On Assignment (ASGN) Peter T. Dameris on Q2 2016 Results - Earnings Call Transcript

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On Assignment, Inc. (NASDAQ:ASGN)

Q2 2016 Earnings Call

July 27, 2016 5:00 pm ET

Executives

Edward L. Pierce - Chief Financial Officer & Executive Vice President

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

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

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

Analysts

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Gary Bisbee - RBC Capital Markets LLC

Sara Rebecca Gubins - Merrill Lynch, Pierce, Fenner & Smith, Inc.

George K. F. Tong - Piper Jaffray & Co. (Broker)

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Jeffrey Marc Silber - BMO Capital Markets (United States)

Edward S. Caso - Wells Fargo Securities LLC

Timothy J. McHugh - William Blair & Co. LLC

Randle Glenn Reece - Avondale Partners LLC

Operator

Ladies and gentlemen, thank you for standing by and welcome to the On Assignment Second Quarter 2016 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, CFO. Please go ahead, sir.

Edward L. Pierce - Chief Financial Officer & Executive Vice President

Thank you. Good afternoon and thank you for joining us 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 risks and uncertainties and our actual results could differ materially from those statements. Some of these 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.

For your convenience, our prepared remarks can be found in the Investor Relations section of our website.

Please note that on this call, we'll be referencing certain non-GAAP measures such adjusted EBITDA and adjusted net income. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between the GAAP and non-GAAP measures are included in today's press release. We will also the referencing pro forma data, which assume the acquisitions of Creative Circle and a small European Life Sciences business occurred at the beginning of 2014.

I will now turn the call over to 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

Good afternoon. I would like to welcome everyone to the On Assignment 2016 second quarter earnings conference call. With Ed and me today are Rand Blazer, President of Apex Systems, Mike McGowan, COO of On Assignment and President of Oxford Global Resources and Ted Hanson, Executive Vice President of On Assignment.

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 second quarter results and our estimates for the third quarter of 2016. We will then open the call up for questions.

Now on to the second quarter results. Our results for the quarter exceeded the high end of our previously announced financial estimates for revenues, gross profit, earnings and Adjusted EBITDA. Revenues for the quarter were $608.1 million, up 13.7% on a pro forma basis. This marked the tenth consecutive quarter that our company grew above the IT staffing industry projected annual growth rate since January 1, 2013.

Our growth rate reflected, among other things, the contributions from our "hiring surge" of sales and recruiting consultants that began in the second half of 2014, the deepening of many new larger customer that we established over the last three years, and higher overall productivity. Virtually all of our divisions contributed to our strong second quarter performance. Our size and service offerings enables us to grow faster than the published staffing industry growth rate of 6% and we believe that we are well positioned to generate solid, above-market revenue growth into the future.

Revenue growth came from both our local, mid-market and large national accounts reflecting strong customer demand. We believe, based on current operating performance that this solid growth should continue.

Our IT business continues to see high demand from its customers, driven in part by greater adoption of staff augmentation as a viable alternative to outsourcing, offshoring and consulting. Wage inflation is manageable, but within certain of our large financial services customers, we are seeing some price sensitivity.

As you may know, the financial services industry has been trying to contain costs due to their own internal profit challenges. However, due to existing supply/demand imbalance in IT candidates, we firmly believe our customers, as they have always done, will adjust their pricing expectations to meet the realities of the current labor market.

With respect to recent production, our weekly assignment revenues, which excludes conversion, billable expenses and direct placement revenues averaged $42.6 million for the last two weeks, up 8.5% over the same period in 2015.

Adjusted EBITDA for the quarter was $74.1 million or 12.2% of revenues, up from $56.0 million or 11.5% of revenues in the second quarter of 2015 on an as reported basis.

Integration, coordination and cash generation related to our acquisitions continues to be at or above our expectations. Since the closing of the Creative Circle acquisition in June of 2015, we have repaid $166 million of our debt. On June 30, 2016, our leverage ratio was 2.55 times trailing twelve month adjusted EBITDA. We estimate our leverage ratio to be approximately 2.4 times by the end of the third quarter of 2016.

As you will recall, we announced on June 13, 2016 that our board of directors authorized a new $150 million share repurchase program. From June 14 to July 26, we have purchased approximately 215,000 shares at an average price of $37.32. We intend to continue to execute our share repurchase program based on share price and market conditions.

We continue to see signs that the ongoing debate regarding the on demand workforce or gig-economy is accelerating the usage of contract labor. Fractionalization of human capital by using the staffing industry's services is the only way to avoid the risk of misclassification of employees as independent contractors. Our customers have and are realizing this and that is why we believe the secular growth opportunities for the entire professional staffing industry are so attractive. We also believe that we are well positioned to service our customers' IT needs as technology rapidly evolves and is adopted.

We continue to be sensitive to and conscious of the fears of an economic slowdown in the United States. To date, we have not seen a significant change in our customers' normal purchasing behavior for contract assignment services. We continue to see solid demand from the end markets we serve and continue to benefit from the improved productivity of the additional head count that we added during our hiring surge in the second half of 2014 and 2015 and the deepening of our relationships with several large new customers.

I will now turn the call over to Rand Blazer, President of Apex Systems, who will review the operations of his segment. Rand?

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

Great. Thanks, Peter. The Apex Segment, which consists of Apex Systems, Lab Support and Creative Circle business units, reported strong results for the quarter. Revenues for the Segment were $453.7 million, up 16.5% year-over-year on a pro forma basis.

