ASGN Inc (ASGN) 2010 Q3 法說會逐字稿

Good afternoon. My name is Stephanie, and I will be your conference operator today. At this time, I would like to welcome everyone to On Assignment's Q3 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

Thank you. I would now like to turn the conference over to Jim Brill, Chief Financial Officer. Please go ahead, sir.

Thank you. Before we begin, I'd 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," "expect," "believe" and similar expressions. We believe these remarks to be reasonable, but they are subject to risks and uncertainties that could cause actual results to differ materially from the forward-looking statements.

We describe some of these risks and uncertainties in today's press release and in our filings with the Securities and Exchange Commission. We do not assume the obligation to update statements made in this conference call.

I'd now like to introduce Peter Dameris, our CEO and President, who'll provide an overview of our third-quarter results. Peter?

Thank you, Jim. Good afternoon. I would like to welcome everyone to the On Assignment 2011 third-quarter earnings conference call. With Jim and me today is Michael McGowan, President of Oxford, our IT engineering staffing business.

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 myself and Michael. I will then turn the call over to Jim for a more detailed review and discussion of our third-quarter financial performance and our estimates for the fourth quarter of 2010. We will then open the call up for questions.

All markets we served improved during and exiting the third quarter. We saw particularly strong growth and strength in the IT and life sciences end markets. All divisions grew sequentially. In addition, September consolidated revenue of $39.4 million was the highest monthly consolidated revenue generation for our company since January of 2009. Included in our third-quarter consolidated revenue was approximately $2.2 million of revenue earned by our nurse travel group in July from supporting a customer which experienced labor disruption the quarter. Our absolute basis divisional sequential revenue growth performance in the third quarter was 15% for our IT group, 18% for our life sciences group, 3% for the health care group and 2% for our physician group.

Exiting the quarter, revenue growth in our non-health care IT-related groups--excuse me, our non-health care related groups, i.e., IT, engineering and life sciences, which makes up 67% of our total third-quarter revenues, was good and continued to improve. As we stated during our second-quarter conference call, the health care staffing market is still very challenging, but in the third quarter, we saw modest signs of improvement in demand that was greater than the change in demand that we saw in the second quarter. We hope these changes in demand will permit absolute growth in 2011 for our health care groups.

Although health care staffing is currently a drag on our revenue growth, we firmly believe this end market will provide some of the greatest growth opportunities in 2011 and beyond.

Consolidated gross margin of 35.4%, up 197 basis points year over year, was a new record for the company. The secular trends that have permitted temporary labor at large to see greater growth prospects than full-time labor continued during and exiting the quarter. In addition, although growth in the US economy slowed somewhat during the quarter, we did not see a corresponding slowdown in our business. As the recovery starts to restrengthen, we fully expect to benefit from classic cyclical recovery trends that develop in professional staffing. According to the BOS, the US labor market has only recovered 405,000 of the 936,000 temporary jobs lost during the downturn. This fact, along with secular trends developing in the US labor markets, should provide significant growth opportunities ahead.

As we advised you earlier in the year, we recently completed the development of a five-year strategic plan to get to $1 billion in revenues. The plan requires us to grow approximately 10% compounded annually, with approximately $50 million a year in acquired revenues. While fiscal year 2010 is less than an optimal operating environment, our growth in our non-health care businesses and our two acquisitions to date have kept us on track to realistically have an opportunity to achieve our stated revenue goals.

Our second- and third-quarter's operating performance demonstrates that the actions we have taken over the last two years has us positioned well. By increasing our gross margins, substantially paying down our debt with cash generated from our operations, adjusting our non-revenue generating cost and expanding our service offering, we have been able to grow our EBITDA about three times faster than our revenues. In addition, we believe our ability to generate attractive levels of profitability is greatly enhanced now that we are well above $110 million in quarterly revenues.

Regarding capitalization, on October 25, 2010, the Board of Directions of the Company authorized the purchase on the open market of up to $20 million of the Company's common stock. The authorization lasts for up to four years, and is subject to market conditions, compliance with bank covenants and volume limitations.

