ASGN Inc.

10/31/2024 | Press release | Distributed by Public on 10/31/2024 04:02

Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)

asgn-20240930
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-35636
ASGN Incorporated
(Exact name of registrant as specified in its charter)
Delaware 95-4023433
(State of Incorporation)
(I.R.S. Employer Identification No.)
4400 Cox Road, Suite 110
Glen Allen, Virginia23060
(Address, including zip code, of Principal Executive Offices)
(888) 482-8068
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of exchange on which registered
Common Stock ASGN NYSE
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes☐No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes☐No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐Yes ☒No
At October 25, 2024, the total number of outstanding shares of the Common Stock of ASGN Incorporated (the "Company") ($0.01 par value) was $44.2 million.
ASGN INCORPORATED AND SUBSIDIARIES
INDEX
PART I -FINANCIAL INFORMATION
Item 1 -Condensed Consolidated Financial Statements (Unaudited)
3
Condensed Consolidated Balance Sheets
3
Condensed Consolidated Statements of Operations and Comprehensive Income
4
Condensed Consolidated Statements of Stockholders' Equity
5
Condensed Consolidated Statements of Cash Flows
6
Notes to Condensed Consolidated Financial Statements
7
Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations
11
Item 3 -Quantitative and Qualitative Disclosures about Market Risks
15
Item 4 -Controls and Procedures
15
PART II- OTHER INFORMATION
Item 1 -Legal Proceedings
16
Item 1A -Risk Factors
16
Item 2 -Unregistered Sales of Securities and Use of Proceeds
16
Item 3 -Defaults Upon Senior Securities
16
Item 4 -Mine Safety Disclosures
16
Item 5 -Other Information
16
Item 6 -Exhibits
17
Signature
18
2
PART I -FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements (Unaudited)
ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except share data)
September 30,
2024 		December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents $ 166.6 $ 175.9
Accounts receivable, net 686.4 741.5
Prepaid expenses and income taxes 36.0 36.8
Other current assets 18.3 19.1
Total current assets 907.3 973.3
Property and equipment, net 79.2 81.4
Operating lease right-of-use assets 61.8 64.2
Identifiable intangible assets, net 453.7 497.9
Goodwill 1,894.3 1,894.1
Other non-current assets 35.4 33.7
Total assets $ 3,431.7 $ 3,544.6
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 25.8 $ 34.0
Accrued payroll 236.6 236.5
Operating lease liabilities 20.3 19.5
Other current liabilities 120.9 104.1
Total current liabilities 403.6 394.1
Long-term debt 1,034.4 1,036.6
Operating lease liabilities 46.0 49.1
Deferred income tax liabilities 156.1 156.0
Other long-term liabilities 17.2 16.7
Total liabilities 1,657.3 1,652.5
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $0.01 par value; 1.0 million shares authorized; no shares issued
- -
Common stock, $0.01 par value; 75.0 million shares authorized; 44.2 million and 46.7 million shares outstanding at September 30, 2024, and December 31, 2023, respectively
0.5 0.5
Paid-in capital 684.6 696.0
Retained earnings 1,091.4 1,195.6
Accumulated other comprehensive loss (2.1) -
Total stockholders' equity 1,774.4 1,892.1
Total liabilities and stockholders' equity $ 3,431.7 $ 3,544.6
See notes to condensed consolidated financial statements.
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ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
(in millions, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Revenues $ 1,031.0 $ 1,116.8 $ 3,114.7 $ 3,376.5
Costs of services 730.6 794.4 2,217.0 2,401.4
Gross profit 300.4 322.4 897.7 975.1
Selling, general, and administrative expenses 207.5 206.0 623.3 640.6
Amortization of intangible assets 14.0 17.8 44.2 53.8
Operating income 78.9 98.6 230.2 280.7
Interest expense, net (16.0) (18.5) (49.4) (49.7)
Income before income taxes 62.9 80.1 180.8 231.0
Provision for income taxes 15.4 20.7 48.0 62.0
Net income $ 47.5 $ 59.4 $ 132.8 $ 169.0
Earnings per share:
Basic $ 1.07 $ 1.23 $ 2.93 $ 3.46
Diluted $ 1.06 $ 1.23 $ 2.89 $ 3.43
Shares and share equivalents used to calculate earnings per share:
Basic 44.5 48.1 45.4 48.8
Diluted 45.0 48.4 45.9 49.2
Reconciliation of net income to comprehensive income:
Net income $ 47.5 $ 59.4 $ 132.8 $ 169.0
Foreign currency translation adjustment 0.2 (1.3) (2.1) 1.1
Comprehensive income $ 47.7 $ 58.1 $ 130.7 $ 170.1
See notes to condensed consolidated financial statements.
