ASGN Inc (ASGN) 2004 Q2 法說會逐字稿

Good afternoon, my name is Michael and I will be your conference facilitator today. At this time, I would like to welcome everyone to the On Assignment second quarter financial results teleconference. All lines lines have been place on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key. Thank you. I will now turn the call over to Dr. Joe Peterson, President and CEO of On Assignment. Sir, you may begin.

Thank you, Michael. Welcome everyone and thanks for joining us today, with me today are Peter Dameris, Executive Vice-President and Chief Operating Officer and Ron Rudolph, Executive Vice-President and Chief Financial Officer, and Ron will introduce introduce our call.

Thank you, Joe, before we begin today, I would like to remind everyone as we do each quarter, that our presentation contains predictions, estimates, and other forward-looking statements representing our current judgment of what the future holds. These include words such as forecast, estimate, project -- project, expect, believe, and similar expresses. We believe these remarks to be reasonable but they are subject to the risks and uncertainties that could actual results to differ materially from these forward-looking statements. We describe some of these risks and uncertainties in today's press release and also in our filings with the Securities and Exchange Commission. Also, we do not assume the obligation to update any statements made in today's conference call. Now, I'd like to turn the conference call back over to Joe.

Thanks, Ron. In today's call, I'll give you an overview of our markets and results for the second quarter, and our priorities for the second half of the year. Peter will provide a more detailed review of each division and then Ron will provide detail of our numbers as well as our our expectations for the third quarter. Revenue for the fourth quarters was 46.3 million compared with $46.4 million in the first essentially flat quarter-over-quarter. Sorry. Revenue for the Second Quarter was 46.3 compared with 46.4 for the first, essentially flat quarter-over-quarter. Consolidated gross margin was 26%, which represents the 60 basis point improvement from the first quarter, a direct result of margin improvement in our Lab Support and Medical, Financial and Allied businesses. Our Lab Support domestic revenues grew 5.1% sequentially to $17,834,000 and a marketplace I would characterize as still stable and this represents the first sequential growth for domestic Lab Support since the first quarter of 2001. Credit for this growth belongs to Lab Support market leaders and staffing consultants and their hard work during the quarter.

Lab Support's progress includes stronger activity levels, improved sales operations and progress in the placement of higher margin, engineering and clinical research professionals. Lab Support Europe revenues declined slightly in the second quarter to 2.4 million, from 2.6 in the first quarter, but our gross margin was stable at 35.8%. Our Medical, Financial and Allied division or MF&A also posted growth the first quarter over quarter growth since the fourth quarter of 2000. MF&A finished the second quarter with revenues of 6.56 million or a7.9 increase over the first quarter and with a solid gross margin of 30.4% for the division. This quarter-over-quarter growth represents a particular success of our revitalization strategy. Our strengthened population of MF&A staffing consultants are making real progress in both growing assignments and elevating the type of assignments to higher value and higher pay rate occupations. Our Nurse Travel division revenues declined 6% sequentially from the first quarter in a market still still characterized by lackluster demand and challenges expanding the pool of nurse candidates currently prepared to travel. Growth in future quarters will be driven more by effective internal execution in a still difficult marketplace.

Expenses for the quarter increased as budgeted and directly reflect the investments we have made in the course of implementing the revitalization plan which supports our ability to grow. Specifically, one, the repopulation of our field force, two, strengthening of operations management and three, progress in the modernization of our technology infrastructure. As we have detailed in our press release, field operating expenses increased 1.4 million in the quarter, this cost, as well as a portion of the $500,000 increase in corporate expenses, the cost of recruiting, repopulating and training our expanded field force and reopening several branch offices. This investment in staffing consultants and their selling skills is an investment in our ability to continue to grow our revenues. But, going forward, spending on training and recruiting should decrease. Staffing consultants, as they always have, take months to reach effective levels of productivity. So this investment precedes the revenue it is expected to drive. We continuously manage the productivity of our staffing consultants and local branches and adjust our investment to see that it's being directed to resources that are demonstrating progressive productivity.

