On Assignment Reports Results for First Quarter 2013
On Assignment Reports Results for First Quarter 2013
Revenues, Income, EPS & Adjusted EBITDA above High-end of Previously Announced Estimates
On Assignment, Inc. has reported results for the quarter ended March 31, 2013.
First Quarter Highlights
Revenues were $389.2 million, up 13.6 percent year-over-year on a pro forma basis and 2.3 percent sequentially. Pro forma results, as used herein, assume that our acquisition of Apex Systems occurred on January 1, 2012. Pro forma operating results are summarized in a table below.
Income from continuing operations was $10.6 million ($0.20 per diluted share), up from $9.7 million ($0.18 per diluted share) in the fourth quarter of 2012 and $5.0 million ($0.13 per diluted share) in the first quarter of 2012. Income from continuing operations excludes the operating results of the Nurse Travel division, which are reported as discontinued operations.
Adjusted income from continuing operations (a non-GAAP measure set forth in the table below) was $18.8 million ($0.35 per diluted share).
Adjusted EBITDA (a non-GAAP measure defined below) was $34.1 million, up from $28.4 million in Q1 of 2012 on a pro forma basis.
Adjusted EBITDA margin of 8.8 percent, up from 8.3 percent in Q1 2012 on a pro forma basis.
Effective tax rate was 42.3 percent.
Percentage of gross profit converted into operating income was 21.0 percent, up from 17.9 percent in Q1 2012 on a pro forma basis. The percentage of gross profit converted into Adjusted EBITDA was 30.1 percent, up from 27.8 percent in Q1 2012 on a pro forma basis.
Leverage ratio (total indebtedness to trailing twelve months Adjusted EBITDA) was 2.49 to 1, down from 2.88 to 1 at December 31, 2012.
Commenting on the results, Peter Dameris, President and Chief Executive Officer of On Assignment, Inc., said, “Results for the quarter reflect a strong start for 2013. We believe we are well positioned to meet or exceed our financial targets for the full year. Demand for our services is strong and in most of our segments our growth is outpacing the market. We are also seeing steady improvement in our operating efficiency as evidenced by the year-over-year expansion in our Adjusted EBITDA margin and the improvement in the percentage of gross profit we converted into operating income and Adjusted EBITDA.
“The supply of technical resources continues to tighten, which provides us with both opportunities and challenges. As these resources become scarcer, we believe all our customers, large and small, will recognize the need to remain competitive with compensation in order to timely acquire the talent they need to execute their operating plans. This circumstance should result in higher bill rates later in the year.”
Dameris continued, “We are currently working on a new $500 million credit facility that will replace our existing facility. This new facility will provide us with greater financial flexibility at a lower effective borrowing rate. We expect this new facility will be in place by mid-May.”
First Quarter 2013 Results
Revenues were $389.2 million in the quarter, up 148 percent year-over-year and 2.3 percent on a sequential basis. On a pro forma basis, revenues were up 13.6 percent year-over-year. Revenues for Apex Systems were up 14.4 percent year-over-year and revenues of the other business segments on a combined basis were up 12.6 percent year-over-year.
Gross profit was $113.3 million, up 115 percent year-over-year and down 2.0 percent sequentially. The year-over-year growth was due to the inclusion of Apex Systems, which accounted for $55.6 million, or 49.1 percent, of total gross profit and the year-over-year organic growth of the other business segments. The year-over-year compression in gross margin was mainly attributable to the inclusion of Apex Systems, which has a lower gross margin than the Company's other business segments.
Selling, general and administrative expenses were $84.2 million, up from $80.2 million in the fourth quarter of 2012. The sequential increase related to headcount and other expenses added during the current and preceding quarters mainly in the branches to drive growth in 2013 and in the corporate departments to enhance our platform to support the larger organization.
Amortization of intangible assets was $5.4 million, down from $11.9 million in the fourth quarter of 2012. The sequential decrease is attributable to an adjustment made in Q4 of approximately $5.0 million for differences between the finalized asset valuation and amortization rates for the customer relationship intangible asset related to the acquisition of Apex Systems and the preliminary determinations reflected in Q2 and Q3. Excluding the Q4 adjustment, amortization of intangible assets was down $1.5 million sequentially.
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization of identifiable intangible assets plus equity-based compensation expense, impairment charges, acquisition-related costs and fees and expenses of the outside consulting firm assisting with the strategic planning initiatives), was $34.1 million, up from $15.1 million in the first quarter of 2012, and $28.4 million on a pro forma basis. The Adjusted EBITDA margin (Adjusted EBITDA as a percentage of revenues) was 8.8 percent compared with 8.3 percent on a pro forma basis for the first quarter of 2012.
The effective tax rate for the quarter was 42.3 percent compared with 43.1 percent for the full year 2012. The decrease in the effective tax rate related to less impact on the effective tax rate for the full year of permanent differences between financial reporting and taxable income.
Income from continuing operations was $10.6 million ($0.20 per diluted share) compared with $5.0 million ($0.13 per diluted share) for the first quarter of 2012 and $6.9 million ($0.13 per diluted share) on a pro forma basis for the first quarter of 2012. Income from continuing operations before income taxes for the quarter included approximately $0.2 million in non-recurring acquisition costs and $0.5 million related to fees and expenses of the consulting firm assisting the company with its strategic planning.
Net income, which is comprised of income from continuing operations, the gain on the sale of the Nurse Travel division and income from discontinued operations, was $24.6 million ($0.46 per diluted share) compared with $11.3 million ($0.21 per diluted share) in Q1 of 2012.