4
ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(in millions)
Common Stock Paid-in Capital Retained Earnings Other Total
Shares Par Value
Three Months Ended September 30, 2024
Balance at June 30, 2024
45.1 $ 0.5 $ 687.2 $ 1,122.5 $ (2.3) $ 1,807.9
Stock-based compensation expense - - 9.9 - - 9.9
Issuances under equity plans 0.1 - 7.7 - - 7.7
Tax withholding on restricted stock vesting - - (3.7) - - (3.7)
Stock repurchase and retirement of shares (1.0) - (16.5) (78.6) - (95.1)
Other - - - - 0.2 0.2
Net income - - - 47.5 - 47.5
Balance at September 30, 2024
44.2 $ 0.5 $ 684.6 $ 1,091.4 $ (2.1) $ 1,774.4
Three Months Ended September 30, 2023
Balance at June 30, 2023
48.5 $ 0.5 $ 702.8 $ 1,223.6 $ (0.3) $ 1,926.6
Stock-based compensation expense - - 10.3 - - 10.3
Issuances under equity plans 0.2 - 7.8 - - 7.8
Tax withholding on restricted stock vesting - - (1.5) - - (1.5)
Stock repurchase and retirement of shares (1.2) - (17.5) (75.1) - (92.6)
Other - - - - (1.3) (1.3)
Net income - - - 59.4 - 59.4
Balance at September 30, 2023
47.5 $ 0.5 $ 701.9 $ 1,207.9 $ (1.6) $ 1,908.7
Common Stock Paid-in Capital Retained Earnings Other Total
Shares Par Value
Nine Months Ended September 30, 2024
Balance at December 31, 2023
46.7 $ 0.5 $ 696.0 $ 1,195.6 $ - $ 1,892.1
Stock-based compensation expense - - 32.6 - - 32.6
Issuances under equity plans 0.5 - 17.2 - - 17.2
Tax withholding on restricted stock vesting - - (13.7) - - (13.7)
Stock repurchase and retirement of shares (3.0) - (47.5) (237.0) - (284.5)
Other - - - - (2.1) (2.1)
Net income - - - 132.8 - 132.8
Balance at September 30, 2024
44.2 $ 0.5 $ 684.6 $ 1,091.4 $ (2.1) $ 1,774.4
Nine Months Ended September 30, 2023
Balance at December 31, 2022
49.5 $ 0.5 $ 703.5 $ 1,200.0 $ (2.7) $ 1,901.3
Stock-based compensation expense - - 33.7 - - 33.7
Issuances under equity plans 0.6 - 18.9 - - 18.9
Tax withholding on restricted stock vesting - - (15.7) - - (15.7)
Stock repurchase and retirement of shares (2.6) - (38.5) (161.1) - (199.6)
Other - - - - 1.1 1.1
Net income - - - 169.0 - 169.0
Balance at September 30, 2023
47.5 $ 0.5 $ 701.9 $ 1,207.9 $ (1.6) $ 1,908.7
See notes to condensed consolidated financial statements.
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ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
Nine Months Ended
September 30,
2024 2023
Cash Flows from Operating Activities
Net income $ 132.8 $ 169.0
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation 72.4 74.6
Stock-based compensation 32.6 33.7
Other 7.2 9.3
Changes in operating assets and liabilities:
Accounts receivable 52.6 48.1
Prepaid expenses and income taxes 0.6 14.5
Accounts payable (7.2) (2.5)
Accrued payroll 0.9 (34.8)
Income taxes payable 17.2 31.6
Other (9.3) (3.0)
Net cash provided by operating activities 299.8 340.5
Cash Flows from Investing Activities
Cash paid for property and equipment (24.0) (32.7)
Other - (0.6)
Net cash used in investing activities (24.0) (33.3)
Cash Flows from Financing Activities
Proceeds from long-term debt - 571.8
Principal payments of long-term debt (3.8) (595.3)
Debt issuance and amendment costs - (8.6)
Proceeds from employee stock purchase plan 17.2 18.9
Repurchase of common stock (283.3) (197.7)
Payment of employment taxes related to release of restricted stock awards (13.7) (15.7)
Payment of contingent consideration - (5.0)
Net cash used in financing activities (283.6) (231.6)
Effect of exchange rate changes on cash and cash equivalents (1.5) (0.3)
Net Increase (Decrease) in Cash and Cash Equivalents (9.3) 75.3
Cash and Cash Equivalents at Beginning of Year 175.9 70.3
Cash and Cash Equivalents at End of Period $ 166.6 $ 145.6
Supplemental Disclosure of Cash Flow Information
Cash paid for -
Income taxes $ 22.8 $ 12.0
Interest $ 41.4 $ 39.4
Operating leases $ 17.6 $ 20.0
Noncash transactions -
Operating lease right of use assets obtained in exchange for operating lease liabilities $ 13.6 $ 26.9
See notes to condensed consolidated financial statements.
