwind going forward?

No, we -- I think their crackdown of 1098 -- 1099s has been on for a while, so we really avoid 1099s. So we're a W2-based business with our contract employees. So we think that's the right thing for the government to do and we're -- we stick with that.

Has that driven extra business as companies switch from 1099 to W2?

I don't have an answer for that, Paul, really.

Rand, I'll take a stab at it. Rand, people trying to work as 1099 on mid-tier skill sets, that's $60 an hour pay rates, not nearly as prevalent as when you get into the higher skill sets where these people thinks they have witch doctor status. And so, it has driven business to Oxford and also to our Life Science group, where we may have had a Ph.D. or a physician doing medical writing and going directly to the pharmaceutical company as a 1099 and HR or Legal's come in and said, "I don't care how important this person is. We ain't taking the risk. You go find a way to make this person a W2."

Great. And then, if I could just throw one more and about the topic du jour, health care reform. Just maybe the level of inbound calls that you're getting from clients about sort of asking you maybe potentially to help them out or help them understand how you could help them?

Well, they're not calling us asking us how we can help them understand Obamacare. They're working with their healthcare professionals and their HR specialists on that. What they're doing is seeing what kind of groups of employees they can turn into contingent labor and they are calling us to envision how we can do that with them.

Our next question comes from the line of Tim McHugh. Timothy McHugh - William Blair & Company L.L.C., Research Division: First thing I just wanted, to ask for the 2013 guidance, what type of growth in the staffing consultants are you expecting for this next year?

Tim, I don't know that off the top my head. I would have to get back to you on that. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then for Rand, you talked about financial services doing better. Is that a -- actually growing in line or even faster than the rest at this point? Or is it still a slower growth? It's part of the business, it's just not as bad as it was before?

Well, it's not growing as much as our health care unit or our telecommunications unit, consumer/industrial so, but it's definitely in the positive. It's moving up and that's a good thing. But no, historically, we've done higher growth in financial services so there's still room to go up. Timothy McHugh - William Blair & Company L.L.C., Research Division: Okay. And then just one more for me. Peter, I guess the acquisition environment, as you think about -- it sounds like you guys are starting to look more aggressively again. What does it look like to you out there and where would you be interested in investing?

Yes. So we're focused on math and science. We're not interested in just acquiring revenues for the sake of having more revenues but more kind of to fill in a void in our service offering. So Physician Staffing is important to us on an acquisition basis. Life Sciences, clinical research, we think we've got a couple of voids there. We'd like, on the IT side, business analytics and health care are kind of top of mind. And the marketplace is good. I mean, I think you have willing sellers and a lot of buyers. As you know, there's been an enormous amount of private equity interest in the second half of 2013, which I think kind of you saw some big acquisitions by Strategics, us and Randstad. And then, you saw a strategic buyers move in and now I think you've seen that the public shareholders move in to invest in the public companies. So there is interest. Things are rational but there's interest.

Our next question comes from the line of Jeff Silber.

I guess I actually wanted to have a follow up in the earlier question on health care reform, just asked in a different way. Have you quantified the potential impact on your own business in terms of cost for providing health care -- health care insurance to your consultants and/or being part of the exchange or paying the penalty?

Not to the extent that we're prepared to share it publicly, Jeff. What I can tell you is the way I view it is it's a timing issue versus a permanent expense. So to the extent that we fall into a category where we're obligated to provide the health care insurance at a cost, we're fully expecting to pass that along to our customers the same way we do any time there's an increase in workers' compensation insurance or state unemployment insurance rates.

And I'm assuming there's no, in terms of your guidance for this year, there's no inclusion of any cost related to that, is that correct?

That's correct.

Okay, great. And then shifting gears to the Life Sciences segment a bit. You mentioned in your prepared remarks, Peter, that you're adjusting operating plans in the division. I was wondering if you can give us a little more color on that, specifically because it looks like your guidance looks for accelerated growth in that division in 2013, so an explanation would be great.

Yes. I'll let Mike go first and then I'll follow behind him.

