wells fargo research and economics conference 11.7.12€¦ · 07/11/2012 · wells fargo research...

Wells Fargo Research and Economics Tech, Media & Telecom Conference

November 7, 2012Jim Brill

SVP & CAORand Blazer

President, Apex SystemsTed Hanson

CFO, Apex Systems

2

Safe Harbor

Certain statements made in this presentation should be consideredforward-looking statements as defined in the Private Securities LitigationReform Act of 1995. These include statements about our future results ofoperations and operating targets, our ability to integrate Apex Systems intoour operations successfully, the size of the markets in which we operate,and our efforts to increase our market share. We caution investors thatthese forward-looking statements are not guarantees of futureperformance, and actual results may differ materially. Investors shouldconsider the important risks and uncertainties that may cause actualresults to differ, including those discussed in our annual report on Form10-K for the year ended December 31, 2011, Form 10-Q for the quarterended June 30, 2012, Proxy Statement filed on April 13, 2012 and otherfilings we make with the Securities and Exchange Commission. Weassume no obligation to update this presentation, which speaks as oftoday's date.

3

Key Investment Highlights

• Large and Growing Provider of Professional Staffing Services

• Strategically Positioned to Capture Favorable Trends in Professional Staffing

• Differentiated Platform Featuring High-end and Mission Critical Skill Sets

• Established Domestic Footprint With Significant Scale

• Experienced Management Team With a Proven Track Record to Execute On Assignment’s Growth

• Attractive Financial Characteristics – Strong Revenue and Substantial Free Cash Flow Generation

Apex53%

Oxford22%

Life Sciences11%

Healthcare7%

Physician7%

4

Large and Growing Provider of Professional Staffing Services• One of the largest professional staffing

companies in the U.S.• $1,476 million LTM revenues1

• ~11,900 contract professionals at approximately 3,000 clients2

• Focused on placing professionals with higher end math and science skills

Broad Capabilities

1 LTM as of September 30, 2012. Pro forma for acquisition of Apex Systems2 Based on Q3 2012 average3 As of September 30, 20124 Staffing Industry Analysts Insight: Staffing Industry Forecast (September 2012)

Revenues by Segment1

Gross Margin by Segment1

• 1,556 staffing consultants2 in 130 branch offices3 in the U.S., Canada, UK, Belgium, Netherlands, Spain and Ireland

• Deliver fast, quality sales and fulfillment services

Established Footprint

• Staffing industry revenue projected to be $127 billion in 20124

• Participates in the most attractive sub-segments of staffing: Healthcare, Life Sciences, Locum Tenens, IT / Engineering

• 2nd largest publicly-traded U.S.professional staffing firm

Large and Growing End

Markets

• One of the highest gross margins in the industry – 30.1% in Q3’121

• High gross margin despite low contribution (~2%) from permanent placement / conversion revenue in Q3 ’121

Attractive Business

Model

35.5% 33.8% 30.6% 28.5% 27.3%

Oxford LifeSciences

Physician Healthcare Apex

$39 $42 $48

$52 $56

2009 2010 2011 2012P 2013P

5

Strategically Positioned to Capture Favorable Trends in Professional Staffing

Professional Staffing Industry Revenue Growth Drivers• Variable cost structure provides potential

cost savings and staff flexibility • Aging U.S. population may constrain

workforce supply• If implemented, healthcare reform may

stimulate staffing demand • Companies are utilizing temporary labor as a

larger percentage of their workforce

Source: Staffing Industry Analysts. Dollars in billions.

1995

Industry Revenue: $55.4 billion

2013P

Industry Revenue: $134.4 billion

Commercial vs. Professional Staffing Trend Structural Change Towards Professional Staffing

• Driven in part by IT staffing (the largest segment)

• Rapid rate of technological change driving companies to flexible workforces

Professional36%

Commercial64%

Professional53%

Commercial47%

Differentiated Platform Featuring High-end and Mission Critical Skill Sets

Industrial Staffing Generalist Staffing Professional Staffing

• Areas of focus: light industrial; clerical and administrative; less specialized skills

• Widely available skill sets

• Providers seek large placements and compete on price (bulk selling)

