ASGN Incorporated (ASGN) on Q1 2021 Results - Earnings Call Transcript
Operator: Greetings, and welcome to ASGN Incorporated First Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kimberly Esterkin, Investor Relations. Thank you. You may begin. Kimberly Esterkin: Thank you, operator. Good afternoon, and thank you for joining us today for ASGN’s first quarter 2021 conference call. With me are Ted Hanson, President and Chief Executive Officer; Rand Blazer, President of Apex Systems; George Wilson, President of ECS; and Ed Pierce, Chief Financial Officer. Ted Hanson: Thank you, Kimberly, and thank you for joining ASGN’s first quarter 2021 earnings call. ASGN reported very strong results for the first quarter, with revenues, adjusted EBITDA and adjusted EPS all exceeding the high end of our guidance ranges. I want to thank all of our incredible employees for making the first quarter such a success, especially as we continue to navigate the challenges of the pandemic. Revenues at $1.026 billion for the quarter were well ahead of our guidance range, representing the highest quarterly revenues ASGN has achieved to date. Our prior revenue record was set in the fourth quarter of 2019. Adjusted EBITDA of $108.6 million also topped expectations and improved 4.9% from the prior-year quarter. With revenues topping $1 billion for the third consecutive quarter, there is no question that demand is returning to our business since the lows of last year, and I am very pleased to report that we saw consistent month-to-month growth across all of our operating segments. Our commercial business, which includes the Apex and Oxford segments, accounted for $767.9 million, or roughly 75% of consolidated revenues, while our government business, the ECS segment, accounted for $257.8 million, or approximately 25% of consolidated revenues. Commercial bookings in particular on a very strong trajectory, with the growth rate of bookings as we enter the second quarter higher than that of which we saw going into Q1 of this year. Our significant exposure to mission critical government work, combined with our ability to provide high end digital transformation services to the commercial marketplace has continued to support our growth. At the same time, our unique deployment model combined with the increased penetration of our large accounts has helped to propel the business forward. Our cash position also remains strong, with free cash flow totaling $110.5 million for the first quarter, an increase of 126.4% year-over-year. Ed Pierce: Thanks, Ted. Good afternoon, everyone. As Ted mentioned, our financial performance for the quarter was above guidance estimates reflecting better than anticipated sequential growth of our commercial business and double-digit year-over-year growth of our federal government business. Revenues for the quarter exceeded $1 billion for the third consecutive quarter and were up 3.6% year-over-year. This was achieved despite one fewer billable day in the quarter and the difficult prior-year comp, as the first quarter of last year was only minimally affected by COVID. Ted Hanson: Thanks, Ed. Following the unprecedented year endured by our company, our employees and people around the globe, there is no doubt that ASGN’s commitment to the environmental, social and governance or ESG causes has never been more important to ensuring the financial health and stability of our business. Assuring the health and well-being of our people while also being mindful of our environmental footprint will contribute to ASGN’s profit, the triple bottom line. At the end of March, thanks to an exceptional company-wide commitment, we debut our second annual ESG report, which significantly progressed our tracking efforts to develop a more robust analysis for our stakeholders. I believe that our 2020 ESG report more closely reflects ASGN’s identity as a leading IT services and solutions provider. While we certainly accomplished many achievements in 2020, from more than doubling our volunteer efforts from the prior year to significantly advancing our diversity, equity and inclusion efforts across all levels of our organization. We recognize that excellence is not an act, but a habit, and thus there is a solid runway ahead of us for continued ESG progress. In terms of responsibly managing our environmental impact, our advancement as a company will be gradual and strategic. Beginning in 2021, we have committed to effectively measuring and establishing a baseline for ASGN’s carbon usage. We’ve also established a Green Leasing Policy and Sustainable Office Guidelines to further promote these efforts. To improve our social impact, we’ve created a Corporate Social Responsibility Committee to unite company best practices. We are also pledging to become a member of the United Nations Global Compact, aligning our corporate goals with that of the UN’s 17 Sustainable Development Goals. Accountable corporate governance, including policies that comply with relevant laws, regulations and ethics principles, has been core to ASGN’s