Revenues from Apex Systems, which accounts for 74% of the segment's revenues, were up 18.3% year-over-year. This performance reflects, among other things, as Peter said, higher demand in our end markets and continued improved contribution from our field sales teams.

Lab Support's revenue growth was below our expectations with a single digit growth rate over Q2 of 2015. Creative Circle reported revenue growth that just slightly outpaced the growth rate for the segment. This unit continues to perform well, with a year-over-year pro forma growth rate in the high teens.

Our gross margin for the segment was 30.5%. While top account growth remains strong, growth from local branch mid-market accounts, which typically carries a higher gross margin, increased its growth rate in the quarter over the previous quarter. This slight shift in revenue mix contributed to our gross margin improvement. Our Segment's contribution in terms of EBITDA continued to be strong with EBITDA growing at a faster rate than revenues thereby increasing our conversion of gross profit to EBITDA on a year-over-year basis.

A little more detail on Apex Systems, revenue growth was propelled by a number of factors including: double digit year-over-year revenue growth in Q2 in six out of our seven industry verticals we service and a high single digit growth rate in the remaining industry vertical; growth in our top accounts led the way with continued strong revenue growth; Apex local branch and mid-market business grew double digits in Q2; and finally, our field productivity continued to strengthen in the quarter supporting our revenue performance and very strong conversion rates.

Overall, the segment had a strong quarter with quarterly revenue continuing its double digit growth on a year-over-year basis, with each of its business units contributing strong conversion of gross profit to EBITDA.

With that I'll turn it over to Mike McGowan.

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

Thanks, Rand. The Oxford segment includes Oxford, CyberCoders, our perm placement business, and Life Sciences Europe.

The segment had revenues of $154.4 million for the second quarter of 2016, up 6.3% year-over-year on a pro forma basis and 3.7% sequentially. Gross margin for the quarter was 41.4%, down 20 basis points year-over-year primarily due to overall business mix.

The Oxford business unit's revenues for the second quarter, which accounts for 77.1% of the segment's revenues, were $119.0 million, up 8.4% year-over-year and sequentially up 4.4%. Oxford's gross margin for the quarter was 32.7%, 100 basis points higher than the reported results for the second quarter of 2015.

The Oxford business unit has had consolidated year-over-year growth throughout 2015 and through the second quarter of 2016. In the second quarter we saw strong sequential growth in 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 skill disciplines; and increased demand for EMR implementations, upgrades and optimization projects.

Our segment's permanent placement revenues declined 3.2% year-over-year to $21.4 million and was driven partially by decreased demand from our West Coast technology clients, specifically those early stage companies, lengthening in the time our clients are taking to make hiring decisions and a very tight candidate pool. In addition, our clients also had less urgency in filling their permanent employee needs. While we have seen year-over-year growth in our non-tech clients, our overall growth has slowed.

The Segment's Life Sciences revenues were $11.6 million for the second quarter of 2016, up 7.4% year-over-year on a pro forma basis. Revenues were also up 4.1% sequentially over the first quarter of 2016.

I'll now turn the call over to Ed Pierce. Eddie?

Edward L. Pierce - Chief Financial Officer & Executive Vice President

Thanks, Mike. Revenues and adjusted EBITDA for the quarter were above the high end of our previously-announced estimates. Net income was also above the high end after adjusting for the $1.5 million in acquisition and integration expenses, which consistent with past practice, we do not include in our financial estimates.

Our pro forma revenue growth for the quarter was 13.7%, which is more than double the industry growth rate. Assignment revenues were $574.4 million, up 14.4% year-over-year on a pro forma basis and permanent placement revenues were $33.7 million, up 3% year-over-year on a pro forma basis. The year-over-year fluctuations in foreign exchange rates had an immaterial effect on the revenue growth rate for the quarter.

Gross margin for the quarter was 33.2%, which was in-line with our previously-announced estimates, but down 40 basis points year-over-year on a pro forma basis, primarily because of a lower mix of permanent placement revenues and higher growth of our high-volume, lower-margin accounts.

SG&A expenses were $141.4 million, or 23.2% of revenues. After adjusting for the $1.5 million in acquisition and integration expenses, SG&A expenses were slightly above our previously announced estimates. The acquisition and integration expenses primarily related to the integration of certain operating units onto Oxford's front and back office systems. We believe that, for the most part, this integration will be completed by the end of the year.

In addition to the integration expenses, SG&A included approximately $0.6 million in expenses related to the rationalization of our operations in Europe, including early lease terminations and employee severance and to a foreign exchange loss on indebtedness related to the purchase of LabResource.

Net Income for the quarter was $26 million, or $0.48 per diluted share, up from $14.3 million, or $0.27 per diluted share in the second quarter of last year.

Adjusted Net Income, a non-GAAP measure, was $43 million, or $0.80 per diluted share, up from $32.3 million, or $0.61 per share in the second quarter of last year. Adjusted EBITDA, a non-GAAP measure, was $74.1 million, or 12.2% of revenues, up from $56.0 million in the second quarter last year. The reconciliations of net income to adjusted net income and to adjusted EBITDA are included in today's press release.

Cash flows from operating activities were $61.1 million and capital expenditures were $6.6 million. During the quarter, we paid down $32.0 million of our long-term debt and paid the Creative Circle acquisition earn out of $15.8 million.

Now turning to our financial estimates for the third quarter of 2016, we are estimating revenues of $618 million to $628 million; net income of $28.7 million to $30.5 million, or $0.53 to $0.56 per diluted share; adjusted net income per diluted share, also a non-GAAP measure of $0.83 to $0.86; adjusted EBITDA, a non-GAAP measure of $77 million to $80 million. These estimates do not include any acquisition or integration cost.

