Revenues, Gross Margin and Adj. EBITDA
Margin at the top-end or above guidance ranges
ASGN Incorporated (NYSE: ASGN), a leading provider of IT
services and solutions to the commercial and government sectors,
reported financial results for the quarter and year ended December
31, 2023.
Highlights
Fourth Quarter 2023
- Revenues were $1.1 billion
- Net income was $50.3 million
- Adjusted EBITDA (a non-GAAP measure) was $121.0 million (11.3
percent of revenues)
- Operating cash flows were $116.4 million and Free Cash Flow (a
non-GAAP measure) was $109.2 million
- Repurchased approximately 0.9 million shares of the Company's
common stock for $75.4 million
- IT Consulting Revenues were 55.3 percent of total revenues
Full Year 2023
- Revenues were $4.5 billion
- Net income was $219.3 million
- Adjusted EBITDA (a non-GAAP measure) was $517.2 million (11.6
percent of revenues)
- Operating cash flows were $456.9 million and Free Cash Flow (a
non-GAAP measure) was $417.0 million
- Repurchased approximately 3.4 million shares of the Company's
common stock for $273.1 million
- IT Consulting Revenues were 53.3 percent of total revenues, and
commercial consulting revenues surpassed $1.0 billion
- Commercial Segment - New bookings were $1.4 billion and
book-to-bill ratio was 1.2 to 1
- Federal Government Segment - New contract awards were $1.0
billion and book-to-bill ratio was 0.8 to 1
Management Commentary
“ASGN achieved solid results for the fourth quarter, with
revenues, gross margin, and Adjusted EBITDA margin at the top-end,
or above, our guidance ranges,” said ASGN Chief Executive Officer,
Ted Hanson. “This success in the final quarter of the year resulted
in revenues of approximately $4.5 billion for 2023, of which $2.4
billion was in commercial and government IT consulting work. A
highlight of our annual performance, commercial consulting revenues
officially surpassed $1.0 billion. From a profitability
perspective, Adjusted EBITDA margins remained solid and totaled
11.6 percent for 2023.”
Mr. Hanson continued, “ASGN has strategically shaped and
purposefully built its business to perform well throughout market
cycles, and our quarterly and full-year results demonstrate that
our operating model is well positioned. We have evolved our service
offerings to reflect our clients' needs. We will focus our efforts
in 2024 on further strengthening our IT consulting capabilities,
taking advantage of opportunities as we enter into higher-end,
higher-value projects that position ASGN for continued
success.”
Fourth Quarter and Full Year 2023 Financial Results -
Summary
Three Months Ended,
Year Ended,
December 31,
September 30,
December 31,
(In millions, except per share data)
2023
2022
2023
2023
2022
Revenues
Commercial Segment
$
748.6
$
852.2
$
782.4
$
3,174.4
$
3,435.7
Federal Government Segment
325.5
298.2
334.4
1,276.2
1,145.4
1,074.1
1,150.4
1,116.8
4,450.6
4,581.1
Gross Margin
Commercial Segment
32.1
%
32.2
%
32.5
%
32.1
%
32.8
%
Federal Government Segment
19.9
%
22.1
%
20.4
%
20.6
%
21.3
%
Consolidated
28.4
%
29.6
%
28.9
%
28.8
%
29.9
%
Income from continuing operations
$
50.3
$
55.6
$
59.4
$
219.3
$
266.9
Income from discontinued operations
—
—
—
—
1.2
Net income
$
50.3
$
55.6
$
59.4
$
219.3
$
268.1
Earnings per share - Diluted
Continuing operations
$
1.06
$
1.10
$
1.23
$
4.50
$
5.21
Discontinued operations
—
—
—
—
0.02
$
1.06
$
1.10
$
1.23
$
4.50
$
5.23
Non-GAAP Financial Measures
Adjusted Net Income
$
68.8
$
75.9
$
81.1
$
296.8
$
336.7
Adjusted Net Income per diluted share
$
1.45
$
1.51
$
1.68
$
6.09
$
6.56
Adjusted EBITDA
$
121.0
$
131.9
$
137.5
$
517.2
$
559.4
Adjusted EBITDA margin
11.3
%
11.5
%
12.3
%
11.6
%
12.2
%
__________
Notes: Definitions of non-GAAP measures and reconciliation to
GAAP measurements are included in the tables that accompany this
release.
