ASGN Incorporated Q1 2020 Earnings Release Supplemental Materials
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ASGN Incorporated Q1 2020 Earnings Release
Supplemental Materials
ASGN Incorporated. All rights reserved. 1
© 2019 ASGN Incorporated. All rights reserved.
Table of Contents
• Safe Harbor 3
• Key Takeaways – Q1 2020 4
• COVID-19 Update 5
• Q1 2020 Consolidated Performance 6
• Apex Segment Results 7
• ECS Segment Results 8
• ECS Contract Backlog & Book-to-Bill Ratio 9
• Oxford Segment Results 10
• Illustrative Financial Scenarios – Q2 2020 11
• Second Quarter 2020 Scenario Inputs 12
• Footnotes 13
2
© 2020 ASGN Incorporated. All rights reserved.Safe Harbor
Certain statements made in this presentation are “forward-looking statements” within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and involve a
high degree of risk and uncertainty. Forward-looking statements include statements regarding
our anticipated financial and operating performance.
All statements in this presentation, other than those setting forth strictly historical information,
are forward-looking statements. Forward-looking statements are not guarantees of future
performance and actual results might differ materially. In particular, we make no assurances
that the proposed revenue scenarios outlined in this presentation will be achieved. Additional
examples of forward-looking statements in this presentation include, without limitation,
statements regarding the expected impact of the COVID-19 global pandemic on our
competitive position and demand for our services; our ability to attract, train and retain qualified
staffing consultants, the availability of qualified contract professionals, management of our
growth, continued performance and improvement of our enterprise-wide information systems,
our ability to manage our litigation matters, the successful integration of our acquired
subsidiaries, and other risks detailed from time to time in our reports filed with the SEC,
including our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with
the SEC on March 2, 2020. We specifically disclaim any intention or duty to update any
forward-looking statements contained in this presentation.
3
© 2020 ASGN Incorporated. All rights reserved.Key Takeaways — Q1 2020
REVENUES Solid Performance in Q1:
• Revenues and Adjusted EBITDA within guidance ranges for
$990.5 Million 7.2% Y-Y
the quarter despite unprecedented challenges relating to
COVID-19
• Growth led by above-market performance at ECS along
NET INCOME
with growth by the Apex Segment
$43.8 Million 25.5% Y-Y
Blackstone Federal Acquisition:
• Closed $85 million acquisition on January 24, adding prime
ADJUSTED NET INCOME contract pathways within the Department of Homeland
$57.7 Million 16.8% Y-Y Security (DHS)
• Fully integrated into the ECS business at the completion of
Q1
ADJUSTED EBITDA
$103.5 Million 6.6% Y-Y Successful Strategy Execution:
• Evolution to IT Services
• Expansion of large-account portfolio
FREE CASH FLOW • Increased exposure to the Federal government marketplace
• Continued organic growth combined with select, strategic
$48.8 Million 33.9% Y-Y
tuck-in acquisitions
• Growth in higher-end, higher-margin IT consulting services
LEVERAGE RATIO1 and solutions for commercial and government clients
1.14 to 1.0 Senior Secured Leverage Ratio Achievements Driven By:
• Access to highly-skilled labor and differentiated deployment
model
BOOK-TO-BILL RATIO2 (ECS SEGMENT) • Capabilities in advanced Federal IT solutions
1.4 to 1.0 Q1 2020 • Disciplined approach to capital allocation
4
© 2020 ASGN Incorporated. All rights reserved.COVID-19 Update
• Solid first quarter 2020 results despite downturn beginning in mid-March
• Through February growth tracked at or above internal estimates
Q1 2020 Impact • March saw leveling off or retraction of commercial market revenues, while
Federal Government business remained strong
• Implemented business continuity plans prioritizing safety and health of employees
• Shifted 100% internal workforce and 80% billable consultants to remote; only
Proactive small portion of essential staff remain on site
• Repaid all borrowings under $250M revolver as of April 30, 2020; now have full
Measures Taken availability
• Paused share repurchase program in the quarter
ASGN is Strongly • Increasingly IT-centric with expanded high-end solutions capabilities
• Expanded large account portfolio and exposure to Federal government
Positioned for the • Highly experienced & capable management team
• Smart capital deployment – solid liquidity and free cash flow generation
Future
ASGN is better positioned now to manage through an economic downturn
than at any other time in the Company’s history.
