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On Assignment Reports First Quarter 2012 Results

Date : 04/26/2012 @ 4:01PM
Source : Business Wire
Stock : ON Assignment, Inc. (MM) (ASGN)
Quote : 16.18  0.0 (0.00%) @ 2:05AM
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On Assignment Reports First Quarter 2012 Results

ON Assignment, Inc. (MM) (NASDAQ:ASGN)
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On Assignment, Inc. (NASDAQ: ASGN), a diversified professional staffing firm providing flexible and permanent staffing solutions in specialty skills including Life Sciences, Healthcare, Physician, and Information Technology and Engineering, today reported results for the quarter ended March 31, 2012.

First Quarter 2012 Highlights

  • Revenues for the first quarter of 2012 were $167.1 million, up 29% year-over-year and up 3% from the preceding quarter.
  • Gross Margin was 32.9% compared with 33.3% in the first quarter of 2011.
  • Adjusted EBITDA (a non-GAAP measurement defined below) was $15.7 million, up 49% year-over-year.
  • Adjusted EBITDA margin (Adjusted EBITDA as a % of revenues) for the quarter was 9.4% compared with 8.1% in the first quarter of 2011.
  • Net Income was $5.4 million, or $0.14 per diluted share. Excluding acquisition related expenses (net of tax) net income was $6.8 million or $0.18 per diluted share.
  • Announced the proposed acquisition of Apex Systems.
  • March monthly consolidated revenues highest in history of the firm.

Commenting on the results for the first quarter, Peter Dameris, President and Chief Executive Officer of On Assignment, Inc., said, “We had an excellent first quarter of 2012. Each of our four operating segments generated double-digit revenue growth year-over-year. We also maintained strong gross margins and expense controls, such that our 29% revenue growth translated into 49% growth in Adjusted EBITDA and 100% growth in earnings per share when excluding acquisition expenses.”

Dameris concluded, “During the first quarter, we also announced a milestone transaction in the proposed acquisition of Apex Systems, one of the largest and fastest-growing IT staffing firms in the United States. This acquisition will create one of the largest professional staffing firms and the country’s second-largest IT staffing firm, with pro forma 2011 revenues of $1.3 billion. We are excited about the opportunities this combination brings to us and look forward to continued strong growth as we complete the transaction, expected during the second quarter of 2012.”

Jim Brill, Senior Vice President and Chief Financial Officer of On Assignment, Inc., stated, “We achieved record first Quarter Adjusted EBITDA and Adjusted EBITDA margin. Consolidated gross margin was 32.9% in the first quarter of 2012, while IT and Engineering gross margin was 34.8%, Life Sciences gross margin was 33.5%, Healthcare gross margin was 27.7% and Physician staffing gross margin was 31.1%.”

First Quarter 2012 Results

For the first quarter of 2012, consolidated revenues were $167.1 million, up 29.1% year-over-year and up 3.3% on a sequential basis. The Company had net income of $5.4 million, or $0.14 per diluted share. Excluding acquisition related expenses (net of tax) net income was $6.8 million, or $0.18 per diluted share, compared with $3.5 million, or $0.09 per diluted share in the first quarter of 2011.

The IT and Engineering segment revenues were $78.8 million, up 31.0% from the first quarter of 2011 and 10.6% from the fourth quarter of 2011. Life Sciences segment revenues were $41.4 million, up 25.5% from the first quarter of 2011 and 1.1% from the fourth quarter of 2011. Healthcare segment revenues, which include Nurse Travel and Allied Healthcare lines of business, were $22.9 million, up 15.3% from the first quarter of 2011 and down 11.8% from the fourth quarter of 2011. Nurse Travel revenues were $10.3 million, compared with $9.7 million in the first quarter of 2011 and $13.8 million in the fourth quarter of 2011, which included $2.3 million of revenue generated from supporting a customer that experienced labor disruption during that quarter. Allied Healthcare revenues were $12.6 million, up 23.9% from the first quarter of 2011 and up 3.2 % from the fourth quarter of 2011. Physician segment revenues were $24.1 million, up 45.8% from the first quarter of 2011 and up 1.6% from the fourth quarter of 2011.

