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Greetings, and welcome to the ASGN Inc. First Quarter 2026 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Kimberly Esterkin, Vice President of Investor Relations. Thank you. You may begin.

Good afternoon. Thank you for joining us today for ASGN's, soon to be Everforth's First Quarter 2026 Conference Call. With me are Ted Hanson, Chief Executive Officer; Shiv Iyer, President; and Marie Perry, Chief Financial Officer.

Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call.

For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com. Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release. I will now turn the call over to Ted Hanson, Chief Executive Officer.

Thank you, Kim, and thank you for joining our first quarter 2026 earnings call. Today marks an important milestone for our company. This will be our final earnings call under the ASGN name. And on Friday, we will officially begin operating as Everforth, and trading under our new stock ticker EFOR. This transition reflects the continued transformation of our business, bringing our capabilities together under the Everforth brand to support a more integrated operating model focused on higher-value solutions and deeper client relationships. By pursuing this path, we will unlock further scale and increase our cross-selling opportunities. As part of this evolution, we are also updating our commercial segment reporting to more clearly reflect how we are evolving the business, which is by industry rather than mode of delivery. This change is intentional and aligns with our Next Wave Growth Strategy and industry-led approach, which we previewed at our Investor Day with this past November. Ultimately, the delivery structure of our engagement is much less meaningful than the outcomes we drive and the strong value we create for our clients. We will, therefore, provide color through the lenses that matter most to how we compete in the commercial space, our 5 industries and our 6 solution capabilities.

In addition, to help track demand for our higher-value work and our ability to win in the marketplace, we will disclose our commercial consulting book-to-bill, consistent with what we've shared in prior quarters. With that background, let's discuss our first quarter results.

Revenues for the first quarter were $968.3 million, in line with the prior year and our guidance. Commercial segment revenues were driven by demand in AI and data, cloud and infrastructure and application engineering and modernization. Our AI data and cloud and infrastructure pipelines continue to build, reinforcing momentum in these areas of our business. Commercial consulting book-to-bill was 1.1x on a trailing 12-month basis. Federal segment, new contract awards totaled $151.3 million or a book-to-bill of 0.7x on a trailing 12-month basis. Federal contract backlog was approximately $2.8 billion at quarter end or a coverage ratio of 2.4x the segment's trailing 12-month revenues. Similar to the Commercial segment, AI and data work was a solid contributor to revenues bookings and pipeline within our federal business. Cybersecurity contracts also nicely contributed to revenue and bookings in the quarter.

We are beginning to see award activity at many government agencies pick up following the passage of the federal budget in early February. That said, we experienced some funding delays at the Department of Homeland Security which is navigating both a shutdown and a leadership transition. Importantly, we have not seen any disruption to award funding related to the conflict in Iran. Instead, we are seeing evolving requirements of partner collaboration, particularly around cyber threat analysis and data management and analytics as agencies seek to strengthen decision-making expertise.

While our revenues were within guidance, adjusted EBITDA margin of 8.6% was below our expectations for the quarter. This miss was driven largely by business mix related to lower-than-expected contribution of some of our higher-margin solutions within the Commercial segment. Nevertheless, we continue to closely manage our expenses.

As discussed during our Investor Day, we are making strategic pivots in our business that will position us well for the long term. Those changes are being shaped by how our clients themselves are evolving and the expectations they have for partners that can support them during that change. Our clients are navigating a very volatile macro environment with continued uncertainty around how technologies such as AI and enterprise software will ultimately impact the technology landscape and influence their IT spending. While this dynamic can create some near-term variability, we are focused on strengthening our foundation by building a more unified brand enhancing our go-to-market approach and maintaining disciplined expense management and capital allocation. These actions give us conviction that we are building a stronger, more resilient platform aligned with client demand and positioned to drive top line growth and margin expansion.

Against this backdrop, I want to step back and revisit our next-wave growth strategy. We continue to make progress executing our long-term initiatives. And during the first quarter, we took several important actions that reinforce our strategic priorities. First, we announced key leadership appointments across both our commercial and federal government segments to support our next phase of growth. We welcome Ashish Jandial as President of Commercial North America; Sangita Singh as President of India and International; and Donnie Scott as President of our Federal Government segment. Each leader brings deep experience scaling global services organizations driving AI-enabled digital transformation and building delivery platforms designed for long-term value creation. Collectively, this team enhances our ability to execute our strategy while building on the solid foundation already in place.

We also successfully closed the acquisition of Quinnox, marking another important milestone in advancing our strategy toward enhancing our solutions capabilities and margins. Quinnox meaningfully expands our ability to deliver technical end-to-end application engineering and modernization solutions for our commercial clients while establishing a strong foundation for our offshore delivery platform in India. Although still early, integration is progressing well, and we are already co-selling their services. Ultimately, these actions enhance our ability to support growing client demand for AI-led transformation, scalable delivery and outcomes-based solutions across industries. We remain focused on executing with discipline and building a higher value, more integrated Everforth. With that, I'll turn the call over to Shiv.

Thanks, Ted, and good afternoon, everyone. As Ted noted, we go to market through a combination of industry and solutions expertise. We believe industry is the most meaningful lens for understanding where client demand is emerging and how our customers are prioritizing their IT investments. With that in mind, I will begin with our industry performance for the first quarter.

Within our Commercial segment, we delivered year-on-year growth in the health care, consumer and industrial and TMT industries, reflecting broad-based demand for AI and data, cloud and infrastructure, application engineering and modernization and enterprise platforms. Health care grew at a high single-digit rate, driven by increased engagement from health care payers while the consumer and industrial and TMT industries achieved mid-single-digit growth supported by software, utilities and industrial customers, leveraging our capabilities across AI and data, cloud experience in cybersecurity. Though the financial services industry one of the biggest vendors in IT declined mid-single digits year-over-year, we saw high single-digit growth amongst insurance customers where application engineering and AI engagements continued to gain traction.

Consistent with the typical first quarter seasonality in which certain projects conclude at year-end, most industries softened sequentially with TMT relatively flat. That said, we saw pockets of strength within several industries. In Consumer and Industrial, for example, utilities delivered low single-digit growth, supported by demand in application engineering, cloud and infrastructure and AI and data.

Turning to our Federal segment. We track our Federal revenues across four customer types, including defense and intelligence, national security, civilian and other clients. Defense, intelligence and national security customers continue to comprise approximately 70% of our total Federal revenues, with the remaining balance coming from civilian agencies, government-sponsored entities, state and local agencies and select commercial customers. National security customers delivered the strongest growth for the segment, both year-over-year and sequentially. This was primarily driven by cybersecurity work supporting the continuous diagnostics and mitigation or CDM service program within DHS.

We also saw mid-single-digit growth in our other clients year-over-year led by the USPS where we deployed a purpose-built AI application designed to significantly reduce undeliverable mail and improve operational efficiency. Building on the industry discussion, I'd like to transition to our solutions performance, which provides a clear view of where the client demand is strongest today and how it is evolving. AI and data remain a significant driver of demand across our portfolio. Our clients are increasingly focused on modernizing data foundations to support analytics, AI-enabled decision-making and operational agility. Let me provide a few examples.

In the consumer industry, we partnered with a leading global athletic apparel and footwear company to design and deploy a unified analytics platform powered by Databricks Genie agentic AI interface that enables secure access to governed data. By consolidating product assortment planning, demand, bookings and sales into a single governed experience, our client improved product creation decisioning and speed to market while also establishing a reusable foundation to scale across broader demand planning and supply chain use cases. Databricks is one of our core strategic partners, and during the quarter, our commercial business was recognized as a Databricks silver tier partner. Leveraging that partnership, our industrial team supported a Fortune 100 energy and utilities company in migrating from legacy architectures to a Databricks base integration. This effort aligned the client with enterprise data strategy while also reducing long-term risk and strengthening governance. Following the success of this project, our client is engaging our teams to support legacy migrations into Databricks across other areas of the organization. We're also helping customers unlock the full value of modern hyperscaler AI services in the cloud. In the TMT vertical, for example, our AI and cloud teams partnered with AWS to support a Fortune 50 media company in building a digital twin of its streaming platform. This solution combines advanced cloud engineering with AI cloud simulations to help our clients proactively identify performance risks ahead of some of the largest global streaming sporting events that commonly draw over 100 million viewers. A successful project, we now have a repeatable use case that can be extended across TMT clients with similar streaming and gaming environments.

As AI adoption and data volumes accelerate, cybersecurity has become an increasingly integral component of nearly every client engagement. In the health care industry, we secured an extension with a large national insurance payer to modernize their identity governance using SailPoint. This work established a central identity framework that supports regulatory compliance while safeguarding sensitive patient and member data. Alongside this modernization work, we continue to provide ongoing SailPoint platform support, reinforcing our long-term client relationship.

In the federal market, we're supporting the Cybersecurity and Infrastructure Security Agency, or CISA, through the aforementioned CDM program by delivering security information and event management as a service. This capability standardizes security data collection across federal agencies and enables real-time threat detection and rapid response. We also delivered a first of its kind ATO accredited development environment for the U.S. Navy, a secure government-approved workspace where teams can safely build, test and manage software and data. By combining our DevLabs and software factory with Elastic's cloud infrastructure and AI-enabled automation, we created a development environment that aligns with the DoD Zero Trust requirements. Enterprise platforms also remain central to our clients' digital transformation particularly as organizations look to embed AI into their systems of record. We continue to advance co-selling and co-development efforts across our partner ecosystem with a focus on accelerating time to value through automation, data readiness and agent-enabled workflows.

In our commercial business, we're helping clients embed agentic capabilities across core data platforms, hyperscaler cloud environments and enterprise systems of record. During the quarter, we became a Snowflake's Cortex core preferred partner working closely with Snowflake to build hands-on labs, develop AI readiness case studies and create customer-facing applications leveraging Cortex, Snowflake's native agentic engineering capability. Similarly with AWS, we're partnering to build a Workday data learning agent that combines AWS' agentic technology with top blocks proprietary smart loader tools with Salesforce we're investing in Agentforce to enable AI-driven digital work that supports faster delivery cycles and improved testing outcomes. And with ServiceNow, we were one of the top 10 global partners selected for the launch of Employee Works, a new offering that integrates AI assistance with workflow automation.

Although we're seeing progress in our enterprise platforms work, we're operating in a more deliberate buying environment. Decision cycles have lengthened as customers take a more measured approach to large long-term initiatives while they assess how AI fits into their broader technology road maps. The enterprise software market is also undergoing change from evolving go-to-market models focused on consumption rather than per seat to organizational realignments with changes in sales and executive leadership. That said, we view this as a moment in time. While customers are being more deliberate about how, when and where they invest, we do not see them stepping away from enterprise platforms nor do we see AI displacing these systems of record. In fact, AI is increasing their relevance. Enterprise platforms remain where data workflows and governance reside, and without that foundation, AI lacks context and scale. Our role is to help clients modernize, integrate and optimize these platforms while enabling practical AI applications that drive measurable business outcomes. As spending normalizes and IT programs move forward, we're well positioned to support our clients across this ecosystem.

With that, I'll turn the call over to our CFO, Marie Perry, to discuss our first quarter 2026 performance and second quarter guidance.

Thanks, Shiv. For the first quarter, revenues totaled $968.3 million, within our guidance range and consistent with the prior year period. Given the timing of the acquisition close, Quinnox contributed less than 1 month to the quarterly results.

Revenues from our commercial segment were $675.5 million, an increase of 0.5% compared to the prior year. Revenues from our Federal Government segment were $292.8 million, a decrease of 1.1% year-over-year.

Turning to margins. Gross margins for the first quarter of '26 were 27.5%, a decrease of 90 basis points from the prior year. Commercial segment gross margins totaled 31%, a decrease of 140 basis points year-over-year. Gross margins for the federal government segment were 19.6%, an increase of 10 basis points year-over-year but slightly lower than our expectations due to a higher-than-anticipated contribution of cost plus revenues in the quarter. As Ted mentioned, this decline in margin was primarily driven by business mix related to a lower-than-expected contribution from some of our higher-margin solutions within the Commercial segment.

We also experienced headwinds from changes in our foreign exchange rate related to our delivery center in Mexico. SG&A for the quarter was $224.4 million compared to $214.5 million in the first quarter of 2025. SG&A expenses included $12.8 million in acquisition, integration and strategic planning expenses that were not included in our previously announced guidance estimates. Excluding these expenses, SG&A expenses were relatively consistent with prior year.

For the first quarter, net income was $5.5 million, adjusted EBITDA was $83.6 million, and adjusted EBITDA margin was 8.6%. Adjusted EBITDA margin was below our guidance range due to the lower gross margin just discussed. In addition, our estimates assume an effective tax rate of 28%. For the quarter, the effective tax rate was 48.1%, reflecting the onetime discrete items not included in our guidance. As previously noted in March, we completed our acquisition of Quinnox for $290 million. We also deployed $39 million in cash to repurchase 0.8 million shares at an average share price of $47.69. At quarter end, we had approximately $934 million remaining under our $1 billion share repurchase authorization.

Cash and cash equivalents were $143.6 million at quarter end. We had approximately $160 million available on our $500 million senior secured revolver. Our net leverage ratio was 3.1x at the end of the quarter. We are committed to reducing our debt over time in order to bring our net leverage ratio closer to 2.5x target. We will continue to opportunistically balance capital deployment with organic investment and share repurchase, and have remained active in buying back our shares in the second quarter.

Free cash flow was $9.1 million, while free cash flow is generally seasonally softer in the first quarter, it was lower than we typically see in past quarters, primarily due to an increase in DSOs.

Turning to guidance. Our financial estimates for the second quarter of 2026 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions and assume no further deterioration in the markets that we serve. As we execute against our strategic plan, we expect some continued upfront investments. Our second quarter estimates include $8 million to $10 million in strategic planning expenses related to the execution of our Next Wave Growth Strategy, which we expect will decline over the coming quarters. Alongside these investments, as we highlighted at Investor Day, we are implementing targeted initiatives that will generate meaningful structural cost savings for the business. These efforts are progressing as planned.

As that is background, for the second quarter of 2026, we are estimating revenues of $970 million to $1 billion, net income of $8 million to $13.7 million, adjusted EBITDA of $85 million to $95 million and adjusted EBITDA margin of 8.8% to 9.5%. Thank you. I'll now turn the call back over to Ted.

Thanks, Marie. As we step back from the quarter, the most important takeaway is the consistency between our strategy and our actions. The project Shiv walk through today illustrate how our industry depth and solution capabilities are translating into meaningful outcomes for clients navigating increasingly complex environments. The acquisition of Quinnox strengthens our ability to deliver end-to-end application engineering and modernization at scale while the leadership additions we made earlier this year further align our company to execute our Next Wave Growth Strategy. These are deliberate actions focused on building a higher value, more unified company, positioned for durable long-term growth and expanded margins.

This long-term orientation is a central theme in our annual shareholder letter, which will be released later this week. This letter discusses the evolution of enterprise technology and how those shifts are shaping our strategic priorities. As AI moves from experimentation towards broader enterprise adoption, it is driving greater integration and modernization across the IT environment and increasing the need for sophisticated services to support that transition. Solution providers that can modernize data and infrastructure and embed AI into real-life business processes and workflows are best positioned to succeed. And these are the areas where we have a clear position and right to win.

Our diversified client base, differentiated delivery models, deep industry relationships and portfolio of in-demand solutions collectively create structural advantages in an AI-driven world.

Before we open the call for questions, I want to thank our employees for their dedication this past quarter. Your adaptability and commitment to our clients is the foundation of our progress and our future. As I noted at the start of today's discussion, this call marks an important transition as we prepare to operate and report as Everforth, I look forward to continuing the conversation with you next quarter under our new name. With that, let's open the call to questions.

[Operator Instructions] Our first question comes from the line of Jeff Silber with BMO Capital Markets.

A couple of times in your prepared comments, you talked about lower-than-expected contribution from some higher-margin commercial solutions. Can we get a little bit more color on that? And I'm just curious because you typically have really good visibility. I'm just wondering what happened here.

Thanks, Jeff. Yes, I think, look, coming out of the fourth quarter, you naturally have certain projects come to their conclusion and you have a start-up of new work during the first quarter. And I think in this quarter, what we found was -- while that's always a thing, the ramp-up of higher-margin solutions, especially in our enterprise software areas was slower and later into the quarter than what our expectation was when we set the guidance. So really, what we're seeing here in terms of the EBITDA margin mix is a gross margin issue. It's not an expense issue. We were kind of on an adjusted basis, below our expectations on the cash SG&A side. But on the commercial side within our consulting business, we did see a larger change in normal of the profile of the margin of the projects that contributed during the quarter.

Second piece of that, Jeff, was in our federal business, we overperformed the revenue expectation. The meat of that was in the cost-plus area. You've heard us say before that cost-plus contracts come in at a lower gross margin. Typically, we run 20% to 20.5% gross margins overall. Those cost-plus contracts can be high single digit to low double-digit kind of gross margins. And so that was certainly an influence. And so while we did a good job on the revenue on the federal side, the gross margin came in lower than what our expectations were to forecast. And then as Marie said, we had a little bit of contribution of negative impact from FX. So it's really the sum of those three things, if you will.

Okay. That's helpful. Let me play devil's advocate here. You mentioned in your prepared remarks -- or excuse me in answering this past question about some softness in the enterprise software area. And I know the stock market seems to be that there's a lot of AI disruption risk there. How do we know that, that's not an issue, it's more of a structural issue than anything else?

Well, look, I think our customers -- I mean, we came out of the fourth quarter with really what I would call record bookings, especially in the Workday area and solid bookings in ServiceNow and Salesforce -- and our Salesforce practice, which is our three primary enterprise software practices. And we just didn't see the conversion to revenue at historical rates. So those are our highest margin solution areas. And the delta between what we expected through the quarter and what actually happened was that ramp-up of those was a lot slower from the bookings that we came out of the fourth quarter. I do think that customers are watching very closely the AI story and making sure that they're -- if they're doing a new implementation or a significant upgrade or taking on new SKUs that, that's money well invested. I think what we saw at the end of the quarter kind of exiting, if you will, a quarter and into the first part of April, is a little bit more normal patterns in terms of both getting bookings and beginning to see the conversion of that. And so I think it was temporary, Jeff, because there was a lot of negative commentary and obviously, a lot of negative play on those enterprise software stocks. And I think the customers kind of reacted accordingly. But we're looking for better contribution here in the first few weeks of the quarter here, in April are telling us that will be the case. I don't think it's going to be a rubber band, but I think it will build, and we'll see a better margin profile. Obviously, we gave you a better margin profile in our Q2 guidance, which is solely on the back of improving gross margins in both commercial consulting and federal consulting in the second quarter.

Our next question comes from the line of Maggie Nolan with William Blair.

What should we read into the financial services year-over-year decline as it relates to maybe the balance of the year? And have you seen any change in the first couple of weeks of the second quarter here? And then just given that, that's a segment with typically large spend on IT, any read-throughs to the other segments?

Yes. Maggie, look, as we mentioned in the remarks, what we're seeing is just continued tight management of expenditure in the largest piece of financial services for us, which is the big banks. So if you think about it, they have stabilized, but there is really not an increase in spending that we're seeing at any measurable rate in that segment. That being said, we are seeing some green shoots in insurance and also some green shoots in diversified financials, which we expect will turn into revenue upticks for us in the second quarter. But the continued compression or rather lack of uptick we see in the big banks is why we see the continued decline in -- because they are the largest spender in the financial services industry.

And I think, Maggie, if you look at the sequential growth in the supplemental for that industry, it's kind of negative 3.5% Q4 to Q1. We always have a kind of 3% to 5% decline coming out of Q4 to Q1 for all the seasonal reasons that we talk about all the time. So I'd say Shiv's right on. There's a lot of a lot of caution there, I think, on behalf of those customers, but also it's kind of in line with what we would see seasonally. So I think the real message is you're not seeing a surge or a pickup there, it's less about a sequential decline.

And then on the commercial IT book-to-bill of 1.1, I thought was encouraging. Can you give a little bit more color on that, maybe the quality and duration of recent wins? Are you seeing shorter cycle projects versus what mix is kind of longer-term solution-led work and then just how that translates into your visibility for the remainder of the year?

So Maggie, I think if you think about the strength that we're seeing from a bookings perspective, it's it's relatively broad-based across several areas other than sort of some of the enterprise platform dynamic that Ted alluded to. We're seeing a pretty big uptick in some of our cloud and infrastructure type work in the technology verticals, especially around the services we provide to our software companies. Those are generally longer-term bookings. So that's healthy from a mix perspective. We're also seeing longer-term bookings in cybersecurity and a little bit of more strength in our -- continued strength, I should say, in our application modernization and application engineering capability, so to speak. I don't believe that durations of those have materially shifted, but overall durations are shifting rightwards and lengthening because of some of the cloud and infrastructure work, the volumes we see associated with that with our software providers.

Our next question comes from the line of Kevin McVeigh with UBS.

You alluded to some unanticipated expenses in the quarter in Q4. Can you help us to that a little bit? And then the Q1 and just coming out of Investor Day, I don't remember them being referenced. Is that something new? Or was that maybe I missed it at Investor Day.

Right. So Kevin, this is Marie. So the $12.8 million that we referenced, those are add-backs to EBITDA. And so when we talked about the $80 million of savings that we are going to achieve over the 3-year period, those dollars that we provided on the call for Q1 relate to the implementation of those. So when you think about the $12.8 million, there's a component that's Quinnox, right? So there's costs associated with the Quinnox transaction. Also our go-to-market, our back office outsourcing and then our ERP. So we gave in our guide for Q2 a range of $8 million to $10 million, and those costs will come down, right, throughout '26.

So typically, Kevin, those strategic integration acquisition expenses are immaterial. Since they're a little higher now for a few quarters and because we have better visibility, they're more known. Marie just been able to call them out and also give you a range for the guide for the next quarter.

Okay. And then I guess, Marie, can you remind us how much did Quinnox contribute to the Q2 guidance on the revenue and EBITDA?

We only had them for a couple of few weeks, so just a few million.

No, no, for the next quarter, Ted?

For the next quarter, Marie?

Yes. Similar to how we treated top block, Kevin, we gave the full year revenue contribution. So for Quinnox, it's $100 million with growth of mid -- low to mid-teens and then EBITDA margin of low 20%.

Yes. So 25 just at or just under $100 million, and we're expecting low double-digit growth rate in '26.

You figure about $25 million in Q2, is that fair?

That's about the math.

Our next question comes from the line of Tobey Sommer with Truist Securities.

I was wondering if you could give us some color on the assignment business and get a sense for the trends there. Yes, I'll just start with that.

Yes. So Tobey, just kind of Q4 to Q1, I would say sequentially, it performed about like we expected. It was down kind of mid-single digits, low to mid-single digits quarter-to-quarter. That's seasonally about what we see every year. So no surprises there. Pay-to-bill margins pretty steady. And contribution of pretty flat. So I don't think any -- no surprises, if you will, on the assignment side.

Okay. And then on the government consulting side with the presidential budget request, what are the implications for the business, if you could? And I maybe think about it from a defense and intel and then also a civil perspective where there are some agencies with cuts?

Yes. I think we're pretty -- I mean, we feel like we're pretty well positioned here with where the budget money is flowing. Obviously, there's a watch item for us with DHS, although all our contracts are being supported, but I don't think there's going to be a net increase, if you will, there commensurate with what's going on in defense. But on the defense side, obviously, there's a big new chunk coming there. It's definitely got AI is going to be a big part of that, data is going to be a big part of that, cybersecurity is going to continue to be a big part of that. And so I think in those areas where we play, we're pretty well positioned. I would say the money has been slow to roll out. I think in the first quarter for at least -- the first two months of the quarter, there was not a lot of activity because it really didn't happen until the middle of the quarter. Not a lot happened in the second half of the quarter as we -- because there was plenty of other things the government was focused on. But I think now you're seeing a better release, we're seeing the cycle on new award activity to get out on the street, pick up with volume. And so I think we're expecting, at least in our projected pipeline of bookings a better second quarter than first quarter for sure in that area.

And then last question, if I could, on your, the transition towards consulting more broadly throughout the organization, you've had several executive hires announced recently. And I'm wondering how is the sales force absorbing that? Are there any changes that you're making internally to I don't know, better align incentives and compensation to drive that change throughout the organization going forward?

Yes. Look, I think we are -- we've got a normal amount of change going on. I mean, certainly, we are bringing more to bear for all these accounts. So the sales team is having to kind of, if you will, kind of adapt to that. We're doing a lot more than just bringing IT staffing to bear these big clients. So our sales teams are getting used to kind of bringing everything that's in the toolbox. Incentives change every year based on what we're trying to attack to a large degree, how we allocate businesses to certain objectives, what commission schemes may be, how we resource against account opportunities if you have a certain industry or industries that have really good growth prospects and you are feeding resources into that. If you have other industries that look like it's somewhere you want to be for the long haul, but not working as well right now. You may subtract resources from that equation. So I think at the beginning of the year, that activity is always going on. So you would talk to people and they say they see the normal ebb and flow of all that.

Okay. But nothing like starts where you're in assignment, typically, I think the producers are getting paid on weekly GP dollars, nothing more like fundamental in terms of changes.

No. No. No. As Ted said, you're always looking to make tweaks and adjustments to incent the right sets of behaviors and the right set of things you want, align to your strategy. But a core tenet of that plan hasn't shifted.

Our next question comes from the line of Jason Haas with Wells Fargo.

We've seen the nonfarm payrolls and extra temporary help has bounced off the bottom a little bit in 1Q. I'm curious if you're seeing any green shoots in your business.

You say one time you said...

Yes, we track -- I don't know how helpful it is, but we track nonfarm payrolls next for temporary help and it's been in decline for a number of years now, and it's bounced back a bit in 1Q. I don't know if it's something that you look at as an indicator, but curious if you've seen any any signs of demand increasing to be on the assignment side?

Yes. Honestly, my experience is the IT really tracks IT spending, right? So if our clients are spending on their tech stack, then that's a driver of our business. If they're more muted, then that's a tougher environment. If you -- what you've seen go on broadly in staffing, if you went down to the lower end, like commercial, you would see that that's been resilient, I would say, through all this. But on the white collar piece and especially on the IT piece, it hasn't followed the same trend.

Okay. Got it. That's helpful. And then as a follow-up, you mentioned earlier that some of the sales of these like higher-margin solutions were slower and later in the quarter. Did any of that might push into 2Q here?

