On Assignment, Inc. (NYSE: ASGN), a diversified professional
staffing firm providing flexible and permanent staffing solutions
in specialty skills including Technology, Life Sciences, Healthcare
and Physician, today reported results for the quarter ended
September 30, 2012.
Third Quarter 2012 Highlights
- Revenues were $388.3 million and above
the high-end of the previously-announced estimates.
- Revenues were up 139.1 percent
year-over-year and included Apex Systems (which was acquired on May
15, 2012) for a full quarter. Apex Systems accounted for $202.7
million of total revenues. Revenue growth, excluding Apex Systems,
was 14.3 percent year-over-year.
- Adjusted EBITDA (a non-GAAP measurement
defined below) was $45.5 million, up 150.2 percent
year-over-year.
- Adjusted EBITDA margin (Adjusted EBITDA
as a percent of revenues) was 11.7 percent, up from 11.2 percent in
the third quarter of 2011 and 11.4 percent in the second quarter of
2012.
- Net Income was $17.4 million ($0.33 per
diluted share) compared with $7.8 million ($0.21 per diluted share)
in the third quarter of 2011 and $8.5 million ($0.19 per diluted
share) in the second quarter of 2012.
- Leverage ratio (total indebtedness to
trailing twelve months Adjusted EBITDA) was 2.96 to 1 compared with
3.79 to 1 as of May 15, 2012, the effective date of the acquisition
of Apex Systems.
Commenting on the results, Peter Dameris, President and Chief
Executive Officer of On Assignment, Inc., said, “I’m very pleased,
that despite the macro-economic challenges, we grew our revenues
year-over-year approximately 14 percent on both a pro forma basis
(including Apex) and for our legacy businesses (which excludes
Apex). At the same time, our Adjusted EBITDA (both pro forma and
legacy businesses) grew at twice the rate of our revenues. Our
results reflected an expansion of our operating and Adjusted EBITDA
margins, which did not include any synergy savings from the
acquisition of Apex.
Dameris continued, “Since the acquisition of Apex Systems, we
have paid down our bank indebtedness $50.9 million ($27.5 million
in Q3 and $23.4 million in Q2). As a result of these repayments and
the growth in our Adjusted EBITDA, our total leverage ratio at the
end of the quarter was 2.96 times trailing twelve months Adjusted
EBITDA down from the peak of 3.79 times following the acquisition
of Apex Systems.”
Third Quarter 2012 Results
Revenues were $388.3 million, up 139.1 percent year-over-year
and 37.4 percent on a sequential basis. This growth was the result
of the inclusion of Apex Systems for a full quarter, which
accounted for $202.7 million of total revenues in the quarter, and
14.3 percent combined year-over-year revenue growth of the other
business segments.
Gross profit was $119.0 million, up 118.3 percent year-over-year
and 33.8 percent sequentially. This improvement was related to the
contribution of Apex Systems, which accounted for $56.9 million of
total gross profit, and the year-over-year revenue growth of the
other business segments. Gross margin was 30.7 percent compared
with 33.6 percent for the third quarter of 2011. The year-over-year
decline in gross margin was attributable to the inclusion of Apex
Systems. Excluding Apex Systems, the combined gross margin for the
other business segments was 33.5 percent, down slightly from the
33.6 percent in the third quarter of 2011 and the second quarter of
2012. The gross margin for Apex Systems was 28.1 percent for the
quarter, up from 27.4 percent in the second quarter of 2012.
Adjusted EBITDA (earnings before interest, taxes, depreciation,
and amortization of identifiable intangible assets plus
equity-based compensation expense, impairment charges and
acquisition-related costs), was $45.5 million, up from $18.2
million in the third quarter of 2011 and $32.3 million in the
second quarter of 2012. The Adjusted EBITDA margin (Adjusted EBITDA
as a percentage of revenues) was 11.7 percent compared with 11.2
percent for the third quarter of 2011 and 11.4 percent in the
second quarter of 2012. The expansion in the Adjusted EBITDA margin
was the result of higher operating efficiencies.
