Financial Results Exceeded
Previously-announced Guidance Estimates
ASGN Incorporated (NYSE: ASGN), a leading provider of IT
services and solutions, including technology and creative digital
marketing, across the commercial and government sectors, reported
financial results for the quarter ended June 30, 2022.
Q2 2022 Highlights
- Revenues were $1.1 billion, up 17.1 percent over the second
quarter of 2021
- Income from continuing operations was $72.6 million, up 26.7
percent over the second quarter of 2021
- Adjusted EBITDA (a non-GAAP measure) from continuing operations
was $144.0 million (12.6 percent of revenues), up from $119.3
million (12.2 percent of revenues) in the second quarter of
2021
- Spent $91.2 million to repurchase 911,700 shares of the
Company's common stock
- Entered into an agreement (which closed on July 6, 2022) to
acquire GlideFast Consulting, an Elite ServiceNow partner and
leading IT consulting, implementation and development company, for
$350.0 million in cash
- Subsequent to quarter end, ASGN's Board of Directors approved a
new two-year $400 million stock repurchase program
Management Commentary
“The second quarter capped off a strong first half to the year,
as ASGN’s business continued to build momentum, which has carried
into the second half of the year,” said ASGN Chief Executive
Officer, Ted Hanson. “Revenues for the second quarter 2022
surpassed the high-end of our guidance range and were up 17.1
percent year-over-year, while Adjusted EBITDA also beat our
estimates and was up 20.7 percent year-over-year. The continued
acceleration of our top line was largely driven by the strength of
our Commercial Segment, which grew 19.4 percent over last year,
with consulting revenues up 53.9 percent year-over-year. Our
government business also remained solid, with Federal Government
Segment revenues improving 11.0 percent year-over-year, including
flat organic growth on a difficult comparable."
"Importantly, customers continue to see investments in
technology as a business driver, and IT spend is not slowing in the
face of recessionary pressures. On the commercial side, our
customers are confident in their digital roadmaps and are actively
bidding out new work, including ServiceNow implementations as a
result of our recent GlideFast acquisition. On the government side,
our customers are seeing the benefit of the flow through of the new
federal budget, which tends to be counter-cyclical and is aligned
with the areas in which ASGN excels. These favorable market
dynamics in both the commercial and government end markets, along
with the critical nature of the work ASGN performs, create
consistent demand for our IT services and solutions and provide us
with confidence in the stability of our business as we head into
the second half of this year.”
Second Quarter of 2022 Financial Results - Summary
Change
(In millions, except per share data)
Q2 2022
Q2 2021
Q1 2022
Y-Y
Sequential
Revenues
Commercial Segment
$
850.6
$
712.5
$
832.9
19.4
%
2.1
%
Federal Government Segment
291.2
262.4
258.1
11.0
%
12.8
%
1,141.8
974.9
1,091.0
17.1
%
4.7
%
Gross Margin
Commercial Segment
33.1
%
32.0
%
32.7
%
1.1
%
0.4
%
Federal Government Segment
21.4
%
18.3
%
20.9
%
3.1
%
0.5
%
Consolidated
30.1
%
28.3
%
29.9
%
1.8
%
0.2
%
Income from continuing operations
$
72.6
$
57.3
$
67.6
26.7
%
7.4
%
Income (loss) from discontinued
operations
(0.1
)
6.9
(0.8
)
N/M
N/M
Net Income
$
72.5
$
64.2
$
66.8
12.9
%
8.5
%
Earnings per share - Diluted
Continuing operations
$
1.41
$
1.06
$
1.29
33.0
%
9.3
%
Discontinued operations
—
0.13
(0.01
)
N/M
N/M
$
1.41
$
1.19
$
1.28
18.5
%
10.2
%
Non-GAAP Financial Measures
(from Continuing Operations)
Adjusted Net Income
$
88.0
$
70.9
$
82.1
24.1
%
7.2
%
Adjusted Net Income per diluted share
$
1.71
$
1.32
$
1.57
29.5
%
8.9
%
Adjusted EBITDA
$
144.0
$
119.3
$
134.8
20.7
%
6.8
%
Adjusted EBITDA margin
12.6
%
12.2
%
12.4
%
0.4
%
0.2
%
__________
Notes:
Definitions of non-GAAP measures and
reconciliation to GAAP measurements are included in the tables that
accompany this release.
