ASGN Incorporated Reports First Quarter 2023 Results

Achieves 50 percent of revenues from IT consulting

Record level of commercial consulting bookings

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 March 31, 2023.

Q1 2023 Highlights

• Revenues were $1.1 billion, up 3.5 percent over the first quarter of 2022
• Net income was $49.5 million
• Adjusted EBITDA (a non-GAAP measure) was $123.5 million (10.9 percent of revenues)
• Operating cash flows were $80.5 million and Free Cash Flow (a non-GAAP measure) was $68.8 million
• Full availability under the $460.0 million Senior Secured Revolving Credit Facility
• Repurchased 563,200 shares of the Company's common stock for $48.8 million
• Subsequent to quarter end, ASGN's Board of Directors approved a new two-year $500 million stock repurchase program

IT Consulting Revenues - 50.4 percent of total revenues, up from 42.4 percent in the first quarter of 2022

Commercial Segment Consulting -

• Revenues were $271.7 million, up 32.7 percent year-over-year
• Record new bookings in the quarter of approximately $392 million
• New bookings for the trailing-twelve-month period ("TTM") were $1.3 billion and book-to-bill ratio was 1.3 to 1.0

Federal Government Segment - New awards for the TTM were $1.0 billion and book-to-bill ratio was 0.9 to 1.0

Management Commentary

"Continuing to execute solidly in the core strategic areas of our business, ASGN's revenues for the first quarter improved 3.5 percent as compared to the prior-year period,” said ASGN Chief Executive Officer Ted Hanson. “Our IT consulting revenues, including both commercial and federal government work, surpassed the 50 percent mark, totaling 50.4 percent for the quarter, a significant increase from 42.4 percent of revenues in the first quarter of 2022. The strong growth of our IT consulting services and solutions revenues reconfirms ASGN’s decision to double down on high-end, higher value consulting work for Fortune 1000 and federal government clients. That said, the areas of our business that are more discretionary and cyclical in nature, namely assignment revenue, declined. We programmed for some of this in our guidance; however, the decline towards the end of the quarter was greater than we had initially anticipated in our first quarter guidance, negatively impacting our revenues and margins."

Mr. Hanson continued, "Importantly, the long-term EBITDA margin profile of our business has not changed and is expected to further improve over time based on our move toward a more consultative model. With a number of key business stabilizers in place to protect us on the downside, ASGN remains committed to providing leading IT services and solutions to the commercial and government end markets. While macro conditions may continue to be challenging, the long-term growth trajectory of our business has never been stronger."

First Quarter 2023 Financial Results - Summary

Consolidated revenues for the first quarter of 2023 were up 3.5 percent over the first quarter of 2022. Revenues for the first quarter of 2023 included approximately $50.4 million from businesses acquired in the past twelve months.

Revenues from the Commercial Segment (73.7 percent of total revenues) were essentially flat year-over-year. Consulting services revenues were $271.7 million (32.7 percent of the segment's revenues), up 32.7 percent year-over-year. Excluding the contribution from GlideFast of $25.9 million, consulting services revenues were up 20.0 percent. Assignment revenues totaled $560.4 million (67.3 percent of the segment's revenues), down 10.8 percent year-over-year.

Revenues from the Commercial Segment's IT services and solutions division accounted for 85.4 percent of the segment's revenues, up 3.1 percent year-over-year driven by double-digit growth in consulting services. The segment's more discretionary and cyclical businesses, creative digital marketing and permanent placement, accounted for 14.6 percent of the segment's revenues and were down 15.5 percent year-over-year.

Revenues from the Federal Government Segment (26.3 percent of revenues) were up 15.0 percent year-over-year. Excluding the contribution from Iron Vine of $24.5 million, revenues increased 5.5 percent.

Gross margin for the first quarter of 2023 was 28.9 percent, down 100 basis points from the first 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 $224.1 million (19.9 percent of revenues), compared with $212.1 million (19.4 percent of revenues) from the first quarter of 2022. This increase reflected, among other things, investments in workforce and technology made in 2022. SG&A expenses also included $2.3 million in acquisition, integration and strategic planning expenses, which were not included in the Company's previously-announced guidance estimates.

Net income was $49.5 million ($0.99 per diluted share), compared with $66.8 million ($1.28 per diluted share) from the first quarter of 2022.

Adjusted EBITDA (a non-GAAP measure) was $123.5 million, or 10.9 percent of revenues ("Adjusted EBITDA margin", a non-GAAP measure), a compression of 150 basis points year-over-year, mainly related to changes in business mix.

Capital Resources and Capital Allocation

At March 31, 2023, the Company had:

• Cash and cash equivalents of $65.0 million
• Full availability under its $460.0 million Senior Secured Revolving Credit Facility (due 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 563,200 shares of its common stock for $48.8 million. Subsequent to quarter end, ASGN's Board of Directors approved a new two-year $500 million stock repurchase program.

Leverage Ratio was 1.88 to 1.0 at March 31, 2023.

Second Quarter 2023 Financial Estimates

The Company's financial estimates for the second 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.

The financial estimates above are based on an estimate of “Billable Days”, which are Business Days (calendar days for the period less weekends and holidays) adjusted for other factors, such as the day of the week a holiday occurs, additional time taken off around holidays, year-end client furloughs and inclement weather. There are 63.25 Billable Days in the second quarter of 2023, which is essentially the same as the year ago period and sequentially. The financial estimates also include estimated revenues of $52.8 million from businesses acquired in the last 12 months.

Conference Call

The Company will hold a conference call today at 4:30 p.m. ET to review its financial results for the first quarter of 2023 and to provide second 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 13737097. Participants should dial in ten minutes before the call. The prepared remarks, supplemental materials and webcast for this call can be accessed at www.asgn.com.

A replay of the conference call will be available beginning today at 7:30 p.m. ET until May 10th, 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 13737097.

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.

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 12 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.

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.

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