ASGN Incorporated

Greetings. Welcome to ASGN Incorporated's third quarter 2021 earnings call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. At this time, I'll turn the conference over to Kimberly Esterkin with Investor Relations. Kimberly, you may now begin.

Thank you, Operator. Good afternoon, and thank you for joining us today for ASGN's third quarter 2021 conference call. With me are Ted Hansen, President and Chief Executive Officer, Ran Blazer, President of APEC Systems, George Wilson, President of ECS, and Ed Pierce, Chief Financial Officer. Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call. For your convenience, our prepared remarks and supplemental materials can be found in the investor relations section of our website, at investors.asgn.com. Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income, and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between the GAAP and non-GAAP measures are included in today's press release. I will now turn the call over to Ted Hansen, President and Chief Executive Officer.

Thank you, Kimberly, and thank you for joining ASGN's third quarter 2021 earnings call. ASGN reported very strong results for the third quarter, and I want to thank our entire team for their incredible effort, which contributed to such strong performance. I'm pleased to report that we came in above the high end of our revenue and adjusted EBITDA guidance ranges for Q3, which we raised from our initial guidance during our Investor and Analyst Day conference last month. indicating a continued acceleration of our business. Importantly, all of our businesses, with the exception of CyberCoders, achieved record revenues for the quarter, with CyberCoders revenues increasing to levels above the third quarter of 2019. Given these strong results, we will be raising our guidance estimates for Q4 2021. Ed Pierce, our CFO, will discuss our updated guidance shortly. Revenues for the third quarter totaled approximately $1.1 billion, up 18.7% year-over-year. Excluding acquisition contributions, revenues improved 14.1% year-over-year. Adjusted EBITDA of $136.6 million improved 34.1% from the prior year period. ASGN has significant capital resources to support investments in our organic growth M&A and share were purchased. In the third quarter, acquisitions contributed $47.2 million in revenue. We continue to believe that M&A generates the highest return of capital for all of our stakeholders. Our M&A pipeline remains robust, and we recently added a Senior Vice President of Corporate Development to our team to support our company-wide acquisition efforts. Year-to-date, We also spent $118.4 million in the repurchase of shares and have $131.6 million remaining under our $250 million share repurchase plan. With that said, let's turn to more detail on our segment performance for the quarter, beginning with our largest segment, commercial, which serves large enterprise and Fortune 1000 companies across multiple end markets. For the third quarter of 2021, the commercial segment generated revenue of $774.9 million, up 25.8% year-over-year, and up 24.1% organically. Apex Systems continued to report very strong growth, and for the first time, Creative Circle and CyberCoder surpassed 2019 quarterly revenues. Each of these operating units also reported their fifth quarter of sequential growth. From an industry perspective, all five commercial industry verticals for APEX Systems are commercial IT services and solution division. Experience growth during the quarter with every vertical except the financial services industry accounts achieving double digit growth on a year-over-year basis. APEX Systems commercial and industrial accounts were up double digits both year-over-year and sequentially due to the continued strength across all sectors with particularly high growth in energy, utilities, airlines, and air freight. Its technology and telecommunications, or TMT, vertical was up double digits year over year. Within the vertical, technology accounts saw significant growth over Q3 2020, while telecommunications accounts were up high single digits year over year. Government and business services was up double digits with airspace and defense, and government accounts up mid-single digits for the third quarter, while business service accounts grew double digits year over year. Financial services accounts were up mid-single digits, with growth in regional banks, wealth management, and fintech accounts. Revenues in applications and project management, including Agile, Digital, ERP, and Cloud, continued to perform well. Apex Systems top accounts and retail and branch accounts achieved double-digit growth rates for Q3. From an industry perspective for the quarter, top account revenue at Apex Systems was up in all five industry verticals we target, while Creative Circle also posted positive growth across their top accounts. Gross margin for the commercial segment was 32.4%, up 150 basis points from Q3 of last year, due to growth across our high margin commercial consulting, creative marketing, and permanent placement businesses. EBITDA margins were also up due to the associated growth and gross margins, along with higher productivity in our workforce. We also continued to expand our commercial consulting revenues during the quarter. Commercial consulting revenues totaled $187.6 million, a significant increase of 94.2% year-over-year, virtually all of which was organic growth. Our pipelines of booked revenue and future opportunities each continue to grow at high double-digit rates and are trending positively in the fourth quarter. Consulting offerings in our commercial segment remain an important source of the value we provide our clients, and so we continue to identify acquisition opportunities that expand our capabilities in areas in high demand, such as cloud, data analytics, and AI, agile development, digital transformation, and enterprise application implementation. In the consulting space, we are seeing an increasing amount of work in digital innovation and modern enterprise solutions that enable us to implement many of the elements of our clients' individual digital roadmaps. Working agile and DevOps, in particular, is a large component of the support we provide as our clients tie together applications in their cloud environment and strengthen their customer support with real-time data updates. For example, our ability to build dashboards and software interfaces to propel the customer experience and internal management of business operations have been key drivers of our revenues of late. Now let's turn to our federal government segment, which provides mission-critical solutions to the Department of Defense, intelligence agencies, and other civilian agencies. Revenues for the federal government segment totaled $298.9 million for the third quarter, up 3.6% year-over-year. EBITDA margin also improved during the quarter to total 11.4%, up 230 basis points from the third quarter of 2020. The federal government segment's new business pipeline remained strong, with $430.2 million in new business awarded during the third quarter and a book-to-bill ratio of 1.44 to 1. Contract backlog totaled 3.1 billion at the end of the third quarter, or a healthy coverage ratio of 2.6 times the segment's trailing 12-month revenues. In Q3, examples of some of the contracts awarded to our federal government segment included a legacy data consolidation solution contract with the Naval Information Warfare Center, to support its work for the Defense Health Agency, including achieving new efficiencies and cost savings. Three task orders to support the National Oceanic and Atmospheric Administration with the development of decision support tools such as economic impact models. A five-year prime contract with the U.S. CENTCOM to provide personnel, supervision, and services necessary to support critical missions and operations. and a five-year multiple award prime contract with the General Services Administration to aid the development of manned and unmanned systems for the Department of Defense. With that, I will now turn the call over to Ed Pierce, our CFO, to discuss the third quarter financial results and our fourth quarter guidance. Ed?