business since our founding. Much of these principles and practices come down to the strength of our management team and our Board of Directors. As you may have seen, we recently announced several changes to our Board, including the upcoming retirement of Chairman, Jerry Jones at the end of his current term. Jerry has served on our Board since 1995 and has been our Chairman since 2003. I want to thank Jerry for his incredible service to our company. While his shoes will be tough to fill, we are fortunate to have Arshad Matin, who has led a very successful career across the software, security and IT industries and who has been a Director on our Board since 2014, to step into Jerry’s place as our new Chairman this June. We also recently welcomed two new directors, Vice Admiral Joseph Dyer and Carol Lindstrom, to our Board. Both Joe and Carol previously served in an advisory capacity to our Board, and we are glad that they have both taken on full-time Director roles with ASGN. Ultimately, as we continue to evolve and enhance our Board membership, by 2022 we are committing to advancing gender equity by having at least three female directors. While there is no doubt that the world of work has changed, ASGN remains committed to supporting our clients’ digital transformation efforts, while also engaging and mobilizing tomorrow’s workforce responsibly and sustainably. Part of that client support will come from our current set of advanced IT solutions and capabilities, while additional support will be developed over time through new and expanded services and contracts brought to ASGN through strategic, tuck-in acquisitions. With a strong balance sheet and ample cash flow, we will continue to look to make acquisitions in both the commercial and government end markets that provide us with new capabilities, new customers and new contract vehicles. Our pipeline of acquisition opportunities remains solid and there are several interesting opportunities we are currently exploring. Throughout the process, we will remain thoughtful and measured in our M&A strategy. As important as it is to identify acquisition targets, so too is ensuring that each of the companies we acquire is successfully integrated into ASGN. As I mentioned earlier, all of the acquisitions we completed in 2020 have now been fully integrated and are performing in line or in some cases better than anticipated. With that said, this concludes our prepared remarks today. On behalf of our entire company and Board of Directors, we thank you for your continued support of ASGN. We will now open up the call to your questions. Operator? Operator: Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. Our first question comes from the line of Maggie Nolan with William Blair. Please proceed with your question. Maggie Nolan: Hi, thank you. Can you hear me, okay? Ted Hanson: Hearing great. Thank you. Maggie Nolan: Great. Congrats on the strong results. I wanted to talk a little bit more about the recovery that you’ve seen. And when you think about some of the softer industries within Apex Systems, it seems like there are those positive trends in the verticals they’re growing on a sequential basis. Do you have any updated thoughts on the time line of the recovery for some of these segments and when they may return to year-over-year growth? Ted Hanson: I’ll let Rand talk about the individual industries. I will tell you, Maggie, that while the government business has been very strong and steady through all of this, obviously some of the commercial industries have been up and down over the last few quarters. The commercial business as a whole has been on a really steady march forward back to kind of mid-May of last year, so Q2 of 2020. And I would say it’s – that’s accelerated, if you will, coming out of Q4 and now into Q1 where we saw really strong progression of revenue growth through the quarter. And that’s at a high level for all the commercial industries. And then Rand, on the individual industries, that remain down? Are you seeing anything there? Rand Blazer: Yes. I think, Maggie, you’re referring to, the parts that we’re still a little soft on are business services also the parts of consumer industrial that were COVID hit, particularly transportation, the airlines, for example, retail and hospitality. And then lastly, the telco side of our business. I would tell you that all three, if you look at bookings that we’ve had over the past two quarters, I think we’re seeing a surge in those areas of business opportunity and certainly some business that we’re starting to book. And I would suspect they’re all going to get into more positive growth pretty quickly. Maggie Nolan: Okay, great. Thanks. And then when you think about – there’s such unique demand patterns right now when you think about the three different segments of the business and you kind of layer in the acquisition strategy that you have on top of that and recognizing that the mix of the business has changed. So significantly over the last several years, how do you envision that mix towards