As we noted in today's press release, our revenue estimates imply year-over-year growth of approximately 8% to 10%, which is 2 percentage points to 4 percentage points higher than the published industry growth rate for the year. The growth rate for the quarter reflects a more difficult comparable as the year-over-year growth rate for Q3 2015 was 4.7 percentage points higher than the growth rate for Q2 of last year.

I will now turn the call back over to Peter for some closing remarks.

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

Thank you. We believe our scale, size and breadth of services has us well positioned to take advantage of what we believe will be historic secular growth for the staffing industry and dynamic changes in the technology world as it moves more into the digital one. While the entire On Assignment team is very proud of our performance, we remain focused on continuing to profitably grow our business and increase our rate of growth.

I would 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?

Question-and-Answer Session

Operator

Thank you. Our first question will come from Tobey Sommer with SunTrust. Go ahead please.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Thank you. I had a question for you Peter, about your own internal plans to hire sales consultant. From my math unless there is some adjustment because of the Creative Circle acquisition a year or a little more than a year ago. You're up about 14% year-over-year, you are growing faster than the industry. You kind of have to sustain growth in sales consultants, above the industry rate of revenue growth to feel comfortable that you can sustain that superior rate of growth.

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

Not at all, Tobey. I mean, we are doing it, because we have the luxury of being able to expand our EBITDA margin and grow and we're just planning for the future. I mean we have made an investment this year over budget in our digital practices that we think will serve us well in the forward years and we continue to add personnel in all the divisions except really I guess the permanent, the contingent search permanent placement because we see demand out there and as you know our business model is to serve large customers, and it takes a while to create that relationship, and then it takes a lot of servicing, in order to deepen that relationship. So this is all our forward planning, and has nothing to do with our ability to grow at the rates we are right now. So, because it's actually a slower – we're actually hiring at a slower rate than we did in 2015.

Operator

Was that all Mr. Sommer?

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Oh. Yes. Based on the normal customer behavior that you described, do you anticipate still hiring maybe in the back half of the year?

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

Right. What I meant to communicate is we're sticking to our plans. We've actually increased our hiring plans, in a targeted fashion for the digital space. And if anything we're a little more conservative with regard to incremental hiring, in the contingent search division.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Peter, what are you hearing from customers in the small lab business, where we're historically they have kind of long lead time movements, and can I have some visibility into economic sensitivity? Thank you.

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

Well, my final comment on that is, the small medium enterprise as defined by customers who have less than a 100 internal employees which we don't do a lot of work with unless it's some venture capital backed life sciences businesses. They're not as sophisticated. They don't have as deep a pocket. They don't have the same capitalization, and they probably turn off the quickest. I think one of the reasons that our first and second quarter was faster than maybe others is just because of our customer mix being different than others. They are both great customer bases, but our customers have the luxury at time to focus on product development that will serve tem well into the future not in a particular quarter or calendar year. And that's what we're working on right now is servicing our customers' needs for the future versus real-time activity to get a particular function completed for 2016.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

What do you hope to achieve with the integration and strategic planning that you cited as an expense in the quarter or in an activity that's probably going to wrap up this year?

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

Right. Well, as you know we have moved a lot of kind of service back office activities out of California into Beverly, Massachusetts and Richmond, Virginia and consolidating the number of front office systems. We're really down to kind of $2.5 million. And we're also moving – making California more of a classic parent company activity, risk management treasury, legal finance and accounting, SEC reporting, strategy and M&A. And all field activity being housed at Apex and Oxford. And so that's some of the work, some of it is the acquired businesses consolidating their systems and then on the strategy part of it is building the practice areas and products for the future.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Okay. Just two more questions from me along the way you ended that answer, products for the future. Historically you have, I think, done an interesting job particularly in the Oxford business of establishing kind of new lines of business. Without asking to reveal what those maybe, do you see such opportunities now in other things in the works?

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

Yeah. I mean, I don't think I am letting the cat out of the bag, but I'll just give you a big generic one. I think the biggest spend that's viewed almost non-discretionary is corporations trying to move to a digital world and creating a digital business model versus their prior models and trying to monetize their data or create revenues from monitoring activity of a product they may have developed. So, we're trying to focus more on the technologies that are being developed and deployed go forward versus some of the early adoption technologies of 2000 that are now in later stage adoption.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Okay. Thank you. Last question from me. The Creative Circle earn out, was that at a level that was as expected when you originally consummated the deal or any variance compared to how you thought about it a year or more ago?

Edward L. Pierce - Chief Financial Officer & Executive Vice President

Variance is not significant from what we originally...

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

It's public information. There were two components; one was revenue and one was EBITDA. They maxed out on the EBITDA number and on the revenue number, they got into it a little bit.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Thank you very much.

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

So, it was as we expected.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Great. Appreciate it.

Operator

Thank you. Our next question will come from Gary Bisbee with RBC Capital Markets. Please go ahead.

Gary Bisbee - RBC Capital Markets LLC

Yeah. Thanks. Just I guess any other color on the firm business slowing? I mean, obviously we're hearing that from everybody, increased uncertainty slows down that whole process. But do you have any sense from clients, is it temporary what's causing the slowdown? What – is there particular areas that are doing better or worse and just how you're thinking about that? Thank you.

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

Gary, really I would like to kind of relate the comments to our specific performance versus the read through for through industry, but our contingent search business, which is really a wonderful division, they worked with some hard-charging startup technology companies on the West Coast. And those companies typically have a smaller base and have funding restrictions at times. And they've lengthened their decision-making process.