SG&A increased by $4.9 million over the fourth quarter, primarily due to acquisition related expenses of $2.5 million and higher branch office expenses, mainly commissions on the higher revenue levels and headcount additions to support anticipated high growth in certain segments. This increase was partially offset by a $0.7 million decrease in equity based compensation. Capital expenditures were $2.1 million, amortization of intangibles was $0.6 million and depreciation was $1.4 million.

Second Quarter 2012 Financial Estimates

On Assignment is providing financial estimates for the quarter ending June 30, 2012 on a standalone basis excluding any contribution from Apex Systems. Based on revenues in the first four weeks of the second quarter of 2012 and taking into account the Company’s normal seasonal operating patterns, the Company’s financial estimates for the quarter are as follows:

  • Revenues of $177 million to $180 million
  • Gross Margin of approximately 33%
  • SG&A of approximately $44.3-$44.7 million which excludes any acquisition related expenses but includes depreciation of approximately $1.6 million, amortization of approximately $0.6 million and approximately $2.1 million in equity-based compensation expense
  • Adjusted EBITDA of $18.0 million to $19.1 million
  • Net income of $7.6 million to $8.2 million
  • Earnings per diluted share of $0.20 to $0.22

The estimates assume year over-year-revenue growth in the low 30% range for IT and Engineering, the mid 20% range for Life Sciences, the mid-teens for Healthcare and the mid 40% range for Physician Staffing. The estimates above assume no deterioration in the staffing markets On Assignment serves and do not include the impact of the acquisition of Apex Systems which is expected to close during the second quarter.

Upon consummation of the acquisition of Apex Systems, On Assignment will provide updated financial estimates for the quarter ending June 30, 2012. The Company is also reiterating its financial estimates for the second half of 2012, including contributions from Apex Systems. Taking the acquisition 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 million1
  • Adjusted EBITDA as a percentage of revenue 10% to 11%1 2 4
  • Tax Rate of 41% to 41.5%
  • Adjusted net income per diluted share of $0.50 to $0.601 4
  • Cash earnings per diluted share of $0.77 to $0.881 2 3 4
  • Fully diluted shares outstanding of 54,385,000

1 Excludes transaction related costs2 Excludes stock-based compensation expense3 Excludes amortization of intangibles and includes all tax benefits from section 338(h)10 election4 Excludes write-offs of deferred financing fees

On Assignment will hold its quarterly conference call to discuss its first quarter 2012 financial results this afternoon, Thursday, April 26, 2012 at 1:30 p.m. Pacific Time. Interested parties are invited to listen to the conference call by dialing (877) 837-4158 or (281) 913-8521 ten minutes before the call. The conference ID number is 73460659. A replay of the conference call can be accessed from approximately 5:30 p.m. Pacific Time Thursday, April 26, 2012 through Friday, May 4, 2012 by dialing (855) 859-2056 or (404) 537-3406 with the conference ID number 73460659.

This call is being webcast by Thomson/CCBN and can be accessed via On Assignment’s web site at www.onassignment.com. Individual investors can also listen at Thomson/CCBN's site at www.fulldisclosure.com or by visiting any of the investor sites in Thomson/CCBN's Individual Investor Network.

About On Assignment

On Assignment, Inc. (NASDAQ: ASGN), is a leading global provider of highly skilled, hard-to-find professionals in the growing life sciences, healthcare, and technology 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 76 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 http://www.onassignment.com.