the end of this year and on a couple of years out from that, in terms of those segments and the percentage of revenue? Rand Blazer: So I think that we’re in a pretty good place here. Approximately 75% of the revenues are in the commercial market. In the federal government – market with to is about 25%. We obviously look to see both of them grow. Our long-term expectation for the federal government market is kind of high single digits, and then we’ll layer in acquisitions here to go. And that’s always been our target at ECS and within that marketplace. In the near-term, just because of the step down last time for this time last year, I think you’re going to see stronger growth, most likely in the commercial industries we serve and our guidance generally reflects that. But how dramatic will that affect the mix? I don’t think it will dramatically affect the current mix of revenues. Maggie Nolan: Got it. Thanks for taking my questions. Operator: Our next question comes from the line of Gary Bisbee with Bank of America Securities. Please proceed with your question. Gary Bisbee: Hey, guys. Good afternoon. I guess, first question for me the consulting businesses had another terrific quarter. When you think about that over the next few years, I mean, how are you thinking about the growth potential? And maybe as part of that, given how well clients seem to be responding to those offerings, what are the gating factors to growing this business at a really rapid rate for a long time? Ted Hanson: So Gary, I think if you think about the IT staffing marketplace here in the U.S., pre-COVID it was like a $30 billion market and surely it’s down a few points since then. But IT consulting in the U.S. is about a $300 billion market. So the total addressable market opportunity is a lot bigger then we have behind that secular trends going on, which are causing our clients to think differently about how they purchase certain services within their IT spend, right. And I think we’re definitely getting a favorable wind in our sales here around the changes that are going on in terms of how the CIO thinks about getting done – things done. That’s not new. That’s been going on for several years, but it’s evolving here. And then gating factors, Rand, you may have a few things on your mind. But I think, Gary, the one thing I’d say before and Rand takes it is just that we think this is an enormous market opportunity for us, and it’s a part of our business that will be as large as our IT staffing business, just based on these growth rates. And that’s a good thing, right, for us. And also, we like our IT staffing business. It enables do in the consulting space for our clients. Rand, anything you’d add to that? Rand Blazer: Yes. I think, Gary, when you talk about things we have to do well to continue to grow, both in consulting and staffing. And I guess I’d go back to my 30 years at KPMG Consulting as the Chairman and CEO of that business as well as Apex, it’s three things. It’s, number one, having a strong reputation and delivering excellence to our client and the services we provide. It’s the deepness of the account relationship that we’ve built over the decades. And third, it’s bringing real value to our client, particularly in the key skill areas like digital transformation, modern enterprise, some of the applications that we’re talked about in the script that we build strength and have what I call technical muscle in that area that delivers value to the client. I think we’re on a path where we have all three when you look at the combined relationship with our accounts. We have a strong reputation. We have great account relationships that have been there for a long time built by the staffing side of our business and now adding technical muscle and value in the kind of work we’re doing and muscling up in the key solution areas that are important to them. So I think we’ve got those things in the works. I think it’s working. We just have to stay with it. Does that help? Does that answer your question? Gary Bisbee: Yes, definitely. That’s good. And then, Ted, you said twice in your prepared remarks that bookings or sort of demand as you enter Q2 is stronger than how it was a quarter ago entering Q1. I guess is part of that easier comp or really, are you thinking in sequential terms and sort of absolute dollar terms, not year-over-year that you’re seeing things improve? And all I’m really trying to get at is sort of momentum versus the fact that we’re facing really easy comps and the numbers will look a lot better, almost irrespective of how well they’re doing. Ted Hanson: Sure. Yes. It was more about momentum, Gary. So definitely coming into the quarter, we had good momentum. We’ve pretty far outperformed our guidance. That tells you there was some momentum building throughout the quarter and continued into the beginning of Q2. Gary Bisbee: And then one last quick one. Just you cited you’re going to start spending more on head count to support the commercial staffing growth. And I guess the SG&A guidance indicates