Greetings and welcome to the ASGN Incorporated Fourth Quarter and Full Year 2020 Earnings Call. Please note that this conference is being recorded. I will now hand the call over to Kimberly Esterkin from Investor Relations. You may begin.

Thank you, operator. Good afternoon and thank you for joining us today for ASGN’s fourth quarter 2020 conference call. With me are Ted Hanson, President and Chief Executive Officer; Rand Blazer, President of Apex Systems; George Wilson, President of ECS; and Ed Pierce, 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 the GAAP and non-GAAP measures are included in today’s press release. I will now turn the call over to Ted Hanson, President and Chief Executive Officer.

Thank you, Kimberly, and thank you for joining ASGN’s fourth quarter 2020 earnings call. ASGN reported very strong results for the fourth quarter, with revenues, adjusted EBITDA, and EPS all exceeding the high end of our guidance ranges. This strength in Q4 has continued into the new calendar year and we are seeing positive business trends in early 2021. We look to accelerate both organic and inorganic investments into our business in the coming year to ensure that we stay relevant with our clients as well as continue to capture increased market share. For the quarter, revenues totaled approximately $1.01 billion, well ahead of our guidance of $968 million to $988 million. As a result of our strong fourth quarter performance, full year 2020 revenues improved year-over-year and reached nearly $4 billion, a true testament to the resiliency of our business. ASGN’s success in 2020 can be attributed to several key factors including focusing on IT services and solutions with industry expertise, targeting large strategic accounts in the commercial and government end markets, and utilizing our unique contract deployment model that enables our variable cost structure. Together, the ASGN team never lost focus on our operations or our execution. And I want to thank all of our employees who remained committed to our clients during these difficult times. As I mentioned on our Q1 call, with over three decades since our founding, the current global pandemic is not the first economic downturn ASGN has experienced. As a result, we entered COVID-19 with a good sense of how our business might perform in an economic downturn even if we could not predict the type of disruption a global pandemic would have on the overall business environment. First, we expected our revenues and gross profit would ebb and flow with the market. Second, given our positioning as an IT services and consulting firm to the commercial and government markets, we anticipated we’d be able to maintain our EBITDA margins and generate solid free cash flow. And we did exactly that. Adjusted EBITDA margins of 11.5% for the fourth quarter were well above the high end of our guidance range for Q4. For the full year, adjusted EBITDA margins were 11.1%. Free cash flow totaled $82.7 million for the quarter and $392.2 million for the full year. As a result of our solid free cash flow this past year, we successfully closed four acquisitions without taking on additional leverage. Between the cash we have on the balance sheet, our strong free cash flow, and our very modest leverage, we remain acquisition-ready in 2021. As we execute against our capital allocation strategy with the marketplace strengthening, we will reintroduce certain costs back into the business in 2021 to accommodate the increased demand for our services. The Apex segment is a great example of this increased demand. The segment displayed considerable strength throughout Q4, including in the final two weeks of the year, something we have not traditionally experienced. To discuss this in further detail, let’s now turn to our segment results, beginning with Apex. Apex, our largest segment, which includes Apex Systems and Creative Circle, services clients across multiple commercial end markets. For the fourth quarter, the Apex segment generated revenues of $619.1 million or 61.2% of total revenues, down 3.5% year-over-year. Sequentially, revenues for the segment were up 3.9% and 9.9% adjusted for the 3.5 fewer billable days in the quarter. Apex Systems in Q4 achieved slight positive growth year-over-year, while Creative Circle declined double digits. Importantly, both Apex Systems and Creative Circle continue to rebound from the slowdown in the second and third quarters of 2020. Apex Systems exited the fourth quarter at weekly volumes above pre-COVID-19 levels seen in early March 2020. Creative Circle’s revenues, while down from the prior year, continued to move higher with digital-related skill placements driving this growth. Revenues for Apex Systems demonstrated some notable trends in the fourth quarter. Three of our five reported industries exhibited positive growth year-over-year. Financial services accounts maintained their double-digit growth rate. Healthcare accounts accelerated to mid-single digit growth rates. And services, which include government and business accounts, achieved single-digit growth rates. The two industry verticals that were down year-over-year, consumer and industrial and TMT were up sequentially. Within consumer and industrials, consumer staples, e-commerce, and utilities performed solidly, while retail, energy, hospitality, and transportation remain in decline. Within TMT, technology customer accounts increased year-over-year and sequentially. Top accounts achieved low single-digit growth rates for Q4, while retail and branch accounts declined mid-single digits as compared to the prior year. Gross margins for the Apex segment were 29.5%, down just slightly from the prior-year period due to lower permanent placement business attributable to COVID-19. Importantly, we continue to grow our commercial consulting revenues. Consulting