ASGN rporated(ASGN) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights Q2 2025 Performance Overview ASGN reported solid second quarter 2025 results with revenues exceeding the high-end of guidance estimates and Adjusted EBITDA margin at the top end of expectations. IT consulting revenues grew to 63% of total revenues, with the recent acquisition TopBloc performing above expectations Q2 2025 Key Financial Highlights | Metric | Value | | :-------------------------------- | :------------------- | | Revenues | $1.02 billion | | Net income | $29.3 million | | Adjusted EBITDA | $108.5 million | | Adjusted EBITDA margin | 10.6 % | | Operating cash flows | $124.9 million | | Free Cash Flow | $115.8 million | | Shares Repurchased | 200,000 shares | | Repurchase Value | $9.5 million | | Commercial Segment TTM Bookings | $1.4 billion | | Commercial Book-to-bill ratio | 1.2 to 1 | | Federal Government TTM Awards | $1.4 billion | | Federal Book-to-bill ratio | 1.1 to 1 | - IT Consulting Revenues reached 63% of total revenues for the quarter[3] - TopBloc, the newest addition to ASGN, is performing above expectations and contributed to the continued growth of the IT consulting business[3] Management Commentary CEO Ted Hanson highlighted strong Q2 performance with revenues above guidance and Adjusted EBITDA margin at the top end. He noted the positive impact of TopBloc and the growth in IT consulting. Despite macroeconomic uncertainty affecting discretionary spending, client demand for cloud, data solutions, and AI for IT modernization remains strong - Revenues of $1.02 billion were above the high-end of guidance, while Adjusted EBITDA margin of 10.6 percent was at the top end of expectations[3] - While commercial consulting bookings are growing, macroeconomic uncertainty continues to impact discretionary spending[3] - Clients remain focused on staying competitive, driving strong demand for cloud and data solutions to modernize legacy systems and enable AI[3] Second Quarter 2025 Financial Results Consolidated Financial Performance ASGN's consolidated revenues for Q2 2025 were $1.02 billion, a slight decrease compared to Q2 2024. Net income and Adjusted EBITDA also saw year-over-year declines Q2 2025 Consolidated Financial Summary | Metric | Q2 2025 | Q2 2024 | | :-------------------------- | :------------------- | :------------------- | | Revenues | $1,020.6 million | $1,034.7 million | | Net income | $29.3 million | $47.2 million | | Earnings per diluted share | $0.67 | $1.02 | | Adjusted EBITDA | $108.5 million | $117.1 million | | Adjusted EBITDA margin | 10.6 % | 11.3 % | - Consolidated revenues for the quarter were $1.02 billion, compared with $1.03 billion in the second quarter of 2024[6] Segment Performance (Commercial & Federal Government) Commercial Segment revenues decreased year-over-year, while the Federal Government Segment experienced a slight increase. Within the Commercial Segment, the Consumer and Industrial vertical showed double-digit growth, while other verticals declined or remained flat Segment Revenues (Q2 2025 vs Q2 2024) | Segment | Q2 2025 Revenues | Q2 2024 Revenues | % of Total Revenues (Q2 2025) | | :------------------------ | :----------------- | :----------------- | :------------------------------ | | Commercial Segment | $708.1 million | $725.7 million | 69 % | | Federal Government Segment | $312.5 million | $309.0 million | 31 % | - The Consumer and Industrial industry vertical was up double digits, Healthcare was flat, and the remaining three industry verticals declined[6] Revenue Mix (IT Consulting vs. Assignment) IT consulting revenues significantly increased year-over-year, now representing 63% of total revenues, driven by a 15.7% growth in Commercial Segment consulting. Conversely, assignment revenues declined, reflecting continued softness in macro-sensitive parts of the Commercial Segment Revenue Mix (Q2 2025 vs Q2 2024) | Revenue Type | Q2 2025 Revenues | % of Total (Q2 2025) | Q2 2024 Revenues | % of Total (Q2 2024) | | :------------------- | :----------------- | :------------------- | :----------------- | :------------------- | | IT consulting revenues | $638.2 million | 63 % | $590.5 million | 57 % | | Assignment revenues | $382.4 million | 37 % | $444.2 million | 43 % | - Commercial Segment consulting revenues were up 15.7 percent year-over-year[7] - Assignment revenues reflected continued softness in the portions of the Commercial Segment business that are more sensitive to changes in macroeconomic cycles[7] Gross Margin