Yes. I think just to clarify, what we said was we had record bookings in Q4, and our guide for Q1 assumed historical conversion of those things. So there are two dynamics in Q1, right? And you can see this pattern where the ramp-up time for those projects was slower than anticipated. So how quickly those sales turned into revenue wasn't exactly at the rate we expected, which is what you saw in Q1. That being said, from a sales perspective in Q1, again, similar dynamic coming out by clients. I would say sales cycles are getting slightly longer as clients are deliberating longer before they pull the trigger on projects. We're not seeing a material impact and some of that has been factored into the guide for Q2. But we see the recovery happening throughout the year. So as Ted said, it's not a rubber band because there's still a lot of uncertainty around some of the topics we talked about in the macros. And that's what we're seeing both in buying cycles and conversion cycles.

Our next question comes from the line of Mark Marcon with Baird.

Just following up on the last point, Shiv or Ted. You mentioned the gross margins are down. It seems like on the consulting side, we clearly had a deceleration and financial services was a weak spot. But coming off of these high bookings, I'm just wondering, aside from -- is there any way to disaggregate the gross margin compression and EBITDA margin compression that we saw in the commercial side between pure mix versus was there any change with regards to the bill rates or how profitable the actual contracts that were actually executed against? Are you seeing any sort of pricing pressure from that perspective? And how do you expect that to flow as these clients become more deliberative, how do you think that's going to shape up as the year unfolds?

Mark, I think if you -- just to give you more color, let me start by saying we're not seeing a material compression in pricing. It is -- the most important thing that drove the gross margins down for us was really timing in many cases. And as some of our higher-margin pieces of the business didn't ramp up at the same rate, you noticed that from a timing perspective, the solutions mix that drives our consulting revenue was different than what we thought it would be. So short answer is we're not seeing a material compression. That being said, there is volume in a lot of -- as you would expect as a normal ebb and flow, we have higher-margin solutions, lower-margin solutions. So when the mix gets off kilter on some of the higher-margin pieces, it drives this down.

Okay. But -- and if we're taking a look at like whether it's GlideFast or your Workday practice, in terms of your actual pricing for those in terms of the projects that are at one in place, those are not changing.

No, they're not. And which is why we said we will see the recovery in margin gradually throughout the year, won't rubber band it, but the unit pricing and pricing on those things, we're not seeing any deterioration.

Okay. And then can you explain a little bit about what's going on with the DSO? And Marie, how should we think about the free cash flow conversion relative to EBITDA over the course of this year.

So Mark, I think still a good rule of thumb is 60% of our adjusted EBITDA converting. If you think about last year, Q1 of '25, our free cash flow was actually slightly lower than what we're reporting this quarter. So there is absolutely a seasonality around free cash flow and DSO. And as we ended the year of '25, we actually ended the full year, I think it was at 68% conversion. So it's not 60% every quarter. And so it just kind of gradually gets there for the full year.

Okay. So the DSO is just a normal seasonal thing that -- you're not seeing any change in behavior with regards to how quickly the clients are paying?

No change in behavior. No increase in bad debt.

That's correct.

We have reached the end of the question-and-answer session. I would like to turn the floor back over to CEO, Ted Hanson for closing remarks.

Great. Well, I want to thank everyone for being here with us today and for your questions, and we look forward to speaking to you next quarter as Everforth for our second quarter earnings release. Have a great evening.

And thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Greetings, and welcome to the ASGN Inc. Fourth Quarter and Full Year 2025 Earnings Call.

[Operator Instructions]

It is now my pleasure to introduce your host, Kimberly Esterkin of Investor Relations. Thank you. You may begin.

Good afternoon. Thank you for joining us today for ASGN's, soon to be Everforth's, Fourth Quarter and Full Year 2025 Conference Call.

With me are Ted Hanson, Chief Executive Officer; Shiv Iyer, President; and Marie Perry, Chief Financial Officer.

Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements.

Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call.

For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com.

Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release.

I will now turn the call over to Ted Hanson, Chief Executive Officer.

Thank you, Kim, and thank you for joining our fourth quarter and full year 2025 earnings call. As we begin 2026, I want to thank everyone who joined us for our Investor Day this past November. .

And if you've not had a chance to view the presentation, a replay of the webcast is available on our website. Our Investor Day provided a valuable platform to showcase our Next Wave Growth Strategy and the significant progress we made in our transition toward higher value, higher-margin technology and digital engineering solutions.

At this event, we also had the opportunity to introduce several of our solutions leaders, whose presentations brought to life our advanced capabilities in AI, cybersecurity and enterprise platforms.

AI is now a dominant driver of demand with nearly 80% of enterprises planning to increase their AI spending in 2026. These investments are driving growth in solution capabilities, vital to the successful deployment of the AI enterprise-wide. Shiv Iyer, our President, will speak more on that shortly.

Turning to our fourth quarter 2025 results, which we previewed with you in our recent Quinnox announcement. ASGN delivered solid results for the quarter. Revenues of $980.1 million were at the top end of our guidance range, with IT consulting revenues comprising 63% of the total, up from 59% in the prior year.

Adjusted EBITDA margin was 11%, exceeding our expectations. Commercial consulting bookings hit a record $444.4 million, translating to a book-to-bill of 1.3x for the quarter and 1.2x on a trailing 12-month basis.

Volume of new consulting work continues to grow, as our customers increasingly recognize the importance of preparing data, building infrastructure and deploying enterprise platforms to harness the full potential of AI.

In our Federal segment, new contract awards totaled $144.2 million, or a book-to-bill of 0.9x on a trailing 12-month basis. Federal contract backlog was approximately $3 billion at quarter end or a coverage ratio of 2.5x the segment's trailing 12-month revenues.

In addition to traditional holiday-related seasonality, the lengthy government shutdown delayed new award activity in the fourth quarter. Nonetheless, we are seeing solid pent-up demand in Q1 and increased defense, intelligence and national security budgets, position our federal business strongly for the future.

As we discussed at our Investor Day, our clients are increasingly seeking us out as one of their strategic technology partners. To meet this demand, we've been proactively transforming our business, advancing our solution capabilities, developing proprietary assets and accelerators and partnering with leading technology companies to better serve our clients' IT needs.

Continuing this transformation momentum in the first half of 2026, we will be adopting a new customer and investor-facing brand Everforth, unifying our commercial and federal brands under a single dynamic identity, our transition to Everforth, a name rooted in forward progress, is designed to unlock our scale as an enterprise and increase cross-selling by bringing the breadth of our solutions to our enterprise clients, all while supporting continued revenue growth and margin expansion.

While organic revenue growth remains a primary focus, we will also pursue strategic acquisitions that enhance our solutions capabilities and technology partnerships. I'm pleased to report, just 2 weeks ago, we announced our intent to acquire Quinnox, an agile, results-driven digital solutions provider.

As an acquirer of choice, we employ a proven, repeatable acquisition strategy, our M&A playbook, which is guided by well-defined strategic filters and rigorous financial criteria.

The acquisition of Quinnox followed this disciplined approach. From a strategic standpoint, joining forces with Quinnox represents a key step forward in our long-term strategy to enhance our digital engineering and global delivery capabilities.

Like ASGN, Quinnox is exceptionally client-centric, maintaining customer relationships for well over a decade. We're excited to leverage their established client connections to broaden our market presence, and as we did with GlideFast and TopBloc, pull Quinnox's capabilities across our gold nugget commercial client base.

From a financial perspective, Quinnox is an accretive transaction that strengthens our market position without compromising the strength of our balance sheet or our financial flexibility. Our disciplined approach to capital allocation enables us to make strategic acquisitions like Quinnox, while still investing organically and buying back our shares.

In the fourth quarter, we generated $93.7 million in free cash flow and bought back $64.2 million in shares. We continued to repurchase shares in the first quarter and with the newly approved $1 billion share repurchase program, we are well positioned to provide sustainable shareholder returns.

To build upon our discussion, let me now turn the call over to our President, Shiv Iyer, to speak about Quinnox's digital engineering capabilities and global delivery strength.

Thanks, Ted. It's great to speak with everyone this afternoon. It has certainly been a busy and productive start to the new year, and I shared Ted's enthusiasm about the acquisition of Quinnox.

Over the past few months, I've had the opportunity to meet with Quinnox's executive team. It is very clear from our meetings that there is a strong cultural fit between our organizations. Cultural alignment is at the heart of the successful acquisition and integral to the comprehensive process that shapes the M&A playbook Ted discussed.

During our Investor Day, we spoke about our journey towards becoming a top-tier technology and digital engineering company. And I'm proud to report that we're well on our way to expanding our digital engineering capabilities.

Fourth quarter bookings for application engineering and services practice nearly doubled quarter-over-quarter. By integrating Quinnox's deep expertise in application management and modernization, analytics and enterprise platforms into our existing practice, we will immediately expand our market share.

In addition, Quinnox's alliance partnerships with companies such as AWS, Databricks, Salesforce, SAP and Calypso complement our own partner network and will enable us to co-create agile future-ready solutions that accelerate value for our customers.

The ability to deliver complex digital engineering capabilities is key for us to be competitive. Quinnox significantly enhances our delivery capability and broadens our delivery footprint with its highly mature global capability centers in India.

These centers will form the foundation of our offshore delivery platform and complement our best-in-class nearshore operations in Mexico.

As a leader in offshore delivery, Quinnox deploys cutting-edge technologies, including AI across its delivery model. Quinnox's proprietary assets combined with an AI-first workforce, help promote automation, compliance, and speed to value for every single client.

As Ted emphasized, we are an acquirer of choice, and I'd like to believe that part of that strong reputation comes from our unique market positioning. We have the scale of a large IT services player, but also the velocity and agility of the start-up.

An agile results-driven digital technology company like Quinnox, aligned seamlessly with our business objectives and supports our long-term growth strategy. With that as background, let's turn to our industry performance for the fourth quarter.

In our Commercial segment, year-over-year growth was driven by a combination of improvements in healthcare accounts, which improved by mid-teens and consumer and industrial accounts, which improved by low teens.

Growth in the healthcare industry was seen across our provider, pharmaceutical and biotech clients. In the consumer and industrial space, industrial saw the largest improvement, followed by materials and utilities accounts.

We also achieved low single-digit revenue growth in the TMT vertical as compared to the prior year. Looking sequentially, on a billable day adjusted basis, we saw growth in 4 of our 5 commercial segment industries.

Healthcare accounts posted mid-single-digit improvements with growth in payers, providers and pharmaceutical accounts. TMT also improved mid-single digits with telecom, e-commerce and software and services all increasing. In addition, as we anticipated on our last quarter's call, the financial services industry returned to sequential growth on a billable day adjusted basis, picking up low single-digit improvements from the third quarter of 2025. Within this industry, we achieved sequential improvements in wealth management, regional banks, diversified financials and insurance accounts.

In our Federal segment, we track our revenues across 4 types of customers, which are Defense, Intelligence, National Security, Civilian and other Clients. Defense, Intelligence and National Security accounts continue to comprise approximately 70% of our total government revenues.

Government-sponsored entities, such as USPS, state and local customers and commercial entities comprise our other clients' categories. The other clients category saw mid-teens growth year-over-year due to expansion of our data, AI and modernization efforts for USPS as well as increases in cybersecurity work for commercial clients.

Defense and Intelligence revenues improved low single digits year-over-year due in part to additional funding for Project Maven, a flagship geospatial AI contract for the Department of War.

For those who have not had a chance to view our Investor Day presentation, I highly recommend watching the video on Project Maven, an incredible case study in mission-ready AI.

Moving from industries to solutions. As Ted highlighted at the beginning of today's call, we continue to secure projects that strengthen technology infrastructure and enable governance readiness for enterprise-wide AI usage. Let me provide a few examples from the fourth quarter.

For a top 5 U.S. bank, our financial service industry experts were engaged to improve the bank's testing, automation and governance ecosystem, working hand-in-hand with our clients, we deployed a bank-wide modernization program across online banking, mobile platforms and partner integrations, vastly improving our clients' enterprise-wide functionality and governance.

Also within Financial Services, our team helped a major U.S. online banking and credit card company, maintain its system performance as it underwent the merger with another major financial institution.

As a part of this DevOps project, our engineering and applications team coordinated infrastructure changes, monitored system health and managed the building, testing and deploying of software to ensure a smooth transition as the 2 banks join forces.

On the theme of data migration, during the fourth quarter, our telecom industry experts partnered with Snowflake for whom we are an elite AI data and cloud services partner to enable a major U.S. connectivity and communications company to centralize marketing data from a variety of external vendor systems in Snowflake.

Now in the first quarter of 2026, we are laying a governed foundation for Snowflake's Cortex, Snowflake's native AI/ML capability that will enable our clients to securely run built-in features such as large language models, AI-powered apps and Gen AI insights.

AI's explosive growth powered by soaring energy demand is driving unprecedented expansion in data center capacity worldwide.

Our cloud and infrastructure team actively collaborating with clients and rapidly scaling their AI data center fleets. For example, we're currently partnering with a major hyperscaler to operationalize multiple data centers on what is already one of the largest AI data center campuses in the world. For this project, we are responsible for managing the hyperscalers critical environments and leading the complex logistics required to deploy and integrate the data center's advanced system.

Ultimately, scaling AI from concept to production requires addressing long-standing challenges of fragmented tools, governance complexity and resource constraints.

In response to these inherent challenges, in November, we launched our AI factory, a unified framework designed by our joint commercial and government AI teams to empower organizations to integrate AI seamlessly into their core business strategies.

Understanding the challenges around safe and secure AI deployments, our teams have been particularly focused on our solutions related to AI governance.

Our federal cybersecurity experts have been busy demoing our AI Factory's Watchtower, a monitoring tool with built-in Trust-Ops to both our federal and commercial clients. In addition to building our own assets and accelerators, we're partnering with enterprise platforms to co-deliver high-impact solutions to our commercial and federal clients.

Starting with our Federal segment. In the fourth quarter, we were awarded additional funding by the Department of Homeland Security and the agency's continuous diagnostic and mitigation program office to deploy Elastic's AI capabilities at scale.

Our federal team boasts more Elastic-certified engineers than any other organization other than Elastic itself and was recently named the Elastic's Top Services Partner of the year.

In addition to Elastic, we continue to be a leading ServiceNow provider in the federal space, leveraging ServiceNow's Agentic capabilities in new initiatives across the Department of Homeland Security, War and Energy.

We also recently established a strategic partnership with Wiz, a rapidly growing cloud security company in the process of being acquired by Google. In the fourth quarter, we won our first engagement with Wiz for the centers for Medicare and Medicaid services, establishing our footprint in the high-value federal healthcare market.

On the commercial side of our business, we continue to make great progress in advancing our positioning with Workday. During the fourth quarter, we were selected as one of the first partners, approved to deploy Paradox. Workday's candidate experience agent.

Paradox uses conversational AI, simplify interactions and deliver better experiences. Conversational AI use cases are growing rapidly. As a part of our Salesforce 360 partnership, for example, we are integrating Agentforce into Slack to enable clients to search their Salesforce CRM with ease.

As we expand our value proposition as Everforth, Salesforce, ServiceNow and Workday will all be central to our cross-platform AI strategy. These are just a few of the many advanced solutions capabilities we deployed in the fourth quarter.

We're excited about the future and look forward to continuing to advance our Next Wave Growth Strategy.

With that, I'll turn the call over to our CFO, Marie Perry, to discuss ASGN's Fourth Quarter 2025 performance and first quarter 2026 guidance.

Thanks, Shiv. For the fourth quarter, revenues totaled $980.1 million, at the top end of our guidance range and relatively consistent with the prior year period. .

Revenues from our Commercial segment were $698.6 million, an increase of 0.9%, compared to the prior year and up 2.2% sequentially on a billable day adjusted basis.

Assignment revenue totaled $359.2 million, a decline of 12% year-over-year, reflecting continued softness in portions of our commercial segment that are more sensitive to changes in the macroeconomic cycle.

Revenue from our commercial consulting, the largest of our high-margin revenue stream, totaled $339.4 million, an increase of 19.2% year-over-year. Excluding TopBloc, which we acquired in March of 2025, consulting revenues improved mid-single digits year-over-year. Revenues from our federal government segment were $281.5 million, a decrease of 3.7% year-over-year.

Turning to margins. Gross margin for the fourth quarter of 2025 was 28.9%, consistent with the prior year. Gross margin for our Commercial segment was 32.6%, which is in line with the prior year.

Gross margins from our Federal Government segment was 19.9%, a decline of 60 basis points year-over-year, due primarily to the loss of higher-margin contracts related to DOGE. The impact of DOGE will anniversary in March of 2026.

SG&A for the quarter was $210.5 million,compared to $197.9 million in the fourth quarter of 2024. SG&A expenses included $10.7 million in acquisition, integration and strategic planning expenses.

These items were not included in our previously announced guidance estimates. Also relative to guidance, our estimates assume an effective tax rate of 28%. In the fourth quarter, our effective tax rate was 36.4%, above the 28% forecast, driven primarily by discrete onetime items not included in our guidance.

For the fourth quarter, net income was $25.2 million. Adjusted EBITDA was $107.9 million. Adjusted EBITDA margin was 11% above our guidance range, driven mainly by greater mix of commercial segment revenues. At quarter end, cash and cash equivalents was $161.2 million, and we had approximately $455 million available on our $500 million senior secured revolver.

Our net leverage ratio was 2.4x at the end of the quarter. As Ted previously mentioned, we had very strong free cash flow generation in the fourth quarter. Free cash flow was $93.7 million, a conversion rate of approximately 87% of adjusted EBITDA, well above our conversion target rate of 60% to 65%.

We continue to deliver value to our shareholders. And in the quarter, we deployed roughly $64.2 million of our free cash flow to repurchase 1.4 million shares at an average share price of $46.05.

On a full year basis, free cash flow was also strong and totaled $288.1 million or 68.2% of adjusted EBITDA. We deployed $170.1 million of free cash flow to repurchase 3.1 million shares in 2025 at an average price of $55. We have approximately $972 million remaining on our $1 billion share repurchase authorization.

Reemphasizing Ted's prior commentary, our strong free cash flow is a hallmark of our business model. It provides a strategic advantage that enables us to fund growth initiatives, opportunistically repurchase shares and invest in strategic M&A, all while maintaining a healthy balance sheet.

By following a disciplined and balanced approach to capital allocation, we can invest in high-return opportunities and prudently manage our leverage, driving sustainable, long-term value for our shareholders.

With that in mind, in January, we signed a definitive purchase agreement to acquire Quinnox for $290 million in cash. The acquisition, which remains subject to HSR approval, is anticipated to close in March.

Post close, we anticipate our net leverage ratio will be approximately 2.9x after funding the acquisition with cash and borrowings on our revolver. We are committed to reducing our debt over time to bring our net leverage closer to our 2.5x target.

We will, however, continue to opportunistically balance capital deployment with organic investments and share repurchases.

Turning to guidance. Our financial estimates for the first quarter of 2026 are set forth in our earnings release and supplemental material. These estimates are based on current market conditions and assumes no further deterioration in the markets we serve.

Guidance also assumes 62 billable days in the first quarter, which is the same number of billable days as the year ago period and 1 more day than the fourth quarter of 2025. We typically see a low single-digit decline in revenue in the fourth quarter to the first quarter despite the increase in the sequential billable day due to a seasonal reset that occurs annually.

Our quarterly estimates do not include any acquisition, integration and strategic planning expenses. As we highlighted during our Investor Day, we are streamlining our technology systems and deploying strategic efforts to generate sizable structural cost savings for our business.

These cost savings are progressing as planned and will ramp up further over the coming quarters. Our first quarter guidance incorporates 2 additional considerations.

With regards to adjusted EBITDA margin, the first quarter typically sees an approximate 100 basis point decrease sequentially related to our annual payroll tax reset.

In addition, our first quarter guidance does not include a contribution from Quinnox. Quinnox Is expected to generate low to mid-teens revenue growth in 2026 over 2025 revenues of approximately $100 million.

We anticipate 9 months of Quinnox 2026 revenues will be incorporated into our full year financials. Quinnox also anticipates adjusted EBITDA margins in the low 20% range for the year.

With that as background, for the first quarter of 2026, we are estimating revenues of $960 million to $980 million, net income of $25.8 million to $29.4 million. Adjusted EBITDA of $93.5 million to $98.5 million and adjusted EBITDA margin of 9.7% to 10.1%.

Thank you. I'll now turn the call back over to Ted.

Thanks, Marie. We enter the new year energized by the progress we've achieved and the robust foundation we've established.

Our strategic initiatives are firmly in place, and our strong balance sheet and disciplined approach to capital allocation empowers us to pursue growth opportunities with confidence. The acquisition of Quinnox is a great example of our M&A playbook in action, and directly aligns with the strategy to enhance our digital engineering and global delivery capabilities as we highlighted at our recent Investor Day.

The upcoming launch of Everforth, our new unified customer an investor-facing brand, debuting in the first half of this year also marks a transformative step in our Next Wave Growth Strategy and will enhance our operational efficiency and scale.

Ultimately, by integrating cutting-edge technology, world-class engineering and deep expertise, we are very well positioned to adapt and thrive in today's rapidly evolving AI-driven business landscape.

That concludes our prepared remarks. I want to thank all our employees for your incredible efforts this past year. Your unwavering commitment to our clients is evident and will most certainly guide us to success in 2026.

With that, let's open up the call to questions.

[Operator Instructions]

Our first question comes from the line of Jeff Silber with BMO Capital Markets.

I wanted to focus on, I guess, your M&A strategy. If you can tell us what is your focus? I know you've been a little bit more acquisitive over the past [ year ] what are you looking for, how comfortable are you in terms of continued leverage?

So Jeff, thanks for the question. I'll just go back to the Investor Day. Obviously, organic growth first. That's always the primary focus. We're beginning sequentially and soon year-over-year to get back to organic growth rates here on a positive basis.

If you think about the acquisition strategy, overall, at the highest level, it's identifying solution capabilities that we see are in the greatest need of our enterprise clients and then pulling those acquired solution capabilities across our enterprise account base our acquisition GlideFast and ServiceNow ecosystem was a great example of that.

Our acquisition, most recently of TopBloc within the Workday system, another example of that. And now with Quinnox, real digital engineering capabilities, deep and complex systems and being able to deploy that across this account base and with it getting an offshore platform delivery capability was really the point here.

But again, it's solution capabilities that we see are in demand, and I think the good thing about this, Jeff, is we get to see these because we're sitting at the table with our clients, understanding their strategic IT roadmaps, and then we could pull back from that and say, can we position for that organically? Or is this an opportunity to buy versus build, if you will, from an M&A standpoint.

And I'm sorry, the second part of the question was, are you comfortable being with leverage?

Yes. Well, look, I think we're, post acquisition, going to be at 2.9. I mean I would say that still very modestly leveraged. So one, we have to have confidence in our numbers going forward, which we have visibility to; two, we have to have confidence in the target and their ability to generate the revenues and EBITDA they expect coming in.

And then three, we have to have a pathway if we're going to take on a modest amount of leverage to get the acquisition done to see a path to delever back below our target of 2.5.

And so I think all 3 of those things are in line, if you will, this time. And you know, Jeff, from past acquisitions when we've made larger platform acquisitions, we've levered up to 3.8x, probably on 6 different occasions. And within 18 to 24 months, delevered right back down below our target of 2.5.

Our next question comes from the line of Tobey Sommer with Truist Securities.

Along the same lines of acquisitions, how do you think about the capital allocation retention between buying back your stock, which is at a multiple that you can see in buying commercial IT consulting businesses that carry higher margin and usually are growing more quickly than sort of the mothership, but also such a premium to the aggregate multiple of the company.

Yes. Well, look, Tobey, I think on the one hand, doing share repurchases is a very accretive thing, especially where the stock is trading today, but we have to be mindful that that's also a permanent retirement of capital, right?

And there's some investment that needs to go into the firm, both organically and pointed towards M&A to position the firm to where we need to be for the future.

And we're very fortunate that at this scale, we can do both, both are accretive.

As you said, the acquisition is accretive to growth rates, to gross margins, to EBITDA margins, to cash flow and to strategy. And so I think the 2 of those work hand-in-hand. So we're certainly mindful of that. But you can't be all one or the other. You have to have a strategy around both.

And then for the government consulting business, what's your outlook for that? OBBBA funding has been sort of slow to percolate through indeed works its way into actual contracts and revenue and profit.

We do have a budget behind us. But do you think there's an opportunity for your book-to-bill to kind of materially improve with the convergence of those items over the next 2 or 3 quarters?

Yes. We kind of are where we were coming out of the third quarter. The only difference was we had a shutdown, which kind of slowed things down for a number of weeks longer than anyone anticipated.

But I think in the back half of the quarter, award activity was moving along I think here in the first month of January, we've obviously been dealing with getting past a shutdown, which, by and large, we have except for on the Department of the Homeland Security side.

And I think as that gets resolved, the cycle is moving here. And I expect award activity to be strong in the areas that are getting budget support, which is Department of Defense and Security and Intelligence.

And I think we're well positioned for that. So as always, something comes up in this industry segment that seems to push things down the road a bit, but the budget is certainly there now. We feel good about our positioning there. And from a solution capability, I mean we play exactly where dollars are being shifted towards.

So I think all those things lined up, I think it's just a matter of timing. And what we said coming out of the third quarter was we thought there would be heavy award activity in the first half of the year. And those would begin to be realized in terms of growth in the second half of the year. And I think that's still the case.

The last one for me, with respect to gross margin within government consulting. What's reasonable, sustainable range for gross margin here hopefully a post-DOGE world?

Yes. Marie, do you want to take that one?

Certainly. So to your point, DOGE, we will lap in March of '26. And so we've really seen consistently what we've talked about less than 2% of total revenues, which probably equates to about $15 million. On a steady state for federal gross margin, it's probably closer to the 20% gross margin and maybe a little more to that.

Our next question comes from the line of Surinder Thind with Jefferies.

Ted, can you provide maybe a bit more color on this idea that the client demand for AI is beginning to pick up and you're starting to see demand drive there on the consulting side of the business and maybe talk about the push/pull versus are there maybe offsets within the staffing business? Or how should we think about the clients' desire to fully transform and use your services on the consulting side, but then maybe internally, they want to use some of the tools to be more efficient and the impact on staffing.

Yes. Well, let me take the second. I'll let Shiv take the first. I think what's going on in the staffing program is 2 things, Surinder. I mean, obviously, that business is kind of sequentially steady.

So I don't see a lot of movement either way on the program opening up wider or having less volume sent through it, it's certainly at a moderated level.

And I think it's because really there's a buying behavior change going on with our clients, where they used to open up that staffing pick it very wide and let resources flood in to work on internal projects.