In addition, we recently executed a non-binding commitment letter with Bank of America and Wells Fargo to jointly arrange a new $125 million term loan and revolving credit facility. The new facility will replace our existing credit facility. Pricing should be approximately 350 basis points better than the existing facility, and covenants and terms of the new facility should provide us flexibility to continue to pursue attractive acquisitions.

Now to the third quarter. Revenues in the third quarter increased 18.4% over the third quarter of 2009. Net income was $3.2 million, or $0.09 per diluted share. Revenue generated outside the US was $8.5 million or 7.3% of consolidated revenues in the third quarter, versus $6 million or 6.1% in the third quarter of 2009.

Consolidated gross margin in the third quarter was 35.4%, up from 33.4% in the third quarter of '09. Adjusted EBITDA was $11.6 million or 10% of revenue for the quarter, up from $8.7 million or 8.9% of revenue in the third quarter of '09.

Permanent placement and conversion fees represented 4% of revenue for the quarter.

Exiting the quarter, demand for our services strengthened in most divisions. In nurse travel and physician staffing, we are starting to see better demand trends. Our consolidated revenues in September were $39.4 million. Our weekly assignment revenue, which excludes conversion, billable expenses and direct placement revenues, averaged $8.5 million for the last three weeks. This is up 14% from the same period in 2009, and up 16% from the same period last quarter.

Before turning the call over to Mike, I would like to give you a brief review of operations.

As we look at the nurse travel division, we are pleased to announce that this is the second consecutive quarter that the group has grown revenues. During the third quarter, we are once again benefiting from supporting customers who experience labor disruption. Quarterly revenue of $9.7 million, which included $2.2 million in revenue from labor disruptions, was a sequential increase of 1.8%, but a year-over-year decrease of 9.6%. Gross profit was $3.4 million, a 34% sequential increase, and up 24% year over year. Gross margin of 34.8% represented an 831 basis point sequential increase, and a 940 basis point increase year over year.

Excluding the $2.2 million in labor disruption revenue, Q3 revenues were relatively flat with the revenue reported in the prior quarter. However, our gross margins would have been 23.5%, a 59 basis points sequential improvement.

The best news for Q3 was stability in average bill rates and average number of working nurses for the first time in more than a year. This is a result of our continuing effort to strengthen our relationship with clients while providing outstanding service. As we have transitioned more fully into recovery, we are confident that the growth in demand will be carried into the fourth quarter. The bulk of this improvement is evidenced by a more than 59% increase in booked weeks, and a 33% increase in open orders since September 1, 2010.

Beyond this, our client pipeline has strengthened lately. During the quarter, our average bill rates were down year over year by 2.7%, to about $67, but remained relatively flat sequentially. Average hours worked per nurse decreased sequentially from 40.9 hours to 40 hours, and decreased year over year by 3%, from 41.4 hours in Q3 of '09. And without the labor disruption revenue, the bill pay margin would have increased 37 basis points sequentially, but decreased 58 basis points year over year.

Now, let's turn to the life sciences group. Revenues for the life sciences segment grew to $30.1 million, which represents 17.8% growth sequentially, and a 33.1% increase year over year. The improved operating environment of the legacy scientific division, combined with the positive performance of the Cambridge Group and Sharpstream Life Sciences acquisitions, accelerated growth in the quarter. Revenue from the acquisitions were $3.4 million.

Excluding acquisitions, revenue grew 10.6% sequentially and 17.8% year over year. On a divisional basis, US operations generated $25.8 million in revenue, increasing 15% sequentially and 36.7% year over year. Excluding Cambridge and Sharpstream, US operations grew 11.1% sequentially and 23.6% over the prior year. Foreign revenues were $4.3 million for the quarter, increasing 38.8% sequentially and 14.9% year over year. Excluding Sharpstream, foreign revenues were up 7% sequentially and down 11.4% year over year. Cambridge has no foreign revenues. We attribute the year-over-year decline in legacy foreign revenues to both a continued soft operating climate and the volatile exchange rates of the pound and the euro.