revenues for the commercial business totaled $127.6 million, up 19% year-over-year. Gross margin for our consulting work is higher than the overall gross margin in commercial. Additionally, our pipeline of consulting work grew again for the quarter at double-digit rates over the prior period. ASGN’s high-end consulting offering remains an important source of value we provide our clients, so we continue to make acquisitions that expand our consulting capabilities. In September of 2020, we acquired LeapFrog, a specialized consultancy that focuses on enterprise-scale business transformation services to Fortune 500 clients in the financial services, insurance, and healthcare industries. Under the Apex umbrella, LeapFrog has continued to benefit from greater access to industry-leading methodologies, as well as a broader talent pool. At the same time, LeapFrog has provided Apex subject matter expertise and long-standing client relationships. We are also seeing traction with our previous acquisition, Intersys, where we have secured new contracts in cloud strategy and dev-ops engagements. Other project areas that are driving revenues include those in application and project management skill areas such as Java, Digital, ERP, and cloud. Let’s now turn to ECS, which provides mission-critical solutions to the federal government, including the Department of Defense, intelligence agencies, and other civilian agencies. ECS recorded another quarter of strong revenue growth, with Q4 2020 revenues of $263.2 million or 26% of total revenues, up 12.7% year-over-year. As you may recall, in Q4 2019, ECS’s performance was stronger than we had initially anticipated due to a customer-driven early purchase of software licenses. Even with this headwind, ECS outperformed our initial expectations of 10% growth year-over-year, primarily due to the continued high demand from our federal government customers for artificial intelligence and machine learning services, an increased volume of cloud services and solutions provided and new opportunities presented through recent acquisitions. For the full year, ECS revenues topped $1 billion for the first time since its acquisition in 2018. It was our goal when acquiring ECS that we would reach $1 billion in revenues within 5 years of the acquisition. With ECS’s continued outperformance, including higher organic growth than growth through M&A, I am pleased to report that we accomplished this goal well ahead of schedule. We have seen minimal impact on ECS’s business as a result of COVID-19, and ECS's new business pipeline remains robust. The segment was awarded approximately $119.2 million in new business in the fourth quarter and maintained a book-to-bill of 1 to 1 on a trailing twelve-month basis, the same as the end of the preceding quarter. Contract backlog totaled $2.65 billion at the end of the fourth quarter or a healthy coverage ratio of 2.6 times ECS’s trailing 12-month revenues. We do not see our pipeline of ECS work slowing. Early indications show that the Biden Administration will make IT modernization and cybersecurity, both key services ECS provides its clients, major focus areas early in President Biden’s term. Key contracts won in Q4 2020 included providing IT solutions to the Defense Information Systems Agency, supporting the Department of Health Services’ Home and Community-Based Services programs, and offering IT technology and services to the United States Marine Corps Department of Manpower and Reserve Affairs. Similar to our commercial end market, we continue to acquire in the government space. In October, we welcomed Skyris to ECS. Skyris’s team is focused on cutting-edge and technically complex DoD, intelligence community, and other federal civilian programs and missions. Skyris is one of the largest providers of remote sensing data and scientific expertise to the National Geospatial Intelligence Agency. In December, we acquired ISM, which offers industry-leading expertise in Internet of Things, IT services, and operations management. ISM is one of a very small number of Elite ServiceNow partners in the government space. Both Skyris and ISM have been fully integrated into ECS’s business and are actively partnering on projects with ECS. As we continue to build and strengthen our ECS segment, just one month ago we announced several new leadership positions within the segment, including John Heneghan as ECS’s Chief Operating Officer. John is a veteran of the ECS team, since 2017 was ECS’s Senior Vice President of enterprise solutions. John has been instrumental in not only driving ECS’s organic growth, but also integrating the acquisitions we just discussed. John has two decades of experience in IT product development, digital transformation, and emerging technologies, and I am excited to welcome him into this newly expanded role. Turning to our last segment, Oxford. Oxford offers on-demand consulting talent for commercial IT, healthcare, life sciences, and engineering clients, as well as permanent placement talent through our CyberCoders division. The Oxford segment reported revenues of $129.1 million for the fourth quarter of 2020, and while down year-over-year, was up 1.5% sequentially driven by revenue per billable day growth of 9.2% for Oxford’s core services and solutions business. I am very pleased with ASGN’s performance this past year. Between the organic growth of our commercial and government end markets and the addition of several strategic acquisitions, we’ve positioned our company well for success in 2021 and beyond. Importantly, the marketplace is strengthening, and our pipeline of opportunities remains robust. Before speaking about future opportunities and our goals for 2021, I will turn the call over to Ed Pierce, our CFO, to discuss our Q4 2020 performance and our Q1 2021 guidance in further detail. Ed?

