Greetings and welcome to the ASGN Incorporated Fourth Quarter and Full Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, Kimberly Esterkin, Investor Relations. Thank you. You may begin.

Good afternoon. Thank you for joining us today for ASGN's fourth quarter and full year 2024 conference call. With me are Ted Hanson, Chief Executive Officer; Rand Blazer, 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. 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 fourth quarter and full year 2024 earnings call. Throughout 2024, we remained committed to advancing ASGN's business towards higher-end, high-value IT consulting solutions. This commitment is reflected in the growth of our IT consulting revenues. For the year, IT consulting revenues from both the commercial and government sectors comprised approximately 58% of total revenues, up from roughly 53% in the prior year period. While Q4 revenue was slightly below expectations, the highlight of the quarter was once again gross and adjusted EBITDA margins which exceeded our expectations. Despite IT budgets remaining constrained, our pipeline of work has continued to expand. Double-digit year-over-year growth in commercial consulting bookings in the fourth quarter underscores our participation in our clients' long-term IT strategies. As we transition into 2025, we are beginning to see an improvement in business confidence, although we believe a turnaround in IT spending has yet to materialize. To meet the anticipated growing demand for IT services, we remain closely aligned with our enterprise and federal government customers, understanding their strategic needs and positioning our solutions accordingly in key areas such as AI, cybersecurity, and data. Maintaining deep customer relationships with the Fortune 1000 and key defense and intelligence agencies is essential to ASGN's market differentiation. Also important to driving the underpinnings of our long-term strategy is the depth and breadth of our leadership team. As part of a planned succession, we recently announced that our President, Rand Blazer, will transition to the role of Executive Vice Chairman this March. I'll elaborate on Rand's continued commitment to our company, as well as welcome our newest executive team addition, Shiv Iyer, who will be joining us from Accenture, later in today's call. Beyond a forward-thinking leadership team, successful tuck-in acquisitions are core to enhancing our organic consulting growth. We continued our M&A efforts in 2025, announcing just yesterday our definitive agreement to acquire TopBloc, a preferred certified Workday Services Partner. I'll discuss the strategy behind the TopBloc acquisition shortly, but first, let's turn to our segment performance for the quarter. Our Commercial Segment services Fortune 1000 and large mid-market companies. Revenues for the segment were again driven by growth in our consulting business, which improved 6% year-over-year. Consulting bookings of $348.2 million put our book-to-bill at 1.2 times for the quarter and 1.1 times on a trailing 12-month basis. Although consulting bookings remained weighted towards renewals, a reflection of our strong client relationships, our new work continues to grow each quarter. From an industry perspective, growth for the quarter was led by our TMT and Consumer & Industrial verticals. The TMT vertical improved mid-single-digits compared to the fourth quarter of 2023 and also improved low single-digits for the full year. Improvement in TMT revenues were led by growth in e-Commerce and Media & Entertainment accounts. Consumer & Industrial accounts improved low single-digits as compared to the prior year quarter, driven by double-digit improvement in utilities and material accounts along with mid-single-digit growth in Consumer Staples and Consumer Discretionary accounts. While the financial services vertical declined year-over-year within the vertical, big banks, Fintech and Diversified Financials all improved low single-digits on a billable day-adjusted basis. As one of the largest spenders on IT, this improvement within the Financial Services vertical, especially amongst our Big Banking clients, is a move in the right direction. On a sequential basis, adjusting for the two and a half fewer billable days in the quarter, Consumer & Industrial accounts improved low single-digits with growth in the Utility, Consumer Staples, Consumer Discretionary, and Industrial sectors. We also achieved a low single-digit growth in the health care vertical with advancements in both payer and provider account. Consulting engagements for the fourth quarter focused on our cloud and data infrastructure, cybersecurity, and AI solution capabilities. Let me provide a few noteworthy examples. In the fourth quarter, a prominent freight and transportation client engaged ASGN to migrate their legacy on-premise data management center to the cloud. Our team of data experts conducted a comprehensive assessment of our client's 25-year-old system, developed architectural roadmaps, and consulted our client on their migration to AWS Cloud. Once fully migrated to AWS, we will proceed to modernize our client's architecture by adopting cloud native practices that provide enhanced agility, scalability, and a robust foundation to leverage advanced services such as data, analytics, and AI. With vast amounts of data moving to the cloud, there is an increasing need to protect sensitive enterprise information. As noted last quarter, we continue to fortify our Governance, Risk, and Compliance, or GRC, Practice, which leverages our commercial and government cybersecurity resources to support our commercial industry clients. In the fourth quarter, our GRC consultants partnered with a Medical Technology Company to help them achieve HITRUST Certification. Our client was looking to achieve this cybersecurity certification, which combines regulatory and industry standards by year end. Our combined commercial and government team seamlessly collaborated with our clients, quickly developing the domain knowledge needed to achieve the HITRUST Certification and prompting our client to extend our engagement into 2025 for ongoing advisory support. Also during the quarter, we were engaged by a technology company to establish a center of excellence to streamline the onboarding of various retailers onto their platform. By identifying onboarding commonalities, developing best practices, and addressing procedural anomalies, our solution architects collaborated with our clients to create a gold standard for retail implementations. As this project continues, we will create more automation around the monitoring compliance and securing of sensitive data. Importantly, as the creator of this center of excellence, we've become an integral part of our clients' professional services organization, assuming responsibility for the onboarding of their retail partners. Our IT consulting solutions create efficiencies that help our clients deliver more value to their customers, while also improving