ASGN Incorporated

Greetings and welcome to the ASGN Incorporated fourth quarter and full year 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Kimberly Estikin of Investor Relations. Thank you. You may begin.

Good afternoon. Thank you for joining us today for ASGN's fourth quarter and full year 2024 conference call. With me are Ted Hanson, Chief Executive Officer, Rand Blazer, President, and Marie Perry, Chief Financial Officer. Before we get started, I would like to remind everyone that our commentary contains four booking 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 GAAP and non-GAAP measures are included in today's press release. I will now turn the call over to Ted Hansen, Chief Executive Officer.

Thank you, Kim, and thank you for joining ASGN's fourth quarter and full year 2024 earnings call. Throughout 2024, we remain committed to advancing ASGN's business towards higher-end, high-value IT consulting solutions. This commitment has reflected in the growth of our IT consulting revenues. For the year, IT consulting revenues from both the commercial and government sectors comprised approximately 58% of total revenues, up from roughly 53% in the prior year period. While Q4 revenue was slightly below expectations, the highlight of the quarter was once again gross and adjusted EBITDA margins, which exceeded our expectations. Despite IT budgets remaining constrained, our pipeline of work has continued to expand. Double-digit year-over-year growth in commercial consulting bookings in the fourth quarter underscores our participation in our clients' long-term IT strategies. As we transition into 2025, we are beginning to see an improvement in business confidence, although we believe a turnaround in IT spending has yet to materialize. To meet the anticipated growing demand for IT services, we remain closely aligned with our enterprise and federal government customers understanding their strategic needs, and positioning our solutions accordingly in key areas such as AI, cybersecurity, and data. Maintaining deep customer relationships with Fortune 1000 and key defense and intelligence agencies is essential to ASGN's market differentiation. Also important to driving the underpinnings of our long-term strategy is the depth and breadth of our leadership team. As part of a planned succession, we recently announced that our president, Rand Blazer, will transition to the role of executive vice chairman this March. I'll elaborate on Rand's continued commitment to our company, as well as welcome our newest executive team addition, Shiv Iyer, who will be joining us from Accenture later in today's call. Beyond a forward-thinking leadership team, successful tuck-in acquisitions are core to enhancing our organic consulting growth. We continued our M&A efforts in 2025, announcing just yesterday our definitive agreement to acquire TopLock, a preferred certified workday services partner. I'll discuss the strategy behind the TopLock acquisition shortly. But first, let's turn to our segment performance for the quarter. Our commercial segment services Fortune 1000 and large mid-market companies. Revenues for the segment were again driven by growth in our consulting business, which improves 6% year-over-year. Consulting bookings of $348.2 million put our book to bill at 1.2 times for the quarter and 1.1 times on a trailing 12-month basis. Although consulting bookings remain weighted towards renewals, a reflection of our strong client relationships, our new work continues to grow each quarter. From an industry perspective, growth for the quarter was led by our TMT and consumer and industrial verticals. The TMT vertical improved mid-single digits compared to the fourth quarter of 2023 and also improved low single digits for the full year. Improvement in TMT revenues were led by growth in e-commerce and media and entertainment accounts. Consumer and industrial accounts improved low single digits as compared to the prior year quarter, driven by double-digit improvements in utilities and material accounts, along with mid-single-digit growth in consumer staples and consumer discretionary accounts. While the financial services vertical declined year-over-year, within the vertical, big banks, fintech, and diversified financials all improved low single digits on a billable-day adjusted basis. As one of the largest spenders on IT, this improvement within the financial services vertical, especially amongst our big banking clients, is a move in the right direction. On a sequential basis, adjusting for the two and a half fewer billable days in a quarter, consumer and industrial accounts improve below single digits with growth in the utility, consumer staples, consumer discretionary, and industrial sectors. We also achieved low single-digit growth in the healthcare vertical with advancements in both payer and provider accounts. Consulting engagements for the fourth quarter focused on our cloud and data infrastructure, cybersecurity, and AI solution capabilities. Let me provide a few noteworthy examples. In the fourth quarter, a prominent freight and transportation client engaged ASGN to migrate their legacy on-premise data management center to the cloud. Our team of data experts conducted a comprehensive assessment of our client's 25-year-old system, developed architectural roadmaps, and consulted our client on their migration to AWS Cloud. Once fully migrated to AWS, we will proceed to modernize our client's architecture by adopting cloud-native practices that provide enhanced agility, scalability, and a robust foundation to leverage advanced services such as data, analytics, and AI. With vast amounts of data moving to the cloud, there's an increasing need to protect sensitive enterprise information. As noted last quarter, we continue to fortify our governance risk and compliance, or GRC, practice, which leverages our commercial and government cybersecurity resources to support our commercial industry clients. In the fourth quarter, our GRC consultants partnered with a medical technology company to help them achieve HITRUST certification. Our client was looking to achieve this cybersecurity certification, which combines regulatory and industry standards by year end. Our combined commercial and government team seamlessly collaborated with our client, quickly developing the domain knowledge needed to achieve the HITRUST certification and prompting our client to extend our engagement into 2025 for ongoing advisory support. Also during the quarter, we were engaged by a technology company to establish a center of excellence to streamline the onboarding of various retailers onto their platform. By identifying onboarding commonalities, developing best practices, and addressing procedural anomalies, Our solution architects collaborated with our client to create a gold standard for retail implementations. As this project continues, we will create more automations around the monitoring, compliance, and securing of sensitive data. Importantly, as the creator of this center of excellence, we've become an integral part of our client's professional services organization, assuming responsibility for the onboarding of their