Financial Results Exceeded
Previously-announced Guidance Estimates
ASGN Incorporated (NYSE: ASGN), a leading provider of IT
services and solutions, including technology, creative, and
digital, across the commercial and government sectors, reported
financial results for the quarter ended March 31, 2022.
Q1 2022 Highlights
- Revenues were $1.1 billion, up 20.3 percent over the first
quarter of 2021
- Income from continuing operations was $67.6 million, up 57.9
percent over the first quarter of 2021
- Net income was $66.8 million, up 37.2 percent over the first
quarter of 2021
- Adjusted EBITDA (a non-GAAP measure) from continuing operations
was $134.8 million, or 12.4 percent of revenues, up from $96.9
million, or 10.7 percent of revenues
- Spent $76.9 million to repurchase of 684,176 shares of the
Company's common stock
Management Commentary
“2022 is off to a very strong start, with revenues and Adjusted
EBITDA for the first quarter exceeding the high end of our guidance
ranges,” said ASGN Chief Executive Officer, Ted Hanson. “Revenues
of approximately $1.1 billion improved 20.3 percent year-over-year,
while Adjusted EBITDA of $134.8 million increased 39.1 percent
compared to the prior-year period and also set a new record for the
first quarter. The continued outperformance of our Commercial
Segment, combined with our Federal Government Segment’s consistent
year-over-year performance, have enabled ASGN to track ahead of the
three-year financial targets we laid out this past September. This
performance brings us closer to our goal of $6.0 billion in
revenues by 2024.”
“It is clear that ASGN’s unique go-to-market strategy supports
the future of work. In the commercial space, our digital
transformation projects that assist our clients’ development of new
tools and pathways that enhance their customer support and supply
chain are in great demand. In the government market, artificial
intelligence and machine learning remains at the forefront of
ASGN’s expertise and the Department of Defense’s newly passed
budget. Our strategic and financial objectives are well-aligned
with industry tailwinds and will enable ASGN to remain a leading
provider of IT services and solutions to the commercial and
government end markets,” Mr. Hanson concluded.
First quarter of 2022 Financial Results - Summary
Change
(In millions, except per share data)
Q1 2022
Q1 2021
Q4 2021
Y-Y
Sequential
Revenues
Commercial Segment
$
832.9
$
649.2
$
790.5
28.3
%
5.4
%
Federal Government Segment
258.1
257.8
263.3
0.1
%
(2.0
)%
1,091.0
907.0
1,053.8
20.3
%
3.5
%
Gross Margin
Commercial Segment
32.7
%
30.6
%
32.5
%
2.1
%
0.2
%
Federal Government Segment
20.9
%
17.5
%
21.6
%
3.4
%
(0.7
)%
Consolidated
29.9
%
26.9
%
29.8
%
3.0
%
0.1
%
Income from continuing operations
$
67.6
$
42.8
$
65.4
57.9
%
3.4
%
Income (loss) from discontinued
operations
(0.8
)
5.9
19.6
N/M
N/M
Net Income
$
66.8
$
48.7
$
85.0
37.2
%
(21.4
)%
Earnings per share - Diluted
Continuing operations
$
1.29
$
0.80
$
1.24
61.3
%
4.0
%
Discontinued operations
(0.01
)
0.11
0.37
N/M
N/M
$
1.28
$
0.91
$
1.61
40.7
%
(20.5
)%
Non-GAAP Financial Measures (from
Continuing Operations)
Adjusted Net Income
$
82.1
$
55.1
$
82.1
49.0
%
—
%
Adjusted Net Income per diluted share
$
1.57
$
1.03
$
1.55
52.4
%
1.3
%
Adjusted EBITDA
$
134.8
$
96.9
$
130.3
39.1
%
3.5
%
Adjusted EBITDA margin
12.4
%
10.7
%
12.4
%
1.7
%
—
%
Notes:
The Company has two financial reporting
segments: Commercial and Federal Government. The Commercial Segment
is comprised of the Apex Systems, Creative Circle and CyberCoders
divisions. The Federal Government Segment was formerly referred to
as the ECS Segment.