• Areas of focus: healthcare, scientific, IT, engineering, finance/accounting, legal

• Skills in short supply and critical to revenue potential of clients

• Competition based on quality of professional and speed and relevancy of response

Bill

Rat

es &

Gro

ss M

argi

ns

Specialization & Client “Stickiness”

On Assignment has one of the strongest margins in the industry

Revenue Growth:1 32.2%

Gross Margin: 30.2%

Adj. EBITDA Margin:2 9.7%

PF FY 2011

1 Revenue growth is based on year-over-year change of combination of ASGN and Apex revenue for 2010 and 20112 Adjusted EBITDA presented is one of the non-GAAP financial measures used by the Company and is defined as earnings before interest, taxes, depreciation, and amortization of identifiable intangible assets plus equity-based compensation expense, impairment charges, and acquisition related expenses, which terms might not be calculated in the same manner as, and thus might not be comparable to, similarly titled measures reported by other companies and other one-time items. Refer to Appendix for EBITDA reconciliation.

6

7

Established Domestic Footprint With Significant Scale

Our 1,556 staffing consultants in 130 branch offices provide staffing solutions for in-demand, skilled talent

Belgium

Netherlands

UKIreland

Spain

United States Canada

Physician Staffing branch offices

Oxford branch offices

Healthcare/Life Sciences branch officesApex Systems

8

Experienced Management Team With a Proven Track Record to Execute On Assignment’s Growth

Peter DamerisPresident & CEO

• 15 years of staffing/public company experience

• Tenure w/ ASGN: 9 years

• Metamor(MMWW) CEO / Chairman

• Quanta (PWR) EVP/COO

Emmett McGrathPresident

Lab Support & Allied Healthcare

• 25 years of staffing/public company experience


• Yoh Scientific

James Brill Senior VP, CAO

& Treasurer

• 21 years CFO experience, 28 years public company experience


• Diagnostic Products CFO since 1999

• 18 years of staffing industry experience

• Named President of VISTA on Nov 1, 2011

• Medfinders, COO

• WeatherbyLocums, President

• CompHealth

ChristianRutherford

PresidentVISTA Staffing

Solutions

MichaelMcGowan

PresidentOxford Global

Resources & COO

• 15 years of staffing industry experience (13 yrs w/ Oxford, 2 yrs w/ KELYA)


• Automatic Data Processing (ADP), The MEDSTAT Group, Kelly Services (KELYA) Middle Markets Division

KathrynHoffman-Abby

PresidentNurse Travel

• 26 years of staffing industry experience (21 yrs w/ Vista, 5 yrs w/ CHG)


• Founded VISTA in 1990

• Entered the Locum Tenens industry in 1985

Rand BlazerPresident

Apex Systems

• 30 years in professional services industry (consulting and staffing)

• Joined ASGN in 2012

• Apex Systems COO since 2007

• BearingPoint, CEO

Edward PierceExecutive VP

& CFO

• 11 years CFO experience, 21 years public company experience

• Formerly, director of ASGN since 2007

• First Acceptance Corp. (FAC), President

• BindViewDevelopment Corp. (BVEW), CFO

• Metamor(MMWW), CFO

• Arthur Andersen & Co.

Industry Growth2

• $120/hour• ~5 months• U.S.

• $100 million7%

• $109 million7%

• $163 million11%

• $326 million22%

9

Operating in Attractive Professional Staffing Segments

Physician Staffing

Business Description

Professionals– Qualified Database– On Assignment– Full-Time

Employees

LTM Revenues1

% of Total

KeyCustomers

• Physician Staffing (locum tenens)

• 1,300+• ~270• ~200

Apex

• Mission Critical IT

• 400,000+• ~6,300• ~1,100

• $778 million53%

Oxford

• High-end IT

• 35,000+• ~1,400• ~600

Healthcare

• Allied Healthcare and Nurse Travel

• 32,000+• ~1,200• ~200

Life Sciences

• Lab Support, Clinical Research and Engineering

• 44,000+• ~2,200• ~300

Key Statistics– Bill Rate– Engagement Length– Geography

• $59/hour• ~5 months• U.S.