A portion of our increased corporate expenses resulted from recruitment fees which, along with the $647,000 charge this quarter, represents investment in our divisional leadership, which Peter will detail in his review of operations. This, too, is a premeditated part of our revitalization plan. As we refresh our divisional and sales management with experienced staffing industry leaders who will accelerate the performance of the offices and staffing consultants they lead. Finally, a portion of our corporate expense supports the implementation of our PeopleSoft ERP. That with Sarbanes-Oxley, and especially, Section 404 compliance expenses also contributed to our corporate plus in this quarter. Flat revenues in these expenses contributed to our net loss this quarter of 2.99 million or 12 cents per share. The priority of this management team is to execute our revitalization strategy and ensure that our resources are being used most judiciously and to progressively reduce corporate expenses as we grow. As our revitalization plan progresses and while we will support this planned investment during the time it takes for our expanded resources to achieve effective productivity we intend to protect the healthy balance sheet that On Assignment has maintained.

In summary, the growth of Lab Support and MF&A are highlights for the quarter and they represent invigorated hard work by Peter in these divisions and their focus upon fundamentals. The Excellent support provided to staffing consultants by our centralized operations in Op Central group have created an environment that more than ever allows us to both support our hard working staffing consultants and to recruit proven performers as we fill openings in our field force. Now, let me turn the call over to Peter to more fully detail our progress in the revitalization.

Thank you Joe. During the quarter we continued to execute against our stated goals under the revitalization plan that was adopted by our board on February 12, 2004. We entered the quarter quarter with 102 staffing consultants in our Lab Support group up from 88 at the end of the first quarter. As of today we have 102 staffing consultants in Lab Support. In the Medical, Financial and Allied group, we started the quarter with 64 staffing consultants and as of today's date we have 91 staffing consultants in this group. In Nurse Travel, we started the quarter with 55 account managers, recruiters, recruiter assistants and regional sales directors and as of today we have a total of 52 account managers, recruiters, recruiter assistants, and regional sales directors in our Nurse Travel group. All of these new employees have specific applicable scientific healthcare sales and/or recruiting/staffing experience.

We also announced today that we appointed Emmit Mcgraph as President of our U.S. Lab support group. Emmit has over 20 years of technical staffing experience. Emmit held a variety of positions at the YO company. Most recently Emmit was President of the western region of the YO company, reporting to the CEO of the YO group, was a member of the executive committee of the YO group, and a member of the chairmens board at Dave Zimmerman group, the $1 billion parent company of the YO company. Emmit has vast, hands on experience in growing scientific and clinical research and engineering staffing divisions. He will continue to support our Lab Support group as it focuses on regaining its market share and its position in the scientific staffing space. In addition his understanding and knowledge of vendor on-premise management strategies will enable our Lab Support group to more forcefully compete for mid and large-sized accounts. Emmit will report directly to me and have our valued Lab Support market leaders report directly in to him.

Exiting the quarter, we were once again, encouraged by the trends that we experienced in Lab Support and MF&A. Two divisions which had experienced severe revenue declines over the last three years. Billable head count, number of customers billed, and total hours billed in these these two groups are all at highs for the year. Bill pay spreads have also remained at or near the highest levels of the year. Specifically, in Lab Support we have increased the number of clients we billed on a weekly basis by 68 clients. The number of temporary professionals has grown by 125, from April, 2004, and our average bill rate rate has increased by 40 cents. In addition, the number of opened job orders in new opportunities are continuing to steadily increase. We also continue to make solid progress on strengthening and growing our permanent placement and clinical research service offerings in this group. In MF&A, we have increased the number of clients we bill on a weekly basis by 164. The number of temporary professionals has grown by 180 since April of 2004, and our average bill rate has increased by $1.36. This group, much like Lab Support, exited the quarter experiencing continued increase in demand, opened orders and new opportunities. We are very encouraged by the progress we have made in this group.

In less than four months we have reversed significant quarterly revenue declines and are now growing at a healthy rate. These significant increases in clients over this period of time positions Lab Support and the MF&A groups for solid growth as they penetrate these new clients even further with more temporary professionals. With regard to our Nurse Travel group, we experience greater operating and pricing challenges in the second quarter than in the first. As we disclosed in our preannouncement in June of 2004, this performance was attributable to a combination of events that included, supply constraints on the number of nurses willing to travel, aggressive selling, and pricing pressure in our second largest customer, which translated into a drop in head count of approximately 30 nurses, and a lack of -- (Audio problems) the first two week weeks of the third quarter generated results in demand similar to what we experienced at the end of the second quarter. However, over the last two weeks, job orders have moved up, two new large hospital accounts with favorable bill rates have been executed and we have successfully submitted to and are filling those orders. We have also taken steps to improve our operational performance as it relates to average number of daily submittals, interviews with RN's, sales calls, and acquisition of new customers in this group. Demand in this end market continues to stabilize over what we experienced in 2003, but most industry analysts are predicting a 3% contraction in 2004 over 2003, with 10% growth predicted in 2005.

