Financial results above previously-announced
estimates
ASGN Incorporated (NYSE: ASGN), a leading provider of IT and
professional services in the technology, creative/digital,
engineering and life sciences fields across commercial and
government sectors, today reported financial results for the
quarter ended September 30, 2018.
Highlights
- Revenues were $906.4 million, up 35.9
percent (10.5 percent on a pro forma basis) over the third quarter
of 2017. Pro forma assumes the acquisition of ECS occurred at the
beginning of 2017.
- Net income was $49.2 million ($0.93 per
diluted share), up from $34.9 million ($0.66 per diluted share) in
the third quarter of 2017.
- Adjusted Net Income (a non-GAAP
measure) was $68.7 million ($1.30 per diluted share), up from $44.1
million ($0.83 per diluted share) in the third quarter of
2017.
- Adjusted EBITDA (a non-GAAP measure)
was $112.9 million (12.4 percent of revenues), up from $83.4
million (12.5 percent of revenues) in the third quarter of
2017.
- Cash flows from operating activities
were $92.1 million, up from $54.6 million in the third quarter of
2017.
- Free cash flow (a non-GAAP measure) was
$84.6 million, or 9.3 percent of revenues.
- During the quarter, paid down $88.0
million of debt and the leverage ratio (a non-GAAP measure) was
2.89 to 1 at September 30, 2018, down from 3.2 to 1 at June 30,
2018. Since the closing of the ECS acquisition on April 2, 2018
through September 30, 2018, repaid $221.0 million of debt.
- During the quarter, ECS secured $306.4
million in new awards, which are included in its $1.5 billion
contract backlog as of September 30, 2018.
- Book-to-bill ratio (a non-GAAP measure)
for ECS for the quarter was 1.7 to 1. Book-to-bill ratio was
calculated as the sum of the change in total contract backlog
during the quarter plus revenues for the quarter, divided by
revenues for the quarter.
Management Commentary
"The U.S. economy continues to perform well and our commercial
and governmental clients are aggressively investing in their
businesses", commented Peter Dameris, CEO of ASGN. Against this
strong economic back drop, along with a continued increase in the
adoption of our "shared resource" delivery model, we were able to
accelerate our growth rate and expect to continue to be able to
deliver above-market growth in the quarters ahead. We believe that
we are well positioned to continue to service our customers' IT
needs as technology rapidly evolves and is adopted."
Third Quarter 2018 Financial Results
Revenues were $906.4 million, up 35.9 percent year-over-year on
a reported basis and 10.5 percent on a pro forma basis, which
assumes the acquisition of ECS occurred at the beginning of 2017.
On a "Same Billable Days" and "Constant Currency Basis" (both
non-GAAP measures), the pro forma year-over-year growth rate would
have been approximately 40 basis points higher.
Assignment revenues for our Apex and Oxford segments totaled
$705.6 million, up 11.2 percent year-over-year and permanent
placement revenues were $36.8 million (4.1 percent of revenues)
compared with $32.7 million (4.9 percent of revenues) in the third
quarter of 2017. Revenues for the quarter included $164.0 million
in revenues from ECS, which was acquired on April 2, 2018. ECS is
reported as a separate operating segment.
Our largest segment, Apex, accounted for 65.1 percent of total
revenues and grew 14.0 percent year-over-year. Our Oxford Segment
accounted for 16.8 percent of total revenues and was up 2.1 percent
year-over-year. Our ECS Segment accounted for 18.1 percent of total
revenues and was up 7.1 percent year-over-year on a pro forma
basis.
Gross profit was $270.1 million, up $51.8 million, or 23.8
percent year-over-year. Gross margin was 29.8 percent, compared
with 32.7 percent in the third quarter of 2017 on a reported basis
and 30.0 percent on a pro forma basis. The compression in reported
gross margin was primarily due to the inclusion of ECS, which has
lower margins than our other segments. On a pro forma basis, the
gross margin compression is mainly related to changes in business
mix.
Selling, general and administrative (“SG&A”) expenses were
$177.3 million (19.6 percent of revenues), compared with $149.2
million (22.4 percent of revenues) in the third quarter of 2017.
SG&A expenses for the quarter included acquisition, integration
and strategic planning expenses of $1.6 million, compared with $1.5
million in the third quarter of 2017.
Amortization of intangible assets was $18.5 million, up from
$8.2 million in the third quarter of 2017. The increase is related
to the intangible assets from the ECS acquisition.