Gross margin for life science segment was 37.2%, increasing 543 basis points sequentially and 360 basis points year over year. On a divisional basis, US gross margin was 35.2%, increasing 390 basis points sequentially and 191 basis points year over year. Foreign gross margin was 49.4%, increasing 1,402 basis points sequentially and 1,410 basis points year over year. The improvement in gross margins in the quarter is primarily attributable to increased permanent placement revenue in the legacy business as well as the recent acquisitions.

Moving on to the fourth quarter of 2010, demand for both contract and permanent placement services remains steady, and the business climate in most of our markets continues to stabilize and improve. The successful integration of the Cambridge Group and Sharpstream Life Sciences is a top priority, and we are focused on building new business relationships and leveraging life science customers and prospects.

Early in the fourth quarter, we are encouraged with the level of contract and permanent orders, number of weekly contract assignments and permanent placement activity. However, normal fourth-quarter seasonal factors may constrain sequential revenue growth. With that being said, we expect revenue production per billable day to be flat to slightly up sequentially, given current trends and the pipeline of opportunities.

The wildcards that could hamper growth are greater number of plant closures during the holiday season, extended and encouraged time off, poor weather and postponing hiring decisions until the New Year, all of which was realized in the fourth quarter of 2009.

Now, I'll turn to Allied Health Care. Revenue for the Allied Health Care division was $10.2 million, which represented a 4.1% increase sequentially and a 1.3% decline year over year. Although the operating environment shows signs of improvement, growth was constrained by the following specific factors. One, continued reduction in demand for elective procedures. Two, greater number of patients choosing more cost-effective forms of treatment, such as self-medication, over more costly medical procedures. Three, hospitals' reduced usage of contract professionals in response to declining cash balances and patient admissions. Four, reduced demand for less critical Allied skilled modalities. And five, a dramatic decline in demand for flu vaccines as compared to the H1N1 pandemic we faced in the prior year.

The Allied Health Care gross margin for the quarter was 34.2%, which represents a 115 basis point sequential increase and a decrease of 34 basis points year over year.

Turning to the fourth quarter of 2010, the health care markets in which we operate continue to be challenge, but signs of improvement do exist. Demand for core clinical labs, local nursing, Allied travel, rehab therapy and health information management professionals continues to stabilize and improve. Although we have secured several flu vaccine-related projects, demand for such services will be significantly less this quarter as compared to this time last year.

In the event of a pandemic arising, or general demand for flu vaccine increases, we are positioned to provide nursing support throughout the United States. The main challenge we face in the quarter are seasonal and economic factors beyond our control, and for similar reasons cited earlier. Based on our current run rate and pipeline of orders, we expect revenues to be flat to slightly down from the third quarter.

Now, let's turn to our position staffing segment, Vista Staffing Solutions. In Q3, we continued to feel the pressure being experienced by hospitals and integrated health care systems. In a recent survey from Health Leaders magazine, hospital CFOs reported lower admissions due to higher unemployment, increasing demand for charity care, growing bad debt and flat to lower reimbursement from Medicare and Medicaid. These institutions continue to watch costs very carefully, which has had a negative impact on demand for locum tenens.

All of the CFOs quoted said they expected a very slow recovery. They expressed a great deal of uncertainty about the impact of health care reform, but like us, they are cautiously optimistic. They cited the development of accountable care organizations, the expansion of the physician networks and finding new sources of market share and revenue as a priority in the near term. These efforts should translate into increased demand for physicians and locum tenens services.

Our physician segment Q3 revenue was $18.8 million, a 16.8% decline year over year but a 2% sequential increase. Gross profit was $5.6 million, down 25.7% year over year and a 10.8% sequential decrease.

It should be noted that included in the cost of sales is $400,000, which relates to a reduction in the amount of indemnification owed by Vista's selling shareholders to On Assignment, due to favorable development on indemnified medical malpractice cases.