Analysis Consolidated gross margin compressed by 40 basis points to 28.7% in Q2 2025 compared to Q2 2024. Commercial Segment gross margin improved due to a higher mix of consulting revenues, while Federal Government Segment gross margin declined due to an increased volume of low-margin software licenses Gross Margin (Q2 2025 vs Q2 2024) | Segment | Q2 2025 Gross Margin | Q2 2024 Gross Margin | | :------------------------ | :------------------- | :------------------- | | Commercial Segment | 33.0 % | 32.7 % | | Federal Government Segment | 19.2 % | 20.6 % | | Consolidated | 28.7 % | 29.1 % | - Gross margin for the Commercial Segment was up 30 basis points, reflecting a higher mix of consulting revenues[8] - Gross margin for the Federal Government Segment was down 140 basis points, due to higher volume of low-margin software licenses revenue[8] Operating Expenses and Net Income Selling, general, and administrative (SG&A) expenses increased, partly due to unguided acquisition, integration, and strategic planning expenses. Net income and diluted earnings per share significantly decreased year-over-year, as did Adjusted EBITDA Net Income and Adjusted EBITDA (Q2 2025 vs Q2 2024) | Metric | Q2 2025 | Q2 2024 | | :-------------------------- | :------------------- | :------------------- | | SG&A expenses | $216.8 million | $205.6 million | | Net income | $29.3 million | $47.2 million | | Earnings per diluted share | $0.67 | $1.02 | | Adjusted EBITDA | $108.5 million | $117.1 million | | Adjusted EBITDA margin | 10.6 % | 11.3 % | - SG&A expenses included $8.3 million in acquisition, integration, and strategic planning expenses, which were not included in the Company's previously-announced guidance estimates[9] Capital Resources and Allocation Balance Sheet Highlights As of June 30, 2025, ASGN maintained a strong liquidity position with $138.9 million in cash and significant availability under its revolving credit facility, alongside its senior secured debt and unsecured notes Capital Resources (as of June 30, 2025) | Metric | Value | | :------------------------------------------------ | :------------------- | | Cash and cash equivalents | $138.9 million | | Availability under Senior Secured Revolving Credit Facility | $320.0 million | | Senior Secured Debt (term loan B facility) | $491.3 million | | Senior unsecured notes (4.625% due 2028) | $550.0 million | Share Repurchase Program During Q2 2025, ASGN repurchased 200,000 shares of its common stock for $9.5 million, with approximately $470 million remaining available under the existing stock repurchase plan - In the second quarter of 2025, Company repurchased 200,000 shares of its common stock for $9.5 million at an average price of $58.69 per share[11] - Approximately $470 million remained available at quarter end for repurchases under the Company's stock repurchase plan[11] Third Quarter 2025 Financial Outlook Q3 2025 Estimates ASGN provided financial estimates for the third quarter of 2025, projecting revenues between $992.0 million and $1,012.0 million, and diluted EPS between $0.82 and $0.90. These estimates exclude acquisition, integration, or strategic planning expenses Q3 2025 Financial Estimates | Metric | Low Estimate | High Estimate | | :-------------------------- | :------------------- | :------------------- | | Revenues | $992.0 million | $1,012.0 million | | SG&A expenses | $206.5 million | $210.5 million | | Amortization of intangible assets | $16.6 million | $16.6 million | | Net income | $35.8 million | $39.4 million | | Earnings per diluted share | $0.82 | $0.90 | | Gross margin | 29.3 % | 29.6 % | | Effective tax rate | 28.0 % | 28.0 % | | Adjusted EBITDA | $108.5 million | $113.5 million | | Adjusted Net Income | $51.7 million | $55.4 million | | Adjusted Net Income per diluted share | $1.18 | $1.26 | | Adjusted EBITDA margin | 10.9 % | 11.2 % | Billable Days Impact The financial estimates for Q3 2025 are based on 63.50 billable days, which is consistent with the prior year period and slightly more than the second quarter of 2025 - There are 63.50 Billable Days in the third quarter of 2025, which is equal to the year ago period, and 0.25 more days than the second quarter of 2025[14] Company Information & Legal Disclosures Conference Call Details ASGN held a conference call on July 23, 2025, to discuss its Q2 2025 financial results and provide Q3 2025 estimates. A replay of the call is available until August 6, 2025 - The Company held a conference call on July 23, 2025, at 4:30 p.m. ET to review its