UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20222023
OR
| | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 001-35636
ASGN Incorporated
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | | | | | | | |
Delaware | 95-4023433 |
(State of Incorporation) | (I.R.S. Employer Identification No.) |
4400 Cox Road, Suite 110
Glen Allen, Virginia 23060
(Address, including zip code, of Principal Executive Offices)
(888) 482-8068
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol | | Name of exchange on which registered |
Common Stock | | ASGN | | NYSE |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | |
Large accelerated filer | ☒ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒ No
At October 31, 2022,2023, the total number of outstanding shares of the Common Stock of ASGN Incorporated (the "Company") ($0.01 par value) was 49.947.2 million.
ASGN INCORPORATED AND SUBSIDIARIES
INDEX
PART I — FINANCIAL INFORMATION
Item 1 — Condensed Consolidated Financial Statements (Unaudited)
ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(in millions, except share data)
| | | September 30, 2022 | | December 31, 2021 | | September 30, 2023 | | December 31, 2022 |
ASSETS | ASSETS | | | | ASSETS | | | |
Current assets: | Current assets: | | Current assets: | |
Cash and cash equivalents | Cash and cash equivalents | $ | 211.2 | | | $ | 529.6 | | Cash and cash equivalents | $ | 145.6 | | | $ | 70.3 | |
Accounts receivable, net | Accounts receivable, net | 877.9 | | | 708.2 | | Accounts receivable, net | 804.6 | | | 853.6 | |
Prepaid expenses and income taxes | Prepaid expenses and income taxes | 15.3 | | | 41.2 | | Prepaid expenses and income taxes | 25.4 | | | 39.9 | |
Other current assets | Other current assets | 15.6 | | | 30.4 | | Other current assets | 18.3 | | | 17.3 | |
Total current assets | Total current assets | 1,120.0 | | | 1,309.4 | | Total current assets | 993.9 | | | 981.1 | |
Property and equipment, net | Property and equipment, net | 62.3 | | | 55.0 | | Property and equipment, net | 78.6 | | | 66.3 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 55.4 | | | 57.1 | | Operating lease right-of-use assets | 60.1 | | | 51.1 | |
Identifiable intangible assets, net | Identifiable intangible assets, net | 545.4 | | | 487.9 | | Identifiable intangible assets, net | 515.7 | | | 569.6 | |
Goodwill | Goodwill | 1,805.9 | | | 1,569.5 | | Goodwill | 1,893.5 | | | 1,892.0 | |
Other non-current assets | Other non-current assets | 22.2 | | | 23.9 | | Other non-current assets | 37.1 | | | 25.6 | |
Total assets | Total assets | $ | 3,611.2 | | | $ | 3,502.8 | | Total assets | $ | 3,578.9 | | | $ | 3,585.7 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
Current liabilities: | Current liabilities: | | Current liabilities: | |
Accounts payable | Accounts payable | $ | 33.5 | | | $ | 20.1 | | Accounts payable | $ | 32.1 | | | $ | 35.2 | |
Accrued payroll | Accrued payroll | 329.2 | | | 305.5 | | Accrued payroll | 250.8 | | | 285.1 | |
Operating lease liabilities | Operating lease liabilities | 23.5 | | | 23.3 | | Operating lease liabilities | 20.5 | | | 22.9 | |
| Other current liabilities | Other current liabilities | 106.1 | | | 102.0 | | Other current liabilities | 139.8 | | | 98.7 | |
Total current liabilities | Total current liabilities | 492.3 | | | 450.9 | | Total current liabilities | 443.2 | | | 441.9 | |
Long-term debt | Long-term debt | 1,080.8 | | | 1,033.9 | | Long-term debt | 1,037.5 | | | 1,066.6 | |
Operating lease liabilities | Operating lease liabilities | 37.2 | | | 40.2 | | Operating lease liabilities | 43.5 | | | 32.3 | |
Deferred income tax liabilities | Deferred income tax liabilities | 98.2 | | | 89.0 | | Deferred income tax liabilities | 130.6 | | | 129.2 | |
Other long-term liabilities | Other long-term liabilities | 13.6 | | | 23.4 | | Other long-term liabilities | 15.4 | | | 14.4 | |
Total liabilities | Total liabilities | 1,722.1 | | | 1,637.4 | | Total liabilities | 1,670.2 | | | 1,684.4 | |
Commitments and contingencies | Commitments and contingencies | | Commitments and contingencies | |
Stockholders’ equity: | Stockholders’ equity: | | Stockholders’ equity: | |
Preferred stock, $0.01 par value; 1.0 million shares authorized; no shares issued | Preferred stock, $0.01 par value; 1.0 million shares authorized; no shares issued | — | | | — | | Preferred stock, $0.01 par value; 1.0 million shares authorized; no shares issued | — | | | — | |
Common stock, $0.01 par value; 75.0 million shares authorized; 50.0 million and 51.8 million shares outstanding at September 30, 2022 and December 31, 2021, respectively | 0.5 | | | 0.5 | | |
Common stock, $0.01 par value; 75.0 million shares authorized; 47.5 million and 49.5 million shares outstanding at September 30, 2023 and December 31, 2022, respectively | | Common stock, $0.01 par value; 75.0 million shares authorized; 47.5 million and 49.5 million shares outstanding at September 30, 2023 and December 31, 2022, respectively | 0.5 | | | 0.5 | |
Paid-in capital | Paid-in capital | 702.7 | | | 690.8 | | Paid-in capital | 701.9 | | | 703.5 | |
Retained earnings | Retained earnings | 1,190.1 | | | 1,174.4 | | Retained earnings | 1,207.9 | | | 1,200.0 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (4.2) | | | (0.3) | | Accumulated other comprehensive loss | (1.6) | | | (2.7) | |
Total stockholders’ equity | Total stockholders’ equity | 1,889.1 | | | 1,865.4 | | Total stockholders’ equity | 1,908.7 | | | 1,901.3 | |
Total liabilities and stockholders’ equity | Total liabilities and stockholders’ equity | $ | 3,611.2 | | | $ | 3,502.8 | | Total liabilities and stockholders’ equity | $ | 3,578.9 | | | $ | 3,585.7 | |
See notes to condensed consolidated financial statements.
ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
(in millions, except per share data)
| | | Three Months Ended | | | Nine Months Ended | | Three Months Ended | | Nine Months Ended | |
September 30, | | | September 30, | | September 30, | | September 30, | |
| | 2022 | | 2021 | | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | |
Revenues | Revenues | $ | 1,197.9 | | | $ | 1,073.8 | | | | $ | 3,430.7 | | | $ | 2,955.7 | | Revenues | $ | 1,116.8 | | | $ | 1,197.9 | | | $ | 3,376.5 | | | $ | 3,430.7 | | |
Costs of services | Costs of services | 839.0 | | | 765.1 | | | | 2,401.2 | | | 2,127.0 | | Costs of services | 794.4 | | | 839.0 | | | 2,401.4 | | | 2,401.2 | | |
Gross profit | Gross profit | 358.9 | | | 308.7 | | | | 1,029.5 | | | 828.7 | | Gross profit | 322.4 | | | 358.9 | | | 975.1 | | | 1,029.5 | | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 232.6 | | | 192.7 | | | | 665.1 | | | 533.4 | | Selling, general and administrative expenses | 206.0 | | | 232.6 | | | 640.6 | | | 665.1 | | |
Amortization of intangible assets | Amortization of intangible assets | 17.9 | | | 15.9 | | | | 45.3 | | | 39.9 | | Amortization of intangible assets | 17.8 | | | 17.9 | | | 53.8 | | | 45.3 | | |
Operating income | Operating income | 108.4 | | | 100.1 | | | | 319.1 | | | 255.4 | | Operating income | 98.6 | | | 108.4 | | | 280.7 | | | 319.1 | | |
Interest expense | Interest expense | (12.1) | | | (9.6) | | | | (31.5) | | | (28.2) | | Interest expense | (18.5) | | | (12.1) | | | (49.7) | | | (31.5) | | |
Income before income taxes | Income before income taxes | 96.3 | | | 90.5 | | | | 287.6 | | | 227.2 | | Income before income taxes | 80.1 | | | 96.3 | | | 231.0 | | | 287.6 | | |
Provision for income taxes | Provision for income taxes | 25.2 | | | 24.2 | | | | 76.3 | | | 60.8 | | Provision for income taxes | 20.7 | | | 25.2 | | | 62.0 | | | 76.3 | | |
Income from continuing operations | Income from continuing operations | 71.1 | | | 66.3 | | | | 211.3 | | | 166.4 | | Income from continuing operations | 59.4 | | | 71.1 | | | 169.0 | | | 211.3 | | |
| Income from discontinued operations, net of income taxes | Income from discontinued operations, net of income taxes | 2.1 | | | 145.7 | | | | 1.2 | | | 158.5 | | Income from discontinued operations, net of income taxes | — | | | 2.1 | | | — | | | 1.2 | | |
Net income | Net income | $ | 73.2 | | | $ | 212.0 | | | | $ | 212.5 | | | $ | 324.9 | | Net income | $ | 59.4 | | | $ | 73.2 | | | $ | 169.0 | | | $ | 212.5 | | |
| Earnings per share: | Earnings per share: | | | | Earnings per share: | | |
Basic — | Basic — | | | | Basic — | | |
Continuing operations | Continuing operations | $ | 1.42 | | | $ | 1.26 | | | | $ | 4.15 | | | $ | 3.14 | | Continuing operations | $ | 1.23 | | | $ | 1.42 | | | $ | 3.46 | | | $ | 4.15 | | |
Discontinued operations | Discontinued operations | 0.04 | | | 2.76 | | | | 0.02 | | | 2.99 | | Discontinued operations | — | | | 0.04 | | | — | | | 0.02 | | |
| | $ | 1.46 | | | $ | 4.02 | | | | $ | 4.17 | | | $ | 6.13 | | | $ | 1.23 | | | $ | 1.46 | | | $ | 3.46 | | | $ | 4.17 | | |
Diluted — | Diluted — | | | | | | | | | Diluted — | | | | | | | | |
Continuing operations | Continuing operations | $ | 1.40 | | | $ | 1.24 | | | | $ | 4.09 | | | $ | 3.10 | | Continuing operations | $ | 1.23 | | | $ | 1.40 | | | $ | 3.43 | | | $ | 4.09 | | |
Discontinued operations | Discontinued operations | 0.04 | | | 2.73 | | | | 0.02 | | | 2.95 | | Discontinued operations | — | | | 0.04 | | | — | | | 0.02 | | |
| | $ | 1.44 | | | $ | 3.97 | | | | $ | 4.11 | | | $ | 6.05 | | | $ | 1.23 | | | $ | 1.44 | | | $ | 3.43 | | | $ | 4.11 | | |
| Shares and share equivalents used to calculate earnings per share: | Shares and share equivalents used to calculate earnings per share: | | | | Shares and share equivalents used to calculate earnings per share: | | |
Basic | Basic | 50.1 | | | 52.7 | | | | 50.9 | | | 53.0 | | Basic | 48.1 | | | 50.1 | | | 48.8 | | | 50.9 | | |
Diluted | Diluted | 50.7 | | | 53.4 | | | | 51.6 | | | 53.7 | | Diluted | 48.4 | | | 50.7 | | | 49.2 | | | 51.6 | | |
| Reconciliation of net income to comprehensive income: | Reconciliation of net income to comprehensive income: | | | | Reconciliation of net income to comprehensive income: | | |
Net income | Net income | $ | 73.2 | | | $ | 212.0 | | | | $ | 212.5 | | | $ | 324.9 | | Net income | $ | 59.4 | | | $ | 73.2 | | | $ | 169.0 | | | $ | 212.5 | | |
Foreign currency translation adjustment | Foreign currency translation adjustment | (2.2) | | | 2.6 | | | | (3.9) | | | 0.7 | | Foreign currency translation adjustment | (1.3) | | | (2.2) | | | 1.1 | | | (3.9) | | |
Comprehensive income | Comprehensive income | $ | 71.0 | | | $ | 214.6 | | | | $ | 208.6 | | | $ | 325.6 | | Comprehensive income | $ | 58.1 | | | $ | 71.0 | | | $ | 170.1 | | | $ | 208.6 | | |
See notes to condensed consolidated financial statements.
ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)
(in millions)
| | | Common Stock | | Paid-in Capital | | Retained Earnings | | Other | | Total | | Common Stock | | Paid-in Capital | | Retained Earnings | | Other | | Total |
| | | Shares | | Par Value | |
Three Months Ended September 30, 2023 | | Three Months Ended September 30, 2023 | | | | | | | | | | | | |
Balance at June 30, 2023 | | Balance at June 30, 2023 | | 48.5 | | | $ | 0.5 | | | $ | 702.8 | | | $ | 1,223.6 | | | $ | (0.3) | | | $ | 1,926.6 | |
Stock-based compensation expense | | Stock-based compensation expense | | — | | | — | | | 10.3 | | | — | | | — | | | 10.3 | |
Issuances under equity plans | | Issuances under equity plans | | 0.2 | | | — | | | 7.8 | | | — | | | — | | | 7.8 | |
Tax withholding on restricted stock vesting | | Tax withholding on restricted stock vesting | | — | | | — | | | (1.5) | | | — | | | — | | | (1.5) | |
Stock repurchases and retirement of shares | | Stock repurchases and retirement of shares | | (1.2) | | | — | | | (17.5) | | | (75.1) | | | — | | | (92.6) | |
Other | | Other | | — | | | — | | | — | | | — | | | (1.3) | | | (1.3) | |
Net income | | Net income | | — | | | — | | | — | | | 59.4 | | | — | | | 59.4 | |
Balance at September 30, 2023 | | Balance at September 30, 2023 | | 47.5 | | | $ | 0.5 | | | $ | 701.9 | | | $ | 1,207.9 | | | $ | (1.6) | | | $ | 1,908.7 | |
| | Shares | | Par Value | | Paid-in Capital | | Retained Earnings | | Other | | Total | | | | | | | | | | | | |
Three Months Ended September 30, 2022 | Three Months Ended September 30, 2022 | | | | | | Three Months Ended September 30, 2022 | |
Balance at June 30, 2022 | Balance at June 30, 2022 | | 50.4 | | | $ | 0.5 | | | $ | 692.1 | | | $ | 1,165.5 | | | $ | (2.0) | | | $ | 1,856.1 | | Balance at June 30, 2022 | | 50.4 | | | $ | 0.5 | | | $ | 692.1 | | | $ | 1,165.5 | | | $ | (2.0) | | | $ | 1,856.1 | |
Stock-based compensation expense | Stock-based compensation expense | | — | | | — | | | 11.9 | | | — | | | — | | | 11.9 | | Stock-based compensation expense | | — | | | — | | | 11.9 | | | — | | | — | | | 11.9 | |
Issuances under equity plans | Issuances under equity plans | | 0.2 | | | — | | | 8.5 | | | — | | | — | | | 8.5 | | Issuances under equity plans | | 0.2 | | | — | | | 8.5 | | | — | | | — | | | 8.5 | |
Tax withholding on restricted stock vesting | Tax withholding on restricted stock vesting | | — | | | — | | | (1.6) | | | — | | | — | | | (1.6) | | Tax withholding on restricted stock vesting | | — | | | — | | | (1.6) | | | — | | | — | | | (1.6) | |
Stock repurchases and retirement of shares | Stock repurchases and retirement of shares | | (0.6) | | | — | | | (8.2) | | | (48.6) | | | — | | | (56.8) | | Stock repurchases and retirement of shares | | (0.6) | | | — | | | (8.2) | | | (48.6) | | | — | | | (56.8) | |
Other | Other | | — | | | — | | | — | | | — | | | (2.2) | | | (2.2) | | Other | | — | | | — | | | — | | | — | | | (2.2) | | | (2.2) | |
Net income | Net income | | — | | | — | | | — | | | 73.2 | | | — | | | 73.2 | | Net income | | — | | | — | | | — | | | 73.2 | | | — | | | 73.2 | |
Balance at September 30, 2022 | Balance at September 30, 2022 | | 50.0 | | | $ | 0.5 | | | $ | 702.7 | | | $ | 1,190.1 | | | $ | (4.2) | | | $ | 1,889.1 | | Balance at September 30, 2022 | | 50.0 | | | $ | 0.5 | | | $ | 702.7 | | | $ | 1,190.1 | | | $ | (4.2) | | | $ | 1,889.1 | |
| Three Months Ended September 30, 2021 | | |
Balance at June 30, 2021 | | 53.2 | | | $ | 0.5 | | | $ | 683.0 | | | $ | 1,039.2 | | | $ | (2.9) | | | $ | 1,719.8 | | |
| | | Common Stock | | Paid-in Capital | | Retained Earnings | | Other | | Total |
| | | Shares | | Par Value | |
Nine Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 | | | | | | | | | | | | |
Balance at December 31, 2022 | | Balance at December 31, 2022 | | 49.5 | | | $ | 0.5 | | | $ | 703.5 | | | $ | 1,200.0 | | | $ | (2.7) | | | $ | 1,901.3 | |
Stock-based compensation expense | Stock-based compensation expense | | — | | | — | | | 20.5 | | | — | | | — | | | 20.5 | | Stock-based compensation expense | | — | | | — | | | 33.7 | | | — | | | — | | | 33.7 | |
Issuances under equity plans | Issuances under equity plans | | 0.1 | | | — | | | 6.6 | | | — | | | — | | | 6.6 | | Issuances under equity plans | | 0.6 | | | — | | | 18.9 | | | — | | | — | | | 18.9 | |
Tax withholding on restricted stock vesting | Tax withholding on restricted stock vesting | | 0.2 | | | — | | | (6.7) | | | — | | | — | | | (6.7) | | Tax withholding on restricted stock vesting | | — | | | — | | | (15.7) | | | — | | | — | | | (15.7) | |
Stock repurchases and retirement of shares | | (1.2) | | | — | | | (14.7) | | | (105.7) | | | — | | | (120.4) | | |
Stock repurchase and retirement of shares | | Stock repurchase and retirement of shares | | (2.6) | | | — | | | (38.5) | | | (161.1) | | | — | | | (199.6) | |
Other | Other | | — | | | — | | | — | | | — | | | 2.6 | | | 2.6 | | Other | | — | | | — | | | — | | | — | | | 1.1 | | | 1.1 | |
Net income | Net income | | — | | | — | | | — | | | 212.0 | | | — | | | 212.0 | | Net income | | — | | | — | | | — | | | 169.0 | | | — | | | 169.0 | |
Balance at September 30, 2021 | | 52.3 | | | $ | 0.5 | | | $ | 688.7 | | | $ | 1,145.5 | | | $ | (0.3) | | | $ | 1,834.4 | | |
| | Common Stock | | Paid-in Capital | | Retained Earnings | | Other | | Total | |
Balance at September 30, 2023 | | Balance at September 30, 2023 | | 47.5 | | | $ | 0.5 | | | $ | 701.9 | | | $ | 1,207.9 | | | $ | (1.6) | | | $ | 1,908.7 | |
| | Shares | | Par Value | | Paid-in Capital | | Retained Earnings | | Other | | Total | | | | | | | | | | | | |
Nine Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | | | | | | Nine Months Ended September 30, 2022 | |
Balance at December 31, 2021 | Balance at December 31, 2021 | | 51.8 | | | $ | 0.5 | | | $ | 690.8 | | | $ | 1,174.4 | | | $ | (0.3) | | | $ | 1,865.4 | | Balance at December 31, 2021 | | 51.8 | | | $ | 0.5 | | | $ | 690.8 | | | $ | 1,174.4 | | | $ | (0.3) | | | $ | 1,865.4 | |
Stock-based compensation expense | Stock-based compensation expense | | — | | | — | | | 35.9 | | | — | | | — | | | 35.9 | | Stock-based compensation expense | | — | | | — | | | 35.9 | | | — | | | — | | | 35.9 | |
Issuances under equity plans | Issuances under equity plans | | 0.4 | | | — | | | 18.9 | | | — | | | — | | | 18.9 | | Issuances under equity plans | | 0.4 | | | — | | | 18.9 | | | — | | | — | | | 18.9 | |
Tax withholding on restricted stock vesting | Tax withholding on restricted stock vesting | | — | | | — | | | (12.9) | | | — | | | — | | | (12.9) | | Tax withholding on restricted stock vesting | | — | | | — | | | (12.9) | | | — | | | — | | | (12.9) | |
Stock repurchase and retirement of shares | Stock repurchase and retirement of shares | | (2.2) | | | — | | | (30.0) | | | (196.8) | | | — | | | (226.8) | | Stock repurchase and retirement of shares | | (2.2) | | | — | | | (30.0) | | | (196.8) | | | — | | | (226.8) | |
Other | Other | | — | | | — | | | — | | | — | | | (3.9) | | | (3.9) | | Other | | — | | | — | | | — | | | — | | | (3.9) | | | (3.9) | |
Net income | Net income | | — | | | — | | | — | | | 212.5 | | | — | | | 212.5 | | Net income | | — | | | — | | | — | | | 212.5 | | | — | | | 212.5 | |
Balance at September 30, 2022 | Balance at September 30, 2022 | | 50.0 | | | $ | 0.5 | | | $ | 702.7 | | | $ | 1,190.1 | | | $ | (4.2) | | | $ | 1,889.1 | | Balance at September 30, 2022 | | 50.0 | | | $ | 0.5 | | | $ | 702.7 | | | $ | 1,190.1 | | | $ | (4.2) | | | $ | 1,889.1 | |
| Nine Months Ended September 30, 2021 | | |
Balance at December 31, 2020 | | 52.9 | | | $ | 0.5 | | | $ | 661.3 | | | $ | 926.3 | | | $ | (1.0) | | | $ | 1,587.1 | | |
Stock-based compensation expense | | — | | | — | | | 41.7 | | | — | | | — | | | 41.7 | | |
Issuances under equity plans | | 0.2 | | | — | | | 14.3 | | | — | | | — | | | 14.3 | | |
Tax withholding on restricted stock vesting | | 0.4 | | | — | | | (13.9) | | | — | | | — | | | (13.9) | | |
Stock repurchase and retirement of shares | | (1.2) | | | — | | | (14.7) | | | (105.7) | | | — | | | (120.4) | | |
Other | | — | | | — | | | — | | | — | | | 0.7 | | | 0.7 | | |
Net income | | — | | | — | | | — | | | 324.9 | | | — | | | 324.9 | | |
Balance at September 30, 2021 | | 52.3 | | | $ | 0.5 | | | $ | 688.7 | | | $ | 1,145.5 | | | $ | (0.3) | | | $ | 1,834.4 | | |
See notes to condensed consolidated financial statements.