So, some of our growth challenges in contingent search relates to our customer mix, our geographic coverage versus the overall health. Because as you could expect, small companies control their head count early and more aggressively than a larger company may. But that, those are comments that relate to our business. And I just don't know how that's impacting other companies.

In general, what I would tell you, when you look at the type of growth rates that we posted for the contract side is that, there is still a lot of money being spent on IT services and the shift between internal execution versus external execution comes into play. And people – the size of customers and their confidence in their own profits and capitalization drive behavior.

Gary Bisbee - RBC Capital Markets LLC

Any color on how that business performed month-to-month during the quarter and maybe how it's looking in July as that's been...

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

It was pretty choppy to be honest with you.

Gary Bisbee - RBC Capital Markets LLC

Okay.

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

I mean, I would tell you that our sense is June and July kind of look the same and stable, May was one of the tougher months, but it's so hard to read through that that's a trend.

Gary Bisbee - RBC Capital Markets LLC

Okay. Fair enough. You called out the price sensitivity of large financial customers. I guess beyond that component of it, I think, the story had been that you'd seen some improvement off of the challenges, a year or so ago in that customer base. Are they still actively doing new jobs? And they have engagements ongoing, you're just seeing them push back on price or has there been some impact on actually the level of demand?

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

Demand has been good. Demand has been rational and healthy.

Gary Bisbee - RBC Capital Markets LLC

Okay. And then, just lastly, any more color you could give on the SG&A comment, what exactly are you doing at Oxford. It's just you're integrating your own back office systems, was that basically the comment?

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

That's right. HR programs, front office systems, travel and housing departments because you know Gary, we divested some things, we've acquired some things, we moved some divisions into different segments and it's just associated with that. And also positioning the Calabasas office as kind of the classic parent public company, and no servicing occurring out of California anymore and being done in Richmond and in Beverly.

Gary Bisbee - RBC Capital Markets LLC

Great. One last one, actually. The buybacks – the share count guidance is up from this quarter and yet it sounds like you did – started to do a reasonable amount of buybacks early in the second quarter. Is that just the normal ebb and flow of incentive comp coming into the diluted share count or why would that not be down?

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

Yes.

Gary Bisbee - RBC Capital Markets LLC

Thank you. Okay. All right. Fair enough. Thanks.

Operator

Thank you. Our next question is from Sara Gubins with Bank of America. Go ahead please.

Sara Rebecca Gubins - Merrill Lynch, Pierce, Fenner & Smith, Inc.

Hi. Thanks. Good afternoon. Quarter to-date you talked about, running at 8.5%, I know, we're still very early in the quarter, but the guidance is 8% to 10%. So, I'm wondering if there's any expectation of anything one-time first couple of weeks, or what gives you the confidence that we might be towards the higher end of that revenue growth range?

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

Sara, the only kind of rational comment I can make to that, honestly is the second quarter is always difficult for us to give you that data point, because the 4th of July holiday falls into it, and people take early time off or time for (27:57) or payroll process gets into the third week of the month versus the second. So we just gave you kind of like-on-like, a full week and a holiday week year-over-year. And how the holiday – what day of the week the holiday falls on, and how many people are likely to make it a four day weekend versus a three day weekend, moves things around right and left.

Sara Rebecca Gubins - Merrill Lynch, Pierce, Fenner & Smith, Inc.

Okay. And then could you give us some color on, how you're trends progressed during the second quarter, you talked a bit about perm but on the temporary staffing side?

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

Well, we don't give that data out, but what I can tell you is, it was pretty stable growth.

Sara Rebecca Gubins - Merrill Lynch, Pierce, Fenner & Smith, Inc.

Okay. And then going back to your comments about seeing some pricing pressure from financial services clients, how is that playing out for you from a practical perspective? Is there work that you're not taking as a result? Is it pressuring your margins? Are you able to pass that back at all to the workers? Operationally what should we see there?

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

It mostly affects Rand's business and I'll let him speak first and then I'll follow up, Rand?

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

Well, Sara listen Apex grew financial services client base very strong double digit, again in quarter two, and it's – we gave the segment gross margin numbers, they really were pretty stable year-over-year. So, Peter is right that we recognized that banks are having earnings issues and looking to cut costs wherever they can. I think, it's something that will unfold as time goes on, but the answer is we're a partner and we are going to support and we make trade-offs sometimes for more business in order to give up a little bit of margin it depends. And then, we can still convert it, if we have a different way of delivering the service. So, I wouldn't overplay it too much, but I think we're saying we recognize it's there and maybe it is in some banks more than others, but did I answer your question I think. And Peter, maybe you want to jump in?

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

Yeah. I would just add that the numbers reflect that it wasn't dramatic. We brought it up because the financial service industry is a big component, but there has been more pressure there to pass along certain statutory expenses or wage expectations, but it's manageable. Some of it has to do with timing of renewal of rate cards, some of it has to do with realization that things have changed as it relates to wage expectations or statutory expenses. But as we said in our prepared remarks, our clients in that industry vertical have always been thoughtful and come to the right conclusion over time.

Sara Rebecca Gubins - Merrill Lynch, Pierce, Fenner & Smith, Inc.

Okay. Great. Thanks very much.

Operator

Thank you. We'll go next to George Tong of Piper Jaffray. Please go ahead.

George K. F. Tong - Piper Jaffray & Co. (Broker)

Hi. Thanks for taking my questions. Can you comment on how you see growth in the Apex and Oxford segments, evolving going forward in light of any anticipated changes in either supply or demand. And if you see any industry trends that benefit one segment more than the other?