Consolidated revenues for the fourth quarter were $1.1 billion,
down 6.6 percent over the fourth quarter of 2022. From an industry
perspective, the Company operates in six broad industry verticals.
Commercial Segment revenues (69.7 percent of total revenues), were
down 12.2 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 and Government Services. Consumer and Industrial and
Healthcare verticals saw mid-single-digit revenue declines
year-over-year and the remaining three verticals saw double-digit
declines year-over-year. Federal Government Segment revenues (30.3
percent of total revenues), the sixth industry vertical, were up
9.2 percent year-over-year.
Total IT consulting services revenues were $594.0 million (55.3
percent of total revenues), up 5.6 percent year-over-year. Federal
Government Segment revenues, which are all consulting revenues,
were $325.5 million, up 9.2 percent year-over-year as stated above,
and Commercial Segment consulting revenues were $268.5 million, up
1.7 percent year-over-year. The growth in IT consulting services
revenues was offset by a 18.4 percent year-over-year decline in
assignment revenues, which totaled $480.1 million (44.7 percent of
total revenues), reflecting continued softness in the more cyclical
portions of the Commercial Segment business.
Gross margin for the fourth quarter of 2023 was 28.4 percent,
down 120 basis points from the fourth quarter of 2022. The
compression mainly related to business mix: (i) within the
Commercial Segment, a lower mix of certain high-margin assignment
revenues, namely, creative digital marketing and permanent
placement revenues, which was partially offset by a higher mix of
high-margin IT consulting revenues with a year-over-year expansion
in margin and (ii) a higher mix of revenues from the Federal
Government Segment, which have a lower gross margin than commercial
revenues.
Selling, general and administrative (“SG&A”) expenses were
$203.6 million (19.0 percent of revenues), compared with $229.9
million (20.0 percent of revenues) from the fourth quarter of 2022.
This improvement was primarily due to lower incentive compensation
expense. SG&A expenses included $1.6 million in acquisition,
integration and strategic planning expenses, which were not
included in the Company's previously-announced guidance
estimates.
Net income was $50.3 million ($1.06 per diluted share), compared
with $55.6 million ($1.10 per diluted share) from the fourth
quarter of 2022.
Adjusted EBITDA (a non-GAAP measure) was $121.0 million, or 11.3
percent of revenues ("Adjusted EBITDA margin", a non-GAAP measure),
compared with $131.9 million or 11.5 percent of revenues in the
fourth quarter of 2022.
Capital Resources and Capital Allocation
At December 31, 2023, the Company had:
- Cash and cash equivalents of $175.9 million
- Full availability under its $500.0 million Senior Secured
Revolving Credit Facility (due 2028)
- Senior Secured Debt of $498.8 million (term loan B facility due
2030)
- Senior unsecured notes totaling $550.0 million at 4.625 percent
(due 2028)
In the fourth quarter of 2023 the Company repurchased 872,952
shares of its common stock for $75.4 million at an average price of
$86.37 per share. Approximately $273.7 million remained available
at quarter end for repurchases under the Company's stock repurchase
plan.
First Quarter 2024 Financial Estimates
The Company's financial estimates for the first 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
$
1,032.0
$
1,052.0
SG&A expenses(1)
205.1
208.4
Amortization of intangible assets
15.1
15.1
Net income
37.7
41.3
Diluted earnings per share
$
0.80
$
0.87
Gross margin
28.0
%
28.3
%
Effective tax rate(2)
28.0
%
28.0
%
Non-GAAP Financial Measures:
Adjusted EBITDA
$
104.5
$
109.5
Adjusted Net Income(3)
$
52.2
$
55.8
Adjusted Net Income per diluted
share(3)
$
1.10
$
1.18
Adjusted EBITDA Margin
10.1
%
10.4
%
___________
- Includes non-cash expenses totaling $20.0 million, comprised
of: (i) $11.9 million of stock-based compensation, (ii) $7.0
million of depreciation and (iii) $1.1 million of amortization
related to capitalized cloud-based application implementation
costs.
