For Release
November 2, 2009
1:00 p.m. PT
Contacts:
Jim Brill
SVP, Finance and Chief Financial Officer
(818) 878-7900
| On Assignment Reports Third Quarter Results |
Record Gross Margin
CALABASAS, Calif., November 2, 2009 -- On Assignment, Inc. (NASDAQ: ASGN), a diversified professional staffing firm providing flexible and permanent staffing solutions in specialty skills including Laboratory/Scientific, Healthcare/Nursing, Physicians, Medical Financial, Information Technology and Engineering, today reported results for the quarter ended September 30, 2009.
Third Quarter 2009 Financial Highlights
| - | Revenues for the third quarter of 2009 were $98.1 million down from $101.8 million in the second quarter of 2009. Excluding the Nurse travel group revenues were down $466,000 or 0.5%. |
| - | Gross Margin was 33.4% up from 32.8% in the second quarter of 2009. |
| - | Net Income was $1.5 million, or $0.04 per diluted share, up from $0.6 million or $0.02 per diluted share in the second quarter of 2009. |
| - | Adjusted EBITDA (a non-GAAP measurement defined below) was $8.7 million or 8.9% of revenues, up from $7.5 million or 7.3% of revenue in the second quarter of 2009. |
| - | Term Debt was reduced by $18.0 million to $82.9 million in the quarter. |
For the third quarter of 2009, the Life Sciences segment revenues were $22.6 million, down 0.7% from $22.7 million in the second quarter of 2009. The Healthcare segment revenues, which include Nurse Travel and Allied Healthcare lines of business, were down 9.6% to $21.0 million compared with $23.3 million in the second quarter of 2009. Nurse Travel revenues were $10.7 million, down 23.6% from $14.0 million in the second quarter 2009, Allied Healthcare revenues were $10.3 million, up 11.8% from $9.2 million in the second quarter of 2009. The Physician segment revenues were $22.6 million, down 3.1% from $23.3 million in the second quarter of 2009, and the IT and Engineering segment revenues were $31.9 million, down 2.0% from $32.5 million in the second quarter of 2009.
Peter Dameris, President and Chief Executive Officer of On Assignment, Inc. said, “During the quarter, we executed very well against our stated 2009 operating objectives of sustaining gross and EBITDA margins.” Dameris concluded, “For the first time since the third quarter of 2008, the number of billable consultants out on assignment was greater at the end of the quarter than at the beginning. This placement trend should permit us to grow revenues sequentially on a same number of billable day basis in the seasonally impacted fourth quarter.”
Jim Brill, Senior Vice President and Chief Financial Officer of On Assignment, Inc. stated, “Our third quarter gross margin was 33.4%, up from 32.8% in the second quarter of 2009. In the third quarter of 2009 gross margin in Life Sciences was 33.6%, Healthcare gross margin was 29.9%, while Physician staffing gross margin was 33.4% and IT and Engineering gross margin was 35.7%." Brill continued, "We ended the quarter with $35.1 million in cash and cash equivalents, which was down from $44.5 million at the end of the preceding quarter. After generating $9.2 million in cash flow from operations during the quarter, we paid down our bank debt by $18.0 million to $82.9 million. Capital expenditures were $1.1 million, amortization of intangibles was $1.5 million, depreciation was $1.4 million and equity-based compensation expense was $1.5 million."
Fourth Quarter 2009 Financial Estimates
Based on revenues in the first four weeks of the fourth quarter of 2009, taking into account the Company’s normal seasonal patterns and assuming no further deterioration in the staffing markets On Assignment serves, the Company’s financial estimates for the quarter ending December 31, 2009 are as follows:
| · | Revenues of $93 to $98 million |
| · | Gross Margin of 33.25% to 33.45% |
| · | SG&A of $29.3 to $29.6 million, including depreciation of approximately $1.4 million, amortization of approximately $1.5 million and approximately $1.2 million in equity-based compensation expense |
| · | Adjusted EBITDA of $5.4 to $7.6 million |
| · | Net income (loss) of ($0.2) to $1.0 million |
| · | Earnings (loss) per diluted share of ($0.00) to $0.03 |
On Assignment will hold its quarterly conference call to discuss its third quarter 2009 financial results this afternoon, Monday, November 2, 2009 at 1:30 p.m. Pacific Time. Interested parties are invited to listen to the conference call by dialing (877) 805-4089 or (281) 913-8521 ten minutes before the call. The conference code is 34962901. A replay of the conference call can be accessed from approximately 3:30 p.m. Pacific Time Monday, November 2, 2009 through Monday, November 9, 2009 by dialing (800) 642-1687 or (706) 645-9291 with the access code 34962901.
