ASGN Incorporated Reports First Quarter 2021 Results
ASGN reported strong Q1 2021 financial results, with revenues of $1,025.7 million, up 3.6% year-over-year. Net income rose to $48.7 million ($0.91 per share), an increase of 11.1% compared to Q1 2020. Adjusted EBITDA also improved to $108.6 million, or 10.6% of revenues. The Federal Government segment saw a significant revenue increase of 21.2% year-over-year. The company announced a new $250 million stock repurchase program, enhancing shareholder value. Cash and equivalents stood at $386.5 million.
- Revenue growth of 3.6% year-over-year to $1,025.7 million.
- Net income increased 11.1% to $48.7 million ($0.91 per share).
- Adjusted EBITDA rose to $108.6 million, representing a 4.9% increase.
- Free Cash Flow improved significantly to $110.5 million, up 126.4% year-over-year.
- Federal Government revenues surged by 21.2% year-over-year.
- Commercial revenues declined 1.3% year-over-year.
- Gross margin decreased to 27.4%, down from 28.4% in Q1 2020.
- Net income decreased sequentially by 12.1% from Q4 2020.
ASGN Incorporated (NYSE: ASGN), one of the foremost providers of information technology (IT) and professional services in the technology, digital, creative, engineering and life sciences fields across commercial and government sectors, reported financial results for the quarter ended March 31, 2021.
Highlights
-
Revenues were
$1,025.7 million , up 3.6 percent over the first quarter of 2020 -
Net income was
$48.7 million ($0.91 per diluted share), up 11.1 percent over the first quarter of 2020 -
Adjusted EBITDA (a non-GAAP measure) was
$108.6 million (10.6 percent of revenues), up from$103.5 million (10.5 percent of revenues) in the first quarter of 2020 -
Free Cash Flow (a non-GAAP measure) was
$110.5 million -
Cash and cash equivalents were
$386.5 million at quarter end -
No outstanding borrowings under the Company's
$250.0 million revolving credit facility -
Approved a
$250.0 million stock repurchase plan replacing previous plan - Senior Secured Debt leverage ratio (a non-GAAP measure) was 1.13 to 1.0 at March 31, 2021 (maximum allowable Senior Secured Debt leverage ratio of 4.0 to 1.0)
Management Commentary
“ASGN surpassed expectations for the first quarter of 2021, with revenues, adjusted EBITDA and adjusted EPS all ahead of our guidance ranges,” said ASGN President and Chief Executive Officer, Ted Hanson. “Revenues exceeded
Mr. Hanson continued, “Between the organic growth of our commercial and government end markets and the strong performance of our strategic tuck-in acquisitions, our business continues to be positioned for success. It is also clear that the marketplace is strengthening, with the growth rate of bookings in some commercial industries accelerating even faster than what we saw going into the first quarter of this year. In addition, our commercial consulting business, which remains an important source of the value we provide our Fortune 500 clients, continues to see significant growth, with revenues improving 34.0 percent year-over-year. As we look forward to the rest of 2021, we remain committed to supporting our clients’ digital transformation needs, while also engaging and mobilizing tomorrow’s workforce responsibly and sustainably. With a strong balance sheet and ample cash flow, we are also acquisition ready and will remain thoughtful and measured in our M&A strategy.”
First Quarter of 2021 Financial Results - Summary |
||||||||||||||||||||
|
|
|
Change |
|||||||||||||||||
(In millions, except per share data) |
Q1 2021 |
Q1 2020 |
Q4 2020 |
Y-Y |
Sequential |
|||||||||||||||
Revenues |
|
|
|
|
|
|||||||||||||||
Commercial |
$ |
767.9 |
|
$ |
777.8 |
|
$ |
748.2 |
|
(1.3 |
) |
% |
2.6 |
|
% |
|||||
Federal Government |
257.8 |
|
212.7 |
|
263.2 |
|
21.2 |
|
% |
(2.1 |
) |
% |
||||||||
|
$ |
1,025.7 |
|
$ |
990.5 |
|
$ |
1,011.4 |
|
3.6 |
|
% |
1.4 |
|
% |
|||||
Gross Margin |
|
|
|
|
|
|||||||||||||||
Commercial |
30.7 |
% |
31.3 |
% |
31.3 |
% |
(0.6 |
) |
% |
(0.6 |
) |
% |
||||||||
Federal Government |
17.5 |
% |
17.4 |
% |
16.0 |
% |
0.1 |
|
% |
1.5 |
|
% |
||||||||
Consolidated |
27.4 |
% |
28.4 |
% |
27.4 |
% |
(1.0 |
) |
% |
— |
|
% |
||||||||
|
|
|
|
|
|
|||||||||||||||
Net Income |
$ |
48.7 |
|
$ |
43.8 |
|
$ |
55.4 |
|
11.2 |
|
% |
(12.1 |
) |
% |
|||||
Earnings per diluted share |
$ |
0.91 |
|
$ |
0.82 |
|
$ |