Interest expense was $14.6 million compared with $7.1 million in
the third quarter of 2017. Interest expense for the quarter was
comprised of (i) $13.2 million of interest on the credit facility
and (ii) $1.4 million of amortization of deferred loan costs.
Interest expense was $6.0 million lower than the preceding quarter
as a result of (i) a one-time expense of $5.8 million in the second
quarter of 2018 related to the amendment of the credit facility
effective April 2, 2018 and (ii) lower average outstanding
borrowings, partially offset by a higher average interest rate.
The effective tax rate for the quarter was 17.5 percent, down
from 25.5 percent in the second quarter of 2018. The sequential
improvement in the rate was mainly attributable to: (i) changes in
our provisional estimates for the transitional tax on deemed
foreign dividends and the tax treatment of executive compensation
based on recently issued IRS regulations, (ii) higher excess tax
benefits from stock-based compensation and higher employment tax
credits and (iii) a one-time benefit of approximately $1.8 million
resulting from the acceleration into 2017 of the tax deduction for
certain deferred loan costs. For the fourth quarter of 2018, we
estimate the effective tax rate (before excess tax benefits on
stock-based compensation) to be approximately 26.0 percent.
Net income was $49.2 million ($0.93 per diluted share), up from
$34.9 million ($0.66 per diluted share) in the third quarter of
2017. Adjusted Net Income (a non-GAAP measure) was $68.7 million
($1.30 per diluted share), up from $44.1 million ($0.83 per diluted
share) in the third quarter of 2017. Adjusted EBITDA (a non-GAAP
measure) was $112.9 million (12.4 percent of revenues), up from
$83.4 million (12.5 percent of revenues) in the third quarter of
2017. Reconciliations between GAAP and non-GAAP measures are
included in this release.
Cash flows from operating activities were $92.1 million and free
cash flow (a non-GAAP measure) was $84.6 million. At September 30,
2018, our leverage ratio (a non-GAAP measure) was 2.89 to 1, down
from 3.2 to 1 at June 30, 2018.
Fourth Quarter 2018 Financial Estimates
ASGN is providing financial estimates for the fourth quarter of
2018. These estimates do not include any acquisition, integration
or strategic planning expenses and assume no deterioration in the
markets that ASGN serves. These estimates also assume no
significant change in foreign exchange rates. Reconciliations of
estimated net income to the estimated non-GAAP measures are
included in this release.
- Revenues of $905.0 million to $915.0
million
- Gross margin of 29.5 percent to 30.0
percent
- SG&A expenses (excludes
amortization of intangible assets) of $178.7 million to $181.2
million (includes $7.0 million in depreciation and $9.1 million in
stock-based compensation expense)
- Amortization of intangible assets of
$18.6 million
- Interest expense of $14.4 million
- Effective tax rate of 26.0 percent
(before any excess tax benefits related to stock-based
compensation)
- Net income of $40.9 million to $44.6
million
- Earnings per diluted share of $0.77 to
$0.84
- Diluted shares outstanding of 53.3
million
- Adjusted EBITDA(1) (a non-GAAP measure)
of $107.0 million to $112.0 million
- Adjusted Net Income (a non-GAAP
measure) of $59.2 million to $62.9 million
- Adjusted Net Income per diluted
share(2) (a non-GAAP measure) of $1.11 to $1.18
_______________
(1) Depreciation of $2.6 million included in costs of
services related to an ECS project and depreciation of $7.0 million
included in SG&A expenses are added back in the determination
of Adjusted EBITDA. (2) Does not include the “Cash Tax Savings on
Indefinite-lived Intangible Assets.” These savings total $6.8
million each quarter, or $0.13 per diluted share, and represent the
economic value of the tax deduction that we receive from the
amortization of goodwill and trademarks.
Our financial estimates above are based on our 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.
For the fourth quarter, we estimate Billable Days of 60.2 (for our
Apex and Oxford segments), which is 0.2 more than the fourth
quarter of 2017 and 2.2 fewer than the third quarter of 2018. Each
Billable Day is approximately $11.8 million in revenues. On a pro
forma basis, which assumes the acquisition of ECS occurred at the
beginning of 2017, our revenue estimates imply year-over-year
growth of 8.8 to 10.0 percent.
Conference Call
ASGN will hold a conference call today at 5:00 p.m. EDT to
review its financial results for the third quarter. The dial-in
number is 800-230-1059 (+1-612-234-9959 for callers outside
the United States) and the conference ID number is 455205.