• $35/hour• 2-13 weeks• North America,

Europe

• $47/hour• 3-12 months• North America,

Europe

• $182/hour• 6 weeks• U.S.

• 8%• 10% / 15%• 8%• 12%• 12%

Corporations Corporations Biotech & Pharma Hospitals / Physician Offices

Hospitals / Physician Offices

Labs / UniversitiesHealthcare / Gov

Agencies

1 LTM as of September 30, 20122 Staffing Industry Analysts Insight: Staffing Industry Forecast (September 2012)

$55$64

$32 $35

$61

$28 $27$37

$21 $15$6 $8 $5 $6 $8

$0

$20

$40

$60

$80

$100

$120

$140

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Adjusted EBITDA Free Cash Flow Capital Expenditures

10

Strong Cash Flow Generation Through Economic CyclesStrong free cash flow generation in up and down economic cycles allow for quickdeleveraging of the balance sheet

($ in millions)

Adj. EBITDA-to-FCF Conversion %: 50% 42% 117% 55%59%

Peak economic cycleEconomicdownturn Expansionary period

Bank DebtBalance: $136 $126 $78 $67

$126

$70

Combined with Apex

$87

$78

$35

$55 $58

Note: Adjusted EBITDA-to-FCF Conversion % represents standalone ASGN financials

11

Disciplined Acquisition Strategy

In January 2007, On Assignment acquired Oxford Global Resources

In January 2007, On Assignment acquired VISTA Staffing Solutions

In May 2012, On Assignment acquired Apex Systems

Purchase Price

Rationale

Integration

• On Assignment purchased Oxford for $212 million, or 9.6x enterprise value to LTM EBITDA

• On Assignment purchased VISTA for $49 million

• On Assignment purchased Apex Systems for $600 million, or 9.2x enterprise value to 2011 EBITDA

• Acquisition represented On Assignment’s entry into the large and growing Information Technology and Engineering Services market

• Oxford supported On Assignment’s growth strategy and provided a niche offering in the IT sector

• Helped On Assignment increase participation in healthcare staffing by entering them into the locum tenens industry

• VISTA has over 200 physicians on assignment daily with an average bill rate of approximately $185 per hour

• Acquisition created the second largest IT staffing provider in the U.S. with approximately $1 billion of revenue from IT staffing

• Expands On Assignment’s business into new verticals (financial services, telecom) and new geographies (within the U.S.)

• No customer overlap and seamless front and back office integration with legacy On Assignment

• 55 out of 60 managers from the Oxford acquisition are still with On Assignment

• Oxford supported On Assignment’s growth strategy and provided a niche offering in the IT sector

• Allows for greater cross-selling opportunities because of minimal overlap in client base

• Apex and Oxford do not compete against one another

• Expected to be immediately accretive on both a GAAP and cash EPS basis (excluding potential synergies)

A Powerful Combination

12

+

Highly Complementary Acquisition

• Focused on different sets of IT skills – no channel conflicts– Oxford: High-end IT– Apex: Mission Critical IT

• Limited integration required• Similar business models and corporate cultures

Revenue Diversification

• Broaden services offering across IT skills• New business verticals and geographical

diversification• Expand permanent placement business• Cross-selling opportunities

Attractive Financial Characteristics

• Accretive to revenue growth and earnings

• Strong conversion of EBITDA to cash flow

• Significant cash tax savings, resulting in anticipated rapid debt paydown

Size and Scale

• Together, creates a Top 3 IT staffing provider in the U.S., according to SIA rankings1

• Based on year-to-date performance above market growth, we believe we will be the 2nd largest IT staffing provider by the end of 2012

• Full spectrum of staffing services (high-end to mission critical)

Source: Staffing Industry Analysts Insight: 2012 List of Largest U.S. IT Staffing Firms (July 2012)

1 Based on FY 2011 estimated revenues

13

Information Technology – Market OverviewForecasted IT staffing revenues to be $23.1 billion in 20121

Growth Characteristics• IT staffing industry is forecasted to grow by 12% in 2012

and 8% in 20131

($ in billions)

Projected Market Size1

- IT staffing involves providing temporary professionals and placing full-time employees in areas rangingfrom multiple platform systems integration to end-user support, including specialists in programming,networking systems integration, database design and help desk support.