Thanks, Ted. Good afternoon, everyone. As Ted mentioned, our financial performance for the quarter was well above our guidance estimates driven by strong sequential growth of our commercial divisions and the double-digit growth of our federal government business. For the second consecutive quarter, revenues were above $1 billion, reflecting only a slight decline year-over-year. Net income and adjusted EBITDA for the quarter were up both year-over-year and sequentially. Our adjusted EBITDA margin of 11.5% was the highest quarterly margin since the third quarter of 2019. Commercial revenues for the quarter were $748.2 million. Although down mid-single digits year-over-year, quarterly revenues have increased sequentially since the second quarter. Commercial revenues for the fourth quarter were up 3.4% sequentially despite 3.5 fewer billable days, reflecting the 9.4% sequential increase in revenues per billable day. Both commercial segments and all five of our industry verticals were up sequentially. Permanent placement revenues for the full year were approximately 2.6% of total revenues and are no longer significant to our consolidated results for disclosure purposes. Consequently, we will not present these revenues separately and instead will include them in assignment revenues. All prior periods will be recast for this change in presentation. Federal government revenues for the quarter were $263.2 million, an increase of 12.7% year-over-year despite a challenging Q4 2019 comparable. This strong double-digit year-over-year growth was driven by a number of factors, including increased volume on certain existing programs, new contract awards, and the contribution from the businesses acquired. ECS’s revenues were down sequentially due to the surge in revenues in Q3 under two government programs that coincided with the end of the federal government’s fiscal year. Gross margin for the quarter was above the high end of our guidance estimates, and our commercial and federal businesses were both up sequentially. On a year-over-year basis, our gross margin was down related to changes in business mix. These changes included a lower mix of revenues from our high-margin creative marketing and permanent placement services and a higher mix of revenues from our federal government business that carries a lower gross margin than our commercial business. SG&A expenses were 17.8% of revenues, a year-over-year reduction of approximately 130 basis points. The improvement in the SG&A margin reflected, among other things, effective expense management by our operating units and lower incentive compensation expense. We anticipate our expense margin will increase over the course of this year as COVID-19-related restrictions are relaxed and we make the necessary investments in our operating divisions to support growth. Net income for the quarter was $55.4 million, up 41% year-over-year. As a reminder, net income for Q4 of last year included a one-time charge of $18.9 million, or $14 million after income taxes, related to the write-off of deferred loan costs on our senior secured credit facility. This write-off resulted from a debt restructuring in November 2019, which included the issuance of $550 million in senior unsecured notes and the pay down of our senior secured credit facility. EBITDA and adjusted EBITDA for the quarter were both up year-over-year. As previously noted, our adjusted EBITDA margin was above our guidance estimates and up 20 basis points year-over-year. EBITDA for the full year was $400.1 million, up slightly from 2019, while adjusted EBITDA was down 2.2% related to lower stock-based compensation expenses. Free cash flow for the quarter was $82.7 million, benefiting from the deferral of payroll taxes of $24.9 million under the CARES Act. The conversion rate of adjusted EBITDA into free cash flow was 71.1%. Cash used for investing activities included $34.7 million for acquisitions and $4.3 million for capital expenditures. At quarter-end, cash and cash equivalents were $274.4 million, up 19.4% from the end of the preceding quarter. There were no outstanding borrowings under our $250 million revolving credit facility, and our senior secured debt leverage ratio was 1.14 to 1, well below the maximum allowable ratio of 4 to 1. Our financial guidance estimates for the first quarter this year are set forth in our earnings release and supplemental materials. These estimates are based on current production trends and assume no significant deterioration in the markets that we serve. These estimates are as of the date of our earnings release and consequently any worsening of the pandemic could adversely affect results for the quarter. For the first quarter of 2021, we estimate revenues of $1 billion to $1.02 billion, net income of $42.6 million to $46.2 million, and adjusted EBITDA of $101 million to $106 million. For our commercial business, we expect revenues for the first quarter to be in line with or slightly up from the fourth quarter of 2020, which considers the typical latency in spending at the beginning of the year on recently approved capital projects. For the federal government revenue business, revenues are expected to be up double-digits year-over-year, but down low single-digits sequentially. Our estimates include the effects of the payroll tax reset, which occurs at the beginning of each year. These annual resets result in lower gross and adjusted EBITDA margins in the first quarter. Our SG&A expenses include sequential increases for additional headcount investments to support the expected growth of our commercial business, as well as increases in other expenses that were curtailed due to COVID-19. Certain of those expenses, such as travel and entertainment, will be gradually reintroduced back into the business and weighted more to the second half of the year as COVID-19 restrictions are relaxed.