Participants should dial in ten minutes before the call. The
prepared remarks, supplemental materials, and the webcast for this
call can be accessed at asgn.com.
A replay of the conference call will be available beginning
Wednesday, October 24, 2018 at 7:00 p.m. EDT until midnight on
Wednesday, November 7, 2018. The access number for the replay is
800-475-6701 (+1-320-365-3844 outside the United States) and the
conference ID number is 455205.
About ASGN Incorporated
ASGN Incorporated (NYSE: ASGN) is a leading provider of IT and
professional services in the technology, creative/digital,
engineering and life sciences fields across commercial and
government sectors. Operating through its Apex, Oxford and ECS
segments, ASGN helps leading corporate enterprises and government
organizations develop, implement and operate critical IT and
business solutions through its integrated offering of professional
staffing and IT solutions.
Our mission as an organization is to be the most trusted partner
for companies seeking highly skilled human capital and integrated
solutions to fulfill their strategic and operational needs. ASGN
was founded in 1985 and is headquartered in Calabasas, California.
For more information, visit us at asgn.com.
Reasons for Presentation of Non-GAAP Financial
Measures
Statements in this release and the accompanying financial
information include non-GAAP financial measures. Such information
is provided as additional information, not as an alternative to our
consolidated financial statements presented in accordance with
accounting principles generally accepted in the United States
("GAAP"), and is intended to enhance an overall understanding of
our current 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 statement tables that accompany this press release
include a reconciliation of each non-GAAP financial measure to the
most directly comparable GAAP financial measure. Below is a
discussion of our non-GAAP financial measures.
Pro forma revenues and gross profit by segment are presented to
provide a more consistent basis for comparison between quarters.
Pro forma was prepared as if the acquisition of ECS occurred at the
beginning of 2017. Although the pro forma segment data are
considered non-GAAP measures, they were calculated in the same
manner as the consolidated pro forma data, which are GAAP
measures.
EBITDA (earnings before interest, taxes, depreciation and
amortization of intangible assets) and Adjusted EBITDA (EBITDA plus
stock-based compensation expense and, as applicable, acquisition,
integration and strategic planning expenses, write-off of loan
costs and impairment charges) are used to determine a portion of
the compensation for some of our executives and employees.
Stock-based compensation expense is added to arrive at Adjusted
EBITDA because it is a non-cash expense. Write-off of loan costs,
acquisition, integration and strategic planning expenses and
impairment charges are added, as applicable, to arrive at Adjusted
EBITDA as they are not indicative of the performance of our core
business on an ongoing basis.
Non-GAAP net income (net income, less income (loss) from
discontinued operations, net of tax, plus, as applicable, write-off
of loan costs, credit facility amendment expenses, acquisition,
integration and strategic planning expenses, accretion of fair
value discount on contingent consideration, impairment charges, and
the tax effect of these items) provides a method for assessing our
operating results in a manner that is focused on the performance of
our core business on an ongoing basis. Adjusted Net Income
(Non-GAAP net income plus amortization of intangible assets, less
income taxes on amortization for financial reporting purposes not
deductible for income tax purposes) provides a method for assessing
our operating results in a manner that is focused on the
performance of our core business on an ongoing basis, adjusted for
some of the cash flows associated with amortization of intangible
assets to more fully present the performance of our
acquisitions.
Constant currency information removes the effect of
year-over-year changes in foreign currency exchange rates. Constant
currency information is calculated using the foreign currency
exchange rates 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. In order
to remove the fluctuations caused by comparable periods having
different billable days, revenues on a Same Billable Days basis are
calculated 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.
The term Same Billable Days and Constant Currency basis means
that the impact of year-over-year changes in foreign currency
exchange rates has been removed from the Same Billable Days basis
calculation.
Free cash flow is defined as net cash provided by (used in)
operating activities, less capital expenditures. Management
believes this provides useful information to investors about the
amount of cash generated by the business that can be used for
strategic opportunities. Our leverage ratio provides information
about our compliance with loan covenants and is calculated in
accordance with our credit agreement, as filed with the Securities
and Exchange Commission ("SEC"), by dividing our total indebtedness
by trailing 12 months Adjusted EBITDA.