5
© 2020 ASGN Incorporated. All rights reserved.Q1 2020 Consolidated Performance
Revenues Revenue Mix3
($ in millions)
$990.5
$923.7
+7.2%
+7.23%
Q1 2019 Q1 2020
Adjusted EBITDA4 Adjusted EPS4
($ in millions) Operating Cash Flows Cash Paid for Acquisitions
$97.1
$103.5
$1.08 $64.1M $85M
$0.93 Paid for Blackstone Federal
on 1/24/2020
+6.6% +16.1%
10.5%5 10.5%5 Capital Expenditures
Share Repurchases
$27.9M $15.3M
(762,501 Shares)
Q1 2019 Q1 2020 Q1 2019 Q1 2020
6
© 2020 ASGN Incorporated. All rights reserved.Apex Segment — 63.5% of Q1 2020 Consolidated Revenues
Revenues Gross Profit Revenue Mix
($ in millions) ($ in millions)
Perm
$629.1 Placement
$606.1
$184.5 2.1%
$175.4
+5.2%
+3.8%
28.9%6 29.3%6
Assignment
&
Consulting
97.9%
Q1 2019 Q1 2020 Q1 2019 Q1 2020
Recent Trends
• Industry diversification, large account portfolio and exposure to financial services provides stability
• Apex/Intersys partnership leading to joint wins; Mexico Delivery Center seeing traction with U.S.
clients
• 24.4% consulting services revenue growth Y-Y
7
© 2020 ASGN Incorporated. All rights reserved.ECS Segment — 21.5% of Q1 2020 Consolidated Revenues
Revenues Gross Profit Contract Type
($ in millions) ($ in millions)
Firm-Fixed-
Price Time &
26.8% Materials
$212.7 $37.1 34.0%
$168.0 $29.6
+26.6% Cost
+25.3% Reimbursable
39.2%
Customer
17.6%6 17.4%6
Federal
Civilian
39.8%
Defense &
Intel
54.0%
Commercial
& Other
Q1 2019 Q1 2020 Q1 2019 Q1 2020 6.2%
Recent Trends
• Continued industry-leading revenue growth
• No slowdown in March despite pandemic
• High demand for machine learning, artificial intelligence services and cloud solutions
8
© 2020 ASGN Incorporated. All rights reserved.ECS Contract Backlog & Book-to-Bill Ratio
$2,694.3 $2,677.3
$2,571.1
Contract Backlog ($M)7
$1,946.0
$1,776.5
$2,200.0 $2,082.7 $2,186.7
$1,317.9 $1,589.4
$458.6 $356.6 $494.3 $488.4 $490.6
Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20
8 9
Funded Backlog Unfunded Backlog
4.6
Book-to-Bill Ratio2
1.9 2.4 2.1 2.0
1.5
0.5
1.3 1.5 1.4
Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20
Book-to-Bill Trailing Twelve Months Book-to-Bill
9
© 2020 ASGN Incorporated. All rights reserved.Oxford Segment — 15.0% of Q1 2020 Consolidated Revenues
Revenues Gross Profit Revenue Mix
($ in millions) ($ in millions)
Perm
Placement
13.9%
$149.6 $148.7 $58.9 $59.3
+0.7%
39.4%6 39.9%6
Assignment
&
Consulting
Q1 2019 Q1 2020 Q1 2019 Q1 2020 86.1%
Recent Trends
• Consistent performance vs. prior year despite pandemic
• Permanent placement revenues up Y-Y in Q1
• 9% consulting services revenue growth Y-Y
10
© 2020 ASGN Incorporated. All rights reserved.Illustrative Financial Scenarios — Q2 2020
The table below is provided for illustrative purposes only and is not intended to provide guidance as to the outcome of the Company’s
results for the second quarter. The table estimates what the Company’s financial outcomes could look like if such revenue scenarios were
to occur, and are solely for the purposes of illustrating financial effects of actions that would be taken to manage operating costs and
expenses.
