on assignment investor relations

ASGN Incorporated (NYSE: ASGN) is a leading provider of IT services and solutions, including technology and creative digital marketing, across the commercial and government sectors.

We help corporate enterprises and federal government organizations develop, implement, and operate critical IT and business solutions through our integrated offering of professional staffing and IT solutions.

Digital Transformation Expertise

By supplying critical STEM skill sets, our companies are uniquely positioned to be the total talent solution for digital transformation. Due to our companies' achievements, we are viewed as best in class across multiple industries and have built an outstanding reputation of excellence over the past 37 years.

We serve our commercial and federal government clients by effectively understanding their IT services and professional staffing needs and providing them qualified professionals with the unique combination of skills, experience, and expertise to meet those needs.

Our technology services provide a broad spectrum of staffing and consulting solutions in information technology, engineering, health information, telecommunications, and related technical disciplines, including training services.

Our History

ASGN Incorporated was founded in 1985 and began operation of our first contract staffing line of business, which is now part of our Apex segment. Since our IPO in 1992, the company has grown steadily, with multiple offices throughout North America.

We have achieved expansion through acquisitions and internal growth. Today, ASGN Incorporated (NYSE: ASGN) is a leading provider of IT services and solutions, including technology and creative digital marketing, across the commercial and government sectors .

Operating first-rate companies through our commercial and federal government segments, we provide highly skilled human capital to improve productivity and utilization among corporate enterprises and government organizations, primarily in North America.

On Assignment Inc (ASGN) Q3 2018 Earnings Conference Call Transcript

October 24, 2018 — 09:32 am EDT

Written by The Motley Fool  ->

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On Assignment Inc (NYSE: ASGN)

Q3 2018 Earnings Conference Call

Oct. 24, 2018 , 5:00 p.m. ET

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Ladies and gentlemen, would like to thank you for standing by. And welcome to the Third Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session with instructions being given at that time. (Operator Instructions) And as a reminder, today's call will be recorded.

I would now like to turn the conference over to our hostess and facilitator, Laura Bainbridge of ADDO Investor Relations. Please go ahead ma'am.

Laura Bainbridge -- Managing Director

Thank you. Good afternoon and thank you for joining us today. With me today are Peter Dameris, Chief Executive Officer; Ted Hanson, President; Rand Blazer, President of Apex Systems; George Wilson, President of ECS; and Ed Pierce; Chief Financial Officer.

Before we get started, I would like to remind everyone that our presentation contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and our actual results could differ materially from those statements. Certain 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 and supplemental materials can be found in the Investor Relations section of our website. Please note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income and free cash flow. 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.

I will now turn the call over to Peter Dameris. Peter?

Peter Dameris -- Chief Executive Officer

Thank you, Laura. Welcome to the ASGN 2018 third quarter earnings conference call During our call today, I will comment on the markets we serve and our financial highlights. Ted, Rand and George will then discuss the performance of our operating segments in greater detail before turning the call over to Ed for a detailed review of our third quarter results and our estimates for the fourth quarter of 2018.

Now on to the third quarter results. Across all of our guided metrics, our results for the third quarter were above our previously announced estimates. Revenues for the quarter were $906.4 million, up 35.9% year-over-year on a reported basis or 10.5% on a pro forma basis. Our growth rate for the third quarter was up over the second quarter and reflected, among other things, the deepening of many large customer relationships established over the last five years, a healthy US economy and Federal marketplace and the continuing increase in the rate of adoption of our delivery model.

Our size and service offerings allowed us to grow faster than published IT services industry growth rates and we believe that we are well positioned to generate solid above-market revenue growth in the future. During the quarter, we saw strong double-digit revenue growth at Apex Systems and Creative Circle and a return to year-over-year growth at Oxford Core and our Oxford Segment. Our Federal IT services and solutions business, ECS, grew revenues at roughly twice the projected annual growth rate of its peer group for 2018. ECS has grown above its peer group's organic growth rate in the last two quarters since it was acquired by ASGN. Customer demand was strong across our federal, local and mid-market, and large national accounts.

Adjusted EBITDA was up 35.3% year-over-year to $112.9 million and cash generation continues to be at or above our expectations. Free cash flow was $84.6 million and our leverage ratio was 2.89 times trailing 12-month adjusted EBITDA at quarter-end. Year-to-date we have paid down $231 million in debt and expect to pay down at least an additional $60 million before the end of the year, resulting in a leverage ratio at year end of approximately 2.7 times.

With respect to recent production at our Apex and Oxford Segments, our weekly assignment revenues, which excludes conversion, billable expenses and direct placement revenues averaged $56.3 million for the last two weeks, up 13.8% over the same period in 2017. As for ECS, we estimate revenues will range between $160 million and $165 million for the fourth quarter.

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. We believe that we are well positioned to continue to service our customer's IT needs as technology rapidly evolves and is adopted. We also 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 truly the only way to avoid the risk of misclassification of employees as independent contractors. Our customers have and are realizing this, creating attractive secular growth opportunities for the entire industry.

Our Federal IT services and solutions business continues to see new long-term contract awards, robust spending against existing contracts, and the forward positive benefits of increased funding and visibility of defense, intelligence, and federal civilian agency budgets, particularly in the areas of artificial intelligence and machine learning. During the quarter, ECS secured $306.4 million in new awards. George will speak in more detail regarding these recent awards.

I would like to now turn over the call to Ted Hanson, who will review the operations of the segments. Ted?

Theodore Hanson -- President

Thanks, Peter. For the third quarter, all three segments contributed to ASGN's growth. The Apex Segment, which Rand will review, grew 14% year-over-year, which is an increase from the growth rate in Q2 of 2018, and the Oxford Segment grew 2.1% for the third quarter. The Apex and Oxford end markets we serve in IT, Digital/Creative Marketing, Life Sciences and Engineering all remained stable and productive throughout the quarter. Secular changes remain in our favor in regards to how our customers approach solutions to supporting their business and getting projects completed. While our staffing services continue to grow, and we are taking share, our value added service offerings, or consultative work, are growing at a much faster pace.

Now on to the Oxford Segment results. The Oxford Segment is comprised of Oxford Core, CyberCoders, our permanent placement business, and Life Sciences Europe. For the third quarter of 2018, Oxford Segment revenues were $152.8 million, up 2.1% year-over-year. Adjusted for constant currency and same number of billable days, the third quarter revenues grew 3.7% year-over-year. Oxford Core revenues, which account for approximately 75.1% of the segment revenues, were up approximately 2.5% year-over-year, or 3.6% on an adjusted for billable day basis, in line with our expectations. CyberCoders, our permanent placement service offering, which accounts for 96.2% of the segment's permanent placement revenues, had 3.9% growth year-over-year, or 5.6% on an adjusted for billable day basis meeting our initial expectations. Gross margin for the segment was 41.1% performing in-line with expectations, but down 70 basis points year-over-year due in large part to business mix within the segment.