Reasons for Presentation of Operating Metrics and
Supplemental Information
Operating metrics are intended to enhance the overall
understanding of our business and our current financial
performance. These operating metrics might not be calculated in the
same manner as, and thus might not be comparable to, similarly
titled metrics reported by other companies. Contract backlog for
our ECS segment represents the estimated amount of future revenues
to be recognized under negotiated contracts and task orders.
Book-to-bill ratio for our ECS segment is calculated as the sum of
the change in total backlog during the quarter plus revenues for
the quarter, divided by revenues for the quarter. The operating
metrics for the Apex and Oxford segments presented on this release
are calculated as follows: average number of staffing consultants
are full time equivalent staffing consultant headcount in the
quarter; average number of contract professionals and average
number of customers are the number of contract professionals
employed each week and the number of customers served each week,
averaged for the quarter, respectively (average is weighted by
total number of hours billed per week); top 10 customers as a
percentage of revenue are the 10 largest clients defined by the
revenue generated in the quarter, divided by total revenues in the
quarter; gross profit per staffing consultant is gross profit for
the quarter divided by the average number of staffing consultants;
average bill rate is total assignment revenue client billings in
the quarter divided by total hours billed in the quarter.
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 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 estimates of revenues,
gross margin, SG&A, amortization, effective tax rate, net
income, diluted shares outstanding, contract backlog, book-to-bill
ratio, Adjusted EBITDA, Adjusted Net Income, and related per share
amounts (as applicable) set forth above will be achieved. Factors
that could cause or contribute to such differences include actual
demand for our services, our ability to attract, train and retain
qualified staffing consultants, our ability to remain competitive
in obtaining and retaining clients, 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 our acquired subsidiaries, 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, 2017, as filed with
the SEC on March 1, 2018 and our Quarterly Reports
on Form 10-Q for the quarters ended March 31, 2018 and June 30,
2018, as filed with the SEC on May 10, 2018 and August 9, 2018,
respectively. We specifically disclaim any intention or duty to
update any forward-looking statements contained in this news
release.
SUMMARY CONSOLIDATED STATEMENTS OF
OPERATIONS (Unaudited)
(In thousands, except per share
amounts)
Three Months Ended Nine Months Ended September 30,
June 30, September 30, 2018 2017 2018 2018
2017 Revenues $ 906,449 $ 667,048 $ 878,509 $
2,470,131 $ 1,946,889 Costs of services 636,277 448,733
614,663 1,718,376 1,317,493 Gross
profit 270,172 218,315 263,846 751,755 629,396 Selling, general and
administrative expenses 177,335 149,197 179,616 521,395 440,446
Amortization of intangible assets 18,540 8,248 18,548
44,689 25,011 Operating income 74,297 60,870
65,682 185,671 163,939 Interest expense (14,606 ) (7,099 ) (20,573
) (41,724 ) (21,667 ) Income before income taxes 59,691 53,771
45,109 143,947 142,272 Provision for income taxes 10,474