I think they're being very judicious about that. It's a way that they control spend. And also, it's a way they further control outcomes, right? As if the client more and more is making investments in certain technology outcomes they want to get to, but they're doing it on an outcome basis, where there's real scope, real delivery that they can see what the investment is and what the return is.

And with that being impacted by AI, I really don't think it is not what we view, but I think it's more around the 2 things I just mentioned. Shiv on the first part of that?

Look, I think you're right, AI is a big driver of demand on a number of dimensions. If I were to put a spectrum to it all the way from using AI for different use cases, which are either industry specific or sort of horizontal customer service, any of those.

So a lot of work around readiness and modernization of the application stack as well as data. And what we're actually seeing is even for clients that have done some of the readiness work, finding that scaling is still challenging because of interoperability considerations because of just not having a framework to manage this massive AI applications that are being developed and to be put into production, govern, traceability, all of those elements.

So demand across the spectrum, whether clients are getting ready or if they're ready how do you actually take advantage of the technology at scale.

That's helpful. And then as a follow-up with Marie, could you maybe elaborate on the cost savings plan and what it means for 2026. I think in the prepared comments, you talked about generating sizable structural cost savings. And that these are going to ramp up over the coming quarters. So just any color on magnitude run rates, anything like that, that would be helpful.

So as we kind of noted in the [ prepared remarks ] related to the cost savings, so we gave a net $80 million of cost savings, if you will, over the 3-year period, indicated that, that cost savings would be kind of moderate in '26, but really building in '27 and '28.

The reference in the prepared remarks was really around the acquisition integration and strategic planning costs of $10.7 million.

Our next question comes from the line of Maggie Nolan with William Blair.

The commercial consulting growth, I think it was nearly 20% year-over-year. Can you talk about the mix of that? Like what was project based versus maybe longer duration manager platform-led work and then tie that into how you're thinking about revenue visibility in the coming year 2026.

We've seen growth across the board, Maggie. It's a lot of transaction or project-based implementation work, whether it's around our enterprise platforms. We've seen a pretty significant growth, as I mentioned in the prepared remarks in our application engineering and services space, which has been growing pretty rapidly.

Our data and AI work is actually also growing pretty rapidly from that perspective. And so we are seeing demand across the board for our solution set.

It's a mix of sort of, as you rightly pointed out, more longer-term projects. And I would say, implementation driven projects. We're seeing a pretty healthy mix of both of those. We're also seeing more fixed price improvements in our pricing from a project perspective.

So as you look forward from a revenue outlook perspective, we also noted our bookings for the fourth quarter which were a pretty significant number, ending up at a very healthy book-to-bill of about 1.3 plus, which really gives us a pretty good platform to build on.

Now keep in mind, as we continue to pivot our business, we're constantly trying to improve the more long-term piece of the consulting business. It's -- we're still wrapping up that curve.

So we still have a lot of work that has finite starts and ends, which sometimes results in bookings converting into revenue over time, right, typically happens to the end of Q4 to Q1 where we see revenues ramp up a little bit more slower than usual.

But that mix is constantly improving, and that's what we're striving to do is to get more secure longer-term projects, so we don't have to deal with ebbs and flows.

That's helpful can you talk a little bit as well from a market perspective, obviously, healthcare and consumer and industrial looks pretty good. What are you seeing in terms of financial services or TMT and any early commentary on budgets for 2026 from clients now that they finish their budgeting processes?

Look, I think we're seeing a pretty steady demand, I would say. And it's not like we're -- as we've said before and I said in my prepared remarks, our sequential improvement in financial services was outside of the big banks.

So those are the ones we're actually waiting and watching in terms of a pivot. So we're still trying to get an early read.

As Ted said before, some of the flow of demand that we're seeing on the staffing side from requisitions and everything else is holding steady.

So still trying to get a better handle. So we've not seen what I would call a massive inflection in demand. I think demand is holding steady to moderately positive.

We are seeing more uptick in demand in both TMT and software and services, as I noted, because of all the work that is happening around data centers and data center build-out and the demand for those services.

So Maggie, if you think about it sequentially, 4 or 5 industries up Q3 to Q4. That's certainly a positive. That's a better progress than we've had from an industry standpoint. And then for the fourth quarter, 3 industries of the 5 up year-on-year, right, kind of held back by what's going on with big banks and also what's going on in the services space.

So it's a progress if we'll say. And so we're cautiously optimistic. But we -- I would say we need to see some inflection in the big bank area to really contribute to the total to move forward at a little higher pace than what we're seeing right now.

Our next question comes from the line of Kevin McVeigh with UBS.

Great. I just want to clarify, was there any impact in the quarter from the government shutdown?

So there was a small impact from the government shutdown during the quarter, we mostly had a programmed in at the beginning. It went on for a few weeks longer, obviously, than we thought. But it wasn't material to the outcome for the entire quarter.

That's helpful. And then few comments on the offshore capability through Quinnox were interesting. Is that enhancing what you have? Or is that just new capabilities that you're bringing offshore?

Well, it's all new capabilities we're bringing offshore. We have a very small presence in India driven by some of our past acquisitions, largely in the realm of those platforms of ServiceNow and Infor.

But this brings a whole new set of complex mature delivery capability across sort of the application life cycle, whether it's application modernization management, whether it's modern application development, a lot of home digital integration capabilities, which are critical as clients are looking to make some of these AI solutions work from an interoperability perspective.

And also some very specific capabilities around platforms around SalesForce, Calypso and even SAP. So it's, frankly, a lot of truly incremental net new, but in a much more advanced complex global delivery model.

That's helpful. And then just my last one real quick. Do you have any contracts with DHS?

We do. So we're -- they're obviously a pillar customer of ours, an important customer, a lot of important cybersecurity work and other work, I think that, look, as we go through this, obviously, they're going to be adjudicating the funding here for DHS, and there are certain things and odds. I don't think any of that affects our work. We don't do a lot or anything that touches some of the areas that are kind of odds in the conversation in the further funding of DHS going forward.

Our next question comes from the line of Mark Marcon with Baird.

Ted and Shiv, I'd just like to step back to some of your initial commentary with regards to AI. Obviously, there's been a lot in the news about AI regarding SaaS companies, data retrieval services, et cetera.

And what I'm wondering is when you're taking a look at your client base writ large. To what extent are you seeing them just focus on AI?

And to what extent are you also seeing like we've had other companies that have basically said that they felt like some of their clients were basically stalling on some legacy or more traditional kind of SaaS implementations because they wanted to see how AI was going to shake out and what needed to be done.

And now that they've -- some of them have come to the conclusion that maybe they're not quite ready, and so they're proceeding with some projects that they previously stalled and that there was some releasing of pent-up demand. Are you seeing any of that? And when we think about the industry groups that are picking up and are seeing good sequential growth. To what extent of that is pure AI type projects as opposed to more legacy or traditional projects.

Look, I think, Mark, let me start by saying we're not seeing that, right? I don't think we're seeing large client signals that say that they're stopping implementation projects because they think AI can do what those platforms can do for them, right?

And as Ted and I have repeatedly maintained these enterprise platforms, at least for our large clients, we don't believe are going anywhere anytime soon because of just the nature of those systems and how interconnected they are to the workflows and the processes and where the canonical data truth resides within those organizations. So that's sort of the first part of the question.

In terms of your second part, look, we're seeing healthy demand across, as I said, all our capability areas. Look, if you think about -- I talked about application engineering services, a lot of that is focused on both legacy technologies as well as new product development that these companies are doing.

I talked about data and AI growing very, very fast for us. So a lot of work both in data, but also pure AI around use cases around governance, around scalability and trust in AI. So the demand pattern is pretty healthy across the solution stack.

Mark, I don't think there's a -- we're seeing any massive shift of funds or other stop some things and go fund and mass AI projects at scale.

Great. That's what I thought. I just wanted to confirm that. And then with regards to Quinnox, if I'm getting the right information, it looks like they have between 1,500 and 1,888 people. Is that kind of a bench model? And how quickly can that business scale with some of the cross-selling that you're going to end up bringing in? And what sort of gross margins do they typically produce?

Yes. So great questions. So typically, let me start with the numbers you have are accurate. They're roughly somewhere between the -- around the 2,000 number, if you may, Mark?

It's a very, very robust platform and can actually scale pretty rapidly depending on how we choose to sort of -- and the speed at which we want to take it and deploy it across our base, if you may.

And because it's a very well-run machine in terms of its talent supply chain, the ability to scale. And I may have mentioned it in previous it runs at an attrition level that is half of what the industry average is, which is great because part of the challenge in scaling up tends to be just the ability to replace and replenish talent in India.

So all pretty positive, positive. The gross margins are in the high close -- I would say, low 40s and EBITDA margins in the 20s.

And I think, Mark, if we -- if they maybe have something of note, I'd say different about this versus our past acquisitions as they come into the first year. We really think that because of their ability to scale on their platform, in India from a resource standpoint and the need from our client base to engage in the opportunities here with them that we can go a little faster on the revenue synergy side, than maybe we would in a difficult acquisition in the first year.

So our hope is that those synergies appear a little sooner. But that will -- we'll be careful about picking a finite number of opportunities and really engaging thoughtfully as we do that.

But one of the most attractive things about this acquisition beyond their solution capabilities and their global delivery footprint was the fact that they could naturally scale up very quickly.

And if you'll remember, we did the same thing in our nearshore operation when we acquired Intersys, which had maybe about 1,000 resources that we moved pretty quickly up to about 2,000 on an organic basis. So we think the same opportunity exists here.

We have reached the end of the question-and-answer session. I would like to turn the floor back to CEO, Ted Hanson for closing remarks.

Great. Well, thank you, everyone, for attending our fourth quarter and 2025 earnings release, and we look forward to speaking with you in a short number of weeks in the latter half of April on our Q1 2026 earnings call. Have a great evening.

Thank you. And this concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.

Good morning, everyone. Well, you can hear me. Okay, good. Welcome to ASGN's 2025 [indiscernible] Kim, Vice President of Investor Relations for ASGN. [indiscernible] you joining us today in New York, thank you for coming to the New York [indiscernible]. It's great to see such good turnout today. For those of you connecting with you in person over the weeks, [Audio Gap] expectations and assumptions about future events. [Audio Gap] cause actual results to differ from those discussed today. [Audio Gap] non-GAAP financial measures. [Audio Gap] and quarterly earnings materials on our Investor Relations website for [Audio Gap] great one for you today.

One that highlights how ASGN is advancing its strategy and positioning for the next wave of growth. We'll start with Ted Hanson, our Chief Executive Officer, who will speak about his views on the evolution of ASGN as well as how we're leading at the intersection of technology and high-growth markets.

Next, Shiv Iver, our President, will speak about how we're positioned through innovative platforms and accelerators, focused IT solutions and [Audio Gap]. Starting with Heather MacKinnon-Miller [Audio Gap] AI practices. They'll speak about how we're leading [Audio Gap].

Next, Steve Hittle [indiscernible] segment. Steve will speak about our cybersecurity practice and how we're protecting today's enterprises in an era of evolving cyber threats. After that, we'll have our [Audio Gap] to start off the second half, Shiv Iver, our President, will speak about our M&A strategy and [Audio Gap] progress as well as our power positioning ASGN for sustained growth and of course strong shareholder returns. Ted Hanson [indiscernible] remarks and one more Q&A session and then we'll open it up to an executive lunch.

So [Audio Gap] advance the slide, Kim, to officially kick off [Audio Gap].

[Audio Gap] to talk about the business and really frame our going-forward strategy and what we thought we could do over the coming years. And here we are today, 4 years later, ready to do it again. I think I'm going to repeat today about this business transformation. I mean, it's really remarkable what this leadership team has done to transform the business. And so we look forward to speaking about that today.

Welcome to all of you, our analysts our shareholders, the ASGN management team, many people on the webcast, other stakeholders. It's so great to be able to have this opportunity to speak with everyone about the business.

Most of you know me over many years. I'm Ted Hanson, the CEO of ASGN. I came to the public company by way of the Apex Systems acquisition in 2012. And since 2019, I've been the CEO. Today, we're going to, here in the beginning, really talk about the positioning of the business. And then Shiv is going to carry it on from there and really get deeper into the components of our strategy and where we're headed. As I tell you, every time we meet, we sit at the intersection of where technology meets a business opportunity or business need. We've been transforming the business a public company with -- depending on how you count it, 6 to 7 individual units, now thinking about how do we come together and serve more needs for the client together in a more forceful way.

You're going to get a sense today of where we're making investments around our solution capabilities and how we're driving higher value, higher margin work in those areas, executing a disciplined shift. I mean we're certainly going towards a higher-value model business. We have been for many years, today is a refinement and an optimization of that strategy, which we'll speak about along the way.

At the end of the day, it always comes back to accounts. And so you're going to hear us talk a lot about accounts today. Why now? So I've had some people say, well, why do your Investor Day today? The market is choppy for lack of a better word. You aren't quite back to growth rates that the company has historically had.

But in our opinion, now it's the exact right time to be here with you talking about the business. It's evolved so much from its roots as an IT staffing company now a 70% of the business, much more consultative. And I think you're going to be really impressed today as you talk to some of our leaders about the things that we can do in the marketplace. We're going to talk to you about the next phase of growth and how do we get there. Our next wave strategy, which is really unlocking the next wave of growth and value creation inside of the business, and really purposefully doing it as one business.

We've got a great leadership team. I'm really proud of them. They're purpose-built for this. And so we're going to get a chance to introduce the leadership team and hear from them. And really excited to talk about our acquisitions, highlighting Chris and TopBloc because it's really investments in the future. It's about how do you spur growth in the future and how do you meet your clients' most pressing needs.

Many of you know us, it's a $4 billion IT services provider. We've been on a march around building this gold nugget account portfolio for years and decades. 70% of the business is commercial, I think Fortune 1000-type accounts, 30% is government, serving kind of the most attractive government agencies within that industry sector. EBITDA margins of double digits. They've proven tremendously resilient here in a difficult 24 months that we've just been through.

Before I became the CEO, we were recognized as a best-in-class IT staffing company. It is still kind of our legacy and the roots of who we are. It differentiates us in the market and it created these enduring trusted long-term enterprise account relationships that we have. Over the last 6 years, we've really been sharpening our focus, making sure that we were raising our capabilities to meet the customer need. We made some divestitures of businesses that were less strategic. We moved investments from areas that were needed to be pointed at things that were higher value in the future.

We've made some key acquisitions here over the last 2 years. GlideFast in our ServiceNow ecosystem, TopBloc in our Workday ecosystem and a divestiture of Oxford. And now here we are in 2025 thinking about the future. And we're emboldened as now thinking about coming more forcefully at the market as one company with this very attractive solution set and this gold nugget account base, we're certainly set up to transform the business, to find margin expansion on the way there and to expose the opportunities as one company coming to the market.

This is the team you're going to hear from today. It's purposely built. If this place was only as much as I could think about between these 2 years, we'd be in real trouble. This is a management team that's really capable, experienced and has been where we're going. We also have the good fortune along the bottom row there to have some of our solution leaders in the room today. I think you're going to be really impressed to hear from them. They'll get a chance to introduce themselves as we come up to stage.

And every great leadership team needs a supportive, engaged and talented Board of Directors. So we certainly have that in spade. This Board of Directors has been refreshed for a lack of a better word, over the last 5 or 6 years. They're super talented. They take their job as a fiduciary on behalf of shareholders really seriously, they add a lot of value to strategy. And most importantly, with all of that, they're supportive of management once we have a strategy. They're super supportive of us as we go out and try to execute that strategy.

Representing the Board here today is Patty Obermaier. Patty wave -- raise your hand. Thanks, Patty. It's great to have her today. She's our newest Board member, but super effective here even in our first year to 2 years.

This is a business that is consistently recognized for excellence. I think that talent has their choice of where they want to go and work. And so it's really important for us to make sure that we're the most attractive place that they can spend their time and energy and effort, serving our clients and the business. We are also consistently one of the highest rated firms in Net Promoter Scores, amongst our peer group, which is about what our clients make their own referrals to colleagues either inside their business or outside the business for our services. And so when clients say that to you through Net Promoter Scores, it's super encouraging stat to have, and we have top of the chart results in that every year.

Really super proud of our last 2 acquisitions, GlideFast and now TopBloc just this year, being named Partner of the Year in their respective ecosystems. Remember, we compete with the global integrators. We compete with everybody and, if you will, of the big consulting firms in those technologies. And so that says a lot when you are the Partner of the Year, and so we're super proud to have that recognition.

Okay. Well, let's turn to the market we serve. This -- our legacy total addressable market here was really around the IT staffing programs. That's with the other disciplines around creative and digital marketing about a $50 billion marketplace. It's a good grower. It has been in the past. It has such challenges right now, but we recognize that it has volatility to it, and that's not a new recognition. So over the years, we've been moving ourselves in partnership with our client into a much more dynamic, larger addressable market that's more resilient.

And so I think you can see in our numbers that here, we're moving into higher-margin areas. We're doing work that's more consequential to the client with responsibility to get to certain outcomes, and so now have brought ourselves into about a $700 million addressable market. It's large, dynamic, highly fragmented, both opportunity for organic growth and for strategic M&A.

We can't have any conversation without talking about AI, but let this be the kickoff of that part. You're going to hear a lot about it today. And I think what we -- the thing I really wanted to say here was probably good to think about this chart from Gartner kind of split in half. On the left-hand side, there's been new technology here, obviously, especially as ChatGPT came out 2 or 3 years ago. There's been enormous inflation of expectations now supported by the tremendous amount of capital going into the build out. And on the consumer side, an enormous adoption of these technologies, right, as we use them every day. I know we all probably don't use just one of them. We'd probably use 2, 3 or 4 whether it's Gemini or Perplexity or ChatGPT. And so that is real in the market today.

What's still a developing story on the right-hand side is large enterprise adoption of AI and specifically Agentic AI. And while there's a lot of conversation around that, and now you can see real functionality being driven by the big enterprise software firms, the corporate enterprise client has not yet gotten there.

Well, why is that? Most companies still remain focused on proof of concept and pilots because anything that's of any scale is not quite -- you can -- many reports out there, not quite meeting the ROI objectives that are set out prior to the project. The expectations have outpaced what's really possible. And so there's a synchronization that needs to go on there between capabilities and what the expectation is.

And I think most importantly, the clients are finally realizing among other stakeholders that the tech debt that's associated with all their legacy systems is a real impediment to recognizing return of AI and Agentic AI scale. For years, our clients and our own firm have spent much time and money putting in enterprise-wide systems that were oriented to departments and siloed and data was spread in all kinds of various places according to that matrix. And that is a huge obstacle for realizing the promise of AI.

And so what's the opportunity? Well, look, I think our clients are now recognizing that they have a lot of the tech debt to deal with in order to get to their objectives around the big enterprise software firms are realizing that they can't sell through Agentic AI without our help. And I think we've got some great examples here recently where just in the last few days, our partnership with Salesforce, where Salesforce is saying, look, we're not getting the pull-through adoption of Agentic AI. We need you to be our 360 partner to help engineer these into our clients' custom IT environments.

And we're beginning to see that happen enterprise system by enterprise system, whether it's ServiceNow, whether it's Workday and others. So the thought that maybe agents would just come out of the box when you adopted one of these enterprise systems has proven to be a false expectation. And I think it really speaks to what the client needs for us and the value proposition is for our business in order to help them to get to the promise of that. So it's a tremendous opportunity. We're perfectly positioned with its enterprise customer base with the years of relationship and work we've done with them for understanding their unique IT environments and be able to help them engineer these Agentic AI opportunities into their business workflows and processes.

This is really a lead behind for each of you, maybe for later, which is just a few comments from our customers about what's important to them in terms of who we are at ASGN and what we do for them. I think even in the last week, maybe just to illustrate some of the -- some of the early on things that are happening with Agentic AI. I was talking to a Fortune 500 utility company, and obviously, they're on quite a run right now. That is industry in our portfolio that for decades has been kind of a really stable but slow grower kind of place to be. Now it's one of our most dynamic industry segments.

But we were talking about a simple use case of Agentic AI with ServiceNow, which made total sense of having agents monitoring field equipment. So think about big wind turbines or meters or other things and having metrics and data flowing in from those sources, if you will. And then being able to have agents receive that and then decide what to do with it. Can they reset something and fix it immediately? Can they afford it to a responsible party, whether that's a person or a department more quickly and make their own decisions about where this goes and can the agent resolve it or not? And it was just a simple -- really -- it was not a terribly expensive use case. It was more of one of these proof of concepts, but it was like real-world stuff around how clients are going to be able to get to better outcomes, more productive outcomes with Agentic AI and a great example of how we being embedded with that customer for all these years are able to connect the dots on that because as you can imagine, there are various systems in the field, there are various enterprise systems inside of their operations.

And so our understanding of all that, we're able to take a Agentic AI and make those connections. So just a great example of a customer really being able to take advantage here early on of agentic opportunity.

If you think about that in the context of really what is our promise to our corporate and enterprise customers, our value proposition is really about the engineering of all these technology solutions into their custom IT environment, right? No one customer, even if they're both big money center banks have the exact same IT environment nor do they use the exact same applications. And so embedded with them for all of these years has given us the right to play here and win as they pursue these outcomes. And it's really about bringing technology together with talent which is the foundation of our business in the newest technologies that we help them adaptive provide adaptive engineering to help them get to their biggest opportunities.

Well, that leads to our promise, engineering the adaptive enterprise, right? So we're no longer just looked at to say, look, I need a specific piece of technology talent here or there on a one-off basis and need ASGN to be my partner in bringing talent, engineering capabilities and technology together to meet all of their most pressing needs. As we do this, we have an opportunity to build on our strengths as one company. So as we come together more and more as one company, both in our go-to-market approach and in how we harmonize our solutions, and in terms of how we play off of all the great qualifications that we have in our individual business units, we have a really big opportunity with all of these customers to bring all of our services in a way that we've never done before.

In order to get there, we've entered into an initiative over the last weeks and months to think about our brand in the marketplace, right? Our ASGN brand, which represents all of our individual units, has really always been a customer-facing brand -- excuse me, an investor-facing brand, right? So if I were in the customer marketplace and I said, well, I'm the CEO of ASGN and we're so thankful to be your partner here. The customer would say, well, I'm not really sure who you are, but Apex is pretty darn good, right, or ECS is pretty darn good. But it's a missed opportunity for us not to be able to bring all of this to bear in front of our customers.

So this rebranding initiative is going to do a few things. We're going to increase our brand equity because we're going to bring one powerhouse brand into the marketplace. It's going to represent all of our teams all of our units, all of our solution capabilities, all of our past qualifications to bring a much more comprehensive portfolio of services to our clients. It's going to enhance our own collaboration within the firm. Our teams have been really supportive of each other and really work with each other in the best interests of each of our individual units.

But at the end of the day, they're in a certain unit and a certain brand. And so this is just going to continue to break down those silos so that they can work more seamlessly together. This is going to simplify client engagement. There are a lot of times where we have a client opportunity where we'll have multiple salespeople trying to serve the client and get to the right outcome just because they come from different units.

The same thing can happen on the solution side. So this is going to simplify all that. And then we're going to take this opportunity to modernize all of our brand elements. So the look and the feel, a name, what's the visual identity of that, what's our promise, as I mentioned earlier, around engineering the adaptive enterprise, how do we position as one business in front of these customers, is going to be a real opportunity for our business going forward.

So with that, I'd like to announce today that we're rebranding the name and identity of ASGN to Everforth. Everforth is really about the forward motion of leaning in for our clients, staying up with the latest changes in technology, skating to where the puck is going to be and be able to serve all of our clients' need. It's about bringing technology to meet a business opportunity and problem. It's about engineering that opportunity and to the customers technology environment, and it's about having the expertise at the moment to be able to achieve all of those goals.

So with that, I'd like to turn to a quick video here and give you the first clips, if you will, of some of the elements of the brand that we're going to be bringing to the market in Everforth.

[Presentation]

The ASGN name, which is a ticker symbol of the company, has had a tremendous run over decades and years. But I think the opportunity to transfer that brand equity, both from ASGN and from our units over a thoughtful period of time is going to really go a long way into helping us meet the greatest needs of our customers. It's also going to be unifying for our team. They're finding out now right now since we've released it to the public with a really, what I hope is a thoughtful message and also a very kind of clean strategy on how we get there over a responsible amount of time.

And I think, too, a lot of times when you undertake efforts like this, someone will say, well, how much does that cost? And if you think about it today, we're supporting 7 brands every day in the marketplace on an ongoing investment to try to make them the best brand they can be in their respective markets. Now we're bringing all that together as one. So there's operational efficiency captured in all this, not additional layered spend in the future. So -- and it's included and later today, we'll talk about our financial targets. And while it's not terribly material, it is just one more piece of operational efficiency for the business as we go forward versus just new layer on expense.

I think, hopefully, you've gotten a little taste here through these first few slides that we're positioned in the right place to address all of our customers' most pressing needs. And through that, addressing various trends that are going on in the market. I spoke to rising IT complexity. There's nobody better positioned because of our model to be there with the right skills at the right time to help our clients deal with the ever-changing landscape of the need for expertise in all these new technologies.

We talked about the technical debt that exists within our enterprise customer base. I think that to mention from time to time in the markets but it's certainly not appreciated. But it will be here as customers begin to finally try to capture the promise of what comes with their AI opportunities. And there's been a buyer trend going on in the market, which is a movement towards more outcome-based solutions. And I think as I've talked to investors along the way and on our earnings calls, we've spoken many times about this shift where the customer says, well, look, I understand I could just capture these resources through the IT staffing program, but that's not going to help me because then the [indiscernible] is on me to get to these outcomes. I need you to be here with a solution, with some skin in the game and defining what the investment will be for that solution and what the return is.

And then we have real responsibility in all that and an enhanced value proposition for the customer around that. And you're going to get a great example of that through many of our solutions that we talk about, especially as we get into the conversation around Workday and TopBloc.

We have unique competitive advantages to meet those trends. And it all starts with industry expertise. Commercial technologies are not all adopted the same way, banks versus health care companies, versus consumer industrials on and on and on, adopt all these technologies in a different way. So bringing technology together with industry expertise is the key. And that's why our customers rely on us. More and more partnerships with the tech firms where we come to market together also with assets and accelerators and other IP to help them to get from start to value in the shortest amount of time possible, is part of these outcome-based trends.