As we typically do, let me give some color on the progress in Oxford Core. We have seen moderate year-over-year revenue growth year-to-date through Q3. Growth was driven by momentum in our domestic IT and Engineering disciplines and strong performance in our European business. It is a longer road to fully institutionalize our sales strategies and build upon the productivity we have created over the last few quarters. However, our results provide us the confidence that our actions have and will lead to better growth and bottom line results in the future.

I will now turn the call over to Rand Blazer. Rand?

Randolph Blazer -- President, Apex Systems

Great, thank you, Ted. The Apex Segment, which consists of Apex Systems, Apex Life Sciences and Creative Circle business units, again reported solid results for the quarter. Revenues for the segment in the third quarter were $589.6 million, up 14% year-over-year. Apex Systems, which accounts for 75.5% of the segment's revenues in the quarter, continues to lead the way with 15.1% year-over-year revenue growth. Our Creative Circle unit again posted double-digit year-over-year growth at 11.3%, and our Life Sciences' unit was up 8.9%.

Gross Margin for the segment was slightly up compared to the previous quarters again reflecting stable pricing in our end markets. Our segment's EBITDA also grew double digits in the quarter and once again outpaced top line growth. Our EBITDA performance and conversion of gross profit to EBITDA was driven by revenue growth and continued strong productivity of our sales, delivery and infrastructure teams. As we usually do on these calls, we give you insights with respect to factors driving Apex Systems performance. Apex Systems' revenue growth again was driven by broad based growth across accounts in all of our industries.

Double-digit revenue growth in four of the seven industry verticals we service including Financial Services, Healthcare, Consumer Industrial, and Technology industry accounts. Of the remaining three industry verticals, Aerospace & Defense and Business Services accounts grew high single digits, while Telecommunications accounts exhibited lower single digit growth year-over-year. Growth was achieved in both our top accounts and retail or branch centric accounts with top accounts again growing double-digits and outpacing our overall revenue growth rates. Retail accounts also experienced high single-digit growth rates. Growth in SOW, our consulting type work remained strong in the quarter and continues to outpace our expectations and our overall revenue growth rate. Finally, as mentioned, field and back office teams exhibited exceptional productivity during the quarter while supporting Apex Systems' EBITDA performance.

Creative Circle grew revenue double-digits in the quarter as I mentioned and continues to exceed our expectations for overall profitability. Generally, the digital marketing end markets remains favorable and we continue to see growth in corporate business as our accounts are shifting more work internally and to us versus using Ad agencies for support. Our Life Sciences business revenue growth was also up, again driven by strength in our top accounts and in our clinical skill areas. Overall, the Apex Segment had yet another solid quarter and continues to significantly outpace the published growth rate of the overall staffing industry.

Now, I'll now turn the call over to George Wilson. George?

George Wilson -- President, ECS

Thanks, Rand. ECS had very good performance in the third quarter, both from a revenue and profitability standpoint. ECS reported revenues of $164 million, an increase of 7.1% year-over-year and 5.7% sequentially. This growth was ahead of the industry average for peer companies operating in the federal IT services space. We have seen continued strong demand for services and solutions in areas of cybersecurity, cloud and artificial intelligence, key business areas for ECS. We have also seen increased funding and customer interest in IT modernization, where ECS is well positioned to support our clients with deep customer knowledge, the required IT skills, and the relevant contract vehicles.

In the third quarter, we received a total of $306.4 million in contract awards across a variety of customers and we continue to see a high level of proposal activity into our fourth quarter. Included in our awards this quarter were new task orders in AI and machine learning work for Defense and Intelligence customers and a new award to support the Army's Integrated Pay and Personnel System, referred to as IPPS-A. With a Q3 book-to-bill ratio of 1.7 to 1, ECS's end of third quarter contract backlog of $1.5 billion equates to a healthy coverage ratio of 2.5 times our trailing 12-month revenue.

In the third quarter, ECS continued to strengthen its technical skills and business partnerships with commercial providers in cloud, cyber, risk management and artificial intelligence. During the third quarter, we were awarded a contract with US Transportation Command, referred to as TRANSCOM, to manage commercial cloud services. More recently we were awarded a contract with the United States Marine Corp to plan and support cloud migrations.

In addition to our premier status with AWS and Microsoft, we were recently designated as a Premier Partner for Google's Cloud Platform. We were also awarded the Machine Learning Competency Status from Amazon Web Services and continues to deliver critical AI solutions to customers in Defense and Intelligence communities. From a profitability standpoint, ECS's adjusted EBITDA grew faster than our revenues in the quarter. We largely attribute the growth in adjusted EBITDA to higher top line revenues, which allow us to leverage our fixed indirect costs over a wider contract base.

I will now turn the call over to Ed Pierce to discuss ASGN's overall financial results. Ed?

Edward Pierce -- Chief Financial Officer

Thanks, George. As Peter mentioned, revenues for the quarter were up 10.5% year-over-year on a pro forma basis and exceeded our previously announced estimates. Our pro forma growth rate was approximately 40 basis points higher than last quarter's growth rate of 10.1%. On a Constant Currency and same Billable Day basis, our pro forma growth rate was approximately 10.9%. Gross margin for the quarter was 29.8%, which was in line with our previously announced estimates.

SG&A for the quarter totaled $177.3 million and were lower than our previously announced estimates. Despite sequential growth in revenue and gross profit, SG&A expenses excluding acquisition and integration-related expenses were flat from the second quarter as a result of favorable variances in compensation and healthcare expenses. Interest expense for the quarter was $14.6 million, down $6 million from the second quarter. The sequential decrease was mainly attributable to one-time expenses of $5.8 million in the second quarter related to the amendment of our credit facility on April 2nd. Interest expense on our credit facility was also down sequentially as a result of principal repayments of $221 million over the last two quarters, partially offset by increases in LIBOR. Our effective tax rate for the quarter was 17.5% or 9 percentage points lower than our previously announced estimate of 26.5%. The lower rate was the result of, one, changes, based on recently issued IRS guidelines, to our provisional estimates for the transitional tax on deemed foreign dividends and the tax treatment of executive compensation. Two, excess tax benefits from stock based compensation of approximately $1.1 million, which we do not include in our guidance estimates. Three, higher employment tax credits. And four, a one-time cash and earnings benefit of approximately $1.8 million related to the acceleration of tax deductions for deferred loan costs into 2017.