ASGN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in millions)
| | | Nine Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2022 | | 2021 | | 2023 | | 2022 |
Cash Flows from Operating Activities | Cash Flows from Operating Activities | | | | Cash Flows from Operating Activities | | | |
Net income | Net income | $ | 212.5 | | | $ | 324.9 | | Net income | $ | 169.0 | | | $ | 212.5 | |
Adjustments to reconcile net income to net cash provided by operating activities: | Adjustments to reconcile net income to net cash provided by operating activities: | | Adjustments to reconcile net income to net cash provided by operating activities: | |
Gain on sale of discontinued operations | — | | | (218.6) | | |
| Depreciation and amortization | Depreciation and amortization | 64.8 | | | 67.5 | | Depreciation and amortization | 74.6 | | | 64.8 | |
Stock-based compensation | Stock-based compensation | 35.9 | | | 41.7 | | Stock-based compensation | 33.7 | | | 35.9 | |
Deferred income taxes | 0.3 | | | (42.4) | | |
| Other | Other | 6.5 | | | 3.7 | | Other | 9.3 | | | 6.8 | |
Changes in operating assets and liabilities, net of effects of acquisitions and divestiture: | Changes in operating assets and liabilities, net of effects of acquisitions and divestiture: | | Changes in operating assets and liabilities, net of effects of acquisitions and divestiture: | |
Accounts receivable | Accounts receivable | (154.2) | | | (99.5) | | Accounts receivable | 48.1 | | | (154.2) | |
Prepaid expenses and income taxes | Prepaid expenses and income taxes | 26.4 | | | 12.6 | | Prepaid expenses and income taxes | 14.5 | | | 26.4 | |
Accounts payable | Accounts payable | 10.0 | | | (12.0) | | Accounts payable | (2.5) | | | 10.0 | |
Accrued payroll | Accrued payroll | 20.0 | | | 75.3 | | Accrued payroll | (34.8) | | | 20.0 | |
Income taxes payable | Income taxes payable | 15.1 | | | 130.6 | | Income taxes payable | 31.6 | | | 15.1 | |
Other | Other | (4.8) | | | (7.9) | | Other | (3.0) | | | (4.8) | |
Net cash provided by operating activities | Net cash provided by operating activities | 232.5 | | | 275.9 | | Net cash provided by operating activities | 340.5 | | | 232.5 | |
Cash Flows from Investing Activities | Cash Flows from Investing Activities | | Cash Flows from Investing Activities | |
Cash paid for property and equipment | Cash paid for property and equipment | (27.0) | | | (25.6) | | Cash paid for property and equipment | (32.7) | | | (27.0) | |
Cash paid for acquisitions, net of cash acquired | Cash paid for acquisitions, net of cash acquired | (351.8) | | | (224.4) | | Cash paid for acquisitions, net of cash acquired | — | | | (351.8) | |
Cash received from sale of the Oxford business | 9.8 | | | 499.1 | | |
Cash received from the sale of a business | | Cash received from the sale of a business | — | | | 9.8 | |
Other | Other | 2.4 | | | 0.1 | | Other | (0.6) | | | 2.4 | |
Net cash provided by (used in) investing activities | (366.6) | | | 249.2 | | |
Net cash used in investing activities | | Net cash used in investing activities | (33.3) | | | (366.6) | |
Cash Flows from Financing Activities | Cash Flows from Financing Activities | | Cash Flows from Financing Activities | |
| Proceeds from long term debt | Proceeds from long term debt | 46.0 | | | — | | Proceeds from long term debt | 571.8 | | | 46.0 | |
Principal payments of long term debt | | Principal payments of long term debt | (595.3) | | | — | |
Debt issuance and amendment costs | | Debt issuance and amendment costs | (8.6) | | | — | |
Proceeds from employee stock purchase plan | Proceeds from employee stock purchase plan | 18.9 | | | 14.3 | | Proceeds from employee stock purchase plan | 18.9 | | | 18.9 | |
Repurchases of common stock | Repurchases of common stock | (227.6) | | | (118.4) | | Repurchases of common stock | (197.7) | | | (227.6) | |
Payment of employment taxes related to release of restricted stock awards | Payment of employment taxes related to release of restricted stock awards | (12.9) | | | (13.9) | | Payment of employment taxes related to release of restricted stock awards | (15.7) | | | (12.9) | |
Payment of contingent consideration | Payment of contingent consideration | (8.1) | | | — | | Payment of contingent consideration | (5.0) | | | (8.1) | |
Debt issuance and amendment costs | — | | | (1.4) | | |
| Net cash used in financing activities | Net cash used in financing activities | (183.7) | | | (119.4) | | Net cash used in financing activities | (231.6) | | | (183.7) | |
Effect of exchange rate changes on cash and cash equivalents | Effect of exchange rate changes on cash and cash equivalents | (0.6) | | | (0.7) | | Effect of exchange rate changes on cash and cash equivalents | (0.3) | | | (0.6) | |
Net increase (decrease) in cash and cash equivalents | Net increase (decrease) in cash and cash equivalents | (318.4) | | | 405.0 | | Net increase (decrease) in cash and cash equivalents | 75.3 | | | (318.4) | |
| Cash and cash equivalents at beginning of year | Cash and cash equivalents at beginning of year | 529.6 | | | 274.4 | | Cash and cash equivalents at beginning of year | 70.3 | | | 529.6 | |
Cash and cash equivalents at end of period | Cash and cash equivalents at end of period | $ | 211.2 | | | $ | 679.4 | | Cash and cash equivalents at end of period | $ | 145.6 | | | $ | 211.2 | |
|
| Supplemental Disclosure of Cash Flow Information | Supplemental Disclosure of Cash Flow Information | | Supplemental Disclosure of Cash Flow Information | |
Cash paid for — | Cash paid for — | | Cash paid for — | |
Income taxes | Income taxes | $ | 33.4 | | | $ | 39.6 | | Income taxes | $ | 12.0 | | | $ | 33.4 | |
Interest | Interest | $ | 23.6 | | | $ | 20.1 | | Interest | $ | 39.4 | | | $ | 23.6 | |
Operating leases | Operating leases | $ | 20.4 | | | $ | 25.3 | | Operating leases | $ | 20.0 | | | $ | 20.4 | |
Noncash transactions — | Noncash transactions — | | Noncash transactions — | |
| Operating lease right of use assets obtained in exchange for operating lease liabilities | Operating lease right of use assets obtained in exchange for operating lease liabilities | $ | 15.5 | | | $ | 3.4 | | Operating lease right of use assets obtained in exchange for operating lease liabilities | $ | 26.9 | | | $ | 15.5 | |
|
See notes to condensed consolidated financial statements.
ASGN INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. General
Basis of presentation — The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the rules of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The December 31, 20212022 balance sheet was derived from audited financial statements. The financial statements include adjustments consisting of normal recurring items, which, in the opinion of management, are necessary for a fair presentation of the financial position of ASGN Incorporated and its subsidiaries ("ASGN" or the "Company") and its results of operations for the interim dates and periods set forth herein. The results for any of the interim periods are not necessarily indicative of the results to be expected for the full year or any other period. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 ("20212022 10-K").
2. Accounting Standards Update
In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update 2021-08, Business Combinations (Topic 805) Accounting for Acquired Contract Assets and Contract Liabilities, which requires an acquirer to recognize and measure contract assets and liabilities in a business combination in accordance with Accounting Standards Codification Topic 606 Revenue from Contracts with Customers, rather than adjust them to fair value at the acquisition date. The Company early adopted this standard and it had no impact on the condensed consolidated financial statements.
3. Acquisitions
On July 6, 2022, the Company acquired GlideFast Holdings, LLC and affiliated entities ("GlideFast"), a ServiceNow consulting company, for $351.8 million in cash. GlideFast is part of the Commercial Segment and its results of operations are included in the consolidated results of the Company from the date of its acquisition. The purchase accounting for this acquisition remains incomplete with respect to the provisional fair value of assets acquired and liabilities assumed, as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Measurement period adjustments will be recognized prospectively within 12 months from the date of acquisition. The preliminary fair value of the identifiable intangible assets related to this acquisition totaled $102.8 million, including a trademark of $30.2 million which has an indefinite life. Other acquired identifiable intangible assets have useful lives ranging from three to nine years.
In 2021, the Company acquired three consulting services businesses for $221.3 million in cash. These acquisitions increased the Company's investment in IT consulting in its Commercial and Federal Government segments. The fair values allocated to the assets and liabilities for these acquisitions have been finalized.
4. Goodwill and Identifiable Intangible Assets
The following table summarizes the activity related to the carrying amount of goodwill by segment since December 31, 20202021 (in millions).
| | | Commercial | | Federal Government | | | Total | | Commercial | | Federal Government | | | Total |
| Balance as of December 31, 2020 | $ | 778.6 | | | $ | 642.1 | | | | $ | 1,420.7 | | |
2021 acquisitions | 51.1 | | | 94.8 | | | | 145.9 | | |
Balance as of December 31, 2021 | | Balance as of December 31, 2021 | $ | 829.3 | | | $ | 740.2 | | | | $ | 1,569.5 | |
2022 acquisitions | | 2022 acquisitions | 246.4 | | | 85.5 | | | | 331.9 | |
Purchase price adjustments | Purchase price adjustments | — | | | 3.3 | | | | 3.3 | | Purchase price adjustments | 0.4 | | | (8.5) | | | | (8.1) | |
Translation adjustment | Translation adjustment | (0.4) | | | — | | | | (0.4) | | Translation adjustment | (1.4) | | | — | | | | (1.4) | |
Balance as of December 31, 2021 | 829.3 | | | 740.2 | | | | 1,569.5 | | |
2022 acquisition | 246.9 | | | — | | | | 246.9 | | |
Balance as of December 31, 2022 | | Balance as of December 31, 2022 | 1,074.7 | | | 817.2 | | | | 1,891.9 | |
| Purchase price adjustments | Purchase price adjustments | 0.4 | | | (8.5) | | | | (8.1) | | Purchase price adjustments | — | | | 1.1 | | | | 1.1 | |
Translation adjustment | Translation adjustment | (2.4) | | | — | | | | (2.4) | | Translation adjustment | 0.5 | | | — | | | | 0.5 | |
| Balance as of September 30, 2022 | $ | 1,074.2 | | | $ | 731.7 | | | | $ | 1,805.9 | | |
Balance as of September 30, 2023 | | Balance as of September 30, 2023 | $ | 1,075.2 | | | $ | 818.3 | | | | $ | 1,893.5 | |
Approximately $163.6 million and $127.2$250.7 million of the goodwill for the 2022 and 2021 acquisitions respectively, is deductible for income tax purposes.
Acquired identifiable intangible assets consisted of the following (in millions):
| | | September 30, 2022 | | December 31, 2021 | | | September 30, 2023 | | December 31, 2022 | |
| | Estimated Useful Life in Years | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | | Estimated Useful Life in Years | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | |
Customer and contractual relationships | Customer and contractual relationships | 7 - 13 | | $ | 555.9 | | | $ | 299.7 | | | $ | 256.2 | | | $ | 493.9 | | | $ | 260.2 | | | $ | 233.7 | | | Customer and contractual relationships | 1 - 13 | | $ | 589.3 | | | $ | 360.4 | | | $ | 228.9 | | | $ | 589.3 | | | $ | 315.7 | | | $ | 273.6 | | |
Contractor relationships | 4 | | — | | | — | | | — | | | 45.5 | | | 45.5 | | | — | | | |
Contract Backlog | 1 - 3 | | 34.8 | | | 33.8 | | | 1.0 | | | 34.8 | | | 31.0 | | | 3.8 | | | |
| Contract backlog | | Contract backlog | 1 - 3 | | 44.1 | | | 42.2 | | | 1.9 | | | 44.1 | | | 36.5 | | | 7.6 | | |
Non-compete agreements | Non-compete agreements | 1 - 7 | | 39.7 | | | 24.3 | | | 15.4 | | | 29.4 | | | 21.6 | | | 7.8 | | | Non-compete agreements | 1 - 7 | | 41.2 | | | 29.1 | | | 12.1 | | | 41.2 | | | 25.6 | | | 15.6 | | |
| | | 630.4 | | | 357.8 | | | 272.6 | | | 603.6 | | | 358.3 | | | 245.3 | | | | 674.6 | | | 431.7 | | | 242.9 | | | 674.6 | | | 377.8 | | | 296.8 | | |
Not subject to amortization: | Not subject to amortization: | | | Not subject to amortization: | | |
Trademarks | Trademarks | | 272.8 | | | — | | | 272.8 | | | 242.6 | | | — | | | 242.6 | | | Trademarks | | 272.8 | | | — | | | 272.8 | | | 272.8 | | | — | | | 272.8 | | |
Total | Total | | $ | 903.2 | | | $ | 357.8 | | | $ | 545.4 | | | $ | 846.2 | | | $ | 358.3 | | | $ | 487.9 | | | Total | | $ | 947.4 | | | $ | 431.7 | | | $ | 515.7 | | | $ | 947.4 | | | $ | 377.8 | | | $ | 569.6 | | |
Estimated future amortization expense follows (in millions):
| | | | | |
Remainder of 2022 | $ | 17.8 | |
2023 | 59.3 | |
2024 | 49.8 | |
2025 | 41.8 | |
2026 | 35.4 | |
Thereafter | 68.5 | |
| $ | 272.6 | |
5. Discontinued Operations
On August 17, 2021, the Company sold its Oxford business to an affiliate of H.I.G. Capital for $525.0 million. Included in the nine months ended September 30, 2021, was a $218.6 million ($149.3 million net of income taxes) gain from the sale. The financial results of that business are reported as discontinued operations in the accompanying condensed consolidated statements of operations.