Definitions of non-GAAP measures and
reconciliation to GAAP measurements are included in the tables that
accompany this release.
N/M means not meaningful.
Consolidated revenues for the first quarter of 2022 were up 20.3
percent over the same period of last year, or 18.7 percent after
adjusting for the one additional Billable Day in the quarter.
Revenues for the first quarter of 2022 included approximately $40.2
million from businesses acquired after the first quarter of 2021
accounting for 4.4 percentage points of the year-over-year growth
rate.
Revenues from the Commercial Segment (76.3 percent of total
revenues) were up 28.3 percent over the first quarter of last year.
Assignment revenues totaled $628.2 million (75.4 percent of the
segment's revenues), up 18.1 percent year-over-year. Consulting
services revenues (virtually all IT services) were $204.7 million
(24.6 percent of the segment's revenues), up 74.2 percent
year-over-year. Consulting services included approximately $11.9
million in revenues from a business acquired in 2021.
Revenues from the Commercial Segment's IT services and solutions
division accounted for 82.7 percent of the segment's revenues, up
25.8 percent over the first quarter of 2021 driven by high
double-digit growth in consulting services and double-digit growth
in assignment revenues. Revenues from the segment's creative
digital marketing and permanent placement divisions accounted for
17.3 percent of the segment's revenues, up 41.5 percent
year-over-year.
Revenues from the Federal Government Segment (23.7 percent of
revenues) were flat year-over-year despite the first quarter of
last year being a difficult comparable. The first quarter of last
year benefited from higher spending levels on certain cost
reimbursable contracts and revenues from a low-margin web service
contract that the segment elected to not renew in the third quarter
of last year. Federal Government revenues for the first quarter
included $28.3 million from businesses acquired in 2021.
Gross margin for the first quarter of 2022 was 29.9 percent, up
3.0 percentage points over the first quarter of last year. Both
business segments and all operating divisions reported
year-over-year expansion in gross margin for the quarter. The
expansion in gross margin of the Commercial Segment was driven by
the double-digit growth of its high-margin services (commercial
consulting, creative digital marketing and permanent placement
services). The expansion in gross margin of the Federal Government
Segment was driven by changes in business mix, including the
contribution of high-margin businesses acquired in 2021 and a lower
mix of revenues from low-margin services.
Selling, general and administrative ("SG&A") expenses were
$212.1 million, up 29.1 percent year-over-year. This increase was
commensurate with the growth in the business, changes in business
mix and investments to support the high growth of the business.
These investments were mainly in headcount, employee compensation
and IT applications and systems.
Income from continuing operations for the first quarter of 2022
was $67.6 million ($1.29 per diluted share), up 57.9 percent over
the first quarter of 2021. Net income was $66.8 million ($1.28 per
diluted share), up 37.2 percent over the first quarter of 2021.
Adjusted EBITDA (a non-GAAP measure) was $134.8 million, up 39.1
percent over the first quarter of 2021. The Adjusted EBITDA margin
for the quarter was 12.4 percent, up 170 basis points
year-over-year related to the expansion in gross margin.
Liquidity and Capital Resources
The Company's primary source of liquidity is cash flows from
operating activities, which have been sufficient to fund working
capital and capital expenditure requirements.
At March 31, 2022, the Company had:
- Cash and cash equivalents of $502.4 million
- Full availability under its $250.0 million Senior Secured
Revolving Credit Facility (due 2024)
- Outstanding Senior Secured Debt of $490.8 million (term B loan
facility due 2025)
- Senior unsecured notes totaling $550.0 million at 4.625 percent
(due 2028)
Borrowings under the Company’s $250.0 million Senior Secured
Revolving Credit Facility are limited to a maximum Senior Secured
Debt leverage ratio (ratio of Senior Secured Debt to trailing 12
months Adjusted EBITDA) of 3.75 to 1.0. The Company's Senior
Secured Debt leverage ratio was 0.96 to 1.0 at March 31, 2022.