On a prospective basis we expect our effective tax rate will range between 26% and 27% for any excess tax benefits from stock based compensation. Net Income for the quarter was $49.2 million, up from $34.9 million in the third quarter of last year, adjusted net Income was $68.7 million, up from $44.1 million in the third quarter of 2017. Adjusted EBITDA for the quarter was $112.9 million, up 12.7% from $100.2 million in the third quarter of last year on a pro forma basis. Cash flows from operating activities were $92.1 million and free cash flow was $84.6 million or 9.3% of revenues. Cash flows benefited from a lower cash tax rate for the quarter, related to the items previously mentioned, as well as the benefit of various tax attributes related to the ECS acquisition. During the quarter, we repaid $88 million of our long-term debt.

For the fourth quarter of 2018 revenues are estimated to range from $905 million to $915 million, which implies growth of 8.8% to 10% on a pro forma basis. Billable days as defined in today's release are estimated to be 60.2 days, up 0.2 days year-over-year and down 2.2 days sequentially. Revenues per billable day for the fourth quarter are estimated to be 3.5% to 4.6% higher than the preceding quarter.

Net income is expected to range from $40.9 million to $44.6 million, adjusted net income to range from $59.2 million to $62.9 million and adjusted EBITDA to range from $107 million to $112 million. Our adjusted net income estimates do not include the cash tax savings related to the amortization deduction for goodwill and trademarks, with savings are approximately $6.8 million quarterly.

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

Thank you, Ed. As our quarterly results continue to prove out, our scale, size and breadth of services has us well positioned to benefit during a period of historic secular growth for the services industry. Without a doubt,the world of work is changing. Accelerating digital transformation, coupled with favorable labor and immigration legislation and an improving US government market are all market forces occurring in our space. We are optimistic that ASGN is well situated to continue experiencing strong results into the foreseeable future. The entire ASGN team is pleased with our third quarter performance. We look forward to carrying this momentum into the last quarter of 2018.

Our focus remains on growing the business profitably along with maintaining our healthy rate of growth. We would like to once again acknowledge and congratulate our many loyal dedicated and talented employees whose efforts have enabled ASGN to progress to where we are today. Thank you for your time.

I would like to now open the call up to participants for questions. Operator?

Questions and Answers:

(Operator Instructions) Our first question comes from the line of Kevin McVeigh with Credit Suisse. Please go ahead.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Thank you, and Peter and team congrats on the results. You just continue to really put a tremendous numbers. Hey, Peter, just any thoughts, number one on, what drove the upside to the estimates which was obviously came in above the high end of the range, just let's start with that and then just what conversions were in the quarter if you could?

Okay. Well, I'll start and then I'll turn it over to Ted and Rand. First, just on a high level basis, our growth in revenue was driven by increase in hours billed and increase in number of billable consultants. And the least, the smallest contributor was increase in bill rate. Our bill rate, I think in our largest segment Apex, only grew like 1.6%. The real growth was in the number of billable consultants in the hours that they billed. As it relates to specific demands and things that we saw. Rand and Ted -- Rand why don't you go first and Ted follow up with your segment. Rand are you on mute ?

Yes, I'm sorry. So I guess as you said, Peter, I think the growth is coming across the Board in every industry in every accounts. Kevin, you'll recall, we've -- an investment in our segment is really an investment in a client base in a portfolio of clients that themselves are healthy and are spending money on technology. So if you look at our skills that we're providing, it's across the Board, both the application, the high-end, the growth skills as well as the infrastructure. If you look by industry, you can see pretty much growth across the Board, telecommunications the only ones, a little slower than the others. But it's just our consulting business are growing. Everything I just said, it's kind of across the Board and I think it's a lot of bread and butter work that the clients are doing to themselves continue to achieve efficiency and cost effectiveness in their internal operations.

Ted, do you want to add something?

Yeah, I would just add and maybe that by division if you looked at it, Apex Systems and Apex Life Sciences and ECS all came in above where they were, so in that way it was pretty broad based and the rest of our units came in basically in line with where we expected.

Got it. And then, Peter, this is more just the thrust obviously with the stocks didn't related (ph) to the market. I mean, it seems pretty clear there is no recessionary clouds on the horizon. But can you just kind of take us through the process like what client conversations you're like here versus heading into the last cycle? This way, we can frame a more realistic case for investors.

Yeah, I mean, all I can do is give you an insight into how we view our business. Our businesses haven't -- has never had a larger backlog or visibility than it does today because of the ECS and also the SOW work that we're doing at Apex. On top of, as you know, Apex's business, it tends to be more mission-critical than it is CapEx driven. The second thing is, our business really with greater adoption, really can exist and perform satisfactory in any environment except job destruction. Because more and more work is being performed with contract labor, outsource labor, offshore labor, project consulting labor versus internal labor. So as long as there's not job destruction, work has to be performed and our model can take market share from other models.

And finally, as you see from our results, our profit margin is very durable, because we have a very, very small contribution of profit derived from permanent placement, that's just not our model. I mean, we do, do permanent placement at the request of our customers and to stay close to our customers and not to invite competitors into our meaningful accounts. But if you look at our contribution from perm and conversion fees, it's less than 4%, it's about 4% of revenue. So we feel equally confident with regard to our ability to generate attractive margins, profit margins in the event of an economic slowdown.

So I don't -- everything is cyclical, GDP growth drives certain decisions, but so much of the money that's being spent with us is -- must have where customers are digitizing their business and automating their businesses, and it's not replenishing inventories. And then, George, why don't you give him a little bit of an insight into the government space in your backlog and spending today versus two, three years ago, because of budgets, et cetera.

Yeah, sure. Peter. What we've said in the call, so what we're really seeing is a lot more money throwing into the AI/ML projects that we're doing and also our cloud services, also IT modernization, all tying back to our customers feeling. A) more comfortable with the technologies and B) more comfortable with the budgets and such. So -- and all the IT modernizations include cloud and cyber components, and as I mentioned, our AI/ML which is really targeted at this point in time in defense areas, but we look forward to providing AI/ML solutions in things like document management, document review and business analytics down in the future. And again it all ties back, like Peter said, they're feeling a lot -- our customers are feeling much more comfortable with the current budget environment.

Very helpful. Congrats again. Thank you.

All right. Now we'll go to the line of Gary Bisbee with Bank of America Merrill Lynch. Please go ahead.

Gary Bisbee -- Bank of America Merrill Lynch -- Analyst

Hey, guys. My congrats as well on the quarter. I guess a couple of questions. The consulting or SOW work at Apex, you talked a lot about at the Investor Day. I guess the question for me is, is this getting you deeper into customers, is that really the driving force behind doing it, you've got a relationship and this allows you to get more share, if you will, or is it just there is a shift in each what they want from you in that, that's more what you're seeing in complexity?

So, I'll let Rand address that, but it's really not something that we've come up with that we're selling into the customer, truly the customer who's driving us in a collaborative fashion to work with them. Rand?