There were no significant operating results from discontinued operations subsequent to December 31, 2021.The following table summarizes the results of operations of the Oxford business (in millions):
| | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | | | |
| September 30, 2021 | | September 30, 2021 | | | | | | | | |
Revenues | $ | 71.6 | | | $ | 324.3 | | | | | | | | | |
Costs of services | 49.0 | | | 223.0 | | | | | | | | | |
Gross profit | 22.6 | | | 101.3 | | | | | | | | | |
Selling, general and administrative expenses | 27.5 | | | 89.9 | | | | | | | | | |
Amortization of intangible assets | 0.1 | | | 0.4 | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Income (loss) before income taxes | (5.0) | | | 11.0 | | | | | | | | | |
Provision (benefit) for income taxes | (1.4) | | | 1.8 | | | | | | | | | |
| | | | | | | | | | | |
Gain on sale, net of income taxes | 149.3 | | | 149.3 | | | | | | | | | |
Income from discontinued operations, net of income taxes | $ | 145.7 | | | $ | 158.5 | | | | | | | | | |
| | | | | |
Remainder of 2023 | $ | 17.9 | |
2024 | 58.1 | |
2025 | 48.8 | |
2026 | 41.8 | |
2027 | 32.0 | |
Thereafter | 44.3 | |
| $ | 242.9 | |
During the nine months ended September 30, 2022, the Company received $9.8 million related to the finalization of the purchase price. The following table provides select cash flow information related to the Oxford business for the nine months ended September 30, 2021 (in millions):
| | | | | | | |
| | | |
| | |
| | | |
Net cash provided by operating activities | | | $ | 8.2 | |
Net cash provided by (used in) investing activities | | | |
Cash received from sale of discontinued operations | | | 499.1 | |
Other | | | (3.9) | |
| | | $ | 495.2 | |
| | | |
6.3. Long-Term Debt
Long-term debt consisted of the following (in millions):
| | | | | | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 | | | | |
Senior Secured Credit Facility: | | | | | | | |
Borrowings under $250 million revolving credit facility, due 2024 | $ | 46.0 | | | $ | — | | | | | |
Term B loan facility, due 2025 | 490.8 | | | 490.8 | | | | | |
| | | | | | | |
Unsecured Senior Notes, due 2028 | 550.0 | | | 550.0 | | | | | |
| 1,086.8 | | | 1,040.8 | | | | | |
Unamortized deferred loan costs | (6.0) | | | (6.9) | | | | | |
| $ | 1,080.8 | | | $ | 1,033.9 | | | | | |
| | | | | | | | | | | | | | | |
| September 30, 2023 | | December 31, 2022 | | | | |
Senior Secured Credit Facility: | | | | | | | |
Revolving credit facility | $ | — | | | $ | 31.5 | | | | | |
Term loan B | 500.0 | | | 490.8 | | | | | |
Unsecured Senior Notes | 550.0 | | | 550.0 | | | | | |
| 1,050.0 | | | 1,072.3 | | | | | |
Unamortized deferred loan costs | (7.5) | | | (5.7) | | | | | |
Term loan B, principal payments due in the next 12 months(1) | (5.0) | | | — | | | | | |
Long-term debt | $ | 1,037.5 | | | $ | 1,066.6 | | | | | |
__________
(1) In connection with the amendments described below, the Company is required to make quarterly minimum principal payments totaling $5.0 million annually on the term loan until its maturity date; this amount is included in other current liabilities on the accompanying condensed consolidated balance sheet as of September 30, 2023.
Senior Secured Credit Facility —The In August 2023, the Company amended its senior secured credit facility consists(the "facility") to extend the maturity date of athe term loan B loan("term loan") to August 2030 and a $250.0 millionthe maturity date of the revolving credit facility.facility (the "revolver") to February 2028 and increased the borrowing capacity of the revolver to $500.0 million. Borrowings under the $500.0 million term B loan bear interest, at LIBORthe Company's election, at (i) the secured overnight financing rate ("SOFR") plus 1.752.25 percent, or (ii) the bank’s base rate plus 0.751.25 percent. Borrowings under the revolver bear interest, at LIBORthe Company's election, at (i) SOFR plus 1.25a 10 basis points adjustment plus 2.00 to 2.253.00 percent, or (ii) the bank’s base rate plus 0.251.00 to 1.252.00 percent, depending on leverage levels. A commitment fee of 0.200.30 to 0.350.45 percent is payable on the undrawn portion of the revolver. ThereThe facility is subject to various restrictive covenants including, when amounts are no required minimum payments ondrawn under the facility. The revolver, is limited to a maximum ratio of senior secured debt to trailing 12-monthstrailing-twelve-months of lender-defined consolidated EBITDA of 3.75 to 1, which was 0.960.95 to 1 at September 30, 2022.2023. The facility is secured by substantially all of the Company's assets and includes various restrictive covenants. Atat September 30, 2022,2023, the Company was in compliance with its debt covenants. In July 2021, the Company amended its facility to, among other things, permit the sale of its Oxford business and allow the net cash proceeds (approximately $0.4 billion) to be used for future acquisitions and other permitted investments. With the acquisition of GlideFast on July 6, 2022 (see Note 3. Acquisitions) and other investments of the net cash proceeds, no debt prepayments were required.
Unsecured Senior Notes — The Company has $550.0 million of unsecured senior notes, due in 2028, which bear interest at 4.625 percent payable semiannually in arrears on May 15 and November 15. These notes are unsecured obligations and are subordinate to the senior secured credit facility. These notes also contain certain customary limitations including, the Company's ability to incur additional indebtedness, engage in mergers and acquisitions, transfer or sell assets and make certain distributions.
7.4. Commitments and Contingencies
The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of business.business, and collective class and Private Attorneys General Act ("PAGA") actions alleging violations of wage and hour laws. The Company does not believe that the disposition of matters that are pending or asserted will have a material effect on its consolidated financial statements.
8.
5. Income Taxes
For interim reporting periods, the Company’s provision for income taxes is calculated using its annualized estimated effective tax rate for the year. This rate is based on its estimated full year income and the related income tax expense for each jurisdiction in which the Company operates. The effective tax rate can be affected by changes in the geographical mix, permanent differences and the estimate of full year pretax accounting income. This rate is adjusted for the effects of discrete items occurring in the period. Income taxes payable were $33.9 million at September 30, 2023 and $1.1 million at December 31, 2022, and are included in other current liabilities in the condensed consolidated balance sheets. Prepaid income taxes were $16.3 million at December 31, 2022, and are included in prepaid expenses and income taxes in the condensed consolidated balance sheets.
9.6. Earnings per Share
The following table shows the calculation of basic and diluted earnings per share (in millions, except per share data).
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | |
| September 30, | | September 30, | | |
| 2022 | | 2021 | | 2022 | | 2021 | | | | |
Income from continuing operations | $ | 71.1 | | | $ | 66.3 | | | $ | 211.3 | | | $ | 166.4 | | | | | |
Income from discontinued operations, net of income taxes | 2.1 | | | 145.7 | | | 1.2 | | | 158.5 | | | | | |
Net income | $ | 73.2 | | | $ | 212.0 | | | $ | 212.5 | | | $ | 324.9 | | | | | |
| | | | | | | | | | | |
Weighted-average number of common shares outstanding — basic | 50.1 | | | 52.7 | | | 50.9 | | | 53.0 | | | | | |
Dilutive effect of common share equivalents | 0.6 | | | 0.7 | | | 0.7 | | | 0.7 | | | | | |
Weighted-average number of common shares and share equivalents outstanding — diluted | 50.7 | | | 53.4 | | | 51.6 | | | 53.7 | | | | | |
| | | | | | | | | | | |
Basic earnings per share: | | | | | | | | | | | |
Continuing operations | $ | 1.42 | | | $ | 1.26 | | | $ | 4.15 | | | $ | 3.14 | | | | | |
Discontinued operations | 0.04 | | | 2.76 | | | 0.02 | | | 2.99 | | | | | |
| $ | 1.46 | | | $ | 4.02 | | | $ | 4.17 | | | $ | 6.13 | | | | | |
Diluted earnings per share: | | | | | | | | | | | |
Continuing operations | $ | 1.40 | | | $ | 1.24 | | | $ | 4.09 | | | $ | 3.10 | | | | | |
Discontinued operations | 0.04 | | | 2.73 | | | 0.02 | | | 2.95 | | | | | |
| $ | 1.44 | | | $ | 3.97 | | | $ | 4.11 | | | $ | 6.05 | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended | | |
| September 30, | | September 30, | | |
| 2023 | | 2022 | | 2023 | | 2022 | | | | |
Income from continuing operations | $ | 59.4 | | | $ | 71.1 | | | $ | 169.0 | | | $ | 211.3 | | | | | |
Loss from discontinued operations, net of income taxes | — | | | 2.1 | | | — | | | 1.2 | | | | | |
Net income | $ | 59.4 | | | $ | 73.2 | | | $ | 169.0 | | | $ | 212.5 | | | | | |
| | | | | | | | | | | |
Weighted-average number of common shares outstanding — basic | 48.1 | | | 50.1 | | | 48.8 | | | 50.9 | | | | | |
Dilutive effect of common share equivalents | 0.3 | | | 0.6 | | | 0.4 | | | 0.7 | | | | | |
Weighted-average number of common shares and share equivalents outstanding — diluted | 48.4 | | | 50.7 | | | 49.2 | | | 51.6 | | | | | |
| | | | | | | | | | | |
Basic earnings per share: | | | | | | | | | | | |
Continuing operations | $ | 1.23 | | | $ | 1.42 | | | $ | 3.46 | | | $ | 4.15 | | | | | |
Discontinued operations | — | | | 0.04 | | | — | | | 0.02 | | | | | |
| $ | 1.23 | | | $ | 1.46 | | | $ | 3.46 | | | $ | 4.17 | | | | | |
Diluted earnings per share: | | | | | | | | | | | |
Continuing operations | $ | 1.23 | | | $ | 1.40 | | | $ | 3.43 | | | $ | 4.09 | | | | | |
Discontinued operations | — | | | 0.04 | | | — | | | 0.02 | | | | | |
| $ | 1.23 | | | $ | 1.44 | | | $ | 3.43 | | | $ | 4.11 | | | | | |
| | | | | | | | | | | |
10.7. Segment Reporting
ASGN provides ITinformation technology ("IT") services and professional solutions and creative digital marketing services across the commercial and government sectors. ASGN operates through itstwo segments, Commercial and Federal Government. The Commercial Segment, which is the largest segment, provides consulting, creative digital marketing and permanent placement services primarily to large enterprises and Fortune 1000 companies. The Federal Government segments.Segment provides mission-critical solutions to the Department of Defense, the intelligence community and federal civilian agencies. Virtually all of the Company's revenues are generated in the United States.
