Revenues, Adjusted EPS & Adjusted EBITDA
above Previously Announced Estimates
Pro Forma Revenue Growth of 17.7
Percent
Fourth Consecutive Quarter Year-over-Year
Revenue Growth Rate Up over Preceding Quarter
On Assignment, Inc. (NYSE: ASGN), a leading global provider of
diversified professional staffing solutions, today reported results
for the quarter ended March 31, 2016.
First Quarter Highlights
- Revenues were $582.0 million up 17.7
percent year-over-year on a pro forma basis. Pro forma results
assume the acquisitions of Creative Circle, LLC ("Creative Circle")
and a small Life Sciences business in Europe (the "Acquisitions")
occurred at the beginning of 2015.
- Revenues, excluding the contribution
from the Acquisitions, were $502.7 million, up 16.9 percent
year-over-year.
- Adjusted EBITDA (a non-GAAP measure
defined below) was $62.4 million, or 10.7 percent of revenues.
- Adjusted income from continuing
operations (a non-GAAP measure defined below) was $35.4 million
($0.66 per diluted share).
- Leverage ratio (total indebtedness to
trailing 12 months Adjusted EBITDA) was 2.80 to 1 at March 31,
2016, down from 3.02 to 1 at December 31, 2015.
Commenting on the results, Peter Dameris, President and Chief
Executive Officer of On Assignment, Inc., said, "Over the last
three years, we significantly increased the value of our company by
expanding our service offerings and strengthening our
capitalization. Because of these actions, we have better positioned
our company to service a dynamic and ever changing IT Services
marketplace. Few companies have our scale, reach or ability to
serve customer’s IT services needs from infrastructure to creation
to monetization of new digital initiatives."
Dameris concluded, "We believe the next five years will permit
the IT services industry to flourish because of demand for new
digital/technology skills and continued secular changes in the U.S.
labor markets that have altered how technology solutions are
developed and deployed."
First Quarter 2016 Financial Results
Revenues for the quarter were $582.0 million, up 35.3 percent
year-over-year on an as reported basis. Revenues on a pro forma
basis, which assume the Acquisitions occurred at the beginning of
2015 were up 17.7 percent year-over-year. Revenues from the
Acquisitions (Creative Circle and a small European Life Sciences
business, which were both acquired in the second quarter of 2015)
were $79.3 million for the current quarter. Revenues, excluding the
contribution from the Acquisitions, were $502.7 million, up 16.9
percent year-over-year.
Our largest segment, Apex, accounted for 74.4 percent of total
revenues. Apex grew 46.4 percent year-over-year on an as reported
basis, and 20.8 percent on a pro forma basis. Excluding the revenue
contribution of $76.3 million from Creative Circle, the Apex
Segment grew 20.6 percent year-over-year.
Our Oxford Segment accounted for 25.6 percent of total revenues.
Oxford grew 11.0 percent year-over-year on an as reported basis,
and 9.3 percent on a pro forma basis. Excluding the revenue
contribution of $3.0 million from an acquired business, the Oxford
Segment grew 8.8 percent.
Gross profit was $187.8 million, up $51.9 million or 38.2
percent year-over-year. Gross margin for the quarter was 32.3
percent.
Selling, general and administrative (“SG&A”) expenses were
$139.9 million (24.0 percent of revenues), up from $105.9 million
(24.6 percent of revenues) in the first quarter of 2015.
Amortization of intangible assets was $10.1 million, compared
with $4.9 million in the first quarter of 2015.
Interest expense for the quarter was $9.0 million compared with
$3.1 million in the first quarter of 2015. Interest expense for the
quarter was comprised of (i) interest on the credit facility of
$7.2 million, (ii) amortization of deferred loan costs of $0.9
million, and (iii) accretion of $0.9 million on the contingent
consideration liability related to acquisitions.
Adjusted income from continuing operations (a non-GAAP measure
as calculated in an accompanying table) was $35.4 million ($0.66
per diluted share). Net income on a GAAP basis was $17.4 million
($0.32 per diluted share).
Adjusted EBITDA (a non-GAAP measure defined below) was $62.4
million, or 10.7 percent of revenues. The Adjusted EBITDA
contribution from Creative Circle was $16.0 million.
Cash flows from operating activities were $37.3 million and free
cash flow was $30.0 million. During the quarter, we repaid $33.0
million of long-term debt and at March 31, 2016, our leverage ratio
(total indebtedness to trailing 12 months Adjusted EBITDA) was 2.80
to 1, down from 3.02 to 1 at December 31, 2015.
