asgn-20230930

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, 2023


☐			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, 2023, the total number of outstanding shares of the Common Stock of ASGN Incorporated (the "Company") ($0.01 par value) was 47.2 million.

ASGN INCORPORATED AND SUBSIDIARIES

INDEX


PART I — FINANCIAL INFORMATION

Item 1 — Condensed Consolidated Financial Statements (Unaudited)			3

Condensed Consolidated Balance Sheets			3

Condensed Consolidated Statements of Operations and Comprehensive Income			4

Condensed Consolidated Statements of Stockholders’ Equity			5

Condensed Consolidated Statements of Cash Flows			6

Notes to Condensed Consolidated Financial Statements			7

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations			12

Item 3 — Quantitative and Qualitative Disclosures about Market Risks			16

Item 4 — Controls and Procedures			17

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings			18

Item 1A — Risk Factors			18

Item 2 — Unregistered Sales of Securities and Use of Proceeds			18

Item 3 — Defaults Upon Senior Securities			18

Item 4 — Mine Safety Disclosures			18

Item 5 — Other Information			18

Item 6 — Exhibits			19

Signature			20

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, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	145.6	$	70.3
Accounts receivable, net	804.6		853.6
Prepaid expenses and income taxes	25.4		39.9
Other current assets	18.3		17.3
Total current assets	993.9		981.1
Property and equipment, net	78.6		66.3
Operating lease right-of-use assets	60.1		51.1
Identifiable intangible assets, net	515.7		569.6
Goodwill	1,893.5		1,892.0
Other non-current assets	37.1		25.6
Total assets	$	3,578.9	$	3,585.7
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	32.1	$	35.2
Accrued payroll	250.8		285.1
Operating lease liabilities	20.5		22.9

Other current liabilities	139.8		98.7
Total current liabilities	443.2		441.9
Long-term debt	1,037.5		1,066.6
Operating lease liabilities	43.5		32.3
Deferred income tax liabilities	130.6		129.2
Other long-term liabilities	15.4		14.4
Total liabilities	1,670.2		1,684.4
Commitments and contingencies
Stockholders’ equity:
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; 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	701.9		703.5
Retained earnings	1,207.9		1,200.0
Accumulated other comprehensive loss	(1.6)		(2.7)
Total stockholders’ equity	1,908.7		1,901.3
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
	September 30,				September 30,
	2023		2022		2023		2022
Revenues	$	1,116.8	$	1,197.9	$	3,376.5	$	3,430.7
Costs of services	794.4		839.0		2,401.4		2,401.2
Gross profit	322.4		358.9		975.1		1,029.5
Selling, general and administrative expenses	206.0		232.6		640.6		665.1
Amortization of intangible assets	17.8		17.9		53.8		45.3
Operating income	98.6		108.4		280.7		319.1
Interest expense	(18.5)		(12.1)		(49.7)		(31.5)
Income before income taxes	80.1		96.3		231.0		287.6
Provision for income taxes	20.7		25.2		62.0		76.3
Income from continuing operations	59.4		71.1		169.0		211.3

Income from discontinued operations, net of income taxes	—		2.1		—		1.2
Net income	$	59.4	$	73.2	$	169.0	$	212.5

Earnings per share:
Basic —
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 —
Continuing operations	$	1.23	$	1.40	$	3.43	$	4.09
Discontinued operations	—		0.04		—		0.02
	$	1.23	$	1.44	$	3.43	$	4.11

Shares and share equivalents used to calculate earnings per share:
Basic	48.1		50.1		48.8		50.9
Diluted	48.4		50.7		49.2		51.6