outcomes for their internal teams. A Fortune 500 energy company tasked our AI consultants with developing a cutting-edge conversational GenAI Chatbot, custom-built in Microsoft Azure's Cloud. This multi-agentic application provides real-time IT support via connection to back-end knowledge repositories that empower our chatbot to troubleshoot a wide range of technical IT issues in record time. When the chatbot cannot independently resolve the IT issue, it seamlessly integrates with ServiceNow to create a ticket ensuring an efficient and timely resolution. While it will likely be several quarters before we see enterprise-wide applications of GenAI, many companies like our energy clients are implementing targeted AI models that focus on high-impact use cases to improve efficiency, reduce costs, and provide deeper data insights. As we evolve our business, we are not only upscaling our teams in the latest GenAI applications, but we're also strategically partnering with industry leaders knowing that these tech partnerships are integral to our continued success. Thus far today, I've highlighted projects in which our consulting teams have partnered with Amazon Web Services, Microsoft Azure, and ServiceNow, each of which, amongst other tech innovators, comprise our core group of technology partners. As we enter 2025, I am pleased to welcome one more technology partnership to that list, Workday. As I noted at the beginning of the call, ASGN signed a definitive agreement to acquire TopBloc, a leading high-growth tech-enabled Workday consultant. While Marie will provide further details on the acquisition financials, I'll focus my commentary on our strategy and market opportunity. Recognizing a growing customer demand for ERP implementations and related services, we identified Workday, a leader in enterprise cloud applications with over 60% of Fortune 500 as customers. This led us to TopBloc, a company purposefully built to partner with the Workday platform. An industry innovator, TopBloc's team of over 500 consultants leverage a proprietary deployment model that accelerates customer time to value. In addition, by increasingly incorporating AI into its offerings, TopBloc improves efficiency for its customers and differentiates its implementation processes. Beyond the initial implementation of Workday, TopBloc also provides post-deployment services that foster long-term customer relationships. With more than 300 Workday installations over the past five years, TopBloc's consultants are well-positioned to gain immediate scale in the ERP market, which Workday has identified as $160 billion in size and growing. We anticipate TopBloc's innovative solutions will seamlessly integrate with our commercial consulting customer base as well as provide significant opportunities within the federal government sector. Speaking of our government customers, let's now turn to our Federal Government Segment whose services include advanced IT solutions for the Department of Defense, the Intelligence Community, and other critical agencies that support our national security. The Federal Government segment win rate remained robust for the fourth quarter at approximately 90% for our re-competed contracts. Although revenues fell below expectations, predominantly due to the lower-than-expected software licenses, net new contract awards of $283 million put our book-to-bill at 1.0 times for the quarter and back to our target of 1.1 times on a trailing 12-month basis. In addition to booking strength, at year-end contract backlog was over $3.1 billion or a coverage ratio of 2.5 times the segment's trailing 12-month revenues. Discussions of backlog and thus, indications of future performance, lead me to a topic gaining a lot of attention of late: the new administration spending initiatives and, in particular, the Department of Government Efficiency, or DOGE. DOGE has been tasked with modernizing federal technology and software, including upgrading network IT systems, ensuring data integrity, and facilitating responsible data collection, all with the end goal of maximizing governmental efficiency and productivity. While it is still in early days, we believe that DOGE's priorities could lead to an increased emphasis on our core solutions and capabilities in AI, cybersecurity, and digital modernization services, which comprise the vast majority of our federal government revenues. Alongside the solutions we offer, the agencies we support are also strongly aligned with the government's budget priorities. Two-thirds of our federal government revenues are derived from contracts with the Department of Defense, Intelligence Agencies, and the Department of Homeland Security. The remaining one-third of revenues comes from more high-end IT business operations and modernization services for civilian and state and local agencies. This includes cloud, data management, and cybersecurity services, all aimed at automating and modernizing governmental processes. So, let me provide a few examples of contracts we won during the fourth quarter that further underscore our commitment to upgrading and enhancing government IT infrastructure. For the U.S. Navy, we were awarded additional work on an existing defense and intelligence contract in which our teams are providing data center management to two Navy Installations, one in Norfolk, Virginia and the other in Coronado, California. As part of this new fixed price contract, we will support the Navy's secure global public safety network and manage their data center, which provides essential naval business functions worldwide. Beyond defense and cybersecurity, we are also seeing sizable bookings to support healthcare IT modernization. In December, we were awarded our first task order under a four-year prime contract with the Department of Health and Human Services. By providing program and financial management services, we will assist the Advanced Research Projects Agency for Health to address scalability and global supply chain challenges to increase the efficacy and productivity of their future programs. As we improve efficiency for our government clients, we also continue to invest in our own technological capabilities. For instance, for the past two years, we've been building a differentiated solution at the intersection of AI and cybersecurity. This solution helps organizations identify and prioritize remediation of secured vulnerabilities using advanced mathematical AI models that save our clients and our internal cybersecurity team time and money in the protection against cyberattacks. In addition, during the fourth quarter, we successfully deployed an in-house AI platform that enhances our business development, capture, and proposal workflows. We plan to expand the use of this platform to other operational workflows throughout 2025 in order to drive measurable gains in productivity and quality for our internal teams and our clients. With that, I'll turn the call over to Marie to discuss the fourth quarter results and our first quarter 2025 guidance.

