Results Met or Exceeded Previously Announced
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, 2023.
Q2 2023 Highlights
- Revenues were $1.1 billion
- Net income was $60.1 million
- Adjusted EBITDA (a non-GAAP measure) was $135.2 million (12.0
percent of revenues)
- Operating cash flows were $112.5 million and Free Cash Flow (a
non-GAAP measure) was $101.3 million
- Full availability under the $460.0 million Senior Secured
Revolving Credit Facility
- Repurchased 836,257 shares of the Company's common stock for
$57.6 million
IT Consulting Revenues – 53.1 percent of total revenues,
up from 45.0 percent in the second quarter of 2022
Commercial Segment Consulting –
- Revenues were $281.1 million, up 26.5 percent
year-over-year
- New bookings for the trailing-twelve-month period ("TTM") over
$1.3 billion and book-to-bill ratio was 1.2 to 1
Federal Government Segment – New awards for the TTM were $1.1
billion and book-to-bill ratio was 0.9 to 1
Management Commentary
“ASGN’s results for the second quarter of 2023 were in line with
our expectations. Revenues of $1.1 billion were above the midpoint
of our guidance range and supported by growth in our high-end,
higher-value commercial and federal consulting businesses,” said
ASGN Chief Executive Officer, Ted Hanson. “This revenue strength
was offset by the anticipated softness in the more discretionary
and cyclical portions of our assignment services. From a margin
perspective, Adjusted EBITDA margin of 12.0 percent was above the
top-end of our guidance range, driven by growth in commercial
consulting as well as the benefits of our variable cost structure
and effective expense management.”
Mr. Hanson continued, “While macro conditions remain
challenging, we continue to see demand for our IT services and
solutions. This is particularly evident in the strength of our
consulting bookings for the quarter. Maintaining the necessary
qualifications to win new work in leading solutions areas, from
cloud and cybersecurity to artificial intelligence, along with our
ability to adapt and evolve with our clients’ needs remains
critical. Our resilient operating model supported by key business
stabilizers will continue to drive our future performance."
Second Quarter 2023 Financial Results - Summary
Three Months Ended
(In millions, except per share data)
Q2 2023
Q2 2022
Q1 2023
Revenues
Commercial Segment
$
811.3
$
850.6
$
832.1
Federal Government Segment
319.6
291.2
296.7
1,130.9
1,141.8
1,128.8
Gross Margin
Commercial Segment
32.2
%
33.1
%
31.5
%
Federal Government Segment
20.5
%
21.4
%
21.6
%
Consolidated
28.9
%
30.1
%
28.9
%
Income from continuing operations
$
60.1
$
72.6
$
49.5
Loss from discontinued operations
—
(0.1
)
—
Net Income
$
60.1
$
72.5
$
49.5
Earnings per share - Diluted
Continuing operations
$
1.22
$
1.41
$
0.99
Discontinued operations
—
—
—
$
1.22
$
1.41
$
0.99
Non-GAAP Financial Measures
Adjusted Net Income
$
78.2
$
88.0
$
68.7
Adjusted Net Income per diluted share
$
1.59
$
1.71
$
1.38
Adjusted EBITDA
$
135.2
$
144.0
$
123.5
Adjusted EBITDA margin
12.0
%
12.6
%
10.9
%
Notes:
Definitions of non-GAAP measures and
reconciliation to GAAP measurements are included in the tables that
accompany this release.
Consolidated revenues for the second quarter of 2023 were down
1.0 percent over the second quarter of 2022. Revenues for the
second quarter of 2023 included approximately $52.9 million from
businesses acquired in the past 12 months.
Revenues from the Commercial Segment (71.7 percent of total
revenues) were down 4.6 percent year-over-year. Consulting services
revenues were $281.1 million (34.6 percent of the segment's
revenues), up 26.5 percent year-over-year. Excluding the
contribution from GlideFast of $27.7 million, consulting services
revenues were up 14.1 percent. Assignment revenues totaled $530.2
million (65.4 percent of the segment's revenues), down 15.6 percent
year-over-year.