Source:1 Staffing Industry Analysts Insight: Staffing Industry Forecast (September 2012)

IndustryPotential

Shortage ofTalent

• IT has recovered quicker than most otherstaffing segments; and is the onlyprofessional staffing segment expectedto surpass 2008 levels in the currentyear

• Growth in 2012 is expected to be drivenby demand in the healthcare industry,given deadlines for conversionsimplemented by the US Dept. of Health& Human Services

• One of the main constraints on growthin this segment is a shortage of talent,and not necessarily demand, due to avariety of organizational, candidate-specific and environmental/marketfactors

$20.5 $19.8

$15.8 $17.9

$20.6 $23.1

$24.9

$10

$15

$20

$25

$30

2007 2008 2009 2010 2011E 2012P 2013P

14

Apex – Segment Overview

Apex Revenue Mix1

• Provides mission critical IT skill sets to Fortune 500 and mid-market companies

• 100+ National Accounts with a presence in 49 markets

– Over 16,000 temporary IT professionals staffedannually

• Service clients in: – Information technology, business services, financials

healthcare, pharmaceuticals, government services,consumer industrials and telecommunicationsindustries

• Provides highly skilled professionals:– Network Engineers– Application Developers– Social & Mobile App. Developers– Help Desk

• Current statistics:– ~6,500 contract professionals at ~650 clients– Average bill rate at $59 an hour– Top 10 clients represent 33% of segment revenue

% of Segment Revenue

$778mm

1 Q3 2012 Average

53%

LTM Revenue Split

Financial25%

A&D / Gov't / Business Services

18%

Industrial18%

Telecom14%

Healthcare / Pharma

14%

Technology & Other11%

15

Oxford – Segment Overview

• “The Right Talent. Right now.®”

• Four divisions:– Oxford International - nation-wide recruitment for nation-

wide vacancies– Oxford & Associates - local recruitment through branch

network– Healthcare IT - functional and technical recruitment in all

aspects of healthcare IT

– Centerpoint - fills permanent staffing needs

• High-end IT and engineering focus– Time sensitive project requirements– Traditional average assignment of approx. 5 months– Average bill rate of $120 per hour1

• Proactive, recruiting-driven organization– Significantly higher success rate filling engagements

than competitors

• Attractive financial characteristics– Minimal client and industry business concentration; no

customer accounts for more than 6% of sales– Top 10 clients represent 16% of segment revenue

Oxford’s disciplined focus on the high-end of IT and engineering markets yields industry leading bill rates, success rates and margins

Oxford Revenue Mix1

1 Q3 2012 Average

$326mm22%

LTM Revenue Split

Information Technology

36%

Engineering28%

Software / Hardware

21%

Healthcare IT13%

Telecom2%


16

Life Sciences – Market Overview

- Lab support professionals assist clients in the life sciences industries with research and development,product production, quality control and assurance, regulatory affairs and compliance, engineering,consumer testing and clinical research

The U.S. market for outsourced Clinical/Scientific staffing is forecasted to be $1.9 billion in 20121

Industry Highlights

• Highly fragmented; market dynamics are favorable

• Middle market, small/medium clients favor personalized service

• Clinical trials already in progress tend to carry through the length of assignments which can last several months or even years

• The industry is saturated with start-up companies with venture capital-backed funding that, in some cases, may have a need for the use temporary help or “temp-to-perm” staffing models as a way of managing a flexible workforce


Sources:1 Staffing Industry Analysts Insight: Staffing Industry Forecast (September 2012)

($ in billions)

$1.5 $1.6 $1.8 $1.9

$2.1

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

2009 2010 2011E 2012P 2013P

11%

LTM Revenue Split

17

Life Sciences – Segment Overview

• The Life Sciences lines of business:– Lab Support– Clinical Research– Engineering

• Operations in the U.S., Canada, and Europe

• Service clients in: – Biotechnology, pharmaceutical, food and beverage,

medical device, personal care, materials sciencechemical, nutraceutical, petrochemical consumerproducts, environmental, and contract manufacturingindustries

