Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and is available for replay. I would now like to turn the conference over to our host, CFO, Ed Pierce. Please go ahead.

Thank you, operator. Good afternoon and thank you for your time today. Before we get started, I would 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 risks and uncertainties that could cause actual results to 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. I would now like to introduce Peter Dameris, our CEO and President, who will provide an overview of our results for the quarter. Peter?

Thank you, Ed. Good afternoon. I would like to welcome everyone to the On Assignment 2014 fourth 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 of Oxford Global Resources. 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 Rand and Mike. I will then turn the call over to Ed for a more detailed review and discussion of our fourth quarter results and our estimates for the first quarter of 2015. We will then open the call up for questions. Now on to the fourth quarter and full year results, revenues from continuing operations in the fourth quarter were $475.8 million, up 8.3% on a pro forma basis and 12.5% on an as-reported basis year-over-year. Full year revenues from continuing operations were $1.86 billion. For the fourth quarter, income from continuing operations, adjusted EBITDA and conversion of gross profit to adjusted EBITDA were above our projections provided in the third quarter earnings press release. Revenues generated outside the United States were $20.6 million or 4.3% of consolidated revenues in the fourth quarter versus $19.2 million or 4.4% in the fourth quarter of 2013. Adjusted EBITDA was $54.7 million or 11.5% of revenues, up from $50.2 million or 11.4% of revenues in the fourth quarter of 2013 on a pro forma basis. On February 1, 2015, we completed the sale of our Physician Staffing business. Accordingly, we will not be commenting on the segment’s results. Later in this call, Ed will walk you through the restated financial statements included our earnings press release that excludes the Physician Staffing segment for comparative purposes. Spending…

Great, thank you, Peter. The Apex segment, consisting of the Apex and US Lab Support business units, grew revenues by 9.5% in the fourth quarter over the fourth quarter of 2013. Revenue was $307.7 million. Gross profit for the quarter grew 11.4% on a year-over-year basis with gross margin of 28.5%, an increase of 47 basis points compared to the fourth quarter of 2013. Segment contribution in terms of divisional EBITDA grew 14.3% for the quarter as we continue to grow our business on the top and the bottom line. Pace in Apex segment growth was fourth quarter year-over-year growth in our business services, health care and technology accounts. Our lab support unit also posted solid revenue growth. The Apex and U.S. Lab Support business units grew full year revenues by 12.3% in 2014 over 2013. Revenue was $1.19 billion. Gross profit for the 2014 period grew 13.8% on a year-over-year basis with gross margins at 28.2%, which is up 38 basis points from the previous year. Segment contribution in terms of divisional EBITDA grew 17.2% year over year. The Apex and U.S. Lab Support business units see a stable market for our services going into the first quarter of 2015. Apex also successfully completed our initiative to add headcount for our field teams as we start 2015, as Peter indicated earlier. I'll now turn the call over to Mike McGowan to discuss results of Oxford, Physician and European business segments. Mike?

Thanks, Rand. The Oxford segment, consisting of the Oxford core and CyberCoders, had revenue of $123.9 million for the fourth quarter, a 6.7% increase over the fourth quarter of 2013 on a pro forma basis. Gross margin for the quarter was 41.7%. Oxford's core revenue for the fourth quarter was $105.1 million, up sequentially by 22 basis points over the third quarter of 2014 and an increase of 4.3% over the fourth quarter of 2013. Oxford's core gross margin for the fourth quarter remained strong at 33.8%. Within Oxford core, the Oxford International division which comprises all of our national recruiting centers in the US and Cork, Ireland as well as our local office operations showed steady improvement throughout 2014 and had a strong fourth quarter. Revenue in the quarter was $84.6 million, a 3.3% sequential increase over the third quarter and year over year growth of 9% as compared to the fourth quarter of 2013. The revenue growth was primarily driven by our regulatory and compliance and traditional engineering segments. Our ERP segment also started to show improvement in the fourth quarter, after experiencing relatively soft trends during the first three quarters of the year. Based on our early results in 2015, our expectation is for continued growth in the first quarter, tempered somewhat by the negative impact of the strengthening US dollar against the euro and the recent significant snowstorms that Peter mentioned in the Northeast. The strong performance in Oxford International was somewhat mitigated though by a continued slowdown in revenues for our other core division, Oxford Healthcare IT. As we mentioned in our previous conference call, while the first five months of 2014 were good, revenues declined from June through November as a result of the completion of several large projects and a sluggish demand for new electronic medical record implementations and actual EMR assignments. The good news though is that this division had a strong December and our current expectation is for continued growth in 2015 off of our fourth quarter base. Based on feedback from our clients, we expect several new EMR implementations, optimizations of previously installed systems and overall demand for consultant use to slowly increase during 2015, including the need for ITD 10 related work. And finally, CyberCoders had a very strong quarter with revenues $18.7 million, 22.7% greater than the fourth quarter of 2013 on a pro forma basis. During the fourth quarter, we increased our headcount by approximately 6%. In addition, we are continuing to invest in our in-house systems and search technology that we believe will continue to increase our efficiency and drive business. And like Oxford, based on early results in 2015, we expect continued growth in the first quarter and throughout the year. Ed, over to you please?

