Greetings, and welcome to the ASGN Incorporated First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kimberly Esterkin, Vice President of Investor Relations. Thank you. You may begin.

Good afternoon. Thank you for joining us today for ASGN Incorporated's first quarter 2025 conference call. With me are Ted Hanson, Chief Executive Officer; Shiv Iyer, President; Marie Perry, Chief Financial Officer; and Rand Blazer, Executive Vice Chairman. 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. As such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call. For your convenience, our prepared remarks and supplemental materials can be found in the investor relations section of our website at investors.asgn.com. Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income, and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release. I will now turn the call over to Ted Hanson, Chief Executive Officer.

Thank you, Kim. Thank you for joining ASGN Incorporated's first quarter 2025 earnings call. As Kim noted, I'm pleased to welcome our new President, Shiv Iyer, to his very first ASGN Incorporated earnings call. Shiv will make some brief remarks at the close and join us for the Q&A session. Despite macro uncertainty, revenues of $968.3 million and an adjusted EBITDA margin of 9.7% were in line with our guidance expectations for the quarter. We continue to deliver solutions that cater to our clients' IT modernization, efficiency, and cost containment requirements, leading to strong quarterly bookings for both our commercial and government segments. Our IT consulting revenues also grew, reaching roughly 61% of total revenues for the first quarter, up from 57% in the prior year period. As I noted last quarter, we entered the year with a renewed sense of business optimism from our client base. This improvement in confidence faded as the quarter progressed, but clients remain cautious about increasing their IT spending. Nonetheless, ASGN Incorporated's unique business model demonstrates resilience across economic cycles, primarily due to our business stabilizers that support our gross margin, along with our variable cost structure, which aids in safeguarding our operating leverage. Further, our business model also provides flexibility that helps reduce our clients' costs while maintaining a commitment to providing high-value IT services. Speaking of providing high-value services, in March, we successfully closed our acquisition of TopBloc, a preferred Workday services partner and recently named Workday Business Impact Partner of the Year. The integration of TopBloc is going well, and in the short period of time since the acquisition closed, our Apex and TopBloc teams have already partnered on a number of new consulting opportunities. Importantly, while market conditions remain volatile, we are confident that nurturing our long-standing client relationships, expanding our technology partnerships, and enhancing our solution capabilities organically and through strategic acquisitions like TopBloc will position ASGN Incorporated favorably for the future. So let me provide some examples of our different segments and discuss our segment performance for the first quarter, beginning with commercial. Our commercial segment services Fortune 1000 and large mid-market companies. Revenues for this segment were again driven by growth in our consulting business, which improved 4.7% year over year. Consulting bookings of $336.9 million improved 4.2% as compared to the first quarter of 2024, and put our book-to-bill at 1.2 times for the quarter and 1.1 times on a trailing twelve-month basis. From an industry perspective, we saw growth in our consumer and industrial verticals, which improved mid-single digits year over year. Improvement in this vertical was driven by double-digit growth in materials, utilities, and consumer discretionary accounts, along with mid-single-digit growth in industrial. While revenues for the remaining four commercial verticals were down year over year, within our healthcare vertical, pharmaceutical and biotech accounts were up low single digits as compared to the first quarter of 2024. Within our TMT vertical, e-commerce accounts were up mid-teens year over year. Finally, within the financial services vertical, diversified financials saw mid-single-digit growth and regional banks saw slight growth as compared to the first quarter of 2024. Although the financial services industry is one of the highest spenders on IT, macroeconomic factors such as higher inflation and uncertainty regarding tariffs have driven cautiousness to spend on new projects across the banking sector. Despite these headwinds, our differentiated IT solutions remain in demand by our diverse US-based Fortune 1000 clients. Consulting engagements for the quarter focused on AI and data solutions, Gen AI, cybersecurity, cloud, and digital engineering, with projects specifically aimed at promoting cost savings and efficiency. Let me provide a few examples. For a Fortune 200 consumer and industrial client in the process of modernizing their supply chain, our industry and technical leaders are helping develop and operationalize their data and AI strategy. We are providing a nearshore team of consultants to support the implementation of our client's supply chain optimization solutions, using Informatica's cloud-native and AI-augmented platform to support data and machine learning operations. Although enterprise-wide applications of Gen AI are still to come, we continue to see AI initiatives like this that focus on high-impact use cases to improve efficiency, reduce cost, and provide deeper data insights. In another example, for a large health services company, we helped build a scalable, secure, and efficient identity and access management platform that supports our clients' growth, compliance, and evolving business needs. By migrating to a new IAM platform, our client will be able to