retail partners. Our IT consulting solutions create efficiencies that help our clients deliver more value to their customers while also improving outcomes for their internal teams. A Fortune 500 energy company tasked our AI consultants with developing a cutting-edge conversational GenAI chatbot, custom-built in Microsoft Azure's cloud. This multi-agent application provides real-time IT support via connection to back-end knowledge repositories that empower our chatbot to troubleshoot a wide range of technical IT issues in record time. When the chatbot cannot independently resolve the IT issue, it seamlessly integrates with ServiceNow to create a ticket ensuring an efficient and timely resolution. While it will likely be several quarters before we see enterprise-wide applications of GenAI, many companies, like our energy client, are implementing targeted AI models that focus on high-impact use cases to improve efficiency, reduce costs, and provide deeper data insights. As we evolve our business, we are not only upskilling our teams in the latest GenAI applications, but we're also strategically partnering with industry leaders knowing that these tech partnerships are integral to our continued success. Thus far today, I've highlighted projects in which our consulting teams have partnered with Amazon Web Services, Microsoft Azure, and ServiceNow, each of which, amongst other tech innovators, comprise our core group of technology partners. As we enter 2025, I am pleased to welcome one more technology partnership to that list, Workday. As I noted at the beginning of the call, ASGN signed a definitive agreement to acquire TopLock, a leading high-growth, tech-enabled Workday consultancy. While Marie will provide further details on the acquisition financials, I'll focus my commentary on our strategy and market opportunity. Recognizing a growing customer demand for ERP implementations and related services, we identified Workday a leader in enterprise cloud applications with over 60% of the Fortune 500 as customers. This led us to TopBlock, a company purposefully built to partner with the Workday platform. An industry innovator, TopBlock's team of over 500 consultants leverage a proprietary deployment model that accelerates customer time to value. In addition, by increasingly incorporating AI into its offerings, TopLock improves efficiency for its customers and differentiates its implementation processes. Beyond the initial implementation of Workday, TopLock also provides post-deployment services that foster long-term customer relationships. With more than 300 Workday installations over the past five years, Top Blocks consultants are well positioned to gain immediate scale in the ERP market, which Workday has identified as $160 billion in size and growing. We anticipate Top Blocks innovative solutions will seamlessly integrate with our commercial consulting customer base, as well as provide significant opportunities within the federal government sector. Speaking of our government customers, let's now turn to our federal government segment whose services include advanced IT solutions for the Department of Defense, the intelligence community, and other critical agencies that support our national security. The federal government segment win rate remained robust for the fourth quarter at approximately 90% for our re-competed contracts. Although revenues fell below expectations, predominantly due to the lower than expected software licenses, net new contract awards of $283 million put our book to bill at 1.0 times for the quarter and back to our target of 1.1 times on a trailing 12-month basis. In addition to booking strength, at year end, contract backlog was over 3.1 billion for a coverage ratio of 2.5 times the segment's trailing 12-month revenues. Discussions of backlog and thus indications of future performance lead me to a topic gaining a lot of attention of late, that of the new administration spending initiatives and, in particular, the Department of Government Efficiency, or DOGE. DOGE has been tasked with modernizing federal technology and software, including upgrading network IT systems, ensuring data integrity, and facilitating responsible data collection, all within goal of maximizing governmental efficiency and productivity. While it is still in early days, we believe that DOJA's priorities could lead to an increased emphasis on our core solutions and capabilities in AI, cybersecurity, and digital modernization services, which comprise the vast majority of our federal government revenues. Alongside the solutions we offer, The agencies we support are also strongly aligned with the government's budget priorities. Two-thirds of our federal government revenues are derived from contracts with Department of Defense, intelligence agencies, and the Department of Homeland Security. The remaining one-third of revenues comes from more high-end IT business operations and modernization services for civilian and state and local agencies. This includes cloud, data management, and cybersecurity services, all aimed at automating and modernizing governmental processes. So let me provide a few examples of contracts we won during the fourth quarter that further underscore our commitment to upgrading and enhancing government IT infrastructure. For the U.S. Navy, we were awarded additional work on an existing defense and intelligence contract in which our teams are providing data center management to two Navy installations, one in Norfolk, Virginia, and the other in Coronado, California. As part of this new fixed-price contract, we will support the Navy's secure global public safety network and manage their data center, which provides essential naval business functions worldwide. Beyond defense and cybersecurity, we are also seeing sizable bookings to support healthcare IT modernization. In December, we were awarded our first task order under a four-year prime contract with the Department of Health and Human Services. By providing program and financial management services, we will assist the Advanced Research Projects Agency for Health to address scalability and global supply chain challenges to increase the efficacy and productivity of their future programs. As we improve efficiency for our government clients, we also continue to invest in our own technological capabilities. For instance, for the past two years, we've been building a differentiated solution at the intersection of AI and cybersecurity. This solution helps organizations identify and prioritize remediation of security vulnerabilities using advanced mathematical AI models that save our clients and our internal cybersecurity team time and money in the protection against cyber attacks. In addition, during the fourth quarter, we successfully deployed an in-house AI platform that enhances our business development, capture, and proposal workflows. We plan to expand the use of this platform to other operational workflows throughout 2025 in order to drive measurable gains in productivity and quality for our internal teams and our clients. With that, I'll turn the call over to Marie to discuss the fourth quarter results and our first quarter 2025 guidance.