Thanks, Mike. Before reviewing the results for the quarter, please note that we restated our historical results to report our European retained search unit as discontinued operations. This unit closed in December and incurred a loss of approximately $1.8 million on revenues of $2 million for the full year 2014. Also please note that I'll be making references to pro forma results, which assume the acquisitions of CyberCoders and Whitaker occurred at the beginning of 2013. Now, turning to financial results for the quarter, fourth quarter revenues were $475.8 million, up 12.5% on a reported basis and 8.3% on a pro forma basis. Adjusted income from continuing operations was $31.4 million or $0.60 per share, and adjusted EBITDA was $54.7 million or 11.5% of revenues. Cash flows from operating activities were $28.1 million and capital expenditures were $5.5 million. These results either exceeded or were in line with our financial estimates for the quarter. Direct hire and conversion revenues were $21.1 million or 4.4% of revenues, up from $16.6 million or 3.8% of revenues in Q4 of last year on a pro forma basis. CyberCoders accounted for $15 million of the perm revenues for the quarter. Our gross margin was 32.3%, up 1.7 percentage points on a reported basis and 42 basis points on a pro forma basis. The expansion in gross margin was primarily a result of higher mix of direct hire and conversion revenues. SG&A expenses were $108.6 million or 22.8% of revenues compared with $108 million or 22.6% of revenues in the preceding quarter. SG&A expenses for the quarter included $1.8 million in acquisition, integration and strategic planning costs and expenses related to our realignment and consolidation initiatives and expenses related to the sale of the Physician segment, which closed Q1 of 2015. Our conversion of gross…

Thanks, Ed. We believe that we are still well positioned to take advantage of what we believe will be historic secular and cyclical growth for the staffing industry over the next five 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 Kevin McVeigh. Please go ahead.

Peter, if you said this, I missed it. It sounds like you went to 140 on the new hires in sales, is that a net number in terms of what came off with the sale of the Physician or what would be the net impact you had if you factor out the recruiters that weren’t with the Physician sale, if any?

It’s my understanding those numbers are net of the Physician headcount and it’s a combination of sales and recruiters, heavily weighted towards sales.

And I know it was about, if I had the number right, about $10 million or so for the 100, the increase for the full year is 3.3, can you just give what’s the expense impact for the incremental 40 or just what the total expense impact is for 2015 from those 140?

I don’t have that, Kevin. I guess what I would do is, just extrapolate from the numbers that we gave here.

And then, listen, it looks like Oxford had its first year on year sequential acceleration since Q2 2012, nice job there. Is that due to some of those recruiters hitting the ground already or we expect more momentum as we work our way through 2015?

No, it’s not, we really haven’t seen any sort of positive impact from the hiring, because the hiring really started in Q4, it takes time for them to be on boarded, trained and actually stop shadowing people and have their own book of business. Mike, why don’t you just walk them through qualitatively what drove the performance in the fourth quarter that allowed you to have this sequential and year over year growth?

The biggest thing, Kevin, was very, very specific targeted sales initiatives that we conducted in Oxford International which were those national recruiting centers, local operations as well as in the healthcare IT group. So that's primarily, we have about five or six major initiatives that we focused on in terms of, as an example of, increasing penetration in some of our accounts. Some of those sort of things. But that was really the result and really aggressive posture that we taken out doing the same thing, because we had those same initiatives and programs, now in 2015 we're seeing the same positive impact.

Kevin, based on working hard all year, just it takes time, the passage of time for some of these things to start bearing fruit. So they were working harder in the second and third quarter than they may have even been in the fourth, but time just had passed and the reaction to our initiatives hadn't occurred to allow us to report the revenues and now passage of time has occurred.

That's a nice outcome. And last question, I will jump back in, the weather impact, was that across all segments or did it disproportionately impact one versus the other?

It's more on the IT side than the life sciences side.

Next question comes from the line of George Tong.