The Commercial Segment provides IT services and solutions, and creative digital marketing services to Fortune 1000 and mid-market clients across the United States, Canada and Europe. The Federal Government Segment delivers advanced solutions in cloud, cybersecurity, artificial intelligence, machine learning, application and IT modernization, science and engineering to defense, intelligence and federal civilian agencies. Management evaluates the performance of each segment primarily based on revenues, gross profit and operating income derived directly from internal financial reporting of the segments used for corporate management purposes, which is presented below by segment (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | |
| | September 30, | | September 30, | | |
| | 2022 | | 2021 | | 2022 | | 2021 | | | | |
Commercial | | | | | | | | | | | | |
Revenues | | $ | 900.0 | | | $ | 774.9 | | | $ | 2,583.5 | | | $ | 2,136.7 | | | | | |
Gross profit | | 297.8 | | | 251.1 | | | 852.1 | | | 678.1 | | | | | |
Operating income | | 108.7 | | | 98.5 | | | 319.6 | | | 258.8 | | | | | |
Depreciation | | 5.0 | | | 3.5 | | | 12.0 | | | 10.4 | | | | | |
Amortization | | 9.9 | | | 7.3 | | | 21.1 | | | 18.6 | | | | | |
Federal Government | | | | | | | | | | | | |
Revenues | | $ | 297.9 | | | $ | 298.9 | | | $ | 847.2 | | | $ | 819.0 | | | | | |
Gross profit | | 61.1 | | | 57.6 | | | 177.4 | | | 150.6 | | | | | |
Operating income | | 23.0 | | | 23.3 | | | 66.4 | | | 56.8 | | | | | |
Depreciation | | 1.3 | | | 2.3 | | | 4.2 | | | 6.8 | | | | | |
Amortization | | 8.0 | | | 8.6 | | | 24.2 | | | 21.3 | | | | | |
Consolidated | | | | | | | | | | | | |
Revenues | | $ | 1,197.9 | | | $ | 1,073.8 | | | $ | 3,430.7 | | | $ | 2,955.7 | | | | | |
Gross profit | | 358.9 | | | 308.7 | | | 1,029.5 | | | 828.7 | | | | | |
Operating income | | 108.4 | | | 100.1 | | | 319.1 | | | 255.4 | | | | | |
Depreciation | | 7.2 | | | 7.1 | | | 19.5 | | | 21.7 | | | | | |
Amortization | | 17.9 | | | 15.9 | | | 45.3 | | | 39.9 | | | | | |
_______ | | | | | | | | | | | | |
Consolidated operating income includes corporate operating expenses, which are not allocated to the segments. These include stock-based compensation expense, depreciation expense, compensation for corporate employees, acquisition, integration and strategic planning expenses and public company expenses. | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | |
| | September 30, | | September 30, | | |
| | 2023 | | 2022 | | 2023 | | 2022 | | | | |
Commercial | | | | | | | | | | | | |
Revenues | | $ | 782.4 | | | $ | 900.0 | | | $ | 2,425.8 | | | $ | 2,583.5 | | | | | |
Gross profit | | 254.2 | | | 297.8 | | | 777.5 | | | 852.1 | | | | | |
Operating income | | 91.4 | | | 108.7 | | | 267.0 | | | 319.6 | | | | | |
Depreciation | | 5.0 | | | 5.0 | | | 14.5 | | | 12.0 | | | | | |
Amortization | | 8.6 | | | 9.9 | | | 26.1 | | | 21.1 | | | | | |
Federal Government | | | | | | | | | | | | |
Revenues | | $ | 334.4 | | | $ | 297.9 | | | $ | 950.7 | | | $ | 847.2 | | | | | |
Gross profit | | 68.2 | | | 61.1 | | | 197.6 | | | 177.4 | | | | | |
Operating income | | 27.2 | | | 23.0 | | | 74.9 | | | 66.4 | | | | | |
Depreciation | | 1.4 | | | 1.3 | | | 4.3 | | | 4.2 | | | | | |
Amortization | | 9.2 | | | 8.0 | | | 27.7 | | | 24.2 | | | | | |
Consolidated | | | | | | | | | | | | |
Revenues | | $ | 1,116.8 | | | $ | 1,197.9 | | | $ | 3,376.5 | | | $ | 3,430.7 | | | | | |
Gross profit | | 322.4 | | | 358.9 | | | 975.1 | | | 1,029.5 | | | | | |
Operating income | | 98.6 | | | 108.4 | | | 280.7 | | | 319.1 | | | | | |
Depreciation | | 7.0 | | | 7.2 | | | 20.8 | | | 19.5 | | | | | |
Amortization | | 17.8 | | | 17.9 | | | 53.8 | | | 45.3 | | | | | |
_______ | | | | | | | | | | | | |
Consolidated operating income includes corporate operating expenses, which are not allocated to the segments. These include stock-based compensation expense, depreciation expense, compensation for corporate employees, acquisition, integration and strategic planning expenses, and public company expenses. | | | | |
Substantially allThe majority of the revenues from the Commercial Segment are generated from time-and-materials ("T&M") contracts where payments are based on fixed hourly rates for each direct labor hour expended and reimbursements for allowable material costs and out-of-pocket expenses. Revenues from the Federal Government Segment are generated from: (i) firm-fixed-price, (ii) T&M, and (iii) cost reimbursable contracts. Virtually all of the Company's revenues are recognized over time. Revenues by segment and by type are as follows (in millions):
| | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | | | September 30, | | September 30, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 | |
Commercial | Commercial | | | | | | | | | | Commercial | | | | | | | | | |
Assignment | Assignment | | $ | 631.4 | | | $ | 587.3 | | | $ | 1,888.0 | | | $ | 1,687.2 | | | Assignment | | $ | 508.2 | | | $ | 631.4 | | | $ | 1,598.8 | | | $ | 1,888.0 | | |
Consulting | Consulting | | 268.6 | | | 187.6 | | | 695.5 | | | 449.5 | | | Consulting | | 274.2 | | | 268.6 | | | 827.0 | | | 695.5 | | |
| | 900.0 | | | 774.9 | | | 2,583.5 | | | 2,136.7 | | | | 782.4 | | | 900.0 | | | 2,425.8 | | | 2,583.5 | | |
Federal Government | Federal Government | | | Federal Government | | |
Firm-fixed-price | Firm-fixed-price | | 91.7 | | | 94.5 | | | 242.9 | | | 217.0 | | | Firm-fixed-price | | 107.3 | | | 91.7 | | | 297.9 | | | 242.9 | | |
Time and materials | Time and materials | | 113.7 | | | 106.0 | | | 338.5 | | | 296.9 | | | Time and materials | | 126.8 | | | 113.7 | | | 377.9 | | | 338.5 | | |
Cost reimbursable | Cost reimbursable | | 92.5 | | | 98.4 | | | 265.8 | | | 305.1 | | | Cost reimbursable | | 100.3 | | | 92.5 | | | 274.9 | | | 265.8 | | |
| | 297.9 | | | 298.9 | | | 847.2 | | | 819.0 | | | | 334.4 | | | 297.9 | | | 950.7 | | | 847.2 | | |
Consolidated | Consolidated | | $ | 1,197.9 | | | $ | 1,073.8 | | | $ | 3,430.7 | | | $ | 2,955.7 | | | Consolidated | | $ | 1,116.8 | | | $ | 1,197.9 | | | $ | 3,376.5 | | | $ | 3,430.7 | | |
Federal Government Segment revenues by customer type are as follows (in millions):
| | | Three Months Ended | | Nine Months Ended | | | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | | | September 30, | | September 30, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 | |
Department of Defense and Intelligence Agencies | Department of Defense and Intelligence Agencies | | $ | 165.5 | | | $ | 166.0 | | | $ | 458.4 | | | $ | 450.8 | | | Department of Defense and Intelligence Agencies | | $ | 164.8 | | | $ | 165.5 | | | $ | 452.7 | | | $ | 458.4 | | |
Federal Civilian | Federal Civilian | | 124.8 | | | 112.1 | | | 361.9 | | | 303.5 | | | Federal Civilian | | 159.5 | | | 124.8 | | | 468.3 | | | 361.9 | | |
Other | Other | | 7.6 | | | 20.8 | | | 26.9 | | | 64.7 | | | Other | | 10.1 | | | 7.6 | | | 29.7 | | | 26.9 | | |
| | $ | 297.9 | | | $ | 298.9 | | | $ | 847.2 | | | $ | 819.0 | | | | $ | 334.4 | | | $ | 297.9 | | | $ | 950.7 | | | $ | 847.2 | | |
11.8. Fair Value Measurements
Recurring Fair Value Measurements — The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued payroll and contract professional pay approximate their fair value based on their short-term nature. The carrying amount of long-term debt recorded in the Company’s accompanying condensed consolidated balance sheet at September 30, 2022 was $1.1 billion (see Note 6. Long-Term Debt) and its fair value was $1.0 billion. The fair value for the term B loan and senior notes was determined using quoted prices in active markets for identical liabilities (Level 1 inputs) and the carrying value of the revolving credit facility approximates its fair value.
Certain acquisition agreements contained provisions requiring the Company to pay contingent consideration in the event the underlying acquired business achieved certain specified earnings results or obtained certain contract awards. Contingent consideration liabilities had a fair value of $15.1 million at December 31, 2021, of which $8.1 million was paid and the remaining amount was reduced to zero as a measurement period adjustment, with no effect on results of operations. There were no contingent consideration liabilities at September 30, 2022.
Nonrecurring Fair Value Measurements — Certain assets, such as goodwill and trademarks, are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, such as, when there is evidence of impairment. There were no fair value adjustments for non-financial assets or liabilities during the three and nine months ended September 30, 2022.2023.
12. Subsequent Events
On October 3, 2022, the Company acquired Iron Vine Security, LLC ("Iron Vine") a leading cybersecurity company that designs, implements and executes cybersecurity programs for federal customers. The resultscarrying amount of operations of Iron Vine will be includedlong-term debt recorded in the Federal Government Segment from the date of acquisition.
Company’s accompanying condensed consolidated balance sheet at September 30, 2023 was $1.1 billion (see
Note 3. Long-Term Debt
) and its fair value, determined using quoted prices in active markets for identical liabilities (Level 1 inputs), was $1.0 billion.
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations, as well as management's beliefs and assumptions, and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words "believes," "anticipates," "plans," "expects," "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences include those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 20212022 ("20212022 10-K"). In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q and we assume no obligation to update any forward-looking statements or the reasons why our actual results may differ.
OVERVIEW
ASGN provides ITinformation technology ("IT") services and professional solutions and creative digital marketing services acrossto the commercial and government sectors. ASGN operatesWe operate through itstwo segments, Commercial and Federal Government. The Commercial Segment, which is the largest segment, provides consulting, creative digital marketing and permanent placement services primarily to large enterprises and Fortune 1000 companies. Our Federal Government segments.Segment provides mission-critical solutions to the Department of Defense, the intelligence community and federal civilian agencies. Virtually all of the Company's revenues are generated in the United States.
