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On Assignment Reports Results for First Quarter of 2016

CALABASAS, Calif., Apr 27, 2016 (BUSINESS WIRE) -- On Assignment, Inc. ASGN, -6.99% 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...


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