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. Institutional investors can access the call via Thomson/CCBN's password-protected event management site, StreetEvents at www.streetevents.com.
About On Assignment
On Assignment, Inc. is a diversified professional staffing firm providing flexible and permanent staffing solutions in specialty skills including Laboratory/Scientific, Healthcare/Nursing, Physicians, Medical Financial, Information Technology and Engineering. The corporate headquarters are located in Calabasas, California. On Assignment, Inc. was founded in 1985 as On Assignment/Lab Support and went public in 1992. The Company’s branch network encompasses approximately 71 branch offices across the United States, United Kingdom, Netherlands, Ireland and Belgium and the Company also provides physicians in Australia and New Zealand.
Reasons for Presentation of Non-GAAP Financial Measures
Statements made in this release and the Supplemental Financial Information accompanying this release includes 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), another term is Adjusted EBITDA (EBITDA plus equity-based compensation expense), which 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 2009. 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, 2008, as filed with the SEC on March 16, 2009 and our Quarterly Reports on Form 10-Q for the quarters ending March 31, 2009 and June 30, 2009, as filed with the SEC on May 11, 2009 and August 10, 2009 respectively. 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)
| | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Revenues | | $ | 98,053 | | | $ | 161,947 | | | $ | 101,834 | | | $ | 316,689 | | | $ | 470,442 | |
| Cost of Services | | | 65,280 | | | | 109,138 | | | | 68,437 | | | | 213,535 | | | | 319,541 | |
| Gross Profit | | | 32,773 | | | | 52,809 | | | | 33,397 | | | | 103,154 | | | | 150,901 | |
Selling, General and Administrative Expenses | | | 28,451 | | | | 39,190 | | | | 29,985 | | | | 91,565 | | | | 117,713 | |
| Operating Income | | | 4,322 | | | | 13,619 | | | | 3,412 | | | | 11,589 | | | | 33,188 | |
| Interest Expense | | | (1,777 | ) | | | (1,863 | ) | | | (2,059 | ) | | | (4,923 | ) | | | (6,999 | ) |
| Interest Income | | | 34 | | | | 158 | | | | 47 | | | | 137 | | | | 589 | |
| Income before income taxes | | | 2,579 | | | | 11,914 | | | | 1,400 | | | | 6,803 | | | | 26,778 | |
| Income Tax Provision | | | 1,125 | | | | 4,977 | | | | 830 | | | | 3,131 | | | | 11,346 | |
| Net Income | | $ | 1,454 | | | $ | 6,937 | | | $ | 570 | | | $ | 3,672 | | | $ | 15,432 | |
| | | | | | | | | | | | | | | | | | | | | |
| Basic Earnings Per Share | | $ | 0.04 | | | $ | 0.20 | | | $ | 0.02 | | | $ | 0.10 | | | $ | 0.44 | |
| | | | | | | | | | | | | | | | | | | | | |
| Diluted Earnings Per Share | | $ | 0.04 | | | $ | 0.19 | | | $ | 0.02 | | | $ | 0.10 | | | $ | 0.43 | |
| | | | | | | | | | | | | | | | | | | | | |
Weighted Average Number of Shares Outstanding | | | 36,068 | | | | 35,546 | | | | 36,181 | | | | 35,978 | | | | 35,413 | |
| | | | | | | | | | | | | | | | | | | | | |
Weighted Average Common and Common Equivalent Shares Outstanding--Diluted | | | 36,578 | | | | 36,071 | | | | 36,385 | | | | 36,416 | | | | 35,795 | |
| | | | | | | | | | | | | | | | | | | | | |
SUPPLEMENTAL SEGMENT FINANCIAL INFORMATION
(In thousands)
(Unaudited)
| | | | | | |
| | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | |
| Life Sciences | | $ | 22,590 | | | $ | 33,948 | | | $ | 22,749 | | | $ | 70,715 | | | $ | 98,653 |
| | | | | | | | | | | | | | | | | | | | |
| Healthcare Staffing | | | 21,019 | | | | 47,999 | | | | 23,252 | | | | 75,782 | | | | 138,368 |
| | | | | | | | | | | | | | | | | | | | |
| Physician Staffing | | | 22,594 | | | | 23,612 | | | | 23,320 | | | | 67,658 | | | | 66,005 |
| | | �� | | | | | | | | | | | | | | | | | |
| IT and Engineering | | | 31,850 | | | | 56,388 | | | | 32,513 | | | | 102,534 | | | | 167,416 |
| Consolidated Revenues | | $ | 98,053 | | | $ | 161,947 | | | $ | 101,834 | | | $ | 316,689 | | | $ | 470,442 |
| | | | | | | | | | | | | | | | | | | | |
| Gross Profit: | | | | | | | | | | | | | | | | | | | |
| Life Sciences | | $ | 7,599 | | | $ | 11,609 | | | $ | 7,244 | | | $ | 22,945 | | | $ | 32,926 |
| | | | | | | | | | | | | | | | | | | | |
| Healthcare Staffing | | | 6,279 | | | | 12,265 | | | | 6,616 | | | | 21,202 | | | | 35,121 |
| | | | | | | | | | | | | | | | | | | | |
| Physician Staffing | | | 7,536 | | | | 7,455 | | | | 7,584 | | | | 21,662 | | | | 19,967 |
| | | | | | | | | | | | | | | | | | | | |
| IT and Engineering | | | 11,359 | | | | 21,480 | | | | 11,953 | | | | 37,345 | | | | 62,887 |
| Consolidated Gross Profit | | $ | 32,773 | | | $ | 52,809 | | | $ | 33,397 | | | $ | 103,154 | | | $ | 150,901 |
| | | | | | | | | | | | | | | | | | | | |
SELECTED CASH FLOW INFORMATION
(In thousands)
(Unaudited)
| | | | | | |
| | | | | | | | | | | | | | | |
| Cash provided by Operations | | $ | 9,167 | | | $ | 10,281 | | | $ | 13,244 | | | $ | 40,569 | | | $ | 25,726 |
| Capital Expenditures | | | 1,145 | | | | 1,348 | | | | 947 | | | | 3,730 | | | | 6,344 |
SELECTED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
(Unaudited)
| | | |
| | | | | | | | | |
| Cash and Cash Equivalents | | $ | 35,068 | | | $ | 48,737 | | | $ | 44,505 |
| Accounts Receivable, net | | | 49,386 | | | | 87,567 | | | | 51,226 |
| Intangible Assets, net | | | 229,654 | | | | 227,807 | | | | 231,149 |
| Total Assets | | | 350,128 | | | | 402,423 | | | | 365,176 |
Current Portion of Long-Term Debt | | | - | | | | 1,040 | | | | - |
| Current Liabilities | | | 38,769 | | | | 48,156 | | | | 38,831 |
| Long-Term Debt | | | 82,913 | | | | 134,872 | | | | 100,913 |
| Other Long-Term Liabilities | | | 2,872 | | | | 5,709 | | | | 3,056 |
| Stockholders’ Equity | | | 225,574 | | | | 213,686 | | | | 222,376 |
RECONCILIATION OF GAAP NET INCOME AND EARNINGS PER SHARE TO NON-GAAP EBITDA AND EBITDA PER SHARE
(In thousands, except per share amounts)
(Unaudited)
| | | |
| | | | | | | | | |
| Net Income | | $ | 1,454 | | | $ | 0.04 | | | $ | 6,937 | | | $ | 0.19 | | | $ | 570 | | | $ | 0.02 |
| Interest Expense, net | | | 1,743 | | | | 0.05 | | | | 1,705 | | | | 0.05 | | | | 2,012 | | | | 0.06 |
| Income Tax Provision | | | 1,125 | | | | 0.03 | | | | 4,977 | | | | 0.14 | | | | 830 | | | | 0.02 |
| Depreciation | | | 1,377 | | | | 0.04 | | | | 1,202 | | | | 0.03 | | | | 1,460 | | | | 0.04 |
| Amortization of Intangibles | | | 1,495 | | | | 0.04 | | | | 2,368 | | | | 0.07 | | | | 1,538 | | | | 0.04 |
| EBITDA | | | 7,194 | | | | 0.20 | | | | 17,189 | | | | 0.48 | | | | 6,410 | | | | 0.18 |
| Equity-based Compensation | | | 1,514 | | | | 0.04 | | | | 1,596 | | | | 0.04 | | | | 1,062 | | | | 0.03 |
| Adjusted EBITDA | | $ | 8,708 | | | $ | 0.24 | | | $ | 18,785 | | | $ | 0.52 | | | $ | 7,472 | | | $ | 0.21 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Weighted Average Common and Common Equivalent Shares Outstanding | | | 36,578 | | | | | | | | 36,071 | | | | | | | | 36,385 | | | | |