The Commercial Segment provides IT servicesBillable Days are business days (calendar days for the period less weekends and solutions,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 creative digital marketing services to Fortune 1000 and mid-market clients acrossinclement weather. Revenues calculated on a same Billable Days basis provide more comparable information by removing the United States, Canada and Europe. The Federal Government Segment delivers advanced solutionseffect of differences in cloud, cybersecurity, artificial intelligence, machine learning, application and IT modernization, science and engineering to defense, intelligence and federal civilian agencies.the number of Billable Days 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.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 20222023 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 20212022
Revenues
Revenues for the quarter were $1.2$1.1 billion, up 11.6down 6.8 percent over the third quarter of last year. Revenues for the quarter included approximately $34.2 million from businesses acquired in the last twelve months. Excluding the contributions from acquisitions, revenue growth was 8.4 percent year-over-year. The table below shows our revenues by segment for the three months ended September 30, 20222023 and 20212022 (in millions).
| | | | | % of Total | | | | | | % of Total | | |
| | 2022 | | 2021 | | | Change | | | 2022 | | 2021 | | | Change | | | 2023 | | 2022 | | | Change | | | 2023 | | 2022 | | | Change | |
| Commercial | Commercial | | | | | | | | | | | | | | | | | Commercial | | | | | | | | | | | | | | | | |
Assignment | Assignment | | $ | 631.4 | | | $ | 587.3 | | | | 7.5 | % | | | 52.7 | % | | 54.7 | % | | | -2.0 | % | | Assignment | | $ | 508.2 | | | $ | 631.4 | | | | (19.5 | %) | | | 45.5 | % | | 52.7 | % | | | (7.2 | %) | |
Consulting | Consulting | | 268.6 | | | 187.6 | | | | 43.2 | % | | | 22.4 | % | | 17.5 | % | | | 4.9 | % | | Consulting | | 274.2 | | | 268.6 | | | | 2.1 | % | | | 24.6 | % | | 22.4 | % | | | 2.2 | % | |
| | 900.0 | | | 774.9 | | | | 16.1 | % | | | 75.1 | % | | 72.2 | % | | | 2.9 | % | | | 782.4 | | | 900.0 | | | | (13.1 | %) | | | 70.1 | % | | 75.1 | % | | | (5.0 | %) | |
Federal Government | Federal Government | | 297.9 | | | 298.9 | | | | -0.3 | % | | | 24.9 | % | | 27.8 | % | | | -2.9 | % | | Federal Government | | 334.4 | | | 297.9 | | | | 12.3 | % | | | 29.9 | % | | 24.9 | % | | | 5.0 | % | |
Consolidated | Consolidated | | $ | 1,197.9 | | | $ | 1,073.8 | | | | 11.6 | % | | | 100.0 | % | | 100.0 | % | | | | | Consolidated | | $ | 1,116.8 | | | $ | 1,197.9 | | | | (6.8 | %) | | | 100.0 | % | | 100.0 | % | | | | |
|
Commercial Segment — Revenues from our Commercial Segment (75.1 percent of total revenues) were up 16.1 percent over the third quarter of last year. Assignment revenues were $631.4 million (70.2 percent of the segment's revenues), up 7.5 percent year-over-year. Consulting services revenues were $268.6 million (29.8 percent of the segment's revenues), up 43.2 percent year-over-year. Excluding the contribution of $25.1 million from GlideFast, which was acquired on July 6, 2022, consulting services revenues were up 29.8 percent year-over-year.
From an industry perspective, Commercial revenues fall into fivethe Company operates in six broad industry verticals. Commercial Segment revenues (70.1 percent of total revenues) were down 13.1 percent year-over-year and are categorized in five verticals: (i) Financial Services, (ii) Consumer and Industrials,Industrial, (iii) Healthcare, (iv) Technology, Media and Telecom ("TMT"), (iv) Healthcare, and (v) Business and Government Services. Four outConsumer and Industrial and Healthcare verticals saw low single-digit revenue declines year-over-year and the remaining three verticals saw double-digit declines year-over-year. Federal Government Segment revenues (29.9 percent of our fivetotal revenues), the sixth industry verticals achieved double-digit growth over the third quarter of last year, while our Businessvertical, were up 12.3 percent year-over-year and Government Services verticalincluded $24.6 million from Iron Vine Security, LLC ("Iron Vine"), which was slightly up over last year.acquired in October 2022.
WithinTotal IT consulting services revenues were $608.6 million (54.5 percent of total revenues), up 7.4 percent year-over-year. Federal Government Segment revenues, which are all consulting revenues, were $334.4 million, up 12.3 percent year-over-year as stated above, and Commercial Segment consulting revenues were $274.2 million, up 2.1 percent year-over-year. The growth in IT consulting services revenues was offset by a 19.5 percent year-over-year decline in assignment revenues which totaled $508.2 million (45.5 percent of total revenues), reflecting continued softness in the more discretionary and cyclical portions of the Commercial Segment IT services and solutions revenues, which accountedbusiness. On a same Billable Day basis, adjusting for 84.1 percent of the segment's revenues in the quarter, were up 18.3 percent over the third quarter of last year driven by double-digit growth in consulting services, the contribution from GlideFast and high single-digit growth in IT staffing services. Creative digital marketing and permanent placement revenues, which combined accounted for 15.9 percent of the segment's revenues in the quarter, were up 6.1 percent over the third quarter of last year.
Federal Government Segment — Revenues from our Federal Government Segment (24.9 percent of revenues) were down slightly year-over-year and included $9.1 million from the two businesses acquired subsequent to June 30, 2021. The third quarter of last year benefited from approximately $13.4 million in low-margin revenues under a web services resale program the segment elected not to renew1.5 fewer Billable Days in the third quarter of last year.2023 compared to the third quarter of 2022, assignment revenues declined 17.6 percent.
Gross Profit and Gross Margin
The table below shows gross profit and gross margin by segment for the three months ended September 30, 20222023 and 20212022 (in millions).
| | | Gross Profit | | | | Gross Margin | | | | Gross Profit | | | | Gross Margin | | |
| | 2022 | | 2021 | | | Change | | | 2022 | | 2021 | | | Change | | | 2023 | | 2022 | | | Change | | | 2023 | | 2022 | | | Change | |
| Commercial | Commercial | | $ | 297.8 | | | $ | 251.1 | | | | 18.6 | % | | | 33.1 | % | | 32.4 | % | | | 0.7 | % | | Commercial | | $ | 254.2 | | | $ | 297.8 | | | | (14.6 | %) | | | 32.5 | % | | 33.1 | % | | | (0.6 | %) | |
Federal Government | Federal Government | | 61.1 | | | 57.6 | | | | 6.1 | % | | | 20.5 | % | | 19.3 | % | | | 1.2 | % | | Federal Government | | 68.2 | | | 61.1 | | | | 11.6 | % | | | 20.4 | % | | 20.5 | % | | | (0.1 | %) | |
Consolidated | Consolidated | | $ | 358.9 | | | $ | 308.7 | | | | 16.3 | % | | | 30.0 | % | | 28.7 | % | | | 1.3 | % | | Consolidated | | $ | 322.4 | | | $ | 358.9 | | | | (10.2 | %) | | | 28.9 | % | | 30.0 | % | | | (1.1 | %) | |
Gross profit is comprised of revenues less costs of services, which consist primarily of compensation for our contract professionals, allowable materialsother direct costs and reimbursable out-of-pocket expenses. Consolidated gross profit was up 16.3down 10.2 percent year-over-year on a revenue growthdecline of 11.66.8 percent.
Gross margin was 30.028.9 percent, an expansiona compression of 130110 basis points overfrom the third quarter of 2021. Both2022. The compression mainly related to business segmentsmix: (i) within the Commercial Segment, a lower mix of certain high-margin assignment revenues, namely, creative digital marketing and all operating divisions reportedpermanent placement revenues, which was partially offset by a higher mix of high-margin IT consulting revenues with a year-over-year expansion in gross margin. The expansion in gross margin and (ii) a higher mix of the Commercial Segment was driven by double-digit growth of its high-margin commercial consulting and permanent placement services. The expansion in gross margin ofrevenues from the Federal Government Segment, was driven by changes in business mix, includingwhich have a lower contribution from cost reimbursable contracts, which carry a lowergross margin than other contract types, the contribution from higher-margin businesses acquired subsequent to June 30, 2021, and the decision not to renew a low-margin web services resale program in the third quarter of last year.commercial revenues.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses consist primarily of compensation expense for our field operations and corporate staff, rent, information systems, marketing, telecommunications, public company expenses and other general and administrative expenses. SG&A expenses were $232.6$206.0 million (19.4(18.4 percent of revenues), compared with $192.7$232.6 million (17.9(19.4 percent of revenues) in the third quarter of 2021.2022. This increaseimprovement was commensurate with the growth in the business and also included investments in headcountprimarily due to support future growth.lower incentive compensation expense.
Amortization of Intangible Assets
Amortization of intangible assets was $17.9 million, up from $15.9 million in the third quarter of 2021. This increase relates to the effects of businesses acquired.
Interest Expense
Interest expense was $12.1 million and was comprised of $5.2 million of interest on the senior secured credit facility, $6.4 million of interest on the unsecured senior notes, and $0.5 million in amortization of deferred loan costs. The weighted-average outstanding borrowings were $1.0 billion in both periods and the weighted-average interest rate was 4.4 percent, up from 3.4 percent in the third quarter of 2021.
Provision for Income Taxes
The provision for income taxes was $25.2 million, up from $24.2 million in the third quarter of 2021. The increase was related to the growth in income before income taxes as the effective tax rate for the current quarter was slightly lower than in the third quarter of 2021.
Income from Continuing Operations
Income from continuing operations was $71.1 million, up from $66.3 million in the third quarter of 2021 driven by the growth in the business and the expansion of our gross margin.
Income from Discontinued Operations
Income from discontinued operations was $2.1 million, compared with $145.7 million in the third quarter of 2021. In the prior year, virtually all of the income from discontinued operations related to the gain, net of income taxes, on the sale of the Oxford business.
Net Income
Net income of $73.2 million was comprised of income from continuing operations of $71.1 million and discontinued operations of $2.1 million.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2021
Revenues
Revenues for the first nine months of the year were $3.4 billion, up 16.1 percent year-over-year. Revenues for the nine-month period included approximately $110.7 million from businesses acquired during the last twelve months. Excluding the contributions from acquisitions, revenue growth was 12.3 percent year-over-year. The table below shows our revenues by segment for the nine months ended September 30, 2022 and 2021 (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | % of Total | | |
| | 2022 | | 2021 | | | | Change | | | | 2022 | | 2021 | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial | | | | | | | | | | | | | | | | | | | | |
Assignment | | $ | 1,888.0 | | | $ | 1,687.2 | | | | | 11.9 | % | | | | 55.0 | % | | 57.1 | % | | | | -2.1 | % | | |
Consulting | | 695.5 | | | 449.5 | | | | | 54.7 | % | | | | 20.3 | % | | 15.2 | % | | | | 5.1 | % | | |
| | 2,583.5 | | | 2,136.7 | | | | | 20.9 | % | | | | 75.3 | % | | 72.3 | % | | | | 3.0 | % | | |
Federal Government | | 847.2 | | | 819.0 | | | | | 3.4 | % | | | | 24.7 | % | | 27.7 | % | | | | -3.0 | % | | |
Consolidated | | $ | 3,430.7 | | | $ | 2,955.7 | | | | | 16.1 | % | | | | 100.0 | % | | 100.0 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial Segment — Revenues from our Commercial Segment (75.3 percent of total revenues) were up 20.9 percent over the first nine months of last year. Assignment revenues were $1.9 billion (73.1 percent of the segment's revenues), up 11.9 percent year-over-year. Consulting services revenues were $695.5 million (26.9 percent of the segment's revenues), up 54.7 percent year-over-year. Excluding the contribution of $45.8 million from GlideFast, consulting services revenues were up 44.5 percent year-over-year. All five industry verticals were up double-digits year-over-year.