Yes, the biggest issue there we had, Jeff, was last year, we were down staffing in specific markets and specific segments within the Life Sciences arena, so what we did is we actually expanded and grew our staffing consultants in the third and fourth quarter. Ed related to that in terms of some of the increases that we did in the fourth quarter and we're continuing that into the first quarter. So like most of our businesses, it's a good 6 to 9 months for those folks to come up to speed and we're anticipating that's going to happen, so we're really seeing growth in that segment really in the second half of this year following the incremental headcount. That's primarily where we're at on it.

Yes. I think that's 100% accurate and then on the profitability basis, I think we could've probably reacted a little quicker to some trends that developed in our permanent placement business, and I think we have reacted to those conditions and we expect a better performance by that group this year than last year.

And next question comes from the line of Edward Caso.

It's actually Rick Elskelsen on for Ed. Question is just around financial services. I'm wondering how much work you're seeing or expect to see from financial reform efforts accelerating in 2013 on the IT side?

That's probably one of the biggest areas for opportunity within the major money center banks. A lot of them have -- are a little bit behind in implementing the data management tools that are necessary for them to appropriately value their assets for capitalization purposes. And we see that as an area where we're having a lot of productive conversations, but that's just one of many areas but it's probably top of mind because a lot of banks are behind right now on that.

And has the sort of demand in the activity there accelerated since the election?

I would say, yes. We are seeing faster engagement and a greater release of projects that have been discussed in the fourth and first than what occurred in the second and third.

And then just last one, kind of relating to that as well, on the Healthcare IT side, have you seen a similar pickup in demand for Healthcare IT also after the election?

No. This is just -- what was driving early adoption of it was the stimulus dollars. But now what's driving it is it's just a reality that it's getting embedded and that Medicare reimbursements are at a certain point and be contingent on it being processed electronically. So as they say, the horse is out of the barn and it ain't not going back.

Our next question comes from Randy Reece.

I was just wondering if you could explain how you don't end up taking a bath on growth hiring from quarter-to-quarter, given that the -- that when you hire people, there has to be a ramp before they're productive. It doesn't seem like it has a perceptible effect on your margins and how do you achieve that?

Well, Randy, I don't if this is going to -- tell me if this makes logical sense. We've been reporting to our shareholders for the last 12 quarters our growth and headcount every quarter and we don't all of a sudden wake up and say, "Wow, things are so good. We're really going to hire now. And it's going to take time for these people to get productive but once they do, you're going to really think we're smart." We've been doing this now for 12 quarters and showing you how many people we hire. So we've got a little bit of a crescendo that's occurring that people that we've previously hired are ramping up and are productive and they're offsetting some of the dilution from the new hires.

Also, in terms of market share gains in, let's say, the second half of 2012, do you have a feel for how you performed against the market in the second half of the year?

Yes. On IT, I would say that we probably grew 600 basis points faster than the market. In Life Sciences, we were probably 300 basis points below the market. And Physician Staffing, we were probably at or 200 basis points above the market. And then Allied Healthcare, I think we were probably 1,200 basis points above the market.

Why is Allied so good?

That is -- the health care market has gotten better. Our team has done a great job. Randy, we really made it a priority in 2006 to really start this Healthcare Information Management group and with all the conversions of ICD-9 to ICD-10 spend in Healthcare, that group had a very good quarter and we've got a great team there and they're making great strides in growing that to a critical mass and it's feeding on itself right now.

Our next question comes from Mark Marcon. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I was wondering if you could talk a little bit about what you're seeing in terms of the supply of candidates. How difficult is it to attract candidates on the IT side? That was sort of questions for Rand and Mike.

Yes. So I'm going to go first and then the 2 of these guys can add their own personal color. From my high level, I'm not hearing too much justification of why they're growing at whatever rate they're growing at because the markets are so tight, they can't find people. That may be a product that we hired a lot of additional recruiters. So we have more people looking, but I haven't seen an appreciable change based on what I hear from our people from the fourth quarter. Mike, do you want to go first and then Rand, follow up for your group?