Thanks, Ted. It's great to speak with everyone this afternoon. For the fourth quarter, revenues totaled $985 million, a decrease of 8.3% year-over-year, but essentially flat to the third quarter on the same number of billable days. Revenue from the Commercial Segment was $692.7 million, a decrease of 7.5% as compared to the prior year. Assignment revenues totaled $408 million, a decline of 15% year-over-year due to continued softness in the more cyclical portion of our commercial business. Revenue for the commercial consulting, the largest of our high-margin revenue streams outpaced our expectations and totaled $284.7 million, up 6% year-over-year and flat sequentially. Revenues from our Federal Government segment were $292.3 million, a decrease of 10.2% year-over-year. When we prepared our guidance for the fourth quarter, we anticipated we would have a consistent level of software licenses year-over-year. As Ted noted, license revenues were lower than our expectations by approximately $20 million to $30 million for the quarter. Lower license revenues as well as the delay in certain research and development projects due to the continuing resolution led to the revenue shortfall for the quarter. Our Commercial Segment, on the other hand, outperformed our expectations. Turning to margins, gross margin for the fourth quarter of 2024 was 29%, an increase of 60 basis points from the fourth quarter of last year and exceeded our expectations. Gross margin for the Commercial Segment was 32.6%, up 50 basis points year-over-year, reflecting a higher mix of consulting revenues as well as margin expansion in these revenues. Gross margin for the Federal Government segment was 20.5%, up 60 basis points year-over-year, primarily due to a higher mix of fixed price and time and materials contracts. SG&A expense for the quarter was $197.9 million compared to $203.6 million in the fourth quarter of 2023. SG&A expense also included $1.9 million in acquisition, integration, and strategic planning expenses, not included in our guidance estimates. For the fourth quarter, net income was $42.4 million, adjusted EBITDA was $109.7 million and adjusted EBITDA margin was 11.1%. Adjusted EBITDA margin also exceeded our guidance expectations for the quarter due to the outperformance of our commercial segment, which resulted in a higher mix of commercial revenues. In addition to this favorable business mix, we saw the expansion of margins within the commercial consulting revenues for the quarter. At quarter end, cash and cash equivalents were $205.2 million. We had full availability under our $500 million senior secured revolver and our net leverage ratio was 1.86 times. Free cash flow was $88.9 million for the fourth quarter, a conversion rate of approximately 81% of adjusted EBITDA. In the quarter, we deployed $43.9 million to repurchase 0.5 million shares at an average price of $90.45. On a full year basis, free cash flow totaled $364.7 million, also a conversion rate of approximately 81% of adjusted EBITDA. With active share repurchases in the first three quarters of the year, even with the slowdown in Q4 repurchases in advance of the due diligence for the TopBloc acquisition, in 2024, we deployed $327.2 million to repurchase 3.5 million shares at an average price of $94.06. We have approximately $529 million remaining under our $750 million share repurchase authorization. A strong free cash flow provides a strategic advantage that enables ASGN to fund key 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 to our shareholders. As Ted mentioned earlier, we signed a definitive purchase agreement to acquire TopBloc for $340 million, consisting of 90% cash and 10% equity. The acquisition, which remains subject to HSR approval, is anticipated to close late in the first quarter. Post-close, we anticipate our net leverage ratio will be approximately 2.4 times after borrowing approximately $200 million on the revolver related to the acquisition. With our acquisition of TopBloc, we will begin to allocate free cash flow towards paying down the revolver. Turning to guidance, our financial estimates for the first quarter of 2025 are set forth in the earnings release and supplemental materials. These estimates are based on current market conditions and assume 62 billable days in the first quarter, which is 0.75 fewer than a year ago period and one day more than the fourth quarter. Our first quarter guidance incorporates three main considerations. First, while business optimism is improving, we expect market conditions and demand for our services in the first quarter of 2025 will be similar to that of the fourth quarter of 2024. Second, with regards to EBITDA margin, the first quarter typically sees approximately 100 basis point decrease sequentially related to the annual payroll tax reset. Third, our first quarter guidance does not include contribution from TopBloc. For the full year 2025, TopBloc is expected to generate approximately $150 million of revenue, which represents year-over-year revenue growth in excess of 20%. We anticipate roughly nine months of TopBloc full year revenues will be incorporated in our 2025 financials given the timing of the close. TopBloc also anticipates EBITDA margin in the high teens for 2025. With this background, for Q1 2025, we are estimating revenues of $950 million to $970 million, net income of $27.8 million to $30.7 million, and adjusted EBITDA of $91 million to $95 million and adjusted EBITDA margin of 9.6% to 9.8%. Thank you. I'll now turn the call over to Ted for closing remarks.