And it allows us to really lean in on our superior delivery model. A lot of our big traditional consulting competitors have a large bench of workforce and all you hear about today is their retraining, upskilling and all these things. More than 80% of our team on any project is put together by us in a custom-fit way through our IT staffing capability. And in that, you get the exact right skill with the exact right industry expertise, the right tenure and experience in the market at a better price point. And as you bring all that together, customers have gotten really smart on this. And so we're seeing a big adoption of our services around these unique competitive advantages.

Now we need to bring all this into the market with a certain strategy. So today, we're going to talk about our strategy, which we call, Next Wave. And Next Wave is about unlocking the next wave of growth and value creation for the firm. And many of these elements of this go-to-market strategy already exist in our business today. So I'd like to think about this as a refinement and an optimization of our current path that we've been on here for many years. I'm going to focus on the left-hand side of this for a moment, which is where we play in the marketplace, and then I'm going to let Shiv Iver, our President, talk about more in depth about what are our winning attributes as we approach the market and what are the key enablers of that.

Gold nugget account base with industry diversification. If you were building a business today, you would want large in IT services, you want large enterprise accounts. You'd want long year -- many years of tenure with those accounts, you'd want those accounts to be diversified by industry to give your portfolio balance. And so that's exactly what we are here at ASGN.

No one industry segment here represents more than 21% of revenues. As difficult times ripple through the marketplace. Typically, it happens by industry segment. So having your business spread out diversified among different industry segments is really key as you build the business for the future. These are -- all provide certain strategic growth areas as they're going through their cycles of higher spending on IT to get to the solutions they want to get to. You've heard us many times say financial services and TMT particularly are really important right now in order to get back to better growth rates, if you will, across the whole portfolio because those are really where technologies are first adopted if you think about all the industries on this wheel.

And more and more, we have a unique advantage here around how commercial, how solutions play across both now commercial and federal. More than ever the federal customers wanting to adopt commercial technologies. Now they're having to learn how to receive them and deploy them because it's different, if you will, than in the commercial industries. But again, that's our innate capability and kind of our right to win there because we've been embedded with these federal customers and our ECS business for all of these many years.

There are also certain technologies that more than ever today are playing back across from federal to commercial. Certainly, cybersecurity is one of those, and you're going to hear from Steve Hittle in a few minutes about our capabilities in cybersecurity and the federal space and how we've been able to port those into the commercial industries and win more and more opportunities there.

Also on the AI front, the government customer has been the first mover here on AI. If you go back many years when ECS came to our business in 2018, the gold nugget of that business was their work on Project Maven, which we're going to highlight today and using AI to collect intelligence from across the world and really understand at a moment to notice what is going on.

To me, one of the -- one of the highlights of this business is the growth algorithm. And I think we're at a spot where we can really leverage off of the pillars of this business to create a long-term growth algorithm that at the end of the day is going to continue to create value for shareholders.

Sustainable revenue growth. I mean there's a ship takes you through the solution areas where we're going to be focused. There's demonstrated long-term future growth in all of those solution areas. And we have the enterprise customer base who are going to be the highest spender on adopting all of these solutions over the coming years. We have opportunity for margin expansion as we continue to come up the pyramid that we talk about so many times in our one-on-one meetings and the value proposition increases because of the complexity of the solution that we're providing we're going to get expanded gross margins from that. You've already seen that demonstrated here over several years inside of our business portfolio with commercial consulting.

The second thing that's going to happen is just in business mix shift, we're going to get an expansion of gross margin. Naturally, over long periods of time, our commercial business is going to grow faster than our federal business. And so with that comes a favorable mix shift. We also have the opportunity, which Marie is going to discuss later, to be even more and more efficient in our operations. And really, changed, to some degree, the structural cost components of this business. And so that's going to provide -- all 3 of those things together are going to provide margin expansion over the coming years.

It's a business that's known for high free cash flow. We don't have a lot of CapEx. We have an increasing margin opportunity here, which is going to support free cash flow generation and then the opportunity to allocate capital for the highest return for shareholders. And so when you put those things together, it gives us a lot of confidence that we're going to be able to create long-term shareholder value here over the coming years. And that's really the investment thesis.

As we go forward as one company and we bring growth together with margin expansion and free cash flow strength, we're going to take advantage of an opportunity in the market, partly because of our competitive advantages, partly due to how we're transforming our business model. It's going to market with one business. I hope you see today that there's a clear and focused strategy and a management team here that's ready to continue to deliver on it and take advantage of our differentiated delivery model.

And through all those things, there's going to be a value creation opportunity here and a commitment from this management team and this company to continue to allocate capital in the best interest of shareholders and apply above-market returns.

So with that, I'd like to invite Shiv Iver, our President of ASGN to the stage. Thank you.

Thank you, Ted. I'm Shiv Iver, and as President of ASGN, I oversee our commercial and federal businesses. I've spent about 25 years in the consulting and technology services industry. Most recently at Accenture, running Accenture's consulting and industry businesses for the Americas. And I'm pleased to be here. I've got to know some of you through our calls, and I'm hopeful to get to know more of you as we go through the day today.

So taking off from where -- what Ted outlined earlier, I'm going to go a little deeper into some of the elements of our strategy, including how we see the threat and the opportunity from AI, how we're focused on the right solutions portfolio and in elevating our strategic partnerships. We believe through these actions, we can not just play defense, but play offense with the large addressable market that Ted alluded to.

So as with any presentation in today's day and age, we can't go any further without talking about AI. So let's just talk about AI. Now there's not a single day, it's the most dominant topic on people's minds. There's not a single day that goes by when we don't see something talked about around AI. We just spoke earlier about the discussions on the AI bubble.

But every day, you see a report and these reports range from, hey, SaaS is dead, we don't need developers anymore. Services are dead. That's one side of the equation. The other side of the equation is there's a lot of reports which talk about AI creating new jobs. AI creating workforce opportunities. So if you look at reports from McKinsey or the World Economic Forum, they talk about creations of millions of jobs globally and in the U.S. economy. So that's the paradox. That's the sort of risk/reward balance that we're looking at every single day in this business, right?

And so as we look at this and you look at what the opportunity set is, we think there's a massive opportunity for services. Just at this very moment, if you take a step back and think about what's happening with the infrastructure build-out. The numbers are in the multi-trillions, 5% of GDP. We're seeing a surge in demand for specialized services just associated with infrastructure build-out, whether it's on the networking side, where there's a need for networking services because as computing gets pushed out more to the edges, communications providers are refreshing their networks. Now that's creating opportunities for us, purely at the infrastructure layer. Data center build-out, again, opportunities for us, right, as you think about this.

So there's just tons of services that are coming in at the infrastructure layer. And as this model evolves, there's going to be more around the application layer and how do we make all these applications work. So as we think about AI, are there near-term headwinds? There are. Sentiment, clearly. And we think that our expectations and in many cases, the expectations are somewhat unrealistic and aren't panning out the way we think they would pan out, right? So that creates pressure.

But on the flip side, if you think about AI, and there's 2 things that I would say are truisms when it comes to AI. The first is the pace at which this technology is evolving and changing, is driving massive amounts of complexity in the architectures for our clients. And when -- and complexity equals opportunity for services companies. So that's sort of the first truism.

The second one is really that many companies aren't ready to take advantage of what this technology has to offer. Ted talked about legacy debt, their tech stacks, their data, their talent is not ready to take advantage of this because they don't know either how to integrate these, how to get themselves up the curve to integrate these technologies. And again, creates massive opportunities for us. So net-net, as we look at this picture, all the noise notwithstanding, we think the opportunity for us far outweighs the risks.

And when you're in a situation like that, it's always important to take a step back and say, are we walking into this environment, operating with certain inherent structural advantages? And we are, and Ted talked about this, right? So we have a very unique business model, which we think is a real differentiator because it allows us to keep pace with the change of technology and the rate of change of technology, right?

The second thing is our account portfolio. We've built this account portfolio over years. And it's -- we've helped these clients navigate waves of technology change and continue to deliver results for them. So there's a level of trust that this wave of technology change is, again, something that we can navigate with them, right? So when we do those things, and we complement it with M&A in the right solution and capability areas, right, and build these capabilities around us, we're well positioned.

Lastly, one ASGN and Ted talked about it. There's an increasing demand for commercial solutions in the federal segment. And we have some really powerful capabilities there. But we also have an ability to take solutions from the federal segment and start to translate them into the commercial segment. And you'll hear some examples of it. So we think that our ability to do this to navigate the shift is from a position of strength and we can actually play offense.

So bringing us back to AI, what's the real impact? And what are we seeing out there? For clients, it's -- they're questioning everything, the whole business model, how do we make money? How do we do work? How do we make product? How do we ship product? How do we engage customers? And what they're doing is there's a lot of activity around proofs of concepts, pilots in each one of these domains. And some clients are seeing results and some aren't, right?

But the #1 question that I think everybody has read is whether you call it scale it, whether you call it enterprise adoption, is the #1 question. So how do I get from what I'm doing in pockets to really create value at an enterprise scale. And so what really is stopping the scale up. If you -- the #1 thing, and if you read reports from BCG or Bain or any of these consultancies, the #1 thing stopping scale-up is talent and the access to talent with skills, with deep expertise in these technologies, right? So then in itself, you can start to see where the opportunity [indiscernible].

The second thing around scale-up is really, as I talked about, data readiness, infrastructure and the ability to deploy AI securely and address the vulnerabilities that come across as you deploy AI. I don't know if any of you read the recent press release and article from [indiscernible]. There's a Chinese threat actor, which used agents to execute cyber attacks. And when you think about that, it just ups the ante on security to a whole new level on what you need to be able to deploy [indiscernible]. So the heightened sense of importance of cybersecurity, you can start to see with that.

The third thing is, as we start to look at this, and again, this ties into the strategy is where are our clients deploying AI. They're doing it on the platforms and the technology stacks that are sitting within their environments. And the need for understanding those stacks, build expertise around those is critically important. And so that's what we're focused on.

Last but not the least, like every one of our clients, we're thinking about AI in our own context. How can we use AI within our organization to drive productivity, to drive efficiency and as a margin lever? And I use the word margin very carefully because a lot of the discussion around AI today has shifted away from classical use of AI to agents and productivity and efficiency and loss of jobs.

But we think about it not just from that context. We think about it also from the context of growth. So things like how do we upscale our sales force, how do we enable our sales force with faster, better information to engage with clients. So it's really an overall opportunity for margin expansion, both from a revenue perspective and a cost perspective. And again, bringing us back to speed and scale, both are important to win in this race. And I think we have a business model that's really tailor-made for it.

So how are we preparing ourselves for the age of AI. 3 big broad buckets, if you may. The first is what are the AI solutions that we're bringing to our clients, and I'll talk about that in a minute. The second is how can we deploy those AI solutions at speed and pace within our client environments? And the third is how do we build and test things within our organization that become opportunities for us to go talk to clients about. So almost lead the way with these technologies in some sense.

So if you come back to the left of the page, on the client AI solutions, we think about it sort of in 2 broad vectors. The first is what I call Horizontal AI solutions, right? And that's things that you can deploy across any client. And we have a comprehensive suite there. We can go all the way from AI literacy to building use cases to talking about data, right? So that's one set of things.

The second is specialized AI use cases that are specific to an industry or specific to a client, whether it's deploying AI in a pharmacy environment or underwriting for insurance or AI in manufacturing environments, right? In order to do all of that, we have to start to build our own IP, our own assets, and we're investing in those. I won't steal Heather and Marshall's thunder here. They're going to talk [indiscernible] about that stuff as they come on.

And then the last thing, we're not waiting. If you saw the sales force announcement that we just put out, a big piece of that was how do we adopt -- we view Salesforce as our CRM platform, how do we use agents within our organization at scale. We're starting to do that in several areas. Now these are great proof points to take to our clients. So -- and we think we're starting to make very, very good progress on all 3 of these vectors.

Bringing us back to strategy Next Wave. Ted talked about the left side of the page, the attractive markets that we're in, the client portfolio that we have, the core solutions that we're playing in. I think the million-dollar question in all of your minds is, look, everybody has that. What's different? How are you differentiating yourself? What's different about how you're thinking about how you're going to win in this marketplace? That's, I think, the million-dollar question.

So I want to start really at the top here, right? Over many years, we've built deep industry expertise and has a very granular understanding of our clients' environments, their business problems and their challenges. That's always the bedrock of anything we build our differentiation on.

When you layer on top of that, the investments that we're making in IP, in our accelerators, based on the understanding of those challenges, we have monetizable assets that we can actually deploy to accelerate value. But we can't do any of that if we're not tied in closely to our partners. Because they're -- and staying ahead of the curve on where their technologies are going. Chris will talk about some of that stuff.

That's part of why we're tied in with Salesforce and ServiceNow because they're constantly evolving their product and we have to evolve our capabilities alongside them. So that's really how we think about winning in this market. And I'll click into each one of those in a minute, but really building on the foundation of knowledge that we have about our clients, the industries they operate in and then building the differentiation on top of that.

This is a very, very important page. And I want to spend a little bit of time on it at the risk of maybe spending too much time on it, but I think it's very, very important. Ted talked about a solutions portfolio. I talked about accelerators, and I talked about partnerships. Now there's probably any presentation that you look at from a technology services company will have all 3 of these elements, right?

So what's different? What's -- what are we doing? How do we think about it? And how do we approach this from a strategy perspective? The solution areas are very clear, and we'll talk about why those solution areas are attractive, right? But the key thing here is the interplay of these 3 elements. And what do I mean by that? The process of maturation for us really has taken us from saying, hey, ASGN help us with something and we go help you with something to the point where now we're talking about repeatable things. So rather than the client asking us for x, us saying, Mr. Client, we think you have a problem in this area with this technology. We have a perspective, we have an asset, we can help you solve that.

So the pattern recognition the repeatability of what we're doing and building assets around that is the critical part of the maturation. So if you build assets without a firm understanding of what those repeatable challenges are in these deployments, they're just experiments, they're R&D experiments. But we're building assets that are relevant in the context of these repeated challenges that we see.

When Chris Skinner, who comes down later in the day talks about it, his entire TopBloc business was built on this premise of accelerating deployments, addressing repeatable challenges, building assets that automate and now we're doing that with an AI-first mindset.

And last but not the least, right, it's the partnerships. These partners give us access to their technologies ahead of the curve. We're able to experiment with them. we're able to co-engineer with them, and that gives us a leg up as we play in this space.

I won't spend too much time on this page. I'll just reground us really, really quickly. And there's a reason these solution areas are critical and important. The first is, as you can see from this page, they're all growing at high single digits or double digits, sort of point number one. The second point is these are all solution areas in which we believe we have a right to win based on the work that we're already doing or the work that we think we can do in collaboration with our partners.

The third thing in this day and age of AI, it's not just about deploying these solutions individually. We are taking the lens of interoperability because no matter which client to walk into who's thinking about AI, they're going to have some enterprise platform whether it's SAP, Oracle, Salesforce, Workday, any of those. They're going to have some data in the cloud. They're going to have some needs for customer, they're going to have some needs for cybersecurity, and they're going to have to think about all of these elements if they have to truly adopt and scale AI at an enterprise level.

So the interoperability and the ability to engineer that interoperability is also a massive opportunity. So it's not just the point solutions but the ability to make all of these work in this day of AI. And you see the talent solutions line along the bottom. We've always been there. That's a complement to everything we do. And Ted talked about the uniqueness of our model where we can bring these skills and talent in each one of these areas at speed, scale, right? So that's how we think about these solution areas because I think these all have massive runway headway for us.

So what exactly do we do? And what are we delivering to our clients in each one of these solution areas? I'm not going to talk about this in the abstract. I'm really going to start to use some examples to bring these to life. So let's start with data and AI, and I'll pick some of these areas to talk about. So let's talk about data and AI for a moment, and let's start at AI. I talked about the idea that in AI, we have a solution spectrum that goes from AI literacy all the way to scaling AI. And I hope you saw our announcement on our AI Factory. Again, Heather is going to talk about it. But that's a comprehensive framework to take AI enterprise-wide.

One great example on the AI side, at the top end of the spectrum around use cases. So for a professional services company, which has a lot of documentation and this documentation is tied into regulatory things. So when a small piece of regulation changes, holds of documents have to be updated. This firm, a professional services firm, was trying to crack the nut on this for a very long time, and they've got to a certain point. And beyond that certain point, they could make progress. So they called us in.

So we built an agent that cut short the amount of time it takes to update these documents from months to weeks, right? So we're right there at the use case level.

Now we're working with Databricks, on the other side of the spectrum on AI to get data readiness going where we are now talking about working with Databricks and other partners to suck in data from distributed assets in the field on top of which we can build AI models.

Now if you think about software development, we've got our own proprietary Dev Labs, which is a lot of open source-based stuff, which allows us to build accelerators, which we can use for our own work, but also work with clients on solution delivery.

Customer experience. Through our Creative Circle teams, we have a long history of serving the marketing departments of a lot of enterprises, enabling their own in-house agencies. So we've built this framework on what we call Agency Excellence, which allows us to truly understand the workflows that go in the entire experience journey.

So recently for a large pharma client, we were one of the 3 partners chosen to take the next logical step, which is to start embedding AI into those workflows. So our ability to truly understand the process, those workflows as a creative partner allowed us the right to play in embedding AI into those workforces, right?

Talk about -- let's talk about cybersecurity for a moment, right? You'll hear from Steve Hittle shortly, but I will give you a little teaser here so that he can come in and then wow you with the sizzle. The teaser here is that for the Army, we secure 800,000 endpoints in the federal space. We are the 24/7 SOC for the U.S. House of Representatives, right? They probably needed it during the shutdown, but we were the ones supporting that.

Now if you think about the first example I gave you on the 800,000 endpoints, you go to any manufacturing client, you go to a utility, where are the most vulnerable pieces of their network? The endpoints, right? And our ability to take that and translate that into an environment like that, allows us to really, really make a difference and add value to our clients, and we're starting to do it with partners.

Last but not the least, enterprise platforms. You've probably heard Ted say this, you've probably heard it from other people, but we believe that the fastest channel to get ROI from AI or even Agentic AI today is through enterprise platforms. Now through our acquisitions, what have we done? We've built a portfolio that -- and -- with the recent Salesforce announcement, which gets us pretty squarely into the front of the house with CRM, we've got the front, we've got the middle with supply chain and manufacturing, we've got the back with Workday, HCM and Financials, and we've got ServiceNow, which is a true orchestration layer.

Now what this allows us to do now is to talk to clients about really thinking about Agentic AI in the context of their entire enterprise platform architecture front to back. And that's what we're doing. We're trying to deploy these. We're ahead of the curve in thinking about how do you think about agentic architectures front to back.

So hopefully, this gives you a sense for the things that we're talking about in these solution areas are not just concepts. We're actually living it day to day with our clients, and you've hopefully seen that through the examples that I just gave you.

Okay, there you go. I won't spend a ton of time on this page. Heather and Marshall are going to talk about this [indiscernible]. A couple of things, again, that I want to highlight. I talked about pattern recognition, and I talked about the need for understanding repeatable patterns, right? And that's true for anything, whether it's platforms, whether it's AI.

So one of the things I want to point out here is our AI Innovation Center. And what we're doing with that is we're creating a centralized hub where we can capture the knowledge from every engagement, every use case, every piece of client work that we do to make it reusable across both our delivery base and our sales force. So they can actually understand what we're doing across the whole thing.

The other one I pick out here is agent, which is really a framework for responsible AI deployment. The rest of it, you'll hear from Marshall and Heather.

The third leg of this stool. Now if you go back to the page I highlighted earlier, the first part of the stool was Solutions. The second was Accelerators. And you saw at the bottom, there were Partnerships, that's the third leg of the stool for us.

Now again, I bet you've seen many presentations from many companies, which show you a ton of logos of partners. So how are we different? And how do we think about partnerships differently, right? Our partnerships, many partnerships that I've seen over the time are very opportunistic. You walk into a client, the client says, hey, I need to do a deployment of product, actually go talk to the product company and you start the deployment. That's one way of doing it.

But the approach we've taken is fairly purposeful and fairly strategic. And it's what we call a 360 approach to these partnerships. And what do I mean by that? In our partnerships, we're not just focused on identifying and opportunistically fulfilling a client need, we are actually working with these partners using their technologies in-house, building on them codeveloping with them. And in some -- again, I harken back to the sales force announcement or what we're doing with Workday. We've deployed Workday. We use Salesforce. We're building agents on those. We're deploying them in our environment. We're doing the same with all of these areas, right? So that's the difference.

It's that 360 approach that allows us to do 2 things, right? Deeper relationships with our partners, right? Because we're helping them advance in the marketplace, using their products and then we go together to solve client problems.

I do want to point out one last thing on this page, which is we talk about all these scale partners, the hyperscalers, the enterprise platforms, the security partnerships. But in this day and age of AI, the ecosystem of solutions is exploding. Like if you go and look at any sort of reputed source on research, CB Insights or whatever, there are AI companies or solution providers for every problem you can imagine in most industries. And these are specialized companies that are very, very good at solving specific things.

And if you truly want to be a partner that can accelerate value, the ability to scan the environment, identify these and start to think about how do you deploy them is critical. That can only be done, a, if you understand the industry; and b, if you understand the landscape. And we're constantly doing that through our solutions team and Heather and Marshall will talk about it, and that's what led us to this company called [indiscernible] which is a very unique company that deploys agents in manufacturing and operational environments, a pretty hard engineering problem to crack, and we're actually doing that with a client.

So partnerships aren't just about opportunity, they're truly deep enablers of our strategy. I've said a lot about our partnerships. I'm going to stop, and I'm going to let you hear it from the horse's mouth from one of our partners. So I'll play a short video right now.

[Presentation]

As that video was playing, I was just thinking that the French accent sounds so much better than the Indian accent. It would be so much cooler if I had that. You heard from him. It's great that we can do that. But is it actually manifesting in results for us in real life, right, as we go there. So we're seeing a 10% to 15%, call it, whatever, double-digit growth in our partner attached sales and revenue, whether it's ServiceNow, whether it's TopBloc and all the new partners that we're adding, we're building assets, we're putting them on their company stores, right?

So the thought I want to leave you here with is you're going to hear about partnerships everywhere. I think what makes us different is the unique way in which we're approaching this very purposefully, very thoughtfully with the right set of investments with the right partners for each one of those solution areas in a very 360 manner as we go through what we're doing.

So as I close out, I want to anchor us to a few things on this page, right? AI is here to stay. We all know that, whether it's the year of AI or the decade of AI, is up for questioning, and we can talk about the evolution of all of that. But it's here to stay. As I said at the very beginning, we think it's a massive tailwind for us. And we're not looking at it defensively, we're ready to play offense with AI because we're building ourselves up for it. We're gearing up for it.

We thought through the purposeful set of solutions that we want to be in, where we believe we have a right to win with our positioning, with our clients, with our partnerships. And we're investing in the right things to be able to go solve our clients' problems with our own IP and our own assets, right?

The last thought for me on this page is, as you think about this marketplace, the marketplace has a lot of scaled players and has a lot of upstarts or start-ups or whatever term you want to use, and they're all competing. I think we're in a very unique place where we have the scale, we also have the velocity and the agility of a startup. So think about us as a scaled player with the velocity of a startup. That's who we are.

So with that, I'm going to now invite Heather, who's our Head of AI; and Marshall, who is our Technology and Innovation Officer, to talk about AI. Thank you.

All right. Thank you, Shiv. That's a great segue into our conversation about data and AI today. Hello, everyone. I'm Heather MacKinnon-Miller, our Head of AI. I spent over a decade as an engineer. I came from 7 years in data and AI at Microsoft. I also led data science and machine learning for UPS.

Good morning. I'm Marshall Thames. I'm the Senior Vice President of Technology and Innovation at -- on the federal arm. I ran the Defense and Intelligence business unit for a number of years before we started this Technology Innovation Group earlier this year.

If I could, I just want to point out, we're wearing very cool new Everforth [indiscernible], if you missed that.

Great. So to Shiv's point, if you come out with anything from our conversation today, is that AI is not a myth, it's a reality. We see it in every industry, every domain, every role in ASGN, now Everforth, is really well poised to take advantage of this opportunity. So really starting a couple of points per Shiv's, original like 6-pillar strategy, we are our own AI customer. So ASGN has been building AI applications internally for a long time for everything from selling to developing, and that means we can take the lessons learned and the best practices, package those up into solutions that we're calling accelerators and offer those to our customers.

Second, we go-to-market industry first, and that's really important because we aren't out here just building flashy demos. We work with our experts to see what are the real industry problems that need to be solved, turning those into prebuilt solutions and then offering those up to others.

And I'll give you a quick example. In the utility industry, when you go out and update a natural gas line, you create a work order. People have to come back into the office, take that manual work, turn it into a digital asset and then update their GIS systems. Every utility company has thousands, if not hundreds of thousands, of these in backlog, right? Perfect opportunity for AI. We've built a prebuilt solution for that, an accelerator.

Finally, we work through our partnerships to help us scale the impact of these accelerators, bringing their best tech talent and marrying that with our best tech talent. So we are not just building AI. We're creating AI as a growth engine.

Moving into the state of AI adoption. I don't know if any of you have seen the report from Gartner this year that estimated only 6% of companies have AI and adoption in production, and that's not a great stat for the industry, but it's a great stat for us, right? That shows how much massive opportunity there is out there to Shiv's point, limited AI talent pool, #1 problem. High implementation costs, not sure which use cases are the right use cases, that's all being worked out, right? Whether it's the market has figured out how to regulate cost we've figured out what commodity use cases make sense for GenAI and which ones make sense for traditional machine learning.

So that's where we come in, right? And we're starting to see companies not ask us for 5 or 10 use cases. They're asking us for hundreds and thousands. One customer came to us for 1,800 use cases. How can you help us build 1,800 use cases?

So the problem is not coming from like how do we build one use case. It's how do we build thousands of use cases. So now it's not around the AI application itself. It's around the infrastructure, the data, the cybersecurity, the internal readiness of your employees, figuring out how we can get to 1,800 use cases. So now we're not only looking at the opportunity of getting beyond that 6%, but how do we grow to 100% times thousands, right? So well poised to exceed that 14% growth, and you'll see some numbers in a few slides.

Getting into really what customers are asking us for, there are really 2 things, to Shiv's point, talent, right? AI -- technical talent is hard to come by. We have a deep bench of technical talent. We also have been doing staffing for tech talent since the mid-'90s. So if we don't have it in-house, we can find it really quickly. We are also upscaling technically our developers. We have over 1,500 developers in our Mexico delivery center. And by this time next year, our AI talent pool will be 10x through that internal training program.

