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On Assignment Reports First Quarter 2012 Results

On Assignment Reports First Quarter 2012 Results

Record Quarterly Revenues up 29% Year-over-Year and 3% sequentially

Record 1st Quarter Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA up 49% Year-over-Year

EPS (excluding acquisition related expenses) $0.18 vs. $0.09 in the 1st Quarter of 2011

On Assignment, Inc. 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 labour 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

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