In the short-term, our performance will be most dependent on our internal operational execution and increasing the number of nurses we work with that are willing to travel. We believe the actions we have taken and are taking position us to grow going forward. On a consolidated basis, we have clearly started to turn the corner and generate meaningful week over week growth in the number of temporary personnel, the number of clients billed, number of hours billed, and actual revenues. Our staffing consultants productivity continues to increase as we reopen markets and gain market share. Yet, this productivity curve has not met levels that are necessary to generate net income for our targeted goals. We are committed to completing the implementation of our revitalization plan for the remainder of 2004, and growing our absolute gross profit dollars. We are also very committed and focused on flattening the organization and improving our cost structure in order for us to generate appropriate net income. With regard to operating leverage in reduction of fixed overhead we continue to focus on the same, through today's date we have taken certain steps to flatten the corporate organization, reduce our spending on telecommunications, streamline marketing, eliminate the majority of expenses related to third-party consultants not involved in our PEOPLESOFT implementation, and distribute field operations across a smaller group of leaders. Our goal is to continue to reduce fixed costs at corporate and focus our available SG&A dollars in the field.

Finally, with regard to operations management and financial reporting we continue to make good progress. Our regional managers and staffing consultants are now receiving weekly information relating to productivity and revenue generating activity. In closing, it's important to remember where we started from. Throughout the majority of 2002 and 2003, on On Assignment experienced double digit revenue and gross profit declines every 90 days in each of its operating divisions. Since launching our revitalization plan we have reversed this decline and actually started to grow our Nurse Travel, Lab Support, and MF&A revenues once again. We believe we have successfully addressed many operational issues during the first half of 2004 in a clear and consistent fashion and that the most significant period for measurement of our success under the revitalization plan is now upon us. As we stated in our first quarter conference call, there's still much work to be done and we are in the in the middle of implementing our revitalization plan, but we've seen clear signs that the company is moving in the right direction. I would like, once again, to thank our many loyal, dedicated, and talented employees whose efforts have brought us to this stage. I would like to now turn the call over to Ron. Ron?

Thanks Peter. I will start with revenues for the second quarter, which revenues for the company on a consolidated basis were 46.3 million. This is a decrease of 14.5% from the second quarter of last year. And essentially flat compared with the first quarter of this year, there were 63.75 billing days in this quarter. That's second quarter of this year compared with the same number of days last year, and with 62.5 days in the first quarter of this year, Lab Support segment revenues were 20.3 million, decrease of 16% from the Second Quarter of last year, and an increase of 3.3% sequentially. Lab Support U.S. revenues, again, increased 5.1% sequentially to 17.8 million in the second quarter. Lab Support Europe revenues decreased 8% sequentially, but only 5.6% on a constant currency basis at 2.4 million. Lab Support segment accounts were 44% of total revenues. Healthcare segment revenues for the second quarter were 26.1 million, down 13% from the second quarter of last year and down 3% sequentially. This segment represents 56% of total revenues.

Within the healthcare segment Nurse Travel revenues of 19.5 million were down 1.5% from the second quarter of last year and decreased by 6% sequentially. Nurse Travel makes up 42% of total revenues. Medical, Financial and Allied or MF&A revenues decreased 36% from the second quarter of last year, 6.5 million, but increased close to 8% sequentially. MF&A comprises 14% of total revenues. Excluding Allied travel, remaining local healthcare lines of business within MF&A increased 13% sequentially. Turning to gross margin, gross profit was 12,025,000 for the quarter, this represents 26% of total revenues compared with 28.1% of revenues for the second quarter last year and 25.4% of revenues for the first quarter of 2004. The 60 basis-point sequential improvement is primarily a result of stable and traditionally high consolidated mark-ups in combination with reductions in indirect labor cost in the second quarter. Lab Support segment gross profit was 6,193,000 for the quarter representing 36.6% margin of 30.6% -- a margin of 30.6% compared with 33.3% of revenues for the second quarter last year and 29.8% during the first quarter of 2004.