better manage data controls and provide appropriate access and governance across their organization. Our scope of work encompasses the application and integration phases of the new IAM platform, including integration across hundreds of different applications, while optimizing workloads and performing various testing and validation. Through innovative optimization techniques, we will enhance automation, risk management, and user experience for our clients. Improving data processing, while at the same time driving efficiency and cost savings, remain top priorities across our client base. For a Fortune 100 oil and gas client, for example, we've successfully implemented the Databricks Unity Catalog unified governance solution, by optimizing compute resources and nightly processing times and significantly reducing our clients' Databricks costs. Driving innovation and automation on cloud-based platforms is also in high demand. In the first quarter, we collaborated with a US banking client to create a cloud-first automation framework, integrating APIs and modern engineering practices. By eliminating manual file handling, our client achieved end-to-end automation of their costing process by which they assign fees to their products and services, thereby enhancing their overall workflow efficiency. Each of these consulting projects involves aspects of intelligent data management, and the usage of AI is increasingly becoming central to successfully managing enterprise data. Even as companies limit their IT spend, our clients continue to scale their investments in AI. Clients early in their AI journeys are investing in AI workshops and AI literacy training to prepare their organization for future AI usage. Clients further along in their journeys are partnering with us on thought leadership pieces and innovation studies to drive competitive advantages. The most common AI use cases we are currently seeing include the development of agent assistance or copilot, the implementation of Gen AI to accelerate the software development lifecycle, the usage of AI tools for code conversion and documentation, especially in banking, and leveraging AI for IT operations. With that, let's turn to discuss our federal government segment. Our federal government segment provides advanced IT solutions for the Department of Defense, the Intelligence Community, and other critical agencies in support of national security. Although the segment's quarterly revenues declined year over year, bookings were strong, with new contract awards totaling $343.1 million for the first quarter. This put our book-to-bill at 1.2 times on both a quarterly and trailing twelve-month basis. In addition, contract backlog was over $3.1 billion at quarter end, or a coverage ratio of 2.6 times the segment's trailing twelve-month revenues. We are not immune to DOGE, and our first quarter federal government segment revenues and margins saw a slight impact from DOGE's cost-cutting efforts. That said, our solution capabilities and agency focus remain well aligned with the administration's priorities. The government will gain efficiency through IT modernization that leverages AI, automation, and a commercial delivery model. ASGN Incorporated brings those exact services and delivery best practices to our customers with our core solution capabilities in AI, cybersecurity, and digital modernization, for mission-critical defense, national security, and law enforcement programs. Our government teams have consistently led the charge in IT innovation, and during the quarter, we won a new five-year firm fixed-price contract with the FBI's laboratory division to provide IT modernization services. As the prime awardee on this contract, our team will centralize and modernize information and operational technology, or IT and OT, by streamlining technology usage, powering the FBI services with AI tools, and automating key processes that enhance the FBI's ability to solve cases and prevent acts of crime and terror. Our services to the FBI include infrastructure support, cloud integration and modernization, enhanced cybersecurity protection, and improved data governance. The FBI is a long-standing client of ASGN Incorporated, and this contract represents an additional opportunity to promote the agency's essential mission. We also support the essential missions of the Department of Defense, and during the first quarter, our defense and intel unit won additional work with the DoD's Chief Digital and AI Office to operate the department's premier AI development environment for innovation and speed and scale. As a mission-critical partner, we will collaborate with the DoD on AI innovation work streams that provide improved operational insight and decision-making capabilities, as well as enhanced value across global warfighting domains. Also during the quarter, we secured a large recompete contract with a strategic logistics customer. By providing technical expertise and solutions to our customers' engineering and technical support center, we will help them reduce their costs while at the same time drive quality and innovation across their operations. As illustrated by these three examples, we continue to see a steady flow of work consistent with DoD's efficiency and IT modernization missions. Nonetheless, this is prudent. We are actively tracking those activities and identifying ways to support our customers with additional work or to move essential work onto contracts with available ceiling. Although we remain in a continuing resolution through set customers are extending current projects. We expect to defend financial security programs along with essential citizen services, which together constitute the vast majority of our federal government support, will remain priorities in the new government fiscal year. With that, I'll turn the call over to Marie to discuss the first quarter results and our second quarter 2025 guidance. Thanks, Ted.