that is – should we think that kind of sequential growth Q1 to Q2 continues, if you continue to deliver the kind of revenue growth you’re doing now? Or is it sort of smooth growth from here or anything about how you think it would phase during the year that’s worth calling out? Thank you. Ted Hanson: Ed, anything you’d say to that? Ed Pierce: No. Gary, we did mention that we talked some about the sequential increase, and we talked about where we thought we would be for the full year. And so we’re really not getting into the individual quarters, Q3 and Q4. But I think we’re going on up on the full year and sequentially that you can probably draw some good conclusion throughout. Gary Bisbee: Yes. Fair enough. Thanks. Appreciate it. Operator: Our next question comes from the line of Kevin McVeigh with Credit Suisse. Please proceed with your question. Kevin McVeigh: Great. Thank you so much. And let me add my congratulations as well. Ted, I guess, I want to start with more of a higher level in terms of how are you thinking about where we are in the cycle? I mean, it’s been such a kind of a volatile time over the last kind of 12 to 18 months. And I’m just trying to figure out where you think we are from a cycle perspective? And is that maybe based on client conversations or demand? Just anything you’d call out one way or the other, I just – I wanted to start there, if possible? Ted Hanson: Well, I mean, I guess the economists would tell you that we’ve been through a – by definition, an economic event, right, a downturn and that we’re at the beginning of a new business cycle. I don’t pay as much attention to that as I do the trends of our clients, and there’s spending trends, the conversations and what are kind of themes going on. And there’s definitely here a launch and a renewed push around digital transformation. It didn’t just start this quarter. It started in the second half of last year has been steady and building, if you will, here as we go. So I don’t – I guess, you could say there’s a business cycle, but I think more importantly, there’s been a leap forward in terms of where all our clients expect to be and by the way, us internally at ASGN as it relates to our technology platforms and the digitizing of our own business. Kevin McVeigh: And then, Ted, that was part of – my second question was post-COVID, obviously, there’s been an accelerated shift online. Maybe help us understand the scope of work you’re doing on the consulting side versus the staff log? And then are you using the staff log as a feeder for the consulting? And if so, does that revenue sit in the consulting or would it be reflected on the staff log? Ted Hanson: So Rand, do you want to take that one? Rand Blazer: I’m sorry, I didn’t catch the last part of that. The revenue for what is in either consulting or staff log… Kevin McVeigh: Right. So if you’re using the staff augmentation as a feeder for consulting projects, does that revenue – if you are, does that revenue get reflected on a consulting side of the ledger or on the staff side? Rand Blazer: Staff log is staff log revenue, and it’s based on the client staff log programs. So that’s a separate program in most Fortune 500 accounts. The consulting program is also run by them, and we’re in that side of the program as well. And that’s different work. That’s work it’s packages of work with real accountability for performance and outcomes. So we separate the two very cleanly and distinctly. Did that answer your question, Kevin? Kevin McVeigh: It did. But I guess part of my question was, do you source some of the labor from your staff log to the consulting work? Rand Blazer: I would say in a different way, Kevin. Yes. I would say a different way. We source labor for our – some of our labor and consulting is contingent labor that we take from our database of qualified people. So I wouldn’t call it staff log. It’s not taking away from staff log. It’s just we have access to 18 million IT professionals out there, and we will assemble teams with our own internal team and capability and leadership and methodologies along with some contingent labor with the right skills at the right time. So we are using some contingent labor in our consulting work. Yes, that’s our deployment model. Kevin McVeigh: That’s very helpful. And then just, I guess, average – go ahead, I’m sorry. I don’t mean to cut you off. Rand Blazer: No, go ahead. Kevin McVeigh: I was just going to say, what about kind of average length of engagement on the consulting side versus staffing? Rand Blazer: Ted, I’ll go ahead. It’s longer. Okay. So if you’ve noticed, we don’t report too separately, but our length of assignments in general within Apex Systems and Create Circle and Oxford are lengthening from 26 weeks to now 30-some weeks, and some of that is the influence of consulting, which tend to be longer-term projects. Okay. Kevin McVeigh: Very helpful. Thank you very much. Operator: Our next question comes from the line of Tobey Sommer with Truist. Please proceed with your question. Tobey Sommer: Thank