You said it right, Peter. It's just, Gary, it's about serving the account, serving the client. And what they found is our efficiency in the relationship we already had with them and with high performance support they've said hey how about this, how about that, can you help us here? And we've stepped into that and served and provided that support, and it just builds on itself. Does it in fact end up strengthening the relationship after the fact? Of course, it does. But we had to have it first and just as Peter said, it's just about focusing on providing real value to the client.

And should we think that there is any real meaningful difference in economics of those relative to the -- how your Apex businesses performed or is it, are you able to do that at a level that's not much better, not much worse?

Yeah. The economics of the consulting work are a little stronger than the traditional staffing work. But I'll emphasize again, Gary, if it's hand and foot, they go together, you have to be excellent in both sides of that and strengthen the relationship. But you can get a little better -- look, you're taking on more value creation for the client, and you're taking on some risk although it's manageable risk given the way we've set this up. So by virtue of that, you're going to get better economics as long as you can execute correctly.

I would just add, Gary, that the sales cycles are little bit longer and the length of the assignments tend to be -- the projects tend to be a little bit longer.

Okay, that's helpful. Thanks. And then maybe one for Ed. I think all of your debt at this point is floating rate given that you've taken debt up and down, but maintained the balance for a while. Is there any desire given the way rates are trending to lock any of that in or are you comfortable with the balance sheet the way you do? Thank you.

Well, we're considering a lot of things.

What I would share with you Ed, because we're in the midst of considering and right now is that the CLO market is relatively attractive where there might be an opportunity to reprice our debt downward again. And so we don't look to fix the rate at this point, mostly because we're deleveraging so quickly. Our absolute cost -- dollars out the door to service, our interest expense is down year-over-year because we're paying down debt so rapidly. So I don't think you'll see us fix in that rate, Gary, and I don't think it's going to create a lot of volatility to the P&L.

Yeah, no, I guess, I was more thinking you might want to buyback some stock given what's happened lately and if that led to keep not paying debt down so quickly at some point that maybe it might make sense, but, fair enough that's a good answer. I appreciate it guys. Thank you.

Right now we'll go to the line of Jeff Silber with BMO Capital Market. Go ahead, your line is open.

Jeff Silber -- BMO Capital Market -- Analyst

Thank you so much. I noticed in your supplemental material, excuse me, when you talk about the number of staffing consultants, we got ramp-up in the number staffing consultants hired at Apex. I know you typically do that in 3Q, but I'm just curious, was there anything driving that specifically and what are your internal hiring plans going forward?

Thanks. You know up a little bit in third quarter, but in response to business opportunity. I think going forward, we won't be hiring ahead or behind, we'll be matching it up with the opportunity in the market. You typically see us add to headcount, but not at the -- as faster rate as we grow the business and that's really what we're shooting for over an long window of time.

And would that hold true in your other divisions as well?

That's how we treat the other divisions as well.

Okay, great. And then, Peter, when you answered the question about the upside, you did mention that billing rates, overly up, I think about 1% in Apex, if I remember correctly. Was there any specific reason? Was it a mix shift issue? Are you seeing pushbacks on increases? Any color would be great.

Well, I'll go first and I'll pass it on to Rand. Our business model was such that we have deep meaningful ongoing relationships with Fortune 400 companies, Jeff. And I can't tell you precisely how much we're going to do each year with them, but I know we're going to do a meaningful amount of work with them each year. So our pricing model is not as dynamic as someone who is putting one or two people in a retail account. And there are customer who has 50 internal employees where we're just taking advantage of the supply/demand imbalance. We're building a relationship that's durable, do tight labor market and otherwise. So I don't think you would ever expect the wage and -- the bill rate increase you see at other smaller retail IT services businesses translating to what we're seeing in our market. Rand, would you add or subtract to that please?

Yeah. Well, Peter, again you said most of it right on. Jeff, listen, I don't think given our client base and the nature of our contracts with the clients, we are not negotiating bill rates every day, we're usually setting bill rate today a year or two ahead into these master service agreements and then we're executing against those. We will get reliefs in bill rates if it's a tough skill set or a tough -- in a tough geography or if it's a consulting piece of work and we can mix together a different theme. But those are the times where we'll get some change in the bill rate composition. And our bill rates are increasing this past year a little close to 2%. Pay rates by the way not -- are a little below that number, which is allowing us to add to our margin. But, Jeff, it's not, don't think of this as a day to day auction, this is I think longer term, as Peter implied, contracts and relationships in bill rates. And so we have to find labor that fits to bill rates to the client and/or get relief, which we do on occasion.

Okay. Really appreciate you guys clarifying that. Thanks so much.

All right. Now we'll go to the line of Edward Caso from Wells Fargo. Please go ahead.

Edward Caso -- Wells Fargo -- Analyst

Hi, good evening. Could you talk a little bit about the noise out of Washington with the Trump administration squeezing tighter on professional visas particularly H-1Bs. If that has had any indirect impact on your business, are you hearing any concerns from your clients?

So, Ed, we're pretty well verged on this for a number of reasons. There was an enormous amount of abuse of the H-1B visa system with regard to whether people were truly advertising and offering a prevailing wage, who was the true employer of record. And the lottery system where true Indian body shops where outsourcers were overwhelming the visa lottery system. Whereas, an offshore may put in 39 visa lotteries and someone like a Google or an Apple or Facebook -- and this is all public data, might put in a 1,000 applications.

And if you look at the data, the visa applications that were awarded to the defined (ph) stock names, the big tech names, were paying these people on average a $110,000 a year. And the visas that were awarded to the body, the offshore body shops, the average was about $71,000. So the true talent was getting squeezed out just because of the lottery system and the gaming of the situation. So what the Trump administration really has done is tightened up on really requiring strict adherence to the rules about prevailing wage publication, amendments et cetera. And that has forced to greater attention and focus on domestic labor. We're fortunate in our business that added 23,000 people. I've gone by memory, but less than a 1,000 of them are really on H-1B visas. These are truly green carded or domestic labor people. So it makes our model a lot more credible and reliable that the people are going to be available to perform the work, there's not a threat of a visa not being timely awarded.

So it's actually helped our business. It hasn't hurt it. And it actually has helped the American tech worker. And so -- and so where there was a wage arbitrage, that's being eliminated by the adherence to prevailing wage. And the other thing that's also going to be changing how these visas are awarded is, the lower-end stuff is getting automated. So some of the lower-end stuff that was being done with cheap offshore labor is getting automated. And those visas just aren't going to be applied for.

A question on the government side, of the $306 million, how much is sort of new-new work and how much is sort of repeat -- recompete or extensions?

Yeah, it's new work, new task orders coming from our customers and then a competitive awards that we've gotten.

That is none of it that is just sort of ongoing work that you sustained?