Financial Estimates for Q2 2016
On Assignment is providing financial estimates for the second
quarter of 2016. These estimates do not include acquisition,
integration, or strategic planning expenses and assume no
deterioration in the staffing markets that On Assignment serves.
These estimates also assume no significant change in foreign
exchange rates.
- Revenues of $592.0 million to $602.0
million
- Gross margin of 33.0 percent to 33.4
percent
- SG&A expense (excludes amortization
of intangible assets) of $136.5 to $139.0 million (includes $5.3
million in depreciation and $6.5 million in equity-based
compensation expense)
- Amortization of intangible assets of
$10.0 million
- Adjusted EBITDA of $71.0 million to
$74.0 million
- Effective tax rate of 39.5 percent
- Adjusted income from continuing
operations of $41.0 million to $42.8 million
- Adjusted income from continuing
operations per diluted share of $0.76 to $0.79
- Income from continuing operations of
$24.9 million to $26.8 million
- Income from continuing operations per
diluted share of $0.46 to $0.49
- Diluted shares outstanding of 54.1
million
The above estimates assume billable days of 63.8 compared with
63.5 days for the second quarter of 2015 and 62.8 days for the
preceding quarter.
Conference Call
On Assignment will hold a conference call today at 5:00 p.m. EDT
to review its financial results for the first quarter. The dial-in
number is 800-230-1074 (+1-612-234-9960 for callers outside the
United States) and the conference ID number is 390511. Participants
should dial in ten minutes before the call. The prepared remarks
for this call are available via On Assignment's web site at
www.onassignment.com. This call is being webcast by CCBN and
can be accessed at www.onassignment.com. Individual investors can
also listen at CCBN's site at www.fulldisclosure.com or by
visiting any of the investor sites in CCBN's Individual
Investor Network.
A replay of the conference call will be available beginning
Wednesday, April 27, 2016 at 7:00 p.m. EDT until midnight on
Wednesday, May 11, 2016. The access number for the replay is
800-475-6701 (+1-320-365-3844 outside the United States) and the
conference ID number is 390511.
About On Assignment
On Assignment, Inc. is a leading global provider of highly
skilled, hard-to-find professionals in the growing technology, life
sciences, and creative 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 contract, contract-to-hire, and direct hire
assignments. Clients recognize On Assignment for its 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, which is based in Calabasas,
California, was founded in 1985 and went public in 1992. The
Company has a network of branch offices throughout the United
States, Canada and Europe. To learn more, visit
http://www.onassignment.com.
Reasons for Presentation of Non-GAAP Financial
Measures
Statements in this release and the accompanying Supplemental
Financial Information 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 Generally Accepted Accounting Principles in the
United States ("GAAP"), and is intended to enhance an overall
understanding of our current financial performance. The
Supplemental Financial Information sets forth financial measures
reviewed by our management to evaluate our operating performance.
Such measures also are 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 EBITDA (earnings before interest, taxes, depreciation,
and amortization of intangible assets), other terms include
Adjusted EBITDA (EBITDA plus equity-based compensation expense,
impairment charges, write-off of loan costs, and acquisition,
integration and strategic planning expenses) and Non-GAAP income
from continuing operations (Income from continuing operations, plus
write-off of loan costs, and acquisition, integration and strategic
planning expenses, net of tax) and Adjusted income from continuing
operations and related per share amounts. 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. The
financial statement tables that accompany this press release
include a reconciliation of each non-GAAP financial measure to the
most directly comparable GAAP financial measure.
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 2016. 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
estimates of revenues, gross margin, SG&A, Adjusted EBITDA,
income from continuing operations, Adjusted income from continuing
operations and related per share amounts, earnings per share or
earnings per diluted share 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 professionals, management
of our growth, continued performance of our enterprise-wide
information systems, our ability to manage our potential or actual
litigation matters, the successful integration of our recently
acquired subsidiaries, the successful implementation of our
five-year strategic plan, and other risks detailed from time to
time in our reports filed with the Securities and Exchange
Commission ("SEC"), including our Annual Report on Form 10-K for
the year ended December 31, 2015, as filed with the SEC on February
29, 2016. We specifically disclaim any intention or duty to update
any forward-looking statements contained in this news release.