Thanks, Marie. As I mentioned at the start of the call, at the beginning of March, our current President, Rand Blazer, will be transitioning to the role of Executive Vice Chairman. In Rand's place as President, we are thrilled to welcome Shiv Iyer, formerly of Accenture. Over the past 12 years, Rand has played a pivotal role in driving ASGN's impressive growth and transformation. His leadership, in conjunction with our broader executive team, has been key in evolving ASGN from a diversified staffing player to a top-tier provider of higher-end, high-value IT services. Rand has not only spearheaded our go-to-market strategy, but he has helped to elevate the quality of our broader leadership team, prioritizing their development and success. As both my long-term colleague and close friend, I'm very grateful for Rand's continued involvement with ASGN and for the strong foundation he has helped build for our company. In Rand's new role, he will advise ASGN on key strategic initiatives while helping ensure a seamless handover and leadership to Shiv. Shiv brings over two decades of consulting experience to ASGN, having most recently led Accenture's Consulting and Industry X Solutions across the Americas. His experience leading large-scale consulting businesses in combination with industry and M&A expertise would make an excellent fit for ASGN as we continue to move up the IT services pyramid. I am confident that Shiv will help propel our company to new heights, and we are very excited to have him on board. We look forward to having Shiv join us on our first quarter 2025 earnings call in April. As we wrap up our prepared remarks, I'd like to reflect on some of the most important points we covered today. We are committed to building ASGN for the future and continue to position our business towards higher-end, high-value IT consulting services and solutions. We are achieving our long-term goals through the expansion of our IT consulting revenues, bookings, and margins, the introduction of new leadership as just discussed, and the addition of strategic tuck-in acquisitions such as TopBloc, whose solutions can be sold across our commercial and government customer base. Additionally, we maintain a robust portfolio of enterprise and federal government clients in six key industries to whom we offer innovative solutions aligned with demand for cost savings and efficiency. Of note, we demonstrated strength in the TMT vertical throughout 2024. And as we exited the year, we began to see improvements with our Big Banking clients, which are some of the biggest investors in information technology. As business confidence steadily increases, we are certain that we have strategically positioned our business for sustained growth. Before opening up the call to questions, I'd like to extend our deepest sympathies to our Los Angeles teammates and their families impacted by the recent wildfires. Our thoughts are with all of those impacted, and we are committed to supporting the affected communities during this difficult time. I also want to thank everyone at ASGN for your dedication and hard work this past year. Together, we move forward into the new year with a collective determination to advance ASGN toward even greater success. Thank you again for joining our fourth quarter and full year 2024 call. Operator, please open the call to questions.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from the line of Jeff Silber with BMO Capital Markets. Please proceed with your question.