• Provides highly skilled professionals:– Chemists, clinical research associates, clinical lab

assistants, engineers, biologists, biochemists,microbiologists, molecular biologists, food scientists,regulatory affairs specialists, lab assistants, andother skilled scientific professionals

• Current statistics:– ~2,200 contract professionals at ~900 clients1

– Average bill rate at $35 an hour1

– Top 10 clients represent 23% of segment revenue

Life Sciences Revenue Mix1

1 Q3 2012 Average

$163mm

0%

2%

3%

3%

3%

3%

4%

7%

16%

18%

19%

21%

0% 5% 10% 15% 20% 25%

Physiology

Other

Medical Devices

Research

University & Municipal

Personal Products

Environmental

Material Science

Food & Beverage

Pharmaceutical

Chemical

Biotechnology


$2.6 $2.4

$2.7 $2.9

$3.2

$1.5

$2.0

$2.5

$3.0

$3.5

2009 2010 2011E 2012P 2013P

376

394

400

461

582

0 150 300 450 600

Home Health Aides

Food Prep & Serving Workers

Customer Service Reps

Personal & Home Care Aides

Registered Nurses

Employment Grow th (000s)

18

Healthcare – Market Overview

Allied Staffing forecasted revenues to be $2.9 billion in 20121

Industry Highlights• ~13 week assignments• Within allied healthcare specialties, health information

technology is projected to grow the fastest• It is estimated that 60 percent of healthcare workers are in the

allied healthcare field3

• Significant shortage due to growth in population needing care

($ in billions)

Nurse Travel forecasted revenues to be $1.5 billion in 20121

Industry Highlights

Sources:1 Staffing Industry Analysts Insight: Staffing Industry Forecast (September 2012)2 U.S. Department of Health and Human Services, HRSA (2004)3 Center for Health Professionals (2011)

Source: Bureau of Labor Statistics (Dec. 2009)

Allied Health Nurse Travel

• Nurse Travel is estimated to have increased 25% in 2011 and is projected to grow by 15% in 20121

• However, a primary long-term growth driver is nurse shortage, which is expected to grow to 36% by 20202

Occupations with Largest Projected Job Growth ‘08-’18Projected Market Size1

7%

LTM Revenue Split

19

Healthcare – Segment Overview

• The Healthcare lines of business:– Nurse Travel

– Allied Healthcare

• Nurse Travel current statistics:– Rapid response nurses

– Critical position focus

– Average bill rate approx. $68 an hour1

– Approx. 350 nurses at approx. 140 clients1

– Top 10 clients represented 40% of segment revenue

– Gross margin was 25% for the quarter

• Allied Healthcare current statistics:– Offer contract professionals on both a local and

traveling basis ranging from phlebotomists to HIM professionals

– Average bill rate approx. $37 an hour1

– Approx. 970 contract professionals at approx. 500 clients1

– Top 10 clients represented 30% of segment revenue

– Gross margin was 32% for the quarter

Healthcare Revenue Mix1,2

1 Q3 2012 Average2 Excludes Nurse Travel revenue related to labor disruption

$109mm

Allied Healthcare

56%

Nurse Travel44%


20

Physician Staffing (Locum Tenens) – Market OverviewLocum Tenens forecasted revenues to be $2.1 billion in 20121

Growth Characteristics• Long-term growth may be fueled by a growing shortage,

an aging population, and accessible healthcare insurance to more citizens with healthcare reform, if implemented

• Physicians are “revenue generators”

Sources:1 Staffing Industry Analysts Insight: Staffing industry Forecast (September 2012)2 Association of American Medical Colleges – Wall Street Journal (April 2010)3 2011 Retention Survey, American Medical Group Association and Cejka Search

($ in billions)


- Locum Tenens: involves placing physicians on temp assignments in a variety of healthcare settings

High BarriersTo Entry

Physician Shortage

Physician Workforce Demographics

• Need for malpractice insurance• Complexities involved in recruiting

and marketing physicians• High level of specialized positions

requiring specific training andexperience

• Lack of licensing reciprocity betweenstates (unlike nursing)