SUMMARY CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
(In thousands, except per share
amounts)
Three Months Ended March 31, December
31, 2016 2015 2015 Revenues $ 582,040 $
430,045 $ 577,517 Costs of services 394,258 294,170
384,585 Gross profit 187,782 135,875 192,932 Selling,
general and administrative expenses 139,881 105,935 138,754
Amortization of intangible assets 10,144 4,869 11,316
Operating income 37,757 25,071 42,862 Interest expense, net
(9,025 ) (3,067 ) (9,098 ) Income before income taxes 28,732 22,004
33,764 Provision for income taxes 11,384 8,981 14,591
Income from continuing operations 17,348 13,023 19,173 Gain
on sale of discontinued operations, net of tax — 25,703 — Income
from discontinued operations, net of tax 53 409 165
Net income $ 17,401 $ 39,135 $
19,338 Basic earnings per common share: Income from
continuing operations $ 0.33 $ 0.25 $ 0.36 Income from discontinued
operations — 0.51 0.01 $ 0.33 $
0.76 $ 0.37 Diluted earnings per common
share: Income from continuing operations $ 0.32 $ 0.25 $ 0.36
Income from discontinued operations — 0.50 — $
0.32 $ 0.75 $ 0.36 Number
of shares and share equivalents used to calculate earnings per
share: Basic 53,147 51,519 52,867 Diluted
53,644 52,209 53,590
SUPPLEMENTAL SEGMENT FINANCIAL
INFORMATION (Unaudited)
Three Months Ended March 31,
December 31, Year-Over-Year Growth Rates
AsReported
AsAdjusted
ProForma
AsAdjusted
AsReported(3)
ProForma
ConstantCurrency(4)
2016 2015(1) 2015(1) 2015(1) (Dollars in millions) Revenues by
segment: Apex: Assignment $ 422.1 $ 291.7 $
348.9 $ 423.9 44.7 % 21.0 % 21.0 % Permanent placement 11.0
4.3 9.5 10.7 156.9 % 15.9 % 15.9 % 433.1 296.0
358.4 434.6 46.4 % 20.8 % 20.8 % Oxford: Assignment 127.4 114.4
116.6 121.0 11.3 % 9.3 % 9.7 % Permanent placement 21.5 19.6
19.7 21.9 9.4 % 9.1 % 9.1 % 148.9 134.0 136.3
142.9 11.0 % 9.3 % 9.6 % Consolidated: Assignment 549.5 406.1 465.5
544.9 35.3 % 18.1 % 18.2 % Permanent placement 32.5 23.9
29.2 32.6 35.9 % 11.3 % 11.3 % $ 582.0
$ 430.0 $ 494.7 $ 577.5
35.3 % 17.7 % 17.8 % Percentage of total revenues: Apex 74.4 % 68.8
% 72.5 % 75.2 % Oxford 25.6 % 31.2 % 27.5 % 24.8 % 100.0 % 100.0 %
100.0 % 100.0 % Assignment 94.4 % 94.4 % 94.1 % 94.3 %
Permanent placement 5.6 % 5.6 % 5.9 % 5.7 % 100.0 % 100.0 % 100.0 %
100.0 % Domestic 95.3 % 95.5 % 95.6 % 95.7 % Foreign 4.7 %
4.5 % 4.4 % 4.3 % 100.0 % 100.0 % 100.0 % 100.0 % Gross profit:
Apex $ 126.2 $ 80.2 $ 106.6 $ 131.9 57.4 % 18.3 % Oxford 61.6
55.7 56.5 61.0 10.6 % 9.1 %
Consolidated
$
187.8
$ 135.9 $ 163.1 $ 192.9
38.2 % 15.1 % Gross margin(2): Apex 29.1 % 27.1 % 29.7 % 30.4 % 2.0
% (0.6 )% Oxford 41.4 % 41.6 % 41.5 % 42.7 % (0.2 )% (0.1 )%
Consolidated 32.3 % 31.6 % 33.0 % 33.4 % 0.7 % (0.7 )% (1)
Prior periods have been adjusted to reflect our new segment
configuration. The Apex Segment now includes a clinical research
business which was previously included in the Oxford Segment and
represented approximately 1 percent of the Oxford Segment's
revenues and gross profit. (2) The year-over-year change in gross
margin is the absolute change in the margin. (3) Compares current
quarter reported results, with the quarters ended March 31, 2015
and December 31, 2015 results as adjusted for our new segment
configuration. (4) Constant currency data on this table are on a
pro forma basis and were calculated using the foreign exchange
rates from the quarter ended March 31, 2015.