Net income was $17.4 million ($0.33 per diluted share) compared
with $7.8 million (0.21 per diluted share) for the third quarter of
2011. Income before income taxes included approximately $0.8
million ($0.01 per diluted share) in non-recurring acquisition and
offering costs. Offering costs are not deductible for federal
income tax purposes and caused in a slight increase in the
Company’s effective tax rate in the quarter. Income before income
taxes in the quarter benefited from a $1.0 million ($0.01 per
diluted share) reduction in the earn-out obligation for HealthCare
Partners. Excluding these two items, net income on an adjusted
basis was $17.5 million ($0.33 per diluted share).
Financial Estimates for the Fourth Quarter of 2012
Based on revenues for the first three weeks of the fourth
quarter, On Assignment is providing financial estimates for the
quarter ending December 31, 2012, which do not include any
acquisition-related or offering costs. Those estimates follow:
- Revenues of $385 million to $389
million
- Gross Margin of 30.1 percent to 30.4
percent
- SG&A of $86 to $87 million, which
includes $1.8 million in depreciation, $3.5 million amortization
and $2.9 million in equity-based compensation expense
- Adjusted EBITDA of $37.1 million to
$40.8 million
- Effective tax rate of 42 percent
- Net income of $13.3 million to $15.4
million
- Earnings per diluted share of $0.25 to
$0.29
- Diluted shares outstanding of 53.3
million
The estimates assume approximately one less billable day in the
fourth quarter than the third quarter and year-over-year revenue
growth rate in the high 20’s for Oxford, a slight contraction for
Life Sciences, mid-to-high teens for Healthcare (which includes
estimated revenues from supporting a customer that is anticipating
a likely labor disruption), and high single digits for Physician
Staffing and approximately 10 percent for Apex. The estimates above
assume no deterioration in the staffing markets On Assignment
serves.
On Assignment will hold a conference call today at 1:30 p.m. PDT
(4:30 EDT) to review its third quarter financial results. The
dial-in number is 877-837-4158 (+1-281-913-8521 for callers outside
the United States) and the conference ID number is 37436132.
Participants should dial in ten minutes before the call. A replay
of the conference call will be available beginning today at 4:30
p.m. PDT and ending on November 8, 2012. The access number for the
replay is 855-859-2056 (1+404-537-3406 for callers outside the
United States) and the conference ID number 37436132.
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. (NYSE: 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 130 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,
and amortization of identifiable intangible assets), other terms
include Adjusted EBITDA (EBITDA plus equity-based compensation
expense, impairment charges and acquisition related costs) and Net
Income Before Acquisition Related Costs (Net Income plus
acquisition related expenses, deferred financing fees written –off
and non-recurring financing fees, 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