1.04 |
|
11.0 |
|
% |
(12.5 |
) |
% |
|||||
Cash provided by operating activities |
$ |
119.8 |
|
$ |
64.1 |
|
$ |
87.0 |
|
86.9 |
|
% |
37.7 |
|
% |
|||||
|
|
|
|
|
|
|||||||||||||||
Non-GAAP Financial Measures |
|
|
|
|
|
|||||||||||||||
Adjusted Net Income |
$ |
61.6 |
|
$ |
57.7 |
|
$ |
70.1 |
|
6.8 |
|
% |
(12.1 |
) |
% |
|||||
Adjusted Net Income per diluted share |
$ |
1.15 |
|
$ |
1.08 |
|
$ |
1.31 |
|
6.5 |
|
% |
(12.2 |
) |
% |
|||||
Adjusted EBITDA |
$ |
108.6 |
|
$ |
103.5 |
|
$ |
116.3 |
|
4.9 |
|
% |
(6.6 |
) |
% |
|||||
Adjusted EBITDA margin |
10.6 |
% |
10.5 |
% |
11.5 |
% |
0.1 |
|
% |
(0.9 |
) |
% |
||||||||
Free Cash Flow |
$ |
110.5 |
|
$ |
48.8 |
|
$ |
82.7 |
|
126.4 |
|
% |
33.6 |
|
% |
|||||
__________
Notes:
Commercial business is comprised of the Apex and Oxford Segments and the Federal Government business is the ECS Segment.
Definitions of non-GAAP measures and reconciliation to GAAP measurements are included in the tables that accompany this release.
Consolidated revenues for the first quarter were up 3.6 percent year-over-year. Revenues from the Commercial business (74.9 percent of total revenues) were down 1.3 percent year-over-year (up slightly after adjusting for the one fewer Billable Day in Q1 2021) and up 2.6 percent sequentially. Revenues from the Federal Government business (25.1 percent of revenues) were up 21.2 percent year-over-year.
Commercial business revenues reflected the high growth in consulting services, which was up 34.0 percent year-over-year to
Federal government revenues for the quarter were up 21.2 percent year-over-year. Revenue growth related to a number of factors including increased volume under certain existing programs, new contract awards and the contribution from acquisitions.
Gross profit was flat year-over-year on revenue growth of 3.6 percent. Gross margin was 27.4 percent, down from 28.4 percent in the first quarter of 2020. The year-over-year compression in gross margin related to changes in business mix and higher unemployment tax rates for 2021 in certain states. These business mix changes included a lower mix of revenues from our high margin creative marketing and permanent placement services and a higher mix of revenues from our Federal Government business, which carries a lower gross margin than our Commercial business. The effect of the changes was partially offset by a higher mix of commercial consulting revenues.
Selling, general and administrative (“SG&A”) expenses were
Net income was
Adjusted EBITDA (a non-GAAP measure) was
Stock Repurchase Program
On March 18, 2021, the Board of Directors approved a new
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, 2021, the Company had:
-
Cash and cash equivalents of
$386.5 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); and -
Senior unsecured notes totaling
$550.0 million at 4.625 percent (due 2028)
Borrowings under the Company’s
No principal payments are due on any of the Company’s borrowings until maturity.
Second Quarter 2021 Financial Estimates
The Company financial estimates for the second quarter of 2021, 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 and assume no significant change in current foreign exchange rates. Full Company financial estimates and 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 |
|
$ |
1,058.0 |
|
|
|
$ |
1,078.0 |
|
SG&A expenses(1) |
|
$ |
200.7 |
|
|
|
$ |
203.5 |
|
Amortization of intangible assets |
|
$ |
12.1 |
|
|
|
$ |
12.1 |
|
Net income |
|
$ |
56.4 |
|
|
|
$ |
60.1 |
|
Earnings per diluted share |
|
$ |
1.05 |
|
|
|
$ |
1.12 |
|
Diluted shares outstanding |
|
53.9 |
|
|
|
53.9 |
|
||
Gross margin |
|
28.3 |
% |
|
|
28.5 |
% |
||
Effective tax rate(2) |
|
27.0 |
% |
|
|
27.0 |
% |
||
|
|
|
|
|
|
||||
Non-GAAP Financial Measures: |
|
|
|
|
|
||||
Adjusted EBITDA |
|
$ |
119.0 |
|
|
|
$ |
124.0 |
|
Adjusted Net Income(3) |
|
$ |
68.2 |
|
|
|
$ |
71.8 |
|
Adjusted Net Income per diluted share(3) |
|
$ |
1.27 |
|
|
|
$ |
1.33 |
|
Adjusted EBITDA Margin |
|
11.2 |
% |
|
|
11.5 |
% |
||
___________
(1) |
Includes non-cash expenses totaling |
|
(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 |
The financial estimates above are based on estimated of “Billable Days” of 63.5, which is 0.25 fewer than the second quarter of 2020 and 1.5 more than the first quarter of 2021. 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.