You've indicated you're seeing a return to normality in spending from some of your larger customers at Apex, can you provide some more context here, what specifically you are seeing, or what's driving the rebound in spend?

George, I'll go first and then I will ask Rand to specifically address it, but our prepared comments were confident that there will be a return to normality, but we are not actually saying that we've seen it specifically in the financial services industry. And although we are growing above industry growth rate, it's a little bit less growth than we would expect because of our brand and size. And the growth as we said from our smaller accounts, again, a small account could be Johnson & Johnson, if that we do $500,000 a year with them, we don't do $10 million a year with them, it's not that customer has 300 employees. We saw almost 22% growth in our smaller purchasing size accounts and that has been carrying a little bit of the load, while some of the large money center banks have been muted in their spending. Rand, what would you add to it?

No, I think you said it and we said in the comments too, the industries where our top accounts are continuing to shine are technology, business services and healthcare accounts.

You mentioned that you expect healthcare IT spending at Oxford to increase as you move through 2015. Can you talk about how much visibility into this increase you have and how expectations now differ from what they were a year ago?

Look, our comments, prepared comments where we expect to grow off of our fourth quarter run rate, and the fourth quarter run rate was around $13 million, $14 million, where at the second quarter 2014 run rate was about $21 million. So we feel like a good portion of some of the surge in spending is through our system and people are starting to look more forcefully at phase 2 of these implementations and optimizations. I wouldn’t get overly excited, we’re excited that it’s not shrinking, and that we’re starting to see more work to bid on, but it’s one week at a time.

Got it. And then final question for me. Your leverage ratio is currently at 2.06. Can you discuss your strategic views on where you would like to take that and what the implications are for additional indebtedness and share repurchase activity?

Yes, so absent an acquisition we said anytime we’re under 2.5 times leveraged, we don’t think that based on current cash flow generation and cost of debt that our capitalization is optimized. So we tried to get to 2.5 leverage with the first $100 million share repurchase and it didn’t happen. And now we got a situation of about $105 million in net proceeds, plus we're going to generate north of $100 million in free cash flow this year. So we're going to be looking to get to 2.5 times the leverage through the share repurchase if you don't have attractive acquisitions to work on.

Our next question comes from the line of Tobey Sommer.

Another question for you about the large customers, how do you feel like on an apples-to-apples basis the large customers have performed since last summer? And then maybe if you can segregate it and talk to the large customers from a perspective of this year, do you have access to a different or larger set of potential large customers? Thanks.

Rand, I want you to go first and I’ll follow.

Tobey, first of all, yes, every year we target or retarget the top accounts we really want to service, a high percentage of them stated same year after year, but what we've found is we've targeted accounts in technology, business services, and healthcare obviously well the last few years and those areas continue to grow for us. Our stable and historic base have been the banks, the financial institutions, the consumer industrial companies, the and government contract companies, and what we've seen there is little bit of ebb and flow business. For example, our energy accounts are down in their spending and obviously our revenue from them is down a bit. Our banking clients are relatively flat over this past year, we still believe we have the same if not a growing market share in those accounts, but their spending is down a bit. Now having said that, we continue to target and pursue other accounts within that sector, insurance accounts, midmarket banks, and other things. The government accounts I think are also clear, we've seen them decline during the course of the year, a little bit of a churn out in Q4, but not enough to say we are out of the woods, but I think we can all watch what goes on in Washington DC and will get a sense of where spending will come. Where we are leveraged the best in government is Defense and Homeland Security and that's the area that I suspect will get more funding as we go forward. Does that give you some sense, Tobey?

It does, thank you.

And Tobey, I would just add, as you said about 2015, our customer base, the wisdom of the large customer base is, we worry about quality of revenue as much as quantity of revenue. And by having these larger archons, they may move around, instead of being number one they are number 10 in a given year and then move back to number four the following year. But we have a stable of clients that we can pretty much rely on year in year out that we're going to get some sort of business from. But we added to that stable in the fourth quarter. So we have a couple of major wins that will start firing up in 2015 that we really didn't do any significant work with in 2014. And that offset some of the fall off in some of the bank spending or energy companies.

Okay. I was wondering – if you commented on it, I apologize, but how did ERP perform in the fourth quarter? And to the extent you have any comments on an expectation for the first quarter, it would be appreciated.

So our comment was that after a couple of sluggish quarters in 2014, in the fourth quarter ERP performed better than we expect that continued performance in 2015.

Then my last question is just a numeric one. I think you said the 140 new recruiters and salespeople represented – is that 6% growth?