Our gross margin in the quarter was, excluding the expenses noted above, 32%, down 139 basis points year over year and down 213 basis points sequentially. Demand as measured by days of requested coverage or sold days has leveled off. Sold days were 19,669, down 18% year over year but essentially flat quarter to quarter. Notably, sold days with our largest accounts have increased in seven of the last nine months. These clients were the first to begin belt-tightening and reducing their use of locum tenens, and now appear to be the first to be bringing in physicians to win market share during the recovery.

As noted in past reports, the economic downturn has changed the industry in a fundamental way. Historically, the industry was able to fill approximately 30% of all requests for coverage. This quarter, our fill rate was 57%, which was essentially flat with the same quarter of last year. The division's hourly bill rate for locum tenens was strong at $186 per hour, up 1.6% year over year and up 2% sequentially. This is an indication of our strong mix of business. Vista has a large presence in the internal medicine hospitality specialty, which staffing industry analysts have dubbed the fastest growing specialist in locums. The division is also heavily invested in family medicine, surgical specialties, emergency medicine and psychiatry, which are very competitive but have remained relatively strong. We have minimal investments in anesthesiology and radiology, specialties in which revenue has plunged by double digits this year, according to the staffing industry analysts.

We have seen a continuing surge in revenue from permanent conversions, which was 328,000 in Q3, a 25.2% year-over-year increase and a small sequential increase. Unfortunately, a permanent conversion effectively reduces our inventory of both physicians and ongoing jobs to fill.

We see this as a continuing sign of physicians opting for permanent jobs in an insane and insecure economy, and expect it to turn around slowly with the economic recovery. Vista is the only physician staffing agency that offers a full spectrum of opportunities for physicians. Vista diversification is serving us well. Revenue from the permanent physician search and consulting division was $340,000 this quarter, up 100% year over year and 23% sequentially. Gross profit from the international placement division was $430,000, up 8% year over year and 76% sequentially.

I'll now turn the call over to Mike McGowan, the president of Oxford Global Resources, our IT and engineering business. Michael?

Thanks, Peter, and good afternoon. I'm pleased to report On Assignment's IT and engineering segment had an excellent quarter. Revenue, gross profit, gross margin and EBITDA exceeded our expectations with continued improvement for each month of the quarter. Revenues for the third quarter were $47.4 million, a 15% sequential increase over the second quarter of 2010, and a 48.9% increase over the third quarter of 2009. For the third quarter in a row, we experienced growth in each of our respective specialty areas, IT, software and hardware engineering, mechanical and electrical engineering, and telecomm.

The 48.9% increase in year-over-year revenue was due to a significant increase in the number of billable consultants on assignment, just partially offset by lower average bill rates. During the third quarter of 2010, we averaged 817 billable consultants on assignment, compared to 537 in the third quarter of 2009. The 817 consultants was also an increase of 12.8% over the average of 724 in the second quarter of 2010.

The average bill rate in the third quarter of 2010 was $108 per hour, compared to $112 in the third quarter of 2009, and $106 per hour in the second quarter of 2010.

Our gross margin for the third quarter of 2010 remained strong at 36.8%, compared to 35.7% for the same period last year.

As we've mentioned on previous calls, the bill rates and gross margins of our IT and engineering segment continue to be among the highest in the staffing industry. Total fees for our permanent placement business unit, called Centerpoint, were $335,000 in the third quarter of 2010 and $864,000 for the first nine months of 2010, representing just one half of 1% of Oxford's total revenue.

During the third quarter, we were successful in continuing our strategy of diversifying our business across clients and industries, billing over 725 different client companies. No single client accounted for more than 2.6% of our revenue, and revenues from our top ten clients represented only 13% of our total revenues for the quarter.

Demand was especially strong for our quality assurance and regulatory affairs consultants among medical device manufacturing companies and for our ERP and business intelligence consultants in the finance insurance industries, utilities and retail trade. We launched our health care IT business in late 2009, and it is now our fastest growing area as we continue to add staff and accelerate our penetration in this market.