And my last request is that, Ed Pierce repeats the tax reasons 4 times fast, so -- but thanks, congrats.

All right. Well, everybody enjoyed that.

And now we'll go to line of Tobey Sommer with SunTrust. Please go ahead.

Tobey Sommer -- SunTrust -- Analyst

Thank you. With respect to consultative services and SOW work, what do you feel like the differentiators are? If you are taking share. Why?

Well, the differentiator is that it's -- we are not envisioning or architecting the solution, but the customer is making a conscious decision that they're going to retain a little more of the responsibility of the project on the envisioning, the architecture and some of the project consulting and then giving some to us. And by having that blended project development Tobey, they can avoid the complete higher end project consulting. So to the extent that the projects customization or it's the carry-on, I mean, adjusted embedded software, they feel comfortable on doing that and they are using a more cost effective, control and visibility delivery model than just the old project consulting. So, vis-a-vis taking market share from a particular competitor, I don't think that's what we're really trying to focus on. We're just saying that our delivery model is shared resources or shared responsibility is taking market share from other deployment models.

Okay, thanks, Peter. How would you describe the competitive threat (technical difficulty) from new online platforms?

I'm sorry, you broke up a little bit. Could you repeat it?

Yeah. How would you describe the competitive threat or lack thereof from new online platforms?

Yeah. So it varies by company. But if you really look at some of the noise in the marketplace right now for things like Takl, TaskRabbit, Upworks. If you really dive into the revenue streams, we're not competitors at all. I mean, first of all, one of them just went public and they got $250 million of revenue and 83% of the revenue comes from North America and they call our core customers, somebody that paid $100 in fees to them over the past 12 months. And the vast majority of the business is non-IT. So it's -- those models I think are durable on a business-to-consumer basis. If you need someone to clean your gutters, walk your dog, give you a massage, maybe even do a static web page and you're not a Fortune 400 company that has to worry about labor department audits and HR and legal department reviewing what you're doing and you're not worried about cyber and personal security, you may use one of those kind of marketplaces.

But you see what our growth rate is, and it continues to grow. And so those really are on the IT space, the clinical research and especially in the government space, meaningful threat, and they've been around forever. Look, if you are able to go back in history and look at the job postings on Craigslist, Craigslist has been putting graphic designers and content writers on their postings forever. So this isn't -- these businesses have been around for some time and they're still relatively small vis-a-vis the total spend in IT. And so I don't see on a true commercial basis that they're a threat.

Now with that said, I think they have an application if you're working with day laborers and there's been a rock concert in Central Park and you need people to come pickup trash or breakdown the event facilities and you only need them for two or three days, but SunTrust is not finding somebody off of Upworks to go help them with the mobile banking app, we're just not seeing that.

Thank you, appreciate that. What's your strategy for internal investments in consultant headcount growth?

Well, I'm going to let Ted speak to that again, just I'll reiterate what he said, that's steady state. We have the privilege that we have never held back on our investments. So there's no deferred maintenance here. And you'd not once heard through this whole period from us that things are so strong, we're adding ahead of the curve and it's going to affect our profits, we're exactly the opposite. Ted, why don't you give him more granularity to where you see maybe bigger spend?

I think that's it, Peter, I mean, I don't think I have too much to add. It's a steady state, and we'll keep adding where there's better for a business opportunity, we'll keep working internally on different things that we think make us more productive or efficient from an automation and toolset standpoint, but it's steady as we go there.

Thanks. Last one is just a numbers question. What was the leverage ratio at the close of ECS? Thank you.

Yes, it was 3.7 on April 2, 2018.

Thank you very much.

All right. Now we'll go to the line of Tim McHugh from William Blair. Please go ahead.

Tim McHugh -- William Blair -- Analyst

Thanks. Most of my questions has been asked, but just on ECS that backlog number I know given the acquisition, there is some noise, but can you give us a sense of the backlog growth rate that you're seeing on a year-over-year basis?

So, George I want you to answer that more on a historic qualitative basis, but we have not published your historical quarterly backlog. So just kind of compare it form of what you've seen in prior cycles and historically, if you could.

Yeah, sure. And I have been with the company for almost seven years now and this is a very, very healthy pipeline that we have as well as the submitted waiting award. I'll say last quarter reported at 2.3 times our coverage ratio, so that's going a bit 2.3 or 2.4, so it is accelerating. We have moved now to 2.5 in terms of the backlog, OK?

All right. And now from the line of Mark Marcon from Robert W. Baird. Please go ahead.

Mark Marcon -- Robert W. Baird -- Analyst

Good afternoon. I was wondering if you could give us a little bit more color with regards to the guidance outside of ECS, specifically within Apex. Would you assume that Apex Systems will continue to lead the way in terms of the growth followed by creative and that maybe Life Sciences ends up being the slowest grower, but still solid?

One, Mark, I'd tell you, we gave you the two weeks revenues exiting the quarter. We exited the quarter with good momentum, fortunate for us our largest division grew the fastest and we kind of continue to expect that. Our next largest division outside of ECS grew 11.3% and the Apex Life Sciences grew but it's the smallest division. And it was -- it had I think 8.9% growth this year, but it's on a much smaller base of revenue. So I think what you'll takeaway from my kind of wondering comments is that momentum was good exiting the quarter.

Great. I got that. I was just thinking about Apex Systems, specifically. With regards to the statement of work business, can you talk a little bit about how much that has grown or what percentage of the revenue it is at this point?

Rand, give him some qualitative comments. We're not prepared to break that out on a specific revenue basis yet, but give him some qualitative comments if you would please.

Yeah, so Mark, first of all, it's growing faster than the numbers we posted for Apex Systems overall. So if Apex Systems in the quarter was 15.1%, consulting is growing faster than that, that's the first data point. Does that answer your question for do we --

I was wondering magnitude of --

The magnitude of consulting?

Well, it's certainly double-digit percent of our revenues. I think it's -- we haven't given that number. We spent the last ex number of years jumping into providing more value to the clients and it's becoming material and it's an important part of how we serve the client. So -- but it's definitely into the double-digit range now and as a percent of our revenues overall in Apex Systems. And by the way, Creative, Life Sciences and the Oxford team also have consulting revenues in their client in account base.

Great. And then with regards to the bill rate increases and the wage rate increases, what are you anticipating, particularly on the wage rates and how's that impacting recruiting trends in terms of kind of fill rates, and just when we think about the tightness of the labor market?

Well, I think we've watched our pay rates. Our pay rates are migrating up not as fast as the bill rates in general, but I would say it's obviously different market by different skill types. So there are some skills that are in higher demand, it may have less availability in certain regions around the country. But for the most part, the IT world I think we've talked about this before, has been in a very high employment status for years. And so while the overall economy is now had a 3.7% unemployment rate, IT is already been a very low unemployment rate.