and our Forms 10-Q for the quarterly periods ended March 31, 2012
and June 30, 2012, as filed with the SEC on May 9, 2012 and July
30, 2012, respectively. 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 Nine Months Ended September
30, June 30, September 30, 2012 2011 2012 2012
2011 Revenues $ 388,283 $ 162,370 $ 282,685 $ 838,046 $
435,491 Cost of services 269,244 107,842
193,731 575,005 289,015
Gross profit 119,039 54,528 88,954 263,041 146,476 Selling,
general and
administrative expenses
82,543 40,792 69,300
196,944 115,546 Operating income 36,496
13,736 19,654 66,097 30,930 Interest expense (6,317 ) (750 ) (4,906
) (11,925 ) (2,264 ) Interest income 33 18
5 39 39 Income
before income
taxes
30,212 13,004 14,753 54,211 28,705 Provision for income taxes
12,779 5,237 6,238
22,880 11,909 Net income $ 17,433 $
7,767 $ 8,515 $ 31,331 $ 16,796
Earnings per share: Basic $ 0.33 $ 0.21 $ 0.19
$ 0.70 $ 0.46 Diluted $ 0.33 $ 0.21 $
0.19 $ 0.68 $ 0.44 Number of shares and
share equivalents used to
calculate earnings per
share:
Basic 52,131 37,001 44,852
44,777 36,866 Diluted
53,162 37,769 45,879
45,807 37,756
SUPPLEMENTAL SEGMENT FINANCIAL
INFORMATION (Unaudited)
(In thousands)
Three Months Ended Nine Months Ended September
30, June 30, September 30, 2012 2011 2012 2012
2011 Revenues: Technology – Apex $ 202,664
$
―
$ 98,503 $ 301,167
$
―
Oxford 88,104 70,074 88,107 254,970
195,512 290,768 70,074 186,610 556,137 195,512 Life
Sciences 40,646 41,820 40,509 122,506 114,403 Healthcare 29,390
27,091 30,527 82,796 68,671 Physician 27,479 23,385
25,039 76,607 56,905 $ 388,283 $ 162,370 $
282,685 $ 838,046 $ 435,491 Gross profit: Technology – Apex
$ 56,934
$
―
$ 26,983 $ 83,917
$
―
Oxford 31,250 25,113 31,646 90,266
69,483 88,184 25,113 58,629 174,183 69,483 Life
Sciences 14,002 14,163 13,808 41,649 39,025 Healthcare 8,483 7,458
8,799 23,622 19,242 Physician 8,370 7,794
7,718 23,587 18,726 $ 119,039 $ 54,528 $ 88,954 $
263,041 $ 146,476
SELECTED CASH FLOW INFORMATION
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended September
30, June 30, September 30, 2012 2011 2012 2012
2011 Cash (used in) provided
by operations
$ 23,531 $ 2,109 $ (15,865 ) $ 14,639 $ 15,054 Capital expenditures
3,712 1,374 5,052 10,883 6,046
SELECTED CONSOLIDATED BALANCE SHEET
DATA (Unaudited)
(In thousands)
September 30, June 30, 2012
2011 2012 Cash and cash equivalents $ 13,873 $ 13,245 $
18,423 Accounts receivable, net 247,731 96,485 238,535 Goodwill and
intangible assets, net 772,598 261,053 775,795 Total assets
1,098,935 406,729 1,094,748 Current portion of long-term debt
10,000 5,000 13,650 Total current liabilities 129,480 64,985
125,823 Working capital 155,414 58,999 153,319 Long-term debt
429,088 83,000 452,938 Other long-term liabilities 23,912 20,076
25,401 Stockholders’ equity 516,455 238,668 490,586
RECONCILIATION OF GAAP NET INCOME AND
EARNINGS PER SHARE TO NON-GAAP ADJUSTED EBITDA AND ADJUSTED
EBITDA PER DILUTED SHARE (Unaudited)
(In thousands, except per share
amounts)
Three Months Ended September 30, June 30, 2012
2011 2012 Net income $ 17,433 $ 0.33 $