Within the Commercial Segment, IT services and solutions revenues, which accounted for 83.3 percent of the segment's revenues in the first nine months of 2022, were up 20.9 percent over the same period last year driven by high growth in consulting services, the contribution from GlideFast and high single-digit growth in IT staffing services. Creative digital marketing and permanent placement revenues, which combined accounted for 16.7 percent of the segment's revenues, were up 21.1 percent over the same period last year.
Federal Government Segment — Revenues from our Federal Government Segment (24.7 percent of revenues) were up 3.4 percent year-over-year. Revenues for the first nine months of 2022 included $64.9 million from the two businesses acquired subsequent to June 30, 2021. Last year benefited from higher spending levels on certain cost reimbursable contracts and approximately $38.6 million in revenues from a low-margin web services contract that the segment elected to not renew in the third quarter of last year.
Gross Profit and Gross Margin
The table below shows gross profit and gross margin by segment for the nine months ended September 30, 2022 and 2021 (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gross Profit | | | | Gross Margin | | |
| | 2022 | | 2021 | | | | Change | | | | 2022 | | 2021 | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 852.1 | | | $ | 678.1 | | | | | 25.7 | % | | | | 33.0 | % | | 31.7 | % | | | | 1.3 | % | | |
Federal Government | | 177.4 | | | 150.6 | | | | | 17.8 | % | | | | 20.9 | % | | 18.4 | % | | | | 2.5 | % | | |
Consolidated | | $ | 1,029.5 | | | $ | 828.7 | | | | | 24.2 | % | | | | 30.0 | % | | 28.0 | % | | | | 2.0 | % | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consolidated gross profit was up 24.2 percent on revenue growth of 16.1 percent. Gross margin was 30.0 percent, an expansion of 200 basis points over the first nine months of 2021. Both segments reported expansion in gross margin. The expansion in gross margin of the Commercial Segment was driven by 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 a lower contribution from cost reimbursable contracts, which carry a lower margin than other contract types, the contribution from higher-margin businesses acquired subsequent to June 30, 2021, and the decision not to renew a low-margin web services resale program in the third quarter of last year.
Selling, General and Administrative Expenses
SG&A expenses were $665.1 million (19.4 percent of revenues), compared with $533.4 million (18.0 percent of revenues) in the first nine months of 2021. This increase was commensurate with the growth in the business, including growth of high-margin commercial revenue streams (which carry a higher SG&A expense component than IT staffing and federal government services revenues).
Amortization of Intangible Assets
Amortization of intangible assets was $45.3$17.8 million, up from $39.9compared with $17.9 million in the first nine monthsthird quarter of 2021. This increase related to the effects of businesses acquired.
Interest Expense
Interest expense was $31.5$18.5 million, and was comprisedup from $12.1 million in the third quarter of $10.9 million2022, primarily as a result of higher interest rates on the senior secured credit facility, $19.1and also included $2.3 million of interest oncosts related to the unsecuredAugust 2023 amendments to the senior notes, and $1.5 million in amortization of deferred loan costs.secured credit facility. The weighted-average outstanding borrowings and cash-based interest rate in the third quarter of 2023 and 2022 were $1.0 billion in both periods and the weighted-average interest rate was 3.86.0 percent up from 3.4(excluding costs related to aforementioned amendments), and $1.0 billion and 4.4 percent, in the first nine months of 2021.respectively.
Provision for Income Taxes
The provision for income taxes was $76.3$20.7 million, updown from $60.8$25.2 million in the first nine monthsthird quarter of 2021. The increase related2022 due to the growth inlower income before income taxes as thetaxes. The effective tax rate forwas 25.8 percent, down from 26.2 percent in the first nine monthsthird quarter of the year was slightly lower than the first nine months of 2021.2022.
Income from Continuing Operations
Income from continuing operations was $211.3$59.4 million, down from $71.1 million in the third quarter of 2022.
Income from Discontinued Operations
Income from discontinued operations was $2.1 million in the third quarter of 2022.
Net Income
Net income was $59.4 million, down from $73.2 million in the third quarter of 2022.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2022
Revenues
Revenues for the first nine months of the year were $3.4 billion, down 1.6 percent year-over-year. Revenues for the period included approximately $128.0 million from businesses acquired during the last 12 months. Excluding the contributions from acquisitions, revenues declined 5.3 percent year-over-year. The table below shows our revenues by segment for the nine months ended September 30, 2023 and 2022 (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | % of Total | | |
| | 2023 | | 2022 | | | | Change | | | | 2023 | | 2022 | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial | | | | | | | | | | | | | | | | | | | | |
Assignment | | $ | 1,598.8 | | | $ | 1,888.0 | | | | | (15.3) | % | | | | 47.3 | % | | 55.0 | % | | | | (7.7 | %) | | |
Consulting | | 827.0 | | | 695.5 | | | | | 18.9 | % | | | | 24.5 | % | | 20.3 | % | | | | 4.2 | % | | |
| | 2,425.8 | | | 2,583.5 | | | | | (6.1) | % | | | | 71.8 | % | | 75.3 | % | | | | (3.5 | %) | | |
Federal Government | | 950.7 | | | 847.2 | | | | | 12.2 | % | | | | 28.2 | % | | 24.7 | % | | | | 3.5 | % | | |
Consolidated | | $ | 3,376.5 | | | $ | 3,430.7 | | | | | (1.6) | % | | | | 100.0 | % | | 100.0 | % | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial Segment revenues (71.8 percent of total revenues) were down 6.1 percent year-over-year and included $53.6 million of revenues from the GlideFast business through its acquisition date anniversary, which was at the beginning of July 2023. From an industry vertical perspective: Consumer and Industrial and Healthcare verticals saw low single-digit revenue increases year-over-year. Financial services saw low single-digit revenue decline year-over-year. TMT and Business and Government Services saw double-digit declines year-over-year. Federal Government Segment revenues (28.2 percent of total revenues), the sixth industry vertical, were up 12.2 percent year-over-year and included $74.3 million from Iron Vine, which was acquired in October 2022.
Total IT consulting services revenues were $1.78 billion (52.6 percent of total revenues), up 15.2 percent year-over-year. Federal Government Segment revenues, which are all consulting revenues, were $950.7 million, up 12.2 percent year-over-year as stated above, and Commercial Segment consulting revenues were $827.0 million, up 18.9 percent year-over-year. The growth in IT consulting services revenues was offset by a 15.3 percent year-over-year decline in assignment revenues which totaled $1.60 billion (47.4 percent of total revenues), reflecting continued softness in the more discretionary and cyclical portions of the Commercial Segment business. On a same Billable Day basis, adjusting for 1.75 fewer Billable Days in the first nine months of 2023 compared to the same period in 2022, assignment revenues declined 14.5 percent.
Gross Profit and Gross Margin
The table below shows gross profit and gross margin by segment for the nine months ended September 30, 2023 and 2022 (in millions).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Gross Profit | | | | Gross Margin | | |
| | 2023 | | 2022 | | | | Change | | | | 2023 | | 2022 | | | | Change | | |
| | | | | | | | | | | | | | | | | | | | |
Commercial | | $ | 777.5 | | | $ | 852.1 | | | | | (8.8 | %) | | | | 32.1 | % | | 33.0 | % | | | | (0.9 | %) | | |
Federal Government | | 197.6 | | | 177.4 | | | | | 11.4 | % | | | | 20.8 | % | | 20.9 | % | | | | (0.1 | %) | | |
Consolidated | | $ | 975.1 | | | $ | 1,029.5 | | | | | (5.3 | %) | | | | 28.9 | % | | 30.0 | % | | | | (1.1 | %) | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Consolidated gross profit declined 5.3 percent on revenue decline of 1.6 percent. Gross margin was 28.9 percent, a compression of 110 basis points over the first nine months of 2022. The compression mainly related to business mix: (i) within the Commercial Segment, a lower mix of certain high-margin assignment revenues, namely, creative digital marketing and permanent placement revenues, which was partially offset by a higher mix of high-margin IT consulting revenues with a year-over-year expansion in margin, and (ii) a higher mix of revenues from the Federal Government Segment, which have a lower gross margin than commercial revenues.
Selling, General and Administrative Expenses
SG&A expenses were $640.6 million (19.0 percent of revenues), compared with $665.1 million (19.4 percent of revenues) in the first nine months of 2022. This improvement was primarily due to lower incentive compensation expense.
Amortization of Intangible Assets
Amortization of intangible assets was $53.8 million, up from $166.4$45.3 million in the first nine months of 2021 driven by the growth2022. This increase reflects amortization expense related to businesses acquired in the businesssecond half of last year.
Interest Expense
Interest expense was $49.7 million up from $31.5 million in 2022, primarily as a result of higher interest rates on the senior secured credit facility, and also included $2.3 million of costs related to the expansionAugust 2023 amendments to the senior secured credit facility. The weighted-average outstanding borrowings and cash-based interest rate in the first nine months of our gross margin.2023 and 2022 were $1.1 billion and 5.8 percent (excluding costs related to aforementioned amendments), and $1.0 billion and 3.8 percent, respectively.
Provision for Income Taxes
The provision for income taxes was $62.0 million, down from $76.3 million in the first nine months of 2022 due to lower income before income taxes. The effective tax rate was 26.8 percent, up from 26.5 percent in the first nine months of 2022.
Income from Continuing Operations
Income from continuing operations was $169.0 million, down from $211.3 million in the first nine months of 2022.
Income from Discontinued Operations
Income from discontinued operations was $1.2 million compared with $158.5 million in the first nine months of 2021. In the prior year, virtually all of the income from discontinued operations related to the gain, net of income taxes, on the sale of the Oxford business.2022.
Net Income
Net income of $169.0 million, down from $212.5 million was comprisedin the first nine months of income from continuing operations of $211.3 million and discontinued operations of $1.2 million.2022.
Commercial Segment - Consulting Metrics
Commercial consulting bookings are defined as the value of new contracts entered into during a specified period, including adjustments for the effects of changes in contract scope and contract terminations.terminations ("Bookings"). The underlying contracts are terminable by the client on short notice with little or no termination penalties. The book-to-bill ratio for our commercial consulting revenues is the ratio of our commercial consulting bookingsBookings to the commercial consulting revenues for a specified period. The average duration of commercial consulting projects is one year.
| | | Three Months Ended | | Nine Months Ended | | Trailing-Twelve-Months Ended | | Three Months Ended | | | Trailing-Twelve-Months Ended |
| | September 30, | | September 30, | | September 30, | | September 30, | | | September 30, |
(Dollars in millions) | (Dollars in millions) | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | (Dollars in millions) | | 2023 | | 2022 | | | 2023 | | 2022 |
Bookings | Bookings | | $ | 254.3 | | | $ | 185.7 | | | $ | 892.4 | | | $ | 585.4 | | | $ | 887.2 | | | $ | 558.9 | | Bookings | | $ | 291.0 | | | $ | 254.3 | | | | $ | 1,340.0 | | | $ | 1,117.3 | |
Book-to-Bill Ratio | Book-to-Bill Ratio | | 0.9 to 1 | | 1.0 to 1 | | 1.3 to 1 | | 1.3 to 1 | | 1.3 to 1 | | 1.3 to 1 | Book-to-Bill Ratio | | 1.1 to 1 | | 0.9 to 1 | | | 1.2 to 1 | | 1.3 to 1 |
Federal Government Segment Metrics
Contract backlog for our Federal Government Segment represents the estimated amount of future revenues to be recognized under awarded contracts, including task orders and options.options, at a point in time ("Contract Backlog"). These estimates are subject to change and may be affected by the execution of new contracts, the extension or early termination of existing contracts, the non-renewal or completion of current contracts and adjustments to estimates for previously included contracts. Changes inThe timing of the funded contract backlogexecution of new contracts and other changes are also affected by the funding cycles of the government.
| | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | September 30, 2022 | | December 31, 2021 | | September 30, 2021 |
Funded Contract Backlog | | $ | 548.0 | | | $ | 529.2 | | | $ | 558.3 | |
Negotiated Unfunded Contract Backlog | | 2,564.6 | | | 2,472.0 | | | 2,575.1 | |
Contract Backlog | | $ | 3,112.6 | | | $ | 3,001.2 | | | $ | 3,133.4 | |
| | | | | | |
Contract Backlog Coverage Ratio | | 2.8 to 1 | | 2.6 to 1 | | 2.6 to 1 |
___
government and can vary from quarter to quarter. New contract awards are the estimated amount of future revenues to be recognized under contracts awarded during a specified period, including adjustments to estimates for contracts awarded in previous periods (“New Contract Awards”). Due to variability, New Contract Awards are presented on a trailing-twelve-months (“TTM”) basis. The book-to-bill ratio for our Federal Government Segment is the ratio of New Contract Awards to revenues for a specified period. Contract backlog coverage ratio is calculated as total contract backlogContract Backlog divided by trailing-twelve-months of Federal Government SegmentTTM revenues.