So it's nothing new from what we've seen over the years. And I think, remember, people are rotating off the jobs constantly and we've built a certain brand awareness and loyalty with a candidate base, if you will, that knows that not just what the pay rate is but certain benefits and healthcare, medical insurance and pay time off and 401K opportunities. So -- as well as technical training and continued support and almost a concierge service to help them through some of their issues.

So it's a combination of things that I think keep that factory there, but we haven't -- look, knocking on wood, we haven't run into a situation where we found a big disconnect between what we need and what we can provide our clients.

Great. And then with regards to the SG&A this past quarter, it was actually a little bit lower than what we were looking for even though there were headcount additions. What was the key driver for that?

Mark, as we said in our prepared remarks, we had some favorable variances in certain expenses and we're also giving guidance obviously for Q4. And we expect it to be on a cash basis before acquisition related expenses, about 18% of revenues on a go-forward basis, at least in near term.

Great. Thank you.

(Operator Instructions) And there are no more questions at this time. Please go ahead.

All right. Well, thank you for your attention and we look forward to reporting our fourth quarter results. Everyone have a good evening. Thank you.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and using AT&T Teleconference. You may now disconnect.

Duration: 50 minutes

Call participants:

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On Assignment, Inc. Nasdaq

Us6821591087, it services & consulting.

• On Assignment, Inc. : On Assignment to Acquire Apex Systems

Transaction Creates the Second Largest IT Staffing Firm in the United States and Further Positions On Assignment in the Most Attractive and Fastest-Growing Segments of the Professional Staffing Industry Transaction is Expected to be Significantly Accretive to On Assignment EPS

On Assignment, Inc. (NASDAQ: ASGN) ("Company") today announced that it has signed a definitive agreement to acquire Apex Systems Inc., a leading information technology staffing and services firm. The transaction will create one of the largest professional staffing firms and the 2 nd largest IT staffing firm in the United States. The acquisition is expected to be significantly accretive to On Assignment's earnings per share, on both a GAAP and cash EPS basis, in 2012 and beyond. On a pro forma basis, 2011 revenue of the combined entity was $1.3 billion.

Privately-held Apex Systems is the 6 th largest and one of the fastest growing IT staffing firms in the United States. In 2011, Apex Systems had approximately $700 million in revenue and adjusted EBITDA of approximately $65 million. Apex Systems has achieved a compound annual revenue growth rate (CAGR) of 30.4% since 2000 and expects to achieve double-digit top-line growth in 2012.

"Apex Systems becoming part of On Assignment further positions us in the most attractive and fastest-growing segments of the staffing industry," said Peter T. Dameris, president and chief executive officer of On Assignment, Inc. "Apex Systems' IT staffing services are complementary to those offered by our existing technology division, Oxford Global Resources. Because the offerings do not compete, the acquisition will create value for our clients, shareholders and employees by expanding our presence in the IT staffing market. The transaction also achieves On Assignment's five-year strategic plan to reach $1 billion in annual revenue three years ahead of schedule.

"Apex Systems has an impressive track record of consistent revenue growth and strong margins. The company's numerous achievements and accolades are a direct result of its talented leadership team, dedicated employees and their ability to set aggressive goals and execute accordingly," Dameris added. "This transaction did not take place overnight. It is the result of years of discussions and analysis to ensure it came together in the right way, at the right time and was the right fit. As a result, integrating Apex Systems with On Assignment should be a seamless process and will permit our companies to remain focused on serving our clients and growing our business."

Acquisition Creates a More Diversified and Faster Growing Staffing Firm

The acquisition uniquely positions On Assignment to provide a broader spectrum of IT staffing offerings, from mission critical daily IT services to high-end specialty projects.

"We are thrilled to join forces with On Assignment. As one of the largest and most respected professional staffing firms in North America, On Assignment's success is a testament to its strategic vision, disciplined management, consistent growth and operating profitability," said Win Sheridan, co-founder and co-CEO of Apex Systems.

"We believe the transaction will open the door to new opportunities for our employees as they join a combined platform with greater public visibility, increased financial firepower and the ability to offer an even broader array of services for our clients. Furthermore, the absence of sales channel conflict enables us to continue to focus on aggressively driving top-line growth. We want to thank our employees whose hard work and dedication have allowed us to become one of the most recognized and trusted IT staffing firms in the market," said Jeff Veatch, co- founder and co-CEO of Apex Systems.

Apex Systems will continue to operate substantially as it has in the past. The company's three co-founders will continue to focus on Apex Systems' strategy and its high-performance culture as they have done for the last three years, and will also have representation on the On Assignment board of directors. Rand Blazer and Ted Hanson, Apex Systems' chief operating officer and chief financial officer, respectively, and the rest of the senior management team will remain in place and continue to oversee the day-to-day operations of the business.

"This transaction is expected to be immediately accretive to earnings per share (without any synergy savings) and generate strong cash flow," Dameris said. "We look forward to working closely with the talented team at Apex Systems to take advantage of the many growth opportunities this transaction will bring."

Transaction Details

Under the terms of the definitive agreement, On Assignment will acquire all of Apex Systems' equity and retire all of its debt, for a total of $600 million. The purchase price is comprised of $383 million in cash, and newly-issued stock valued at $217 million. The transaction is expected to be accretive on both a pro forma GAAP and cash EPS basis in 2012 and beyond, excluding transaction-related costs.

In connection with the execution of the definitive agreement, On Assignment obtained a commitment for a new $540 million senior secured credit facility from Wells Fargo Bank, N.A., Bank of America Merrill Lynch and Deutsche Bank Trust Company Americas. The credit facility provides for a $50 million revolving credit facility and $490 million term loan. The proceeds of the term loan will be used to finance the cash portion of the purchase price, to repay existing indebtedness of On Assignment and Apex Systems and to pay fees and expenses in connection with the transaction.

Upon closing of the transaction, funded debt of the combined company will total approximately 3.75x estimated pro forma adjusted EBITDA (as defined below) for the twelve months ended March 31, 2012. On Assignment will benefit from having the acquisition treated as an asset sale under section 338(h)(10) of the IRS code. The election is expected to result in an estimated $14 million of annual cash tax saving over the next 15 years. On Assignment expects its increased scale, along with strong revenue and free cash flow generation, to result in rapid deleveraging, creating further equity value. In connection with the acquisition, On Assignment intends to make grants of restricted stock units covering the Company's common stock to certain employees of Apex Systems as employment inducement awards pursuant to the NASDAQ rules.

The acquisition, which was approved by the Boards of Directors of both companies, remains subject to approval by On Assignment's shareholders, required regulatory approvals as well as other customary closing conditions. The transaction is expected to close in May 2012.