For our Fortune 500 companies, the #1 thing they ask us for to scale is we need a centralized place to get insights on and govern, manage costs for all this AI sprawl. To Shiv's point, there are hundreds of tools and some customers are using at least 50. So how do you centralize all that? And then get a way to manage it all even from a project management perspective, right?

So in reaction to that, I don't know if anyone saw the press release yesterday, but we have built our own IP called the AI Factory. It's really important because it sets the stage from taking an AI idea from the very beginning, all the way through building putting it into production and then governing it. Most customers do not want to build AI and then baby set their AI. They want someone else to do that, right?

So once you build that baseline and what we're calling an AI Watch Tower, that can become a really flexible pricing model for customers, for customers who want to offload all of their AI operations or just governance as a service, for example. So that strategy isn't just theory, right? This is traction and you'll see it in a couple of these numbers, 86% year-over-year pipeline growth for data and AI services and 30% year-over-year realized revenue growth.

I'll turn it off to Marshall to talk about the federal space.

Yes. I think it's worth noting, too, that the AI Factory is a joint effort between the commercial and the federal arm. We built that. We envision it together. We built that together, and we've had a lot of success with that.

There's a lot of growth, obviously, in the national -- in the federal space around AI. We're seeing the priorities of national security and productivity. On the national security side, obviously, AI is already mission essential and defense and intelligence, border security, law enforcement and places like that. And in those areas, the government doesn't just need some AI, they need the best AI. They need literally the best AI in the world. And so AI is the new arms race in that piece and the government is investing heavily to maintain their lead. There's no doubt about that.

But there's also this great push for productivity. We're seeing that headcounts are being reduced across the government. Resources are being shifted into national security priorities, and that's leaving AI -- I mean, leaving agencies to do more with less through AI. That's their plan.

So we're working with the commercial team to find expertise and solutions from the commercial team that we can leverage into the federal space in this area. This looks a lot like commercial when you're pursuing productivity. So we work very closely together there.

But the government has very unique challenges, right? So AI talent is even harder to find when you have to have clearances. Data integration is even harder when you think about the huge numbers of legacy systems that are out there spread across the government and the scrutiny around governance, risk and compliance is intense. And so the government simply can't afford to get AI wrong, and that's where we come in. We already have the cleared talent, mission expertise and proven ability to deliver AI at scale around the world.

Across the business, we're seeing 5 key drivers for AI, and we're building differentiated solutions in each of these areas. And where it makes sense, we're tailoring those solutions to specific missions and industries. Our goal is to meet customers where they are and to show up with proven solutions and accelerators that maximize ROI and speed to value. There is a great example of the commercial team is doing really, really cool stuff. They're working -- they're building AI tools that use deep reinforcement learning to help oil and gas companies optimize the refinery process -- is actually using AI to optimize the running of a refinery. That's decision optimization tailored for the oil and gas space. There's enormous demand in all of these areas, and we're investing to lead with innovative solutions where we can show up with ready-to-go solutions.

But where does that innovation come from? As Shiv mentioned earlier, a lot of times, that comes from us being our own first customer. When we build an internal tool that often starts this flywheel effect, right? And we've seen it a number of times, where we create a tool, we solve an internal challenge and that makes us more efficient and more competitive and that's great.

But a lot of times, our customers are starting -- are facing the same challenges and the solutions that we create start to flywheel effect, where we build it internally, we prove that it works and our customer, we take it out to our customers, and they see how it can affect their business as well.

So I'll give you 2 great examples. Our federal team built -- a couple of years ago, we built an AI tool called Atlas. So for anybody tracking it. We actually had an AI tool called Atlas years before OpenAI did. And it was an internal tool for proposals, knowledge management, recruiting, things like that. And it was never intended for customer use, but when we showed it to DHS and to the Navy, they said, wow, we really have the same challenges that you do, and Atlas quickly became a sales differentiator and a delivery accelerator. It helped us win that business and deliver that business faster.

Similar story on the commercial side, they built a tool that helps an AI tool that helps organize proposal content and streamline the proposal process. And when they went out and talked to customers, their customers said -- some of them said, yes, that's great, we can use that tool. Other customers said, we have the exact opposite process. We need a tool that's going to help us generate templated documents like request for proposal. So they were able to adapt the initial tool into a document generation tool and then eventually into a tool that can receive proposals, score them and rank them. So one internal innovation became 3 market-ready solutions. That's the flywheel in action. Internal innovation that scales to client value. Heather has even more examples.

Heather needs to go back to that last slide. Okay. Great. So we talked a lot about investment in internal innovation and turning that into client outcomes. I want to give you an example of how we made that real this year.

So we built an internal tool called a Rapid Discovery tool, not a cool name, but it's a really cool use. So it's about -- it's 11 tools in one. And really what it does is enable our developers when they get into a consulting engagement to get a lay of the land. It's AI-enabled. It allows you to look at how things are related, create architecture diagrams, figure out what's useful, what's not, document code. It seems kind of a boring, but we brought it to 2 customers.

These first 2 points are for a manufacturing customer. We brought this into their first phase with our application development project. These are their numbers, they shared, so 25% acceleration in their discovery phase, which is one of 5 or 7, depending on who you ask on the software development life cycle and then a 40% improvement in requirements accuracy. And so that means they were not only able to do it faster, but better.

My favorite stat is this third one. So this is for a hospitality company, very similar project. But what would normally take one to 2 months, and we verified this because these were our engineers and they're doing the work, we brought it down to 2 days, right? So that's pretty powerful because it's not just productivity metrics, it's lower total cost of ownership, faster time to market, right? And those are the real metrics companies are looking at.

I should mention that before the power of partnerships, the importance of partnerships, we're really strategic about who we choose to work with. We want to start with the platforms because our most immediate value in the AI space is the AI that's embedded into our enterprise platform. So Salesforce, ServiceNow, Workday, all have their own AI. And we always want to start where the data is, and that's true of Databricks. It's true of your data in AWS. But the difficulty sometimes is the customization and the integration of those tools.

We work through alliance programs. We have a co-sell motion. We are in forums with them. So we've put our solutions, our accelerators into their marketplaces, and it's really starting this flywheel of co-selling and winning with us. Getting a new pure plays. I'll just highlight Databricks and one of the stats here. But again, a lot of customers have data and Databricks and they want to leverage those tools.

So most of our customers want to start bottom up and get the AI ready, and that's exactly what these projects did. Fortune 500 food distributor, realized 40% savings in operational costs. And that's important because even before they started layering on AI, they were able to save costs just by putting data where it really belongs to get ready for AI.

And finally, a lot of customers, especially our Fortune 500 are way up the maturity curve in AI. And it's not enough to just build a couple of chatbots, right? So we partnered with a company called [ AMESA ] this year. They have a platform that enables multi-agent orchestration for simulation and optimization. So this is old deep reinforcement learning. I hate to say, old, because it's really cutting edge tech, but it came out, people weren't ready for it, came back. So this is machine learning.

So when we start to see the limitations and maybe the lack of adoption in generative AI, we are seeing the pendulum swing back to traditional ML. And so I'll give you an example how AMESA has been used. There's a CPG company that used it for production scheduling, and they were able to realize a 21% profit margin for those products over their existing optimization method.

Lots of examples of that. So we've got companies looking at the last mile supply chain, companies looking at improving yield in a continuous batch use cases. So lots of opportunity there. It's a differentiator for us for sure. And we have 16 projects right now in the queue for 2026. These are big needle-moving projects worth usually $1 million in savings or more a year for these companies.

And finally, I chose a case study that I think really highlights the complexities of AI and Shiv [indiscernible] that you still have my thunder, so I'm going to give the other half of the thunder now. But this is the same case study that Shiv was talking about. So this is a big private professional services company. They have a problem where third-party update standards. And every time they update the standards, internally, you have to update tens of thousands of documents, web pages, applications, it takes an army of people to do that manually. And by the time they get it done, which is about 6 months, another set of standards has come about, right?

So not only is that a lot of investment in time and resources, but it's a risk, right? If you're a consultant doing an audit on 4-month old standards, that can be risky. So they said, hey, this is right for agentic optimization, making this workflow agentic. They tried it on their own, and they got pretty far. And this is why where most customers stop because they say, is this the best way to do it? Is it the only way to do it? Should we have somebody else do this? What's going to happen when we roll this out to hundreds of concurrent users who wants to baby sit this us? And how do we even make sure that when its put in production, it's safe, secure, responsible.

So they reached out to us. We did looked at the full life cycle of this AI application and really realize that their limitations were on the back end, right? They've done a pretty good job of getting it where they wanted to. We found ways to make it more accurate, but it was this whole last mile, right? Observability, managed support, which is something we'll be doing. And so that team did not have a managed support team, so they were able to offload that to us.

And so when you start to look at the whole ecosystem, it's not just the AI application, it's all the data, all the infrastructure, all the cybersecurity all of the interfacing of a lot of these tools with internal systems. And so when you are able to take 6 months of manual chaos and reduce that down to 6 weeks or less, it's looking like it will be about 4.5 of controlled intelligence.

Okay. So now I get to talk about Maven. Very excited to talk about Maven. Maybe there's a [indiscernible] study in AI for national security. In 2017, the DoD had more drone video footage than human analysts would ever be able to review. And they asked a really smart question, could AI help us with this?

And so Maven started as an experiment to see if AI could add value to DoD mission sets. It definitely worked. And it's gone on to change the nature of military intelligence and a lot of military operations ever since. ECS has been the prime on Maven since inception. And we started with drone footage. And since then, we've expanded to dozens of data types and sensors across all classification levels. Our data and AI practice grew dramatically under Maven, and we've been able to identify key lessons learned that we apply to all of our data and AI engagements.

So here's a deeper dive into Maven. Great video.

[Presentation]

Tough act to follow, but here we go. So our AI strategy is based on 4 pillars. We have -- we were capitalizing on the explosive growth in AI. The opportunities are real. They're happening every day. We're injecting AI into our own operations, and that starts the flywheel effect that I talked about, where we build something internally, and we find that there are huge market opportunities for that as well.

Third, we are not building generic AI. We're building AI that's specifically tailored to meet the needs of industry partners.

And finally, we are scaling the impact of our AI through accelerators, continuous improvement and strategic alliances. Every solution we build becomes an asset for the next customer. Every partnership extends our reach and our relevance. We are building solutions that work, partnerships that matter. And I like to say we're creating real value for customers who are counting on AI to meet their goals.

With that, I'd like to invite our CIO, Steve Hittle, to come up and present. Thank you very much.

Good morning, everybody. Before we go, I'd be remiss if I didn't draw back to what you guys just saw from Heather and Marshall. That really highlights the why ASGN? And so ASGN is building and bringing AI to the marketplace, not just the federal marketplace, not just the commercial marketplace, but to the marketplace, jointly built. And so Heather, Marshall, thank you so much.

As introduced, I'm Steve Hittle, Chief Information Officer of the Federal organization. I come to you with 32 years of experience with military, DoD, IT and cybersecurity experiences with companies like industries, NCI, Northrop Grumman. I've been with ASGN as an Executive Officer from a CIO perspective and a Chief Security Officer for the better part of 11 years now.

So my intent today is to kind of walk you through what does ASGN deliver from a cybersecurity perspective? What is our vision? How do we deploy it? How are we different? And so we'll get into that.

All right. So messaging for today, we really want to stay focused on where ASGN is uniquely positioned to capitalize on massive tailwinds in the cybersecurity marketplace. All right. This ties into things, supply chain risk management. You have ransom-ware -- there are certain things that are tying this massive tailwinds that ASGN is uniquely positioned for.

Where we focus? We deliver a comprehensive custom solution to every one of our customers based off of a solution set that is uniquely designed by our service security practitioners, all right? We leverage -- and you heard from Shiv, you've heard from Marshall, you've heard from Heather, is that we don't just say, we actually build. We use -- we drink our own champagne. So we deploy, build our own AI tools, but we also enable and we buy and we partner with the best in the business, all right?

And last but not least, when I say partner with the best of the business, we scale and we grow through strategic partnerships. And I'll show you a little later in one of the slides kind of the unique value of that strategic partnership. So again, these are just messages that I'm going to walk you through today as we get moving forward.

With nearly double-digit CAGR for the next 10 years or taking us through the end of the decade, one of the areas where ASGN is uniquely set aside is that we have over 1,000 cyber security professionals. These folks have over 1,400 individualized certs unique to the cyber security landscape. What's even more staggering is nearly 50% of those folks are cleared at least to the secret level.

And so why is [indiscernible] yes, why? Why do we care about that? So we operate in unique areas of health care, pharmaceuticals, defense, financial and hospitality. These are all highly regulated organizations that can leverage that unique cybersecurity [indiscernible] those clearances, all right?

And so with that, we also -- talking back to where Heather and Marshall, you've heard from Shiv, you've heard from Ted, is our expertise, the talent, you hear the word talent and expertise. That is our foundation of why are we different from an ASGN perspective, what do we do from a cybersecurity perspective is it's in our expertise. I'll walk you through how we couple what I call people, process and technology.

And so this page kind of highlights where we're at from the people where there's expertise in that. And then throughout the rest of the presentation, we'll talk more about kind of the tech and then some of the process side house.

All right. So we're looking at what are the megatrends of cybersecurity? What -- I say there's massive tailwinds. You know what are driving us there. And so throughout -- your -- no harder than picking up your phone looking at the Newswire, right? And you can see Microsoft SharePoint exploits. You can see SAP net exploits. You can see CrowdStrike exploits. Almost daily, you look and you see a new cybersecurity threat, all right?

Those megadriving trends, you take ransomware. That is the #1 largest cost to organizations right now in cybersecurity. In the calendar year of 2025, ASGN has filed over 200 ransomware attacks for our ASGN customers. If you take into consideration over the last 5 years, the average cost of ransomware is up 575% -- went from $760,000 per incident to $5.1 million. Quick math, back of the napkin math, ASGN and cybersecurity has saved our customers more than $1 billion through October of 2025, right?

Say, okay, how does that get in there? One of the other mega drivers. We've got cybersecurity phishing, phishing e-mails. I can guarantee you right now, somebody in here is on your laptop, has got a phishing e-mail within the last 20 minutes. 3.4 billion phishing e-mails circulate daily, all right? And you think about it, one click. In any organization, any customer you support, one click of that phishing e-mail that they're in. And now that's either ransomware, they're deploying payload. They're doing things that are going to disrupt your business, right? That's where ASGN is unique and the packaging that we've been able to take from our defense and our federal practice and start to apply that to commercial segments.

So also moving through that is supply chain and risk management. So as we continue to improve and we protect our customers at that actual infrastructure side and the endpoint that Ted and Shiv talked about, bad actors are moving down the line, all right? We can't get into your customer, but now we're going to hit supply chain. And so we've uniquely designed offerings around going down supply chain risk management, pulling in those unique partnerships to better fortify all the ASGN customer base.

And then last but not least, is you've got governance risk and compliance. So I've talked about pharma. I've talked about health care. I talked about the federal side. There is an expansion in the actual governance side of the house. So ASGN -- we've established our own governance risk and compliance as a service offering to stay out in front of that demand for every one of our, not just federal customers, but also our commercial customers.

All right. So as we work through this, we look to -- and Shiv talked about it, I'll go left to right on the slide. I don't want to kind of get into too much of the geek. I've been told don't geek out with everybody. Keep at high level. So I will not do that with you guys. But so you're looking at endpoint protection, you're looking at identity, you're looking at advanced framework. You heard things like Zero Trust, security operation centers, monitoring, governance risk compliance, those are kind of the unique offerings that we provide from an ASGN perspective.

But one of the things that you don't really see and where we have the value and where we're taking advantage of those tailwinds is that you look at something like penetration testing, right? So ASGN has a very comprehensive penetration testing that we deploy. The unique thing with that is that 80% of every ASGN customer that buys once through a penetration testing or one of our offerings, buys more. That's sticky. That's where we grow. Our offering is in that we provide that service and then they need to consume more. We do vulnerability management. We find remediation items. We continue to grow through expanding on that comprehensive service model.

Okay. We like to look at every ASGN customer as they have a unique requirement. Like to Shiv's point, every customer has IT, but it's not the same. Their infrastructure is slightly different. The tool sets that they run are slightly different. Everything is just a little off. And so the way that we approach things from an ASGN perspective, is every ASGN customer gets treated like we're doing a custom fit suit.

Now it's based off of a comprehensive service catalog. So we have our base catalog of our offerings but every customer is treated like we're doing a custom fit suit. So it's unique to their specific IT and cybersecurity requirements. And I like to always joke, ASGN customers don't buy off the rack. Everything is custom [indiscernible].

So this takes you back to, and so Heather and Marshall did a fantastic job talking about what we've built from our own AI tools and things. And so I also like to look at things from a 3-pronged approach. We enable, we buy and we build. And so when we come into an ASGN customer set, we're going to look, first and foremost, what tools do you already have. We're not going to come in and say, hey, rip it out, this is the only solution we have for you. We're going to come in and say, okay, what are the tool set that you have. And we're going to enable all of the AI and all of the machine and all of the algorithms are already built into the systems that you have before we do anything else.

Then we're going to assess, right, what are the procurements needed? What do we need to buy to continue to fortify the systems that you want us to protect. And once that's done, then we can overlay our own unique IP with the platforms that we've built from an ASGN perspective. And so again, that's where we look at kind of that 3-pronged approach.

What's some of the proof points from that? So we're seeing 80% faster detection across all of our client environments. So with that 80%. So now you're Tier 1 analyst. The first person that's flipping tickets that's coming in thousands and thousands of tickets a day, we've reduced that down to 80%. So now they can focus on 20% of the real route and the problem.

Other thing is 90% of our automation now has reduced that first touch with AI accelerators. So we've taken -- so 80%, 90% now of that 80% they go look at, we've already filtered out 90% of that first touch. So we're really getting to efficiency with your analyst TopBloc be able to sit down, say, I have now boiled down all of this massive amount of issue and to the few things I really need to focus on.

Okay. And then last but not least, Accelerators. When I spoke earlier about penetration testing, we have partnered with Horizon 3, and it's given us from an ASGN perspective, a unique opportunity to have a 20x multiplier. So for every 20 hours of penetration testing that we used to do, we do now with one human hour. That's the use and efficiency of AI and the strategic partnerships.

Okay. Diving in, Shiv covered it perfectly, I'm not going to be able to improve upon what he did, but I'll give it my best shot. We look at from an ASGN perspective, we look strategically to partner with vendors in the marketplace. And so [indiscernible], we are -- and you guys heard about Partner of the Year Awards for Workday and Partner of the Year Awards for ServiceNow. [indiscernible] if I didn't announce that we recently awarded the Elastic professional services Partner of the Year for 2025. So not to one up anybody, but we're there with you guys as well.

With that said, one of the reasons why we got that Elastic partnership with the Year Award is take a look at one of our DHS customers. It was one of the kind of our first example customers. We built out data and search, observability in search. And so we had a great model with that DHS customer. With that, and to Shiv's point, we made that repeatable. And now that same solution has been deployed across several DoD customers numerous. And when I say numerous, I can't remember how many commercial clients we've deployed that same too.

And it's not a reengineering, that is a one-for-one repeatable delivery -- and repeatable opportunity that we deploy. And so the cool point here is, from a strategic perspective, Elastic really leans on ASGN. In fact, ASGN has more certified elastic engineers than Elastic. And so a lot of times you hear like, hey, we've got to go to our vendor partner to backstop because this is a little bit too big for us. Elastic comes to ASGN when something is too big for them from a pro services perspective. So that's the uniqueness, that's the strategy, the strategic value of partnering with some of these firms.

And what I didn't cover on the slide here is really important from an investor perspective is sales extension. Elastic sells ASGN. So they're with their sellers going to market and they're advertising ASGN from a professional services perspective. That's the value. That's where we see that value and strategy, right?

Use case. Shiv queued up a very large DoD Army customer that we have, [indiscernible] over 800,000 endpoints. We did a pilot with them over 200,000 endpoints. And so another area where I was told don't geek out with everybody, but some of you have heard or you'll hear of quantum computing. And so quantum is kind of a next generation where things are going to be going.

Just on that side, data usually, as we look at supercomputers now, data or bits are done in 1s and 0s. From a quantum perspective, it's cubits. And so search or the -- how it solves, it does in parallel. And so for simplistic sake care, you have very high-level security search on all of your infrastructure, all of your endpoints, everything that you have has certs, all right?

So we did a 200,000 end point deployment of a quantum readiness for our Army customer. And so yielded great returns for that customer gave them focus areas of where they needed to look at. We're giving a unique opportunity with a global hospitality leader, and I can promise you everyone in this room has stayed at one of their properties.

They had a simple set. They came to us what they thought was a simple issue, simple problem. Hey, we need a vulnerability assessment done just to make sure that our payment records, our certifications and everything around payment records for all of our guests are safe. And so we had the unique opportunity to lift and shift to repeat the same quantum readiness assessment for this global hospitality leader. And over the course of a 1-week deployment, we uncovered 1,300 vulnerabilities for this provider.

All right. And I'll go back to, okay, so 1,300, what does that mean? That's the stickiness. So that hospital leader within 48 hours, cut a new statement of work for ASGN to come and do all the remediation. That's the sticky, that's the value, that's taking that repeatable delivery and putting it into practice from the DoD side of the house to commercial, direct application, no reengineering, that's the value.

All right. So at that point, I'll now queue up my own video, and let you see where we're at.

[Presentation]

All right. So as I close my portion of today, I kind of want to bring you back and level set on exactly what it is, ASGN capitalizes on. And so we have that massive tailwind in the market. We have a unique delivery model. We're able to bring to bear what we do from a DoD and a defense and federal perspective into the commercial marketplace. And so that uniquely sets ASGN apart because we are bridging that gap, right?

We are delivering trusted solutions that are customized to every one of the ASGN customers as that custom fit suit. But most importantly, we do that with a clear focus on driving growth and maximizing margin and return. And I'll leave you with in short, we adapt and we thrive.

And thank you. At this point, I'll turn everything back over to Kim.

All right. You've been waiting for it, our first Q&A session. So we're going to have mics. If you have a question, please raise your hand. We'll come to you. I ask that you say your name and your company first. So everyone on the webcast knows who's speaking. Okay?

[indiscernible]

Tobey Sommer with Truist. I wanted to ask sort of a basic customer spend question. Are you seeing IT spending or in the areas in which you're focusing increase? Or is AI -- are the initiatives there supplanting spending in other areas? And if so, what might those be?

Tobey Sommer from Truist. Thanks for the question. Shiv, you want to take that one?

Tobey, good -- great question. We're actually seeing demand sustain or trickle up in these areas? Because honestly speaking, the infrastructure that our clients have is just not ready for what they want to do with AI, right? So whether it's cloud, whether it's modernizing their application stack, whether it's getting more prepared from a vulnerability perspective, the spend is going up, right, in those areas.

Now how are they keeping their budgets flat and trying to manage all of that stuff? I mean -- but that's where AI comes into help with some of that stuff. It's not the spending going down. they're doing more with that, right? So they're getting more spend in each one of those areas. So we don't see that -- the only places where we could see AI actually compressing work is in certain very low commoditized parts of the software development life cycle.

Mark Marcon from Baird. Rand, I don't know if this is the question you thought I was going to ask. But just I'm pivoting based on what Ted was saying and what Shiv's been saying. Ted, you talked about transformation. It's obvious for anybody who's followed your company for a long time that ASGN has really transformed in multiple ways. .

I'm wondering, can you get a little bit more granular with regards to describing the state of the organization just in terms of current head count in terms of permanent head count and then the number of consultants that you typically end up working with and how many have been actually trained because you're doing so many different things now relative to what's traditional IT staffing it sounds like there's different ways of selling, different ways of going to the market, different ways of competing? So I'm wondering if you can just be a little granular just in terms of where are we in terms of that transformation in terms of go-to-market, skill set, et cetera?

So thanks for the question, Mark. I believe if you -- I mean I think you can tell just by the presentation today that where we used to be known as the best-in-class staffing company, we're not that anymore. I mean 70% of this business now approaching is higher-end consulting services. The customer is buying all these services and solutions in different ways than they did in the past. And so our evolution as a business has been to kind of get to where we need to be, meet the customer where they want to be.

And it's -- the last piece of this transformation is not just coming together internally as we try to work today and have over the past number of years to serve the company, but now come together in every way, as one brand in the marketplace ready to serve our customer.

Our model in the commercial marketplace is still predominantly bringing IT technical resources that are bespoke fit for each one of these project teams through our IT staffing delivery model. We've augmented that with our nearshore capability, which we purchased in the [indiscernible] acquisition and have scaled over 10x now organically. And with our recent acquisitions in commercial ServiceNow and Workday capability.

And so those have I would call augmented are still predominantly contract delivery method in terms of how we bring our resources. So I think, Mark, in some ways, like how the company looks internally has not dramatically changed in terms of how we deliver our services, say, for the pieces that I mentioned. But as one business now we're much better positioned to continue to bring all these capabilities and solutions to the marketplace.

Kevin?

Great. Kevin McVeigh, UBS. And thank you for doing this very eloquent presentation and complex topics. I've always thought as long as I've covered the sector, you're only as good as your clients and you've got a terrific [indiscernible] clients. As you think about the alliances, what percentage of your revenue goes to those alliances historically? And what does that become over time? And what's the go-to-market motion on that? Are you co-selling? Just any thoughts on that?

Because I think it's a terrific -- we cover, obviously, as you know, Accenture and they are about 60%, 65% of the revenues through their alliance is today. How does that go-to-market motion shift over time, just given the caliber of the alliances you have?

Yes, I can talk to it, Kevin. Look, I think historically, we've evolved our alliance motions over the last few years, right? So we're still purposefully picking the alliances that we want to be in. As I pointed out, if you look at TopBloc, for example, or ServiceNow with GlideFast, it's 100% driven off of the alliance motions there. We've got tremendous growth with AWS. We've seen tremendous growth with Databricks.

So I can't give you a specific percentage right now. What I can tell you is we've started tracking it and the growth rates are in double digits, as I pointed out. And we only expect that to rise. You just saw the sales force announcement. It's a big push from us into the marketplace.

So that's sort of the first question. It's really a pretty significant percentage, but we're really tracking growth because we want to establish a true baseline that we can accurately report on over time with you. That's really the answer.

On the co-selling co-developing motions, again, I hit on it very precisely, right? And I spent 15 years in the ecosystem you referenced with Accenture, right? I think, what we're trying to do is really be purposeful. So if you look at our own stack, we've got Workday, we've got ServiceNow. So our entire -- and I'll allude to some of this later.