The book-to-bill ratio for our Federal Government Segment was 1.0 to 1 and 1.1 to 1 for the trailing-twelve-months ended September 30, 2022 and 2021, respectively. The book-to-bill ratio was calculated as the sum of the change in total contract backlog during the period plus revenues for the period, divided by revenues for the period.
| | | | | | | | | | | |
| TTM Ended September 30, |
(Dollars in millions) | 2023 | | 2022 |
New Contract Awards | $ | 1,080.8 | | | $ | 1,089.6 | |
Book-to-Bill Ratio | 0.9 to 1 | | 1.0 to 1 |
| | | | | | | | | | | | | | | | | | | | |
(Dollars in millions) | | September 30, 2023 | | December 31, 2022 | | September 30, 2022 |
Funded Contract Backlog | | $ | 701.0 | | | $ | 582.3 | | | $ | 548.0 | |
Negotiated Unfunded Contract Backlog | | 2,577.8 | | | 2,681.2 | | | 2,564.6 | |
Contract Backlog | | $ | 3,278.8 | | | $ | 3,263.5 | | | $ | 3,112.6 | |
| | | | | | |
Contract Backlog Coverage Ratio | | 2.6 to 1 | | 2.9 to 1 | | 2.8 to 1 |
Liquidity and Capital Resources
Our working capital, which is current assets less current liabilities, at September 30, 20222023 was $627.7$550.7 million, and our cash and cash equivalents were $211.2$145.6 million. Our cash flows from operating activities have been our primary source of liquidity and have been sufficient to meet our working capital and capital expenditure needs. At September 30, 2022,2023, we had $204.0 million availablefull availability under the $250.0$500.0 million revolving credit facility. We believe that our cash and cash equivalents on hand, expected operating cash flows and availability under our revolving credit facility will be sufficient to fulfill our obligations, working capital requirements and capital expenditures for the next 12 months.
Net cash provided by operating activities was $232.5$340.5 million for the first nine months of 2022,2023, compared with $275.9$232.5 million in the same period of 2021.2022. Net cash provided by operating activities before changes in operating assets and liabilities was $286.6 million, compared with $320.0 million in the same period of 2022. Changes in operating assets and liabilities resulted in net cash generation of $53.9 million, compared with net cash usage of $87.5 million in the same period of 2022. This year-over-year change mainlyprimarily related to an increaselower accounts receivable due to decreasing revenues in the first nine months of 2023 as well as improvement in accounts receivable days sales outstanding and timing("DSO"), compared with the same period of certain payments.2022 which had increasing accounts receivable due to revenue growth as well as an increase in DSO.
Net cash used in investing activities was $366.6$33.3 million for the first nine months of 20222023 and was primarily comprised of $32.7 million for capital expenditures. Net cash used in investing activities in the first nine months of the prior year was $366.6 million and included $351.8 million for the acquisition of GlideFast and $27.0 million for capital expenditures, partially offset by $9.8 million in cash received related to the finalization of the purchase price for the sale of the Oxford business. Net cash provided by investing activities in the first nine months of last year was $249.2 million and was comprised of $499.1 million from the sale of Oxford, partially offset by $224.4 million for acquisitions and $25.6 million for capital expenditures.a business.
Net cash used in financing activities was $183.7$231.6 million for the first nine months of 2022, compared with2023 and included $197.7 million to repurchase the Company's common stock, net cash usedrepayments of $119.4borrowings under the revolving credit facility totaling $31.5 million, inand the same periodeffects of 2021.the August 2023 amendments to the Company's senior secured credit facility which generated net proceeds of $8.0 million that were offset by related amendment costs. Net cash used in financing activities forin the first nine months of 2022the prior year was $183.7 million and was primarily comprised of $227.6 million to repurchase the Company's commonfor stock repurchases, partially offset by $46.0 million of borrowings under the revolving credit facility. There were $118.4 million of common stock repurchases in the first nine months of last year.
Senior Secured Credit Facility — TheFor details on the Company’s senior secured credit facility, consistscomprised of a term B loan and a $250.0 million revolving credit facility. At September 30, 2022, the Company had $490.8 million outstanding under thefacility and term loan B, loan and $46.0 million outstanding under the revolver. Borrowings under the term B loan bear interest at LIBOR plus 1.75 percent, or the bank’s base rate plus 0.75 percent. Borrowings under the revolver bear interest at LIBOR plus 1.25 to 2.25 percent, or the bank’s base rate plus 0.25 to 1.25 percent, depending on leverage levels. A commitment fee of 0.20 to 0.35 percent is payable on the undrawn portion of the revolver. There are no required minimum principal payments on the facility until maturity. The facility is secured by substantially all of the Company's assets and includes various restrictive covenants. At September 30, 2022, the Company was in compliance with its debt covenants. In July 2021, the Company amended its facility to, among other things, permit the sale of its Oxford business and allow the net cash proceeds (approximately $0.4 billion) to be used for future acquisitions and other permitted investments. With the acquisition of GlideFast on July 6, 2022 (unsecured senior notes, see see Note 3. Acquisitions to the condensed consolidated financial statements Long-Term Debt in Part I Item 1.) and other investments of the net cash proceeds, no debt prepayments were required.
Unsecured Senior Notes — The Company has $550.0 million of unsecured senior notes due in 2028, which bear interest at 4.625 percent payable semiannually in arrears on May 15 and November 15. These notes are unsecured obligations and subordinate to the senior secured credit facility. These notes contain certain customary limitations including, among other terms and conditions, our ability to incur additional indebtedness, engage in mergers and acquisitions, transfer or sell assets and make certain distributions.
Recent Accounting Pronouncements
See “Note 2 - Accounting Standards Update” inThere have been no recent accounting pronouncements that significantly impact the notes to the condensed consolidated financial statements in Part I, Item 1.Company.
Critical Accounting Policies
There were no significant changes to our critical accounting policies and estimates during the third quarter of 20222023 compared with those disclosed in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 20212022 10-K.
Commitments
There were no material changes to the significant commitments or contractual obligations that were disclosed in our 20212022 10-K.
Item 3 — Quantitative and Qualitative Disclosures about Market Risks
With respect to our quantitative and qualitative disclosures about interest rates risks, there have been no material changes to the information included in our 20212022 10-K. A hypothetical 100 basis-point change in interest rates on variable-rate debt would have resulted in an interest expense fluctuation of approximately $5.4$5.0 million based on $536.8$500.0 million of debt outstanding for any 12-month period.
Item 4 — Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on this evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report. The term "disclosure controls and procedures" means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods. We have established disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in our internal controls over financial reporting that occurred during the three months ended September 30, 20222023 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1 — Legal Proceedings
We are involved in various legal proceedings, claims and litigation arising in the ordinary course of business.business, and collective class and PAGA actions alleging violations of wage and hour laws. However, based on the facts currently available, we do not believe that the disposition of matters that are pending or asserted will have a material effect on our financial position, results of operations or cash flows.
Item 1A — Risk Factors
There have been no material changes to the risk factors previously described in our 20212022 10-K.
Item 2 — Unregistered Sales of Securities and Use of Proceeds
On December 9, 2021, the Board of Directors approved a two-year stock repurchase program under which the Company may repurchase up to $350.0 million of its common stock. On July 27, 2022,April 24, 2023, the Company's Board of Directors approved a new stock repurchase program under which the Company may repurchase up to $400.0$500.0 million of its common stock over the nextfollowing two years.years and this replaces the previous program. Under terms of thethis program, purchases can be made in the open market or under a Rule 10b5-1 trading plan. The stock repurchase program does not obligate the Company to acquire any particular amount of the Company's stock and may be suspended at any time at the Company's discretion. The new program superseded and replaced any remaining availability under the Company's previous $350.0 million stock repurchase program.
The Company's repurchases of its common stock during the three months ended September 30, 20222023 are shown in the table below.
| Period | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or Programs (in millions) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares That May Yet be Purchased Under the Plans or Programs (in millions) |
July | July | 286,580 | | $ | 92.85 | | 286,580 | | $ | 398.5 | | July | 166,175 | | $ | 78.26 | | 166,175 | | $ | 427.8 | |
August | August | 161,303 | | $ | 102.68 | | 161,303 | | $ | 381.9 | | August | 550,322 | | $ | 80.12 | | 550,322 | | $ | 383.7 | |
September | September | 145,456 | | $ | 92.88 | | 145,456 | | $ | 368.4 | | September | 434,284 | | $ | 79.87 | | 434,284 | | $ | 349.1 | |
Total | Total | 593,339 | | $ | 95.53 | | 593,339 | | $ | 368.4 | | Total | 1,150,781 | | $ | 79.76 | | 1,150,781 | | $ | 349.1 | |
In connection with our stock-based compensation plans, during the three months ended September 30, 2022, 17,4902023, 18,683 shares of our common stock with an aggregate value of $1.6$1.5 million were tendered by employees for payment of applicable statutory tax withholding. These shares are excluded from the table above.
Item 3 — Defaults Upon Senior Securities
None.
Item 4 — Mine Safety Disclosures
None.
Item 5 — Other Information
None.(c) During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6 — Exhibits
INDEX TO EXHIBITS
| | | | | | | | |
Number | | Description |
3.1 | | |
3.2 | | |
3.3 | |
|
4.1 | | Specimen Common Stock Certificate (incorporated by reference from an exhibit to the Company's Registration Statement on Form S-1 (File No. 33-50646) declared effective on September 21, 1992) (P) |
10.1* | | EmploymentThird Amended and Restated Credit Agreement, effective dated as of January 31, 2022,August 31, 2023, by and between among ASGN Incorporated, as the Companyborrower, Wells Fargo Bank, National Association, as administrative agent, swing line lender, and Marie L. PerryL/C issuer, and the lenders named therein |
31.1* | | |
31.2* | | |
32.1* | | |
32.2* | | |
101 | | The following material from this Quarterly Report on Form 10-Q of ASGN Incorporated, Part I, Item 1 of this Form 10-Q formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations and Comprehensive Income; (iii) Condensed Consolidated Statement of Stockholders’ Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) related notes to these financial statements. |
104 | | Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101) |
| | |
* | Filed herewith. |
(P) | This exhibit originally filed in paper format. Accordingly, a hyperlink has not been provided. |
SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| ASGN Incorporated |
| | |
Date: November 4, 20221, 2023 | By: | /s/ Marie L. Perry |
| | Marie L. Perry |
| | Executive Vice President and Chief Financial Officer |
| | (Principal Financial Officer and Duly Authorized Officer) |
| | |
| | |
Date: November 4, 20221, 2023 | By: | /s/ Rose L. Cunningham |
| | Rose L. Cunningham |
| | Vice President, FinanceChief Accounting Officer and Corporate Controller |
| | |
| | |
| | |