Yes, I would agree with that, Peter. It's pretty well consistent with what its been in the third, fourth quarter and it also really gets into the issue of skill sets. So obviously, Healthcare IT is very difficult to find all the right people versus -- believe it or not, SAP is a little easier right now than what it was 18 months ago. So really, it depends upon a specific skill set that you're looking at but generally it's been -- it's consistent over the last 6 to 9 months. And also, remember from an Oxford perspective, and I'll have Rand talk, we're glad when it gets tight, remember, because being a recruiter-driven organization versus a lot of our competitors, most of our consultants are not advertising on Dyson and Monster and what not. So we're going out and finding them and a lot of our competitors don't do that. They rely on those job boards. We don't. So we actually, remember, like a tighter market because we can excel on that kind of an environment. So, Rand, how about you guys?

I think you guys have covered it. I would echo what you said, Mike, it's very skill-set dependent. Certain skill sets are a little different than others, but it's been a steady marketplace and I think a lot of contract employees like to work with Oxford and Apex as well, so it kind of works both ways. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And then can you talk a little bit about Physician and Allied? Is there any sort of impact at all in terms of divesting the Nurse Travel business in terms of their marketing efforts?

Not really. We did have a concerted effort. More so on the Allied Healthcare side than the Physician side to kind of get master service agreements, where it was a unified contract where both parties could work under it. But these skills that we provide are in pretty short supply that we've separated most of the contracts pre-divestiture. On the Physician side, Mark, it's just the person purchasing a Physician is much different than the person who is purchasing a Nurse or an Allied professional. So there wasn't that much aggregation at all. So we had maybe out of over $100 million of revenue, maybe a couple of contracts where a hospital purchasing organization wanted us to sign one contract, but again, the scarcity of the resource and the quality of the service we provided, we don't think that there is any problem in separating those contracts and we've separated most of them pre-closing. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And then on the Physician side, you did have really strong growth for the entire year. For the first quarter you're projecting a lower level of growth than you are for the balance of the year. Can you talk a little bit about the dynamics that would lead to the acceleration?

Well, just normal seasonality but what I would tell you is that Christian Rutherford, the President of that division, told me today that last week was the highest production in the history of the firm. Growth rate, not numbers. Percentage. So we're not seeing a slowdown. We're actually seeing good solid progress there. Christian has done a very good job there. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: You are projecting low-single digits for Physician Staffing, right, in terms of the guidance?

Let me pull the press release. I think it implies... Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: I'm just reading. [indiscernible]

The quarter. Full year, we're not. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Right. And that's why I was asking about the acceleration.

Yes. Some of it -- the healthcare professionals, HCP, had a little bit more government agency revenue than VISTA and that business slowed down throughout '12, but we're not seeing a deterioration of the business. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Great. And then how should we think about the cash tax rate? Obviously, you're showing an inflated book rate but...

Well, there's, what, $19.7 million and -- Ed is looking at the spreadsheet, 1 second.

Mark, as it relates to the effective tax rate we're giving you, the 43% for 2013, that book rate and the cash tax rate aren't going to be that much different, if that's what you mean.

Well, is he asking...

If you're talking about the effective tax rate?

Yes. He's asking after you get the $19.7 million of savings from the H10, how much does that effectively lower what you're paying to the IRS?

Mark, let me get back to you on that. Just so that I can give you a number. Mark S. Marcon - Robert W. Baird & Co. Incorporated, Research Division: Okay, we can just follow up offline.

We have a follow-up question from Tobey Sommer.

Just a brief question, how big is the HIT business now? And as part of your strategic review, do you intend to isolate and triangulate it on the other de novo lines of business that you can launch and try to create value that way?

Yes, so it's close to a couple of hundred million and we -- Health IT and we always are looking at, Tobey, what is early adoption, just like we looked at Healthcare IT, we looked at the clinical research space, specifically Health Information Management and then we're spending a lot of time thinking about this business at analytics, mathematicians. There's company called Opera Systems, these things that are really deep, stochastic, mathematical calculations. These people are hard to find but a lot of people will pay whatever it takes to get them.

And at this time, I'm showing we have no further questions. I'd like to turn the floor back over to management for any closing or additional remarks.

Thanks. We greatly appreciate your time and attention and look forward to speaking to you again for our first quarter conference call. Thank you very much.

Thank you. This concludes today's On Assignment's First Quarter 2012 Earnings Call. You may now disconnect and have a great day.