N/M means not meaningful.
Consolidated revenues for the second quarter of 2022 were up
17.1 percent over the second quarter of last year. Revenues for the
second quarter of 2022 included approximately $36.3 million from
businesses acquired in 2021 accounting for 3.7 percentage points of
the year-over-year growth rate.
Revenues from the Commercial Segment (74.5 percent of total
revenues) were up 19.4 percent over the second quarter of last
year. Assignment revenues totaled $628.4 million (73.9 percent of
the segment's revenues), up 10.6 percent year-over-year. Consulting
services revenues were $222.2 million (26.1 percent of the
segment's revenues), up 53.9 percent year-over-year. Consulting
services included approximately $8.8 million in revenues from a
business acquired in 2021.
Revenues from the Commercial Segment's IT services and solutions
division accounted for 83.1 percent of the segment's revenues, up
19.1 percent over the second quarter of 2021 driven by high growth
in consulting services and high single-digit growth in IT staffing
services. Revenues from the segment's creative digital marketing
and permanent placement divisions accounted for 16.9 percent of the
segment's revenues, up 20.6 percent year-over-year.
Revenues from the Federal Government Segment (25.5 percent of
revenues) were up 11.0 percent year-over-year. Federal Government
Segment revenues for the second quarter included $27.5 million from
businesses acquired in the third quarter of last year. Revenues for
the segment exceeded expectations mainly related to a
customer-directed, third-party license purchase of $16.0 million
under a cost reimbursable contract that had been expected to occur
in the second half of the year. The second quarter of last year
benefited from approximately $11.8 million in low margin revenues
under a web services resale program that the Company chose not to
renew in the third quarter of last year.
Gross margin for the second quarter of 2022 was 30.1 percent, up
180 basis points over the second quarter of last year. Both
business segments and all operating divisions reported
year-over-year expansion in gross margin for the quarter. The
expansion in gross margin of the Commercial Segment was driven by
the double-digit growth of its high-margin services (commercial
consulting, creative digital marketing and permanent placement).
The expansion in gross margin of the Federal Government Segment was
driven by changes in business mix, including the contribution of
high-margin businesses acquired in 2021, a lower mix of revenues
from low-margin services and higher profitability under certain
firm fixed price contracts.
Selling, general and administrative ("SG&A") expenses were
$220.4 million, up 24.9 percent year-over-year. This increase was
commensurate with the growth in the business, including growth of
high-margin commercial revenue streams (which carry a higher
SG&A expense component than IT staffing and federal government
services revenues). SG&A expenses included approximately $3.1
million in acquisition and integration expenses (mainly related to
the GlideFast acquisition), which were not included in the
Company’s previously-announced guidance estimates.
Income from continuing operations for the second quarter of 2022
was $72.6 million ($1.41 per diluted share), up 26.7 percent over
the second quarter of 2021. Net income was $72.5 million ($1.41 per
diluted share).
Adjusted EBITDA (a non-GAAP measure) was $144.0 million, up 20.7
percent over the second quarter of 2021. The Adjusted EBITDA margin
for the quarter was 12.6 percent, up 40 basis points year-over-year
primarily related to the expansion in gross margin.
Share Repurchase Program
The Company also announced today that its Board of Directors
approved a new stock repurchase program under which the Company may
repurchase up to $400 million of its common stock over the next two
years. Under terms of the program, purchases can be made in the
open market or under a Rule 10b5-1 trading plan. The stock
repurchase program does not obligate the Company to acquire any
particular amount of the Company's stock and may be suspended at
any time at the Company's discretion. The new program replaces the
Company's previous $350 million stock repurchase program.