• Greater lead time needed tosuccessfully fill positions

• Over the next 15 yrs, the U.S. couldface a shortage of 150,000 doctors2

• The proportion of physicians reportedas working part-time increased to22% for male physicians and 44% forfemale physicians, up from 7% and29%, respectively, in 20053

• Flexible work hours or part-timeoptions were cited as one of the topthree ongoing retention initiatives bymedical group leaders3

$1.6

$1.8 $1.8 $1.8

$2.0 $2.1

$2.3

$1.2

$1.6

$2.0

$2.4

$2.8

2007 2008 2009 2010 2011E 2012P 2013P

7%

LTM Revenue Split

21

Physician Staffing – Segment Overview

• Full-service physician recruitment and staffing company

– Offering contract staffing solutions to commercial, government, and correctional facilities in a variety of physician specialties

• Places physicians throughout the United States, Australia and New Zealand

• Summary statistics:– Approximately 30 specialties through 13

employee teams

– Pool of 1,300+ physicians worldwide, with a range of medical specialties

– Approximately 280 physicians on assignment daily1

• Average domestic locum tenens assignment lasts 6 weeks

– New line of business for longer engagements

Physician Revenue Mix1

1 Q3 2012 Average

$100mm

1%

5%

5%

5%

5%

6%

11%

13%

20%

29%

0% 5% 10% 15% 20% 25% 30%

Radiology

Maternal

OPN

Anesthesiology

IM Subspecialties

Psychiatry

Surgical

Family Practice

Emergency Medicine

Internal Medicine


22

Financial Highlights

• Track Record of Revenue Growth with Consistent Margin Expansion

• One of the Highest Operating Margins in the Industry

• Solid Balance Sheet

• Substantial Opportunity for Continued Growth

$800

$985

$1,303 $1,476

$0

$400

$800

$1,200

$1,600

2009 2010 2011 9/30/12 LTM

Source: Company managementNote: All data represents the combined financials of ASGN and Apex

Gross M

argin

Adjusted E

BITD

A M

argin

Strong Financial Performance• One of the fastest growing staffing firms in the

U.S. by revenues

• One of the highest profit margins in the industry

• Large scale firm with potential to realize continued operating leverage

Revenues$ in Millions

Adjusted EBITDA & EBITDA Margin$ in Millions

Gross Profit & Margin$ in Millions

23

$55

$78

$126

$152

0%

5%

10%

15%

$0

$40

$80

$120

$160

2009 2010 2011 9/30/12 LTM

Adj. EBITDA Adj. EBITDA Margin

$249 $305

$394 $445

0%

10%

20%

30%

40%

$0

$125

$250

$375

$500

2009 2010 2011 9/30/12 LTM

Gross Profit Gross Margin

10.4% 10.3%

8.0%

11.0% 11.7%

6.9% 6.3% 6.7% 6.8%

9.9% 10.0% 10.0% 9.3%

11.3%

0%

4%

8%

12%

16%

Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12

Adjusted EBITDA Margin

24

One of the Highest Operating Margins

Gross Margin

Source: Company management and company filingsNote: All data represents the combined financials of ASGN and Apex. KFRC historical data is not adjusted to exclude clinical research business (divested on April 5th, 2012)

Not Meaningful*Negative Adj.

EBITDA

30.7% 29.7% 29.5%

30.5% 30.7% 31.8% 31.2%

30.1%

32.7% 32.9%

39.8% 39.8% 39.6% 40.4% 40.2%

20%

25%

30%

35%

40%

45%


Perm Placement as % of Revenue & Impact on GM% (Adj. GM% Values Shown)

25

Comparison of Adjusted Gross Margins

1.8% 1.8% 1.9% 1.8% 1.9%

4.1% 3.6% 4.1% 4.8% 4.6%

8.0% 7.7% 8.2% 8.7%

7.9%

0%

3%

6%

9%

12%


29.5% 28.4% 28.1%

29.2% 29.3% 28.9% 28.6% 27.1%

29.3% 29.6%

34.6% 34.8% 34.2% 34.7% 35.1%

20%

25%

30%

35%

40%

45%


Reported GM% Adjusted GM%Source: Company management and company filingsNote: All data represents the combined financials of ASGN and Apex. KFRC historical data is not adjusted to exclude clinical research business (divested on April 5th, 2012)