My prepared comments said, excluding the Physician Staffing segment, the number of internal recruiters and sales personnel increased 10.1% year over year on a pro forma basis as of the fourth quarter. Now, I gave you some apples and orange numbers, Tobey, because what I just read here was fourth quarter and the 140 was as of last week.

Our next question comes from the line of Edward Caso.

It’s actually Rick Eskelsen on for Ed. Hoping to dig in a little bit on the financial services side and just see if you can parse out a little more where you are seeing demand, what areas the banks are or are not spending on, and your expectations in 2015 on how that may or may not change. Thanks.

Without getting into specific customers, generically, Rand, we do kind of talk about where you're seeing kind of the urge to spend in the money center banks?

I think what's happened is some of the merger activity over the last two or three years has calmed down, so that spending is decreasing. What is increasing use consolidation of operations, operating systems that are more end user pointed, infrastructure cost consolidation in the bank and the financial sector, which is kind of an ongoing thing and it is a good cost savings mechanism for the banks. But the biggest thing that's probably come down a bit over the last year is merger and acquisition activity have really started two, three years ago.

Okay, and then just building on that, Rand, you had also talked about healthcare being an area of strength. If you could maybe give a little more detail into the pieces of healthcare where you are seeing any solid demand?

We support on the Apex side, remember we have healthcare units both in the Oxford side and the Apex side, I think Mike gave a good description on the Oxford side. On the Apex side, we took this on the account and our spending has ebb and flowed from spending around EMR, EHR systems implementations over the past couple of years and now more just infrastructure, database generation, connectivity, interoperability of systems, but I would call the normal core fundamental IT kinds of requirements that they need. So we too are experiencing less EMR, EHR implementations, but we are definitely focused on the account and have moved nicely over the past year, year and a half into the other core infrastructure areas and the other the areas of spend. So with regards to payers and providers, so it's with hospital systems and hospital chains as well as the payers, a little bit of pharmaceutical work is in our healthcare sector, new entrant into this is some of the VA and the government healthcare spending which is ebb and flowing also, I would say.

Okay. And then just the last one for me on the – overall across your client base, I don't know if you have a sense for maybe what the IT budgets are looking like for 2015 now that we are towards – well, actually close to the end of February, and then specifically within that, what about the new technology, the more discretionary areas of spending in technology? I think the last time you guys have talked about new tech, you said there wasn't – clients were maybe being a little more deliberate in how they were deploying that. Thank you.

So a couple of comments. With regard to budget, they are genuinely [indiscernible] couple of customers that has specific desires of how they want to manage their P&L in 2015, earnings production and stuff like that. But with regard to newer technologies, cyber security is getting a lot more attention and money spent on it, but the continued focus on new product development and just business analytics, data warehousing and Dodd-Frank compliance with regard to the major money center banks tends to be what is garnering the most attention of the CIO's office right now.

Our next question comes from the line of Jeff Silber.

Now that you have divested the Physician business and closed the European retained search unit, are you happy with the business mix as it stands? And if not, what areas might be missing?

No, no, we feel pretty good. I mean, we think that we have the right focus, breadth, scale to be – we are the second largest in North America and we've got a laser focus on building it out. And as you saw, Jeff, in the quarter, because of our business models, we can throw dollars at SG&A and grow our business versus having to acquire things. So we feel pretty good that we are on the right space, which is IT, engineering and life sciences.

Okay, that's great to hear. Eddie, I guess a question for you. On the statements at the back of the press release that show continuing operations going forward, I just want to double check. Within discontinued operations, that's both the Physician Staffing segment, as well as the European retained search unit?

Yes.

Okay, good. So this is the format that it will look like when you report your first quarter numbers?

Exactly.

Okay, fantastic. Then just one more quick one and not to nitpick on the numbers, but since you gave us so many, when I look at the average number of customers in the Apex segment, it looks like that declined both on a year-over-year and sequential basis. Was there something specifically going on there?

Let me make sure we are looking at the same data. Average number, top end customers, average number of customers, it shows down by about 100 or so sequentially. I don't know, Rand, do you have an explanation?

No, I had to go back and look at that. I wouldn't say there was any major movement there, but we're still moving across the board to finishing, I'll have to go back and look at those numbers.

That number may move around a little bit more as you get more smaller accounts than historically.

Peter, one thing I would add too is I assume that number includes Apex and Lab Support business. The Lab Support business is going through, there's various migration in with us, if you will, and they have focused more on some of the large accounts and saw some of the smaller ones, choosy accounts have probably falled to the wayside, which is fine as far as we're concerned and our team is driving. So I think that's probably a piece of that.