Thanks, Ed. 2020 was unprecedented and while the challenges to our global economy may have been unparalleled to anything we’ve experienced before, our growth and resiliency as a company this past year is something for which I could not be prouder. ASGN enters 2021 on solid footing and ready to face our customers’ greatest IT needs. Since the end of the third quarter of 2020, our customers have been increasingly confident and continue to invest in their technology roadmaps. Supporting our clients’ digital transformation efforts in 2021 will remain the core part of our service offering. Smart capital deployment is also a cornerstone of our overall business model, so while we invest in our organic growth, we will remain active in M&A. In 2020, we invested a total of $186.2 million in M&A. We believe that M&A is the best use of our free cash flow at this time, and in 2021, we plan to bring strategic acquisitions in both the commercial and government end markets into our business at an even higher pace and scale than before. Our M&A pipeline remains active, and we will look to execute acquisitions in the commercial and government end markets that provide us with new solution capabilities, industry expertise, or contract vehicles. Consistent with our previous acquisitions, we will be disciplined in our purchase price, acquiring with cash on hand whenever possible and ensuring that the companies we acquire are accretive to growth, EBITDA, and margin. While none of the world or market events of this past year could have been expected, when it came to ASGN’s performance, and, in particular, our solid EBITDA margins and strong free cash flow generation, those results were something I did anticipate. I believe this, because we positioned our business well so that we could consistently execute even in the event of a global economic downturn. We focused on the mission-critical IT needs of our long-standing clients. We emphasized smart capital deployment, generating strong liquidity and using our free cash flow in the best interests of our company and our shareholders. And, most importantly, we prioritized our employees’ health and well-being, ensuring our professionals could work efficiently and safely in a remote environment. The dynamics of the working world have changed, and while I anticipate that ASGN will continue to work remotely through at least the first half of this year, as is the case with our clients, I expect our business will remain on a solid growth trajectory. Just like the focus of the projects we execute for our clients, ASGN has positioned its business for the future of work, and we look forward to continuing to share our success along the way. That concludes our prepared remarks. On behalf of our entire company and Board of Directors, we thank you for your continued support of ASGN. We will now open up the call to your questions.

And our first question is from Sam Kusswurm with William Blair. Please proceed with your question.

Hey, guys. How am I coming through?

Loud and clear.

Perfect. My question relates to ECS’ market opportunity; I believe the administration included $10 billion in the $1.9 trillion stimulus plan to modernize our IT to protect against cyber attacks. If this is just the start of the modernization effort, how much more market growth we see here? Just trying to get a sense of how much additional market opportunities this could create for you guys?

Sam, thanks for your question. I mean, obviously, we feel like we are positioned in the right places in the federal government space, both from a customer standpoint and a solution capability. Cybersecurity obviously is one where we have a lot of expertise and are doing good work there. George, do you want to respond to Sam’s question?

Yes, sure. Thank you. Thank you, Ted. Yes, Sam, we see it as a growth opportunity for us. It’s one of our major centers of excellence. That’s a big part of our company. We are excited about what’s going to be going on with the federal government and CMMC. And we do see it as a big growth area for us. While we know we have a strong pipeline, but I wouldn’t try to characterize it as any particular percentage, but we do see it as a big growth area for us.