For the first quarter, revenues totaled $968.3 million, a decrease of 7.7% year over year, and in line with our guidance expectation. Given the timing of the acquisition close on March 4th, TopBloc contributed less than one month to our first quarter results. Revenues from our commercial segment were $672.2 million, a decrease of 8.1% as compared to the prior year. Assignment revenue totaled $382.1 million, a decrease of 16% year over year, reflecting continued softness in portions of our commercial segment that are more sensitive to changes in macroeconomic cycles. Revenues from commercial consulting, the highest of our high-margin revenue streams, totaled $290.1 million, an increase of 4.7% year over year. Revenues from our federal government segment were $296.1 million, a decrease of 6.7% year over year, mainly due to a few programs ending and a slight impact of DOGE as Ted previously noted. Turning to margins, gross margin for the first quarter of 2025 was 28.4%, an increase of 20 basis points from the first quarter of last year. Gross margin for the commercial segment was 32.4%, up 40 basis points year over year, reflecting a higher mix of consulting revenues as well as margin expansion in each revenue. Gross margin for the federal government segment was 19.5%, a decline of 20 basis points year over year, primarily due to higher rates leverage benefits. SG&A expense for the quarter was $214.5 million compared to $210.2 million in the first quarter of 2024. SG&A expenses included $3.3 million in acquisition, integration, and strategic planning expenses, and a $4.4 million one-time write-off related to previously capitalized costs for software enhancements that will no longer be placed into service. As a reminder, these types of costs are not included in our guidance estimate. Excluding these one-time items as well as non-cash expenses, such as depreciation and stock-based compensation, SG&A declined by approximately $6 million year over year. For the first quarter, net income was $20.9 million, adjusted EBITDA was $93.6 million, and adjusted EBITDA margin was 9.7%. In the quarter, as discussed, we completed our acquisition of TopBloc for $340 million, consisting of 10% equity and 90% cash, of which approximately $56 million came from our cash balance and the rest was a drawdown on our revolver. In addition, we deployed $50.4 million to repurchase approximately 0.6 million shares at an average share price of $78.44. At quarter end, we had approximately $478.6 million remaining under our $750 million share repurchase authorization. Also at quarter end, cash and cash equivalents were $107 million, and we had $250 million available on our $500 million senior secured revolver. This brings our net leverage ratio to 2.6 times at the end of the first quarter. Free cash flow totaled $6.6 million for the first quarter. Free cash flow was lower than we typically see in the quarter, primarily due to an increase in DSO driven by timing issues from certain enterprise accounts. We expect DSO to improve on a go-forward basis. Our financial estimates for the second quarter of 2025 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions and assume no further deterioration in the markets we serve. Guidance also assumes 63.25 billable days in the second quarter, which is 0.25 billable days fewer than a year ago period, and 1.25 days more than the first quarter. Given the overall macro uncertainty, we are widening our revenue guidance range for the quarter. Our revenue estimates incorporate less than a 2% impact from DOGE. In terms of our second quarter margins, while we no longer have as large of an impact from our payroll tax reset that we did in the first quarter, we anticipate that margins will be negatively impacted by the loss of some of our higher gross margin federal as a result of DOGE changes. With that, I’ll turn the call back over to Ted.