18,892 11,508 31,889 51,775 Income from
continuing operations 49,217 34,879 33,601 112,058 90,497 Loss from
discontinued operations,
net of tax
(45 ) (23 ) (40 ) (233 ) (153 ) Net income $ 49,172 $ 34,856
$ 33,561 $ 111,825 $ 90,344 Per
share income from continuing operations and net income: Basic $
0.94 $ 0.66 $ 0.64 $ 2.14 $ 1.72
Diluted $ 0.93 $ 0.66 $ 0.63 $ 2.11 $
1.70 Number of shares and share equivalents
used to calculate earnings per share:
Basic 52,362 52,500 52,305 52,282
52,660 Diluted 53,034 53,173 53,010
52,990 53,319
SEGMENT FINANCIAL INFORMATION
(Unaudited)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018 AND 2017
(Dollars in millions)
Reported Pro Forma Three Months Ended Nine
Months Ended Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30, 2018
2017 2018 2017 2018 2017 2018
2017 Revenues: Apex: Assignment $ 575.2 $ 506.4 $
1,653.8 $ 1,469.0 $ 575.2 $ 506.4 $ 1,653.8 $ 1,469.0 Permanent
placement 14.4 11.1 41.9 33.5 14.4
11.1 41.9 33.5 589.6 517.5 1,695.7
1,502.5 589.6 517.5 1,695.7 1,502.5 Oxford: Assignment 130.4 128.0
386.1 379.9 130.4 128.0 386.1 379.9 Permanent placement 22.4
21.6 69.2 64.5 22.4 21.6 69.2
64.5 152.8 149.6 455.3 444.4 152.8 149.6 455.3 444.4
ECS 164.0 — 319.1 — 164.0 153.1 468.2 435.0
Consolidated: Assignment 705.6 634.4 2,039.9 1,848.9 705.6 634.4
2,039.9 1,848.9 Permanent placement 36.8 32.7 111.1 98.0 36.8 32.7
111.1 98.0 ECS 164.0 — 319.1 — 164.0
153.1 468.2 435.0 $ 906.4 $
667.1 $ 2,470.1 $ 1,946.9 $ 906.4 $
820.2 $ 2,619.2 $ 2,381.9 Percentage of total
revenues: Apex 65.1 % 77.6 % 68.6 % 77.2 % 65.1 % 63.1 % 64.7 %
63.1 % Oxford 16.8 % 22.4 % 18.4 % 22.8 % 16.8 % 18.2 % 17.4 % 18.7
% ECS 18.1 % — % 13.0 % — % 18.1 % 18.7 % 17.9 % 18.2 % 100.0 %
100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Assignment 77.8 % 95.1 % 82.5 % 95.0 % 77.8 % 77.3 % 77.9 % 77.7 %
Permanent placement 4.1 % 4.9 % 4.5 % 5.0 % 4.1 % 4.0 % 4.2 % 4.1 %
ECS 18.1 % — % 13.0 % — % 18.1 % 18.7 % 17.9 % 18.2 % 100.0 % 100.0
% 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Domestic
95.7 % 94.8 % 95.3 % 95.0 % 95.7 % 95.8 % 95.5 % 95.9 % Foreign 4.3
% 5.2 % 4.7 % 5.0 % 4.3 % 4.2 % 4.5 % 4.1 % 100.0 % 100.0 % 100.0 %
100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Gross profit: Apex $ 177.8
$ 155.7 $ 506.1 $ 445.9 $ 177.8 $ 155.7 $ 506.1 $ 445.9 Oxford 62.7
62.6 187.3 183.5 62.7 62.6 187.3 183.5 ECS 29.6 —
58.3 — 29.6 27.9 85.0 84.8
Consolidated $ 270.1 $ 218.3 $ 751.7 $
629.4 $ 270.1 $ 246.2 $ 778.4 $ 714.2
Gross margin: Apex 30.2 % 30.1 % 29.8 % 29.7 % 30.2 % 30.1 %
29.8 % 29.7 % Oxford 41.1 % 41.8 % 41.1 % 41.3 % 41.1 % 41.8 % 41.1
% 41.3 % ECS 18.1 % — % 18.3 % — % 18.1 % 18.2 % 18.1 % 19.5 %
Consolidated 29.8 % 32.7 % 30.4 % 32.3 % 29.8 % 30.0 % 29.7 % 30.0
%
SELECTED CASH FLOW INFORMATION
(Unaudited)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018 AND 2017
(In thousands)
Three Months Ended Nine Months Ended 2018 2017
2018 2017 Cash provided by operating activities $
92,082 $ 54,594 $ 223,561 $ 138,187 Capital expenditures (7,500 )
(4,830 ) (22,093 ) (18,038 ) Free cash flow (non-GAAP measure) $
84,582 $ 49,764 $ 201,468 $ 120,149
Cash used in investing activities(1) $ (7,296 ) $ (30,510 )
$ (782,526 ) $ (43,866 ) Cash provided by (used in) financing
activities(1) $ (88,466 ) $ (15,525 ) $ 564,017 $ (94,817 )
(1) Investing and financing activities in 2018 included the ECS
acquisition and related financing.
