ASGN
#<UNK>, do you want to ---+
Yes, Tim actually, not true.
If you look at our earnings discussions the last couple of quarters, we have not highlighted government as a fast growing.
I think we've performed better than the market in the government side but it's been coming down for a number of quarters now and not double-digit growth.
So I think that's what we reflected in our earnings call.
I think if you go back and look at budgets in the government sector, same sectors, defense and homeland security, you can see a pretty tight correlation.
Well Tim, I have watched Northrup Jones dynamics and Lockheed Martin earnings calls and while their revenue numbers were not good in Q1, they were optimistic.
I hope they are right and I trust they will be because those would be examples of opportunities for us.
But it has to flow from the government to them and then them to their vendors that support them.
So I think there's a feeling of optimism out there in the government defense sector but it has to unfold.
I think that is an important point that <UNK> made is, Tim, most of our business in the government services is through a government contractor versus direct to the government.
<UNK>, you and <UNK> might want to address that in terms of how we allocate our resources among areas where we see opportunities which I know that we are doing but you can probably provide better color on it than we can.
Let me start.
This is <UNK>.
On the Apex side, Tim, for sure.
And I think it has happened long before this discussion right now.
We have certain areas that are not growing as fast and we have shifted resources toward midmarket accounts or technology accounts or other possible accounts.
So some of that has been going on.
There are other accounts, among our top accounts particularly, where there is still flow.
You have to be there.
When you're supporting these accounts, you have to support whatever flow of recs they do show.
It may be negative, because in many of these accounts we're the number one or number two vendor.
So you still have to support them.
It's just negative growth when you look at it year-over-year.
When you look at our comps from a year ago, it varies.
But yes, we are shifting resources within these sectors.
At the same token, there are still some of these areas, when we look forward, we think are good growth opportunities.
So we're going to still put our best foot forward.
<UNK>.
Tim, on the Oxford side we do the same thing.
We're constantly deploying the resources where we need them.
What is the fastest growing.
We train people differently on different skill sets and all that kind of thing.
Obviously, we're organized more on discipline versus industry.
But as the same time, as <UNK> mentioned, we've changed our strategy a little bit.
We're going after some larger accounts.
So we have moved some of our resources specifically, some of those sales resources, into those functions.
But overall, it's an ongoing basis and we always do it.
It's really across all of our disciplines.
It is across the healthcare technology area as well as some of the ERP stuff and some of the other disciplines we do.
So instead of a onesie twosie we may be able to sign three or four consultants to a specific project.
But Tim, to make sure that we ring fence this, excluding the healthcare IT business which you know does carry a lower margin, the IT staffing business that Oxford is doing is still well above a 32.5% gross margin.
So it's not like things are being heavily discounted.
It's just things may be moving ---+ I think the peak at Oxford in 2007 may have been a 35% gross margin.
I don't know if we're getting what the gross margin is for Oxford International but it is still well above 30%.
Absolutely.
We are.
And we're seeing lines blurred in certain areas and I'd rather wait a little bit to talk about that with you.
Our job is to constantly look for emerging technologies or changing and changes in customers buying behavior and who is controlling spend.
And so, as you know, we spend a lot of time thinking about it strategically and a lot of our marketing dollars are spent on understanding the marketplace versus just brochures.
And we have some thoughts about that that we hope to share at some point with you.
<UNK>, could I add to that for a minute, <UNK>.
An example of that, <UNK>, is we talk about serving 13 major skill areas within IT but in the last year and certainly in the last half of the last year, we have expanded to 14 and 15 skill areas, mobility and cybersecurity which we have invested in as part of this buildup.
So <UNK>, I think that supports what you are saying.
Well, you hit the nail on the head, <UNK>.
It's still very profitable EBITDA margin but it's not nearly, the incremental EBITDA margin is not nearly as high because we are investing aggressively in internal headcount.
If we had not done that, we could have had an enormous incremental EBITDA margin.
It probably would not have shown up in the revenues in the quarter or so but we would have felt it later on.
We're in a cycle.
We want to support the growth and get as much as we can.
And so, we're not going to be overly piggish and as you know, our EBITDA margin on perm is north of 22%.
I'd rather grow that overall revenue than scrape another 10 percentage points on incremental EBITDA margins by holding the SG&A constant.
If my memory serves me correct, Apex's gross margin was 16.5 ---+ excuse me, Apex's growth rate was 16.5% year over year in the first quarter of 2014, 13.8% in the second quarter of 2014, 10.1% in the third quarter of 2014 and 9.5% in the fourth quarter.
So the growth rates came down in the third and fourth quarters.
It should get a little bit easier on a comparison basis in the latter half of the year just because of the growth rates coming down and hopefully, because these new hires start to become productive.
Just to make sure that we are clear.
<UNK> was referring to the Apex piece of the Apex segment.
That's right.
Apex IT, not Lab.
<UNK>, I want to be clear.
We're not blaming the market and we're not saying that others aren't growing faster.
We just think that the particular construct or mix of our customers within these industry verticals has restrained the normal growth rate.
With that said, we tend to take a longer-term perspective and we're not going to ruin the natural purchasing rhythm with our customers by overreacting and starting to work on stuff that we just don't think is high-quality business on a longer-term basis.
Maybe people are going to criticize us for this but we clearly could have grown faster it at Apex we wanted to start dropping the gross margin and bidding on work that is not as sticky or meaningful and we have elected not to do that.
We don't think that there has been a wholesale shift in the end markets that are causing our revenue to slow.
Quite the contrary because when we do our customer satisfaction and we look at our ranking within these major customers, we're not dropping.
We're staying the same, and/or we have come up a little bit.
So it's not like we have gone from third to tenth and someone else has gone from tenth to third at our expense.
This is mostly a complete across the board decline in spending.
And one staffing firm may have a bigger pigeonhole in a bank than we do or vice versa.
We're not being hardheaded.
Trust me, there's plenty of focused passion and focused on where we can expand in a sustainable thoughtful fashion and the market still remains relatively productive.
All we are saying is it is much more productive in certain verticals than others and our construct of mix leans today more heavily in the unproductive industry verticals than the productive industry verticals.
And it's served us well in the past and it is hurting us now and it will serve us well again in the future.
I don't know <UNK> if we gave you the Lab Support business growth rate.
<UNK> can give it to you.
<UNK>, for the Apex segment, it was 5.7% in total and Lab was 5.2%.
Yes.
They had a pretty good 2014 and we always say they are the most directly correlated.
To GDP growth.
And we just got some GDP growth numbers that were pretty anemic but we feel the prospects there are good both because of the market and what the customers that Apex can share with it.
And the focus on being easier to do business with it on a large account scale basis.
Yes.
I think that's what the prepared remarks is.
Including the contract.
Yes, $22.5 million.
We appreciate your time and we look forward to visiting with you again in the near future.