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ASGN INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. General
Basis of Presentation- The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The December 31, 2023 balance sheet was derived from audited financial statements. The financial statements include adjustments consisting of normal recurring items, which, in the opinion of management, are necessary for a fair presentation of the financial position of ASGN Incorporated and its subsidiaries ("ASGN" or the "Company") and its results of operations for the interim dates and periods set forth herein. The results for any of the interim periods are not necessarily indicative of the results to be expected for the full year or any other period. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 10-K").
2. Goodwill and Identifiable Intangible Assets
Goodwill by reportable segment is as follows (in millions):
Commercial Federal Government Total
Balance as of December 31, 2022
$ 1,074.7 $ 817.2 $ 1,891.9
Purchase price adjustment - 1.1 1.1
Translation adjustment 1.1 - 1.1
Balance as of December 31, 2023
1,075.8 818.3 1,894.1
Translation adjustment 0.2 - 0.2
Balance at September 30, 2024
$ 1,076.0 $ 818.3 $ 1,894.3
Acquired identifiable intangible assets consisted of the following (in millions):
September 30, 2024 December 31, 2023
Estimated Useful Life in Years Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Subject to amortization:
Customer and contractual relationships
7 - 13
$ 496.0 $ 322.9 $ 173.1 $ 496.0 $ 282.0 $ 214.0
Non-compete agreements
2 - 7
29.3 21.5 7.8 29.3 18.2 11.1
525.3 344.4 180.9 525.3 300.2 225.1
Not subject to amortization:
Trademarks 272.8 - 272.8 272.8 - 272.8
$ 798.1 $ 344.4 $ 453.7 $ 798.1 $ 300.2 $ 497.9
Estimated future amortization expense is as follows (in millions):
Remainder of 2024 $ 13.9
2025 48.8
2026 41.8
2027 32.0
2028 21.2
Thereafter 23.2
$ 180.9
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3. Long-Term Debt
Long-term debt consisted of the following (in millions):
September 30,
2024 		December 31,
2023
Senior Secured Credit Facility:
$500 million revolving credit facility, due 2028
$ - $ -
Term loan B, due 2030 495.0 498.8
Unsecured Senior Notes, due 2028 550.0 550.0
1,045.0 1,048.8
Unamortized deferred loan costs (5.6) (7.2)
Term loan B, principal payments due in the next 12 months (5.0) (5.0)
Long-term debt $ 1,034.4 $ 1,036.6
__________
The Company is required to make quarterly minimum principal payments totaling $5.0 million annually on the term loan until its maturity date; this amount is included in other current liabilities on the accompanying condensed consolidated balance sheets. Taking into consideration the $5.0 million annual required principal payments, the balance due at maturity will be $466.3 million.
Senior Secured Credit Facility -In March 2024, the Company amended its senior secured credit facility (the "facility") with a 50-basis point reduction in the term loan B ("term loan") interest rate. As a result, borrowings under the $495.0 million term loan bear interest, at the Company's election, at (i) the secured overnight financing rate ("SOFR") plus 1.75 percent, or (ii) the bank's base rate plus 1.00 percent. Related to the debt amendment there were $0.9 million of costs. The Company accounted for the debt amendment as a modification and, accordingly, these costs were expensed as incurred. There was an insignificant amount of previously capitalized costs that were written off. Borrowings under the $500.0 million revolving credit facility (the "revolver") bear interest, at the Company's election, at (i) SOFR plus a 10 basis points adjustment plus 2.00 to 3.00 percent, or (ii) the bank's base rate plus 1.00 to 2.00 percent, depending on leverage levels. A commitment fee of 0.30 to 0.45 percent is payable on the undrawn portion of the revolver. The facility is subject to various restrictive covenants including, when amounts are drawn under the revolver, a maximum ratio of senior secured debt to trailing-twelve-months of lender-defined consolidated EBITDA of 3.75 to 1, which was 1.07 to 1 at September 30, 2024. The facility is secured by substantially all of the Company's assets and at September 30, 2024, the Company was in compliance with its debt covenants.
Unsecured Senior Notes - The Company has $550.0 million of unsecured senior notes, due in 2028, which bear interest at 4.625 percent payable semiannually in arrears on May 15 and November 15. These notes are unsecured obligations and are subordinate to the senior secured credit facility. These notes also contain certain customary limitations including, the Company's ability to incur additional indebtedness, engage in mergers and acquisitions, transfer or sell assets, and make certain distributions.