Great, that’s helpful. Maybe switching gears to the commercial consulting business plan, are there any specific types of projects or client verticals that are really driving the increase here?

Rand?

Well, I think the answer is it’s a little different for each industry. So, for example, in healthcare, particularly in the provider space, there is a renewed interest in building systems to keep track of COVID-testing, registration of the population and then follow-up for the second dose and that sort of thing. So there has been all of a sudden just in the fourth quarter a great swell for that kind of work. In addition to that, there is still a lot of work to be done in healthcare and financial services around what I call digitization of their business and making it a little bit more user-friendly, making it easier for people to make transactions, particularly less knowledgeable consumers, if you will, of financial transactions or healthcare that rely on simple one-stroke kinds of systems. So, a lot of work around the website, a lot of work around user interface, a lot of work behind that in bridging systems together so that you are correlating systems and dropping them into business intelligence files for consumer evaluation. I mean, it’s – we have all talked about the digitization of our systems and the numbers that are being supported. Again, we mentioned the last quarter 31% of financial transactions in 2019 were done online and in 2020 that number jumped, I am sure when it’s reported into the 80s. So, it’s just the further digitization of business and the way in which they interact with consumer. And then there are particular things like what I described in healthcare just created by the vaccine and across – there is what, 3,500 hospitals in this country that have to support that. So, did that give you a flavor?

Yes, it definitely did. I appreciate the color there.

And our next question is from Gary Bisbee with Bank of America Securities. Please proceed with your question.

Hey, guys. Good afternoon. Another really strong result. So, I guess I wanted to ask a couple of questions on the consulting effort. As you know I have written about that recently and I heard a couple of questions back from a lot of your investor base that I thought would be helpful to pose to you in this forum. So, first, is the right way to think about the consulting projects you are taking on that this is really all incremental or is there part of that that could be cannibalizing some of the traditional assignment revenues? So in other words, you went with the assignment, now you are finding consulting opportunities, but they are doing the one delivery method as opposed to the other or is it more incremental?

Yes. So, Gary and I will let Rand comment as well, but I think that this is work we are winning where clients are deciding to use us other – beyond other alternatives, right to get this particular work done. It’s our deployment model to provide contract staff that kind of enables our ability to do that. So, we have consulting expertise and capability to scope, frame, bid and win and then project manage work to a final solution. And then we also, in-house have direct legacy capability to provide technical resources. And so that’s really where our advantage is. I wouldn’t think about this as work that we – that was staffing work that we have turned into something else, because we actually have some kind of solution-oriented outcome here, which the client is pulling us into and asking us to provide. So, Randy, anything to add to that?

Yes. I agree with what Ted said and Gary maybe put it in some numbers. The staffing world is traditionally a $40 billion marketplace in the U.S., IT staffing. The IT services consulting world is a $200 billion to $300 billion world. I can’t say there isn’t some staffing that’s being cannibalized and put into consulting, but I think it’s a minor piece. I think what’s happening is we have stepped up and we are competing in the consulting world for the work that would traditionally go to consultants, where you take, as Ted said, you take on accountability, responsibility, and you have designed outcomes or designed solutions that can meet the client needs. So, I think we are swimming in a different bucket in that work and we are having some success.

And by the way, Gary…

Hey, Gary, one important thing to add there if the client really wanted the very best price point, they would be taking that and driving it down into just traditional staff on work, right, which is not what’s happening here. I mean, we are getting a higher bill rate and higher margins to perform this solution-oriented work. And so I think that too is just another data point here that kind of supports what we are saying.

Yes, no doubt. And the fact that it grew the pandemic certainly points to the attractiveness of the market opportunity. So, two other ones that I heard a lot from people, which is just who are you competing with as you are moving into that? Who are you taking share from, what types of firms? And then could you give a couple of examples of types of projects and when you say you are taking on some deliverables or accountability, could you give an example or two just to help me and some of your investors really frame what you are doing? Thanks a lot.

Sure. Let me take the first part of that and I’ll let Rand take the other. Remember what I said earlier, which is the client has multiple places to go. They have – they could hire fixed internal staff. They could use traditional consulting firms. They could go offshore. They could outsource something to BPO or they could use us. And so what’s happening here is they are making a decision, a purposeful decision, if you will, in many cases to use us for some of this work as we come up the stack if you will. And then what they are asking some of the larger traditional consulting firms, I won’t go through all of them, but they are asking them to play in the top part of the pyramid around strategy, architecture, and design, but they realize there are more efficient ways to get the work done once they define what that roadmap is. And then Rand, some examples?