Liquidity and Capital Resources
The Company's primary source of liquidity is cash flows from
operating activities, which have been sufficient to fund working
capital and capital expenditure requirements.
At June 30, 2022, the Company had:
- Cash and cash equivalents of $490.6 million
- Full availability under its $250.0 million Senior Secured
Revolving Credit Facility (due 2024)
- Outstanding Senior Secured Debt of $490.8 million (term B loan
facility due 2025)
- Senior unsecured notes totaling $550.0 million at 4.625 percent
(due 2028)
Borrowings under the Company’s $250.0 million Senior Secured
Revolving Credit Facility are limited to a maximum Senior Secured
Debt leverage ratio (ratio of Senior Secured Debt to trailing 12
months Adjusted EBITDA) of 3.75 to 1.0. The Company's Senior
Secured Debt leverage ratio was 0.91 to 1.0 at June 30, 2022.
Third Quarter 2022 Financial Estimates
The Company's financial estimates for the third quarter of 2022,
which are set forth below, are based on current operating trends
and assume no significant deterioration in the markets ASGN serves.
These estimates do not include any acquisition, integration or
strategic planning expenses. Reconciliations of estimated net
income to the estimated non-GAAP financial measures are included in
the tables that accompany this release.
(In millions, except per share data)
Low
High
Revenues
$
1,183.0
$
1,203.0
SG&A expenses(1)
225.7
229.1
Amortization of intangible assets
17.9
17.9
Net income
70.5
74.1
Earnings per share - Diluted:
$
1.39
$
1.46
Diluted shares outstanding
50.8
50.8
Gross margin
29.8
%
30.0
%
Effective tax rate(2)
27.5
%
27.5
%
Non-GAAP Financial Measures:
Adjusted EBITDA
$
145.0
$
150.0
Adjusted Net Income(3)
$
88.1
$
91.7
Adjusted Net Income per diluted
share(3)
$
1.73
$
1.80
Adjusted EBITDA Margin
12.3
%
12.5
%
___________
(1)
Includes non-cash expenses totaling $17.8
million, comprised of: (i) $11.9 million in stock-based
compensation and (ii) $5.9 million in depreciation.
(2)
Estimated effective tax rate before any
excess tax benefits related to stock-based compensation.
(3)
Does not include the “Cash Tax Savings on
Indefinite-lived Intangible Assets.” These savings total $8.0
million each quarter, or $0.16 per diluted share, and represent the
benefit of the tax deduction that ASGN receives from the
amortization of goodwill and trademarks.
The financial estimates above are based on estimated of
“Billable Days” of 64.0 which is the same number of days as the
third quarter of 2021 and half a day more than the second quarter
of 2022. Billable Days are defined as Business Days (calendar days
for the period less weekends and holidays) adjusted for other
factors, such as the day of the week a holiday occurs, and
additional time taken off around holidays.
The implied revenue growth rate for the third quarter ranges
from 10.2 percent to 12.0 percent. Guidance includes estimated
revenues of $25.6 million from the GlideFast acquisition, and $9.5
million from two federal government consulting businesses acquired
in 2021 up through their one-year anniversary (both acquisitions
lap in the third quarter).
Conference Call
The Company will hold a conference call today at 4:30 p.m. ET to
review its financial results for the second quarter of 2022. The
dial-in number is 877-407-0792 (+1-201-689-8263 for callers outside
the United States), and the conference ID number is 13730463.
Participants should dial in ten minutes before the call. The
prepared remarks, supplemental materials and webcast for this call
can be accessed at www.asgn.com.
A replay of the conference call will be available beginning
today at 7:30 p.m. ET until August 10, 2022. The access number for
the replay is 844-512-2921 (+1-412-317-6671 for callers outside the
United States) and the conference ID number is 13730463.
About ASGN Incorporated
ASGN Incorporated (NYSE: ASGN) is a leading provider of IT
services and solutions, including technology and creative digital
marketing, across the commercial and government sectors. ASGN helps
corporate enterprises and government organizations develop,
implement and operate critical IT and business solutions through
its integrated offering of professional staffing and IT solutions.