Quarter Ended Quarter Ending June 30, 2020
June 30, Year-over-Year Decline in Revenues
($'s in millions) 2019 -5.0% -7.5% -10.0%
Revenues $ 972.3 $ 923.7 $ 899.7 $ 875.3
Permanent Placement as a % of Revenues 3.8% 1.9% 2.0% 2.0%
Gross Margin 29.3% 27.7% 27.6% 27.5%
Contract Gross Margin10 26.5% 26.3% 26.2% 26.2%
11
Adjusted SG&A Expense Margin 17.9% 17.2% 17.6% 17.9%
Adjusted EBITDA Margin 11.7% 10.6% 10.2% 9.8%
Senior Secured Debt (Term B Facility) - Outstanding $ 490.8 $ 490.8 $ 490.8
12
Availability under $250.0 million Revolving Credit $ 250.0 $ 250.0 $ 250.0
1
Senior Secured Leverage Ratio (end of period) 1.12x 1.14x 1.15x
All illustrative scenarios assume–
• High-single digit year-over-year revenue growth for ECS Segment (ECS accounted for 21.5 percent of total revenues in Q1 2020)
• Decline of over 50.0 percent year-over-year in permanent placement and conversion fees
• Reductions in costs of services, incentive compensation (commissions and bonuses), headcount, travel & entertainment, outside services costs,
costs for events and discretionary spending
• No one-time charges are anticipated in these scenarios
Revenue decline of 5.0 percent assumes the low point (trough) of weekly Assignment Revenue occurs in late May and improves slightly
week-to-week thereafter
Revenue decline of 10.0 percent assumes weekly Assignment Revenue declines occur through the end of the quarter
11
© 2020 ASGN Incorporated. All rights reserved.Second Quarter 2020 Scenario Inputs
In millions, except for tax rate and billable days
$1.2 – Cost of Services
Depreciation $9.3 $8.1 – SG&A
Stock Based
Compensation $8.8
Amortization of
Intangibles $12.6
Interest
Expense $10.3
Effective Tax
Rate13 27.0%
Diluted
Outstanding 53.1
Shares
Q1 Q2 Q3 Q4
FY 2020 63.00 63.75 64.00 60.50
Billable Days14 63.75
FY 2019 62.00 64.00 63.00 60.50
12
© 2020 ASGN Incorporated. All rights reserved.Footnotes
1The ratio of the aggregated principal amount of consolidated indebtedness secured by a Lien on asset of ASGN or any of its subsidiaries to Lender defined trailing 12-
months of EBITDA (Maximum leverage allowable is 4.25 to 1.0 of borrowings outstanding under revolver).
2 Book-to-bill ratio is 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.
3 Assignment/Consulting and Perm Placement revenues includes both Apex and Oxford Segments.
4 This
presentation includes non-GAAP financial measures. A description of these non-GAAP financial measures and the reconciliation from the comparable GAAP
measures to the non-GAAP measures are included in the earnings release for the first quarter of 2020.
5 Adjusted EBITDA margin (a non-GAAP measure).
6 Gross margin.
7 Contractbacklog represents the estimated amount of future revenues to be recognized under negotiated contracts and task orders as work is performed. Contract
backlog excludes awards which have been protested by competitors until the protest is resolved in our favor. Contract backlog is segregated into two categories, funded
contract backlog and negotiated unfunded contract backlog.
8 Funded contract backlog for contracts with U.S. government agencies primarily represents contracts for which funding has been formally awarded less revenues
previously recognized on these contracts, and does not include the unfunded portion of contracts where funding is incrementally awarded or authorized by the U.S.
government even though the contract may call for performance over a number of years. Funded contract backlog for contracts with non-government agencies
represents the estimated value of contracts, which may cover multiple future years, less revenues previously recognized on these contracts.
9 Negotiated unfunded contract backlog represents the estimated future revenues to be earned from negotiated contract awards for which funding has not been awarded
or authorized, and unexercised priced contract options. Negotiated unfunded contract backlog does not include any estimate of future potential task orders expected to
be awarded under indefinite delivery, indefinite quantity (IDIQ), U.S. General Services Administration (GSA) schedules or other master agreement contract vehicles.
10 Excludes permanent placement revenues and related gross profit.
11Adjusted SG&A Expense Margin (a non-GAAP measure) excludes non-cash expenses – depreciation & stock-based compensation – & acquisition and integration
expenses.
12 The revolving credit facility available balance is $246.1 million after adjusting for outstanding letters of credit.
13 Effective tax rate estimate does not include excess tax benefits related to stock-based compensation.
14Billable days are defined as business days (weekdays) less observable holidays (New Year’s Day, Memorial Day, Independence Day, Labor Day, Veteran’s Day,
Thanksgiving Day, Day after Thanksgiving and Christmas), and considers other factors such as the day of the week a holiday occurs and additional time taken off
around holidays.
13
© 2020 ASGN Incorporated. All rights reserved.ASGN Incorporated 26745 Malibu Hills Road 818.878.7900
Calabasas, CA 91301 asgn.com 14You can also read