Actual Actual Year-over-Year Q3 '12 Q3 '11 Growth 1

Oxford 88,104$ 70,074$ Apex 202,664 NA Life Sciences 40,646 41,820 Physician2 27,479 23,385 Healthcare 29,390 27,091

Consolidated Revenues 388,284$ 162,370$

Oxford 35.5% 35.8%Apex 28.1% NA Life Sciences 34.4% 33.9%Physician 30.5% 33.3%Healthcare 28.9% 27.5%

Consolidated Gross Margin 30.7% 33.6%

Adjusted EBITDA 45,491$ 18,179$ Adjusted EBITDA Margin 11.7% 11.2%

EPS 0.33$ 0.21$ EPS (Excl. Transaction Related Exp.) 0.34$ NA

26%

14%

(3%)

18%

8%

139%

150%

26

Recent Financial Performance

Note: Dollars in thousands, except per share data1 Apex’s year-over-year growth is on a pro forma full quarter basis2 Includes acquisition of HealthCare Partners (Aug 2011)

27

Solid Balance Sheet

• Strong liquidity• $65mm undrawn revolver• Excellent working capital control• Low capital expenditure

requirements

Uses of cash:• Investing in long-term opportunities• Focused on debt paydown to drive

EPS accretion

Note: Dollars in millions

September 30, 2012

Total Cash & Short-Term Investments $13.9

Current Portion of Long-Term Debt 10.0

Long-Term Debt 429.1

Stockholders' Equity 516.5

Total Capitalization $955.5

Guidance Range

Low End - High End

Revenues $385.0 - $389.0

Gross Margin 30.1% - 30.4%

SG&A Expenses $86.0 - $87.0

Depreciation & Amortization $5.3

Stock-Based Compensation $2.9

EPS $0.25 - $0.29

Adjusted EBITDA1 $37.1 - $40.8

Fully Diluted Wtd Avg Shares Outstanding 53.3 million

28

Management Q4 Estimates($ in millions, except per share data)

Note: Achievement of these goals is subject to the various risk factors set forth in our public filings1 Adjusted EBITDA presented is defined as earnings before interest, taxes, depreciation, and amortization of identifiable intangible assets plus

equity-based compensation expense, impairment charges, and acquisition related expenses

Cyclical Stabilization and

Growth

Secular Trends Will Favor On

Assignment

Numerous Areas of Opportunity for

Incremental Revenues

Acquisition Environment Is

Favorable

Significant Sources of EPS

Leverage

29

On Assignment’s Strategic Growth Opportunities

• Permanent placement• Healthcare IT• GSA contracts• Clinical research

• Aging U.S. population may constrain supply of available workforce

• If implemented, healthcare reform should stimulate demand for staffing in the longterm

• On Assignment focuses on the highly-skilled component of the labor force, whichcompanies typically have the hardest time staffing

• Smaller, private companies may look to partner with larger, well capitalized firms orprivate equity as activity and valuations increase

• On Assignment is well positioned to enhance its market position and/or add newcapabilities / service offerings once acquisition stabilization has been completed

• Revenue growth vs. fixed costs creates margin opportunity

• Strong cash flow generation provides liquidity for rapid deleveraging

• 338(h)(10) elections yield an estimated $20 million in annual cash tax savings1

• Temporary help penetration rate still below peak historical levels

• Labor markets indicate job recovery continues to strengthen, albeit at an anemic rate

• Companies will look to temporary staffing to meet cyclical recovery in demand

1 Represents combined potential cash tax shields from elections associated with the acquisitions of Apex, Oxford, and HealthCare Partners

30

Key Investment Highlights

• Large and Growing Provider of Professional Staffing Services

• Strategically Positioned to Capture Favorable Trends in Professional Staffing

• Differentiated Platform Featuring High-end and Mission Critical Skill Sets

• Established Domestic Footprint With Significant Scale

• Experienced Management Team With a Proven Track Record to Execute On Assignment’s Growth

• Attractive Financial Characteristics – Strong Revenue and Substantial Free Cash Flow Generation

wells fargo research and economics conference 11.7.12€¦ · 07/11/2012 · wells fargo research...

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