For more information, visit us at asgn.com.
Safe Harbor
Certain statements made in this news release are
“forward-looking statements” within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, and involve a high
degree of risk and uncertainty. Forward-looking statements include
statements regarding our anticipated financial and operating
performance.
All statements in this news release, other than those setting
forth strictly historical information, are forward-looking
statements. Forward-looking statements are not guarantees of future
performance and actual results might differ materially. In
particular, we make no assurances that the proposed revenue
scenarios outlined above will be achieved. Additional examples of
forward-looking statements in this press release include, without
limitation, statements regarding our ability to attract, train and
retain qualified staffing consultants, the availability of
qualified contract professionals, management of our growth,
continued performance and improvement of our enterprise-wide
information systems, our ability to manage our litigation matters,
the successful integration of our acquired subsidiaries and other
risks detailed from time to time in our reports filed with the SEC,
including our Annual Report on Form 10-K for the year ended
December 31, 2021 as filed with the SEC on March 1, 2022. We
specifically disclaim any intention or duty to update any
forward-looking statements contained in this news release.
CONSOLIDATED SELECTED
FINANCIAL DATA (Unaudited)
(In millions, except per share
data)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
2022
2021
2022
2022
2021
Results of Operations:
Revenues
$
1,141.8
$
974.9
$
1,091.0
$
2,232.8
$
1,881.9
Costs of services
797.8
698.6
764.4
1,562.2
1,361.9
Gross profit
344.0
276.3
326.6
670.6
520.0
Selling, general and administrative
expenses
220.4
176.4
212.1
432.5
340.7
Amortization of intangible assets
13.5
12.0
13.9
27.4
24.0
Operating income
110.1
87.9
100.6
210.7
155.3
Interest expense
(10.1
)
(9.4
)
(9.3
)
(19.4
)
(18.6
)
Income before income taxes
100.0
78.5
91.3
191.3
136.7
Provision for income taxes
27.4
21.2
23.7
51.1
36.6
Income from continuing operations
72.6
57.3
67.6
140.2
100.1
Income (loss) from discontinued
operations,
net of income taxes
(0.1
)
6.9
(0.8
)
(0.9
)
12.8
Net income
$
72.5
$
64.2
$
66.8
$
139.3
$
112.9
Basic earnings per common share:
Continuing operations
$
1.42
$
1.08
$
1.31
$
2.73
$
1.89
Discontinued operations
—
0.13
(0.01
)
(0.01
)
0.24
Net income
$
1.42
$
1.21
$
1.30
$
2.72
$
2.13
Diluted earnings per common share:
Continuing operations
$
1.41
$
1.06
$
1.29
$
2.70
$
1.86
Discontinued operations
—
0.13
(0.01
)
(0.01
)
0.24
Net income
$
1.41
$
1.19
$
1.28
$
2.69
$
2.10
Number of shares and share equivalents
used to calculate earnings per share:
Basic
51.0
53.2
51.6
51.3
53.1
Diluted
51.6
53.9
52.3
52.0
53.8
CONSOLIDATED SELECTED
FINANCIAL DATA (Continued) (Unaudited)
(In millions)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
2022
2021
2022
2022
2021