Thank you so much. I wanted to focus first on Federal Government, not surprising. Can we get a little bit more color in terms of the types of conversations that you're having with folks? I'm just wondering, I know it's still early. But what are they saying about what the potential impact might be on the new administration?

Yes, Jeff, thanks for the question. I think, frankly, everyone in that marketplace is trying to figure out exactly what the impact may be. Even our clients who are still trying to learn, there's just a lot going on, and things are breaking here by the hour and the day. If I sit back and look at our portfolio of business, if you think about services and cyber, AI, data, cloud, IT modernization, those are all things that the government is in high need of and it's going to be durable here. And while there may be some bumps in the road here week-to-week, month-to-month, quarter-to-quarter as we work through what's going on with the new administration in DOGE, obviously, the answer for the federal government long term is to modernize IT systems and take advantage of technology to be more efficient. And then if you think about our customer set, DoD, Intel, the Department of Homeland Security, and Justice is about two-thirds of our revenue. If you add to that the cyber work we do in commercial and flood out of the Federal Government units, all of a sudden, you're at greater than 75%. And again, we think those things are fairly durable. But I would not ignore the fact that there's a lot of arm-waving going on in that marketplace right now. And so the key for us is to stay close to our customer and to help them, if you will, in terms of bringing services that help automate and use technology, modernize their operations so that they can ultimately protect us and also be more efficient and productive.

I'm curious, though, aside from the discussions happening, have you noticed any slowdown in awarding contracts or making payments to contractors? With all the disruptions occurring, I'm wondering if it continues to be business as usual or if there have been some existing issues.

Yes. So, I think it's too early to say, is there a slowdown in payments. We haven't seen that. So, I would say no sign of that right now. As it relates to new awards, it's a mixed bag, if you will, by area of the government and customer. We've actually won some things here in the recent couple, three weeks, which we were waiting on, which is a positive sign. I think in other areas, obviously, there's an edict out there in certain agencies to pause on the award of new work or new RFPs, and so we're watching it closely. So, I'd say it's a little bit agency by agency, but we're seeing a little bit of some new awards and some slowdowns.

Okay, appreciate the color. Thanks so much.

Thank you. Our next question comes from the line of Trevor Romeo with William Blair. Please proceed with your question.

Afternoon team. Thanks so much for taking the questions. First, I just want to say, Rand, been great working with you, best of luck in the new role. I also look forward to working with Shiv as well. Then in terms of questions, first one is on TopBloc. It seems like it will be nicely accretive to growth in margins. Just kind of wondering, from a strategy perspective, would love any thoughts you have specifically on the Workday ecosystem, how you evaluated the long-term opportunity, and kind of the strategic importance there and then maybe what kind of potential synergy opportunities could you see materializing with your existing business?

I'll begin and then let Rand contribute. Firstly, Trevor, you can't bid farewell to Rand just yet, as he will still be with us, which we are thrilled about. His extensive institutional knowledge and vast experience in the industry, combined with Shiv’s background and our leadership team in both commercial and federal units, really enhances our leadership as we move forward. Regarding TopBloc, we address this when we discuss capital allocation; strategic mergers and acquisitions have provided the highest return on invested capital for our shareholders. We continue to believe in this, and we have a list of solution capabilities that our customers need both now and in the future. This serves as a priority for us. Enterprise system capabilities, particularly in Workday, rank high on this list. We're consistently engaging in the market, building a pipeline in these areas, and there's significant potential for TopBloc, especially within its mid-market customer base and among our enterprise customers in both commercial sectors and the federal government, a key initiative for Workday. Workday has reported a 15% year-over-year growth in their last earnings call, indicating strong demand for their software. Additionally, when considering the direction of data and AI, ERP systems manage both financials and human capital management, effectively controlling the data within our large enterprise accounts. To deploy AI efficiently across an organization, it's essential to have success and expertise concerning the data and enterprise systems. Our perspective on data and AI highlights the importance of this capability addition. As always, it must contribute to growth, which it undoubtedly does, and enhance our margin profile, which it certainly achieves as well. We believe we are partnering with one of the best businesses in the Workday ecosystem, and it will only grow larger in the future due to our collaborative efforts.

Thanks for that update, Ted. Regarding the overall demand and client budget environment in the commercial sector, you've noted a rise in business confidence over the past few months. Are you seeing any early indications of improving activity, such as an increased willingness to take meetings? You experienced a nice acceleration in bookings this quarter. Is it too early to draw conclusions, or are there any positive signs emerging at this stage?

