Revenues and Adj. EBITDA near the top-end of
guidance ranges Approves new $750 million stock repurchase
program
ASGN Incorporated (NYSE: ASGN), a leading provider of IT
services and solutions to the commercial and government sectors,
reported financial results for the quarter ended March 31,
2024.
Highlights
- Revenues were $1.05 billion
- Net income was $38.1 million
- Adjusted EBITDA (a non-GAAP measure) was $108.3 million (10.3
percent of revenues)
- Operating cash flows were $73.3 million and Free Cash Flow (a
non-GAAP measure) was $62.5 million
- Refinanced term loan B for a 50-basis point reduction in the
interest rate to SOFR plus 175 basis points
- Repurchased approximately 0.8 million shares of the Company's
common stock for $79.7 million
- Subsequent to quarter end, ASGN's Board of Directors approved a
new, two-year $750 million stock repurchase program; the largest in
the Company's history
IT Consulting Revenues - Approximately 56.7 percent of
total revenues
- Commercial Segment - New bookings for the trailing-twelve-month
period (“TTM”) were $1.3 billion; book-to-bill ratio was 1.2 to
1
- Federal Government Segment - New contract awards for the TTM
were $1.1 billion; book-to-bill ratio was 0.9 to 1
Management Commentary
“ASGN achieved solid results for the first quarter of 2024.
Revenues of $1.05 billion and Adjusted EBITDA of $108.3 million
were both near the top-end of our guidance ranges,” said ASGN Chief
Executive Officer, Ted Hanson. “A highlight of our quarterly
performance, IT consulting revenues continued to grow and totaled
56.7 percent of consolidated revenues, up from 50.4 percent in the
prior year.”
Mr. Hanson continued, “Even though clients are still cautious
with their IT spend, we are maintaining a healthy mix of commercial
and government revenues. Our industry-diverse, large account
portfolio not only serves ASGN well in good times, but also in more
difficult macro conditions. As we advance our business toward
higher-value IT consulting services, we continue to proactively
position our operations for stability across market cycles. With
this solid foundation in place, I am confident that when IT spend
accelerates, ASGN will be at the forefront to lead our clients to
their next phases of technological innovation, productivity, and
growth.”
First Quarter 2024 Financial Results - Summary
Three Months Ended,
March 31,
December 31,
(In millions, except per share data)
2024
2023
2023
Revenues
Commercial Segment
$
731.5
$
832.1
$
748.6
Federal Government Segment
317.5
296.7
325.5
1,049.0
1,128.8
1,074.1
Gross Margin
Commercial Segment
32.0
%
31.5
%
32.1
%
Federal Government Segment
19.7
%
21.6
%
19.9
%
Consolidated
28.2
%
28.9
%
28.4
%
Net income
$
38.1
$
49.5
$
50.3
Earnings per diluted share
$
0.81
$
0.99
$
1.06
Non-GAAP Financial Measures
Adjusted Net Income
$
54.6
$
68.7
$
68.8
Adjusted Net Income per diluted share
$
1.16
$
1.38
$
1.45
Adjusted EBITDA
$
108.3
$
123.5
$
121.0
Adjusted EBITDA margin
10.3
%
10.9
%
11.3
%
Notes:
Definitions of non-GAAP measures and
reconciliation to GAAP measurements are included in the tables that
accompany this release.
Consolidated revenues for the quarter were $1.05 billion, down
7.1 percent over the first quarter of 2023. From an industry
perspective, the Company operates in six broad industry verticals.
Commercial Segment revenues (69.7 percent of total revenues) were
down 12.1 percent year-over-year and are categorized into five
verticals: (i) Financial Services, (ii) Consumer and Industrial,
(iii) Technology, Media and Telecom (“TMT”), (iv) Healthcare, and
(v) Business Services. Federal Government Segment revenues (30.3
percent of total revenues), the sixth industry vertical, were up
7.0 percent year-over-year.
Total IT consulting services revenues were $594.5 million (56.7
percent of total revenues), up 4.6 percent year-over-year. Federal
Government Segment revenues, which are all consulting revenues,
were $317.5 million, up 7.0 percent year-over-year as stated above,
and Commercial Segment consulting revenues were $277.0 million, up
2.0 percent year-over-year. The growth in IT consulting services
revenues was offset by assignment revenues, which totaled $454.5
million (43.3 percent of total revenues), and were down 18.9
percent year-over-year, reflecting continued softness in the more
cyclical portions of the Commercial Segment business.
Gross margin for the first quarter of 2024 was 28.2 percent,
down 70 basis points from the first quarter of 2023 due to a higher
mix of revenues from the Federal Government Segment, which have a
lower gross margin than Commercial Segment revenues.
Selling, general, and administrative (“SG&A”) expenses were
$210.2 million (20.0 percent of revenues), compared with $224.1
million (19.9 percent of revenues) from the first quarter of 2023.
SG&A expenses included $1.2 million in acquisition,
integration, and strategic planning expenses, which were not
included in the Company's previously-announced guidance
estimates.