Summary Statements of Cash Flow
Data:
Cash provided by operating activities
$
88.4
$
84.9
$
56.0
$
144.4
$
204.7
Cash provided by (used in) investing
activities
(6.3
)
(94.0
)
0.2
(6.1
)
(103.4
)
Cash provided by (used in) financing
activities
(93.7
)
(2.8
)
(83.4
)
(177.1
)
0.1
Reconciliation of GAAP to Non-GAAP
Measure:
Cash provided by operating activities
$
88.4
$
84.9
$
56.0
$
144.4
$
204.7
Less - Cash flows from discontinued
operations
—
(5.8
)
—
—
(11.5
)
Cash provided by operating activities from
continuing operations
88.4
79.1
56.0
144.4
193.2
Less - Capital expenditures from
continuing operations
(8.8
)
(6.8
)
(9.6
)
(18.4
)
(14.1
)
Free Cash Flow from continuing operations
(non-GAAP measure)
$
79.6
$
72.3
$
46.4
$
126.0
$
179.1
June 30,
December 31,
2022
2021
Summary Balance Sheet Data:
Cash and cash equivalents
$
490.6
$
529.6
Working capital
873.9
858.5
Goodwill and intangible assets, net
2,020.6
2,057.4
Total assets
3,524.5
3,502.8
Long-term debt
1,034.5
1,033.9
Total liabilities
1,668.4
1,637.4
Total stockholders’ equity
1,856.1
1,865.4
RECONCILIATIONS OF GAAP TO
NON-GAAP MEASURES (Unaudited)
(In millions, except per share
data)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
2022
2021
2022
2022
2021
Net income
$
72.5
$
64.2
$
66.8
$
139.3
$
112.9
Income from discontinued operations, net
of tax
(0.1
)
6.9
(0.8
)
(0.9
)
12.8
Income from continuing operations
72.6
57.3
67.6
140.2
100.1
Interest expense
10.1
9.4
9.3
19.4
18.6
Provision for income taxes
27.4
21.2
23.7
51.1
36.6
Depreciation
6.1
7.1
6.2
12.3
14.6
Amortization of intangible assets
13.5
12.0
13.9
27.4
24.0
EBITDA (non-GAAP measure)
129.7
107.0
120.7
250.4
193.9
Stock-based compensation
11.2
9.7
12.8
24.0
18.9
Acquisition, integration and strategic
planning expenses
3.1
2.6
1.3
4.4
3.4
Adjusted EBITDA (non-GAAP measure)
$
144.0
$
119.3
$
134.8
$
278.8
$
216.2
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
2022
2021
2022
2022
2021
Net income
$
72.5
$
64.2
$
66.8
$
139.3
$
112.9
Income from discontinued operations, net
of tax
(0.1
)
6.9
(0.8
)
(0.9
)
12.8
Income from continuing operations
72.6
57.3
67.6
140.2
100.1
Acquisition, integration and strategic
planning expenses
3.1
2.6
1.3
4.4
3.4
Tax effect on adjustments
(0.8
)
(0.7
)
(0.3
)
(1.1
)
(0.9
)
Non-GAAP net income
74.9
59.2
68.6
143.5
102.6
Amortization of intangible assets
13.5
12.0
13.9
27.4
24.0
Other
(0.4
)
(0.3
)
(0.4
)
(0.8
)
(0.6
)
Adjusted Net Income (non-GAAP
measure)(1)
$
88.0
$
70.9
$
82.1
$
170.1
$
126.0
Per diluted share:
Net income
$
1.41
$
1.19
$
1.28
$
2.68
$
2.10
Adjustments
0.30
0.13
0.29
0.59
0.24
Adjusted Net Income (non-GAAP
measure)(1)
$
1.71
$
1.32
$
1.57
$
3.27
$
2.34
Common shares and share equivalents
(diluted)
51.6
53.9
52.3
52.0
53.8
_________
(1)
Does not include the “Cash Tax Savings on
Indefinite-lived Intangible Assets,” which currently total
approximately $7.3 million per quarter (approximately $0.14 per
diluted share) and represent the benefit of the tax deduction for
amortization of goodwill and trademarks.