Reasons for Presentation of Non-GAAP Financial Measures

Statements made in this release and the Supplemental Financial Information accompanying 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. 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, amortization of identifiable intangible assets), other terms include Adjusted EBITDA (EBITDA plus equity-based compensation expense, impairment charges and acquisition related costs), Cash earnings per diluted share (net income plus the after tax impact of transaction related costs, write off of deferred financing expenses, stock based compensation expense, amortization expense and the tax benefits related section 338(h)10 elections),and Adjusted net income (Net Income plus acquisition related expenses net of tax). 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 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 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 estimates of revenues, gross margin, SG&A, Adjusted EBITDA, net income, 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 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.

       

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

   

Quarter Ended

March 31,

December 31,

2012

2011

2011

  Revenues $ 167,078 $ 129,438 $ 161,790 Cost of services   112,030     86,284     108,161   Gross profit 55,048 43,154 53,629 Selling, general and

administrative expenses

  45,101     36,755     40,160   Operating income 9,947 6,399 13,469 Interest expense (702 ) (730 ) (711 ) Interest income   1     17   ―   Income before income taxes 9,246 5,686 12,758 Income tax provision   3,863     2,522     5,257   Net income $ 5,383   $ 3,164   $ 7,501     Earnings per share Basic $ 0.14   $ 0.09   $ 0.20   Diluted $ 0.14   $ 0.08   $ 0.20     Number of shares and share equivalents used to calculate earnings per share: Basic   37,269     36,623     36,903   Diluted   38,154     37,429     37,773            

SUPPLEMENTAL SEGMENT FINANCIAL INFORMATION

(In thousands)

(Unaudited)

  Quarter Ended March 31,   December 31,

2012

 

2011

2011

Revenues: Life Sciences $ 41,351 $ 32,957 $ 40,921   Healthcare Staffing 22,879 19,844 25,927   Physician Staffing 24,089 16,518 23,712   IT and Engineering   78,759   60,119   71,230 Consolidated revenues $ 167,078 $ 129,438 $ 161,790   Gross profit: Life Sciences $ 13,839 $ 11,270 $ 13,618   Healthcare Staffing 6,340 5,627 7,395   Physician Staffing 7,499 5,299 7,132   IT and Engineering   27,370   20,958   25,484

Consolidated gross profit

$ 55,048 $ 43,154 $ 53,629              

SELECTED CASH FLOW INFORMATION

(In thousands)

(Unaudited)

  Quarter Ended March 31,   December 31, 2012   2011 2011 Cash provided by

operations

$ 6,901 $ 5,778 $ 8,365 Capital expenditures 2,119 2,650 2,365    

SELECTED CONSOLIDATED BALANCE SHEET DATA

(In thousands)

(Unaudited)

  As of March 31,   December 31, 2012   2011

20111

Cash and cash equivalents $ 17,685 $ 15,821 $ 17,739 Accounts receivable, net 102,026 74,924 93,925 Goodwill and intangible assets, net 260,626 246,985 260,431 Total assets 419,989 376,179 411,538 Current portion of long-term debt 5,000 5,000 5,000 Total current liabilities 62,541 54,899 56,409 Long-term debt 75,500 73,500 81,750 Other long-term liabilities 25,932 23,159 26,636 Stockholders’ equity 256,016 224,621 246,743  

1Goodwill and intangible assets, net, Total assets and Other long-term liabilities reflect retrospective measurement period adjustments related to the Valesta acquisition.

     

RECONCILIATION OF GAAP NET INCOME AND EARNINGS PER SHARE TO NON-GAAP EBITDA AND EBITDA PER SHARE

(In thousands, except per share amounts)

(Unaudited)

  Quarter Ended March 31,2012 (1)   March 31,2011 (1)   December 31,2011 Net income $ 5,383   $ 0.14 $ 3,164   $ 0.08 $ 7,501   $ 0.20 Interest expense, net 701 0.02 713 0.02 711 0.02 Income tax provision 3,863 0.10 2,522 0.07 5,257 0.14 Depreciation 1,430 0.04 1,548 0.04 1,594 0.04 Amortization of intangibles   634   0.02   416   0.01   713   0.02 EBITDA 12,011 0.31 8,363 0.22 15,776 0.42 Equity-based compensation 1,191 0.03 1,625 0.04 1,843 0.05 Acquisition costs expensed   2,492   0.07   552   0.01   64   0.00 Adjusted EBITDA $ 15,694 $ 0.41 $ 10,540 $ 0.28 $ 17,683 $ 0.47  