financial results for the second quarter of 2025 and to provide third quarter 2025 estimates[16] - A replay of the conference call will be available beginning today at 7:30 p.m. ET until August 6, 2025[17] About ASGN Incorporated ASGN Incorporated is a leading provider of IT services and solutions for both commercial and government sectors, assisting organizations in developing, implementing, and operating critical IT and business solutions - ASGN Incorporated (NYSE: ASGN) is a leading provider of IT services and solutions to the commercial and government sectors[18] - ASGN helps corporate enterprises and government organizations develop, implement, and operate critical IT and business solutions through its integrated offerings[18] Safe Harbor Statement This news release contains forward-looking statements that involve significant risks and uncertainties, meaning actual results could differ materially from projections. The company explicitly disclaims any obligation to update these forward-looking statements - 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[19] - Forward-looking statements are not guarantees of future performance and actual results might differ materially[20] - We specifically disclaim any intention or duty to update any forward-looking statements contained in this news release[20] Consolidated Financial Statements (Unaudited) Consolidated Statements of Operations This section presents the unaudited consolidated results of operations for the three and six months ended June 30, 2025, and 2024, detailing revenues, costs of services, gross profit, operating expenses, and net income Consolidated Statements of Operations (Unaudited) | Metric (In millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :-------------------------------- | :----------------------------- | :----------------------------- | | Revenues | $1,020.6 | $1,034.7 | $968.3 | $1,988.9 | $2,083.7 | | Costs of services | 727.3 | 733.6 | 692.9 | 1,420.2 | 1,486.4 | | Gross profit | 293.3 | 301.1 | 275.4 | 568.7 | 597.3 | | Selling, general, and administrative expenses | 216.8 | 205.6 | 214.5 | 431.3 | 415.8 | | Amortization of intangible assets | 16.9 | 15.1 | 14.3 | 31.2 | 30.2 | | Operating income | 59.6 | 80.4 | 46.6 | 106.2 | 151.3 | | Interest expense | (18.2) | (15.8) | (15.4) | (33.6) | (33.4) | | Income before income taxes | 41.4 | 64.6 | 31.2 | 72.6 | 117.9 | | Provision for income taxes | 12.1 | 17.4 | 10.3 | 22.4 | 32.6 | | Net income | $29.3 | $47.2 | $20.9 | $50.2 | $85.3 | | Earnings per share: Basic | $0.67 | $1.03 | $0.48 | $1.15 | $1.85 | | Earnings per share: Diluted | $0.67 | $1.02 | $0.48 | $1.14 | $1.83 | | Number of shares and share equivalents used to calculate earnings per share: Basic | 43.8 | 45.7 | 43.7 | 43.8 | 46.1 | | Number of shares and share equivalents used to calculate earnings per share: Diluted | 44.0 | 46.1 | 44.0 | 44.0 | 46.5 | Consolidated Statements of Cash Flow This section provides unaudited consolidated cash flow data for the three and six months ended June 30, 2025, and 2024, detailing cash flows from operating, investing, and financing activities, along with Free Cash Flow Summary Statements of Cash Flow Data (Unaudited) | Metric (In millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash provided by operating activities | $124.9 | $90.7 | $16.8 | $141.7 | $164.0 | | Cash used in investing activities | (9.1) | (5.2) | (316.3) | (325.4) | (16.0) | | Cash provided by (used in) financing activities | (84.9) | (110.7) | 201.2 | 116.3 | (190.7) | | Capital expenditures | (9.1) | (5.3) | (10.2) | (19.3) | (16.1) | | Free Cash Flow (non-GAAP measure) | $115.8 | $85.4 | $6.6 | $122.4 | $147.9 | Consolidated Balance Sheets This section presents unaudited consolidated balance sheet data as of June 30, 2025, and December 31, 2024, providing a snapshot of the company's assets, liabilities, and stockholders' equity Summary Balance Sheet Data (Unaudited) | Metric (In millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Cash and cash equivalents | $138.9 | $205.2 | | Working capital | 481.7 | 550.6 | | Goodwill and intangible assets, net | 2,628.5 | 2,332.9 | | Total assets | 3,715.0 | 3,429.0 | | Long-term debt | 1,211.7 | 1,033.5 | | Total liabilities | 1,888.2 | 1,652.3 | | Total stockholders' equity | 1,826.8 | 1,776.7 | Non-GAAP Financial Measures Reconciliation of GAAP to Non-GAAP Measures (Q2 2025) This section provides detailed reconciliations of GAAP net income to various non-GAAP measures, including EBITDA, Adjusted EBITDA, and