Yes. I'll let Rand take that one. Rand, do you want to take that?

Well, listen, I think we do. We look at a number of markers, we look at backlog, we look at our pipeline, we look at the bookings and where the bookings are coming. We look at the sectors, which Ted pointed out in the earnings call, where we're seeing sequential growth. We look at, generally, our activity levels and the flow of business, which maybe not has yet translated into revenue, but we can see the precursors for that. So, that's what gives us confidence. And it's coming in certain sectors, as Ted mentioned, that we know are good bellwethers for IT spend, financial services, one of them. So, does that give you a sense, Trevor, of the plethora of things we look at?

Yes. Thank you, Rand, that was helpful. I really appreciate it, guys. Thanks.

Thank you. Our next question comes from the line of Joseph Vafi with Canaccord. Please proceed with your question.

Hey everyone. Good afternoon. Thanks for the questions. And Rand, congratulations, we'll miss you on these calls and Shiv, welcome aboard as well. We've been discussing financial services for a while, so let's delve into that a bit more. It might be interesting to compare the situation of big banks now to what it was like before we entered the normalized environment. Where did big banks stand in that sector compared to now? I'm trying to understand the potential for recovery to a normalized level. I have a follow-up as well. Thanks.

So, Joe, looking back to 2022, as we saw a slowdown, Big Tech was the first to decline, followed closely by financial services and large banks, both preparing for what they anticipated could be an economic recession. Throughout 2024, Tech has made a comeback. Meanwhile, financial services and large banks seem to have reached their lowest point, and we are beginning to observe slight improvements. Typically, in our commercial business, financial services would represent around 20% to 25% of the revenue mix.

Correct. Estimate in the low 20s.

Right. And so it's obviously in the high teens right now of commercial, Joe, just to put it in perspective and 15% of the total ASGN revenues. So, maybe that gives you an order of magnitude.

Thank you, Ted and Rand, for that information. Looking at the business as a whole, it's encouraging to see the continued resilience in consulting bookings. However, it seems we should have noticed some improvement in the assignment business, which usually acts as a leading indicator. I’m curious if there's a structural shift in the market, where clients might be increasingly choosing consulting revenue over the assignment side during this cycle compared to previous ones. Thank you.

Yes, we've discussed this extensively in previous cycles. It's primarily been the IT staffing and creative digital marketing staffing driving our growth due to a recovery. The rep flow indicates that there is demand from clients, but there seems to be a slight delay in its full realization. We haven't observed that yet. Regarding any structural changes, I think we need to monitor this situation, but I don't believe anything fundamentally has shifted. Nonetheless, we are prepared for any changes. We're here to support our clients in both IT staffing and creative digital sectors, as well as in consulting.

Yes. Ted, you may remind people that we typically see a decrease in business and revenue of about 4% from Q4 to Q1, as we've mentioned many times before. Some of this is just clients concluding their previous year's projects, while we need to prepare for the upcoming year's work. We're currently experiencing that transition. However, as you noted, Ted, our representative flow is largely positive, especially in certain sectors.

Yes. It's important to highlight that looking back at last year, there was a typical drop in business and revenue from Q4 to Q1 of about 4%. This year reflects a similar trend, with a decrease in the low to mid-single digits as we transition from the fourth quarter into the first.

Sure, great. Thanks for that color.

Thank you. Our next question comes from the line of Kevin McVeigh with UBS. Please proceed with your question.

Great. Thanks so much and Rand, thank you for your service and continued service. I wanted to ask a couple of quick questions. Regarding the TopBloc acquisition, I did some quick math. If the revenue is about $150 million and they have 500 consultants, does that imply a bill rate of about $150 to $200 an hour? Is that a fair way to think about it in terms of what the bill rates are?

We won't be disclosing bill rates today or in the future, but you can do the calculations yourself, and you're likely in that range.

Okay, thanks. And then I guess with the acquisition and the leverage going on the balance sheet, does that impact the buyback at all going forward?

Well, look, I think we, obviously, at today's size and scale, don't have to exclusively follow one path. I mean we'll be focused on deleveraging. I think Marie, our leverage post transaction is...

2.4 times.

2.4 on a net basis, right?

That's right.

So, it's modest based on where we've been historically, we've always said that when we're below 2.5, we can pursue whatever the next capital allocation activity is, whether that's repurchasing shares or it's an acquisition. So, we've only got a couple of quarters here of needed free cash flow to work into the delever. So, I would expect you'll see us pursue, but it will depend on what's the best allocation of that next dollar capital.