Revenues from the Commercial Segment's IT services and solutions
division accounted for 86.0 percent of the segment's revenues, down
1.3 percent year-over-year, with double-digit growth in consulting
services, offset by a decline in assignment revenues. The segment's
more discretionary and cyclical services, creative digital
marketing and permanent placement, accounted for 14.0 percent of
the segment's revenues and were down 21.0 percent
year-over-year.
Revenues from the Federal Government Segment (28.3 percent of
revenues) were up 9.8 percent year-over-year. Excluding the
contribution from Iron Vine of $25.2 million, revenues increased
1.1 percent.
Gross margin for the second quarter of 2023 was 28.9 percent,
down 120 basis points from the second quarter of 2022. The
compression mainly related to business mix: (i) higher mix of
revenues from the Federal Government Segment, which have a lower
gross margin than commercial revenues, and (ii) within the
Commercial Segment, a lower mix of revenues from the creative
digital marketing and permanent placement divisions, which have
higher gross margins.
Selling, general and administrative (“SG&A”) expenses were
$210.5 million (18.6 percent of revenues), compared with $220.4
million (19.3 percent of revenues) from the second quarter of 2022.
This improvement related to effective expense management and lower
incentive compensation expense. SG&A expenses included $1.1
million in acquisition, integration and strategic planning expenses
which were not included in the Company's previously-announced
guidance estimates.
Net income was $60.1 million ($1.22 per diluted share), compared
with $72.5 million ($1.41 per diluted share) from the second
quarter of 2022.
Adjusted EBITDA (a non-GAAP measure) was $135.2 million, or 12.0
percent of revenues ("Adjusted EBITDA margin", a non-GAAP measure).
The year-over-year compression of 60 basis points was mainly
related to changes in business mix.
Capital Resources and Capital Allocation
At June 30, 2023, the Company had:
- Cash and cash equivalents of $93.8 million
- Full availability under its $460.0 million Senior Secured
Revolving Credit Facility (due November 2024)
- Senior Secured Debt of $490.8 million on (term B loan facility
due 2025)
- Senior unsecured notes totaling $550.0 million at 4.625 percent
(due 2028)
During the quarter, the Company repurchased 836,257 shares of
its common stock for $57.6 million at an average price of $68.95
per share.
Leverage Ratio was 1.92 to 1 at June 30, 2023.
Third Quarter 2023 Financial Estimates
The Company's financial estimates for the third quarter of 2023,
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
$
1,100.0
$
1,120.0
SG&A expenses(1)
203.4
205.9
Amortization of intangible assets
17.9
17.9
Net income
56.4
60.4
Earnings per share - Diluted:
$
1.16
$
1.24
Diluted shares outstanding
48.8
48.8
Gross margin
28.7%
28.9%
Effective tax rate(2)
28.0%
28.0%
Non-GAAP Financial Measures:
Adjusted EBITDA
$
130.0
$
135.5
Adjusted Net Income(3)
$
73.7
$
77.7
Adjusted Net Income per diluted
share(3)
$
1.51
$
1.59
Adjusted EBITDA Margin
11.8%
12.1%
(1)
Includes non-cash expenses totaling $17.3
million, comprised of: (i) $11.3 million in stock-based
compensation and (ii) $6.0 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 $8.5
million each quarter, or $0.17 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 62.5 Billable Days in the third quarter of 2023, which is
1.5 fewer days than the year ago period and 0.75 of a day less than
Q2 2023. The financial estimates also include estimated revenues of
$25.2 million from the Iron Vine acquisition.
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 2023 and to
provide third quarter estimates. The dial-in number is 877-407-0792
(+1-201-689-8263 for callers outside the United States), and the
conference ID number is 13739307. 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 9, 2023. 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 13739307.