Executive Management Update
ASGN also announced today that Executive Vice President and
Chief Financial Officer, Ed Pierce, will be stepping down as CFO
this coming August and will remain in a strategic role through the
first quarter of 2023. As part of the Company’s long-term
succession planning, ASGN and its Board of Directors have selected
Marie Perry, an accomplished CFO and proven finance industry
leader, as Mr. Pierce’s successor as CFO of the Company.
Ms. Perry, currently Executive Vice President at ASGN, joins the
Company from Brink’s Inc., a global leader in total cash
management, route-based secure logistics and payment solutions,
where she most recently held the position of Chief Financial
Officer for the company’s U.S. division. Prior to Brink’s, Ms.
Perry was the Chief Financial Officer, Executive Vice President,
and Chief Administrative Officer at Jamba Juice and held multiple
finance roles, including Controller, Treasurer and interim CFO for
Brinker International. She also spent approximately 14 years in
roles of increasing responsibility within the finance team at
American Airlines after beginning her career in public accounting
with KPMG.
“Ed has been an integral part of ASGN since 2007, first as a
member of our Board and then as our Executive Vice President and
CFO for the past decade,” said Mr. Hanson. “Ed has been an
invaluable partner to me since I assumed the role of Chief
Executive Officer. On behalf of our Board of Directors and our
entire company, I cannot thank Ed enough for his outstanding
contributions to ASGN. We will certainly miss his presence and wish
him the best in his well-deserved retirement.”
Mr. Hanson continued, “Given Ed’s well planned retirement, we
are fortunate to have the opportunity to welcome Marie Perry into
our team well in advance of Ed’s departure. Marie has already hit
the ground running, and I anticipate her transition into the CFO
role will be seamless.”
Second Quarter 2022 Financial Estimates
The Company's financial estimates for the second quarter of
2022, 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.
(In millions, except per share data)
Low
High
Revenues
$
1,108.0
$
1,128.0
SG&A expenses(1)
209.7
212.8
Amortization of intangible assets
13.5
13.5
Net income
68.3
71.9
Earnings per share - Diluted:
$
1.31
$
1.38
Diluted shares outstanding
52.1
52.1
Gross margin
29.5
%
29.7
%
Effective tax rate(2)
27.2
%
27.2
%
Non-GAAP Financial Measures:
Adjusted EBITDA
$
135.0
$
140.0
Adjusted Net Income(3)
$
81.5
$
85.1
Adjusted Net Income per diluted
share(3)
$
1.56
$
1.63
Adjusted EBITDA Margin
12.2
%
12.4
%
(1)
Includes non-cash expenses totaling $17.4
million, comprised of: (i) $11.3 million in stock-based
compensation and (ii) $6.1 million in depreciation.
(2)
Estimated effective tax rate before any
excess tax benefits related to stock-based compensation.
(3)
Does not include the “Cash Tax Savings on
Indefinite-lived Intangible Assets.” These savings total $7.3
million each quarter, or $0.14 per diluted share, and represent the
benefit of the tax deduction that ASGN receives from the
amortization of goodwill and trademarks.
The financial estimates above are based on estimated of
“Billable Days” of 63.5, which is the same number of days as the
second quarter of 2021 and half a day more than the first quarter
of 2022. Billable Days are defined as 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, and
additional time taken off around holidays.
The implied revenue growth rate for the second quarter ranges
from 13.7 percent to 15.7 percent. Guidance includes estimated
revenues of $42.1 million from the three businesses acquired in
2021, which is approximately 4.3 percentage points of the implied
growth rate for the second quarter of 2022.
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 2022. The
dial-in number is 877-407-0792 (+1-201-689-8263 for callers outside
the United States), and the conference ID number is 13727785.