FINANCIAL ESTIMATES FOR THE
THIRD QUARTER OF 2022
RECONCILIATIONS OF ESTIMATED
GAAP TO NON-GAAP MEASURES
(In millions, except per share
data)
Low
High
Net income(1)
$
70.5
$
74.1
Interest expense
11.6
11.6
Provision for income taxes
26.8
28.2
Depreciation expense(2)
6.3
6.3
Amortization of intangible assets
17.9
17.9
EBITDA (non-GAAP measure)
133.1
138.1
Stock-based compensation
11.9
11.9
Adjusted EBITDA (non-GAAP measure)
$
145.0
$
150.0
Low
High
Net income(1)
$
70.5
$
74.1
Amortization of intangible assets
17.9
17.9
Other
(0.3
)
(0.3
)
Adjusted Net Income (non-GAAP
measure)(3)
$
88.1
$
91.7
Per diluted share:
Net income
$
1.39
$
1.46
Adjustments
0.34
0.34
Adjusted Net Income (non-GAAP
measure)(3)
$
1.73
$
1.80
Common shares and share equivalents
(diluted)
50.8
50.8
_______
(1)
Does not include acquisition, integration
and strategic planning expenses, or excess tax benefits related to
stock-based compensation.
(2)
Comprised of (i) $5.9 million of
depreciation included in SG&A expenses and (ii) $0.4 million of
depreciation included in costs of services.
(3)
Does not include the "Cash Tax Savings on
Indefinite-lived Intangible Assets". These savings total $8.0
million per quarter ($0.16 per diluted share) and represent the
benefit of the tax deduction for amortization of goodwill and
trademarks.
Non-GAAP Financial Measures
Statements in this release and the accompanying financial
information include non-GAAP financial measures that are provided
as additional information to enhance the overall understanding of
the Company's current financial performance and not as an
alternative to the consolidated interim financial statements
presented in accordance with accounting principles generally
accepted in the United States ("GAAP"). Management uses these
non-GAAP measures (EBITDA, Adjusted EBITDA, Adjusted Net Income,
Adjusted Net Income per diluted share, Free Cash Flow, Senior
Secured Debt leverage ratio and Revenues on a same Billable Days
and Constant Currency basis) to evaluate the Company's financial
performance. These terms might not be calculated in the same manner
as, and thus might not be comparable to, similarly titled measures
reported by other companies. The financial information tables that
accompany this press release include reconciliations of net income
to non-GAAP financial measures.
EBITDA and Adjusted EBITDA provide a measure of the Company's
operating results in a manner that is focused on the performance of
the Company's core business on an ongoing basis, by removing the
effects of non-operating and certain non-cash expenses. These
non-operating and non-cash items are specifically identified in the
reconciliations of GAAP measures to Non-GAAP measures that
accompany this release.
Adjusted Net Income provides a method for assessing the
Company's operating results in a manner that is focused on the
performance of the Company's core business on an ongoing basis by
removing the effects of non-operating and certain non-cash
expenses, adjusted for some of the cash flows associated with
amortization of intangible assets to more fully present the
performance of the Company's acquisitions. The calculation of
Adjusted Net Income is presented in the reconciliations of GAAP
measures to Non-GAAP measures that accompany this release.
Free Cash Flow provides useful information to investors about
the amount of cash generated by the business that can be used for
strategic opportunities and is computed as presented in the tables
that accompany this release.
The Senior Secured Debt leverage ratio is a ratio of the
Company's Senior Secured Debt to trailing 12 months Adjusted EBITDA
(gives effect to the divestiture of the Oxford business) and
provides information about the Company's compliance with loan
covenants.
Revenues calculated on a Same Billable Days and Constant
Currency basis provide more comparable information by removing the
effect of differences in the number of billable days and changes in
currency exchange rates on a year-over-year basis. Revenues on a
Same Billable Days basis are adjusted for the following items:
differences in billable days during the period by taking the
current-period average revenue per billable day, multiplied by the
number of billable days from the same period in the prior year;
Billable Days are business days (calendar days for the period less
weekends and holidays) adjusted for other factors, such as the day
of the week a holiday occurs, additional time taken off around
holidays, year-end client furloughs and inclement weather. To
calculate revenues on Constant Currency basis, reported revenues
are re-translated using foreign exchange rates from the comparable
prior year period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220726006190/en/
Ed Pierce Chief Financial Officer 818-878-7900
ADDO Investor Relations Kimberly Esterkin 310-829-5400 /
kesterkin@addo.com
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