4. Commitments and Contingencies
The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of business, and collective class and Private Attorneys General Act ("PAGA") actions alleging violations of wage and hour laws. The Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its condensed consolidated financial statements.
5. Income Taxes
For interim reporting periods, the Company's provision for income taxes is calculated using its annualized estimated effective tax rate for the year. This rate is based on its estimated full year income and the related income tax expense for each jurisdiction in which the Company operates. The effective tax rate can be affected by changes in the geographical mix, permanent differences, and the estimate of full year pretax accounting income. This rate is adjusted for the effects of discrete items occurring in the period.
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6. Earnings per Share
The following is a reconciliation of the number of shares and share equivalents used to calculate basic and diluted earnings per share (in millions, except per share data).
Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Net income $ 47.5 $ 59.4 $ 132.8 $ 169.0
Weighted-average number of common shares outstanding - basic
44.5 48.1 45.4 48.8
Dilutive effect of common share equivalents 0.5 0.3 0.5 0.4
Weighted-average number of common shares and share equivalents outstanding - diluted
45.0 48.4 45.9 49.2
Basic earnings per share $ 1.07 $ 1.23 $ 2.93 $ 3.46
Diluted earnings per share $ 1.06 $ 1.23 $ 2.89 $ 3.43
7. Segment Reporting
ASGN provides information technology ("IT") services and professional solutions across the commercial and government sectors. ASGN operates through two segments, Commercial and Federal Government. The Commercial Segment, which is the largest segment, provides consulting, creative digital marketing, and permanent placement services primarily to Fortune 1000 and large mid-market companies. The Federal Government Segment provides advanced IT solutions to the Department of Defense, the intelligence community, and federal civilian agencies. Virtually all of the Company's revenues are generated in the United States.
Management evaluates the performance of each segment primarily based on revenues, gross profit, and operating income derived directly from internal financial reporting of the segments used for corporate management purposes, which is presented below by segment (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Commercial
Revenues $ 718.8 $ 782.4 $ 2,176.0 $ 2,425.8
Gross profit 235.8 254.2 706.9 777.5
Operating income 73.3 91.4 216.8 267.0
Depreciation and other amortization 7.4 5.0 21.9 14.5
Amortization of intangible assets 6.6 8.6 22.0 26.1
Federal Government
Revenues $ 312.2 $ 334.4 $ 938.7 $ 950.7
Gross profit 64.6 68.2 190.8 197.6
Operating income 24.6 27.2 72.3 74.9
Depreciation and other amortization 1.6 1.4 5.0 4.3
Amortization of intangible assets 7.4 9.2 22.2 27.7
Consolidated
Revenues $ 1,031.0 $ 1,116.8 $ 3,114.7 $ 3,376.5
Gross profit 300.4 322.4 897.7 975.1
Operating income 78.9 98.6 230.2 280.7
Depreciation and other amortization 9.4 7.0 28.2 20.8
Amortization of intangible assets 14.0 17.8 44.2 53.8
_______
Depreciation and other amortization includes $1.6 million and $4.1 million amortization related to capitalized cloud-based application implementation costs in the three and nine months ended September 30, 2024.
Consolidated operating income includes corporate operating expenses, which are not allocated to the segments. These include stock-based compensation expense, depreciation expense, compensation for corporate employees, acquisition, integration, and strategic planning expenses, and public company expenses.
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Virtually all of the revenues from the Commercial Segment are generated from time-and-materials ("T&M") contracts where payments are based on fixed hourly rates for each direct labor hour expended and reimbursements for allowable material costs and out-of-pocket expenses. Revenues from the Federal Government Segment are generated from: (i) firm-fixed-price, (ii) T&M, and (iii) cost reimbursable contracts. Revenues by segment and by type are as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Commercial
Assignment $ 433.8 $ 508.2 $ 1,332.5 $ 1,598.8
Consulting 285.0 274.2 843.5 827.0
718.8 782.4 2,176.0 2,425.8
Federal Government
Firm-fixed-price 92.6 107.3 273.8 297.9
Time and materials 128.0 126.8 395.4 377.9
Cost reimbursable 91.6 100.3 269.5 274.9
312.2 334.4 938.7 950.7
Consolidated $ 1,031.0 $ 1,116.8 $ 3,114.7 $ 3,376.5
Federal Government Segment revenues by customer type are as follows (in millions):
Three Months Ended Nine Months Ended
September 30, September 30,
2024 2023 2024 2023
Department of Defense and Intelligence Agencies $ 141.5 $ 164.8 $ 433.2 $ 452.7
Federal Civilian 159.8 159.5 473.1 468.3
Other 10.9 10.1 32.4 29.7
$ 312.2 $ 334.4 $ 938.7 $ 950.7
8. Fair Value Measurements
Recurring Fair Value Measurements- The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, and accrued payroll approximate their fair value based on their short-term nature.