We're building assets that we're using for delivery on those platforms. And that's what the clients like about us is -- or these partners like about us is the ability to tout what we're doing internally when they go talk to clients. So in the Salesforce partnership, you read about it, we're jointly developing agents that we can take, and they're going to deploy engineers in our environment, working with us to build those. So that's a core developed motion, a co-build motion.

You heard Steve talk about Elastic. There's a lot of co-sell there. There's a lot of co-sell with Databricks where we've built specific assets for energy with Databricks. We're the only guys who have done that. I'll give you another example of co-developed co-sell, AWS. We're the first partner to take a lot of info into the cloud with AWS on their assets. So that's out in their marketplace. So it's 360 in that sense. We're co-developing, co-building, deploying and then co-selling with them. And we expect this to just really accelerate for us.

And I think that, that kind of underpins a misconception around AI that somehow it will just automatically be delivered from big enterprise software or somewhere else into the customer environment. And I think that -- I think the enterprise software firms, platform firms knew this. They're not built as a service business. They're built as software businesses, right? And so in the sales force example, they can't scale. They can't deploy [indiscernible] engineers into everyone that they're in 80% or 90% of enterprise customers, there's no way they can scale that. So they're coming to us and say, we need you to help us scale. And so in that way, customers expect this co-sell motion and the enterprise software companies won't be able to really deliver enterprise AI without it.

Just one point to add on this, Kevin, and this is important, and I alluded to it. If you look at a lot of these enterprise players, and I talked about the world being fragmented between scale and upstarts, a lot of the Agentic AI motions for these platforms is being driven by a lot of smaller companies because they have speed. They have agility and they don't have the incumbent weight of the platform implementations. What makes us attractive to these partners, and we're not saying it, they're saying it, that's why the Salesforce thing is we do both. We have scale, but we can move at real pace in terms of talent deployment and allocation.

Maggie Nolan with William Blair. I appreciate your time today. wanted to dig in also on the AI topic. I think you said the opportunities outweigh the risks. And I wanted to break it into 2 buckets where there's kind of the near-term opportunity that you outlined of modernizing legacy infrastructure and data preparedness. And then there's that spend moving into the application later on.

Do you think that what you're doing -- can you just talk about how robust your practice is in the first bucket, how that can impact your growth rate in the near term here? And then do you expect a step function in growth when that spend truly does move into the applications?

Yes, maybe that's a good one for Heather and Marshall can chip in.

Sure. So if I understand the question correctly, you're looking at the robustness of our practice for all the things around AI first before you get an AI application. Yes. So it's really interesting because one of -- I'll just give you an example, as part of the answer. We have a lot of customers who want to do mainframe modernization, right? And on top of those mainframes and they want to build some AI applications into that, but they can't until they modernize.

So what we've done is embed AI into the process of mainframe modernization, right? So it's not typically one without the other. There's a lot of ways we're embedding AI into how we deliver data migrations, how we deliver BI migrations, how we manage our internal projects. So I think it's difficult to say there's one without the other. What we're seeing though is once customers get AI-ready data and usually it's a subset of data that's specific to a domain of role. They have hundreds of AI applications ready. And for Generative AI we've broken those down into 5 or 6 patterns. So we'll typically build a pattern for a customer first and then find out where we can copy pace that quickly throughout the organization.

So highly regulated industries like yours, for example, I mean data governance, a huge issue to really get into large at-scale promise around AI, right? And so I think that this is the -- probably Shiv has the best way to say the spade work, right, that needs to go on until there's really good enterprise spending on the application of embedding AI across the enterprise in those cases.

Yes. And Maggie, just I want to reiterate what Ted said again, right? Our -- we believe that for our clients, the near-term fastest channel for ROI from AI initiatives is tapping into the native capabilities of enterprise platforms. And as a result, that's what the power of these partnerships is for us, right? So modernization of legacy begins in many cases, you could -- if it's custom built, you may want to move it custom into the cloud, but many oftentimes, you're moving into an enterprise platform. That's where you're embedding your core workflows, your core process logic, and that's where AI impacted the most. So that's the near-term path.

So that modernization is going to pay us dividends not just because we're enabling them to modernize with the platform, but our knowledge of the platform allows us to accelerate their deployment and value from AI and that's where we're building our practices.

Okay. Great. Well, we're going to take our first breakout. Thank you, everyone. Thank you for your questions. I am looking at the clock, 10:35. We're going to give you 5 minutes, so please have something to eat or drink, use the restroom, and please come back. We'll see you soon. Thank you.

[Break]

So you came back. You clearly love the first half of our presentation. We're going to kick it off with Mr. Iver, our President, in one moment. He'll join us up on stage. And we'll go through the second half. So I hope you enjoy it as much as you did the first.

[indiscernible] that we get you to lunch and time and everything else that you need to do. It's hard to come back after quantum readiness and Q&A and talk about more stuff around what we're doing. But I'm going to try to bring the energy back up over the next 15 minutes. So if you stay with me over the next 15 minutes, what I'm trying -- what I want to do here is, Mark, this is kind of in line of your question, right?

All this market stuff sounds great. The opportunity is great. You're doing good stuff. But how are you actually setting yourself up to drive organic growth in the business, right? So we're well on our way as we said, to become a digital engineering firm. We believe we're doing all the right work. We talked about the fact that we're in the right markets. We're building the right IP.

What I will talk about a little bit more today also is some of the things we're doing about our go-to-market strategy, our delivery, how do we drive innovation? How does that flywheel actually work, which gives us the confidence that we can drive organic growth in the business. Again, I always have to reorient us back to strategy Next Wave.

So we talked -- we started with the markets that we're playing in, we talked about how we can win in those markets and differentiate ourselves. Now I'm going to talk about how we're getting ourselves organized. What are some of the things that are driving our transformation to get us ready internally structurally to take advantage of the market opportunity. How are we gearing up.

Look, we would -- this is an important page, and I want to talk about each element of this page pretty quickly. Look, we would be nowhere as a company if we can't deliver on the commitments we make with quality. So it all starts with living up to what you can commit, especially as we move up the curve into higher complexity areas, right?

So if you think about that, our services business, Technology Services, consulting business was built both organically and through acquisitions, right? So you're going to hear from Chris Skinner soon that we have GlideFast. All these organizations came in with ways they deliver stuff to our clients, right? You talked about Ever forth unifying these things.

So one of the first things we're doing is thinking about how do we create a one consistent way of delivering things as one ASGN or one Everforth going forward. I'll give you a very good example of that. We do -- in each one of those businesses with application platforms, we do application managed services. Implementation done, how do we support? Most often, we used to do it through a combination of a tool that each one of those businesses had or our clients' tools.

Now what we're doing is, again, partnership. We're going to use ServiceNow to build our own platform for managed services, which we will consistently use across these businesses that allows us to truly build the KPIs, the dashboards, the methodologies that we want for delivery, and we're already underway on that process. So that's an example of how we're harmonizing delivery.

The second thing, we talked a lot about AI. But we're not going to go further if our people can't use AI, to both solve problems and deliver. So we started out with something called AI University on the federal side of the house, where we are upskilling every person on AI tools. If you're a developer, what's the right choice? Are you going to use cloud? Are you going to use [indiscernible]? Are you going to use something else? And we're going to use that to upskill the entire organization, both on the commercial side and the federal side, both from a selling perspective and a delivery perspective.

AI-first enterprise. So we talked about it. With each one of these platforms, we're starting to think about where can we use agents to do that. So we're -- with Salesforce who are already doing work on the recruiting side of the house. We're starting to think about Salesforce enablement. You heard about RFP generation.

Third thing, we also want to drive productivity through the use of platforms. And you'll hear Marie talk about this a little bit more. So we're starting to think about creating how do we create operating leverage within our business, changing the way we do work internally, right? And you'll hear some of that stuff from Marie as well. So we're focused on that through both platform implementations and Agentic AI implementations.

And then the last thing, we've talked about this ad nauseam through things like the AI Innovation Center, through things like our COEs, we're starting to drive greater pattern recognition in the work that we do. And that's also enabled by our solutions leadership team. So for each one of those solution areas, we have leaders. And the job of those leaders -- and these are pretty seasoned people like Heather who've come in from very accomplished places. And their job is to look at the body of work we're doing and think about repeatability, think about asset build. Think about all of the things that go into making the ability to deliver consistent quality with repeatability for our clients.

Ted talked about this. So that part of it was -- how do we -- what are we doing? This is how do we then deliver. Look, I firmly believe and we firmly believe that our flexible lean bench model is a source of competitive advantage in a world where technology is changing very, very rapidly. A bench model cannot sustain that pace of change in its entirety. But we also have to make sure that there's client context and continuity embedded in everything that we do.

So what we're doing is we're strengthening our internal delivery capabilities with technical talent. So more people who are solution architects for architects who can deliver complex work. And I'll talk about our industry structure a little bit soon. That also supports this model. But we're not standing still. Ted talked about 1,500 people in Mexico. We've got 1,500 engineers in Mexico. So what we're doing is for each one of those solution areas, we're constantly evaluating what is the right delivery mix? Where do we use Mexico? Where do we use the lean bench? Where do we use internal resources? And that's a function of both complexity, relationship, market dynamics.

We are expanding our India footprint, and we're going to absolutely accelerate the expansion of an India footprint because there is a competitive dynamic there in some of these solution areas for us to be competitive in how we deliver work.

So when you layer these things together and you start to start now put assets on top of this with solution leaders who understand the dynamics of each of these solution areas and how to deliver them, we've got a model that can really deliver quality and complexity for our clients.

This is a very important page. I talked a lot about assets and accelerators and innovation. Ted talked about the account portfolio and the breadth of the account portfolio we have. And I can't emphasize enough what I call the power of this model.

I'll give you a stat. Every day, our sales force touches clients 5,000 times. 5,000 times. You can argue if it's a great stat or not, I don't know. It's not -- I haven't benchmarked it. But that happens at all levels of our clients' organizations from the very top to the most granular level. There's a body of intelligence that we get on our clients' knowledge or challenges. There are issues that reaches our capability and innovation teams around acceleration, client needs, which we build things, right?

So I use the ordering a lot, and it tells me what my heart age is using something called Pulse Wave velocity, which is what is the rate at which an electric signal gets from your ring to your heart and back. We have an incredible pulse wave velocity as an organization to get data from the edge to our capability teams.

Now you could flip that around and say, how do you manage all of this? How do you prioritize it? Again, the structure we've built with our solution leaders and the processes we have allow us to filter this information, prioritize the areas that have the highest repeatability and the highest return for our clients, and that's where we go build assets.

So think about it, 5,000 touch points, information every single day. We've got solution leaders who understand how to distill that, build the right sets of things to take to our clients. This is really powerful. And this is one of the greatest strengths of this organization, that's the ability to get data from the edge, react to it and respond.

So Kim and I was mentioning, this is why some of our partners like us because we do have the scale of one of the bigger players and the velocity of a startup because of this very reason.

All that is great, but we still need leaders in the field managing some of our most strategic relationships. So what we've done is, we're going through a model of REIT, as Ted said, optimizing our go-to-market model around larger strategic accounts. We're deploying some of our most senior leaders to manage those relationships. So we talked about integrating from a brand perspective.

Now if you think about that from a go-to-market perspective, these leaders are going to funnel and channel everything that the organization does into those strategic accounts. So that's something we're investing in with very senior leadership. I already talked about some of our capability leaders here who then bring the capability technical side of the house. We also have an industry structure with industry leaders who are on top of what we're doing with industries. So they can understand pattern recognition along with pattern recognition on the capability side.

And frankly, this is the proof point, right? I can talk to you ad nauseam about the structures and the things we're doing, but the proof point is right here. We're in -- and Kevin, you alluded to this, it's the power of the portfolio, right? 2 of the top 5 commercial banks, top hyperscalers, 2 of the top 3 U.S. health care payers, leading sportswear and apparel retailers.

So we serve 40% of the Fortune 1000 with deep trusted relationships. And now as we're elevating the leadership focus on those accounts and bringing the power of everything we do as an organization, there's just massive headroom for us to grow because we were playing in certain amounts of the spend within these accounts. We were playing in certain silos. We've got a much broader playing field within these accounts now.

So we can talk at length over lunch, and I can give you specifics on our account segmentation, the leadership structures and everything else, but I know we're on a time line. So I'm going to try to sort of summarize what we're doing here, right?

So I truly believe that we're well on our way. Again, if you're in New York, you have to talk about [indiscernible], right? And I'm [indiscernible]. People -- if you've done a power zone ride, we're not in Zone 1. We're in Zone 3 or 4. And I think we're fast getting towards Zone 5, 6 and 7 in how we're moving up the path.

I talked about high -- high-growth markets and the IP that we're investing in. And I talked a little bit about some of the internal underpinnings of our go-to-market strategy and how we're transforming ourselves. So when you put these 3 pieces and everything you heard together, we feel really, really comfortable with the underpinnings of driving organic growth.

So that's what I want to leave you with. We are setting ourselves up, again at the risk of repeating myself, to drive organic growth by I truly believe being a scaled player with the velocity of a startup.

So with that, I'm going to invite Ted over again to talk about inorganic growth. Thank you.

[indiscernible] about organic growth here over the first couple hours of our discussion. And at the end of the day, we're an organic growth company. But along the way, strategic M&A is about enhancing that meeting certain customer needs at scale that we can't position for organically and be where the customer needs us to be today. So we're going to talk about how do we leverage this reputation we have as an acquirer of choice.

We've got a strong track record. There's no doubt about it. I mean this company basically was built through M&A, even though the units are organic growers in nature. But it's allowed us to have a track record that we can showcase as we pursue our inorganic growth. We've got great examples here over the last 2 years in cybersecurity and ServiceNow and Workday, where we've been able to enter markets at scale that we haven't been able to do organically or it would take too long to do organically. And we've demonstrated the success of that. The performance of these units and how they fit into our total business is undeniable.

We have a reputation both with our clients and with sellers in the marketplace where business are saying, look, I see what you're doing. I'd love to be there with you. I'm not interested in flipping my badge to one of the big traditional consulting firms. I'd rather be a foundational [indiscernible] your solution capability in my particular area.

Culture differentiation is really important, making sure that we're aligned in culture in terms of -- we have an entrepreneurial spirit in this business. There's no doubt about it. Can we collaborate together? Because as businesses like TopBloc come into ASGN, they bring great accounts, great revenues and EBITDA, and they have to hit their own numbers. But this is all about what can we do together, how does one plus one equal 3, 4 and 5. Commitments to customers around the solution capability and I would say also as well to the technology partner is critical.

And then how do acquired businesses come in and really execute and learn scale from what we do? And how do they serve this much larger client base and how do they expand and play off of various unique situations that we have to make their business bigger in an accelerated way?

As we think about inorganic growth, we're really -- it all starts with having the right strategic filter. So constantly, we are every day, to Shiv's point, sitting with our customers in the room, looking at their IT road maps and that really defines the solution capabilities that we need to be able to bring to bear to meet their needs. Most of those we can position for organically. But in certain cases, as I mentioned earlier, we have to be there in the moment at scale with a really strong defined technology partnership with a particular software provider and with the past quals that come with these acquisitions. It kind of immediately differentiates ourselves.

I've got a zillion stories of sitting with customers and introducing now whether it was one of the other capabilities now Workday and saying, we're one of the best providers in the ecosystem around these enterprise system implementation capabilities and just get the wow. I had no idea that you were going to be able to bring this capability to me.

And leveraging these revenue synergies, which I mentioned, it's not about cost synergies. I mean this is sure we find them along the way. But this is really about creating revenue synergies on top of the ASGN enterprise relationship list.

Financial criteria is the next gate. They have to be accretive. But sometimes when we say accretive, it's like, oh, well, they have to be accretive to adjusted EPS and then EPS and what have you. They have to be accretive across the board. They have to be accretive to our strategy, meaning it has to meet that strategic filter. They have to be accretive to our own revenue growth, meaning they have to be growing faster than we do. They have to be accretive to our margin profile, both at the gross margin level and at the EBITDA margin level. And so we're demanding that in every analysis of every particular acquisition that we're looking for, we're looking not just for accretiveness, we're looking forward across the board in every way.

And in order to make this happen, we're playing off of our strong and healthy balance sheet. I think this -- the people in this room and the rest of our investor community are -- have seen us many times, take on a little bit of leverage, a modest amount of leverage, if you will, on our balance sheet to make a strategic acquisition, which is going to help us build for the future. And then based on the great free cash flow characteristics of our business and the businesses that we're acquiring, we can very quickly within 12 to 24 months delever back below our targets of 2.5 where we feel like we're kind of optimized and ready for the next acquisition. And so Marie is going to talk a little bit more about that in a few minutes.

We're always developing pipeline. Randy Phillips here in the back of the room, he is head of our Corp Dev at [indiscernible], and he is always maintaining our strategic filter of solution capabilities that we're thinking about and going through the marketplace. Where do these opportunities come from? Primarily, they come from our own presence in the market. We see them next to us as we're competing for business. That was the case in the ServiceNow opportunity. We're bidding at one of the big telecom businesses for a pretty sizable ServiceNow project, and we got to the last 2 and unfortunately didn't win, but we looked to our right and said that GlideFast business is pretty good. So they filtered that up through the organization and eventually, we ended up coming together as 2 businesses.

They come through client referrals. Clients will say, I think you ought to take a look at XYZ. They're really important strategic partner of ours. And maybe they're a strategic fit with your business and the scale that you bring and reputation to all this. They come from alliance partners sometimes. We're [indiscernible] alliance partner will say, look, one of our partners over here I know is looking to get acquired, I really think a lot of them, that's maybe somebody should talk to.

And then obviously, they come through bank processes and our coverage teams here today, they do a great job of staying connected with us, making sure that we know that they know what we are looking at, and they help bring opportunities to us in that same way. So pipeline is just an ongoing part and a muscle of this organization. I think we've proven it over the past, and we continue to put a lot of effort into that.

I'd like to focus on 2 of our most recent acquisitions here. GlideFast Consulting, I mentioned that we met during that bidding process on that telecom piece of work has, for multiple years, been a partner -- a lead partner of the year in the ServiceNow ecosystem. Head-to-head with the big global consulting firms every day, winning their share of working more. They've been a part of our portfolio now for 3 years. And it's really been seamless and fruitful on both sides of the fence.

Their team has been able to grow not only their own business, but about now 40% of the bookings of that business come from the enterprise ASGN accounts as an example. And it started immediately within the first 6 months.

TopBloc, which is our most recent acquisition, the first quarter of this year, we found a wonderful partner in Chris and his cofounding partners in that entire business. We were looking at the world of AI and saying, look, in the future, we need to have a presence in enterprise software as it relates to financials and human capital management systems. And the reason is data is everything to AI and most of the data is in the system of record at the ERP financial and HCM levels.

And so -- we then began to look at the landscape of particular software providers, whether it be Oracle, SAP, Workday and others. And we landed on Workday as our favorite choice because it was the most modernized platform, we felt like it was [indiscernible] in terms of its view on AI and Agentic AI. And so then began the process of going through our pipeline to see what our opportunities were.

Thankfully, I had met Chris about 2 years before, and we have been building a relationship for a little while. And so we'll let that conversation happen here in a minute.

But I'll just use that as an example of a very purposeful approach to the market. It doesn't matter if it's acquirable. There's all kinds of things that are acquirable. We're not trying to get volume on top of volume and staffing or any of these other areas. What we're looking for are best-in-class solution capabilities that are in demand that we see in our customers' IT road maps that we believe we can bring into our business and create great revenue synergies.

So with that, I'll bring Chris Skinner up on stage, the CEO of TopBloc.

Hello, everyone. My name is Christopher Skinner, and I'm the Co-Founder and CEO of TopBloc, a Workday implementation and support services organization based out of Chicago, Illinois. That was acquired by ASGN in Q1 of this year. A little over a year ago, Ted and I met for lunch in Boston. And I get to the restaurant before Ted. Ted walks and suddenly says, Chris, ASGN needs an enterprise resource platform capability, and we want that to be Workday. Not only do we believe that if we buy TopBloc, we would have that immediate capability from a Workday perspective, but we would also be vaulted to the front line of an ecosystem growing at double digits year-over-year.

On top of that, if we're going to take advantage and support our customers' initiatives from an AI investment perspective, we need to be able to not only deploy and support their ERP, but we need access to that data.

At that point, I looked up from my menu and I said, Ted, I was thinking about getting Caesar Salad. From there, what I did not know I would be getting that day was an eventual acquirer of choice. From our perspective, ASGN brings many things to the table. But first and foremost, the delivery track record of excellence as well as a credibility that we can actually leverage when engaging with net new large enterprise customers.

On top of that, ASGN, obviously, has a vast network of deep customer relationships that we can bring Workday services to opportunistically. And finally, ASGN can bring us into sectors and verticals of which we currently have 0 penetration whatsoever, like federal. So from our standpoint, this looks like a pretty good deal on paper to us. But what really pushed us over the edge was a cultural alignment in that Ted and the leadership team support our mantra of growth comes from innovation and differentiation.

All in all, this acquisition brings us together expands ASGN's capabilities and sets the foundation for accelerating growth going forward. So let's take a step backwards here and ask ourselves, all right, why the focus on ERP?

Well, we believe there to be significant demand tailwinds here from a modernization and cloud migration perspective. The initiatives surrounding the modernization of customer HR and finance back offices is not only not going anywhere, but we believe to be, frankly, table stakes for enterprise growth going forward. On top of that, mandates around increased efficiency and robust compliance and security also favor the need for a modern ERP.

Additionally, as Ted has alluded to, organizations looking to make it further investments in AI and Agentic workflow are going to not only need to access their data from an ERP perspective, but they're going to need to be able to leverage it to take action on that data. Finally, given the historic lag in modernization of the back office by the public sector, we believe this to be quite a big opportunity for us as a larger organization going forward here.

So how do we capitalize on this demand? Well, lucky for us, Workday is the answer to all of these questions. On top of that, given now with the ASGN can deploy Workday, we can begin to package that notion with our other capabilities in data, integration, security and so on to bring a comprehensive solution offering to our customers, finally ultimately funneling them to our ongoing support services from a Workday support perspective.

All in all, this acquisition brings ASGN end-to-end capabilities in Workday and adding them to a broad partner ecosystem so that we can solve our customers' complex ERP challenges.

So a little bit about why we are now a premier Workday partner? Well, over the last 10 years, TopBloc has spent a considerable amount of time and resources creating IP, that allows us to automate the extraction, transformation and migration of customer ERP data from legacy platform to Workday and beyond. On top of that, we've categorized and standardized much of the configuration that is repeatable across all deployments, allowing our employees the ability to import it into a Workday environment at the click of a button. All of this lends itself to better customer outcomes from -- in the form of faster cycle times from a project time line perspective as well as increased cost efficiencies.

So how do we do this? Well, we've got about 600 certified Workday consultants across not only the U.S. but Mexico. All of them, as mentioned, are certified in Workday, but also trained up to use our tools and accelerators so that when they come out of training, not only are they immediately billable, but they are adding value to projects in the form of task ownership.

Third, these folks are supporting, obviously, the Workday full suite of services from an implementation and ongoing application management support perspective. But we've also got additional services that we offer around customer success outcomes, particularly advisory, digital transformation and change management. Naturally, we've all said the word AI too much today, but we'll stay on the forefront with Workday to codevelop these notions and bring them to the market as Workday's kind of AI deployment road map plays out.

Finally, all of these initiatives of ours and over the -- our track record over the last 10 years has led us to being the fast -- one of, if not the fastest growing, North American partners in the Workday ecosystem across the last half decade. We are consistently ranked in the top quadrant of Workday ecosystem analysts across all categories, such as Gartner and ISG.

And then lastly, Workday did name us at the end of their last fiscal year, the Workday Business Impact Partner of the Year or as I like to call it, just Partner of the Year.

All in all here, ASGN did not just acquire Workday as a capability. What they got was a leader in Workday implementations that delivers high ROI with unmatched speed and time to value. And if that wasn't enough hype for us all today, we've got a short video outlining the strength of our M&A motions, particularly when it comes to GlideFast in the ServiceNow industry and TopBloc in the Workday industry.

[Presentation]

Thanks, Chris. Not to embarrass you, but right over there. Yes, not to embarrass you, but I was on the -- add one thing to all that. I was on the phone recently with Carl Eschenbach after they were awarded Partner of the Year. And Carl said, Ted, they're my #1 partner, they get people from start to value faster than any partner I have in my ecosystem. And I thought that kind of set it off. Congratulations, Chris.

So look, I think you have a good handle on this. You've watched us execute M&A as a part of our strategy as it relates to capital allocation and future growth. We have a repeatable playbook, you've got a good sense of that in terms of how we execute this. It's -- we tell you what we're going to do and then we do it. So I think that you see over time, we -- as we communicate about our differentiated capability here to really make this work that we back it up by doing it and then executing on what we do.

Scale is a big part of this and the revenue synergies. So that's always the biggest takeaway in our relationship as we think about who the right partner is. So you can expect us to continue this to pursuit to be disciplined about it, but also pair it with other forms of capital allocation, which Marie will speak about in a few minutes.

I thought before I let Chris go, I would just kind of capstone it here with a few questions and kind of get Chris' responses. So Chris, 9 months into the game here, we closed in March, what's been your biggest takeaway to this point?

Yes. I think 2 major things. And first of all, we've been frankly welcomed with open arms. So that's been refreshing, especially when it comes to navigating the larger organization. Second, what I think is the most awesome part about this is the enthusiasm and support for our continued growth initiatives. So the team has facilitated introductions to partner organizations as well as our ASGN's existing customer base [indiscernible] basically the drop of the hat, whenever anyone says the word Workday. So I think 8 months in, we couldn't be happier with where we landed.

I think we're already seeing some early returns here on the solution side, not only do you see Workday implementation capabilities, but you see it in other areas, right? Like services that are around the Workday ecosystem. And so tell us about what's it like here is you get access to this enterprise account base and begin to have work opportunities, if you will, in the ASGN clients.

Yes, absolutely. I think, Ted, if you'll recall, 8 months ago, post acquisition [indiscernible]

Great. And then, Chris, obviously, maybe there are people out here on the webcast that are thinking about selling their business and becoming a part of another organization, whether it's ASGN or someone else, what would you say to them?

[indiscernible] And after you put basically everything you have into an organization, you build up a level of trust. And until I met Ted and this leadership team, I did not find that level of trust [indiscernible] from our standpoint, [indiscernible] answer that question [indiscernible].