Look, there are examples in every different industry that are different, but for example, a client may say, I want to build a new agile development center and I want it in the U.S., not overseas or in a near-shore scenario. And we are going to assign lines of code and responsibility to you, and you have to achieve those lines. In other cases, it could be a center where you are directly supporting one of our clients’ end clients, if you will. So if it’s a technology business, you are supporting the end client. We will take over the center responsible for responding to the trouble reports and the issues that they bring in the systems that they are using. And we have accountability for – we are working through those trouble reports and finalizing or getting a correction. In other cases, it’s purely redesigning from the bottom up, putting teams together to help them work through their business processes and look at the digitization of those processes, and we take direct responsibility for that. I mean, when I was using an example of healthcare just a minute ago, they turned to us and said oh my gosh, we have got all this and we have certain accountability and reporting requirements to meet on the vaccine distribution and not to mention our follow-up with the individual patient, so build a system for us. We – here is generally our requirements and here is what we think the throughput will be, and can you go build a system? So it’s a combination of all these things that come from different clients at different times. We’re trying – as Ted said, we’re trying not to be the architect necessarily. Let Accenture be the architect, for example, there. They obviously have some experience, but it’s said when it comes to the execution of this work, where the migration of data in the business, the quality control of that data flow, reconnecting the connectivity of systems, you can use a different set of players to do that work and we’re being asked to, okay, give us a bid and we’re winning obviously some of those bids.

That’s really helpful. If I could sneak one in quickly for Education, just incentive comp you called out throughout 2020 as being somewhat lower, is that the kind of thing we should think resets right away Jan 1, whether that merit raises or incentive comp for the executive team or whatever? And is that going to be one of the factors driving SG&A higher this year? If it’s significant, could you give us a sense of the order of magnitude? Thanks a lot.

Well, it is being – Gary, as you mentioned it’s being phased in at the very beginning, right. And some others are going to be phased in over the course of the year. In terms of the expenses that were curtailed, it was probably not as large as some of the others. But it was significant, let’s call out.

Okay. But it’s in the SG&A with that Q1 guidance I guess?

That is true. It is.

Our next question is from Jeff Silber with BMO Capital Markets. Please proceed with your question.

Thanks so much. Wanted to focus on the supply side of the picture, if you can tell us, are you having more difficulty finding folks? I know the unemployment rates are still high, but the unemployment rates for the folks that you seem to be replacing are fairly low. And if you can also comment on the bill/pay spreads accordingly, that would be great?

Sure. So, Jeff, I don’t – I mean, we’ve talked about this in prior quarters, I will just say it again. This unemployment picture is really not about technology skill sets. So they remain high in demand. That being said, we’re able to find people as we win new work or obviously we wouldn’t be able to bill since most of our work is on a time and material basis. So it’s a difficult time and it’s kind of skill set by skill set, but it’s something we have been able to accomplish. And then, I’m sorry, the second part of your question was?

The bill/pay spreads.

Yes. Bill/pay spreads, Jeff, had been pretty consistent. I mean our bill rates are increasing. Part of that, the supply-demand equation part of that is higher level consulting work, but we’ve been able to both accomplish getting higher bill rates and keeping that spread intact here as we go.

Yes, Jeff, it’s a number of factors. We commented earlier on the incentive compensation. Travel and entertainment is another. So those – some of those are going to be coming in gradually over the course of the year, but if you look at the full year as well as a whole, okay, you can expect our cash expense margin to be, let’s say, slightly up over 2020, but down below 2019 levels. And another thing that is pretty important and that is that our gross and adjusted EBITDA margins for the full year we are expecting to be in line with the margins that we had in 2020. So that would give you some perspective in terms of what we’re expecting over the course of the year.

Our next question is from Tobey Sommer with Truist Securities. Please proceed with your question.

Thank you. We’re about 3 years into the most recent 5-year strategic plan. How do you think you are positioned relative to your goals for 2022 and maybe just comment to whatever extent the pandemic in 2020 may have impeded your ability to hit those goals?