you. In ECS, I was wondering if you might be interested in expanding more into civil work, given the substantially faster spending outlook per Biden’s initial budget request as well as potential other spending initiatives, infrastructure, et cetera, that are more geared that direction? Ted Hanson: So Tobey, I’ll say one high-level thing, and I’ll let George comment on that. We’re very happy about where we’re positioned in that marketplace with the solutions that we provide to the DoD and intelligence, those things are going to be funded and the funding is going to grow for those, when you think about the kind of work we’re doing, which is cybersecurity, AI machine learning, IT modernization, cloud and data migration. So at a high level, I mean, we remain really pleased with where we’re positioned there. But obviously, as you note, the winds are blowing different ways as it relates to the DoD versus the civilian agencies. And George, you can comment on that. George Wilson: Yes, sure. Thanks for the question, Tobey. And I agree with everything Ted has been saying there as well as to point out that the proposed FY2022 budget, it does tilt, as you say, towards civilian agencies. We are in several civilian agencies, and we will continue to expand there. But the defense, although it’s flat, is still, from a historical context, very high. And it’s in the areas that we’re doing very well. So as Ted put it very well, we’re happy where we are right now. But if the winds continue to blow and more pedal civilian agencies get the technology modernization fund and some of the IT initiatives, we will be changing those. Tobey Sommer: And do you have the contract vehicles to be able to compete effectively on kind of short notice with the civil agencies that are going to see big budget increases? George Wilson: We do. One thing that we’re very fortunate about is we have several of the best-in-class contracting vehicles. And there’s many articles out there to talk about how the government is using those more and more. So we are in good position with respect to our contract vehicles. Tobey Sommer: If possible, can I get a little bit more color on the mix of contract awards that you announced in the quarter? And I’m thinking of what proportion of them might have been or what percentage might have been new work versus existing or recompete kind of work, just so we can get a sense for what this book-to-bill means for future growth? Ted Hanson: Sure. The Sandia that we mentioned, that’s a brand new job, brand new work for us. Several of the others would put in more the category of continuations. And some of those are what we call contract growth. So that’s an expansion of existing work, which – and this is not just a one off. So the majority of the work that we report at this time is long-term new work. Tobey Sommer: Okay. And then, I guess, since I’ve got you, got one more sort of ECS question. The book-to-bill while over one in the quarter, on a trailing basis, has been trending down now for a longer period of time. Are there any changes afoot like stepping on the accelerator and bid and proposal investments or something that you’re planning on changing to kick start what has, for a period of time, been sluggish contract awards? George Wilson: Yes. So I mean, even though, as you point out, it’s been less than what we’ve had in the past. We still have a very healthy 2.5 contract backlog, which is very good about the middle for this field. Regarding the business evolve more constantly, looking at adding business development resources, the one thing we cannot control and that’s the timing on when the government complete things and then when they award things. So you will have this up and down and these troughs in book-to-bill. But I would not say in any way whatsoever is that due to a fundamental shift in how we’re approaching business development or anything. I’d say it’s just simply timing. Tobey Sommer: Okay. And if I could ask one sort of broader corporate question. From a balance sheet perspective, you now kind of quote your debt leverage on a secured debt basis. Where do we sit on an overall debt basis in – because I think I recall the historical 2.5 times being an area that was, if you fell, below that considered suboptimal and we could – maybe look for you to buy back more stock in those kind of situations? Ted Hanson: We’ve been kind of steady at 2.3-ish, Tobey, I think this quarter was 2.35. So yes, and our feeling is still the same, kind of when we’re sub 2.5, we’re kind of suboptimal. And we’re looking to deploy capital, obviously. I would say this and I say this every call, I think the highest return on next dollar deployed is in M&A. But obviously, we’re ready to buy our stock back if we don’t think we have the kind of pipeline opportunities that we, at the moment, that we may be able to execute on the – you saw it in the – we mentioned it in the script, you probably saw – and you saw it in the materials that we just basically renewed our existing $250 million repurchase authorization that was