Net income was $38.1 million ($0.81 per diluted share), compared
with $49.5 million ($0.99 per diluted share) from the first quarter
of 2023.
Adjusted EBITDA (a non-GAAP measure) was $108.3 million, or 10.3
percent of revenues (“Adjusted EBITDA margin,” a non-GAAP measure),
compared with $123.5 million or 10.9 percent of revenues in the
first quarter of 2023.
Capital Resources and Capital Allocation
At March 31, 2024, the Company had:
- Cash and cash equivalents of $158.4 million
- Full availability under its $500.0 million Senior Secured
Revolving Credit Facility (due 2028)
- Senior Secured Debt of $497.5 million (term loan B facility due
2030)
- Senior unsecured notes totaling $550.0 million at 4.625 percent
(due 2028)
In the first quarter of 2024 the Company repurchased 0.8 million
shares of its common stock for $79.7 million at an average price of
$96.63 per share. Subsequent to quarter end, ASGN's Board of
Directors approved a new two-year $750 million stock repurchase
program.
Second Quarter 2024 Financial Estimates
The Company's financial estimates for the second quarter of
2024, 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
$
1,034.5
$
1,054.5
SG&A expenses(1)
206.0
210.0
Amortization of intangible assets
15.1
15.1
Net income
44.7
48.3
Earnings per diluted share
$
0.97
$
1.04
Gross margin
28.9
%
29.2
%
Effective tax rate(2)
28.0
%
28.0
%
Non-GAAP Financial Measures:
Adjusted EBITDA
$
114.0
$
119.0
Adjusted Net Income(3)
$
59.2
$
62.8
Adjusted Net Income per diluted
share(3)
$
1.28
$
1.36
Adjusted EBITDA margin
11.0
%
11.3
%
(1)
Includes non-cash expenses
totaling $20.7 million, comprised of: (i) $11.9 million of
stock-based compensation, (ii) $7.5 million of depreciation, and
(iii) $1.3 million of amortization related to capitalized
cloud-based application implementation costs.
(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
$8.5 million each quarter, or $0.18 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 an estimate of
“Billable Days,” which 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.
There are 63.5 Billable Days in the second quarter of 2024, which
is 0.25 days more than the year ago period and 0.75 days more than
Q1 2024.
Conference Call
The Company will hold a conference call today at 4:30 p.m. ET to
review its financial results for the first quarter of 2024 and to
provide second quarter 2024 estimates. The dial-in number is
877-407-0792 (+1-201-689-8263 outside the United States), and the
conference ID number is 13744927. 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 May 8, 2024. The access number for the
replay is 844-512-2921 (+1-412-317-6671 outside the United States
for callers outside the United States) and the conference ID number
is 13744927.
About ASGN Incorporated
ASGN Incorporated (NYSE: ASGN) is a leading provider of IT
services and solutions to the commercial and government sectors.
ASGN helps corporate enterprises and government organizations
develop, implement, and operate critical IT and business solutions
through its integrated offerings. For more information, please
visit 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,
expense, and profit estimates 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 internal employees,
the availability of qualified billable 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 acquisitions, 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, 2023 as filed with the SEC on February 23, 2024.
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
March 31,
December 31,
2024
2023
2023
Results of Operations:
Revenues
$
1,049.0
$
1,128.8
$
1,074.1
Costs of services
752.8
802.4
769.2
Gross profit
296.2
326.4
304.9
Selling, general, and administrative
expenses
210.2
224.1
203.6
Amortization of intangible assets
15.1
18.1
17.9
Operating income
70.9
84.2
83.4
Interest expense
(17.6
)
(15.4
)
(16.7
)
Income before income taxes
53.3
68.8
66.7
Provision for income taxes
15.2
19.3
16.4
Net income
$
38.1
$
49.5
$
50.3
Earnings per share:
Basic
$
0.82
$
1.00
$
1.07
Diluted
$
0.81
$
0.99
$
1.06
Number of shares and share equivalents
used to calculate earnings per share:
Basic
46.5
49.3
47.1
Diluted
46.9
49.8
47.5
CONSOLIDATED SELECTED
FINANCIAL DATA (Continued) (Unaudited)
(In millions)
Three Months Ended
March 31,
December 31,
2024
2023
2023
Summary Statements of Cash Flow
Data:
Cash provided by operating activities
$
73.3
$
80.5
$
116.4
Cash used in investing activities
(10.8
)
(12.3
)
(7.2
)
Cash used in financing activities
(80.0
)
(73.4
)
(79.3
)
Reconciliation of GAAP to Non-GAAP
Measure:
Cash provided by operating activities
$
73.3
$
80.5
$
116.4
Capital expenditures
(10.8
)
(11.7
)
(7.2
)
Free Cash Flow (non-GAAP measure)
$
62.5
$
68.8
$
109.2
March 31,
December 31,
2024
2023
Summary Balance Sheet Data:
Cash and cash equivalents
$
158.4