Healthcare segment gross profit was 5,832,000 for the quarter. This represents 22.4% compared with 23.9% of revenues for Q2 last year and 22.3% for Q1, 2004. Within the healthcare segment Nurse Travel gross profit was 3,836,000 for the quarter. This represents 19.7%, for the current quarter compared with 19.8%, second quarter last year and 20.9% of revenues for the first quarter of 2004. MF&A gross profit was 1,996,000 for the current quarter. Representing 30.4% compared with 31.9% a year ago quarter, to 27.0% of revenues for Q1, 2004. Conversion and direct placement fees totaled 541,000 in the second quarter, compared with 536,000 in the year ago quarter. And 493,000 for Q1, 2004. Regarding selling, general, and administrative costs, total SG&A expense for the quarter was 16.9 million, including almost 650,000 in severance costs, this represents 36.5% of total revenues. This compares to 14.8 million or 27.3% of revenues for the second quarter last year, and 14.3 million or 30.9% of revenues for the first quarter of 2004. The sequential increase reflects higher branch operating expenses in the second quarter, previously mentioned severance costs, and increases in other corporate expenses. The Primary contributors to the sequential increase in branch operating expenses were salaries, commissions, and branch marketing expenses.

Turning to our operating results, the operating loss for the quarter was $4,883,000. Compared with a loss a year ago of 79,464,000. And a loss in the first quarter of this year of 2,536,000. The year ago loss was after goodwill -- a good-will impairment charge of 79,897,000. EBITDA for the quarter was negative 3,279,000 compared with positive result of 2,493,000 for the second quarter of last year and a negative 872,000 first quarter of 2001. Turning to cash flow in our balance sheet, we entered the quarter with cash and equivalents of 31.1 million. Down 3.5 million sequentially from the first quarter, this was after funding $2.2 million in capital expenditures during the quarter. There were no repurchases of On Assignment shares in the open market. Debt accounts receivable were 22.7 million at the end of the second quarter with a DSO of 47 days which compares very favorably to our year end number of 56 and the number at the end of the first quarter of this year of 51 days. So good improvement on DSO. Regarding guidance, based on trends over the last few weeks of the second quarter, and the first three weeks of July, we offer the following guidance for the third quarter. We expect revenues in the range of 47 to 49 million. Within a company loss per share of 10 to 12 cents again, as you knows these estimates are subject to the risks mentioned in today's release and in our filings with the SEC. Michael, we would like to open it up to our participants now for any questions they might have.

At this time, I would like to remind everyone, in order to ask a question, please press star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster. Your first question comes from Jim Janesky, with Ryan Beck & Co.

Yes. Good morning. Could you talk about gross margin and operating expense trends in the third quarter? You have an expectation for revenues to be up but for the loss to stay flat, or to stay the same.

Jim, I'll address the gross profit issue first. We've been encouraged and we're proud that we were able to grow on a sequential basis, the absolute revenues of the Lab Support and the MF&A group without having to compromise the margin. As you know, we are at the highest margins in the industry for the disciplines that we serve, and we think we can continue to grow without a big compression in that in the third or fourth quarter. On the operating expenses, we feel pretty good that the cost associated with training and recruiting is going to flatten out a fair amount compared to the second quarter, because the majority of our our hiring is behind us, but, because of where we are with regard to productivity and clearly, the third and fourth quarter are the measurement periods for us, we just haven't factored in that it's all going to trickle down to the bottom line. The increased revenue.

Okay. But, on the operating expense line, you did say that most of the hiring is behind you. Where would the increase in operating expenses primarily come from? And do you expect a further reduction in the gross profit in Nurse Travel at all?

Well on the Nurse Travel issue, we think that the 19.7, 20% is a sustainable gross profit margin.

Jim, this is Ron. On the operating expenses, the increases in the field complement for staffing consultants will affect our numbers in the third and fourth Quarter, as we've planned and,so, we're still ramping up head count during the second quarter so those people will will be fully reflected in the third quarter. We have additional costs associated with Sarbanes implementation and we don't expect sequentially, that the SG&A will decrease very much. It should go down in the third quarter and possibly, a little more in the fourth quarter as some of these things tail off. But, the comparison of the second quarter to the first quarter is a little bit confusing. But I can just tell you that, you know, but for the incremental amounts of money we're spending for Sarbanes implementation and the amount of money we expect to spend in Q3 on SG&A is according to plan, but it will be in the range of what we spent in the second quarter.

Okay. Excluding or including the charge?

Including the charge.

Okay. Got it. And then, last question is, on branches, do you anticipate opening up more in September and December quarters? Or are you pretty much done?