going to expire here in another few weeks. So that is full and ready and so remains on the shelf so we can access it. Tobey Sommer: Thank you very much. Operator: Our next question comes from the line of Surinder Thind with Jefferies. Please proceed with your question. Surinder Thind: Thank you. Congratulations on the quarter. Ted, any additional color you can provide on the M&A front? It sounds like you may be close on a few deals. Are the targets maybe within the federal consulting space or also you’re looking at something within the commercial segment? And then maybe the size of the targets, continued tuck-in acquisitions or is there may be an opportunity to think about doing something bigger? Ted Hanson: So thanks for the question, Surinder. We are pursuing opportunities in both marketplaces. On the federal side, we have opportunities to either add to our augment current capabilities, new clients and contract vehicles in key parts of the market where we may enter more efficiently by acquisition versus trying to get there organically. And then obviously, in the commercial consulting marketplace, we have a blue ribbon account portfolio of large Fortune 500 accounts. And if we can bring in consulting expertise with industry quals and knowledge and deploy that across our current accounts, that’s really the strategy and we’ve got good momentum there. So obviously, we’re trying to build on that. So looking at both marketplaces, I’d say, when I think about strategic tuck-ins are kind of sub-$100 million in revenue targets, and that’s really the things that we’re pursuing, although we’re open to things of more scale. And so as those become available, we’re obviously thinking about those as well. Surinder Thind: That’s helpful. And then a question on expenses. Obviously, a good guidance on kind of the SG&A side of the equation. In terms of thinking about the, I’ll call it, the COVID-related savings in terms of some of that expense coming back, how should we think about it structurally over the long-term? I mean, should we expect most of those expenses back? Or are you guys going to be able to realize some level of efficiencies at this point where you kind of see the firm evolving to the point where not all of those expenses will come back? Ted Hanson: Well, look, I’m going to let Ed talk about it in detail. But we’re always on a March for better productivity, Surinder. So while we expect that some of these expenses are going to kind of matriculate back into the business over a long period of time, we’re on a March to be more productive so that our revenue growth is – and gross profit growth is greater than our expense SG&A growth. And that’s the way we’re going to get our EBITDA margins from where they are today and kind of march them forward towards our long-term targets. But, Ed, in the near-term around SG&A? Ed Pierce: Yes. I think in the near-term, you’re going to see SG&A and our – probably tick up, as we said, over the course of the year, but we expect our expense margins split to be below what they were in 2019. So in the near-term, that’s what you can expect. I think longer-term, we’re going to benefit from the things Ted is talking about. I think the other thing that’s pretty important is we’re going to benefit from improved economies of scale as the business continues to grow and outperform. So it’s all those things together. Surinder Thind: Understood. And then one question on kind of the – it sounds like the businesses where you guys are seeing strength. Obviously, demand is very robust. Those clients are healthy. You also outlined some areas where demand has quite recovered yet, kind of talking about whether it’s business services or consumer industrial. Is there any additional color you can provide on kind of the conversations that you’re having with those folks? Are they kind of truly in a hold position or are they – do you see a sense that they may be close to pulling the trigger where we may see a meaningful rebound in demand, perhaps in the second half at this point? I mean, it seems clearly that demand across the board, not just for you guys, but just its recovered a lot faster than everybody else has. And just trying to understand that part of the equation, the one where you’re seeing a little bit. Ed Pierce: Yes, I’ll let Rand comment. I mean, I guess, Rand, if you read this, I mean there’s green shoots in places in those industries, for sure. Right, Rand? Rand Blazer: Yes. And I think I commented earlier that in our – if you look at bookings, our pipeline in bookings, there is certainly growth in these, what you call, COVID – hard hit COVID sectors of the economy. So I expect to see positive things to come in the future. Surinder Thind: Thank you. That’s it for me. Operator: Our next question comes from the line of Mark Marcon with Robert W. Baird. Please proceed with your question. Mark Marcon: Good afternoon, gentlemen, and congratulations. I was wondering if you could talk a little bit about some of the dynamics that we’re seeing. First of all, given the tightness