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On Assignment Inc. (NYSE: ASGN) reported revenue rose 15.4 percent on a pro forma basis to $417.9 million in the second quarter, exceeding analyst expectations. Pro forma revenue treats On Assignment’s May 2012 acquisition of Apex Systems — a provider of information technology staffing that marked a major acquisition for the firm —as though it occurred on Jan. 1, 2012. Second-quarter revenue was up 57.2 percent when not looking at results on a pro forma basis.
Revenue growth was mainly driven by the company’s IT businesses, Apex Systems and Oxford. The divisions, which account for 80 percent of On Assignment’s business, grew 18.4 percent year over year on a pro forma basis and 8.7 percent sequentially.
“In that sector of the market, we are the second largest provider of staffing services and we continue to grow faster than the overall market reflecting the benefit of our scale and operating models,” said President and CEO Peter Dameris. “We also believe we are benefiting from a shift in spending toward IT staffing and away from other IT services delivery models, such as consulting and offshoring, as CIOs continue to focus sharply on project flexibility and accountability and cost control.”
Non-IT segments, which account the remainder of On Assignment’s overall business, grew 4.7 percent year over year and 2.2 percent sequentially.
Second-quarter revenue for specific divisions, compared with the second quarter of 2012, include:
- Apex: $233.4 million, +137.0 percent
- Oxford: $101.5 million, +15.2 percent. Oxford provides IT and engineering staffing.
- Life sciences: $41.9 million, +3.4 percent
- Healthcare staffing: $14.7 million, +7.0 percent. The healthcare segment includes allied healthcare staffing.
- Physician staffing: $26.5 million, +5.7 percent
On Assignment’s second-quarter gross margin narrowed to 29.8 percent from 31.8 percent in the year-ago quarter. The company reported the year-over-year compression in gross margin was mainly attributable to the inclusion of Apex Systems for a full quarter, which has a lower gross margin than the company's other business segments, lower permanent placement revenues and higher growth of lower-margin services.
Net income fell 2.9 percent to $7.3 million in the second quarter from $7.6 million in the year-ago quarter. Net income for the quarter included a $15.0 million write-off of loan costs, acquisition-related costs and strategic planning expenses totaling $700,000, and a $500,000 loss from discontinued operations.
On Assignment estimates third-quarter revenue of $429 million to $433 million and gross margin of 29.8 percent to 30.1 percent.
On Assignment Inc. (NYSE: ASGN)
For the quarter ended June 30, 2013, compared with the year-ago quarter.
Revenue: $417.9 million, +57.2 percent
Net income: $7.3 million, -2.9 percent