On Assignment releases Q2 results confirming gross profit up 11.7% YoY
Second Quarter Highlights
Effective June 5, 2015, acquired Creative Circle, LLC ("Creative Circle"), one of the largest digital/creative staffing firms inNorth America, for $570 million in cash and stock, plus contingent consideration of up to $30 million.
Revenues were $485.3 million up 11.7 percent year-over-year (12.8 percent on a constant currency basis).
Revenues, excluding the contribution from acquisitions, were $463.5 million ($468.1 million on a constant currency basis), up 6.7 percent (7.8 percent on a constant currency basis) and above the high-end of our financial estimates.
Adjusted EBITDA (a non-GAAP measure defined below) was $56.0 million. Adjusted EBITDA included $4.9 million from Creative Circle. Excluding the contribution from Creative Circle, Adjusted EBITDA was $51.1 million and towards the high-end of our financial estimates.
Adjusted income from continuing operations (a non-GAAP measure defined below) was $32.3 million ($0.61 per diluted share). Excluding the contribution from Creative Circle, Adjusted income from continuing operations was $28.8 million($0.55 per share) and was towards the high-end of our financial estimates.
In conjunction with the Creative Circle acquisition, entered into a new $975 million credit facility, comprised of an $825 million seven-year term loan and a $150 million revolving credit facility. After the closing of Creative Circle, $875 millionwas outstanding under the facility.
Leverage ratio (total indebtedness to trailing 12 months Adjusted EBITDA) was 3.51 to 1 at June 30, 2015, up from 2.06 to 1 at December 31, 2014.
Revenues for the quarter were $485.3 million ($489.9 million on a constant currency basis), up 11.7 percent (12.8 percent on a constant currency basis) year-over-year. Constant currency revenues and growth rates for the quarter were calculated using the foreign currency exchange rates from the same period in the prior year.
Revenues included $21.8 million from two businesses acquired during the quarter (Creative Circle and a small Life Sciences business in Europe), which are included in consolidated results from the date of acquisition. The revenue contribution from Creative Circle was $19.6 million, and the contribution from the Life Sciences business was $2.2 million. Revenues, excluding the contribution from acquisitions, were $463.5 million ($468.1 million on a constant currency basis), up 6.7 percent (7.8 percent on a constant currency basis) and above the high-end of our financial estimates.
Operating results of Creative Circle are included in the Apex Segment. The Life Sciences European business is now included in the Oxford Segment for reporting purposes. The operating and statistical data for the Oxford Segment have been adjusted to reflect this change in reporting.
Direct hire and conversion revenues were $28.7 million, up 33.8 percent year-over-year, which included $1.5 million from Creative Circle. CyberCoders accounted for 72.6 percent of the total and was up 28.0 percent year-over-year. Direct hire and conversion revenues were 5.9 percent of total revenues for the quarter, up from 4.9 percent in the second quarter of 2014.
The company's largest segment, Apex, accounted for 69.8 percent of total revenues. Apex grew 13.7 percent year-over-year, on a reported basis, which included $19.6 million in revenues from Creative Circle. Excluding the contribution from Creative Circle, Apex grew 7.1 percent year-over-year for the quarter.
The Oxford Segment accounted for 30.2 percent of total revenues. Oxford grew 7.4 percent year-over-year on a reported basis, which included $2.2 million in revenues from an acquired business. On a constant currency basis and excluding the contribution from the acquired Life Sciences business, Oxford grew 9.1 percent year-over-year for the quarter.
Gross profit was $158.5 million, up $16.6 million or 11.7 percent year-over-year. Gross margin for the quarter was 32.7 percent.
Selling, general and administrative (“SG&A”) expenses were $118.9 million (24.5 percent of revenues), up from $99.6 million(22.9 percent of revenues) in the second quarter of 2014. SG&A expenses for the quarter included SG&A from Creative Circle of$4.0 million, acquisition, integration and strategic planning expenses of $6.9 million, and $0.5 million related to the write-off of an IT application. Excluding these expenses, SG&A expense was approximately $107.5 million and within our previously announced financial estimates.
Commenting on the results, Peter Dameris, president and chief executive officer of On Assignment, Inc., said, "We are pleased with our strategic and operational accomplishments during the quarter. The acquisition of Creative Circle positions us well in the fast growing digital/creative staffing space allowing us to engage the CMO along with the CIO to provide solutions that meet the growing needs of both groups while driving greater demand for our traditional services.
"Our financial performance for the quarter was enhanced by the acquisition of Creative Circle, which was accretive on a GAAP and an Adjusted Earnings basis. Excluding the contribution from Creative Circle, our results (adjusted mainly for acquisition-related costs and the write-off of loan costs associated with our old credit facility) were at or above the high-end of our previously announced financial estimates for the quarter. Our revenue growth rates were higher than expected and reflected a slight re-acceleration in our growth rate for the first time in four quarters. Our cash generation during the quarter was strong and permitted us to pay down our indebtedness by $25 million prior to the end of the quarter and we expect to voluntarily pay down an additional $25 million by the end of July."