On
Assignment Q2
| On
Assignment Q2
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| (FOOL
CONFERENCE
CALL
SYNOPSIS)* By Debora Tidwell (MF Debit) On Assignment Inc. UNION CITY, Ca., July 24 1996/FOOLWIRE/ --- On Assignment released Q2 results this afternoon after the market close. Quarterly revenues were up 20% from $17.812 million a year ago to $21.438 million this year. Net income was up 32%, from $1.035 million to $1.37 million and earnings per share were up from $0.20 a year ago to $0.25 this year. This beat analyst estimates by a penny per share.
For the first half of 1996, revenue is up 21%, operating income is up 32%, net income is up approximately 19% (reflecting charges taken in Q1), and earnings per share are up 32% (taking out the one-time charges in Q1).
This quarter completes On Assignment's fourth year as a public company. It has been 16 quarters of continued growth and profitability for On Assignment. The Account Manager concept, its proven delivery system, and highly qualified temporary employees, the efficiency of a central support system, and the quality assignments, the high value-added service, and the high gross margins have differentiated On Assignment in every aspect from any other temporary help company.
The company went through an elaborate selection and screening process and hired 21 new account managers. As a result, they are recruiting faster and more effectively than ever before.
They also integrated the EnviroStaff acquisition. This process is being concluded as the final group of EnviroStaff account managers are being trained by On Assignment.
Finance Support has successfully introduced its first direct mail campaign and the division has reached the record of 100 clients.
Advanced Science Professionals has hired a new general manager who has taken over the responsibilities of the person who started the division. They have recently hired a new account manager who will join the division during the month of August.
Recently they retained a new marketing agency with the size and talent to meet their growing demand to serve 4 or more divisions simultaneously. They have successfully experimented with a new concept of presenting their highly qualified, pre-screened and motivated professional employees to their clients. They call this Assignment Ready and they plan to roll out this concept by August 15th.
The news each day during this election year includes topics very closely associated with their staffing industry such as employment, wages and benefits, and productivity. And, On Assignment is making a significant contribution to the American economy on all 3 fronts. This quarter they have achieved a record number of working employees by assigning professional who have a job within their disciplined areas, helping their client companies meet their production goals. They place strong emphasis on the way they select and manage their inventory of professionals. By adjusting their pay rates in the competitive markets and improving their benefits, they are confident that their ranks of qualified employees available for assignments have never been stronger than they are today. Productivity of each member of the On Assignment team has never been higher. Account managers have reached new heights in the amount of business they have been able to grow, setting new standards for the future.
Operations has made exceptional progress in developing talent. This quarter they opened 10 new branch offices -- 3 in lab support, 2 in finance support, and 5 in EnviroStaff, which takes the On Assignment totals to 44 markets served and 82 branch offices.
One example of successes cited is in Dallas for the Finance Support division. They hired a new manager there in February and superimposed their information on the staffing industry with her. In less than 3 months, she had achieved 32 working employees. A run rate of 30 working employees is a run rate on an annualized basis of over $1 million. That is a very high productivity rate for someone starting very early on. So, they are duplicating that model as they find the strength in these account managers. New clients are strong, margins are still extremely strong, and now they know what they are doing to roll that out nationwide.
They have designed and rolled out a new field compensation program which is simple to understand and directly related to performance and the field has readily accepted this new program with enthusiasm. This plan is also self-funding -- for every incremental revenue dollar and margin dollar generated, the company benefits as well as the individual account manager.
Gross margins for all the divisions were excellent in Q2. Operating expenses as a percentage of revenue declined from 21.1% a year ago to 20.2% in Q2 this year. Consequently, with margins improving and operating expenses declining, their operating margin increased from 9.2% to 10.2% and their net margins went from 5.8% to 6.4%. Cash is up 86% to $11.4 million. Their stockholder's equity is up 33% to $23 million.
Lab Support has a standalone entity with achieving net margins unprecedented in the history of temporary staffing. Lab Support account managers have an 18% productivity improvement in terms of the number of working employees handled per account manager. During Q2 they delayed some hiring waiting for the new recruiting system to be implemented. Now that that is up and running, they should not only see productivity improvement but overall improvement by having more account managers out there staffing existing and new offices.
They have been undertaking a significant IS project to replace their current homegrown system. They are now in the prototype phase of that project, implementing the Adept software from Bond Associates, which has been designed around On Assignment's work processes with the emphasis on productivity enhancements for their field personnel.
They think they are well positioned to achieve their 2nd half numbers and have an outstanding 2nd half. * A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event. | |
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The Motley Fool |