in the labor market, what are you seeing in terms of bill rate increases across the board because it seems like that should be an aid coming to you, should be building over the course of this cycle? Ted Hanson: So we’re definitely seeing volume increases, primarily. We are seeing bill rate increases, I would say, part of that is because we’re doing higher level work, right. So you’re seeing that push up. But Rand, just on an apples-to-apples basis, what would you say? Rand Blazer: I think we’ve been on a – for about over a year, we’ve been on bill rate increases, slight steady bill rate increases. So that’s been happening for some time, Mark, not just now. Okay. Mark Marcon: Yes. No, I’m just wondering if it’s going to accelerate? Rand Blazer: I hope so. I guess, I would say. Yes. Okay, yes, go ahead. Mark Marcon: Okay. And then can you talk a little bit about ratios on the staffing side, what are you seeing there? Just – there are all sorts of stories about the tightness of talent. How is that impacting you? Ted Hanson: So the first part of your question, you blipped out. You said – I’m sorry, you said something about… Mark Marcon: Just the fill ratios and how they’re trending? Ted Hanson: Yes. Rand? Rand Blazer: Very positively. Fill ratios are up. And as Ted has said many times in the past, Mark, we’ve been in a tight labor market in the IT world for a long time. And it’s not just IT in general. It’s really around certain applications, certain skills. So we understand that and fortunate part of our job with our clients is to think forward. So we know where the trends are in some of these skill areas, and we’re trying to use our Apex talent university to help develop skills or to create a pipeline of people that are going through school or training to be ready to take these positions in some of our clients that are capable of thinking forward a year or two. So there’s a combination of things that work here that’s been going on for some time. I mean our clients, I can assure you, Mark, is concerned about the availability of talent a year from now and two years from now. And we’re quick to counsel with them about proper planning, proper by skill area and by location. The fact that we can use remote workers now has actually helped or enhanced our ability meet some of these skill requirements and harder to fill places like New Jersey, where you can now have people sitting in Wyoming doing the work in New Jersey. So there’s a combination of things that work, including training, using our talent university and building the workforce for the future. And all that’s been going on with many, many of our clients and give them credit for that. Mark Marcon: And so when we think about like bill pay spread on an apples-for-apples basis within Apex Systems, I mean, with the demand levels that you’re seeing and particularly things picking up, should that be an aid? Rand Blazer: Ted, so I go ahead. Mark, I think you know this over the years, there’s a lot of things that affect bill pay spread. The skill level of the worker, the different kinds of clients and accounts. So for example, in one industry, the bill pay spread may be higher or at least high gross margin than another industry. So depending on the flow of our work in different industries for different skill types, our margins will float, if you will. If you’ve looked at our margins just for Apex Systems, let’s say, over the past years, you’ll see pretty good steadiness to slight increases in that. Now obviously, consulting is helping a bit, giving us some boost. But depending on which industries are hot and are buying and what skills, it can affect. Infrastructure skills carry a different gross margin than the higher end application skills or some of the artificial intelligence skills. So I think it’s more a flow of work. It’s not our negotiations around bill pay spread. It’s around different parts of our business growing at different times. So I guess I would first point that out. And then just say, generally speaking, we’ve seen good bill pay increases over the past 1.5 years. We’ve had bill increases. We’ve had some pay rate increases. And overall, it’s been a net positive for us for some time now. Mark Marcon: Great. I mean, my sense is with consulting picking up and growing at a faster rate. And then I would imagine firms is also going to pick up and come off the trough and easy comps. I’m just trying to reconcile the rapid growth on the commercial side that we should end up having relative to the easy comps with the commentary in terms of gross margins potentially being slightly lower over the balance of the year, just trying to figure that part out? Ted Hanson: Yes. I wouldn’t say that. I would agree with what you said. Now remember, permanent placement is a very small part of our business. So that’s not really going to be as much of an influencer. But I would expect that you see pretty consistent margins here and that you kind of see the same trends that you’ve been seeing on the commercial side of things that you’ve seen in