7,767 $ 0.21 $ 8,515 $ 0.19 Interest expense, net
6,284 0.12 732 0.02 4,901 0.11 Provision for income taxes 12,779
0.24 5,237 0.14 6,238 0.14 Depreciation 1,817 0.03 1,677 0.04 1,580
0.03 Amortization of intangibles 3,320 0.06
663 0.02 2,205 0.05 EBITDA 41,633 0.78 16,076
0.43 23,439 0.51 Equity-based compensation 3,075 0.06 1,838 0.05
2,308 0.05 Acquisition-related costs 784 0.01
265 0.01 6,562 0.14 Adjusted EBITDA $ 45,492 $
0.86 (1 ) $ 18,179 $ 0.48 (1 ) $ 32,309 $ 0.70 (1 ) Weighted
average common and common equivalent shares outstanding (diluted)
53,162 37,769 45,879 Nine
Months Ended September 30, 2012 2011 Net income $ 31,331
$ 0.68 $ 16,796 $ 0.44 Interest expense, net 11,886
0.26 2,225 0.06 Provision for income taxes 22,880 0.50 11,909 0.32
Depreciation 4,826 0.11 4,911 0.13 Amortization of intangibles
6,159 0.13 1,633 0.04 EBITDA 77,082 1.68 37,474 0.99 Equity-based
compensation 6,574 0.14 5,084 0.13 Acquisition-related costs 9,838
0.21 992 0.03 Adjusted EBITDA $ 93,494 $ 2.04 (1) $ 43,550 $ 1.15
Weighted average common
and common equivalent
shares outstanding (diluted)
45,807 37,756 _______
(1) Does not foot due to
rounding
RECONCILIATION OF GAAP NET INCOME AND
EARNINGS PER SHARE TO NET INCOME BEFORE ACQUISITION-RELATED
COSTS AND EARNINGS PER SHARE BEFORE ACQUISITION-RELATED COSTS
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended September 30, June 30, 2012
2011 2012 Net income $ 17,433 $ 0.33 $ 7,767 $
0.21 $ 8,515 $ 0.19 Non-recurring charges related to
refinancing, net of income taxes ― ― ― ― 701 0.02
Acquisition-related costs, net of income taxes 649
0.01 158 ― 3,788 0.08 Net income before
acquisition-related costs
$ 18,082 $ 0.34 $ 7,925 $ 0.21 $ 13,004 $ 0.28
(1)
Weighted average common
and common equivalent
shares outstanding (diluted)
53,162
37,769 45,879
Nine Months Ended September 30, 2012 2011 Net
income $ 31,331 $ 0.68 $ 16,796 $ 0.44 Non-recurring
charges related to refinancing, net of income taxes 701 0.02 ― ―
Acquisition-related costs, net of income taxes 5,888
0.13 576 0.02 Net income before acquisition-related
costs $ 37,920 $ 0.83 $ 17,372 $ 0.46 Weighted average
common
and common equivalent
shares outstanding (diluted)
45,807
37,756 _______
(1) Does not foot due to rounding
RECONCILIATION OF ESTIMATED GAAP NET
INCOME TO ESTIMATED NON-GAAP EBITDA AND ADJUSTED EBITDA
(Unaudited)
(In thousands)
Estimated Range of Results Quarter Ending December
31, 2012 Net income $ 13,300 $ 15,400 Interest
expense, net 6,000 6,000 Provision for income taxes 9,600 11,200
Depreciation and amortization 5,300 5,300 EBITDA
34,200 37,900 Equity-based compensation 2,900 2,900
Adjusted EBITDA $ 37,100 $ 40,800
SUPPLEMENTAL FINANCIAL INFORMATION –
REVENUES AND GROSS MARGINS (Unaudited)
(Dollars in thousands)
Technology Healthcare
Apex Oxford Total Life Sciences Allied
Healthcare Nurse Travel Total Physician Consolidated
Revenues: Q3 2012 $ 202,664 $ 88,104 $ 290,768 $ 40,646 $ 15,594 $
13,796 $ 29,390 $ 27,479 $ 388,283 Q2 2012 $ 98,503 $ 88,107 $
186,610 $ 40,509 $ 13,704 $ 16,823 $ 30,527 $ 25,039 $ 282,685 %
Sequential change 105.7 % 0.0 % 55.8 % 0.3 % 13.8 % (18.0 %) (3.7