Nonrecurring Fair Value Measurements- Certain assets, such as goodwill and trademarks, are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as, when there is evidence of impairment. There were no fair value adjustments for non-financial assets or liabilities during the three months ended September 30, 2024.
The carrying amount of long-term debt recorded in the Company's accompanying condensed consolidated balance sheet at September 30, 2024 was $1.0 billion (see Note 3. Long-Term Debt) and its fair value, determined using quoted prices in active markets for identical liabilities (Level 1 inputs), was slightly less than the carrying value.
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Item 2 -Management's Discussion and Analysis of Financial Condition and Results of Operations
The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements are based upon current expectations, as well as management's beliefs and assumptions, and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words "believes," "anticipates," "plans," "expects," "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences include those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023 ("2023 10-K"). In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q and we assume no obligation to update any forward-looking statements or the reasons why our actual results may differ.
OVERVIEW
ASGN provides information technology ("IT") services and solutions across the commercial and government sectors. ASGN operates through two segments, Commercial and Federal Government. The Commercial Segment, which is the largest segment, provides consulting, creative digital marketing, and permanent placement services primarily to Fortune 1000 and large mid-market companies. The Federal Government Segment provides advanced IT solutions to the Department of Defense, the intelligence community, and federal civilian agencies. Virtually all of the Company's revenues are generated in the United States.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 2023
Revenues
Revenues for the quarter were $1.0 billion, down 7.7 percent year-over-year. The table below shows our revenues by segment for the three months ended September 30, 2024 and 2023 (in millions).
% of Total
2024 2023 Change 2024 2023 Change
Commercial
Assignment $ 433.8 $ 508.2 (14.6 %) 42.1 % 45.5 % (3.4 %)
Consulting 285.0 274.2 3.9 % 27.6 % 24.6 % 3.0 %
718.8 782.4 (8.1 %) 69.7 % 70.1 % (0.4 %)
Federal Government 312.2 334.4 (6.6 %) 30.3 % 29.9 % 0.4 %
Consolidated $ 1,031.0 $ 1,116.8 (7.7 %) 100.0 % 100.0 %
From an industry perspective, the Company operates in six broad industry verticals. Commercial Segment revenues (69.7 percent of total revenues) were down 8.1 percent year-over-year and are categorized in five verticals: (i) Financial Services, (ii) Consumer and Industrial, (iii) Technology, Media, and Telecom ("TMT"), (iv) Healthcare, and (v) Business Services. The TMT industry vertical had double-digit growth, while Consumer and Industrial was up low single digits year-over-year. The remaining three industry verticals declined year-over-year. Federal Government Segment revenues (30.3 percent of total revenues), the sixth industry vertical, were down 6.6 percent year-over-year, reflecting lower third-party software licenses revenues compared with the prior year.
Total IT consulting revenues were $597.2 million (57.9 percent of total revenues), down 1.9 percent year-over-year. Commercial Segment consulting revenues were $285.0 million, up 3.9 percent year-over-year. Federal Government Segment revenues, which are all consulting revenues, were $312.2 million, down 6.6 percent year-over-year as stated above. Assignment revenues, which totaled $433.8 million (42.1 percent of total revenues), were down 14.6 percent year-over-year, reflecting continued softness in the portions of the Commercial Segment business that are more sensitive to changes in macroeconomic cycles (i.e., more cyclical).
Gross Profit and Gross Margin
The table below shows gross profit and gross margin by segment for the three months ended September 30, 2024 and 2023 (in millions).
Gross Profit Gross Margin
2024 2023 Change 2024 2023 Change
Commercial $ 235.8 $ 254.2 (7.2 %) 32.8 % 32.5 % 0.3 %
Federal Government 64.6 68.2 (5.3 %) 20.7 % 20.4 % 0.3 %
Consolidated $ 300.4 $ 322.4 (6.8 %) 29.1 % 28.9 % 0.2 %
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Gross profit is comprised of revenues less costs of services, which consist primarily of compensation for our contract professionals, other direct costs, and reimbursable out-of-pocket expenses.