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 consulting.
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 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 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, 2022 as filed with the SEC on February 27, 2023.
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,
2023
2022
2023
2023
2022
Results of Operations:
Revenues
$
1,130.9
$
1,141.8
$
1,128.8
$
2,259.7
$
2,232.8
Costs of services
804.6
797.8
802.4
1,607.0
1,562.2
Gross profit
326.3
344.0
326.4
652.7
670.6
Selling, general and administrative
expenses
210.5
220.4
224.1
434.6
432.5
Amortization of intangible assets
17.9
13.5
18.1
36.0
27.4
Operating income
97.9
110.1
84.2
182.1
210.7
Interest expense
(15.8
)
(10.1
)
(15.4
)
(31.2
)
(19.4
)
Income before income taxes
82.1
100.0
68.8
150.9
191.3
Provision for income taxes
22.0
27.4
19.3
41.3
51.1
Income from continuing operations
60.1
72.6
49.5
109.6
140.2
Loss from discontinued operations, net of
income taxes
—
(0.1
)
—
—
(0.9
)
Net income
$
60.1
$
72.5
$
49.5
$
109.6
$
139.3
Basic earnings per common share:
Continuing operations
$
1.23
$
1.42
$
1.00
$
2.23
$
2.73
Discontinued operations
—
—
—
—
(0.01
)
Net income
$
1.23
$
1.42
$
1.00
$
2.23
$
2.72
Diluted earnings per common share:
Continuing operations
$
1.22
$
1.41
$
0.99
$
2.21
$
2.70
Discontinued operations
—
—
—
—
(0.01
)
Net income
$
1.22
$
1.41
$
0.99
$
2.21
$
2.69
Number of shares and share equivalents
used to calculate earnings per share:
Basic
49.0
51.0
49.3
49.1
51.3
Diluted
49.2
51.6
49.8
49.5
52.0
CONSOLIDATED SELECTED
FINANCIAL DATA (Continued) (Unaudited)
(In millions)
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
2023
2022
2023
2023
2022
Summary Statements of Cash Flow
Data:
Cash provided by operating activities
$
112.5
$
88.4
$
80.5
$
193.0
$
144.4
Cash provided by (used in) investing
activities
(11.2
)
(6.3
)
(12.3
)
(23.5
)
(6.1
)
Cash used in financing activities
(72.6
)
(93.7
)
(73.4
)
(146.0
)
(177.1
)
Reconciliation of GAAP to Non-GAAP
Measure:
Cash provided by operating activities
$
112.5
$
88.4
$
80.5
$
193.0
$
144.4
Capital expenditures
(11.2
)
(8.8
)
(11.7
)
(22.9
)
(18.4
)
Free Cash Flow (non-GAAP measure)
$
101.3
$
79.6
$
68.8
$
170.1
$
126.0
June 30,
December 31,
2023
2022
Summary Balance Sheet Data:
Cash and cash equivalents
$
93.8
$
70.3
Working capital
555.7
539.2
Goodwill and intangible assets, net
2,427.5
2,461.6
Total assets
3,561.3
3,585.7
Long-term debt
1,035.7
1,066.6
Total liabilities
1,634.7
1,684.4
Total stockholders’ equity
1,926.6
1,901.3
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,
2023
2022
2023
2023
2022
Net income
$
60.1
$
72.5
$
49.5
$
109.6
$
139.3
Loss from discontinued operations, net of
tax
—
(0.1
)
—
—
(0.9
)
Income from continuing operations
60.1
72.6
49.5
109.6
140.2
Interest expense
15.8
10.1
15.4
31.2
19.4
Provision for income taxes
22.0
27.4
19.3
41.3
51.1
Depreciation
7.0
6.1
6.8
13.8
12.3
Amortization of intangible assets
17.9
13.5
18.1
36.0
27.4
EBITDA (non-GAAP measure)
122.8
129.7
109.1
231.9
250.4
Stock-based compensation
11.3
11.2
12.1
23.4
24.0