You didn't ask the question, but I'll make the statement. We are at aware of a loss of any major customer.

Our next question comes from the line of Paul Ginocchio.

Pete, just if you could maybe break out the bill rate for large versus small clients. I do see it's picked up. It is up 2%, 2.4% year over year, which has been better than it has been. Could we just get a look at that, maybe, on a like-for-like basis, small versus large, and is your initiative to going into smaller clients, is that what's starting to show up with the bill rate, or is it just better pricing?

The bill rate is not moved by the customer size as much as the margin is. So that's just ebb and flow of the mix of skill sets that are sold in a particular quarter to a particular customer. And again, I just want to distinguish how we define our smaller accounts versus others, small account is not a company that has 100 employees. A small account is somebody that we may do $200,000, $300,000 of revenue with. So it could be General Electric, but for whatever reason, General Electric only buys $300,000 of revenue services from us a year, whereas another person going to file a small account as peaked hardware store that does $10 million in revenue and they need a new website built, and they have a total of 150 employees. So our mission is not to go down and find customers that have 150 employees, our mission is to broaden our customer base and accept more smaller size accounts and build some intimacy with them where they may become one of our top 200 account some day.

Okay. And just can we talk about the outlook for the bill rate? Despite everything we hear about talent scarcity in IT staffing, your bill rate was down 13 or slightly down this year. It was down the first half. It was up in the back half. Could we get to 3% to 5% bill rate growth?

The bill rate is just mix. So on Apex, if you see any compression it’s because how they report the scientific surfing, which has on its own bill rate that's $20 or $30 lower than their core bill rate. So that's how that is. As it relates to Oxford, the bill rate most around again with skill sets, the regulatory in theirs that come in when there's been FDA inspection and there have been fighting violations, those people are going out at much higher rate than a normal SAP implementer. And that once again is moving around. We are seeing pricing pressure meaning more conversations from the billable tempo about wage increases and we are having those conversations with the customer.

Okay, just a couple more, if you don't mind. You didn't break out the payroll increase a year ago, but you did this time. Was that because it was unusual this year relative to last year or you just wanted to call it out?

Paul, we did. Actually I think in our first quarter earnings release, not the release but in our prepared remarks, I think we said it was roughly $3 million to $5 million.

Is it unusual this year or no, just the normal course of business?

I'm sorry, that was weather, I was thinking of weather. In fact, if you look at it year over year, the increase was about the same percent of revenue this year than what it was last year.

Okay. Then just on direct hire, I think it was – your revs were down about 13.5%. One of your competitors was down 12% Q-on-Q from third quarter into fourth quarter and another one in a different end market was only down a few single digits. I would have thought with CyberCoders that you may have outperformed one of your IT comparables peer companies, but in fact your direct hire revs were down a little bit more. Is there anything going on in CyberCoders or...

Let me clear that out for you. CyberCoders had a huge fourth-quarter. Remember, when we bought CyberCoders it had two components to its business. A small component of contract staffing and then the vast majority of it being search fees. The search fees grew almost 32% in the fourth quarter. And we have told intentionally CyberCoders to start doing the contract step, because we've got billions of that on our own. So you all go after the contingent search business.

So that Q-on-Q decline may be a bigger percent of it is more because of the reduction in temp?

That’s correct. They had more temp revenues in the fourth quarter of 2013 than they did – at a faster growth rate than they did in the fourth quarter of 2014.

And that was reported in that $18.2 million?

I believe that’s correct.

If I could sneak one more in, apologies. ACA, have you put a price increase through and is that going to cover costs, or is it just not really an issue for you?

The guidance we gave you, it’s not an issue, the guidance we gave you is that we’re factoring in an internal pricing and you see what the margin is that we expect in the quarter.

Our next question comes from the line of Tim McHugh.

I just wanted to ask – I know you're not giving annual guidance, but I guess given the margins it seems are down a little year over year in Q1, and I get you are adding a lot of salespeople, is it simply that we need time for those to mature? I guess whether you want to say for this year or, I guess, over a 12- to 18-month horizon, do you still think we're at a point where earnings should be growing faster than revenue or are we in a sustained period here where you may continue to push on SG&A to drive the organic growth where margins will be down, I guess, over the medium term?