Weighted Average Commonand Common EquivalentShares Outstanding

  38,154   37,429   37,773  

(1) Column does not foot due to rounding

       

RECONCILIATION OF GAAP NET INCOME AND EARNINGS PER SHARE TO NON-GAAP ADJUSTED NET INCOME AND EARNINGS PER SHARE

(In thousands, except per share amounts)

(Unaudited)

    Quarter Ended March 31,2012   March 31,2011   December 31,2011 Net income $ 5,383 $ 0.14 $ 3,164 $ 0.08 $ 7,501 $ 0.20

Acquisition relatedexpenses, net of tax

  1,451   0.04   307   0.01   38   0.00 Adjusted net income $ 6,834 $ 0.18 $ 3,471 $ 0.09 $ 7,539 $ 0.20    

Weighted Average Commonand Common EquivalentShares Outstanding

38,154

37,429

37,773

     

RECONCILIATION OF ESTIMATED GAAP NET INCOME TO ESTIMATED NON-GAAP EBITDA AND ADJUSTED EBITDA

(In thousands)

(Unaudited)

  Estimated Range of Results Quarter Ending June 30, 2012 Net income $ 7,600   $ 8,200 Interest expense 700 700 Income tax provision 5,400 5,900 Depreciation and amortization   2,200   2,200 EBITDA 15,900 17,000 Equity-based compensation   2,100   2,100 Adjusted EBITDA $ 18,000 $ 19,100                

SUPPLEMENTAL FINANCIAL INFORMATION – REVENUES AND GROSS MARGINS

(Dollars in thousands)

(Unaudited)

    Healthcare       Life Sciences Allied Healthcare   Nurse Travel   Total Healthcare Physician Staffing IT and Engineering Consolidated Revenues: Q1 2012 $ 41,351 $ 12,561 $ 10,318 $ 22,879 $ 24,089 $ 78,759 $ 167,078 Q4 2011 $ 40,921 $ 12,166 $ 13,761 $ 25,927 $ 23,712 $ 71,230 $ 161,790 % Sequential change 1.1 % 3.2 % (25.0 %) (11.8 %) 1.6 % 10.6 % 3.3 % Q1 2011 $ 32,957 $ 10,140 $ 9,704 $ 19,844 $ 16,518 $ 60,119 $ 129,438 % Year-over-Year Change 25.5 % 23.9 % 6.3 % 15.3 % 45.8 % 31.0 % 29.1 %   Gross Margins: Q1 2012 33.5 % 32.2 % 22.3 % 27.7 % 31.1 % 34.8 % 32.9 % Q4 2011 33.3 % 32.2 % 25.3 % 28.5 % 30.1 % 35.8 % 33.1 % Q1 2011 34.2 % 31.3 % 25.2 % 28.4 % 32.1 % 34.9 % 33.3 %          

SUPPLEMENTAL FINANCIAL INFORMATION – KEY METRICS

(Unaudited)

  Quarter Ended March 31,

2012

  December 31,

2011

Percentage of revenues: Top ten clients 9.2 % 8.3 % Direct hire/conversion 3.1 % 2.8 %   Bill rate: % Sequential change 1.9 % 1.6 % % Year-over-year change 4.9 % 5.2 %   Bill/Pay spread: % Sequential change 2.3 % 0.9 % % Year-over-year change 4.9 % 5.3 %   Average headcount: Contract professionals (CP) 4,941 5,001 Staffing consultants (SC) 871 855   Productivity:

Gross profit per SC

$ 63,000 $ 63,000  



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