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

Yeah. George, the only comment that we would make about growth rates going forward are as follows: One, we have published what we think are reasonable growth rates to get to $3 billion in revenue by 2018 and that's published. And then we generically say that at a minimum irrespective of what the economic environment is, we would hope that we could grow at least 200 basis points to 300 basis points faster than the industry published growth rate. This quarter, we grew much faster than 200 basis points to 300 basis points but that's kind of our internal expectation.

George K. F. Tong - Piper Jaffray & Co. (Broker)

Got it. In terms of this industry trends in IT and marketing, any trends that you see benefiting one segment more than the other?

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

We see a big focus on digital spend and monetization of a proprietary data and so we continue to focus in those areas. We've seen a good renewal of energy in optimizing embedded or rather implemented electronic medical record systems. And so, there's always evolving technology that need to create new products, mobile products, so that your services are competitive with what the reality of where the technology is today.

George K. F. Tong - Piper Jaffray & Co. (Broker)

Got it. That's helpful. You mentioned increased spending on integrating systems in Oxford, can you elaborate on any additional puts and takes around SG&A expense taking higher it in 3Q?

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

Yeah. I mean guys, I guess, I don't mean to shut the conversation off, but we're not using that as an excuse about our revenue performance or our profit performance. We're just telling you what we're doing with your money. And so, this is ongoing step that we think we have to do to create a monolithic organization, that will enhance productivity and make sure we have the right tools in our people's hand, but this is – if it was significant, we would call it out, but on the margin, it may move the EBITDA margin a little bit, but our guidance for the third quarter is for EBITDA it is driven by what our expectations are from a placement contribution what our expectations are for investments in digital and our spend on the strategy acquisition integration is not in the guidance, so it doesn't matter really other than on a cash usage basis.

George K. F. Tong - Piper Jaffray & Co. (Broker)

Yep. Got it, makes sense. And then lastly, around gross margins, your third quarter guidance points to a contraction there. Is this contraction happening more in the Apex segment or Oxford segment and what are the factors?

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

We're not going to comment by segment, but the year-over-year compression in the gross margin relates to the same as what it was in Q2 and that is a lower mix of firm revenues. It's that simple.

George K. F. Tong - Piper Jaffray & Co. (Broker)

Got it. Thank you.

Operator

Thank you. Our next question comes from Mark Marcon with R. W. Baird. Please go ahead.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Hi. Good afternoon. And really a nice job on the Apex side and it looks like Creative Circle continues to grow at a really rapid rate. Just wondering, can you talk just a little bit more about on the Apex side, are you seeing – which verticals are you seeing acceleration out of? I really appreciate the comment around financial services, but where are the verticals that you're seeing accelerating growth or trends that would suggest things could potentially even pick up?

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

So, Mark, I would answer it that in our prepared remarks, we said six of our seven verticals grew double-digits and I think...

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

I saw that.

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

I prefer to leave it that. What I would tell you is I really think the difference is the size of customer matters in this type of economic environment.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Do you want to elaborate on that?

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

Yeah. When you're working with Fortune 400 companies, they have dedicated budgets that musters true economic catastrophe, they work to deploy and spend. Whereas if you're working with a franchise or 15 muffler shops that has 75 people and they're trying to get something done, they may say cut external labor. So, it's a different mindset, but based on the size and the sophistication of the customer.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

I appreciate that and it also sounds like within those customers you continue to gain share.

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

Yes.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Okay. Great. And then with regard to the Lab business, can you just talk about like your expectations there in terms of how – there was a slowdown this past quarter, do you expect that to continue. How should we think about it?

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

I'll go first, and then I'll ask Ed to add to what I offer. The business is doing well. It's growing probably 200 basis points faster than the industry projected growth rate for the first six months of the year. With that said, the reason we aligned it with Apex, is that Apex did a very good job with large customers and as you know from covering the company for many years Lab Support is the gold label and they use to work primarily on a retail onesie-twosie basis with their customers and as you get larger, you really need to be able to have larger chunks of revenue coming from bigger customers. And we're doing a good job of creating those big large accounts, but it takes some time to change that mindset. Ed would you add to that?

Edward L. Pierce - Chief Financial Officer & Executive Vice President

Yeah. I think, what you said there at the end is right Peter. And I think, although we are adopting a large customer go-to-market strategy, we're in the beginning stages of it. So, our account portfolio needs to get broader and deeper and as that happens we'll have more installation to any one customer being up or down or any one industry being up or down.

So, that's a progress it's building here over time. This quarter, we got caught by a couple of customers that weren't spending the way they were. I don't think, we see it's a reflection on anything in the economy there's still a plenty of opportunity out there and the market feels good. And we just need to continue to build out our large account programs. So that it's a sustainable part of our growth engine every quarter.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Great. And then, with regards to Creative Circle, I mean, that seems like one of the most promising growth opportunities. Can you just talk a little bit more about the investments that you're making there and how you envision that particular area shaping up over the next two years, three years. Just take it a little bit longer.

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

Well, it has the – according to staffing industry analysts, it has the highest projected end market growth rate. If you look at others, whether it's the ad agency projections on advertising spend or Gartner, Digital and Creative. Have a very good glide path forward, even in this economic environment. The majority of our efforts on the Creative side have been to open organic greenfield new offices, which we're trying to do two to three a year. We've opened two offices so far this year and continue to add to their the world class internal workforce and so that's what we're really doing.