I think we're pretty much done for the year.

Okay. Thank you.

Thanks, Jim.

Your next question comes from Adam Waldo with Lehman Brothers.

Yes. Good afternoon. Matthew Cudins, standing in for Adam Waldo. I was wondering if you could please provide an update on your second half '04 staffing consulting hiring plans?

We're pretty close to plan, Matthew. We may have in the aggregate, 10 or 15 openings and that is, you know, we're within 10% of vacancy levels which is an acceptable level for us. And the final hirings will be very dependent on being opportunistic in the marketplace and finding the right person for the right market.

Okay, great. I was also wondering if you could update us on your guidance for 2004 overall beyond the 3Q '04 guidance you issued today?

We're just -- Matthew, this is Ron Rudolph, we're sticking with one quarter guidance now as most of our our competitors and our peers do. We think that's --

Okay. Sure. Certainly.

We think we'll stick with one quarter guidance.

Okay. Would you care to comment on when you would aspire to return to medium free cash flow positive at this point? Or is that too early, again, to really say?

I think it's too early to say with any precision. But, I mean, you know, in the projections we've run, intense analysis we've done, probably middle of next year, second to third quarter of next year.

Great, thanks. Final question, I was just wondering if you could provide the average bill rate inflation by segment? I know you gave the absolute dollar increase in bill rates. But, I was won wondering if you could provide -- I believe ast quarter you provided bill rate inflations by segment at least with Lab Support and healthcare?

Right. The increase -- actually, we had a decrease in lab segment bill rates and on some of this, it's affected by what goes on with Europe and trending conversions and all that. But, bill rates in the lab segment, sequentially, were flat and the pay rates were essentially flat. So there wasn't much of a change there. Healthcare segment, bill rates were down 4% and pay rates were down 6.8%.

And that's sequential?

Yeah. These numbers look backwards to me so I think the formula is wrong. But, let me just summise it differently for you. The increase -- whether you're looking at the segment, the Company as a whole or even the subsegments, we have had bill rate increases but the pay rate increases have been slightly in excess of the bill rate increases.

Okay. Terrific. Just one final question if you have the conversion fee number in the quarter?

It's 541,000, I think.

Great, thank you very very much.

Conversion and direct placement fees were 541,000 in the quarter, that was up sequentially.

Matthew, the only thing that I would clarify, is when you look at the healthcare segment that's got Nurse Travel and MF&A. And when I told you that the MF&A bill rates' gone up $1.36 since April of 2004, that, you know, our Nurse Travel business, the rapid response is at some of the higher rates because we put a relevant nurse into a hospital within four days rather than having to wait four to six weeks with some of the other travel agencies. But if you look at the at the average bill rate of a Cross Country or American Mobile it's lower than the rapid response nurses that we place, so as we place more 13-week nurses our bill rate will blend down which may make the healthcare segment bill rate look flat or sequentially down. But that does not accurately reflect what we're seeing in the MF&A group where we've actually seen an expansion in the bill rate.

Great. Thank you.

Your next question comes from Marta Nichols with Banc of America Securities.

I hate to make you guys go through this again, but I was confused, Ron, with a couple of things that you were saying about the bill rates versus the pay rates, your gross margins went up but -- and I know you said you flipped something in what you were talking about. But, can you just review that again? Are you seeing -- you're seeing flat bill rates and slightly lower pay rates?

On a sequential basis, bill rates were -- and the pay rates didn't change much at all.

In both segments?

In both segments and for the company as a whole.

Okay.

So, and that's consistent with maintaining the high spreads, the high markups that we traditionally do. So there were indirect costs that affected the improvement sequentially. I've got the the year-over-year bill rate data that Matthew had asked for. What I was reading to him and to the group were the sequential numbers. If we look just year-over-year by segment, by contrast, Lab segment bill rates are up 4.5% in the second quarter versus second quarter a year ago. But, pay rates are up 5.4%, and again addressing the mixed issue that Peter commented on. Healthcare segment bill rates are up 6.2%, but the healthcare pay rates are up 9%, so if you look on a consolidated basis, plus the 6% increase in in average bill rates from a year ago, second quarter, at 7.8% an average pay rate.

I'm sorry. The last numbers you cited were for the company as a whole?

That's consolidated. So I gave you two segment numbers and one consolidated number for both bill and pay.