%) 9.7 % 37.4 % Q3 2011 ―
$ 70,074 $ 70,074 $ 41,820 $ 11,735 $ 15,356 $ 27,091 $ 23,385 $
162,370 % Year-over-year change ― 25.7 % N/M (2.8 %) 32.9 % (10.2
%) 8.5 % 17.5 % 139.1 % Gross margins: Q3 2012 28.1 % 35.5 %
30.3 % 34.4 % 32.5 % 24.8 % 28.9 % 30.5 % 30.7 % Q2 2012 27.4 %
35.9 % 31.4 % 34.1 % 32.0 % 26.3 % 28.8 % 30.8 % 31.5 % Q3 2011 ―
35.8 % 35.8 % 33.9 % 31.7 % 24.3 % 27.5 % 33.3 % 33.6 %
Average number of staffing consultants: Q3 2012 650 512 1,162 166
83 42 125 103 1,556 Q2 2012 633 501 1,134 160 81 42 123 98 1,515 Q3
2011 ― 446 446 164 79 39 118 88 816 _______ N/M – not meaningful
SUPPLEMENTAL FINANCIAL INFORMATION –
KEY METRICS (Unaudited)
Technology Healthcare Apex
Oxford Total Life Sciences Allied Healthcare
Nurse Travel Total Physician Consolidated Average
number of customers: Q3 2012 607 650 1,257 928 529 142 671 194
3,050 Q2 2012 585 648 1,233 914 508 139 647 186 2,980 Q3 2011 ― 596
596 915 489 127 616 161 2,288 Top 10 customers as a
percentage of revenue: Q3 2012 33.2 % 15.5 % 23.5 % 22.6 % 29.4 %
34.7 % 23.4 % 19.2 % 17.6 % Q2 2012 33.3 % (1 ) 16.4 % 23.5 % 23.3
% 24.6 % 23.3 % 17.3 % 19.8 % 17.5 % (1 ) Q3 2011 ― 13.0 % 13.0 %
21.0 % 22.4 % 26.6 % 17.9 % 20.3 % 7.5 % Average bill rate:
Q3 2012 $ 59.1 $ 120.2 $ 69.4 $ 35.2 $ 37.2 $ 68.3 $ 46.7 $ 181.6 $
63.5 Q2 2012 $ 59.1 $ 119.5 $ 74.6 $ 35.2 $ 37.4 $ 68.5 $ 47.7 $
175.1 $ 65.0 Q3 2011 ― $ 114.9 $ 114.9 $ 35.0 $ 36.8 $ 70.6 $ 48.9
$ 178.7 $ 65.6 Gross profit per staffing consultants: Q3
2012 $ 88,000 $ 61,000 $ 76,000 $ 84,000 $ 61,000 $ 81,000 $ 68,000
$ 82,000 $ 76,000 Q2 2012 $ 43,000 (2 ) $ 63,000 $ 58,000 $ 86,000
$ 54,000 $ 105,000 $ 72,000 $ 79,000 $ 59,000 (2 ) Q3 2011 ― $
56,000 $ 56,000 $ 86,000 $ 47,000 $ 97,000 $ 63,000 $ 89,000 $
67,000 _______ (1) Top 10 customers as a percentage of revenue for
Apex and Consolidated includes pro forma Apex Systems data for the
quarter ended June 30, 2012. (2) Actual, reported Apex and
Consolidated metrics reflect six weeks of Apex data. A full quarter
would have been $85,000 for Apex and $77,000 for Consolidated.
SUPPLEMENTAL FINANCIAL INFORMATION –
KEY METRICS (Unaudited)
Three Months Ended (3) September 30,
2012
June 30,
2012
Percentage of revenues: Top ten clients 17.6 % 17.5 % Direct
hire/conversion 1.9 % 2.1 % Bill rate: (4) % Sequential
change (2.2 %) (4.3 %) % Year-over-year change (3.2 %) 0.7 %
Bill/Pay spread: % Sequential change (4.7 %) (10.5 %) %
Year-over-year change (12.0 %) (6.9 %) Average headcount:
Contract professionals (CP) 11,871 11,462 Staffing consultants (SC)
1,556 1,515 Productivity: Gross profit per SC $ 76,000 $
59,000
(5)
_______ (3) Information for the three months ended June 30,
2012 includes six weeks of Apex activity, whereas information for
the three months ended September 30, 2012 includes Apex activity
for the full quarter. (4) Change principally due to the inclusion
of Apex for a full quarter for the three months ended September 30,
2012. (5) A full quarter of contribution from Apex would have
resulted in $77,000 of gross profit per SC.
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