SELECTED CASH FLOW INFORMATION
(Unaudited)
(In thousands)
Three Months Ended March 31, December
31, 2016 2015 2015 Cash provided by operations $
37,314 $ 19,943 $ 30,196 Capital expenditures $ 7,282 $ 8,000 $
6,512
SELECTED CONSOLIDATED BALANCE SHEET
DATA (Unaudited)
(In thousands)
March 31, December 31, 2016 2015 Cash
and cash equivalents 28,369 23,869 Accounts receivable, net 378,087
354,808 Total current assets 432,168 414,208 Goodwill and
intangible assets, net 1,283,756 1,292,831 Total assets 1,777,055
1,767,307 Total current liabilities 175,754 160,350 Working capital
256,414 253,858 Long-term debt 723,219 755,508 Other long-term
liabilities 66,645 66,655 Stockholders’ equity 811,437 784,794
RECONCILIATION OF GAAP INCOME FROM CONTINUING
OPERATIONS AND EARNINGS PER DILUTED SHARE TO NON-GAAP
ADJUSTED EBITDA AND ADJUSTED EBITDA
PER DILUTED SHARE (Unaudited)
(In thousands, except per share
amounts)
Three Months Ended March 31, 2016
2015 December 31, 2015 Net income $ 17,401
$ 0.32 $ 39,135 $ 0.75 $ 19,338
$ 0.36 Discontinued operations, net of tax 53
— 26,112 0.50 165 — Income from
continuing operations 17,348 0.32 13,023 0.25 19,173 0.36 Interest
expense, net 9,025 0.17 3,067 0.06 9,098 0.17 Provision for income
taxes 11,384 0.21 8,981 0.17 14,591 0.27 Depreciation 5,283 0.10
3,532 0.07 4,759 0.09 Amortization of intangible assets 10,144
0.19 4,869 0.09 11,316 0.21
EBITDA 53,184 0.99 33,472 0.64 58,937 1.10 Equity-based
compensation 6,924 0.13 3,954 0.08 6,774 0.13 Acquisition,
integration and strategic planning expenses 2,326 0.04 1,278 0.02
5,025 0.09 Adjusted
EBITDA $ 62,434 $ 1.16 $ 38,704 $ 0.74
$ 70,736 $ 1.32 Weighted average common and common
equivalent shares outstanding (diluted) 53,644 52,209
53,590
RECONCILIATION OF GAAP INCOME AND
DILUTED EPS TO NON-GAAP INCOME AND DILUTED EPS (Unaudited)
(In thousands, except per share
amounts)
Three Months Ended March 31, December
31, 2016 2015 2015 Net income $ 17,401
$ 0.32 $ 39,135 $ 0.75 $ 19,338
$ 0.36 Discontinued operations, net of tax 53
— 26,112 0.50 165 — Income from
continuing operations 17,348 0.32 13,023 0.25 19,173 0.36
Acquisition, integration and strategic planning expenses, net of
tax 1,369 0.03 780 0.01 3,771 0.07 Accretion of fair value discount
on contingent consideration, net of tax (1) 592 0.01
— — 466 0.01 Non-GAAP income from continuing
operations $ 19,309 $ 0.36 $ 13,803 $ 0.26
$ 23,410 $ 0.44 Weighted average common and
common equivalent shares outstanding (diluted) 53,644
52,209 53,590
(1) We have contingent consideration obligations related to
our acquisitions. The fair value of the contingent consideration
was determined using an expected present value technique. The
change in present value due to the passage of time (accretion of
fair value discount) is recorded in interest expense.
CALCULATION OF ADJUSTED INCOME FROM CONTINUING OPERATIONS
AND
ADJUSTED EARNINGS PER DILUTED SHARE
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended March 31, 2016 2015
Non-GAAP income from continuing operations (1) $ 19,309 $ 13,803
Adjustments: Amortization of intangible assets (2) 10,144 4,869
Cash tax savings on indefinite-lived intangible assets (3) 6,568
3,882 Income taxes on amortization for financial reporting purposes
not deductible for income tax purposes (4) (601 ) (505 ) Adjusted
income from continuing operations $ 35,420 $ 22,049
Adjusted income from continuing operations per diluted share
$ 0.66 $ 0.42 Weighted average common and
common equivalent shares outstanding (diluted) 53,644 52,209
(1) Non-GAAP income from continuing operations as
calculated on preceding page. Non-GAAP income from continuing
operations excludes the write-off of loan costs, and acquisition,
integration and strategic planning expenses. (2) Amortization of
intangible assets of acquired businesses. (3) Income tax benefit
(using 39 percent marginal tax rate) from amortization for income
tax purposes of certain indefinite-lived intangible assets
(goodwill and trademarks), on acquisitions in which the Company
received a step-up tax basis. For income tax purposes, these assets
are amortized on a straight-line basis over 15 years. For financial
reporting purposes, these assets are not amortized and a deferred
tax provision is recorded that fully offsets the cash tax benefit
in the determination of net income. (4) Income taxes (assuming a 39
percent marginal rate) on the portion of amortization of intangible
assets, which is not deductible for income tax purposes (mainly
amortization associated with the acquisitions of CyberCoders, Inc.