Okay. Can you, Ron, tell us what you are spending? Give us some sense of how the SOX spending, Sarbanes-Oxley spending is trending for you, the first half of '04 and second half of '04 and then what you might expect to spend full year '05 relative to what you're spending this year, if you have some sense of that yet?

We haven't done a projection for -- I don't have a good '05 number, I mean, we spent about 125,000 in the second quarter. We budgeted three hundred and some thousand for the third quarter. Another 200,000 for the fourth quarter. And as far out as we've gone, Marta, is 250,000 for Q1 of '05.

All right.

And then we get into maintenance mode after that.

And the the expectation when you get into maintenance mode would be for those amounts to drop materially? Is that fair?

Yes. Materially, but I couldn't give you a target number yet .

Okay, and then Peter, I think you said that you're essentially where you want to be as it relates to head count right now. Although, I think I did hear you say that your head count for nurse was actually down in the quarter. Are you at a comfortable level in the nursing segment as well? Or would you expect -- Do you think that essentially reflects the demand out there?

You know, that is the long-line business, Marta. So it's not a one to one model. Some of it has to do with a better coordination of the daily revenue generating activity. I would tell you that those ten opened requisitions that I loosely referred to, a couple of them are in Nurse Travel, I would try to pull those first. Because we're seeing a stabilized market. I wouldn't say it's robust but we are starting to see the type -- in all our divisions the type of week over week, growth and temporary personnel that we would want. And as you know in the staffing businesses once you start getting leverage, we have got 250 staffing consultants. And if we can get each of them to increase by 2-3 billable personnel, that's a lot of additional revenue and billable personnel that go to the bottom line so, I think we're at the levels we want to be at.

Okay. And then, Ron, just to make sure that I'm clear, I think you answered a bit of this when Jim asked about expense levels. But, the 16.9 million that we saw for SG&A in the quarter, that's essentially a level that we should be thinking about in September, maybe, minus a couple hundred thousand? Given you have got the increase in stock spending and the decrease in some other spending?

That's correct.

Okay. And then it should drop very modestly from there into the fourth quarter?

That's correct.

Marta --

Hello.

I'm still here. Thanks a lot.

Your welcome.

Thanks Marta.

Once again, ladies and gentlemen, if you would like to ask a question, please press star then the number one on your telephone keypad. Your next question comes from Toby Summer with SunTrust, Robinson Humphrey.

I apologize I joined the call a little bit late. But, I was curious in your Nurse Staffing segment, I sort of heard you say that you thought gross margins may be sort of stable sequentially and, if you had a little bit of pressure there with one of your large customers in lost, you know, some revenue-generation there sort of mid-stream in the quarter, is it fair to think that absent that kind of condition that the gross margins could actually just be a touch higher in the third quarter?

Well, let me take a -- Toby, let me try to respond to that as follows. One, the pressure we saw in that one account is kind of unique. In that it was through a private company and our ability to really prohibit the type of behavior that they represented in that account was pressed by how large a number of nurses we had on billing. At that customer that we didn't want to jeopardize. So I wouldn't apply it to the industry at large. With regard -- and the other thing, is that that particular account, maintained the highest hourly bill rate per nurse. It was the highest that we have in our group and it's probably one of the highest in the industry as well. And those nurses typically, get paid higher in that account as well. And until we found an account where we could put those nurses elsewhere to work it was hard to defend the account in the face of this private competitor. We have signed two new accounts that have bill rates that are higher or as high, as the account I just made reference to, so we have a place to put those nurses to work. So, when you see margin compression specifically at us, it's market pressures but it's also us moving from rapid response, which we can defend the margin in the higher bill rate, much more easily then the 13-week type of assignment. So, to the extent that we expand our rapid response business the four-week assignment business and that makes up a bigger percentage of total revenue versus the previous quarter, I would tell you that you could see the margins go up a touch higher. But, if the 13-week travel business makes up a bigger percentage of total revenues then you would see the margin maybe stay flat or tick down a little bit.

Thank you very much.

Your next question is a follow-up from Marta Nichols with Banc of America Securities.

Simple housekeeping question, what tax rate should we looking for going forward?

38%, Marta.

Okay. Thanks.

We've tested that pretty thoroughly and that looks good for the rest of this year.

At this time are no further questions. Are there any closing remarks?

Michael, thank you. It's Joe Peterson for Peter and Ron. We appreciate everyone's attention this past quarter and look forward to speaking to you in the fall. Thanks very much.