From an operational standpoint, our internal staffing consultants drive our business and are a significant investment necessary for current and future growth. The average number of staffing consultants reached a high of 447 in June of 2008. That number declined throughout the second half of 2008 and all of 2009. Since then, we have intentionally increased our staff size from 275 staffing consultants in December of '09 to 363 at the end of September 2010, a 32% increase over that time period.

In addition to increasing the size of our sales staff, our staffing consulting efficiency and productivity has also been steadily improving. During Quarter 3, we saw aggregate new assignments per day reach pre-recessionary levels with a sales staff that is about 19% less than our peak in June of 2008. AS a matter of fact, our August productivity in terms of assignments per day hit a level that Oxford has not seen in only--has only seen, rather, in four other months in our 26-year history. Due to our strong and steady performance in the past four quarters, which has continued into October, we continue to selectively add staffing consultants to our Oxford International and our Oxford and Associates offices. We monitor our operational activity daily, and will continue to align the size of our sales staff with current and future economic conditions.

To summarize, our IT and engineering segment has seen a steady increase in the number of consultants on assignment and increases in average weekly sales since September of 2009, reflecting the steady economic recovery. The Oxford Index, our forward-looking quarterly survey, indicates our clients anticipate increasing the temporary hiring in the fourth quarter. So therefore, based upon the Index and our solid results in October, we expect moderate sequential revenue growth in Quarter 4 over Quarter 3, as well as significant growth over the fourth quarter of '09.

I'll now turn the call over to Jim Brill. Jim?

Thanks, Mike. As Peter mentioned, consolidated revenues for the quarter were $116.1 million, up 18.5% from the third quarter of 2009. There were approximately 64 billing days in this quarter, 64 in the second quarter and approximately 64 in the third quarter of 2009. However, for nurse travel, there were 92 days in this quarter, 91 last quarter and 92 in the third quarter of 2009. And the quarter included about $2.2 million of revenue related to labor disruption at one of our customers, as Peter mentioned.

Foreign currency had about a $650,000 negative impact on revenue, relative to last year's third quarter, and about a $200,000 positive impact on revenue, relative to last quarter.

Let me now address some of the variances and their related explanations, to the extent Peter or Mike has not.

In life sciences, the bill rate was even with the second quarter. The bill pay spread increased, as did the bill pay margin. Relative to the third quarter of 2009, the bill rate was up slightly, but the bill pay spread and the bill pay margin decreased. In Allied Health Care, the bill rate and the bill pay spread relative to the second quarter were up, as was the bill pay margin. Relative to the third quarter of 2009, Allied Health Care's bill rate was up 2.5%, and the bill pay spread and the bill pay margin expanded.

Peter mentioned that the bill rates expanded in the physician business. The bill pay spread and the bill pay margin expanded relative to the second quarter, but contracted relative to the third quarter of 2009.

Peter also mentioned Vista's cost of sales, which included $400,000 related to a reduction in the indemnity for Vista's selling shareholders, based on improved medical malpractice settlements.

We also had a one-time reduction in employment taxes of about $500,000 related to rate changes, which positively impacted life sciences and health care. Conversion and direct-hire revenues totaled $4.7 million in the quarter, or 4.1% of revenue, as compared to $2.8 million or 2.7% of revenue in the second quarter, and $2 million or 2% of revenue in the third quarter of 2009.

Total SG&A expense for the third quarter was $33.7 million, or 29% of total revenues, which is up from $32 million or 30.6% last quarter, and $28.5 million or 29% in the third quarter of 2009. The increase from last quarter is in part related to an increase of $200,000 in equity-based compensation, an increase in commissions related to increased revenue, and $750,000 associated with Sharpstream. Also included in SG&A in the quarter is $500,000 in amortization, $1.5 million of depreciation. Our operating income was $7.4 million or 6.4% of revenues for the quarter, compared with $3.3 million or 3.2% of revenues last quarter, and $4.3 million or 4.4% of revenues in the third quarter of last year.

Our tax rate for the quarter was 45.9%, and we had net income, as Peter mentioned, of $3.2 million, or $0.09 per diluted share.