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 11, 2022. 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 13727785.
About ASGN Incorporated
ASGN Incorporated (NYSE: ASGN) is a leading provider of IT
services and solutions, including technology, creative, and
digital, 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 solutions.
For more information, visit us at 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
scenarios 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 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, 2021 as filed with the SEC on March 1, 2022. We
specifically disclaim any intention or duty to update any
forward-looking statements contained in this news release.
CONSOLIDATED SELECTED
FINANCIAL DATA (Unaudited)
(In millions, except per share
data)
Three Months Ended
March 31,
December 31,
2022
2021
2021
Results of Operations:
Revenues
$
1,091.0
$
907.0
$
1,053.8
Costs of services
764.4
663.3
740.1
Gross profit
326.6
243.7
313.7
Selling, general and administrative
expenses
212.1
164.3
202.4
Amortization of intangible assets
13.9
12.0
15.8
Operating income
100.6
67.4
95.5
Interest expense
(9.3
)
(9.2
)
(9.3
)
Income before income taxes
91.3
58.2
86.2
Provision for income taxes
23.7
15.4
20.8
Income from continuing operations
67.6
42.8
65.4
Income (loss) from discontinued
operations, net of income taxes
(0.8
)
5.9
19.6
Net income
$
66.8
$
48.7
$
85.0
Basic earnings per common share:
Continuing operations
$
1.31
$
0.81
$
1.26
Discontinued operations
(0.01
)
0.11
0.38
Net income
$
1.30
$
0.92
$
1.64
Diluted earnings per common share:
Continuing operations
$
1.29
$
0.80
$
1.24
Discontinued operations
(0.01
)
0.11
0.38
Net income
$
1.28
$
0.91
$
1.62
Number of shares and share equivalents
used to calculate earnings per share:
Basic
51.6
53.0
52.0
Diluted
52.3
53.7
52.9
CONSOLIDATED SELECTED
FINANCIAL DATA (Continued) (Unaudited)
(In millions)
Three Months Ended
March 31,
2022
2021
Summary Statements of Cash Flow
Data:
Cash provided by operating activities
$
56.0
$
119.8
Cash provided by (used in) investing
activities
0.2
(9.4
)
Cash provided by (used in) financing
activities
(83.4
)
2.9
Reconciliation of GAAP to Non-GAAP
Measure:
Cash provided by operating activities
$
56.0
$
119.8
Less - Cash flows from discontinued
operations
—
(5.7
)
Cash provided by operating activities from
continuing operations
56.0
114.1
Less - Capital expenditures from
continuing operations
(9.6
)
(7.3
)
Free Cash Flow from continuing operations
(non-GAAP measure)
$
46.4
$
106.8
March 31,
December 31,
2022
2021
Summary Balance Sheet Data:
Cash and cash equivalents
$
502.4
$
529.6
Working capital
873.3
858.5
Goodwill and intangible assets, net
2,043.6
2,057.4
Total assets
3,491.2
3,502.8
Long-term debt
1,034.2
1,033.9
Total liabilities
1,622.0
1,637.4
Total stockholders’ equity
1,869.2
1,865.4
RECONCILIATIONS OF GAAP TO
NON-GAAP MEASURES (Unaudited)
(In millions, except per share
data)
Three Months Ended
March 31,
December 31,
2022
2021
2021
Net income
$
66.8
$
48.7
$
85.0
Income from discontinued operations, net
of tax
(0.8
)
5.9
19.6
Income from continuing operations
67.6
42.8
65.4
Interest expense
9.3
9.2
9.3
Provision for income taxes
23.7
15.4
20.8
Depreciation
6.2
7.5
6.3
Amortization of intangible assets
13.9
12.0
15.8
EBITDA (non-GAAP measure)
120.7
86.9
117.6
Stock-based compensation
12.8
9.2
11.0
Acquisition, integration and strategic
planning expenses
1.3
0.8
1.7
Adjusted EBITDA (non-GAAP measure)
$
134.8
$
96.9
$
130.3
Three Months Ended
