On Assignment second-quarter consolidated revenues increase 2.6%

Jul 30 2010

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 June 30, 2010.

“Now that consolidated revenues are growing, the benefits of having preserved our sales and recruiting personnel, expanded our gross margin and contained our operating costs, over the last 2 years, should be reflected in our profitability moving forward.”

Second Quarter 2010 Highlights:

• Consolidated Revenues grew 2.6% over Q209 and 8.5% over the first quarter of 2010.
• Consolidated Gross Margin was a record 33.8%.
• Adjusted EBITDA was up 63% sequentially

For the second quarter of 2010, consolidated revenues were $104.5 million, up 8.5% and 2.6% on a sequential quarter and year over year basis, respectively. The Company had net income of $0.9 million compared with a net loss of $0.3 million in the first quarter of 2010 and net income of $0.6 million in the second quarter of 2009. The Life Sciences segment revenues were $25.5 million, up 10.7% from the first quarter of 2010 and 12.1% from the second quarter of 2009. The Healthcare segment revenues, which include Nurse Travel and Allied Healthcare lines of business, were $19.3 million, up 3.9% from the first quarter of 2010 but down 17.0% from the second quarter of 2009. Nurse Travel revenues were $9.5 million, which included $2.1 million of revenue generated from supporting a customer that experienced a labor disruption during the quarter, compared with $9.0 million in the first quarter of 2010 and $14.0 million in the second quarter of 2009. Allied Healthcare revenues were $9.8 million, up 2.1% from the first quarter of 2010 and 6.1% from the second quarter of 2009. The Physician segment revenues were $18.4 million, down 2.4% from the first quarter of 2010 and 21.0% from the second quarter of 2009. The IT and Engineering segment revenues were $41.2 million, up 15.1% from the first quarter of 2010 and 26.8% from the second quarter of 2009.

Peter Dameris, President and Chief Executive Officer of On Assignment, Inc., stated, "We are pleased that our gross margin expanded to a record level and revenues grew year over year and sequentially."

Dameris concluded, "Now that consolidated revenues are growing, the benefits of having preserved our sales and recruiting personnel, expanded our gross margin and contained our operating costs, over the last 2 years, should be reflected in our profitability moving forward."

Jim Brill, Senior Vice President and Chief Financial Officer of On Assignment, Inc., stated, "Our second quarter consolidated gross margin was a record 33.8%. Gross margin for each segment expanded over those in the first quarter of 2010.

Our SG&A expenses were up from the first quarter due in part to higher commission expense related to the sequential quarterly increase in revenues, the acquisition of Cambridge and an increase in equity-based compensation. Capital expenditures were $1.5 million, amortization of intangibles was $0.4 million, depreciation was $1.5 million and stock-based compensation expense was $1.9 million."

Third Quarter 2010 Financial Estimates

The Company's financial estimates for the quarter ending September 30, 2010 are as follows:

• Revenues of $111 to $115 million
• Gross Margin of approximately 35%
• SG&A of $33.7 to $34.0 million, including depreciation of approximately $1.5 million, amortization of approximately $0.5 million and approximately $1.9 million in equity-based compensation expense
• Adjusted EBITDA of $9.0 to $10.2 million
• Net income of $1.8 to $2.5 million
• Earnings per diluted share of $0.05 to $0.07

The estimates above assume no deterioration in the staffing markets which On Assignment serves, high 30% year over year growth in IT and Engineering, mid 20% year over year growth in Life Sciences and year over year declines in the mid single digits in Healthcare and mid teens in Physician Staffing. The estimates also include approximately $1.3 million in revenue and $0.8 million in SG&A expenses related to Sharpstream Life Sciences Ltd., acquired by the Company in July 2010 and $2.2 million in revenue related to labor disruption at a customer of Nurse Travel.

On Assignment will hold its quarterly conference call to discuss its second quarter 2010 financial results this afternoon, Thursday, July 29, 2010 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 88146532. A replay of the conference call can be accessed from approximately 3:30 p.m. Pacific Time Thursday, July 29, 2010 through Friday, August 6, 2010 by dialing 800-642-1687 or 706-645-9291 with the access code 88146532.