- Estimated effective tax rate before any excess tax benefits
related to stock-based compensation.
- 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 62.75 Billable Days in the first quarter of 2024, which
is 0.25 days fewer than the year ago period and 2.75 days more than
Q4 2023. The above estimates also include the effects of the
payroll tax reset, which occurs at the beginning of each year.
These annual resets cause, among other things, lower gross and
Adjusted EBITDA margins in the first quarter of the year.
Conference Call
The Company will hold a conference call today at 4:30 p.m. ET to
review its financial results for the fourth quarter and full year
2023 and to provide first quarter 2024 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 13742642.
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 February 21, 2024. 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 13742642.
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 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
Year Ended
December 31,
September 30,
December 31,
2023
2022
2023
2023
2022
Results of Operations:
Revenues
$
1,074.1
$
1,150.4
$
1,116.8
$
4,450.6
$
4,581.1
Costs of services
769.2
810.3
794.4
3,170.6
3,211.5
Gross profit
304.9
340.1
322.4
1,280.0
1,369.6
Selling, general and administrative
expenses
203.6
229.9
206.0
844.2
895.0
Amortization of intangible assets
17.9
19.8
17.8
71.7
65.1
Operating income
83.4
90.4
98.6
364.1
409.5
Interest expense
(16.7
)
(14.4
)
(18.5
)
(66.4
)
(45.9
)
Income before income taxes
66.7
76.0
80.1
297.7
363.6
Provision for income taxes
16.4
20.4
20.7
78.4
96.7
Income from continuing operations
50.3
55.6
59.4
219.3
266.9
Income from discontinued operations, net
of income taxes
—
—
—
—
1.2
Net income
$
50.3
$
55.6
$
59.4
$
219.3
$
268.1
Basic earnings per common share:
Continuing operations
$
1.07
$
1.12
$
1.23
$
4.54
$
5.27
Discontinued operations
—
—
—
—
0.03
Net income
$
1.07
$
1.12
$
1.23
$
4.54
$
5.30
Diluted earnings per common share:
Continuing operations
$
1.06
$
1.10
$
1.23
$
4.50
$
5.21
Discontinued operations
—
—
—
—
0.02
Net income
$
1.06
$
1.10
$
1.23
$
4.50
$
5.23
Number of shares and share equivalents
used to calculate earnings per share:
Basic
47.1
49.8
48.1
48.3
50.6
Diluted
47.5
50.4
48.4
48.7
51.3
CONSOLIDATED SELECTED FINANCIAL DATA
(Continued) (Unaudited) (In millions)
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
2023
2022
2023
2023
2022
Summary Statements of Cash Flow
Data:
Cash provided by operating activities
$
116.4
$
75.3
$
147.5
$
456.9
$
307.8
Cash used in investing activities
(7.2
)
(143.4
)
(9.8
)
(40.5
)
(510.0
)
Cash used in financing activities
(79.3
)
(72.8
)
(85.6
)
(310.9
)
(256.5
)
Reconciliation of GAAP to Non-GAAP
Measure:
Cash provided by operating activities
$
116.4
$
75.3
$
147.5
$
456.9
$
307.8
Capital expenditures
(7.2
)
(10.5
)
(9.8
)
(39.9
)
(37.5
)
Free Cash Flow (non-GAAP measure)
$
109.2
$
64.8
$
137.7
$
417.0
$
270.3
December 31,
December 31,
2023
2022
Summary Balance Sheet Data:
Cash and cash equivalents
$
175.9
$
70.3
Working capital
579.2
539.2
Goodwill and intangible assets, net
2,392.0
2,461.6
Total assets
3,544.6
3,585.7
Long-term debt
1,036.6
1,066.6
Total liabilities
1,652.5
1,684.4
Total stockholders’ equity
1,892.1
1,901.3
RECONCILIATIONS OF GAAP TO NON-GAAP
MEASURES (Unaudited) (In millions, except per share data)