and a Life Sciences business in Europe, for which the Company was
not able to step-up the tax basis in those acquired assets for tax
purposes).
SUPPLEMENTAL FINANCIAL AND OPERATING
DATA (1) (Unaudited)
Three Months Ended Mar. 31, Dec. 31,
Sept. 30, June 30, Mar.
31, 2016 2015(1) Revenues
(in thousands): Apex $ 433,155 $ 434,525 $ 422,632 $ 340,480 $
295,971 Oxford 148,885 142,992 149,491 144,843
134,074 Consolidated $ 582,040 $ 577,517 $ 572,123 $
485,323 $ 430,045 Permanent placement revenues (in
thousands): Apex $ 11,041 $ 10,672 $ 10,796 $ 6,603 $ 4,298 Oxford
21,447 21,960 21,944 22,128 19,606
Consolidated $ 32,488 $ 32,632 $ 32,740 $ 28,731 $ 23,904
Gross margins: Apex 29.1 % 30.4 % 30.6 % 28.9 % 27.1 %
Oxford 41.4 % 42.7 % 41.6 % 41.6 % 41.6 % Consolidated 32.3 % 33.4
% 33.5 % 32.7 % 31.6 % Average number of staffing
consultants: Apex 1,296 1,310 1,283 1,083 982 Oxford 988 955
949 919 905 Consolidated 2,284 2,265
2,232 2,002 1,887 Average number of customers: Apex 3,368
3,349 3,226 1,787 1,315 Oxford 1,049 1,099 1,095
1,071 1,005 Consolidated 4,417 4,448 4,321
2,858 2,320 Top 10 customers as a percentage of revenue:
Apex 22.9% 22.8 % 22.6 % 25.1 % 26.8 % Oxford 11.6% 9.0 % 8.8 %
11.3 % 11.6 % Consolidated 17.1% 17.2 % 16.7 % 17.6 % 18.5 %
Average bill rate: Apex $ 55.74 $ 54.83 $ 55.55 $ 55.05 $ 54.07
Oxford $ 101.77 $ 102.10 $ 102.75 $ 103.65 $ 103.90 Consolidated $
62.04 $ 60.68 $ 61.84 $ 62.54 $ 62.06 Gross profit per
staffing consultant: Apex $ 97,000 $ 101,000 $ 101,000 $ 91,000 $
82,000 Oxford $ 62,000 $ 64,000 $ 65,000 $ 66,000 $ 62,000
Consolidated $ 82,000 $ 85,000 $ 86,000 $ 79,000 $ 72,000 (1)
Prior periods have been adjusted to reflect our new segment
configuration. The Apex Segment now includes a clinical research
business which was previously included in the Oxford Segment and
represented approximately 1 percent of the Oxford Segment's
revenues and gross profit.
SUPPLEMENTAL FINANCIAL INFORMATION –
KEY METRICS (Unaudited)
Three Months Ended March 31, 2016
December 31, 2015 Percentage of revenues: Top ten clients 17.1%
17.2% Permanent placement 5.6% 5.7% Bill rate: % Sequential
change 2.2% (1.9%) % Year-over-year change —% (3.3%)
Bill/Pay spread: % Sequential change 1.8% (1.6%) % Year-over-year
change 2.4% (1.7%) Average headcount: Contract professionals
(CP) 17,432 17,612 Staffing consultants (SC) 2,284 2,265 Note: The
above table is shown on a consolidated basis. The changes in bill
rate data are primarily caused by changes in mix of business within
the divisions (such as mix of large versus small accounts) or a
change in the overall mix of business related to different growth
rates of the operating divisions.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160427006711/en/
On Assignment, Inc.Ed Pierce, 818-878-7900Chief Financial
Officer
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