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. The dial-in number is 877-407-0792 (+1-201-689-8263 for callers outside the United States), and the conference ID number is 13718057. Participants should dial in ten minutes before the call. The prepared remarks, supplemental materials and webcast for this call can be accessed at asgn.com.
A replay of the conference call will be available beginning April 28, 2021 at 7:30 p.m. ET until May 12, 2021. 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 13718057.
About ASGN Incorporated
ASGN Incorporated (NYSE: ASGN) is one of the foremost providers of IT and professional services in the technology, digital, creative, engineering and life sciences fields across commercial and government sectors. 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. ASGN's mission is to be the most trusted partner for companies seeking highly skilled human capital and integrated solutions to fulfill their strategic and operational needs. 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 the expected impact of the COVID-19 global pandemic on our competitive position and demand for our services; 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, 2020 as filed with the SEC on March 1, 2021. 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 amounts) |
||||||||||||
|
Three Months Ended |
|||||||||||
March 31, |
|
December 31, |
||||||||||
|
2021 |
|
2020 |
|
2020 |
|||||||
Results of Operations: |
|
|
|
|||||||||
Revenues |
$ |
1,025.7 |
|
$ |
990.5 |
|
$ |
1,011.4 |
|
|||
Costs of services |
744.7 |
|
709.6 |
|
734.8 |
|
||||||
Gross profit |
281.0 |
|
280.9 |
|
276.6 |
|
||||||
Selling, general and administrative expenses |
194.0 |
|
197.9 |
|
179.9 |
|
||||||
Amortization of intangible assets |
12.2 |
|
12.1 |
|
14.1 |
|
||||||
Operating income |
74.8 |
|
70.9 |
|
82.6 |
|
||||||
Interest expense |
(9.2 |
) |
(11.4 |
) |
(9.3 |
) |
||||||
Income before income taxes |
65.6 |
|
59.5 |
|
73.3 |
|
||||||
Provision for income taxes |
16.9 |
|
15.7 |
|
17.9 |
|
||||||
Net income |
$ |
48.7 |
|
$ |
43.8 |
|
$ |
55.4 |
|
|||
|
|
|
||||||||||
Earnings per share: |
|
|
|
|||||||||
Basic |
$ |
0.92 |
|
$ |
0.83 |
|
$ |
1.05 |
|
|||
Diluted |
$ |
0.91 |
|
$ |
0.82 |
|
$ |
1.04 |
|
|||
|
|
|
|
|||||||||
Number of shares and share equivalents used to calculate earnings per share: |
|
|
|
|||||||||
Basic |
53.0 |
|
52.8 |
|
52.8 |
|
||||||
Diluted |
53.7 |
|
53.3 |
|
53.5 |
|
||||||
|
|
|
|
|||||||||
Summary Cash Flow Data: |
|
|
|
|||||||||
Cash provided by operating activities |
$ |
119.8 |
|
$ |
64.1 |
|
$ |
87.0 |
|
|||
Capital expenditures |
(9.3 |
) |
(15.3 |
) |
(4.3 |
) |
||||||
Free Cash Flow (non-GAAP measure) |
$ |
110.5 |
|
$ |
48.8 |
|
$ |
82.7 |
|
|||
|
|
|
|
|||||||||
Cash used in investing activities |
$ |
(9.4 |
) |
$ |
(101.0 |
) |
$ |
(38.9 |
) |
|||
Cash provided by (used in) financing activities |
$ |
2.9 |
|
$ |
6.1 |
|
$ |
(4.7 |
) |
|||
|
|
|
|
|||||||||
|
March 31,
|
December 31,
|
|
|||||||||
Summary Balance Sheet Data: |
|
|
|
|||||||||
Cash and cash equivalents |
$ |
386.5 |
|
$ |
274.4 |
|
|
|||||
Total current assets |
1,074.2 |
|
994.4 |
|
|
|||||||
Goodwill and intangible assets, net |
2,093.1 |
|
2,106.3 |
|
|
|||||||
Total assets |
3,334.5 |
|
3,278.0 |
|
|
|||||||
Total current liabilities |
428.9 |
|
416.2 |
|
|
|||||||
Working capital |
645.3 |
|
578.2 |
|
|
|||||||
Long-term debt |
1,033.7 |
|
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