SELECTED CONSOLIDATED BALANCE SHEET
DATA
AS OF SEPTEMBER 30, 2018 AND DECEMBER
31, 2017
(In thousands)
2018 2017 (Unaudited) Cash and cash equivalents $ 40,888 $
36,667 Accounts receivable, net 572,864 428,536 Total current
assets 646,599 499,523 Goodwill and intangible assets, net
1,923,193 1,246,861 Total assets 2,664,590 1,810,129 Total current
liabilities 291,417 166,717 Working capital 355,182 332,806
Long-term debt 1,154,154 575,213 Other long-term liabilities 89,195
76,808 Stockholders’ equity 1,129,824 991,391
RECONCILIATION OF NET INCOME TO EBITDA
(NON-GAAP MEASURE) AND
ADJUSTED EBITDA (NON-GAAP MEASURE)
(Unaudited)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018 AND 2017
(In thousands)
Three Months Ended Nine Months Ended 2018 2017
2018 2017 Net income $ 49,172 $ 34,856 $ 111,825 $
90,344
Loss from discontinued operations, net of
tax
45 23 233 153 Interest expense 14,606 7,099 41,724 21,667 Provision
for income taxes 10,474 18,892 31,889 51,775 Depreciation 9,759
6,403 26,609 18,482 Amortization of intangible assets 18,540
8,248 44,689 25,011 EBITDA (non-GAAP measure) 102,596
75,521 256,969 207,432 Stock-based compensation 8,619 6,382 22,380
17,943 Acquisition, integration and strategic planning expenses
1,636 1,480 14,866 3,115 Adjusted EBITDA
(non-GAAP measure) $ 112,851 $ 83,383 $ 294,215
$ 228,490
RECONCILIATION OF NET INCOME TO
NON-GAAP NET INCOME AND
ADJUSTED NET INCOME (NON-GAAP
MEASURE) (Unaudited)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2018 AND 2017
(In thousands, except per share
amounts)
Three Months Ended Nine Months Ended 2018 2017
2018 2017 Net income $ 49,172 $ 34,856 $ 111,825 $
90,344 Loss from discontinued operations, net of tax 45 23 233 153
Credit facility amendment expenses(1) — 804 6,159 2,728
Acquisition, integration and strategic planning expenses 1,636
1,480 14,866 3,115 Tax effect on adjustments (427 ) (891 ) (5,487 )
(2,279 ) Non-GAAP net income 50,426 36,272 127,596 94,061
Amortization of intangible assets 18,540 8,248 44,689 25,011 Income
taxes on amortization for financial reporting purposes not
deductible for income tax purposes (269 ) (405 ) (807 ) (1,217 )
Adjusted Net Income (non-GAAP measure)(2) $ 68,697 $ 44,115
$ 171,478 $ 117,855 Per diluted share:
Net income $ 0.93 $ 0.66 $ 2.11 $ 1.70 Adjustments 0.37 0.17
1.13 0.51 Adjusted Net Income (non-GAAP
measure)(2) $ 1.30 $ 0.83 $ 3.24 $ 2.21
Weighted average common and common equivalent shares
outstanding (diluted) 53,034 53,173 52,990
53,319 (1) During the nine months ended
September 30, 2018 we incurred $22.5 million in fees related to the
amendment to our credit facility to fund the acquisition of ECS, of
which $6.2 million were expensed as incurred and included in
interest expense. The remaining $16.3 million fees were capitalized
and are being amortized over the term of the credit facility.
During the nine months ended September 30, 2017 we amended our
credit facility and incurred $3.3 million in fees, of which $2.7
million were expensed as incurred and included in interest expense,
while the remaining were capitalized and are being amortized over
the term of the credit facility. (2) Does not include the “Cash Tax
Savings on Indefinite-lived Intangible Assets.” These savings total
$6.8 million per quarter (approximately $0.13 per diluted share)
and represent the economic value of the tax deduction that we
receive from the amortization of goodwill and trademarks.
OPERATING METRICS (Unaudited)
APEX AND OXFORD SEGMENTS
Q3 2018 Q2 2018 Q3 2017 Average number of staffing
consultants: Apex 1,660 1,532 1,567 Oxford 929 929 925 Average
number of customers: Apex 3,751 3,666 3,530 Oxford 992 1,002 1,048
Average number of contract professionals(1): Apex 20,464 19,536
18,236 Oxford 2,989 2,913 2,896 Top 10 customers as a percentage of
revenues: Apex 24.0 % 23.9 % 26.7 % Oxford 12.1 % 11.9 % 11.3 %
Average bill rate: Apex $ 59.89 $ 59.53 $ 58.16 Oxford $ 100.91 $
101.51 $ 100.78 Gross profit per staffing consultant: Apex $
107,000 $ 111,000 $ 99,000 Oxford $ 68,000 $ 71,000 $ 68,000
(1) Average number of contract professionals placed on
assignment each week that are considered our employees; this number
does not include employees of our subcontractors.