March 31,
December 31,
2022
2021
2021
Net income
$
66.8
$
48.7
$
85.0
Income from discontinued operations, net
of tax
(0.8
)
5.9
19.6
Income from continuing operations
67.6
42.8
65.4
Acquisition, integration and strategic
planning expenses
1.3
0.8
1.7
Tax effect on adjustments
(0.3
)
(0.2
)
(0.4
)
Non-GAAP net income
68.6
43.4
66.7
Amortization of intangible assets
13.9
12.0
15.8
Other
(0.4
)
(0.3
)
(0.4
)
Adjusted Net Income (non-GAAP
measure)(1)
$
82.1
$
55.1
$
82.1
Per diluted share:
Net Income
$
1.28
$
0.91
$
1.61
Adjustments
0.29
0.12
(0.06
)
Adjusted Net Income (non-GAAP
measure)(1)
$
1.57
$
1.03
$
1.55
Common shares and share equivalents
(diluted)
52.3
53.7
52.9
(1)
Does not include the “Cash Tax Savings on
Indefinite-lived Intangible Assets,” which currently total
approximately $7.3 million per quarter (approximately $0.14 per
diluted share) and represent the benefit of the tax deduction for
amortization of goodwill and trademarks.
FINANCIAL ESTIMATES FOR THE
SECOND QUARTER OF 2022
RECONCILIATIONS OF ESTIMATED
GAAP TO NON-GAAP MEASURES
(In millions, except per share
data)
Low
High
Net income(1)
$
68.3
$
71.9
Interest expense
9.9
9.9
Provision for income taxes
25.5
26.9
Depreciation expense(2)
6.5
6.5
Amortization of intangible assets
13.5
13.5
EBITDA (non-GAAP measure)
123.7
128.7
Stock-based compensation
11.3
11.3
Adjusted EBITDA (non-GAAP measure)
$
135.0
$
140.0
Low
High
Net income(1)
$
68.3
$
71.9
Amortization of intangible assets
13.5
13.5
Other
(0.3
)
(0.3
)
Adjusted Net Income (non-GAAP
measure)(3)
$
81.5
$
85.1
Per diluted share:
Net income
$
1.31
$
1.38
Adjustments
0.25
0.25
Adjusted Net Income (non-GAAP
measure)(3)
$
1.56
$
1.63
Common shares and share equivalents
(diluted)
52.1
52.1
(1)
Does not include acquisition, integration
and strategic planning expenses, or excess tax benefits related to
stock-based compensation.
(2)
Comprised of (i) $6.1 million of
depreciation included in SG&A expenses and (ii) $0.4 million of
depreciation included in costs of services.
(3)
Does not include the "Cash Tax Savings on
Indefinite-lived Intangible Assets". These savings total $7.3
million per quarter ($0.14 per diluted share) and represent the
benefit of the tax deduction for amortization of goodwill and
trademarks.
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 Net Income,
Adjusted Net Income per diluted share, Free Cash Flow, Senior
Secured Debt leverage ratio and Revenues on a same Billable Days
and Constant Currency 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 and Adjusted EBITDA 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.
The Senior Secured Debt leverage ratio is a ratio of the
Company's Senior Secured Debt to trailing 12 months Adjusted EBITDA
(gives effect to the divestiture of the Oxford business) and
provides information about the Company's compliance with loan
covenants.
Revenues calculated on a Same Billable Days and Constant
Currency basis provide more comparable information by removing the
effect of differences in the number of billable days and changes in
currency exchange rates 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. To
calculate revenues on Constant Currency basis, reported revenues
are re-translated using foreign exchange rates from the comparable
prior year period.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220426006298/en/
Ed Pierce Chief Financial Officer 818-878-7900
ADDO Investor Relations Kimberly Esterkin 310-829-5400 /
kesterkin@addo.com
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