ASGN Incorporated Q4 FY2024 earnings call

• Committed to advancing towards higher-end, high-value IT consulting solutions, with IT consulting revenues at 58% of total revenues in 2024, up from 53% prior year. - Q4 gross and adjusted EBITDA margins exceeded expectations despite IT budgets being constrained. - Pipeline of work continued to expand, with double-digit year-over-year growth in commercial consulting bookings in Q4. - Announced acquisition of TopBloc, a Workday Services Partner, to enhance consulting growth. - Leadership changes: Rand Blazer to Executive Vice Chairman in March, Shiv Iyer joining from Accenture. - Federal government focused on DOGE initiatives for modernizing technology and software. - Commercial segment outperformed expectations, with higher mix of commercial revenues and margin expansion in commercial consulting.

Commercial Segment: Revenues driven by consulting growth, up 6% year-over-year. Consulting bookings were $348.2 million, with a book-to-bill of 1.2 times for Q4 and 1.1 times on a trailing 12-month basis. Growth led by TMT and Consumer & Industrial verticals, with TMT improving mid-single-digits Q4 2023 and low single-digits full year, and Consumer & Industrial having low single-digit growth. Financial Services vertical had some improvement on a billable day-adjusted basis. Federal Government Segment: Win rate remained robust at ~90% for re-competed contracts. Revenues fell below expectations due to lower software licenses, but net new contract awards were $283 million, book-to-bill 1.0 times for Q4. Backlog was over $3.1 billion. Focused on AI, cybersecurity, and digital modernization services, with two-thirds of revenues from DoD, Intelligence Agencies, and DHS, and one-third from civilian and state/local agencies.

• Q1 2025 revenues estimated at $950 million to $970 million, net income $27.8 million to $30.7 million, adjusted EBITDA $91 million to $95 million, and adjusted EBITDA margin 9.6% to 9.8%. - Full-year 2025: TopBloc expected to generate ~$150 million in revenue, >20% year-over-year growth, with EBITDA margin in the high teens. - Q1 guidance does not include contribution from TopBloc, with TopBloc's full-year revenues expected to be incorporated for roughly nine months due to timing of close.

• Uncertainty in the turnaround of IT spending. - Risks associated with federal government spending initiatives and policy changes affecting IT modernization efforts. - Potential impact of tariffs on delivery centers and related costs.

Q: Can we get more color on conversations with folks regarding the new administration's impact on federal government contracts?

A: Everyone in the marketplace is trying to figure out the impact. Services like cyber, AI, data cloud, and IT modernization are in high need. There's a mixed bag in new awards, with some agencies pausing new work/RFPs while others have new awards. No sign of slowdown in payments yet.

Q: Thoughts on TopBloc acquisition, strategic importance, and synergy opportunities?

A: TopBloc acquisition aligns with solution capabilities customers need. Workday ecosystem has strong demand, and TopBloc's solutions can be sold across commercial and government customer base. Combines Rand's institutional knowledge and Shiv's background, adding strength to leadership team.

Q: Signs of improving activity in commercial client budget environment?

A: Look at backlog, pipeline, bookings, sectors with sequential growth, and activity levels. Certain sectors like financial services are good bellwethers, and there are precursors of improving activity.

Q: On TopBloc acquisition, bill rates and impact on buyback?

A: Bill rates not disclosed, but acquisition will lead to deleveraging, with net leverage ratio post-transaction at 2.4 times. Capital allocation will focus on deleveraging and best use of next dollar capital.

Q: Fed-civ exposure and civil side activity?

A: Civil side revenue is dispersed, no concentration, and includes higher-end IT modernization, cybersecurity, data and AI, cloud work. No significant concentration in regulatory agencies.

Q: Excess capacity and headcount update?

A: Headcount is steady, down a bit from last year. Bookings up sequentially in commercial. No capacity problem currently, and headcount will adjust as business picks up.