Adjusted Net Income, for the three and six months ended June 30, 2025, and 2024 Reconciliation of Net Income to Adjusted EBITDA (Unaudited) | Metric (In millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :-------------------------------- | :----------------------------- | :----------------------------- | | Net income | $29.3 | $47.2 | $20.9 | $50.2 | $85.3 | | Interest expense | 18.2 | 15.8 | 15.4 | 33.6 | 33.4 | | Provision for income taxes | 12.1 | 17.4 | 10.3 | 22.4 | 32.6 | | Depreciation and other amortization | 11.8 | 9.4 | 11.2 | 23.0 | 18.8 | | Amortization of intangible assets | 16.9 | 15.1 | 14.3 | 31.2 | 30.2 | | EBITDA (non-GAAP measure) | 88.3 | 104.9 | 72.1 | 160.4 | 200.3 | | Stock-based compensation | 11.9 | 11.0 | 13.8 | 25.7 | 22.7 | | Acquisition, integration, and strategic planning expenses | 8.3 | 1.2 | 3.3 | 11.6 | 2.4 | | Software costs write-off | — | — | 4.4 | 4.4 | — | | Adjusted EBITDA (non-GAAP measure) | $108.5 | $117.1 | $93.6 | $202.1 | $225.4 | Reconciliation of Net Income to Adjusted Net Income (Unaudited) | Metric (In millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Three Months Ended March 31, 2025 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :-------------------------------- | :----------------------------- | :----------------------------- | | Net income | $29.3 | $47.2 | $20.9 | $50.2 | $85.3 | | Acquisition, integration, and strategic planning expenses | 8.3 | 1.2 | 3.3 | 11.6 | 2.4 | | Software costs write-off | — | — | 4.4 | 4.4 | — | | Credit facility amendment expenses | — | — | — | — | 1.5 | | Tax effect on adjustments | (2.2) | (0.3) | (1.9) | (4.1) | (1.0) | | Non-GAAP net income | 35.4 | 48.1 | 26.7 | 62.1 | 88.2 | | Amortization of intangible assets | 16.9 | 15.1 | 14.3 | 31.2 | 30.2 | | Other | (0.7) | (0.6) | (0.6) | (1.3) | (1.2) | | Adjusted Net Income (non-GAAP measure) | $51.6 | $62.6 | $40.4 | $92.0 | $117.2 | | Per diluted share: Net income | $0.67 | $1.02 | $0.48 | $1.14 | $1.83 | | Per diluted share: Adjustments | 0.50 | 0.34 | 0.44 | 0.95 | 0.69 | | Adjusted Net Income (non-GAAP measure) | $1.17 | $1.36 | $0.92 | $2.09 | $2.52 | | Common shares and share equivalents (diluted) | 44.0 | 46.1 | 44.0 | 44.0 | 46.5 | Reconciliation of Estimated GAAP to Non-GAAP Measures (Q3 2025) This section provides reconciliations of estimated GAAP net income to estimated non-GAAP measures, including Adjusted EBITDA and Adjusted Net Income, for the third quarter of 2025 Reconciliation of Estimated Net Income to Adjusted EBITDA (Q3 2025) | Metric (In millions) | Low Estimate | High Estimate | | :------------------------------------------ | :------------- | :-------------- | | Net income | $35.8 | $39.4 | | Interest expense | 17.7 | 17.7 | | Provision for income taxes | 14.1 | 15.5 | | Depreciation and other amortization | 12.2 | 12.2 | | Amortization of intangible assets | 16.6 | 16.6 | | EBITDA (non-GAAP measure) | 96.4 | 101.4 | | Stock-based compensation | 12.1 | 12.1 | | Adjusted EBITDA (non-GAAP measure) | $108.5 | $113.5 | Reconciliation of Estimated Net Income to Adjusted Net Income (Q3 2025) | Metric (In millions, except per share data) | Low Estimate | High Estimate | | :------------------------------------------ | :------------- | :-------------- | | Net income | $35.8 | $39.4 | | Amortization of intangible assets | 16.6 | 16.6 | | Other | (0.7) | (0.6) | | Adjusted Net Income (non-GAAP measure) | $51.7 | $55.4 | | Per diluted share: Net income | $0.82 | $0.90 | | Per diluted share: Adjustments | 0.36 | 0.36 | | Adjusted Net Income (non-GAAP measure) | $1.18 | $1.26 | Definitions of Non-GAAP Measures This section defines ASGN's non-GAAP financial measures, including EBITDA, Adjusted EBITDA, Adjusted Net Income, Free Cash Flow, Commercial consulting bookings, Federal Government Segment new contract awards, and Revenues on a Same Billable Days basis, explaining their purpose in evaluating core business performance - Non-GAAP financial 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) are provided as additional information to enhance the overall understanding of the Company's current financial performance and not as an alternative to GAAP statements[28] - EBITDA, Adjusted EBITDA, and Adjusted EBITDA margin focus on core business performance by removing non-operating and certain non-cash expenses[29] - Commercial consulting bookings are defined as the value of new contracts entered into during a specified period, including adjustments for changes in contract scope and terminations[32]