Yes, I think, Tobey, thanks for the question. I mean, I’d say, overall, I think we’re progressing on course as we wanted to against our strategic plan. We had objectives to grow off of our current scale within the marketplaces that we served. We wanted to be a much more powerful provider of IT services within the government space, and that has gone well here. M&A was certainly a part of that plan, and we’ve stayed on course there. Maintaining these EBITDA margins to beginning to move our way to something that’s within 12% and 12.5% was something that we were progressing toward before we got into the COVID 2020 situation. But I would say on those fronts, the firm has evolved to really an IT services provider at scale in the commercial and the government marketplace. And that was really the key thrust of where we’re going, and so we’re midstream on that. Whether 2020 caused us not to be able to get to those prior targets, I don’t believe that’s necessarily the case yet. I mean, we may have to do a little bit more M&A than we had planned, which was basically a plug. But I think you’ll remember we told you that we had to do 6% to 7% organic growth rates at about what was about a little over $500 million in revenue M&A over the time period in order to get to that $5 billion target. So maybe we do a little bit more M&A, it’s very possible. We certainly are acquisition-ready and we have the cash on the balance sheet and the wherewithal to go do that. So we’ll have to watch it here as we go and see how things get started here in 2021 and how things progress from there.

Okay, thank you. Segueing into M&A, when we look at where you’ve applied capital in recent years, it’s been either on the ECS side or into consulting. What are the financial trade-offs in between those buckets with respect to kind of which one grows more quickly, which one yields a better margin or better return on that capital? How do you compare and contrast those two kind of buckets?

Well, every acquisition here fights for the best use of the next dollar of capital, but I have to tell you, maybe unique to our firm because of the areas that we focus on within the government space, that the opportunity to make acquisitions there and get a return are just as equal to some of the opportunities in the commercial marketplace. So I don’t put one above or below the other. That’s not typical for all firms, but because of how highly specialized ECS is here, the growth rates they are able to get, margin rates are pretty comparable to what’s going on in the commercial consulting space in the accounts and areas that we traffic. So they’re both highly desirable. And we’re pursuing both. We’re developing pipeline in both areas. And we’ll have to watch and see how that develops here as we get into the first half of this year.

Does ECS in that side generally have more sizable targets? Certainly, recent history you have acquired consulting businesses that are relatively small.

I don’t know that size is really the differentiator. I think what we’re trying to do is be disciplined to solution capabilities that really strategically fit with where we’re headed. And many times those are not big girthy firms that do a lot of everything. We’re trying to be fairly targeted whether it’s bringing solution expertise within a particular area with a contract vehicle that we didn’t have that’s accretive to what we are trying to do or is in the commercial marketplace. We see our clients coming to us for certain solutions in certain industries and we see if we could find an acquisition that we could begin to win more of that work since we’ve already earned the right to do business with that customer. I mean, those are the things that we’re really trying to stay focused on. If we can find them at more scale, great, but we are going to stay – we are certainly going to stay on the path we are on here.

Okay, thank you. And then just one last question for me on ECS, could you describe the competitors that you typically come up against in that market? And also maybe speak to the growth trajectory for the business, because recent quarters the book-to-bill has been about 1, and maybe there are some other factors that give you confidence in a different kind of growth rate than flat? Thanks.

Sure. Well, I mean, I won’t list any particular competitors, but all the ones that we usually compete with, we also team with as well. So it’s all the big Tier 1 type of contractors that are out there vying for the government solutions business area and digital modernization, so a long list of them. As far as book-to-bill, Yes, it’s been a little bit slower over the last couple of quarters. But we’ve had a couple of recent wins that were not included in Q4, but will be included in Q1. And we’ve got a couple of contracts that as you understand, we typically get 5-year contracts and then they come up for recompetes. And these are some of the areas that we’re very, very competitive in and got strong customer base. So those will also help to continue to accelerate our growth moving forward.

Thank you.

And our next question is from Kevin McVeigh with Credit Suisse. Please proceed with your question.

Great. Hey, congratulations on the results. Hey, Ted, I wanted to circle back on kind of the consulting versus the ASN, just the delta there. It seems like the revenue is pretty sure on the consulting side. It’s been outpacing ASN a little bit. Does the consulting business act as a feed for ASN at all in terms of are you sourcing terms from ASN into those consulting assignments? And then along those lines, I’ve always thought consulting has more of a bench-type model to it. Are you taking more kind of full-timers on in that business as it scales or just any thoughts around that? And then if you could help us frame what the margin delta is across those two segments?