Well, thanks, Chris. I'm thrilled to be your partner. So is the rest of the organization. And so better things to come and bigger things have happened already, better things and bigger things in the future. Yes. Yes. Great. Thanks, Chris.

Okay. With that, I'm going to invite Marie Perry, our EVP and CFO of ASGN, to the stage.

Greetings, and welcome to the ASGN Inc. Third Quarter 2025 Earnings Call.

[Operator Instructions]

It is now my pleasure to introduce your host, Kimberly Esterkin of Investor Relations. Thank you. You may begin.

Good afternoon. Thank you for joining us today for ASGN's Third Quarter 2025 Conference Call. With me are Ted Hanson, Chief Executive Officer; Shiv Iyer, President; and Marie Perry, Chief Financial Officer.

Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call. For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com.

Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release.

I will now turn the call over to Ted Hanson, Chief Executive Officer.

Thank you, Kim, and thank you for joining ASGN's Third Quarter 2025 Earnings Call. ASGN delivered solid performance in the third quarter with revenues reaching $1.01 billion and adjusted EBITDA margin of 11.1%, both at the high end of our guidance ranges. Our IT consulting business continues to be a key growth driver, representing approximately 63% of total revenues in the third quarter, up from 58% in the same period last year. Commercial consulting bookings totaled $324 million, translating to a book-to-bill of 1.2x on a trailing 12-month basis. While bookings remain weighted towards renewals, we are seeing the volume of new wins grow as we take on more complex multi-capability engagements and assessment projects.

In our Federal segment, new contract awards totaled $461 million for the third quarter or a book-to-bill of 1x on a trailing 12-month basis and 1.5x for the quarter. As anticipated, bookings increased in the third quarter, coinciding with the end of the government fiscal year. Federal contract backlog was approximately $3.1 billion at quarter end or a coverage ratio of 2.6x the segment's trailing 12-month revenues. Although IT spending levels remain steady quarter-to-quarter, our commercial and government clients continue to acknowledge the importance of executing their key initiatives despite macroeconomic conditions.

Strong quarterly bookings reflect the demand across our client base and ongoing investment in AI highlights a significant commitment to digital advancement. Reflecting upon this ongoing trend, ISG highlighted on their third quarter 2025 index call that AI spending is not merely a passing fad, but a fundamental replatforming of enterprise technology. We are witnessing this firsthand as we deploy a growing number of AI use cases on behalf of our client base and are witnessing an increasing volume of data and cloud initiatives flowing through our pipeline as clients prepare for their next phases of digital and AI growth.

That said, even with this continued drive towards AI, the path to enterprise-wide AI adoption is not without its challenges. Organizational readiness and operational governance remaining hurdles as companies work to streamline and integrate these new technologies into their stacks. In addition, many commercial enterprises and government agencies lack the skills and engineering talent needed to successfully deploy AI. This reality is driving greater reliance on IT service partners like ASGN that can offer the breadth and depth of capabilities needed. On the topic of specialized skill sets, we are actively tracking the potential changes to H-1B Visa application process and believe that any changes to the process will be an incremental positive to ASGN.

To further illustrate the demand for our expertise, I'd like to turn the call over to our President, Shiv Iyer.

Thanks, Ted. It's great to speak with everyone this afternoon. Let me begin with an overview of our commercial segment industries. Our consumer and industrial accounts saw the greatest improvement in the third quarter, posting mid-teens growth year-over-year. This strong performance was driven by gains across our materials, utilities, industrial, consumer discretionary and consumer staples clients. Health care was our second best-performing industry, up high single digits as compared to the year ago due to double-digit growth amongst our health care provider, pharmaceutical and biotech clients. Financial services, TMT and business services all experienced year-over-year declines.

Looking sequentially, we saw growth in 3 of our 5 commercial industries. The healthcare industry saw the largest sequential growth and was led by our provider clients. Consumer and industrial accounts also posted modest sequential gains driven by our work with utility materials and consumer staples customers. In TMT, growth was supported by our e-commerce group as well as incremental gains in telecom, hardware and equipment accounts. Beyond these 3 industries, we continue to watch financial services closely as these customers are some of the largest spenders on IT. While our financial services revenues declined from the second quarter, new wins for the industry outpaced renewals in Q3, which much of this work slated to begin in Q4.

In our Federal segment, we track our revenues across 4 customer types, which are defense and intelligence, national security, civilian and other clients. In the third quarter, defense, intelligence and national security accounts comprised approximately 70% of our total government revenues. Notably, national security revenues improved 12% year-over-year, driven by our work with the Department of Homeland Security. Looking ahead, we're encouraged by the future of our Federal segment, particularly due to the increased defense budget under the One Big Beautiful Bill as well as the strong quarterly bookings that Ted highlighted earlier. Also of note, given the mission-critical nature of the work we perform, the government shutdown to date has had an immaterial impact on our operations. That said, we continue to stay very close to our clients and monitor what is a very dynamic situation.

Let's now turn to our solutions capabilities. For the quarter, we saw an increase in projects focused on data and AI, application development and engineering, customer experience and cybersecurity. I'd like to share a few examples of each, beginning with our data and AI work. For a Fortune 500 managed care organization, we partnered to develop a centralized data supply chain platform, leveraging Databricks, AWS, Snowflake and MongoDB. Through this engagement, not only did we modernize our clients' core data capabilities, we also laid the groundwork for advanced AI and machine learning workflows that will enable our clients to offer smarter, faster and more efficient health care delivery.

Our deep expertise in platforms like Databricks and Snowflake, along with our ability to tailor these solutions to each client's unique environment truly sets ASGN apart in the marketplace. Additionally, our suite of AI embedded developer productivity tools created for specific industry use cases provides a competitive edge. For example, when a global privately held hospitality company sought to modernize its loyalty application, our AI accelerators shortened the discovery phase by 25% and captured 40% more of the project's detailed requirements than traditional manual methods. This approach reduced project risk and laid a solid foundation for faster modernization of the new loyalty application. We're also building accelerators and custom AI solutions for our government clients. In the third quarter, we secured an extension with DHS to continue supporting the agency's enterprise data warehouse.

Our team provides a range of data engineering, data science and data analytics capabilities to DHS and is leveraging both commercial and our own custom-built AI solutions to advance DHS' mission-critical initiatives. Our data and AI work is closely aligned with the work we're conducting in our application development and engineering space. As an example, under the FBI's Information Technology Supplies and Support services contract, a recompete won during the third quarter, we're delivering enterprise-scale software development and application modernization services to help the FBI accelerate DNA analytics delivery across federal, state and international partners.

On the commercial side, with a leading U.S. crop insurance provider, we secured our largest application engineering services contract to date. Our selection was based on our deep industry experience, proven accelerators for legacy modernization and cost optimization through a blend of onshore, nearshore and offshore delivery. This 3-year contract will modernize policy administration, claims and customer engagement platforms, enabling real-time data access and insights that enhance underwriting accuracy, claims efficiency and customer experience.

Using AI to reinvent customer experience represents a growing area within our creative digital solutions portfolio. For a Fortune 250 pharmaceutical company, we're leading a full-scale transformation of their in-house agency, reimagining how customer experience is delivered globally. Using our in-house agency excellence framework, we embedded Adobe-powered personalized and AI-driven operations into their workflows, combining translation, reasoning and execution with human strategy and creativity. This project is one of our many customer experience projects that demonstrate in the AI era. Human creativity isn't replaced, it's amplified with AI.

Just as we help our clients elevate their own customer experiences, we too strive to provide the highest level of service to our clients. This approach often helps us outpace the competition during the proposal process. For example, our cloud and infrastructure team recently replaced a long-standing incumbent as the new Level 3 network support for a Fortune 500 athletic footwear and apparel company. Our deep understanding of this client's business needs was the key differentiator during the selection process. Now as this retails highest level network support, our team of network engineers are responsible for everything from network triage to strategic decisions and network optimization across the company's distribution centers, stores and headquarters.

Similarly, broader network protection or cybersecurity remains in demand across our client base, particularly among our federal government customers. In the third quarter, we won a recompete contract with the U.S. House of Representatives to support their 24/7 security operations team. As the house's first line of defense, our teams provide real-time network security monitoring, endpoint detection and analysis and cyber incident response and reporting for more than 20,000 geographically dispersed endpoints.

These are just a few of the many projects our commercial and government teams secured over the past 3 months. The breadth of this work underscores our deep industry expertise and engineering capabilities. It also highlights the growing strength of our ecosystem and alliance partnership, all of which position our business for continued growth.

With that, I'll turn the call over to our CFO, Marie Perry, to discuss ASGN's third quarter segment performance and fourth quarter guidance.

Thanks, Shiv. For the third quarter, revenues totaled $1.01 billion, a decrease of 1.9% year-over-year, but at the top end of our guidance expectations. Revenues from our Commercial segment were $711.3 million, a decrease of 1% compared to the prior year. Assignment revenues totaled $376.4 million, a decrease of 13.2% year-over-year, reflecting continued softness in portions of our Commercial segment that are more sensitive to changes in macroeconomic cycles. Revenue from our commercial consulting, the largest of our high-margin revenue streams, totaled $334.9 million, an increase of 17.5% year-over-year. Excluding TopBloc, which we acquired in March of 2025, consulting revenues improved mid-single digits year-over-year. Revenues from our Federal Government segment were $300.1 million, a decrease of 3.9% year-over-year.

Turning to margins. Gross margin for the third quarter of 2025 was 29.4%, an increase of 30 basis points from the third quarter of last year. Gross margins for our Commercial segment was 33.2%, up 40 basis points year-over-year, reflecting higher mix of consulting revenues. Gross margin from our Federal Government segment was 20.3%, a decline of 40 basis points year-over-year due to the loss of higher-margin work related to DOGE and the completion of certain projects.

SG&A for the quarter was $212.2 million compared to $207.5 million in the third quarter of 2024. SG&A expenses included $4.2 million in acquisition, integration and strategic planning expanses. These items were not included in our previously announced guidance estimates. For the third quarter, net income was $38.1 million. Adjusted EBITDA was $112.6 million, and adjusted EBITDA margin was 11.1%. Also at quarter end, cash and cash equivalents were $126.5 million, and we had approximately $460 million available on our $500 million senior secured revolver. Our net leverage ratio was 2.4x at the end of the quarter. Our strong free cash flow provides a strategic advantage that enables ASGN to fund growth initiatives, invest in strategic M&A and opportunistically repurchase shares, all while maintaining a healthy balance sheet.

Free cash flow was $72 million for the third quarter, a conversion rate of approximately 64% of adjusted EBITDA, well within our target of 60% to 65% conversion. We deployed roughly $46 million of our free cash flow to repurchase 0.9 million shares at an average share price of $51.46. At quarter end, we had approximately $423 million remaining under our $750 million share repurchase authorization.

Turning to guidance. Our financial estimates for the fourth quarter of 2025 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions and assumes no further deterioration in the markets we serve. In addition, estimates do not include any acquisition, integration and strategic planning expenses. Guidance also assumes 61 billable days in the fourth quarter, which is the same number of billable days as the year ago period and 2.5 days fewer than the third quarter. We typically see larger sequential decline in billable days between the third and the fourth quarter due to holidays. The fourth quarter has the lowest number of quarterly billable days. In terms of our business segment, on a same billable day basis, our estimates assume a slight sequential improvement in our Commercial segment from the third to the fourth quarter. The Federal Government segment estimates assume some caution due to uncertainty around the end of the government shutdown.

With that as background, the fourth quarter 2025, we are estimating revenues of $960 million to $980 million, net income of $32.1 million to $35.7 million, adjusted EBITDA of $102 million to $107 million and adjusted EBITDA margin of 10.6% to 10.9%. Thank you. I'll now turn the call back over to Ted.

Thanks, Marie. As we progress through the final quarter of 2025, I'm genuinely excited about the path ahead and eager to share more about our vision for sustainable growth and long-term value creation. On November 20, we'll be hosting an Investor Day in New York City, where we'll offer an in-depth look at our strategy and unveil new 3-year financial targets. I encourage you to listen to the webcast and hear directly from our expanded leadership team about the next phase of our growth journey. A link to register for the webcast is available on our Investor Relations website. This concludes our prepared remarks. I want to express my deep gratitude to every one of our employees for your steadfast dedication throughout this past quarter. Your hard work has been instrumental in strengthening our client partnerships and driving our continued move into high-value technology and engineering solutions.

With that, we'll open the call to questions.

[Operator Instructions]

Our first question comes from the line of Jeff Silber with BMO Capital Markets.

This is Ryan on for Jeff. Just wanted to dig a little bit more into the H-1B situation, particularly what gives you the confidence that you're a beneficiary there? And how do you see the situation evolving in coming months based on just your conversations with clientele?

Brian, thank you for the question. I think from our standpoint, almost all of our delivery is onshore, nearshore. We have very little presence where most of the H-1Bs are coming from in India. At the end of the day, anything that tightens the program, whether it's enforcing all the regulations the right way, maybe making the program a little smaller and tougher to get in, increasing the fee, which ultimately would tighten the program. All those put a focus back on onshore and nearshore technical skill capabilities, and that's really where we sit. So we're at the intersection there. And I think it just makes our services that much more important to the client without diminishing anything, if you will, on the other side.

And the other side of this, at the end of the day is better enforcement of those regulations is going to create also pricing improvements because a lot of the things that are going on there in terms of the way the program is used to skirt certain situations where the client would want to pay a prevailing bill rate. Again, it's just highlights our services and our core capabilities.

Great. And just one more follow-up on the federal government. I heard the comments that there's a little bit of caution factored into the fourth quarter guidance. I was wondering if any of that is just any lingering DOGE stuff or it's mostly just on the government shutdown and the longevity of that.

Yes, nothing on the DOGE side. I think it's just around the shutdown. The government shutdown does 2 things. One is certain nonessential activities get furloughed. And as we mentioned in the script, as Marie said, it's really immaterial to us right now at this point. But the other thing it does is slow down the cycle of new awards and the ability to ramp up on awards you either just won or may win. And so I think all those things put together, while we think it not a mid- or long-term blip, but could cause some caution here in the near term. So...

Our next question comes from the line of Tobey Sommer with Truist Securities.

We start off by following up on that government shutdown question. Do you assume that the shutdown extends through the fourth quarter? And maybe more specifically, how long do you assume it lasts?

Well, we didn't really make an assumption on the length of it, Tobey, but it did keep us from stretching in the forecast, if you will. So I don't think we -- because it's an immaterial impact at this point, we didn't cut numbers, if you will. But we did say this is not a quarter to stretch. So I think that's probably a better context for it.

Sure. But immaterial at this point that it's the at this point part that we're interested in. Okay. Within commercial consulting, which software implementation -- softwares are you implementing that are experiencing the best demand right now? And where -- when you look at your portfolio of services and how you map out against your customers and frankly, the available software market in terms of implementations, where might you want to add capability to be able to participate in those other areas?

It's a great question. So the areas that, as we called out in the script, we're seeing continued demand are in data and AI, clearly in things like snowflakes -- Snowflake and Databricks where we're actually actively partnering. We continue to see active demand on some of our enterprise platforms. So you look at Workday with TopBloc or even with GlideFast and ServiceNow, we're seeing an uptick in demand in both of those areas. We see continued demand on the cloud side, both from a migration perspective as well as from a custom app development perspective. We continue to ramp up on our Salesforce capabilities because we do see Salesforce as an active player in the -- both in the Agentic world and also in the experience world. So Tobey, really, that's where we're seeing continued demand. So I think the partnerships that we've lined up ourselves against are very much in line with where we see our clients continuing to invest in.

And then just to anticipate your Investor Day, but not steal all the thunder, a feature of the next several years, do you expect commercial IT consulting to continue to be a larger percentage of total company sales and therefore, a driver of margin expansion over time?

Absolutely. I think even if you look at this quarter, I mean, despite maybe a little contribution more in federal towards the full quarter than we expected slightly. And still the same state of affairs with high-margin services like perm placement and creative. You saw our sequential margin here increased about 70 basis points, and that's really due to the strength in commercial consulting. And so I think that's been the driver of margin will continue to be the driver of margin is going to be where we're allocating capital. Obviously, we'll talk more about that in the Investor Day. So it's definitely an underlying pillar here of the strategic plan.

Our next question comes from the line of Jason Haas with Wells Fargo.

There's been some headlines recently about companies not seeing a great ROI on many of the AI projects that they've undertaken. So I was curious if you could weigh in on that, if that's something you're hearing from your customers? And where can you help on -- if that's the case, where can you help -- where is the roadblock? What can you guys do to help companies see a better ROI on those projects?

Look, I think there are multiple reasons why the ROI isn't materializing, right? So I think -- and let me start by saying that we are hearing that and clients are doing a lot of proofs of concepts and pilots around this. Almost 70% of what they're trying requires a deeper level of integration into their architectures. That's sort of one. Second, many of them have challenges with the data and the way their data is lining up, right? The third is it requires integration of these -- whatever they're doing with the workflows that they have. And the logic of these workflows typically sits within enterprise platforms.

So our view on this is the fastest path to ROI at the moment with Agentic AI and agents is really around harnessing the core capability of those platforms around which those workflows are built, right? Because despite all the marketing hype that you hear about end-to-end process automation and multi-platform AI orchestration, we're simply not seeing the returns on those things. So really, the challenges are all around. And of course, that's a big part of it also is technical talent. So the challenges are technical talent, the complexity of integrating these things into their architectures, data. And then the fourth thing is just the ability to make these work with complex workflows, the logic for which is embedded within the enterprise platform. So that's the fastest path to ROI in our opinion.

That's great color. Sounds like a great opportunity. And then as a follow-up, I wanted to switch over to the federal government segment. It sounds like there's some moving pieces there with the shutdown maybe potentially turning into a headwind at some point. But I'm curious about the One Big Beautiful Bill. And to what extent has that started to help the bookings that you're seeing? And over what time frame could you see more benefits? Or at what point do those turn into revenue? Can you just give some more color on the timing of how that could help that segment, that would be really helpful.

Yes. Look, I think that in the areas where we play, we're about 75% of our business in defense and intel and national security. Those are the areas that are going to get the biggest increase from what was passed in the big beautiful bill. We're going to have to get past this shutdown and subsequent continuing resolution to a final budget, which we hope will happen sooner than later. But once we get to that point, let me -- let's just say it's sometime in the early first quarter into this year, then those agencies will be funded at these higher levels. So I think really in the first half of next year, subsequent to that, you're going to see those things begin to get competed, awarded and out on the street and really contribute to revenues probably at the midpoint or second half of next year.

Our next question comes from the line of Surinder Thind with Jefferies.

A question about the staffing business versus the consulting business. Obviously, we're seeing some good growth on the consulting side on an organic basis. But it seems like that there's still some challenges on the staffing side. How would you characterize that in the context of the current environment? Is this a situation where maybe complexity is requiring more outside expertise and maybe less willingness to augment internal staff? Or how should we think about that? And is that something that with increased complexity in the tech stack that, that trend just kind of continues from here?

Look, Surinder, there are a few things, right? Let me start by saying that the staffing business for us, as we look at our numbers has been stable. Year-on-year, obviously, we're declining. But from a sequential basis, our leading indicators are relatively stable. But I think there are multiple buyer dynamics at play here, right? The first is clients -- our customers are looking to partners to drive to outcomes and really start to think about how do we drive outcomes, how do we drive deliverables.

So the trend is that we see a continued shift in buyer behaviors where partners are looked at more as partners who drive value and outcomes versus simply augmentation. And from our vantage point, that's a trend that is a benefit for us on the consulting side, and we're obviously, as you can see, benefit from it, but it creates headwinds on the staffing side. And Ted can opine on this, but I don't see that buying behavior shifting tremendously.

I think especially, Surinder, in today's macroeconomic environment, if the client is really going to invest in something, they want a short time to value, meaning they want an outcome. They want it as soon as they possibly can. They're really focused on total cost of ownership and getting to a certain outcome if they're going to greenlight something. So I think we see just a higher level of rigor of that around that from clients than we've ever seen before. And part of that is because of the increasing cost within their IT environments. And part of that is because their wariness around the macroeconomic backdrop here and concern about where their business may go in the future.

That's helpful. On the federal side, can you maybe talk about the cost-reimbursable contracts. The percentage there continues to kind of trend higher back to peak levels. Can you talk about what's driving the change and its impact on margins? Because it's interesting when I look at the federal margins, the gross margins, those were up pretty materially quarter-over-quarter.

Yes. So we're really not seeing an impact on margins from that. I think that's just the natural ebb and flow of certain contracts ending and certain contracts being won during the quarter and subsequent quarters. I think overall, the government is going to be more focused on fixed-price outcome-based work. But just naturally here, we've seen a slight tick up in the cost plus, and I think that's mostly because of either the prior DOGE activities, which some of the work that were started was fixed price work and also just the natural ebb and flow of what's won and what's completed.

And Surinder, remember, last quarter, we had the surge in license revenue on the federal side. And so we talked about that. And so when you kind of look at Q3, federal margins are really back to their kind of more normal state.

Our next question comes from the line of Alexander Sinatra with Baird.

I'm on for Mark Marcon. I was just wondering, you went through a couple of big projects. I was wondering if you could describe who you're competing against to get those big projects and how the competitive dynamics have maybe changed things on pricing? And then also on the TopBloc and GlideFast side, who do you run into? And how is pricing working there as well?

Look, I think it varies by client, but a lot of these are with our larger clients, and you would find that the people we run into typically are competitors that you would expect a combination of Accenture or the Big Force, in some cases, the India-based pure plays. In certain platforms, there's also smaller competitors we run into. So it's the traditional set that you would expect from these clients, right, on these clients.

And we're seeing pricing both from a GlideFast side and a TopBloc side really hold up. We're not seeing pricing pressures on the work that we're doing, partly because of just the quality of what we're doing and sort of our approach to how we do these things, which is very much around assets and accelerators that we bring, which sort of are truly different from what you would see. So most of the competitors are the standard competitors that you would expect in any of these large clients.

Got you. And then I was also wondering on the Mexican facility side, has that been impacted at all by the political climate and just kind of what you're looking at there going into the future?

No, not at all. Not at all. It has no impact.

Our next question comes from the line of Maggie Nolan with William Blair.

Maybe a slightly different angle on the pricing question as it pertains to accelerators. As you're incorporating more and more of these into the development process, are there active discussions about changes in pricing related to this? Or if not, do you expect that maybe to be a discussion point in the future?

Great question, Maggie. We are exploring those opportunities, but we're not seeing a big uptick today. Right now, these assets and accelerators are really allowing us to deliver work more rapidly, more effectively. As I mentioned in one of the examples I gave about sort of this whole code legacy code modernization where we're able to do things 25% faster and gives us better quality assurance. Now as these assets and accelerators evolve and mature, we have the opportunity to position some of these on a more stand-alone basis. I mean we have some good examples. We have something called Pathfinder, which is an AI-driven cybersecurity product, which we've invested in, which we are actively engaged in conversations about pricing differently, more maybe on a product basis, but those are still early days.

And then it seems like some momentum is building on the commercial consulting side. Could you maybe comment on whether you think that's sustainable? What are the drivers there? Is this more of a point in time or a potential trend on a multi-quarter basis?

No, we actually see it sustaining and continuing, but I don't want to make that a broad-based statement. We see that sustaining and continuing in specific areas where we see client investment being directed. So whether it's data and AI, whether it's custom engineering, whether it's some of the platforms that I alluded to, right? So -- and we've been very, very thoughtful and focused on those areas where we see the growth and the market opportunity happening, right?

So I think that's how I would characterize it, Maggie. We do see continued momentum in that space because all the work that's happening and AI is a big, big tailwind, which is driving a lot of work for us, whether it be data, whether it be cloud, whether it be cybersecurity, whether it be integration associated with putting them and getting it to work in the environments that our clients have.

I would add to that, just even think about a platform like Workday, which is going to be a leader in Agentic AI, I think customers more and more are thinking, "Hey, I've sat on my legacy systems here for many years, but I'm not going to get to take advantage of Agentic AI if I don't have modern enterprise platforms in my environment like a Workday or ServiceNow or Salesforce or right on down the list.

And ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the floor back to CEO, Ted Hanson for closing remarks.

Well, thank you for being here this evening to talk about our third quarter results, and we look forward to speaking with you in the first quarter on our fourth quarter results. And I'll remind you as well that we have our Investor Day on November 20. And so we look forward to being with you if you can be present with us in New York City. Have a great evening.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the ASGN Incorporated Second Quarter 2025 Earnings Call. [Operator Instructions].

It is now my pleasure to introduce your host, Kimberly Esterkin, Vice President, Investor Relations. Thank you. You may begin.

Good afternoon. Thank you for joining us today for ASGN's Second Quarter 2025 Conference Call. With me are Ted Hanson, Chief Executive Officer; Shiv Iyer, President; and Marie Perry, Chief Financial Officer.

Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings.

We do not assume any obligation to update statements made on this call. For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com. Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release.

I will now turn the call over to Ted Hanson, Chief Executive Officer.

Thank you, Kim, and thank you for joining ASGN's Second Quarter 2025 Earnings Call. ASGN reported solid results for the second quarter. Revenues of $1.02 billion were above the high end of our guidance range, while adjusted EBITDA margin of 10.6% was at the top end of our expectations for the quarter.

Our IT consulting revenues continue to grow, reaching approximately 63% of revenues for the second quarter up from 57% in the year ago period. Macroeconomic uncertainty remains impacting discretionary spending. Still, clients are focused on staying competitive driving demand for cloud and data solutions to modernize legacy systems and capitalize on AI. According to ISG Index second quarter 2025 call, the demand for AI is overcoming macroeconomic distractions with companies actively investing in Generative and Agentic AI deploying cost savings from other areas of their operations. We are experiencing this trend in our commercial consulting bookings, where we are seeing continued demand in data, AI and digital engineering, including custom application and development.

Commercial consulting bookings for the quarter totaled $417.5 million, translating to a book-to-bill of 1.2x on a trailing 12-month basis. While bookings remain weighted towards renewals, we are increasingly winning larger, more complex, multi-capability deals as we advance our commercial practice areas and technology partnerships.

Our technology partnership with Workday is progressing very well. and top block, which continues to perform above our expectations, contributed to growth of our commercial consulting bookings for the second quarter. In our federal business, new contract awards totaled $72 million for the second quarter or a book-to-bill of 1.1x on a trailing 12-month basis. Contract awards were challenged as anticipated, reflecting a slowness in award velocity and the impact of [ DOGE ] on procurement and approval processes. -- new federal contract backlog was over $2.9 billion at quarter end or a coverage ratio of 2.4x the Federal segment's trailing 12-month revenues.