That's helpful. Can you clarify if there were any surprises relative to expectations in the federal business this quarter? Was it related to license sales on the federal side? Also, can you remind us of the percentage breakdown of the federal business in terms of licensed sales, managed services, and consulting?

Yes. So, we don't release that number, Kevin, but the miss on revenues was solely that unexpected realization of the software licenses, it was specific to a client. It was $20 million to $30 million of revenue and so obviously, we still delivered on the bottom line. That stuff carries very little margin to it. So, the software license stuff can be a little whimsical, but that was the only thing behind the miss on the revenue side.

And again, was that a federal license?

Correct. There are licenses related to some of our AI projects, some cybersecurity efforts, and other IT modernization initiatives. The client decides when to utilize these as necessary. They are part of the implementation process and also integral to the ongoing use of the system.

Understood. And again, this will be my last question as I've asked many already. Has that had anything to do with some of the pause at the federal level?

Not related.

Ted, you should mention that sometimes the contracting officer prefers to go directly to the vendor for those licenses instead of going through an intermediary like us. We see this as more of a trend than anything else.

Got it. Okay. Thank you.

Thank you. Our next question comes from the line of Tobey Sommer with Truist Securities. Please proceed with your question.

Thank you. I was wondering if you could dig in and give us a little bit more color on your Fed-civ exposure within the ECS government business. I know when we think about it from an activity basis, you do provide higher-end cloud, IT modernization, et cetera, but somebody was probably providing some of those services that are objectively efficiency driving services at USAID and everything paused there. So, could you give us a little more color and granularity on the civil side?

The best way to discuss this is to note that there isn't any client in that group that represents more than mid-single digits of revenue, and it's quite spread out. It doesn't really include many, if any, of the regulatory agencies without going into too much detail. Clearly, any of these agencies could be scrutinized by DOGE. However, we do not have a significant concentration of revenue, even in the 33% that we categorize as civilian. Moreover, only about 10% of that is from commercial and SLED work, leaving approximately 23% unaccounted for. There is no concentration, and the work involves high-end IT modernization, cybersecurity, data, AI, and cloud services. While we acknowledge there are unknowns, we believe we are positioned quite well concerning the services and revenues.

Could you talk to us about the deal, how you came to know TopBloc? Was it an auction process? And how did equity become a component of the value?

Sure. We met this firm a couple of years ago during our GlideFast acquisition and prioritized ServiceNow at that time, but we've been keeping an eye on this company. We've re-engaged with TopBloc over the last several months, going back to the middle of last year. We’ve noticed their progress, and our priorities have shifted, with Workday and a few others rising to the top of our list. The firm had minority ownership by private equity, while the majority stayed with partners, and the founders are still with the business. When considering the mix of proceeds, we believed that including some equity would align our interests with those of the firm. It was a straightforward decision.

Okay. One follow-up on the software licenses. Since there can be, I guess, variability in how the customers procure those. Have you included software licenses in your guide? Is it at a lower level than would have been typical historically? Just anything you can give us there?

Yes and yes. There is a little bit in our guide. It's lower than it would historically be and there's no bulk purchases in that number. It's fairly disparate.

Okay. So, I'm curious from a big picture standpoint, Ted. The industry and the company had three years of revenue declines, what actions have you taken strategically to be able to grow more quickly and sort of strengthen the organization once demand increases, and I'll put TopBloc to the side for now because we've discussed that on the call already?

Yes. Well, look, I mean, I think that TopBloc is one example of things that we've done here, which is to really hone in on and build or strength and muscle in our solutions so that we are there and ready for what our customer needs today and in the future. So, more so than ever, I think there's a strength in solution capabilities that lines up with what our customers need, even if the revenue isn't quite there today, that's the thing that I would say we've moved the furthest on over the last two to three years. I think the other thing is we're kind of honing in and put this with solution strength, but collaboration between our federal units and our commercial units because there are some things in federal will do really well and AI, data, and cybersecurity at the top of that list. And so I would say the biggest thing would be that just continuing to build that solution strength here. Rand, would you add anything else?

Well, I will because you had it in the remarks, Tobey, if you don't mind, our alliance relationships with the big technology players have gotten a lot stronger in the last two years where we have not just support for our technical strength or solution strength, but also lead flow strength. The second thing I've mentioned really comes first and foremost is we continue to stay focused on the right set of accounts, the right set of accounts within the segment to the marketplace, we think are growing and the productivity of our team, both in the client space as well as in our solutions and back office teams. So, we haven't missed a beat in terms of productivity, as you can see by our margins. We maintain, first and foremost, a focus on these accounts and stay with them. So when they return to spend and need us, we're there. And then yes, as Ted said, strengthening solutions, strengthening internal IT, and strengthening alliance relationships.