We believe that it is meaningful to compare EBITDA and adjusted EBITDA when comparing the current quarter's results with prior quarters. As outlined in today's press release, EBITDA for the quarter was $9.5 million. Excluding equity-based compensation expense of approximately $2.1 million, adjusted EBITDA was $11.6 million, or 10% of revenue. Adjusted EBITDA was $7.1 million or 6.8% of revenue last quarter, and $8.7 million or 8.9% of revenue in the third quarter of 2009.

We ended the quarter with cash and cash equivalents of $30.3 million, which included using $5.1 million to acquire Sharpstream. This is down slightly from $30.5 million last quarter, and we generated $5.9 million in cashflow from operations. CapEx was approximately $1.4 million, down from about $1.5 million last quarter, and up from $1.1 million in the third quarter of 2009.

Net accounts receivable was $60.5 million at the end of third quarter, and day sales outstanding were 47 days, up from 46 days last quarter and in the third quarter of last year.

Now, turning to productivity, which we define as quarterly gross profits generated per staffing consultant, for the third quarter we averaged 678 staffing consultants, and the gross profit per staffing consultant was $61,000, up from $58,000 in the third quarter of 2009 and $57,000 in the second quarter. The life sciences segment generated $83,000 in gross profit per staffing consultant, up from $79,000 last quarter. The health care segment generated $61,000 in gross profit per staffing consultant for the quarter, up from $51,000 last quarter. The physician segment generated $71,000 in gross profit per staffing consultant for the quarter, down from $77,000 last quarter. And the IT engineering segment generated $50,000 in gross profit per staffing consultant for the quarter, compared with $47,000 last quarter.

Looking at the fourth-quarter revenue expectations, it continues to be difficult to estimate what will happen to revenues because of the worldwide economy. So given that backdrop, based on labor markets not getting any worse than they are today, and normal seasonal trends, we currently estimate consolidated revenues of $114 million to $118 million for the quarter ending December 31, 2010. This estimate includes $700,000 in nurse travel related to labor disruption at one of our customers. We are establishing consolidated gross margins of approximately 34.5%, SG&A of approximately $34 million, equity-based compensation expenses of approximately $2 million, approximately $500,000 in amortization of intangible assets and depreciation of approximately $1.5 million.

We estimate net income of $2.1 million to $2.9 million, earnings per share of $0.06 to $0.08, and an effective tax rate of about 46%. Adjusted EBITDA is estimated to range from $9.5 million to $11 million.

This estimate does not include any expenses related to our new credit facility or any change in interest expense that would occur if we closed our new loan agreement, which we anticipate will have, as Peter mentioned, a 350 basis point lower rate of interest, and will require us to write off deferred financing fees of about $2.4 million.

I'll now turn it back to Peter for some closing comments before we open up the lines for questions.

Thank you, Jim. We believe that we are well positioned to take advantage of what we believe will be a historic secular and cyclical growth opportunity for the staffing industry over the next three to five years. While the entire On Assignment team is very proud of our performance in this difficult economic environment, we remain focused on regaining our peak levels of profitability. 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?

(Operator Instructions.) Your first question comes from the line of Tobey Sommer with SunTrust.

Hi. This is Frank, in for Tobey. I wanted to ask about the life science segment. Can you give us some color in terms of what you're hearing from clients, and has that environment changed in terms of the customers and strength of your customers?

Good afternoon, Frank. That group has a pretty broad customer base, so in our investor presentation on a quarterly basis, we show you the distribution of revenue generated by industry. Pharmaceutical makes up about 18%. Biotech makes up about 18%. Food and beverage makes up about 10%. Personal care, about 6%. Material sciences is about 6%. And it goes down from there. I would tell you, big pharma's still challenging. We're seeing better activity from biotech and medical device companies, and then our true kind of cyclical commercial customers, whether it's Pepsi-Cola, Frito-Lay, Avon, L'Oreal, PPG, Alcoa. We're starting to see nice trends in those kind of old-economy customers.