Consolidated gross profit declined 6.8 percent year-over-year on a revenue decline of 7.7 percent. Gross margin for the third quarter of 2024 was 29.1 percent, an expansion of 20 basis points compared with the third quarter of 2023. Gross margin for the Commercial Segment was up 30 basis points, reflecting a higher mix of consulting revenues as well as margin expansion in these revenues. Gross margin for the Federal Government Segment was up 30 basis points due to lower third-party software licenses revenues, which carry lower margins.
Selling, General, and Administrative Expenses
Selling, general, and administrative ("SG&A") expenses consist primarily of compensation expense for our field operations and corporate staff, information systems, rent, public company expenses, and other general and administrative expenses. SG&A expenses were $207.5 million, compared with $206.0 million in the third quarter of 2023. The higher SG&A expenses reflected higher legal settlement expenses and depreciation and amortization of capitalized cloud implementation costs.
Amortization of Intangible Assets
Amortization of intangible assets was $14.0 million, compared with $17.8 million in the third quarter of 2023. The decrease was due to the accelerated amortization method of certain acquired intangibles, which have high amortization rates at the beginning of their useful lives.
Interest Expense, Net
Interest expense, net, which consists primarily of cash-based interest expense, amortization and adjustments to deferred loan costs, and interest income, was $16.0 million, down from $18.5 million in the third quarter of 2023. The decrease is attributable to $2.3 million of costs in the prior year period that related to the August 2023 amendments to the senior secured credit facility. The weighted-average outstanding borrowings and cash-based interest rate in the third quarter of 2024 and 2023 were $1.0 billion and 6.0 percent for both periods.
Provision for Income Taxes
The provision for income taxes was $15.4 million, down from $20.7 million in the third quarter of 2023 due to lower income before income taxes. The effective tax rate was 24.5 percent, down from 25.8 percent in the third quarter of 2023.
Net Income
Net income was $47.5 million, down from $59.4 million in the third quarter of 2023.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2023
Revenues
Revenues for the first nine months of the year were $3.1 billion, down 7.8 percent year-over-year. The table below shows our revenues by segment for the nine months ended September 30, 2024 and 2023 (in millions).
% of Total
2024 2023 Change 2024 2023 Change
Commercial
Assignment $ 1,332.5 $ 1,598.8 (16.7 %) 42.8 % 47.3 % (4.5 %)
Consulting 843.5 827.0 2.0 % 27.1 % 24.5 % 2.6 %
2,176.0 2,425.8 (10.3 %) 69.9 % 71.8 % (1.9 %)
Federal Government 938.7 950.7 (1.3 %) 30.1 % 28.2 % 1.9 %
Consolidated $ 3,114.7 $ 3,376.5 (7.8 %) 100.0 % 100.0 %
Commercial Segment revenues (69.9 percent of total revenues) were down 10.3 percent year-over-year. The TMT industry vertical had low single-digit growth. The remaining four industry verticals declined year-over-year. Federal Government Segment revenues (30.1 percent of total revenues), the sixth industry vertical, were down 1.3 percent year-over-year.
Total IT consulting services revenues were $1.8 billion (57.2 percent of total revenues), up 0.3 percent year-over-year. Commercial Segment consulting revenues were $843.5 million, up 2.0 percent year-over-year. Federal Government Segment revenues, which are all consulting revenues, were $938.7 million, down 1.3 percent year-over-year as stated above. Assignment revenues, which totaled $1.3 billion (42.8 percent of total revenues), were down 16.7 percent year-over-year, reflecting continued softness in the more cyclical portions of the Commercial Segment business.
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Gross Profit and Gross Margin
The table below shows gross profit and gross margin by segment for the nine months ended September 30, 2024 and 2023 (in millions).
Gross Profit Gross Margin
2024 2023 Change 2024 2023 Change
Commercial $ 706.9 $ 777.5 (9.1 %) 32.5 % 32.1 % 0.4 %
Federal Government 190.8 197.6 (3.4 %) 20.3 % 20.8 % (0.5 %)
Consolidated $ 897.7 $ 975.1 (7.9 %) 28.8 % 28.9 % (0.1 %)
Consolidated gross profit declined 7.9 percent year-over-year on a revenue decline of 7.8 percent. Gross margin was 28.8 percent, a compression of 10 basis points from the first nine months of 2023. The compression mainly related to business mix, including a higher mix of revenues from the Federal Government Segment, which have a lower gross margin than Commercial Segment revenues.
Selling, General, and Administrative Expenses
SG&A expenses were $623.3 million, down from $640.6 million in the first nine months of 2023. The decrease in SG&A expenses was primarily related to lower compensation-related expenses.
Amortization of Intangible Assets
Amortization of intangible assets was $44.2 million, compared with $53.8 million in the first nine months of 2023. The decrease was due to the accelerated amortization method of certain acquired intangibles, which have high amortization rates at the beginning of their useful lives.