Last question for me. Could you update me on how Creative Circle performed in the quarter? How did their growth compare to the rest of the assignment business?

Yes. Thanks. The CyberCoders, which is most of our firm placement, and Creative Circle together, about 9% of the revenue mix now are down more than our IT offering. So, think about that as kind of low to mid-teens on that side, and that's been kind of consistent with where we were, so not much change there. Although I will say, Tobey, in those areas, we are seeing some of the same good leading indicators within those two units that we're seeing in the overall in the IT area, commercial IT areas that Rand mentioned earlier.

Thank you.

Thank you. And our next question comes from the line of Mark Marcon with Baird. Please proceed with your question.

Hey, good afternoon. Thanks for taking my questions. Rand congratulations on the new position and really glad to hear that you're going to continue to be part of the organization. And hopefully, you actually joined the calls as well and then welcome to Shiv. You've been doing a great job on the margins despite the challenging environment. How much excess capacity do you currently have? And can you give us an update with regards to the internal headcount in terms of where it stands today relative to a year ago?

Our headcount is relatively stable at the moment. It has decreased slightly from last year, but we're managing fine. Our bookings increased by 23% sequentially from the third quarter to the fourth quarter in the commercial sector, and they were up about 12% year-over-year. Our team can handle this workload and is preparing to start our projects as we enter the first quarter, and we're not experiencing any issues with capacity.

Great. And so I didn't think you'd have a problem. I just meant from the perspective of if business picks up, how much excess capacity do you have? Or are you going to need to add headcount if business picks up?

Well, we will eventually resume hiring headcount. Currently, we are stable, but we have the capacity to grow. As we observe a consistent increase in commercial activity, you can expect our EBITDA and gross margins to rise due to changes in our business mix. In recent years, the commercial sector has been declining, while the federal sector has contributed margins that are slightly lower. However, we anticipate a turnaround in this business mix moving forward.

Great. You're not providing specific guidance, but I'm curious if we should expect a similar decline in the government sector for this first quarter, given the uncertainty. Is there a rough range you could share regarding the government side?

I believe our guidance reflects everything we understand about the current market conditions, and we don't foresee any major issues with it at this time. However, there are still many uncertainties. We have carefully assessed our guidance, but I can't provide a specific range because it's difficult to predict what will happen.

Okay. And then TopBloc, congrats on that. I've followed Workday for since prior to the IPO. So, I know it's fairly well. In terms of TopBloc specifically, do you know which exact sectors they're the most focused on with regards to implementations? And how much of the business do they have is kind of recurring versus purely implementations?

So, Mark, their market is across the same diverse industries that we serve, so that's a positive. The one place where they've done less, which obviously, we have the position is in the federal government. And as you know, following Workday, like you do, that's a big initiative, if you will, inside of Workday as an end customer. The piece of the market they've served, I would say, are middle market up to the bottom half of the Fortune 1000, so call it, Fortune 600 to 1,000. So, between that group of players and large middle market accounts, they've got quite a customer list. And then their revenue has a nice mix of implementation work. And then what I'll call post-production services that range from production support, helping to run various services. And so they have a nice recurring revenue stream beyond just the one-time implementation and that work is growing for them quite nicely.

Great. And then do you know if you're on both finance as well as HR or just primarily HR?

Finance plus HR, full suite.

Excellent. That should really complement what you're already doing with ServiceNow and position you well. I hate to ask this question, but it keeps coming up, so I will. It's the tariff question. How do we consider Intersys in your Mexican delivery center? What are your thoughts on that based on the current discussions?

Based on what we know today and what we've seen in the past, those types of services have not faced tariffs like goods have. So that's a positive aspect. Historically, if you consider the demand for technical talent for U.S.-based clients, it's clear that there is a strong desire to maintain a competitive edge and have access to that talent. Recently, there has been some dialogue between major tech companies and the new administration to ensure that pathways remain open to offshore locations to continue accessing technical talent, both in the U.S. and globally. This is a favorable development. However, it's important to note that tariffs can directly impact various factors, potentially leading to increased costs in other regions where tariffs are applied, though these effects are typically more indirect. For now, we are optimistic, but we need to keep monitoring the evolving policy landscape and the new administration's actions.

Super. Thank you.

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

Great. Well, thank you, operator. I appreciate everybody's time and attention today for our fourth quarter earnings release, and we look forward to speaking with you again in April to discuss our first quarter of 2025.

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