Reconciliation of net income to comprehensive income:
Net income	$	59.4	$	73.2	$	169.0	$	212.5
Foreign currency translation adjustment	(1.3)		(2.2)		1.1		(3.9)
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
	Shares	Par Value
Three Months Ended September 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	—	—		10.3		—		—		10.3
Issuances under equity plans	0.2	—		7.8		—		—		7.8
Tax withholding on restricted stock vesting	—	—		(1.5)		—		—		(1.5)
Stock repurchases and retirement of shares	(1.2)	—		(17.5)		(75.1)		—		(92.6)
Other	—	—		—		—		(1.3)		(1.3)
Net income	—	—		—		59.4		—		59.4
Balance at September 30, 2023	47.5	$	0.5	$	701.9	$	1,207.9	$	(1.6)	$	1,908.7

Three Months Ended September 30, 2022
Balance at June 30, 2022	50.4	$	0.5	$	692.1	$	1,165.5	$	(2.0)	$	1,856.1
Stock-based compensation expense	—	—		11.9		—		—		11.9
Issuances under equity plans	0.2	—		8.5		—		—		8.5
Tax withholding on restricted stock vesting	—	—		(1.6)		—		—		(1.6)
Stock repurchases and retirement of shares	(0.6)	—		(8.2)		(48.6)		—		(56.8)
Other	—	—		—		—		(2.2)		(2.2)
Net income	—	—		—		73.2		—		73.2
Balance at September 30, 2022	50.0	$	0.5	$	702.7	$	1,190.1	$	(4.2)	$	1,889.1

	Common Stock			Paid-in Capital		Retained Earnings		Other		Total
	Shares	Par Value
Nine Months Ended September 30, 2023
Balance at December 31, 2022	49.5	$	0.5	$	703.5	$	1,200.0	$	(2.7)	$	1,901.3
Stock-based compensation expense	—	—		33.7		—		—		33.7
Issuances under equity plans	0.6	—		18.9		—		—		18.9
Tax withholding on restricted stock vesting	—	—		(15.7)		—		—		(15.7)
Stock repurchase and retirement of shares	(2.6)	—		(38.5)		(161.1)		—		(199.6)
Other	—	—		—		—		1.1		1.1
Net income	—	—		—		169.0		—		169.0
Balance at September 30, 2023	47.5	$	0.5	$	701.9	$	1,207.9	$	(1.6)	$	1,908.7

Nine Months Ended September 30, 2022
Balance at December 31, 2021	51.8	$	0.5	$	690.8	$	1,174.4	$	(0.3)	$	1,865.4
Stock-based compensation expense	—	—		35.9		—		—		35.9
Issuances under equity plans	0.4	—		18.9		—		—		18.9
Tax withholding on restricted stock vesting	—	—		(12.9)		—		—		(12.9)
Stock repurchase and retirement of shares	(2.2)	—		(30.0)		(196.8)		—		(226.8)
Other	—	—		—		—		(3.9)		(3.9)
Net income	—	—		—		212.5		—		212.5
Balance at September 30, 2022	50.0	$	0.5	$	702.7	$	1,190.1	$	(4.2)	$	1,889.1

See notes to condensed consolidated financial statements.

ASGN INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in millions)


	Nine Months Ended
	September 30,
	2023		2022
Cash Flows from Operating Activities
Net income	$	169.0	$	212.5
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization	74.6		64.8
Stock-based compensation	33.7		35.9

Other	9.3		6.8
Changes in operating assets and liabilities, net of effects of acquisitions and divestiture:
Accounts receivable	48.1		(154.2)
Prepaid expenses and income taxes	14.5		26.4
Accounts payable	(2.5)		10.0
Accrued payroll	(34.8)		20.0
Income taxes payable	31.6		15.1
Other	(3.0)		(4.8)
Net cash provided by operating activities	340.5		232.5
Cash Flows from Investing Activities
Cash paid for property and equipment	(32.7)		(27.0)
Cash paid for acquisitions, net of cash acquired	—		(351.8)
Cash received from the sale of a business	—		9.8
Other	(0.6)		2.4
Net cash used in investing activities	(33.3)		(366.6)
Cash Flows from Financing Activities