A lot of the incremental hiring above budget that I was making reference to is on the Oxford and Apex side to try to build higher end technology-based digital skill sets.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Great. And – so it sounds like, there's ever so slight deceleration there this quarter, but it sounds like the current growth rate from everything that you're seeing there seems like it should be sustainable now?

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

When we bought it and we were reporting 20% plus top line growth, we said that wouldn't last forever. I will tell you it was 16.6% revenue growth organically year-over-year, which is a still very, very good. There was a little bit of a soft pocket in a couple of major metropolitan locations. But that had more to do with clients spend than anything else and has nothing to do with demand or execution.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Okay. Great. And then with regards to the new offices that you've opened, can you talk a little bit about what you're seeing there just in terms of like how quickly one of those new offices can ramp up and what they can generate?

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

So if history is any good reference point. Historically, Creative Circle gets their new offices up to breakeven profitability in a shorter timeframe than we see in other practices and it's typically about eight to nine months.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Great. Thank you. I'll jump back in the queue.

Operator

Thank you. Then our next question will come from Jeff Silber with BMO Capital Markets. Go ahead, please.

Jeffrey Marc Silber - BMO Capital Markets (United States)

Thank you so much. Just to kind of frame the conversation, can you just give us some color of your exposure to the different major industry verticals? You mentioned some of the issues going on at financial services. I am just wondering what that is as a percentage of total revenues and also some of the other major verticals as well? Thanks.

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

Jeff, we try to be as transparent as possible, but I don't think we've been giving – we used to give percentages for remember, Lab Support. But I think we stopped that and we just don't do it by industry verticals. I can tell you kind of kind of – Rand why don't you walk them though qualitatively not quantitatively. They know that financial services is the largest percentage of your customer base, can you rank kind of two, three, four after that?

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

Yeah. I think we said publicly in previous quarters that the financial services is certainly number one. And then it's a series event, they're all kind of packed in together between healthcare, consumer, industrial, government was down a little bit, but honestly back as we reported in the last couple of quarters. Telecommunications, they're all about equal size. The smallest ones for us are business services vertical and the technology vertical; although, the technology vertical is still double-digit percent of our business in the Apex.

Jeffrey Marc Silber - BMO Capital Markets (United States)

That's helpful. And is it somewhat similar in terms of the rank order in Oxford as well?

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

Mike, do you want to try to give a qualitative estimation?

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

Yes. Jeff, as I think we really don't look at it that way from a industry standpoint first as an example we do very little in the financial services sector. We really focused on the skills. So we rank more towards the skill level versus actual industry. So – but I will tell you that we're not – we don't have a single industry more than 25% if you will across all of our skill levels.

Jeffrey Marc Silber - BMO Capital Markets (United States)

Okay. Great. That's helpful. And Peter you said something along the lines of the size of the customer matters and again just to kind of frame the conversation, can you give us a rough estimate between new business between large customers, middle market, smaller customers anyway that you guys look at it will be helpful?

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

My guess is that's kind of 80%, 20%.

Jeffrey Marc Silber - BMO Capital Markets (United States)

80% large, 20% small mid-market?

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

Right.

Jeffrey Marc Silber - BMO Capital Markets (United States)

Okay. Great. Sorry. One more numbers questions. I think you normally give out the bill paid spread, I don't think I saw that this quarter, is that something we can get?

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

No. Because that's not meaningful on a consolidated basis, you almost had to look at it by segment.

Jeffrey Marc Silber - BMO Capital Markets (United States)

Okay. That's fair enough we'll just take it out right now (44:04) . I Appreciate the color.

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

But there really haven't been any significant change.

Jeffrey Marc Silber - BMO Capital Markets (United States)

Okay. Thanks so much.

Operator

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

Edward S. Caso - Wells Fargo Securities LLC

Hi, good evening, congratulations. I'd like to go back to the financial leverage, I think in the past, you've talked about – you wanted to get back to 2.5 times to fulfill the commitments to your lenders you're within spitting distance to that now, can you prioritize for us how you want to deploy your money. Internal, I know you have already done some share repurchase, but could you ramp that up and how active are you at looking at other M&A opportunities?

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

We're looking at a lot of things, but it takes a long time to develop confidence that strategically, operationally and culturally, you found a good fit. So, there's no guarantee that we'll close something in the next 90 days. On a valuation basis, right now, I'm not complaining, I'm just stating the obvious. Private valuations are a little bit higher than the public valuations. So the best company we can buy right now is On Assignment.

Edward S. Caso - Wells Fargo Securities LLC

All right. Can you talk about your interest level, I know you have some mostly non-IT in Europe. Sort of your interest level in – and finally going into Europe and chasing IT work?

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

Ed, on our deployment model, which is contract labor, it's a very tough market, and the margins are not particularly attractive. Europe is thrashing right now. We had stated at our – in our April 14, Analyst Day that after our year-long strategic review because of the fragmentation of the U.S. market and our penetration in that fragmented market that we found domestic expansion more interesting than international.

Edward S. Caso - Wells Fargo Securities LLC

Final question, you mentioned that you're seeing a slowdown in permanent placement work in Silicon Valley. Is that a sign of a slowing digital wave or just the sign of a maturing digital wave?

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

Well, first of all the reference was to the West Coast, some of it is Northern California, some of it is in the LA Basin, with some of the upstart social media companies, or biotech for that matter in the San Diego area. So again my comments, I want to try to reinforce, I'm trying to relate specific to our performance, and not the market. I don't think it reflects anything more than kind of the early-stage young, small startup company, and maybe focus on capitalization a little bit more, and uncertainty. And secondarily, some of the permanent placement we're doing into customers that may have 100 employees versus 10,000 employees and they maybe more cautious. But again, I want to caution you that those are comments related to our business and not the market.