Okay. Sure. Well, look, that was a lot. I mean, I’ll start and I’ll let Rand to kind of jump in here. But obviously, the consulting work is a lead for technical resources, right. And that is – one of the advantages that we have here is that is the bread and butter of who we’ve grown up and as Apex and Oxford. And so when we can capture more work because we have consultative capabilities, then there is something to that. We don’t report it in two places because obviously that would not be the proper accounting, but they do work synergistically together in that way. You asked about are we taking on a bench model, that’s predominantly – that’s what differentiates us from the big traditional consulting firms. I mean, we don’t carry a bench. We may have certain subject matter expertise around industry expertise and solutions. But when we have work to be done, it’s mostly on a time and material basis and we’re deploying the talent on a contract basis. And again, that’s the reason that we are able to be competitive and win here. Rand?

I am sorry I was on mute. Yes, and I think you said everything correctly, Ted. We actually think the client appreciates the deployment model that we use, where we leverage a good part of the team in each and every consulting team with contract labor. Part of the reason for that is they don’t want somebody who had yesterday’s skills, they want somebody who has today’s skills particularly they are industry-specific. So we can – because we have a great search engine for those skills and those people that we’ve built historically over the last two decades, we were able to come up with great teams, and we put them together with our methodologies. We have to provide leadership, but by not carrying a big bench, but carrying an appropriate bench. We are also cushioning ourselves in the bottom line, if you will, making sure we can control, not just the execution of the work, but also the financial impact on our business.

And then your last piece of your question was about margin I believe, the differential. I think we’ve said we get 200 to 300 basis points more in gross margin, that falls down to EBITDA margin as well. So it’s because they are – because of the work that we are taking on here, it’s a value add for the customer and they’re willing to allow us to reflect that in the margin that we bill.

That’s super helpful. And you may have mentioned. If you did, I apologize for the repeat, but if you’re sourcing someone on the consulting side that’s sourced from the staff aug, does that get recorded in ASGN or gets recorded in the consulting business?

Those are consulting revenues.

And our next question is from Surinder Thind with Jefferies. Please proceed with your question.

Hi, guys. Ted, I would like to start with a big picture question. I guess, I wanted to take a step back and I think about the assignment business or more specifically the staff augmentation piece. It can be argued that prior to COVID that maybe the staffing cycle had peaked. Now, I think it can be argued that the cycle has been kind of reset. And so would you agree with that statement and how do you view the opportunity for staff augmentation over the next few years as we now think about it in terms of the macro part of the cycle?

Yes, I think generally characterized, now, I agree with that, Surinder. And I would say one of the things I appreciate so much about this business is we are where the technology needs are, meaning we’re not beholden to any one skill set. So I believe there is going to be growth on the staff aug side of the business. The skill sets may be different than they were in the past, but that’s our – our natural capability is to be able to skate to where we need to be in that way and build pipeline and provide the talent to our customer that needs to be provisioned. And so that’s just who we need to be and who we’ve always been.

And then related to that any color you can provide on the way that you’re thinking about that the type of growth for the approximate level of growth that you may be able to generate or the opportunity out there? Is this kind of an opportunity where we should think about it as mid-single digits or how should we think on a longer-term basis, not quarter-to-quarter, over the next few years?

I mean, I guess I’m not, I can’t look at exactly into a crystal ball. I think because last year, some of just staffing, especially in middle market, and retail accounts, and COVID-affected industries, was down so much that you may see a higher growth rate this year over that. I think over the long haul, it’s been kind of a mid-single-digit kind of growth rate and at Apex. We’ve been able to get more of that because of our large customer focus, and also because of our ability to provide value-added services by way of consulting. So I think that our target is a higher growth rate than that. But I think that if you just look back traditionally over some of the data points at SIA and others report, it’s kind of a 3% to 5% growth rate within the $30 billion to $40 billion industry here in the U.S. that Rand referred to earlier.

We have reached the end of the question-and-answer session. And I will now turn the call over to CEO, Ted Hanson, for closing remarks.

Great. Well, thank you, operator. I want to thank everyone for being on the call today and for your interest in ASGN. And we look forward to sharing our Q1 results with you in the second half of April. Thanks and be well.

And this concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.