Despite lower federal quarterly bookings, our core solution capabilities in AI, cybersecurity and digital modernization remain well aligned with the administration's efficiency cost savings priorities. In addition, the recently passed one big beautiful bill represents one of the largest single year increases in U.S. defense spending and modern history. Much of this funding focuses on our primary competencies including AI and automation, cloud migration, secure communications and threat intelligence platforms.

Ultimately, a constant among this ongoing transformation is a critical need for skilled IT professionals. Case in point, ISG estimates that in the next year of enterprises plan to expand their IT resources to accelerate the capture of AI benefits. ASGN's distinctive model, which delivers a broad spectrum of skill sets just in time on a contingent basis continues to set us apart and will enable us to serve as an excellent partner to enterprises and public agencies seeking to achieve their IT modernization goals.

We are uniquely positioned to identify the right skill sets for our clients. And with an industry-led focus, we deeply understand the nuances of each sector's IT needs.

With that, let me turn the call over to our President, Shiv Iyer, to discuss our industry and solution performance in the second quarter.

Thanks, Ted. It's great to speak with everyone this afternoon. Beginning with our commercial segment verticals. Consumer and industrial accounts performed the strongest in the second quarter and were up mid-double digits year-over-year. Improvement in this vertical was driven by mid-teens or better growth in materials, utilities, industrials and consumer discretionary accounts.

Our health care vertical was relatively flat compared to the prior year as a result of double-digit growth amongst our pharmaceutical and biotech clients. Financial services, business services and TMT accounts declined compared to the year ago period. On a sequential basis, we achieved growth in 4 of our 5 commercial industry verticals with consumer and industrial accounts gain leading our performance.

Our consumer and industrial clients have been leveraging our nearshore delivery center in Mexico as a cost-efficient and capable alternative for application development and data modernization. In the financial services vertical, we saw double-digit growth amongst our wealth management and insurance clients, both of which were active with our cloud and infrastructure teams in the quarter.

In our TMT vertical, we saw mid-single-digit growth in telecom, e-commerce and software and services. For clients in this vertical, we supported enterprise platform implementations, including integrating new AI capabilities into existing cloud platforms and developing solutions to help clients harness the power of their data, AI and advanced analytics.

In our federal business, we track our revenues across 4 end customers. Defense and Intelligence, national security, civilian and other clients. Defense, intelligence and national security accounts comprised approximately 72% of our total government revenues. Growth in national security accounts was largely driven by work for the Department of Homeland Security, examples of which I will share shortly.

As anticipated, our civilian business for the quarter was impacted by DOGE, the impact of which was unchanged and consistent with expectations. Defense and intelligent revenues though up sequentially by mid-single digits, but down year-on-year due to budget constraints. We remain bullish on the long-term positioning of our federal government business, particularly with the recent expansion of the defense budget.

To provide greater clarity on the dynamics driving bookings across our commercial verticals and government clients, let's turn to our solutions capabilities. For the quarter consulting engagements across the company focused on 4 major areas, including cloud and data infrastructure, cybersecurity, enterprise platform advisory and implementation and AI services.

Let me provide a few examples of each, beginning with cloud. For a global financial services company, we were engaged to assess the current state of their cloud operations evaluate a newly procured FinOps tool and build a multiyear cloud road map. As a result of our advisory services, our client will be able to improve its cloud governance taxonomy, capacity and consumption across its wealth management lines of business.

Importantly, this framework provides our clients the confidence to accelerate their cloud migration. For a Fortune 500 life insurance and retirement company, our consultants were engaged to determine if migrating to Amazon's cloud-based system would provide cost savings, operational efficiency and improved scalability for the company. Our team delivered a viable migration model in just 8 weeks, resulting in query execution 3x faster and generating significant cost savings for the client.

By deploying this model, our client will be able to accelerate their data center exits and mainframe retirement while simultaneously unlocking the AI capabilities provided by migrating to AWS. We also work side-by-side with AWS as a premier partner and managed services provider in the federal space. Similar to the commercial market, federal agencies are looking to modernize legacy infrastructure.

In the second quarter, we partnered with AWS on behalf of National Security and Defense Agency clients to secure scalable cloud migrations and continuous compliance in AWS GovCloud. Alongside cloud support, our cybersecurity expertise was another solution area in demand this past quarter. For DHS Cybersecurity and Infrastructure Security Agency, or CISA, we were awarded incremental work to deliver essential technical and digital engineering services with to protecting critical infrastructure and enhancing national cybersecurity.

We also partnered with Elastic a leading platform for search power solutions to add AI search capability into CISA's continuous diagnostic and mitigation dashboard thereby enhancing cross-domain visibility of the agency and reducing national security vulnerabilities. Collaboration with our alliance partners is critical to our success.

Our strategic alliances with partners like AWS and Elastic enable us to deliver cutting-edge technology solutions tailored to our clients' unique business needs. The value of our technology partnerships is particularly evident in enterprise platform implementations, which represented a third area of focus. As an example, TopBloc, a leading high-growth tech-enabled Workday consultancy recently partnered with a global provider of insurance solutions to leverage the full Workday suite across 11 countries.

For this client, top log provided end-to-end implementation of the Workday Human Capital Management and payroll modules, full-service change management, manage testing services and post go-live support. A new win for the quarter, this initiative was designed to centralize our clients' HR operations, streamline its internal processes and enhance the company's ability to attract and retain top talent.

TopBloc was also engaged during the quarter to develop a custom built Workday application for a national mechanical contractor. This application enables the company's foreman and site managers to enter time on behalf of their crews in real time, aligning with the unique needs of the construction environment and showcasing TopBloc ability to support complex unionized work environments across multiple implementation phases.

Our ServiceNow implementations are also on the rise particularly as the company makes a push to become the AI platform for digital business. In the quarter, we assisted a prominent global video game and entertainment company with deploying ServiceNow's Gen AI capabilities within the HR service delivery environment. This consulting project focused on increasing automation and improving user experience by implementing Gen AI to automatically classify HR cases, auto generate resolution summaries and enhanced case documentation and audit readiness.

In addition to platform-driven implementations, we are helping drive to a smarter future for our clients by providing a comprehensive suite of AI services, ranging from advisory and literacy to developing and building Agentic architectures powered by our assets and accelerators.

In the advisory space, one of the world's largest professional services firms engaged our team of consultants, architects and cross-capability solution leaders to rethink the process and technical design of some of their key knowledge management workflows. These workflows are currently conducted manually and involved the complex task of updating governance policies in thousands of downstream documents and systems.

The advisory phase of the engagement was successful, and we're now moving into delivery for collaboration between our U.S. consulting team and our Mexico delivery center. We are also leveraging our AI capabilities to improve data management and accelerate model deployment within the federal space.

During the quarter, our government team used advanced analytics and machine learning to support the U.S. Navy in processing vast amounts of maritime data. By training and deploying AI models on their behalf for helping the Navy enhance its situational awareness safety and operational efficiency.

Beyond AI advisory, we are growing our Agentic AI practice by architecting and building agents to support a myriad of client use cases. Just last week, we published an Agentic AI customer service tool on the new AI agents and tools storefront in the AWS marketplace. This agent is 1 of the many AI accelerators being built by our teams. Ted will discuss more about our AI accelerators and investments shortly.

But first, I'll turn the call over to our CFO, Marie to discuss ASGN's second quarter segment performance and third quarter guidance.

Thanks, Shiv. For the second quarter, revenues totaled $1.02 billion, a decrease of 1.4% year-over-year, but above our guidance expectations. Revenues from our Commercial segment were $708.1 million, a decrease of 2.4% compared to the prior year.

Assignment revenues totaled $382.4 million, a decline of 13.9% year-over-year, reflecting continued softness in portions of our commercial segments that are more sensitive to changes in macroeconomic cycles. Revenues from our commercial consulting, the largest of our high-margin revenue streams, totaled $325.7 million, an increase of 15.7% year-over-year and included the contribution from TopBloc.

Revenues from our federal government segment were $312.5 million, an increase of 1.1% year-over-year, including approximately $10 million of higher-than-expected license revenue. As Shiv noted, the impact from DOGE in the second quarter was in line with our expectations.

Turning to margins. Gross margin for the second quarter of 2025 was 28.7%, a decrease of 40 basis points from the second quarter of last year. Gross margin from our Commercial segment was 33%, up 30 basis points year-over-year, reflecting a higher mix of consulting revenues as well as margin expansion in these revenues.

Gross margin from our Federal government segment was 19.2%, a decline of 140 basis points year-over-year due to higher volume of low-margin software licenses. Gross margin was also impacted by loss of higher-margin work under DOGE. Excluding the impact of client-driven license revenues that were outside of our guidance estimates, consolidated company gross margin was within our guidance range for the quarter.

SG&A expenses for the quarter was $216.8 million compared to $205.6 million in the second quarter of 2024. The SG&A expenses included $8.3 million in acquisition, integration and strategic planning expenses, inclusive of cost optimization initiatives. These items were not included in our previously announced guidance estimates.

For the second quarter, net income was $29.3 million. Adjusted EBITDA was $108.5 million, and adjusted EBITDA margin was 10.6%. Also at quarter end, cash and cash equivalents was $138.9 million, and we had $320 million available on our $500 million senior secured revolver. Our net leverage ratio was 2.46x at the end of the quarter. Our strong free cash flow provides a strategic advantage that enables ASGN to fund growth initiatives, opportunistically repurchase shares and invest in strategic M&A, all while maintaining a healthy balance sheet.

Free cash flow was $115.8 million for the second quarter, a conversion rate of approximately 107% of adjusted EBITDA. We deployed $9.5 million of our free cash flow to repurchase approximately 200,000 shares at an average share price of $58.69. At quarter end, we had approximately $470 million remaining under our $750 million share repurchase authorization.

Turning to guidance. Our financial estimates for the third quarter of 2025 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions and assume no further deterioration in the markets we serve. Guidance also assumes 63.5 billable days in the third quarter, which is the same number of billable days as the year ago period and 0.25 more days than in the second quarter. Estimates do not include any acquisition, integration or strategic planning expenses.

With that as background, for Q3 2025, we are estimating revenue of $992 million to $1.012 billion net income of $35.8 million to $39.4 million, adjusted EBITDA of $108.5 million to $113.5 million and adjusted EBITDA margin of 10.9% to 11.2%.

Thank you. I'll now turn the call back over to Ted.

Thanks, Marie. As discussed at the outset of today's call, despite ongoing macroeconomic uncertainties, our clients are continuing to invest in AI, recognizing that maintaining a competitive edge requires staying at the forefront of technological advancements.

With that in mind, I'd like to take this opportunity to further highlight ASGN's ongoing AI investments. And how like our clients, we are strategically positioning our business amid rapid technological change. AI enables our consultants to work faster, smarter and with more insight driving a higher ROI for our clients. But leveraging our deep expertise in application development and managed services, we've been able to create relevant AI applications for our consultants every day work and ultimately share this IP with our Fortune 1000 and defense and intelligence customer base.

As part of our commitment to unify our company-wide AI expertise, we launched the ASGN AI Innovation Center, a collaborative initiative between our commercial and federal businesses, designed to enhance innovation, optimize resource utilization and promote AI-driven business growth for our clients. The innovation center offers development environments, a centralized, repeatable, IP repository, documented best practices, thought leadership and new technology evaluation.

At the core of our innovation center are the solution accelerators proof of concept developed to quickly solve specific business problems with the help of AI. By building out these accelerators, we create repeatable, lower-cost solutions that can be easily deployed for our clients' custom environment.

Several accelerators have already been published and many more in the pipeline for launch this year. Some examples of those already in use include financial services agents, rapid code discovery tools, network security assistance and AWS Agentic AI tool previously highlighted. Our AI University is also a crucial competent of the ASGN Innovation Center. Our AI University provides resources for upskilling our sales and technical teams while serving as a launching pad for developing white papers, best practices and training for our customers.

We found that by incorporating AI understanding and education into ongoing professional development, we can drive continuous innovation by ensuring that our professionals remain relevant in a rapidly evolving market. Through the establishment of our AI innovation center and our many centers of excellence, we are enhancing our solutions capabilities and positioning ourselves as a leading authority in all facets of commercial and federal IT modernization.

Our diverse customer base has equipped us with a deep understanding of the distinct data and IT needs across a wide range of sectors, enabling us to effectively support each client's long-term IT road map. Speaking of long-term road maps, I'm excited to share today that ASGN will be hosting at Investor Day in the fourth quarter.

During this event, we will speak about our company's near- and long-term strategy to unlock the next wave of growth and value creation. We look forward to sharing more details in the coming weeks.

That concludes our prepared remarks. I'd like to extend my gratitude to all of our employees for your unwavering commitment this past quarter. Your efforts have been evaluable to fostering our client relationships as we continue to evolve our business into higher-end, high-value IT consulting.

With that, we'd now like to open up the call to questions.

[Operator Instructions]. Our first question comes from the line of Tobey Sommer with Truist Securities.

Wanted to start out and ask how TopBloc is performing relative to your expectations and maybe numerically what was the contribution to results?

Yes. So Tobey, thanks for the start of the call and the question. If you remember, we -- at the acquisition date said that TopBloc was going to contribute over the course of the year, $150 million in revenues for the full year. Mind you, it closed in the first of March.

And then EBITDA margins in the high teens. And to this point, I'd say they're tracking just ahead of those numbers on revenue, just ahead of those numbers on bookings kind of in the range on EBITDA.

Okay. Perfect. You talked a lot about AI in your prepared remarks in terms of opportunities and described a lot of initiatives and actions that you're helping with customers. Could you talk about the more cyclical part of your assignment business, specifically sort of the Creative Circle piece? And What, if any, impact are you seeing from AI on that business? Or would you describe the top line softness as purely cyclical at this stage?

Yes. Will let Shiv answer that. I'd say pretty stable right ship and the cyclicality of it, it is one of the more cyclical pieces of the portfolio.

Yes. I think that's spot on Ted. We're not seeing anything that would indicate that there's a massive impact of AI on that business. I think it's largely the macros and cyclicality at this moment.

And I think, Tobey, going on to like -- and into the beginning of the third quarter, I'd say that, that business has been stable kind of quarter-to-quarter.

It has been stable quarter-to-quarter. We expect that, and we also expect some parts of the consulting piece of that business to continue to progress, which we're seeing some uptick on.

Yes. If you think about the opportunity in that business, even though the the discretionary piece of this is earning the results of the traditional staffing part, the opportunity in customer experience is definitely a growth area. We're seeing that to Shiv's point inside the business. And our consulting work in there is growing. It's not the biggest part of the business. I'd call it maybe 25%, but it's growing, and we think there's a big opportunity there as we go forward. So we'll continue to emphasize that. And at some point here, the discretionary spending is going to return and we think both of those things will contribute to [ Career ] Circle.

And then in the government consulting area in the ECS business, a couple of topics on that. One, what is the long-term margin profile? Is it any different because of the the high-margin dose contracts perhaps no longer being ongoing. And do you think you grow from here? We've heard some other dedicated companies that focus on this area of the market exclusively, talk about perhaps an opportunity for calendar third quarter kind of a bigger than usual contract award period because of slow awards year-to-date in the federal fiscal year?

Yes. I'll take the second part, and I'll let Marie talk about the gross margins. But I do think that there is a lot percolating here for the third quarter. So we're only a few weeks in. We'll have to watch that play out, but it does feel like we're back to kind of a normal cycle there.

It has been muted in the second quarter, as you mentioned, just because of the -- I think just the wait-and-see approach of the government contracting officials and the agency heads. But I think the positive note is here, we've -- we've got a new bill out. There's going to be a significant amount of new money in the budget, especially in the defense area, which is where we are embedded.

And so I think all those portend good for us. So I look for a good third quarter, but I really look for a good bookings outcome here as we get a little further down the road because the government has got to put that money to work. they're going to have to get it on the street and compete with us and our peer group to be able to get these things done because as you know very well, Tobey, the government doesn't have all these assets inside of their operation to accomplish these things that need to be accomplished in data and AI and technology modernization, cybersecurity and other areas where we play, and then Marie on the gross margin.

Tobey. Yes, so you were really referencing kind of gross margin and what the long-term view is. And so when we think about the federal business, and you alluded this to as well, that the DOGE revenue that we're losing is higher margin. The reality is some of that is kind of toggling back and forth and so we'll see how that works out.

But the leadership at our federal government is also looking at increasing direct labor. So there's opportunities kind of down the road as we look at the gross margin for federal to increase our direct labor. And then as we've talked about just some diminishing impact on the license revenue or the balance of the license revenue that's embedded in our federal continues to get smaller and smaller.

We've kind of played in a 20% to 21% range, and you have some of these pass-throughs coming in and out, and so that moves up and down, but that still think that's that's a range that we expect to be in Tobey.

Our next question comes from the line of Jeff Silber with BMO Capital Markets.

Sorry, just one more on federal government and then I can move on. You said that the DOGE impact was in line with your expectations. Can you remind us what those expectations were -- and what do you think the impact will be in the current quarter?

Absolutely. We -- and last quarter, we actually said that the DOGE impact would be less than 2% of total revenues. As noted, unchanged, in line with our expectations for Q2, and we expect that same in Q3.

Okay Great. If commercial and maybe we can segment it between your assignment and your consulting revenues. I'm just wondering what the tone is -- it sounds like on the consulting side, there's a lot going on -- but I don't know if you're seeing the same kind of maybe potential enthusiasm on the assignment basis. Any color would be great.

Yes. Well, I'll let Shiv comment, but you're -- I think coming out of Q2, obviously, we had a very good bookings quarter and it was stronger at the end of the quarter than it was at the beginning -- and I think here, the first 3 weeks, we're seeing little incremental positive on 4 metrics in the assignment business. So -- and then Shiv just a tone of conversation with clients.

No. Absolutely, Jeff. I think the -- as you can see from our bookings numbers, there's -- we're seeing some positive signs in our commercial consulting business, specifically in certain areas like cloud, data and -- and then -- and it's obviously a tale of different industries. You can see from our results that some of our industries are doing much better than the others.

The reason weren't out there declaring that there's something majorly under phase. We're still watching some of our larger industries like banking and looking for the turn in those industries, which is still sort of a wait and watch for us. But overall, the sentiment, at least, is we're seeing enough good things to give us cautious optimism.

And if you think about the places where we have real strength, Jeff, like data and AI, application, development, modernization, cybersecurity, enterprise systems around ServiceNow and Workday. I mean those are all kind of developing areas of strength here as things begin to emerge, and that's the core of our capabilities, if you will. So I think we're positioned pretty well here for things to begin to release and I think Shiv hit the nail on the head, while we're seeing some positive signs of the Ford metrics.

We do need a big industry like banking specifically to begin to turn positive instead of just flattish.

Our next question comes from the line of Surinder Thind with Jefferies.

Can you maybe talk a little bit about the AI investments that you're making? And more specifically from the perspective of just kind of building IP. One of the narratives more broadly as we seek across IT services is that in this next wave of growth, I guess the idea is that firms will need to build more IP than they have in the past. Can you comment on that or your thoughts and views on how that fits into your business model, in which you use more temporary workers to provide some of the consulting services on the commercial side.

Right. Well, I think you're on the right track, Shiv.

Absolutely. Surinder, that's very much part of the strategy for us and the evolution for us. We think about -- let me talk about the fact that we're doing -- making investments in AI, as Ted would say, which is very focused on account and deal-specific IP development. That doesn't mean we're not investing in just broader platforms. We are -- we've got things like code discovery and open source tools around code discovery, which is our own IP.

We've got open source tools around applying AI to cybersecurity, which we're deploying for clients as well. So we're doing all of that. But more and more, what we're doing is we're working with partners like AWS, like Workday to start to build IP, specific to client requirements, which, in many cases, tends to be ours, but we can rapidly then scale them across multitudes of clients. So that's very much part of our strategy. That's one big pillar of how we're doing that.

The second big pillar is, we call it our own best qual kind of idea, where we're starting to apply agents within our own business again, with partners with the intent to sort of go with them to monetize them externally. So you hit the nail on the head. It's a big part of our strategy. We're not out here declaring that we've taken the hill of this stuff, but we are actively building on all those vectors that you talked about.

And remember, our AI capabilities within the federal government, which was our first exposure here, our leading capabilities for many years here. So bringing together our commercial and our federal expertise in our AI innovation lab, training our people and using that halo to lift us forward on the commercial side is really what's afoot here.

And I think Shiv is right. While we haven't taken the hill yet. -- you do see that the technology cycle here is emerging. There's been -- there has been and remains an enormous amount of money spent on the compute part of this with the chips -- now we're moving to -- obviously, we're in the [ mill of ] Data Center in power, which we need to power all this stuff. You can already see the investments by big tech into software enterprise to try to bring Agentic AI into their products. So then they can bring that into the customer market.

Our piece of that is laying down all those AI capabilities into our customers' technology environment, which nobody knows better than us since we've been there for so long years year kind of helping them along their road map. So I would say that's developing. It's not fully emerged, but I think this is playing out as we've been speaking about over the past quarters and a couple of years. Anything Shiv want to add?

No, I was just going to say one more thing, which is as a result of what Ted alluded, right, there is a lot of our clients -- a lot of our clients are grappling with what's the best architectural approach to go about doing this. Should we build our own, should we integrate what is existing and -- we're also seeing a pretty big uptick in advisory work around those kinds of questions, which then allows us to parlay it right down to how do you not just think about the architecture, but how do you then build it and deploy it and integrate it into your environment?

Got it. That's actually -- I appreciate the detail there. And then when we think about the government segment, can we talk a little bit about what is the appropriate baseline or run rate revenues? We saw the tick-up in the cost plus segment this quarter. How much of it is truly just incremental or specific to the quarter? It seems like there's obviously a lot of volatility there in that segment. And what is the right starting point or right baseline of revenues?

Yes. Well, I think if you take what we said in the release about the pass-throughs, which were about $10 million to $12 million here during the quarter, and back that out of the number, it kind of brings you down into the $300 million range. We also had a surge of some good, but I felt good direct labor billable work, so of a few million, which contributed to the quarter. So I mean, I think your baseline is in the mid to $290 to mid $295, something like that is a good baseline to think about going forward.

And obviously, we've got a 1.1 book-to-bill. I mean that is going to portend here that as we go into future quarters, we've got some growth in the backlog. And then back to the first question from Tobey, what's going on in that marketplace, but we now have a bill. We're going to have more money flowing into the defense department. There's money flowing into the areas that we practice.

So I don't want to get you Shiv words say that we've taken the hill, but we've got things developing here, and it may take a couple few quarters for them to play themselves out, but we're on a path here. You know that I think that we're we're going to be in a good spot here based on what the government's initiatives are and where we've got the business positioned.

Got it. I'll leave it there for my colleagues.

Our next question comes from the line of Jason Haas with Wells Fargo.

I was curious if you could speak a little bit more about what drove the strength in the Consumer and Industrial segment since that saw a nice acceleration in the quarter.

Yes, Yes. I mean I can give you some color on what drove the strength. Look, we've -- as we pointed out and when we talked about our earnings, there were certain subsectors like materials and utilities which were a significant part of what drove our strength in that from a sectoral perspective.

From a solutions perspective, I think what we're seeing is continued dynamic investments and demand from our clients in states like cloud, data and AI, custom software development. And that's where we're seeing the biggest uptick. So we had several areas where we were able to either add new logos or continue to expand our work in those domains.

And I'll add like in the energy and utilities subsectors of that category, obviously, they have checks to right here to bring themselves forward and meet the needs of the power generation, but for the for the people and for the data centers. And so there's kind of opportunity there that traditionally may be a little stoic as an industry, but it's a lot more dynamic now over the last year or 2.

And also in certain industries like energy, our partnership strategy is paying out pretty significant dividends where we've built some assets for very industry-specific questions on asset utilization, predictive maintenance, et cetera, with partners like Databricks. And that's allowing us to scale across the industry.

So it's different parts of the strategy playing out, but it's essentially continued strength in our solution areas.

That's great. That's great color. And then as a follow-up, I was curious if you could talk about -- you gave some good examples of how AI is helping you generate revenue and helping our clients leverage and use these AI tools. But I was curious about if you could talk about your internal use of AI, and if you've been able to find some efficiencies within your own business from using some of those tools.

Yes. Well, look, I think that we're -- I mean, Shiv put it right, we want to be an AI-led organization, both for ourselves and the productivity and opportunity that gives us and to showcase that in front of clients. in all of our enterprise software tools, whether it's our front office systems or our back office systems or our digital layer with ServiceNow.

There's a Agentic AI opportunities in all of those enterprise systems that we're going to -- are beginning to bring to bear and are going to bring to bear further in our own operations. If you think about our function as an IT staffing company and the recruiting and sales that go along with that.

We've implemented AI techniques in there to make us much more productive -- that's been an ongoing effort here for years. We're developing tools that help us on the bid proposal and win process to bring use cases up very efficiently for our team and delay those down into presentations in a way that we used to use a lot of pushing of the keyboard to do.

So I think those are just some of the opportunities here. I probably should also not let it go without saying cybersecurity has been a big one. Our work that we've done in cybersecurity, beginning in the federal government now in the commercial marketplace, the number of threats are so voluminous that you just can't process at all without AI capabilities.

And some of those are bringing -- brought by the security software firms and some of that's being generated by us. So I think these are all examples across our organization, where we're diving in head first into all of these AI opportunities that make us better, more productive, more growthy and a great call for our customer.

Our next question comes from the line of [ Alex Sinatra ] with Baird.

I've just got a quick 1 just because a lot of things were covered already, but I was just wondering, given this discussion around AI and this big initiative that you're undergoing with all these investments. I was wondering kind of what the cost of that is on your end, especially for can you lot co-discovery the cybersecurity of the agents, just what that will end up costing. Any color on that would be great.

Yes. Look, I don't think you're seeing it. I guess, maybe I'll put it this way. We're not quantifying all these costs, but you're not seeing it degregate or margin profiles. If anything, you're seeing we're thinking about like your clients, which is where can we make an investment here and get an acceleration to a return.

And so in that way, we're able to meet the business case objective, whatever the case may be. And we're continuing to see our our margins here kind of be creeping up because of that. So I mean I won't quantify the number for you, but I'll just say it's not degradating. It's adding to our margin profile will continue to as those things get more mature.

Thank you. And we have reached the end of the question-and-answer session. I would like to turn the floor back to Ted Hanson for closing remarks.

Great. Well, I want to thank everyone for being here this afternoon, and we look forward to speaking with you in October on our third quarter earnings release conference call. Thank you and be well.

Thank you. And this does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.