Edward S. Caso - Wells Fargo Securities LLC

Great. Thank you.

Operator

Thank you. We now have a question from Tim McHugh with William Blair & Company. Go ahead please.

Timothy J. McHugh - William Blair & Co. LLC

Hi. Thanks. Peter, you mentioned you've bought up CyberCoders, I think you were referring to them when you said a few metropolitan areas had a little bit softer demand. I guess, can you elaborate on what you saw, was it some client types or...?

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

That was actually Creative Circle, Tim.

Timothy J. McHugh - William Blair & Co. LLC

Oh, sorry. Yeah. Sorry.

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

And it had to do – one large cost customer was in the midst of integrating a $40 billion acquisition. As you know Creative is not on the systems integration side of the house, so they took a pause. I don't know, if it relates to they had promised a certain level of synergy savings from the acquisition. So, maybe they were stalling some spend on other areas, that's a pure guess, but it just had to do with a couple of offices, that shave, what we expected to be kind of two percentage points to three percentage points faster growth.

Timothy J. McHugh - William Blair & Co. LLC

Okay. And are you seeing more competition at all, as you expand into new markets and so forth? And others trying I guess probably replicate the success they've had?

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

No more than we see and historically in all of our businesses, but we're the leader in that space and there's plenty of business and again, size and reputation matters. So, our biggest competition in that space is not from the fellow competitors, it's from what I call the black market, because the Creative side, not so much the digital side, but the Creative side still – that some of the customers are smaller and they're willing to tap the freelance market, what I call the black market and run the risk of using independent contractors.

Timothy J. McHugh - William Blair & Co. LLC

Okay. And what about Oxford, the healthcare IT, it seems like it was a strong area, I guess, it had some volatility in the past. Do you feel confident that that's I guess sustainably kind of on a better footing or was it I guess, how do you look at part of Oxford now?

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

I'll go first and then I'll let Mike add to my comments. First of all, the difference now versus 2014 is there's no stimulus act that's driving behavior before a certain day. And the work we're really doing it's not so much first time initial implementation versus optimization. So it feels a lot more rational and steady. When we were doing to first wave of it we knew that there was a surge and we took advantage of it to build our practice. Mike?

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

Yeah. The only thing, I'd add to that is besides just the normal optimization, as you said Peter, we're doing a lot of re-dos if you will. Clients that maybe switching vendors, switching software packages et cetera, or doing further work on what they may have already have implemented. So, other than that it's continuing to do well and we expect that to continue for the foreseeable future.

Timothy J. McHugh - William Blair & Co. LLC

Hey, thanks.

Operator

Thank you. And we have a question from Randy Reece with Avondale Partners. Go ahead please.

Randle Glenn Reece - Avondale Partners LLC

Good afternoon.

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

Thank you, Randy.

Randle Glenn Reece - Avondale Partners LLC

How much of Creative Circles growth over the last couple of years came from branch expansion versus same-store sales growth?

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

It's a great question. I can't give you a definitive, but what I would tell you is they have, probably, Randy opened up 10 offices over the last three years. And, but what we look at is – of course, the growth rate in the new offices is going to be substantially larger, but when you're growing – all our major offices are still growing high teens, double digits. So the first offices as you would imagine, were in the larger Metropolitan areas than these – like we opened up Boston and in San Diego, but we opened up, Boston, Chicago, Philadelphia, San Francisco, New York, D.C. decades ago – so a decade ago.

So, I'll try to get you a little more information on that. But what I can tell you is the new office contribution is on a percentage of total revenue. It's still small and we think that's a good growth area, as they get more mature in the marketplace longer that they can't get to a larger and larger critical mass.

Randle Glenn Reece - Avondale Partners LLC

That was my subsequent question, is how much do you expect branch expansion to augment the same-store growth rate over the next couple of years?

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

Well, I will tell you , when we did the underwriting to do the deal, Randy, one of our theses is that we proved up was sustaining this kind of high teens 20% growth rate was a little more believable or realistic than having penetrated all 51 major metropolitan areas and just trying to continue to grow double digits in those markets because Greenfield expansion is a little bit easier at times, geographic expansions at times could be a little bit easier than just taking market share in a well-established existing local market. So, we believe that they can be for – we think, we've – with what we've opened since we acquired and we still think there is like 11 to 13 additional markets that we could open up. And we believe that that will be a big forward contributor to our ability to continue to grow at attractive rates.

Randle Glenn Reece - Avondale Partners LLC

We're half way through the year now. What do we know about first half of 2016 results that will affect comparisons in the first half of next year? Was there anything unusually good or maybe a weak spot that could rebound?

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

Yeah. So a couple of things that, one there wasn't really any large project work that's running off. Two, the perm was much lower in the first half of 2016 and as the economy picks up and small and medium-sized businesses have more courage, then you would assume we'd have a favorable comp in 2017 on the contingent search business. Wage and contractor expenses have been a little bit harder to pass along, but we think that will emolliate and that will have an easier time of it as time goes forward, and we renew some of our rate cards. So, those would be the three takeaways.

Randle Glenn Reece - Avondale Partners LLC

Thank you very much.

Operator

Thank you. We have a follow-up from Tobey Sommer with SunTrust. Please go ahead. Mr. Sommer, is your phone on mute?

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Thanks very much, sorry about that. Could you give us an update on the Statement of Work business and how that trend is developing, it's been a while since I've got an update on that? Thank you.