our numbers now. And I just wouldn’t call out perm placement as a big influencer in all this on our side of the ledger. Mark Marcon: Okay, great. And then one last one. On the Sandia contract, I mean, congrats on that, that seems really large. How much of that will you end up getting within that split? And how many more opportunities are there that could be like that over the next couple of years? Ted Hanson: George, you want to take that one? George Wilson: Yes, sure. So the numbers we reported on our book, that’s the amount that we’re getting. Okay, that’s not the total contract. We’re a subcontractor to a joint venture. So that’s our revenue. We expect that there’ll be some expansion. We’re very excited about the opportunity and the whole area out there in terms of a new customer market for us. Mark Marcon: Thanks, again. George Wilson: Okay. Operator: There are no further questions in the queue. I’d like to hand the call back over to Ted Hanson, CEO, for closing remarks. Ted Hanson: Great. Well, I want to thank everyone for being on the call, again, our great team for their performance this quarter. And I look forward to being with all of you here in another 90 days to talk about the performance for our Q2. Operator: Ladies and gentlemen, this does conclude today’s teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.ASGN Ratings Summary
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Insider Trading at ASGN: Director Carol Lindstrom's Strategic Move
Insider Trading Activity at ASGN: A Strategic Move by Director Carol Lindstrom
On Tuesday, April 30, 2024, Carol Lindstrom, a director at ASGN:NYSE, made a significant move by selling 1,000 shares of ASGN's Common Stock at a price of approximately $97.04 per share. This transaction reduced Lindstrom's stake in the company to 5,639 shares, a detail that was officially recorded in a Form 4 filing with the SEC. This insider trading activity provides a glimpse into the actions of those with intimate knowledge of the company, potentially reflecting their perspective on the company's current valuation and future prospects.
ASGN's Financial Highlights and Strategic Initiatives
ASGN, a company that operates under the NYSE with the symbol ASGN, has recently been in the spotlight for its financial achievements and strategic initiatives. In the first quarter of 2024, ASGN reported impressive financial results, including revenues of $1.05 billion and a net income of $38.1 million. These figures are indicative of the company's strong performance and operational efficiency. Furthermore, ASGN's adjusted EBITDA stood at $108.3 million, representing 10.3 percent of the revenues, which highlights the company's profitability and its ability to generate earnings before interest, taxes, depreciation, and amortization.
The company's commitment to enhancing shareholder value is evident through its actions, such as the repurchase of approximately 0.8 million shares of its common stock for $79.7 million and the approval of a new, two-year $750 million stock repurchase program. These stock repurchase programs are a clear indication of ASGN's confidence in its own future prospects and its dedication to returning value to its shareholders. Additionally, the successful refinancing of its term loan B, achieving a 50-basis point reduction in the interest rate, demonstrates ASGN's strategic financial management and its ability to optimize its capital structure for the benefit of its stakeholders.
ASGN's business segments also show promising growth, with IT Consulting revenues accounting for approximately 56.7 percent of the total revenues. The Commercial Segment's new bookings for the trailing-twelve-month period (TTM) at $1.3 billion further underscore the company's strong market position and its ability to secure new business. These financial and operational achievements are complemented by ASGN's commitment to social responsibility, as evidenced by Apex Systems, a brand under ASGN, receiving the VETS Indexes Recognized Employer designation. This award highlights the company's dedication to supporting veterans and the military-connected community, reinforcing ASGN's role as a leader in fostering an inclusive and supportive work environment.
ASGN's Financial Metrics and Market Valuation
The financial metrics such as the price-to-earnings (P/E) ratio of approximately 21.51, price-to-sales (P/S) ratio of about 1.02, and other valuation ratios provide investors with a comprehensive view of ASGN's market valuation. These ratios indicate the amount investors are willing to pay for a dollar of earnings or sales, offering insights into the company's financial health and market position. The debt-to-equity (D/E) ratio of about 0.56 further provides an understanding of the company's leverage and financial stability. Together, these financial indicators and strategic initiatives paint a picture of ASGN as a robust company with a solid foundation for future growth and a commitment to delivering value to its shareholders and contributing positively to the community.