| | | |
| | | | | | |
| Net Income | | $ | 3,672 | | | $ | 0.10 | | | $ | 15,432 | | | $ | 0.43 |
| Interest Expense, net | | | 4,786 | | | | 0.13 | | | | 6,410 | | | | 0.18 |
| Income Tax Provision | | | 3,131 | | | | 0.08 | | | | 11,346 | | | | 0.32 |
| Depreciation | | | 4,349 | | | | 0.12 | | | | 3,775 | | | | 0.10 |
| Amortization of Intangibles | | | 4,571 | | | | 0.13 | | | | 7,068 | | | | 0.20 |
| EBITDA | | | 20,509 | | | | 0.56 | | | | 44,031 | | | | 1.23 |
| Equity-based Compensation | | | 3,721 | | | | 0.11 | | | | 4,742 | | | | 0.13 |
| Adjusted EBITDA | | $ | 24,230 | | | $ | 0.67 | | | $ | 48,773 | | | $ | 1.36 |
| | | | | | | | | | | | | | | | |
Weighted Average Common and Common Equivalent Shares Outstanding | | | 36,416 | | | | | | | | 35,795 | | | | |
| | | | | | | | | | | | | | | | |
RECONCILIATION OF ESTIMATED GAAP NET INCOME TO ESTIMATED NON-GAAP EBITDA AND ADJUSTED EBITDA
(In thousands)
(Unaudited)
| | | Estimated Range of Results |
| | | Quarter Ending |
| | | |
| Net Income (loss) | | $ | (200 | ) | | $ | 1,000 |
| Interest Expense | | | 1,700 | | | | 1,700 |
| Income Tax Provision (benefit) | | | (100 | ) | | | 800 |
| Depreciation and Amortization | | | 2,900 | | | | 2,900 |
| EBITDA | | | 4,300 | | | | 6,400 |
| Equity-based Compensation | | | 1,100 | | | | 1,200 |
| Adjusted EBITDA | | $ | 5,400 | | | $ | 7,600 |
| | | | | | | | |
SUPPLEMENTAL FINANCIAL INFORMATION – REVENUES AND GROSS MARGINS
(Dollars in thousands)
(Unaudited)
| | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Revenues: | | | | | | | | | | | | | | | |
| | Q3 2009 | | | $ | 22,590 | | $ | 10,287 | | $ | 10,732 | | $ | 21,019 | | $ | 22,594 | | $ | 31,850 | | $ | 98,053 |
| | Q2 2009 | | | $ | 22,749 | | $ | 9,204 | | $ | 14,048 | | $ | 23,252 | | $ | 23,320 | | $ | 32,513 | | $ | 101,834 |
| % Sequential Change | | | | (0.7%) | | | 11.8% | | | (23.6%) | | | (9.6%) | | | (3.1%) | | | (2.0%) | | | (3.7%) |
| | Q3 2008 | | | $ | 33,948 | | $ | 14,552 | | $ | 33,447 | | $ | 47,999 | | $ | 23,612 | | $ | 56,388 | | $ | 161,947 |
| % Year-over-Year Change | | | | (33.5%) | | | (29.3%) | | | (67.9%) | | | (56.2%) | | | (4.3%) | | | (43.5%) | | | (39.5%) |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Gross Margins: | | | | | | | | | | | | | | | | | | | | | | |
| | Q3 2009 | | | | 33.6% | | | 34.5% | | | 25.4% | | | 29.9% | | | 33.4% | | | 35.7% | | | 33.4% |
| | Q2 2009 | | | | 31.8% | | | 33.9% | | | 24.9% | | | 28.5% | | | 32.5% | | | 36.8% | | | 32.8% |
| | Q3 2008 | | | | 34.2% | | | 31.8% | | | 22.8% | | | 25.6% | | | 31.6% | | | 38.1% | | | 32.6% |
SUPPLEMENTAL FINANCIAL INFORMATION – KEY METRICS
(Unaudited)
| | | |
| | | | | |
| Percentage of Revenues: | | | | |
| Top Ten Clients | | | 8.2% | | | 8.7% |
| Direct Hire/Conversion | | | 2.0% | | | 1.9% |
| | | | | | | |
| Bill Rate: | | | | | | |
| % Sequential Change | | | (1.3%) | | | (0.2%) |
| % Year-over-Year Change | | | (1.6%) | | | (0.1%) |
| | | | | | | |
| Bill/Pay Spread: | | | | | | |
| % Sequential Change | | | 0.7% | | | (2.0%) |
| % Year-over-Year Change | | | (2.5%) | | | (2.0%) |
| | | | | | | |
| Average Headcount: | | | | | | |
| Contract Professionals (CP) | | | 3,329 | | | 3,344 |
| Staffing Consultants (SC) | | | 569 | | | 587 |
| | | | | | | |
| Productivity: | | | | | | |
| Gross Profit per SC | | | $ 58,000 | | | $ 57,000 |
| | | | | | | |