Interest Expense, Net
Interest expense, net was $49.4 million, down from $49.7 million in the first nine months of 2023. The decrease was primarily the result of higher interest income and lower debt amendment fees (related to refinancing the senior secured credit facility in both periods), partially offset by higher interest expense on the senior secured credit facility. The weighted-average outstanding borrowings for the first nine months of 2024 and 2023 were $1.05 billion and the cash-based interest rate was 6.1 percent and 5.8 percent (excluding costs related to debt amendments), respectively.
Provision for Income Taxes
The provision for income taxes was $48.0 million, down from $62.0 million in the first nine months of 2023 due to lower income before income taxes. The effective tax rate was 26.5 percent, down from 26.8 percent in the first nine months of 2023.
Net Income
Net income was $132.8 million, down from $169.0 million in the first nine months of 2023.
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Commercial Segment - Consulting Metrics
Commercial consulting bookings are the value of new contracts entered into during a specified period, including adjustments for the effects of changes in contract scope and contract terminations ("Bookings"). The underlying contracts are terminable by the client on short notice with little or no termination penalties. Measuring Bookings involves the use of estimates and judgments and there are no independent standards or requirements governing the calculation of Bookings. Information regarding Bookings is not comparable to, nor should it be substituted for, an analysis of reported revenues. The book-to-bill ratio for our commercial consulting revenues is the ratio of Bookings to commercial consulting revenues for a specified period. The average duration of commercial consulting projects is one year.
Three Months Ended Trailing-Twelve-Months Ended
September 30, September 30,
(Dollars in millions)
2024 2023 2024 2023
Bookings $ 282.5 $ 291.0 $ 1,244.8 $ 1,340.0
Book-to-Bill Ratio
1.0 to 1
1.1 to 1
1.1 to 1
1.2 to 1
Federal Government Segment Metrics
Contract backlog for our Federal Government Segment represents the estimated amount of future revenues to be recognized under awarded contracts, including task orders and options, at a point in time ("Contract Backlog"). These estimates are subject to change and may be affected by the execution of new contracts, the extension or early termination of existing contracts, the non-renewal or completion of current contracts, and adjustments to estimates for previously included contracts. The timing of the execution of new contracts and other changes are affected by the funding cycles of the government and can vary from quarter to quarter. New contract awards are 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 ("New Contract Awards"). Information regarding New Contract Awards is not comparable to, nor should it be substituted for, an analysis of reported revenues. Due to variability, New Contract Awards are presented on a trailing-twelve-months ("TTM") basis. The book-to-bill ratio for our Federal Government Segment is the ratio of New Contract Awards to revenues for a specified period. Contract Backlog coverage ratio is calculated as total Contract Backlog divided by TTM revenues.
TTM Ended September 30,
(Dollars in millions) 2024 2023
New Contract Awards $ 1,114.3 $ 1,080.8
Book-to-Bill Ratio
0.9 to 1
0.9 to 1
(Dollars in millions) September 30,
2024 		December 31,
2023 		September 30,
2023
Funded Contract Backlog $ 612.2 $ 543.5 $ 701.0
Negotiated Unfunded Contract Backlog 2,516.3 2,466.0 2,577.8
Contract Backlog $ 3,128.5 $ 3,009.5 $ 3,278.8
Contract Backlog Coverage Ratio
2.5 to 1
2.4 to 1
2.6 to 1
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Liquidity and Capital Resources
Our working capital, which is current assets less current liabilities, at September 30, 2024 was $503.7 million, and our cash and cash equivalents were $166.6 million. Our cash flows from operating activities have been our primary source of liquidity and have been sufficient to meet our working capital and capital expenditure needs. At September 30, 2024, we had full availability under the $500.0 million revolving credit facility. We believe that our cash and cash equivalents on hand, expected operating cash flows, and availability under our revolving credit facility will be sufficient to fulfill our obligations, working capital requirements, and capital expenditures for the next 12 months.
Net cash provided by operating activities was $299.8 million for the first nine months of 2024, compared with $340.5 million in the same period of 2023. Net cash provided by operating activities before changes in operating assets and liabilities was $245.0 million, compared with $286.6 million in the same period of 2023. Net cash provided by changes in operating assets and liabilities was $54.8 million for the first nine months of 2024, compared with $53.9 million in the same period of 2023.
Net cash used in investing activities was $24.0 million and $33.3 million for the first nine months of 2024 and 2023, respectively, and primarily related to capital expenditures.
