Wall Street Transcript Interview with Peter T. Dameris, President and Chief Executive Officer of On Assignment, Inc. (ASGN)

Wall Street Transcript

67 WALL STREET, New York - January 24, 2013 - The Wall Street Transcript has just published its Staffing, Outsourcing and Rental & Leasing Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Workforce Flexibility Requirements - Growth in Temporary Staffing Demand - Secular Trend Toward Temporary Staffing - Strong Demand For IT Staffing - Growth in Equipment Leasing Adoption Rates - Consolidation Potential in Fragmented Industry

Companies include: On Assignment Inc. (ASGN)

In the following excerpt from the Staffing, Outsourcing and Rental & Leasing Services Report, the CEO of On Assignment discusses the outlook for his company for investors:

TWST: Please begin with a brief company history and then provide an overview of On Assignment's business as it stands today.

Mr. Dameris: On Assignment was founded in 1985, initially focused on scientific staffing, and went public in 1992. We celebrated our 25th anniversary a few years ago, and 2012 marked our 20th year as a publicly traded company. Today we are exclusively focused on math and science skills in the IT, health care and life sciences sectors. I joined the business after running and selling another publicly traded staffing company. When I joined in November 2003, On Assignment was about $200 million in revenue. And this year, according to public estimates, we will proudly report approximately $1.5 billion, with approximately $155 million of adjusted EBITDA.

We are the second largest professional, publicly traded staffing company; the second largest IT staffing company; the fourth largest physician staffing company; and the second largest scientific clinical research staffing company. On any given day, we put 13,000 people to work in contract assignments throughout our 130 offices in the United States and 20 offices in the United Kingdom, Benelux and Ireland. Ninety-four percent of our revenue comes from North America, and 6% comes from outside of North America. Of our total revenue, 98% is from contract staffing and 2% is from permanent placement staffing.

TWST: How is the current economic state around the world, but particularly in the U.S., since that's where most of your revenue comes from, affecting your industry in general and On Assignment specifically?

Mr. Dameris: We have benefited, actually. We've grown faster than most publicly traded staffing companies. We grew in the fourth quarter 14% organically year over year, and this year we'll grow somewhere around 17% to 18% on a full-year basis organically. And what's really driving that is not just this insatiable demand for human capital, it's serving growing industries with high-demand positions. What I mean by that is, irrespective of GDP growth or economic stability, there is a structural imbalance and shortage of qualified technical resources with math and science skills.

Even though there is 7.9% unemployment in the United States, the unemployment rate among physicians is zero, the unemployment rate among clinical research medical writers is 2.5%, and the unemployment rate among IT programmers is about 3.5%.

We focus on mission-critical, high-need resources that are in short supply, and they are just not being minted by the colleges as quickly as they need to be. So we are seeing demand that's different than what is reported in the press on an everyday basis because of this supply/demand imbalance.

Layer on top of that the secular changes that are going on in our U.S. economy and labor markets because of the perceived, at least, kind of warfare against corporations, and mandated Obamacare and other social costs on employers, as well as the belief by corporate America that the government is moving more toward a socialized model versus a free capitalism model.

You're seeing employers react by using more contract labor than they ever have before, and there is a clear road map to why that's happening. If you look at the socialistic economies of France, Germany and the U.K., the temp penetration rate is north of 5%, and the reason is, if you have a full-time employee more than three or four months in some of those countries, the labor laws are so rigid you really can't terminate the employee without having to pay a three-year severance. So they use a permanent layer of contract labor as full-time labor, so they can ramp up and down without having the burdens of providing some of these social costs that governments are burdening corporations with. That's why you've seen throughout this year that temporary labor has grown substantially faster than what the Bureau of Labor Statistics show growth is for total employment in the United States. In the U.S., temp penetration rate is about 2% now, which is half of what it is in other socialized economies.

And the other thing is, the way that Obamacare is written, there is a designation of a part-time employee versus a full-time employee. If you are a part-time employee, the employer is not mandated to provide health care. If you are a full-time employee and your employer has more than 50 employees, then the employer has to provide you health care or pay a penalty. That's driving corporations to really look at what is mission-critical that I have to own and what is something that I can onshore outsource on a contract labor basis?

So for our business, it is actually the perfect blend of a supply/demand imbalance and secular changes. The oddity is that the staffing industry for public investors typically has been a cyclical play - we're the first to recover coming out of a recession and the first to go into a recession, and the business model operates very well when you have GDP growth. Well, today we've had four years of outstanding growth without any help from GDP growth, because GDP growth right now is pretty anemic at around 1.5%.

TWST: Of the key areas that you focus on - technology, health care and life sciences - are you focusing on one more than the others? Or is one experiencing a greater rate of growth or greater future prospects?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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