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
2023
2022
2023
2023
2022
Net income
$
50.3
$
55.6
$
59.4
$
219.3
$
268.1
Income from discontinued operations, net
of tax
—
—
—
—
1.2
Income from continuing operations
50.3
55.6
59.4
219.3
266.9
Interest expense
16.7
14.4
18.5
66.4
45.9
Provision for income taxes
16.4
20.4
20.7
78.4
96.7
Amortization and depreciation(1)
25.7
26.6
24.8
100.3
91.4
EBITDA (non-GAAP measure)
109.1
117.0
123.4
464.4
500.9
Stock-based compensation
10.3
13.4
10.3
44.0
49.3
Legal settlement expense
—
—
2.7
2.7
—
Acquisition, integration and strategic
planning expenses
1.6
1.5
1.1
6.1
9.2
Adjusted EBITDA (non-GAAP measure)
$
121.0
$
131.9
$
137.5
$
517.2
$
559.4
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
2023
2022
2023
2023
2022
Net income
$
50.3
$
55.6
$
59.4
$
219.3
$
268.1
Income from discontinued operations, net
of tax
—
—
—
—
1.2
Income from continuing operations
50.3
55.6
59.4
219.3
266.9
Credit facility amendment expenses
—
—
2.3
2.3
—
Legal settlement expense
—
—
2.7
2.7
—
Acquisition, integration and strategic
planning expenses
1.6
1.5
1.1
6.1
9.2
Tax effect on adjustments
(0.4
)
(0.3
)
(1.6
)
(2.9
)
(2.3
)
Non-GAAP net income
51.5
56.8
63.9
227.5
273.8
Amortization of intangible assets
17.9
19.8
17.8
71.7
65.1
Other
(0.6
)
(0.7
)
(0.6
)
(2.4
)
(2.2
)
Adjusted Net Income (non-GAAP
measure)(2)
$
68.8
$
75.9
$
81.1
$
296.8
$
336.7
Per diluted share:
Net income
$
1.06
$
1.10
$
1.23
$
4.50
$
5.23
Adjustments
0.39
0.41
0.45
1.59
1.33
Adjusted Net Income (non-GAAP
measure)(2)
$
1.45
$
1.51
$
1.68
$
6.09
$
6.56
Common shares and share equivalents
(diluted)
47.5
50.4
48.4
48.7
51.3
_________
- The fourth quarter of 2023 includes (i) $17.9 million of
amortization of intangible assets, (ii) $7.1 million of
depreciation, and (iii) $0.7 million of amortization related to
capitalized cloud-based application implementation costs included
in SG&A expenses.
- 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 FIRST QUARTER OF
2024 RECONCILIATIONS OF ESTIMATED GAAP TO NON-GAAP
MEASURES (In millions, except per share data)
Low
High
Net income(1)
$
37.7
$
41.3
Interest expense
16.8
16.8
Provision for income taxes
14.6
16.0
Amortization and depreciation(2)
23.5
23.5
EBITDA (non-GAAP measure)
92.6
97.6
Stock-based compensation
11.9
11.9
Adjusted EBITDA (non-GAAP measure)
$
104.5
$
109.5
Low
High
Net income(1)
$
37.7
$
41.3
Amortization of intangible assets
15.1
15.1
Other
(0.6
)
(0.6
)
Adjusted Net Income (non-GAAP
measure)(3)
$
52.2
$
55.8
Per diluted share:
Net income
$
0.80
$
0.87
Adjustments
0.30
0.31
Adjusted Net Income (non-GAAP
measure)(3)
$
1.10
$
1.18
_______
- Does not include acquisition, integration and strategic
planning expenses, or excess tax benefits related to stock-based
compensation.
- Includes (i) $15.1 million of amortization of intangible
assets, (ii) $7.3 million of depreciation, and (iii) $1.1 million
of amortization related to capitalized cloud-based application
implementation costs included in SG&A expenses.
- 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 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 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.
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/20240206350045/en/
Kimberly Esterkin Vice President, Investor Relations
kimberly.esterkin@asgn.com
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