Tim, I would answer the question this way. We think we got stable to slightly expanding gross margins. On the EBITDA margin, the first quarter was down for a variety of reasons which is the payroll reset, we just hired 140 people, we are divesting of a segment and we are layering of back-office processing personnel and we're in kind of built suspenders in the back-office now until we finish the transition services to the new buyer as well as we pretty much finished the lift and shifting of the last balances into Richmond, Virginia. So, I mean all things considered, I think we actually expanded our EBITDA margin 2014 fourth-quarter over 2013 fourth-quarter, even with the surge in hiring. So I am not particularly concerned that we are not going to be able to continue to expand our operating leverage if we get a return on Investment on these people. So I want to choose my words carefully, I know others are trying to expand their EBITDA margins, but we have consistently always done that and I think we will continue to do that. We gave you targets at March 2014 in our Analyst Day that we think we can expand 100 to 250 bps and we the expanded them in 2014 and we've got plans to do some things that allow us to do in 2015.

Okay. Then if I look at the top line by segment, I guess typically in the guidance you give us the growth rates by segment and I didn't see that this quarter. I did hear in the prepared comments, I think Oxford, Mike had said, similar growth rate to what they saw in Q4. Is it fair – is that a similar kind of comment for Apex as we think about that in Q1 in terms of what growth you are expecting?

As it relates to Apex, we would be looking at somewhere between nine and 10% top line growth in Q1 and as it relate to Oxford, actually you would expect an acceleration on a pro forma basis from what you saw in Q4. So we are slightly faster growth rate in the first quarter than the fourth.

Yes, exactly. So Oxford should be maybe 6% to 8%. And by the way, Tim, to point out the obvious that 9%, 10% growth rate for Apex is pretty impressive when you consider they grew 16.5% in the first quarter of 2014 and we had inclement weather in the first quarter of 2015.

Next question comes from the line of Gary Bisbee.

First question for me, so it's great to see the sales and recruiter hires. I guess looking back, though, any commentary on why prior to this quarter the year-to-year growth in that – on an organic basis, stripping out the divestiture and stripping out what CyberCoders added, had really slowed in the first nine months of 2014? Was that more a reaction to demand or was it you were focused elsewhere and for some other reason slowed the growth of those hires?

Gary, I think to repeat what we said previously, the performance in 2014 through the first three quarters was because of the ebb and flow in large customers, a dramatic slowdown in electronic medical records, a little bit of distraction in our shifting of the clinical research business in the US to Oxford, and the decline in Europe, but other than that I don’t think it was anything other than that, whether a deterioration in the market, whether a deterioration in our corporate profile, maybe we watched our SG&A a little too tight coming out of the second quarter, but we resolved that quickly. And we’re planning for the longhorn and I think that between what we did was the expansion of our EBITDA, the improvement of over capitalization and the hiring of these new people and the reacceleration of growth at Oxford that we’re well positioned for 2015.

Okay, all right. Moving on, just you said earlier that things would be good if these new hires were productive. Any comment you can give us on how we might gauge your confidence in the earning a good return on those investments, and particular I ask it from the perspective of when you talked about it a quarter ago, you talked about targeting slightly different segments, so smaller customers or customers where you were doing less revenue and some other things. Do you have a good handle on how those customers act such that you feel like you have a good handle on the return you'll earn on those investments?

We have a good handle on understanding the productivity and the financial performance of each person that works for us. And that question will be more answerable in June, but you’ll be able to see it in gross profit per staffing consultant that we give you on the supplement on financial information.

Okay, all right. And then, just any from a high-level change in dialogue with clients as you moved into the new calendar year, particularly in some of those areas where you saw slowing in the second half of the year? Are budgets reopening or is it really just still, I guess I would say it sounds like you said it's still spotty in some areas. Did that change at all in the last month and a half?

What we tried to communicate is that absent the financial services industry and energy, things are relatively stable productive. And in those spaces, financial services, it will be fine and it will just take some time and they will get back to normalized spending. Look they are the biggest spenders on new technology, they’re the fastest to spend and then they are fastest to turn off and there’s just a cycle or two. And some of it has to do with the deployment cycle of a particular customer, so I’m just using these names as example, not as specific, but JP Morgan might be in a different place in their spend cycle and deployment cycle than Bank of America and that could be the case in 2014 and then 2015 it flip-flops, and just depends which banks you do business with. But all in all, the financial services industry will always be a productive place to invest our time and sales efforts. And we are planning for it to get better throughout the year.

Great. And then just one cleanup numbers one. Thanks for the restatement ex the divestiture and the closed business. I don't think you gave your adjusted earnings on a restated – was the Physician business a material piece of the amortization of intangibles? It seems like that might be the one that changed.

It was not material, but if the effect on 2014 pulling out the Physician is roughly $5.86 per share on adjusted which is about $0.15 a quarter. But we did give the numbers going forward to help you, right, for the next five years. That’s what our projections are.