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

So Toby, we'll give you a qualitative update.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Sure.

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

As we don't break it out. We think it's going very well. It's grown sizably and we think it's an important differentiator of us versus others and that's why certain companies just can't play in the large customer base because there are just putting butts in the seat, whereas we're doing – we're actually having to do more than just that.

So, it's an important practice. We have the privilege of having Rand who as you know was instrumental in building BearingPoint and having a lot of people who deeply know about project consulting and solutions determination. And so, we're building that out thoughtfully, not taking risk, we call it consulting life, but definitely moving the way our customers want us to move.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Thank you. And the cash – free cash flow generation in the quarter was very strong, at least by my math almost $1 a share or more. Was there anything unusual, or is that just kind of free cash flow conversion that the business generates from cash from ops?

Edward L. Pierce - Chief Financial Officer & Executive Vice President

I think there was a benefit this quarter which you typically don't see in a growth quarter, I mean, obviously it was a growth quarter, where we had actually cash flow being generated from sort of change in our operating assets and liabilities. Because typically you think, you're going to be investing when you have a growth, and we actually -generated cash this quarter. These kinds of things happen from time to time, don't read too much into it them, but it clearly was a strong growth quarter from a cash standpoint.

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

But I think, Tobey, for the year of 2016, just back of the envelope, we're thinking what Eddie, a $120 million, $130 million a year?

Edward L. Pierce - Chief Financial Officer & Executive Vice President

Yeah, we're on track.

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

And we're on track for it.

Edward L. Pierce - Chief Financial Officer & Executive Vice President

And we've kind of commented on that in the past that this was a – it was a tremendous growth quarter.

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

And some of the things...

Edward L. Pierce - Chief Financial Officer & Executive Vice President

Generation quarter...

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

Tobey, some of the things we told you about moving servicing out of Calabasas into Richmond and Beverly, it takes some time to settle that stuff down. And now we're getting better collections as they fully get their hands around the additional servicing that those back office groups are doing.

Edward L. Pierce - Chief Financial Officer & Executive Vice President

Yeah, and to be a little more specific, as to what Peter is referring to. We did see maybe less than two days, but we saw let's say a two day improvement in our DSOs accounts receivable DSOs sequentially.

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Perfect. Thank you very much to you all.

Operator

Thank you. And we also have a follow up from Mark Marcon with R. W. Baird. Go ahead please.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Two questions. One, one competitor who doesn't occupy a space that's very similar to yours noted how tough it is in terms of recruiting developers. Can you just talk a little bit about that just with regards to what you're seeing in terms of ability to fill orders. And I imagine that your position with some of the larger more prestigious companies probably aids in terms of filling open development positions. But I was wondering if you could comment there in terms of what you're seeing and to what extent is it a constraint in terms of growth?

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

A tight labor market, we're seeing that constraint affect us more on the contingent search side than the contract side, Mark. And if you look at – if you go company by company, we just do a lot more of that, we just don't do as much support work as others. So we're more comfortable and familiar with recruiting the hiring skill sets.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Great. And then, Peter, you've been very vocal about working with agencies such as yours in terms of promoting compliance. Can you – is that resonating with some of the clients that you've been speaking with or that Rand's been speaking with or that Mike's been speaking with in terms of actually seeing a change in client behavior along that front?

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

Absolutely. I mean, we won that battle on the IT side. If you go into any relevant organization and try to comment using a resource that you found on the Internet, HR label is going to just shut you down. They're going to say, we're not going to take the risk of misclassification, penalty, back taxes or the risk of personal security.

Now when you're dealing with a company that's got 25 employees, they may look the other way. So we're quite vocal about it, we're vocal about it with smaller companies, we're vocal about it with startups, we're vocal about it on the Creative side. But there is not a data, it doesn't go by that there's not new regulatory obligations on paid time off, sick leave, maternity leave, paternity leave. And so, it's all driving to our benefit and you can get the same – look, this is kind of a very, very stark statement. You can get the same productivity, the same benefit of using just-in-time resources by using a W-2 employee through a staffing agency and doing it the right way versus pulling somebody off of the Internet and doing it the wrong way. And the only reason you pull them off the internet is you don't want to pay the government employment taxes.

So, we're on the right side of this argument. We pay Workers' Comp, we pay State Unemployment Insurance, we pay FICA, we pay 401(k) contributions, we pay health benefit. And long-term sophisticated organizations are going to do business in the right way.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

I appreciate that. So, it sounds like there is lots of room in terms – on the Creative side to get that point of view across?

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

Well what we said is when we – if you look at the data that Staffing Industry Analysts report on the Creative marketplace, they says it's about a $2.5 billion end market. If you look at the research that we had done by a couple of strategy firms, household name strategy firms, we estimate that $8 billion a year is spent on non-full-time labor in the Creative world. And that other $5.5 billion is going through the black market.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

It's, a great opportunity.

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

And that's because you know a small 20-person agency may go find a freelancer, graphic designer, or user experience person that they may have worked with another agency that's now on their own and just work as an independent contractor, but WPP, McCann Erickson is not going to do that, Walgreens or GE is not going to do that. So it just really is driven by the sophistication of the customer versus anything else.

Mark S. Marcon - Robert W. Baird & Co., Inc. (Broker)

Great. I appreciate the comments. Thanks.

Operator

Thank you. And we have no further questions in the queue.

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

Well we appreciate your time and look forward to reporting our results for the for the rest of the year. Thank you.

Operator

Thank you. And, 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.

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