Okay, great. And you mentioned strong growth in health care IT. Could you give us any idea in terms of either the size or the margins of that business, and its effect on the entire segment?

Well, the growth is just astronomical because it's 100% organic. The margins are very, very competitive with our core business; otherwise, you would have seen dramatic compression in Oxford's margins, which you did not. And Mike, why don't you add a little bit to that?

I agree. The margins are about the same with the rest of the core business. And even our bill rates are actually a little more than the average of $108. They're more in the $120 to $130 range on average, so it's actually an uptick as compared to the rest of our business.

It's probably on a 10% of IT division revenue run rate right now. And we think it will be more than that in '11.

Yes.

All right. Great. Thank you very much. That was helpful.

(Operator Instructions.) Your next question comes from the line of Jeff Silber with BMO Capital Markets.

Thanks so much. You gave us a lot of information on the call. We really appreciate it. If you had to pinpoint it, though, what was the specific reason or where would you focus on in terms of the upside versus your guidance this past quarter?

We just had, Jeff, really strong growth in IT and life sciences. And I think as we've said previously, we thought our IT business performed a little worse than it would ordinarily perform in a recession because of the capital crunch. Because a lot of the work that we do, as you know, is not break, fix or maintenance. It's implementation of new systems, and it's more capital expenditure driven. And because people were hoarding cash in 2009, serious projects that had strong return on investment analysis got stalled, and they're no longer stalled. People still worry about topline revenue growth at our customer base, but if something has a good return on investment, they're releasing the project and executing it pretty forcefully. And then on the life sciences side, I think as we've visited with you over the years, we've told you that's probably the one that is most directly correlated to GDP growth. And we saw a pretty good increase in demand from our more commercial customers, and we have a leading market position in that scientific staffing space. The disappointment was health care. We showed pretty dramatic growth in our profits, and we I think kept up with the industry on a consolidated topline, but that was held back by double-digit declines in health care, which we believe is a macroeconomic issue or an industry issue, and it's not internal execution of performance or positioning. And we think that that's going to be dissipating over time, and that's going to provide us enormous growth on top of what we're already doing.

Great. That's helpful. I appreciate it. You had mentioned in terms of your long-term goals supplementing the acquisitions. Where are the holes, I guess I'll call them, in your portfolio? What would you be looking for?

I think we'll continue to look in the life sciences area and continuing to add to the practices that have higher bill rates than just scientific staffing. We're very, very focused on health information management, so kind of certified coders, billers, medical transcription specialists. We're very, very focused on the health IT, which is electronic medical records, McKesson, Cerner, Epic, MediTech software implementation. We think we can do everything we need to do on the nursing side organically, so I don't think there's a need to dilute ourselves or increase that leverage to just acquire revenues on the nursing side. I think we can do that organically. And then on the physician side, we have been aggressively looking to see if there's some well-positioned private companies that may have a deeper geographic or subspecialty penetration than we have in certain areas of the United States. So physician, health care IT, clinical, high-end life sciences, health information management.

Great. And Jim, just a couple quick numbers questions. Within your guidance, what share count should we be looking for?

That would be about 37.2 million.

Okay, great. And you had mentioned the potential write-up of deferred financing costs. What was that number, and when will that be occurring?

Well, assuming that the transaction goes through, that's when it would occur, and it's about $2.4 million. So if and when, I would say when, we sign the revised bank agreement and refinance the existing agreement, that $2.4 million would be written off.

Is that something that you're hoping to do this quarter?

Yes. We hope to get that done the first couple of weeks of November, Jeff. And on that point, taking our current outstanding debt balance, which is about $77.9 million, and applying a 350 basis point savings, that's about $2.7 million in interest savings a year.

Okay. That's very helpful. Appreciate it. Thanks so much.

(Operator Instructions.) At this time, there are no questions in queue.

Thank you. We appreciate your continued interest and attention towards our company and look forward to reporting our fourth-quarter earnings in the near future. Thank you.

Thank you. This concludes today's conference call. You may disconnect.