Our next question comes from the line of Dan Dolev.

Thanks for taking my question. This is Dan Dolev. It looks like the guidance implies sequential deceleration in Q1 on an apples-to-apples basis, ex Physician. Can you maybe comment on what's driving that specifically?

Dan, I would just think it has to do with the inclement weather, it has to do with – as we told you, on a year over year basis the drop in the currency translation, which is about 100 bps and just the release of the budget. But for the vast majority of our IT business, we’re feeling the low end guidance I think is what around 7% and the high end of around 9%. And the other thing is, as I previously mentioned on this call, Apex grew 16.5% in the first quarter 2014. And that was just a byproduct of – there was a large spin cycle going on at a couple of major banks that wound down towards the end of the first quarter.

How would you envision the progression of Apex as the comps get easier as the year progresses?

We are giving one quarter at a time, we still believe that we are double-digit revenue growth. We are going to grow faster than that, and we’re going faster than the IT staffing market [indiscernible] we are prepared to give.

Got it. Then last question, just a housekeeping question, you have been so kind last three quarters to provide some detail, which we are modeling, at least here, on the Oxford sub-segments. Can you provide a little bit of color as to at least what it was in Q4 between healthcare IT and the non-healthcare IT part?

Well, all I can tell you is that if you go back to the prepared remarks, we said the following that the Oxford core was $105 million and it was up 4.3% off of the fourth quarter of 2013. And that the international grew 3.3% sequentially and 9% while the fourth quarter of 2013. Those are the two staff that we gave you.

Got it. Yes, sorry I missed that.

One thing, Dan, we got to make clear on a go forward basis, we’re going to give information related to the Oxford segment, for Oxford core which is everything but CyberCoders, and we have CyberCoders separately. So that’s how you are going to see – that’s how we’re going to talk about on a go forward basis.

Got it, so you are consolidating healthcare IT and international?

Yes.

Our next question comes from the line of Sara Gubins.

This is David Ridley-Lane for Sara. On the M&A pipeline, are you seeing a good flow in terms of potential deals and how would you characterize your level of appetite?

Well, I would tell you yes, there’s good flow, it’s just you have to be just patient and make sure that the business is the right fit. I will tell you in our life cycle, we’re through divestitures, we’re through the lift and shift of the Lab Support business, we’ve got all better remaining time on transition services for the healthcare business, but we’ve got lot fewer balls in the air in March 2015 than we did in October 2014. So that gives us more confidence as well.

I know the share repurchase is subject to market and stock price, but it sounds like, from your comments around the strong free cash flow you are expecting and the proceeds from the divestitures, you're inclined to be a bit active on share repurchase, absent any attractive M&A?

Right.

Okay, great. Then just a quick numbers, is the 40% tax rate a good proxy for the full year?

For 2015, I think generally speaking, yes.

Our next question comes from the line of Randy Reece.

Maybe I missed this, but did you comment as you usually do directionally on the relative growth rates of the segments that are embedded in your revenue guidance?

Yeah, Randy, we did and in response to our questions and the response was basically that Apex would grow 9% to 10% roughly and Oxford will be – the Oxford segment would grow 6% to 8%.

When you pull that together, how much is Apex affected, if at all, by currency? And which of the two segments do you think has the best revenue mix versus the market going into this year?

I’ll speak as it relates to the currency exposure, there is little to no currency exposure at Apex. So they do have some Canadian operations, but it’s de minimus relative to the whole. The main currency exposure is in the life sciences segment and Oxford does have a European business that is about almost the same size as the life sciences here. But the number that we mentioned in our earnings estimate in terms of the adverse affect on our growth rate, that’s our calculation of what we think the effect will be. Our mix, we’re always trying to stay in turn with early adoption and what customer demand is. So I think both, all of the divisions are appropriately aligned with what the customers have in mind.

It seems like this is an unusual technology environment in that small companies can flash up from zero to being very substantial and disruptive to the marketplace in a short amount of time. That affects the success rate of existing technology providers and it also is accelerating the rate of change. Have you seen this affect any demand from, let's say, legacy users, just historically large users of tech staffing services?