$
175.9
Working capital
561.7
579.2
Goodwill and intangible assets, net
2,376.9
2,392.0
Total assets
3,488.8
3,544.6
Long-term debt
1,036.3
1,036.6
Total liabilities
1,627.4
1,652.5
Total stockholders’ equity
1,861.4
1,892.1
RECONCILIATIONS OF GAAP TO
NON-GAAP MEASURES (Unaudited)
(In millions, except per share
data)
Three Months Ended
March 31,
December 31,
2024
2023
2023
Net income
$
38.1
$
49.5
$
50.3
Interest expense
17.6
15.4
16.7
Provision for income taxes
15.2
19.3
16.4
Depreciation and other amortization(1)
9.4
6.8
7.8
Amortization of intangible assets
15.1
18.1
17.9
EBITDA (non-GAAP measure)
95.4
109.1
109.1
Stock-based compensation
11.7
12.1
10.3
Acquisition, integration, and strategic
planning expenses
1.2
2.3
1.6
Adjusted EBITDA (non-GAAP measure)
$
108.3
$
123.5
$
121.0
Three Months Ended
March 31,
December 31,
2024
2023
2023
Net income
$
38.1
$
49.5
$
50.3
Credit facility amendment expenses
1.5
—
—
Acquisition, integration, and strategic
planning expenses
1.2
2.3
1.6
Tax effect on adjustments
(0.7
)
(0.6
)
(0.4
)
Non-GAAP net income
40.1
51.2
51.5
Amortization of intangible assets
15.1
18.1
17.9
Other
(0.6
)
(0.6
)
(0.6
)
Adjusted Net Income (non-GAAP
measure)(2)
$
54.6
$
68.7
$
68.8
Per diluted share:
Net income
$
0.81
$
0.99
$
1.06
Adjustments
0.35
0.39
0.39
Adjusted Net Income (non-GAAP
measure)(2)
$
1.16
$
1.38
$
1.45
Common shares and share equivalents
(diluted)
46.9
49.8
47.5
(1)
The first quarter of 2024 and fourth
quarter of 2023 include $1.3 million and $0.7 million,
respectively, of amortization related to capitalized cloud-based
application implementation costs included in SG&A expenses.
(2)
Does not include the “Cash Tax Savings on
Indefinite-lived Intangible Assets,” which currently total
approximately $8.5 million per quarter (approximately $0.18 per
diluted share) and represent the benefit of the tax deduction for
amortization of goodwill and trademarks.
FINANCIAL ESTIMATES FOR THE
SECOND QUARTER OF 2024
RECONCILIATIONS OF ESTIMATED
GAAP TO NON-GAAP MEASURES
(In millions, except per share
data)
Low
High
Net income(1)
$
44.7
$
48.3
Interest expense
15.7
15.7
Provision for income taxes
17.4
18.8
Depreciation and other amortization(2)
9.2
9.2
Amortization of intangible assets
15.1
15.1
EBITDA (non-GAAP measure)
102.1
107.1
Stock-based compensation
11.9
11.9
Adjusted EBITDA (non-GAAP measure)
$
114.0
$
119.0
Low
High
Net income(1)
$
44.7
$
48.3
Amortization of intangible assets
15.1
15.1
Other
(0.6
)
(0.6
)
Adjusted Net Income (non-GAAP
measure)(3)
$
59.2
$
62.8
Per diluted share:
Net income
$
0.97
$
1.04
Adjustments
0.31
0.32
Adjusted Net Income (non-GAAP
measure)(3)
$
1.28
$
1.36
(1)
Does not include acquisition, integration, and strategic
planning expenses, or excess tax benefits related to stock-based
compensation.
(2)
Comprised of (i) $7.5 million of depreciation included in
SG&A expenses, (ii) $1.3 million of amortization related to
capitalized cloud-based application implementation costs included
in SG&A expenses, and (iii) $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 $8.5 million per quarter
($0.18 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 include financial information
presented in accordance with accounting principles generally
accepted in the United States ("GAAP") and also 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 GAAP.
Management uses these non-GAAP measures (earnings before interest,
taxes, depreciation, and amortization ("EBITDA"), Adjusted EBITDA,
Adjusted EBITDA margin, Adjusted Net Income, Adjusted Net Income
per diluted share, Free Cash Flow, and Revenues on a same Billable
Days 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, Adjusted EBITDA, and Adjusted EBITDA margin 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.
Commercial consulting bookings are defined as the value of new
contracts entered into during a specified period, including
adjustments for the effects of changes in contract scope and
contract terminations. The book-to-bill ratio for the Commercial
consulting is the ratio of bookings to revenues for a specified
period.
Federal Government Segment new contract awards are defined as
the estimated amount of future revenues to be recognized under
contracts awarded during a specified period, including adjustments
to estimates for contracts awarded in previous periods. The
book-to-bill ratio for the Federal Government Segment is the ratio
of New Contract Awards to revenues for a specified period.
Revenues calculated on a Same Billable Days basis provide more
comparable information by removing the effect of differences in the
number of billable days 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240424692131/en/
Kimberly Esterkin Vice President, Investor Relations
kimberly.esterkin@asgn.com
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