Net cash used in financing activities was $283.6 million for the first nine months of 2024 and included $283.3 million to repurchase the Company's common stock. Net cash used in financing activities in the first nine months of the prior year was $231.6 million and included $197.7 million to repurchase the Company's common stock, net repayments of borrowings under the revolving credit facility totaling $31.5 million, and the effects of the August 2023 amendments to the Company's senior secured credit facility which generated net proceeds of $8.0 million that were offset by related amendment costs.
For details on the Company's senior secured credit facility, comprised of a revolving credit facility and term loan B, and unsecured senior notes, see Note 3. Long-Term Debtin Part I, Item 1.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements that significantly impact the Company.
Critical Accounting Policies
There were no material changes to our critical accounting policies and estimates during the third quarter of 2024compared with those disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operationsof our 2023 10-K.
Commitments
There were no material changes to the significant commitments or contractual obligations that were disclosed in our 202310-K.
Item 3 -Quantitative and Qualitative Disclosures about Market Risks
With respect to our quantitative and qualitative disclosures about interest rates risks, there have been no material changes to the information included in our 202310-K. Our exposure to interest rate risk is associated with our debt instruments. See Note 3. Long-Term Debtin Item 8. Financial Statements and Supplementary Datafor a further description of our debt instruments. A hypothetical 100 basis-point change in interest rates on variable-rate debt would have resulted in an interest expense fluctuation of approximately $5.0 million based on $495.0 million of debt outstanding for any 12-month period. We have not entered into any market risk sensitive instruments for trading purposes.
Item 4 -Controls and Procedures
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report. The term "disclosure controls and procedures" means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. "Disclosure controls and procedures" include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including its Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting that occurred during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
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PART II -OTHER INFORMATION
Item 1 -Legal Proceedings
We are involved in various legal proceedings, investigations, claims, and litigation arising in the ordinary course of business, and collective class and PAGA actions alleging violations of wage and hour laws. However, based on the facts currently available, we do not believe that the disposition of matters that are pending or asserted will have a material effect on our financial position, results of operations or cash flows.
Item 1A -Risk Factors
There have been no material changes to the risk factors previously described in our 202310-K.
Item 2 -Unregistered Sales of Securities and Use of Proceeds
On April 24, 2024, the Company announced that the Company's Board had approved a new stock repurchase program under which the Company may repurchase $750.0 million of its common stock over the following 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 Company's repurchases of its common stock during the three months ended September 30, 2024 are shown in the table below, and the approximate dollar value of shares that may be purchased under the program as of September 30, 2024, are shown in the table below.
Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plan Approximate Dollar Value of Shares That May Yet be Purchased Under
the Plan
(in millions)
July 1 - 31, 2024 410,656 $ 93.75 410,656 $ 628.50
August 1 - 31, 2024 451,752 $ 90.96 451,752 $ 587.40
September 1 - 30, 2024 156,411 $ 92.70 156,411 $ 572.90
Total 1,018,819 $ 92.35 1,018,819 $ 572.90
In connection with our stock-based compensation plans, during the three months ended September 30, 2024, 42,403 shares of our common stock with an aggregate value of $3.7 million were tendered by employees for payment of applicable statutory tax withholding. These shares are excluded from the table above.
Item 3 -Defaults Upon Senior Securities
None.
Item 4 -Mine Safety Disclosures
None.
Item 5 -Other Information
(c) During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
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Item 6 -Exhibits
INDEX TO EXHIBITS
Number Description
3.1
3.2
3.3
4.1 Specimen Common Stock Certificate (incorporated by reference from an exhibit to the Company's Registration Statement on Form S-1 (File No. 33-50646) declared effective on September 21, 1992) (P)
31.1*
Certification of Theodore S. Hanson, Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a)
31.2*
Certification of Marie L. Perry, Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a)
32.1*
Certification of Theodore S. Hanson, Chief Executive Officer, pursuant to 18 U.S.C. Section 1350
32.2*
Certification of Marie L. Perry, Chief Financial Officer, pursuant to 18 U.S.C. Section 1350
101 The following material from this Quarterly Report on Form 10-Q of ASGN Incorporated, Part I, Item 1 of this Form 10-Q formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations and Comprehensive Income; (iii) Condensed Consolidated Statement of Stockholders' Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) related notes to these financial statements.
104 Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101)
* Filed herewith.
(P) This exhibit originally filed in paper format. Accordingly, a hyperlink has not been provided.
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ASGN Incorporated
Date: October 30, 2024 By: /s/ Marie L. Perry
Marie L. Perry
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Duly Authorized Officer)
Date: October 30, 2024 By: /s/ Rose L. Cunningham
Rose L. Cunningham
Vice President, Chief Accounting Officer and Controller
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