Acquisition, integration and strategic
planning expenses
1.1
3.1
2.3
3.4
4.4
Adjusted EBITDA (non-GAAP measure)
$
135.2
$
144.0
$
123.5
$
258.7
$
278.8
Three Months Ended
Six Months Ended
June 30,
March 31,
June 30,
2023
2022
2023
2023
2022
Net income
$
60.1
$
72.5
$
49.5
$
109.6
$
139.3
Loss from discontinued operations, net of
tax
—
(0.1
)
—
—
(0.9
)
Income from continuing operations
60.1
72.6
49.5
109.6
140.2
Acquisition, integration and strategic
planning expenses
1.1
3.1
2.3
3.4
4.4
Tax effect on adjustments
(0.3
)
(0.8
)
(0.6
)
(0.9
)
(1.1
)
Non-GAAP net income
60.9
74.9
51.2
112.1
143.5
Amortization of intangible assets
17.9
13.5
18.1
36.0
27.4
Other
(0.6
)
(0.4
)
(0.6
)
(1.2
)
(0.8
)
Adjusted Net Income (non-GAAP
measure)(1)
$
78.2
$
88.0
$
68.7
$
146.9
$
170.1
Per diluted share:
Net income
$
1.22
$
1.41
$
0.99
$
2.21
$
2.68
Adjustments
0.37
0.30
0.39
0.76
0.59
Adjusted Net Income (non-GAAP
measure)(1)
$
1.59
$
1.71
$
1.38
$
2.97
$
3.27
Common shares and share equivalents
(diluted)
49.2
51.6
49.8
49.5
52.0
(1)
Does not include the “Cash Tax Savings on
Indefinite-lived Intangible Assets,” which currently total
approximately $8.5 million per quarter (approximately $0.17 per
diluted share) and represent the benefit of the tax deduction for
amortization of goodwill and trademarks.
FINANCIAL ESTIMATES FOR THE
THIRD QUARTER OF 2023
RECONCILIATIONS OF ESTIMATED
GAAP TO NON-GAAP MEASURES
(In millions, except per share
data)
Low
High
Net income(1)
$
56.4
$
60.4
Interest expense
16.0
16.0
Provision for income taxes
22.0
23.5
Depreciation expense(2)
6.4
6.4
Amortization of intangible assets
17.9
17.9
EBITDA (non-GAAP measure)
118.7
124.2
Stock-based compensation
11.3
11.3
Adjusted EBITDA (non-GAAP measure)
$
130.0
$
135.5
Low
High
Net income(1)
$
56.4
$
60.4
Amortization of intangible assets
17.9
17.9
Other
(0.6
)
(0.6
)
Adjusted Net Income (non-GAAP
measure)(3)
$
73.7
$
77.7
Per diluted share:
Net income
$
1.16
$
1.24
Adjustments
0.35
0.35
Adjusted Net Income (non-GAAP
measure)(3)
$
1.51
$
1.59
Common shares and share equivalents
(diluted)
48.8
48.8
(1)
Does not include acquisition, integration
and strategic planning expenses, or excess tax benefits related to
stock-based compensation. Also does not include discontinued
operations.
(2)
Comprised of (i) $6.0 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 $8.5
million per quarter ($0.17 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 EBITDA margin,
Adjusted Net Income, Adjusted Net Income per diluted share, Free
Cash Flow, Leverage Ratio 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.
Leverage Ratio is the ratio of the Company's total debt to
trailing-twelve-months (“TTM”) Adjusted EBITDA, further adjusted
for the inclusion of estimated performance from acquisitions made
in the TTM period as if those acquisitions had occurred at the
beginning of that period.
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.
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/20230725871560/en/
Kimberly Esterkin Vice President, Investor Relations
kimberly.esterkin@asgn.com
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