ECS SEGMENT SUPPLEMENTAL
INFORMATION (Unaudited)
MIX OF REVENUES BY CONTRACT
TYPE(1)
Q3 2018 Q2 2018 Q3 2017 Firm-fixed-price 29.4 % 28.8 % 31.6
% Time and materials 25.7 % 31.6 % 30.4 % Cost-plus-fixed-fee 44.9
% 39.6 % 38.0 %
MIX OF REVENUES BY CUSTOMER
Q3 2018 Q2 2018 Q3 2017 Department of Defense and Intelligence
Agencies 62.0 % 61.6 % 61.4 % Federal Civilian 32.0 % 32.9 % 34.3 %
Commercial and Other 6.0 % 5.5 % 4.3 %
CONTRACT BACKLOG(2) (In
millions)
September 30,2018
June 30,2018
Funded Contract Backlog(3) $ 365.1 $ 278.2 Negotiated Unfunded
Contract Backlog(4) 1,163.7 1,137.2 Contract Backlog $
1,528.8 $ 1,415.4
Information for the periods prior to the ECS acquisition date of
April 2, 2018 is presented on a pro forma basis.
(1) Firm-fixed-price ("FFP") contracts provide for a fixed
price for specified products, systems and/or services. Time and
materials ("T&M") contracts provide for payments based on fixed
hourly rates for each direct labor hour expended and reimbursements
for allowable material costs and out-of-pocket expenses.
Cost-plus-fixed-fee ("CPFF") contracts provide for reimbursement of
our direct contract costs and allowable and allocable indirect
costs, plus the negotiated profit margin or fee. (2) Contract
backlog represents the estimated amount of future revenues to be
recognized under negotiated contracts and task orders as work is
performed. Contract backlog excludes awards which have been
protested by competitors until the protest is resolved in our
favor. ECS segregates contract backlog into two categories, funded
contract backlog and negotiated unfunded contract backlog. (3)
Funded contract backlog for contracts with U.S. government agencies
primarily represents contracts for which funding has been formally
awarded less revenues previously recognized on these contracts, and
does not include the unfunded portion of contracts where funding is
incrementally awarded or authorized by the U.S. government even
though the contract may call for performance over a number of
years. Funded contract backlog for contracts with non-government
agencies represents the estimated value of contracts which may
cover multiple future years, less revenues previously recognized on
these contracts. (4) Negotiated unfunded contract backlog
represents the estimated future revenues to be earned from
negotiated contract awards for which funding has not been awarded
or authorized, and unexercised priced contract options. Negotiated
unfunded contract backlog does not include any estimate of future
potential task orders expected to be awarded under indefinite
delivery, indefinite quantity (IDIQ), U.S. General Services
Administration (GSA) schedules or other master agreement contract
vehicles.
FINANCIAL ESTIMATES FOR Q4 2018
RECONCILIATION OF ESTIMATED NET INCOME
TO ESTIMATED NON-GAAP MEASURES
(In millions, except per share
data)
Low High Net income(1)(2) $ 40.9 $ 44.6 Interest expense
14.4 14.4 Provision for income taxes(2) 14.4 15.7 Depreciation(3)
9.6 9.6 Amortization of intangible assets 18.6 18.6
EBITDA (non-GAAP measure) 97.9 102.9 Stock-based compensation 9.1
9.1 Adjusted EBITDA (non-GAAP measure) $ 107.0
$ 112.0 Low High Net income(1)(2) $ 40.9 $
44.6 Amortization of intangible assets 18.6 18.6 Income taxes on
amortization for financial reporting purposes not deductible for
income tax purposes (0.3 ) (0.3 ) Adjusted Net Income (non-GAAP
measure)(4) $ 59.2 $ 62.9 Per diluted share:
Net income $ 0.77 $ 0.84 Adjustments 0.34 0.34
Adjusted Net Income (non-GAAP measure)(4) $ 1.11 $ 1.18
Weighted average common and common equivalent shares
outstanding (diluted) 53.3 53.3 (1)
These estimates do not include acquisition, integration, or
strategic planning expenses. (2) These estimates do not include
excess tax benefits related to stock-based compensation. (3)
Composed of $2.6 million of depreciation included in costs of
services related to an ECS project and $7.0 million of depreciation
included in SG&A expenses. (4) Does not include the “Cash Tax
Savings on Indefinite-lived Intangible Assets.” These savings total
$6.8 million per quarter ($0.13 per diluted share) and represent
the economic value of the tax deduction that we receive from the
amortization of goodwill and trademarks.
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version on businesswire.com: https://www.businesswire.com/news/home/20181024005897/en/
ASGN IncorporatedEd PierceChief Financial
Officer818-878-7900
ASGN (NYSE:ASGN)
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