Proceeds from long term debt	571.8		46.0
Principal payments of long term debt	(595.3)		—
Debt issuance and amendment costs	(8.6)		—
Proceeds from employee stock purchase plan	18.9		18.9
Repurchases of common stock	(197.7)		(227.6)
Payment of employment taxes related to release of restricted stock awards	(15.7)		(12.9)
Payment of contingent consideration	(5.0)		(8.1)

Net cash used in financing activities	(231.6)		(183.7)
Effect of exchange rate changes on cash and cash equivalents	(0.3)		(0.6)
Net increase (decrease) in cash and cash equivalents	75.3		(318.4)

Cash and cash equivalents at beginning of year	70.3		529.6
Cash and cash equivalents at end of period	$	145.6	$	211.2


Supplemental Disclosure of Cash Flow Information
Cash paid for —
Income taxes	$	12.0	$	33.4
Interest	$	39.4	$	23.6
Operating leases	$	20.0	$	20.4
Noncash transactions —



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, 2022 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, 2022 ("2022 10-K").

2. Goodwill and Identifiable Intangible Assets

The following table summarizes the activity related to the carrying amount of goodwill by segment since December 31, 2021 (in millions).


	Commercial		Federal Government		Total




Balance as of December 31, 2021	$	829.3	$	740.2	$	1,569.5
2022 acquisitions	246.4		85.5		331.9
Purchase price adjustments	0.4		(8.5)		(8.1)
Translation adjustment	(1.4)		—		(1.4)
Balance as of December 31, 2022	1,074.7		817.2		1,891.9

Purchase price adjustments	—		1.1		1.1
Translation adjustment	0.5		—		0.5


Balance as of September 30, 2023	$	1,075.2	$	818.3	$	1,893.5

________________________________

Approximately $250.7 million of the goodwill for the 2022 acquisitions is deductible for income tax purposes.

Acquired identifiable intangible assets consisted of the following (in millions):


		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
Customer and contractual relationships	1 - 13	$	589.3	$	360.4	$	228.9	$	589.3	$	315.7	$	273.6

Contract backlog	1 - 3	44.1		42.2		1.9		44.1		36.5		7.6
Non-compete agreements	1 - 7	41.2		29.1		12.1		41.2		25.6		15.6

		674.6		431.7		242.9		674.6		377.8		296.8
Not subject to amortization:
Trademarks		272.8		—		272.8		272.8		—		272.8
Total		$	947.4	$	431.7	$	515.7	$	947.4	$	377.8	$	569.6

Estimated future amortization expense follows (in millions):


Remainder of 2023	$	17.9
2024	58.1
2025	48.8
2026	41.8
2027	32.0
Thereafter	44.3
	$	242.9

3. Long-Term Debt

Long-term debt consisted of the following (in millions):


	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 — In August 2023, the Company amended its senior secured credit facility (the "facility") to extend the maturity date of the term loan B ("term loan") to August 2030 and the maturity date of the revolving credit 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 loan bear interest, at the Company's election, at (i) the secured overnight financing rate ("SOFR") plus 2.25 percent, or (ii) the bank’s base rate plus 1.25 percent. Borrowings under the revolver bear interest, at the Company's election, at (i) SOFR plus a 10 basis points adjustment plus 2.00 to 3.00 percent, or (ii) the bank’s base rate plus 1.00 to 2.00 percent, depending on leverage levels. A commitment fee of 0.30 to 0.45 percent is payable on the undrawn portion of the revolver. The facility is subject to various restrictive covenants including, when amounts are drawn under the revolver, a maximum ratio of senior secured debt to trailing-twelve-months of lender-defined consolidated EBITDA of 3.75 to 1, which was 0.95 to 1 at September 30, 2023. The facility is secured by substantially all of the Company's assets and at September 30, 2023, the Company was in compliance with its debt covenants.

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.

4. Commitments and Contingencies

The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of 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.

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.

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,
	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

7. Segment Reporting

ASGN provides information technology ("IT") services and professional solutions across the commercial and government sectors. ASGN operates through two 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 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.

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,

Septe

SEC Form 10-Q filed by ASGN Incorporated