Legal and Financial Advisors

On Assignment retained Latham & Watkins LLP as legal counsel and Moelis & Company as exclusive financial advisor. Apex Systems retained Troutman Sanders LLP as legal counsel and Wells Fargo Securities as exclusive financial advisor.

Financial Estimates for the Second Half of 2012

Taking the transaction into account as well as the Company's normal seasonal operating patterns, the Company's financial estimates for the second half of 2012 are as follows:

• Revenues of $775 million to $805 million
• Gross margin of approximately 30% to 31%
• SG&A of approximately $167 million to $178 million 1
• Adjusted EBITDA as a percentage of revenue of 10% to 11% 1 2
• Tax rate of 41% to 41.5%
• GAAP earnings per share of $0.50 to $0.60 1
• Cash earnings per share of $0.77 to $0.88 1 2 3
• Fully diluted shares outstanding of 54,385,000

1 Excludes transaction-related costs and write-offs of deferred financing expenses

2 Excludes stock-based compensation expense

3 Excludes amortization of intangibles and includes all tax benefits from section 338(h)(10) election

Conference Call and Webcast

On Assignment will host a conference call with analysts and shareholders on March 20 at 5:00 p.m. Eastern time. To view the accompanying slides, please visit the Investor Relations section of www.onassignment.com . To listen via telephone, the dial-in number is 877-805-4089 or 281-913-8521 and the conference ID number is 64210302. Information to access a replay of the conference call can be found on the website.

About On Assignment

On Assignment, Inc. (NASDAQ: ASGN), is a leading global provider of highly skilled, hard-to-find professionals in the growing technology, healthcare, and life sciences sectors, where quality people are the key to success. The Company goes beyond matching résumés with job descriptions to match people they know into positions they understand for temporary, contract-to-hire, and direct hire assignments. Clients recognize On Assignment for their quality candidates, quick response, and successful assignments. Professionals think of On Assignment as career-building partners with the depth and breadth of experience to help them reach their goals. On Assignment was founded in 1985 and went public in 1992. The corporate headquarters are located in Calabasas, California, with a network of approximately 88 branch offices throughout the United States, Canada, United Kingdom, Netherlands, Ireland and Belgium. Additionally, physician placements are made in Australia and New Zealand. To learn more, visit www.onassignment.com .

About Apex Systems, Inc.

Apex Systems, Inc. is a leading IT Staffing and Services firm whose main goal is to connect their clients with experts and skilled professionals who work in Information Technology. Apex Systems specializes in contract, temp-to-perm and direct placements and offers a variety of other services, including RPO, Statements of Work (SOW) and specialty skill sourcing. Apex Systems was founded in 1995, currently operates in 49 locations across the U.S., and is headquartered in Richmond, VA.

Reasons for Presentation of Non-GAAP Financial Measures

Statements made in this release include non-GAAP financial measures. Such information is provided as additional information, not as an alternative to our consolidated financial statements presented in accordance with GAAP, and is intended to enhance an overall understanding of our current financial performance. Such measures are also used to determine a portion of the compensation for some of our executives and employees. We believe the non-GAAP financial measures provide useful information to management, investors and prospective investors by excluding certain charges and other amounts that we believe are not indicative of our core operating results. These non-GAAP measures are included to provide management, our investors and prospective investors with an alternative method for assessing our operating results in a manner that is focused on the performance of our ongoing operations and to provide a more consistent basis for comparison between quarters. One of the non-GAAP financial measures presented is Adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, and amortization plus stock-based compensation expense, impairment charges and transaction-related costs. Another non-GAAP financial measure presented is cash EPS, which we define as net income plus transaction-related costs, write-off of deferred financing expenses, equity-based compensation expense and amortization of intangibles, divided by outstanding shares. These terms might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures reported by other companies.

Additional Information and Where to Find It

In connection with the transaction, On Assignment will prepare a proxy statement to be filed with the SEC. When completed, a definitive proxy statement and a form of proxy will be mailed to the shareholders of the Company. BEFORE MAKING ANY VOTING DECISION, ON ASSIGNMENT'S SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT REGARDING THE TRANSACTION CAREFULLY AND IN ITS ENTIRETY BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. On Assignment's shareholders will be able to obtain, without charge, a copy of the proxy statement (when available) and other relevant documents filed with the SEC from the SEC's website at http://www.sec.gov . On Assignment's shareholders will also be able to obtain, without charge, a copy of the proxy statement and other relevant documents (when available) by directing a request by mail or telephone to On Assignment, Inc., Attn: Investor Relations, 26745 Malibu Hills Road, Calabasas, California 91301, telephone: (818) 878-3136, or from the investor relations section of the company's website, http://www.onassignment.com .

On Assignment, Apex Systems and their respective directors and executive officers and other persons may be deemed to be participants in the solicitation of proxies in respect of the transaction. Information regarding On Assignment's directors and executive officers is available in On Assignment's notice of annual meeting and proxy statement for its most recent annual meeting and On Assignment's Annual Report on Form 10-K for the year ended December 31, 2011, which were filed with the SEC on April 27, 2011 and March 14, 2012, respectively. Other information regarding the participants in the solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC.

Safe Harbor

Certain statements made in this news release are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and involve a high degree of risk and uncertainty. Forward-looking statements include statements regarding the Company's anticipated financial and operating performance in 2012. All statements in this release, other than those setting forth strictly historical information, are forward-looking statements. Forward-looking statements are not guarantees of future performance, and actual results might differ materially. In particular, the Company makes no assurances that the financial estimates set forth above will be achieved. Factors that could cause or contribute to such differences include actual demand for our services, our ability to attract, train and retain qualified staffing consultants, our ability to remain competitive in obtaining and retaining temporary staffing clients, the availability of qualified temporary nurses and other qualified temporary professionals, management of our growth, continued performance of our enterprise-wide information systems, and other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011, as filed with the SEC on March 14, 2012. We specifically disclaim any intention or duty to update any forward-looking statements contained in this news release.

Media inquiries: Muirfield Partners Mickey Mandelbaum Maya Pogoda 310-785-0810 [email protected] [email protected] or Investor inquiries: On Assignment, Inc. Jim Brill SVP, Finance and Chief Financial Officer 818-878-7900 [email protected]

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What Are Investor Relations (IR)?

• Understanding IR
• IR and Legislation
• IR Functions

The Bottom Line

• Investing Basics

Investor Relations (IR): Definition, Career Path, and Example

Gordon Scott has been an active investor and technical analyst or 20+ years. He is a Chartered Market Technician (CMT).

Investopedia / Hilary Allison

The investor relations (IR) department is a division of a business, usually a public company , whose job it is to provide investors with an accurate account of company affairs. This helps private and institutional investors make informed decisions on whether to invest in the company. 