Right. So I understand your comments and I think they are insightful. I would tell you, I’d have two reactions to how I integrate what you said, Randy. First, we don’t work with a lot of start-up companies that could be the one out of the thousand [indiscernible] SnapChat or WhatsApp, I mean, we work with SnapChat or WhatsApp, but not when they are 15 people and 10 dolls in an office. As it relates to disruptive technology, that is the benefit to us, because it causes churn and we try to stay and Rand gave you a disclosure of which of our customer industries are growing the most, but I use this as a dynamic example, but not like we’re working with Eastman Kodak and everyday that goes by they sell less and less films because of digital photography. So we don’t have a lumbering old economy customer that’s on an AS400 platform that we been doing code maintenance for that, we’re just going to do less and less this year, if that’s what you’re driving at. But we do a lot of work with relevant large newer technology companies, but not one at their venture capital stage. We do that more on the medical device, life sciences, biotech side versus the IT side. It’s too much credit risk.

In the search area, you made a really good bet on when to dive into the search area. Does that feel like it's getting to be a stronger area of demand in 2015 or are there other things you can do to take advantage of the changes in the labor market?

I think the market for contingent search is going to be good in 2015. Our team had a good 2014 and they were comfortable budgeting internally of what we thought was a good number and I think they are benefiting from three things. One, the overall market is improving, which is giving people the confidence to hire full-time. Two, I think contingent search is taking market share from the repaying search market on the lower score, lower salary level because research is a lot more competitive because of the likes of LinkedIn and other parts in software and so contingent search firm can compete with a retained search better than they could in the past. And the third is just that we have better, we think, technology and have a large base of – we got over 290 people basically the majority of them sitting in one place and all they do is have a single focus on identifying Canada’s, almost on a passive basis, they can be presented to customers who want to hire full-time employees. I think that’s what’s driven our higher than industry growth rate in that space.

Our next question comes from the line of Mark Marcon.

It's Mark Marcon from Baird. Can you talk a little bit about what you are seeing on the Oxford – legacy Oxford gross margin side? How are the pay bill spreads trending there?

Mike, do you want address that first?

Yeah, I can. Overall, again, a lot of this comes back to the mix issue [indiscernible] in terms of bill rates and all that. So it really comes back to fluctuations within our mix. Some segments I have higher markup obviously, others lower. And really we’re not seeing trends, if you will, as Peter mentioned, some of the pressure on the consultant side that they feel the economies continue to get better, there is a lot more money. So that’s a negotiation process we have every day with our clients, because as you know, most of our deals are negotiated at one-on-one with our clients. So other than that, there’s nothing that is really unique in terms of what’s going on from a trend standpoint.

Mark, to just add to that, if you’re trying to compare this to 2007, there is no doubt that the gross margins gone down and that’s a product of two specific events, one is we’re trying to reaccelerate the growth and more deeply penetrate the customer, so it’s less of a one-off one by one pricing, it maybe three by four pricing now. And the second is, what Mike was saying, just the shift in skill mix. But it’s the gross margin down, maybe 120, 140 basis points from 2007, yeah, but if you look at the branch contribution and the segment reported gross margin, they are up. And we are just managing the portfolio and we think that that is just probably the reality of what the margin is on a go forward basis, which is at 33.8% still very healthy.

Yes, absolutely. And then, how are you thinking about CyberCoders for within embedded in your first quarter guidance?

It’s probably the fastest growth rate percentage wise of any of the service offering. But we are not being that granular as it relates to our estimates.

Okay. I was just trying to compare the CyberCoders relative to the Oxford discussion in terms of the 6% to 8% growth, and just – because you're coming...

Let’s just leave it at this. If you took CyberCoders out, Oxford is still going to grow.

Okay, great. Then with regards to Apex, it does look like the gross margins are going up over there. Is that just because of the small business mix?

That they are going up?

Yes.

That’s more attributable to the 21.7% growth in the smaller accounts.

Okay, great. Then you mentioned energy a couple of times. Obviously, we have all seen it in the news. How big is energy for you?

I don’t have that of the top of my head, but it is not top seven, eight industry verticals.

Okay, so it's not going to be a big change going forward?

No, I mean, what we said is implicit in our guidance as we are going to grow nine, 10% off of a 16.5% growth rate in 2014 for Apex and that’s even without weather and energy kind of slacking off, we still think we can grow 9%, 10%. So it’s not going to be a big impact.

Okay, and then the net 140 that we ended up adding in terms of the recruiters and account managers, which sounds like up roughly 10%, do you think that's something that will continue through the year or do you think this was a step function?

Well, one, we want to stay above that number, but you know it’s a constant challenge to retain people and we do have the hold people accountable. Two, our 2015 budget have investments that had gone continues to increase somewhat above that number, maybe not at the same rate of growth, but there is additional hiring that will continue throughout the year.

We have more questions in queue. Please go ahead.

We appreciate your attention and look forward to reporting our first quarter earnings call on the next conference call. Thank you very much for your attention.