Key Takeaways

• The investor relations (IR) department is a division of a business whose job it is to provide investors with an accurate account of company affairs.
• IR departments are required to be tightly integrated with a company's accounting department, legal department, and executive management team.
• IR departments have to be aware of changing regulatory requirements and advise the company on what can and cannot be done from a PR perspective.
• Legislation, such as the Dodd-Frank Act, has strengthened investor relations by requiring more transparency in the financial marketplace.

Understanding Investor Relations (IR)

Investor relations ensures that a company's publicly traded stock is being fairly traded through the dissemination of key information that allows investors to determine whether a company is a good investment for their needs. IR departments are sub-departments of public relations (PR) departments and work to communicate with investors, shareholders, government organizations, and the overall financial community.

Companies normally start building their IR departments before going public. During this pre-initial public offering ( IPO ) phase, IR departments can help establish corporate governance, conduct internal financial audits , and start communicating with potential IPO investors.

For example, when a company goes on an IPO roadshow, it is common for some institutional investors to become interested in the company as an investment vehicle. Once interested, institutional investors require detailed information about the company, both qualitative and quantitative.

To obtain this information, the company's IR department is called upon to provide a description of its products and services, financial statements, financial statistics, and an overview of the company's organizational structure.

The IR department's largest role is its interactions with investment analysts who provide public opinion on the company as an investment opportunity.

Investor Relations and Legislation

The Sarbanes-Oxley Act , also known as the Public Company Accounting Reform and Investor Protection Act, was passed in 2002, increasing reporting requirements for publicly traded companies. This expanded the need for public companies to have internal departments dedicated to investor relations, reporting compliance, and the accurate dissemination of financial information.

In the aftermath of the financial crisis, the Obama Administration passed the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2009 to prevent financial institutions from taking excessive risks and introduced new measures to prevent lenders from exploiting consumers. To achieve this, the legislation established an independent agency called the Consumer Financial Protection Burea (CFPB) tasked with setting and enforcing clear, standardized rules for companies providing financial services.

The legislation strengthened investor relations by requiring more transparency across the financial system. For example, the CFPB now requires that a mortgage disclosure comes in a single form that outlines associated risks and costs, allowing consumers to compare loans with other lenders. Similarly, the legislation strengthened the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 , requiring issuers to disclose rates and fees clearly to help customers make more informed financial decisions. Additionally, the reforms prohibit credit card companies from directly marketing promotions to young consumers.

Investor Relations Functions

IR teams are typically tasked with coordinating shareholder meetings and press conferences, releasing financial data, leading financial analyst briefings, publishing reports to the Securities and Exchange Commission (SEC), and handling the public side of any financial crisis.

In addition, IR departments have to be aware of changing regulatory requirements and advise the company on what can and cannot be done from a PR perspective. For example, IR departments have to lead companies in quiet periods , where it is illegal to discuss certain aspects of a company and its performance.

The IR department's largest role is its interactions with investment analysts who provide public opinion on the company as an investment opportunity. These opinions influence the overall investment community, and it is the IR department's job to manage analysts' expectations.

Goals of Investor Relations

IR is intended to increase and sustain investor and other stakeholder confidence by giving them accurate and timely information regarding the company's financial and operating performance. It's also used to communicate the strategic plans and objectives.

IR seeks to maximize shareholder value by giving investors a thorough picture of the business strategy and expansion objectives of the company. This may enhance interest from existing investors, boost demand for the company's shares, and ultimately raise the share price.

IR is also intended to enhance corporate governance by making sure that the business complies with pertinent laws, rules, and moral guidelines. This could increase the company's access to capital markets as well as its reputation and trust with investors. In this realm, IR is meant to invoke confidence that a company is adhering to all of the required laws set forth by governing bodies.

Communication is also made easier because to IR, which acts as a conduit between a firm's stakeholders and investors. This gives investors access to key decision-makers within the company. This can also support the company in addressing investor issues, giving management input, and fostering positive connections with its stakeholders.

Companies often have pages on their website dedicated to investor relations. This section will house financial statements, external disclosures, SEC filings, or annual reports.

Benefits of Investor Relations

By leveraging IR, companies can increase their access to capital markets which can enable them to obtain finance more effectively and at a reduced cost. This is done by developing relationships with investors and analysts.

IR contributes to greater transparency by delivering accurate and timely information to investors about a company's financial performance, strategic positioning, and other significant developments. Investor trust can be increased and the company's reputation can be enhanced as a result.

Effective IR may also assist businesses in growing their investor base and luring fresh capital. By attracting new investors and raising demand for the company's stock, effective IR can assist raise the liquidity of a company's shares. This could enhance the company's worth and make it easier for all investors to trade.

Companies can increase their access to capital markets, which can enable them to obtain finance more effectively and at a reduced cost, by developing relationships with investors and analysts. Effective IR may also assist businesses in growing their investor base and luring fresh capital.

Last, by ensuring that businesses adhere to pertinent laws, regulations, and moral standards, IR aids in enhancing corporate governance . This could increase the company's access to capital markets as well as its reputation and trust with investors.

Why Is It Important for a Company to Have an Investor Relations Division?

Companies require an investor relations division to provide current and prospective investors with relevant information so they can make informed investment decisions. Failure to disclose information that may have a material impact on a company’s share price could result in a fine or other disciplinary action from regulators.

What Are the Primary Functions of an Investor Relations Division?

The investor relations team oversees functions such as coordinating shareholder meetings and press conferences, releasing financial data, leading financial analyst briefings, publishing SEC filings, and handling the public relations of a company-specific financial crisis.

What Role Does an Investor Relations Division Play Before a Company Goes Public?

Before a company goes public, an investor relations division may assist with establishing corporate governance, conducting internal financial audits, and disseminating information to prospective IPO investors.

What Effect Does Government Legislation Have on Investor Relations?

Legislation such as the Sarbanes-Oxley Act and Dodd-Frank Act have strengthened investor relations by requiring financial institutions to provide greater transparency, particularly about fees and risk. Reforms have also increased reporting requirements for publicly traded companies. 

Investor relations refers to a division within a company that provides investors with information about its corporate affairs, helping them make more informed investment decisions. The IR division typically works closely with accounting and legal departments along with executive management to ensure the dissemination of essential financial information.

Often companies establish an IR department before going public, with the division assisting in areas such as corporate governance, financial auditing, and communicating with prospective IPO investors. Since the 2008 financial crisis, legislation, such as the Sarbanes-Oxley Act and Dodd-Frank Act, has strengthened Investor relations by requiring greater reporting and transparency across the financial system to help consumers make more informed decisions.

U.S Congress. " H.R.3763 - Sarbanes-Oxley Act of 2002 ."

The White House Archives. " Jobs and The Economy: Putting America Back to Work ."

FTC.gov. " The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 ," Page 16.

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