Thanks, Marie. Even in the face of macroeconomic uncertainty and factors beyond our control, ASGN Incorporated performed in line with our revenue and adjusted EBITDA expectations for the first quarter. Our unique operating model positions us for sustained progress in delivering higher-end, high-value IT services. Despite client IT spending hesitations, our commitment to innovation and customer satisfaction enabled us to deliver strong bookings. The appointment of Shiv as President and the acquisition of TopBloc are pivotal developments that underscore our adaptive and forward-thinking approach. As I noted previously, TopBloc is already exceeding our bookings, revenue, and adjusted EBITDA expectations. Looking ahead, the resiliency and versatility of our offerings in AI, data, and cybersecurity, in particular, continue to drive demand in a firm, agile market approach in these critical areas of client needs. Our ability to maintain robust client relationships while expanding our technology partnerships provides us confidence that we are well-prepared to capture future opportunities and enhance shareholder value. We remain cautious but hopeful about the go-forward, knowing that our unique delivery model is the fastest and best way for our clients to accelerate their IT investment. It is precisely our innovative contingent labor model and the vast prospects it provides that inspired Shiv, among other reasons, to join the ASGN Incorporated team. So let me pass the call over to Shiv to share his insights and wrap up our prepared remarks.

Thanks, Ted. I'm excited to be part of my first ASGN Incorporated earnings call. It's a great time for me to join the team and immediately make a positive impact on our company. Over the past seven weeks, I hit the ground running, collaborating closely with our segment teams and engaging with our dynamic leadership. The pace of technological change is staggering, and our clients are constantly looking for the right talent with deep targeted skills. I'm confident that our model leverages a combination of internal capabilities and a highly skilled contingent labor force is the optimal approach in this rapidly evolving technological landscape. By maintaining the right IT skill sets is exceedingly challenging for a permanent bench model. In my initial weeks at ASGN Incorporated, I've been immersing myself with our commercial consulting teams, rapidly climbing the learning curve while inserting my own expertise. Having spent the past two decades in the health tech industry, I'm thrilled to bring my experience to ASGN Incorporated and help evolve our strategy and differentiation. Unfortunately, we are at a point in time where clients must exercise caution with their IT spend. Nonetheless, I've been through these economic cycles before, each time learning something new, growing my knowledge base, and emerging even stronger on the other end. While we may be experiencing increased market volatility at the present moment, there is no doubt in my mind that having access to a diverse pool of talent, continuing to focus on our strong account base, and providing the right solutions will allow our company to stay ahead of the competition. I look forward to seeing ASGN Incorporated continue to take market share. Thank you again for joining ASGN Incorporated's first quarter 2025 earnings call. We will now open up the call to your questions.

Great. Thank you. We'll now be conducting a question and answer session. One moment, please, while I prepare for questions. The first question is from Tobey Sommer from Truist Securities. Please go ahead.

Thank you. I want to ask about your bookings in the quarter across the different businesses. Could you characterize some from a new customer and new project, kind of new work perspective, versus renewal of existing work? And then I'll have a follow-up. Thanks.

Sure. And Tobey, thanks for the question. If you think about the commercial side of things, where we continue to see consistently good bookings, there is a mix of renewal work and new work, and renewal is still a larger percentage than the new, but the new is progressing. So the trend there hasn't really changed. On the federal side, our bookings this quarter, which were very strong, keep us moving up, if you will, on book-to-bill now. 1.2 on a trailing twelve-month basis. Again, same characterization. We had some recompete work that we won. We had some new work that we won. And in addition, some of that recompete work also had expansion support. So it varied, but I wouldn't say any different trends there, Tobey, than what we've seen in the latter quarters.

Okay. Thank you. And then if I could pivot based on that response and ask a question about DOGE. And the impact in the federal business. Is there a way to characterize, I mean, you numerically put some numbers there, but from a type of work or type of customer perspective, is there a way to describe where you're seeing the impact and how?

Sure. So, Tobey, I don't think this will be inconsistent with maybe what we're seeing across the industry with other players, but where we've had small interruptions of work, it's been left more on the dev civilian side, not so much on the defense intel side. It may have been discrete pieces of work where we were doing more what I'll call maybe traditional management consulting program oversight. You know, was probably the nature of the work. If we look at the work where we're really good hands-on technical work, with a scope to get the customer to a certain outcome or objective, which is the highest propensity of our work, that's been steady, remains in place, and hopefully that gives you a little bit of a flavor.

It does. With respect to that program management consultative work, how much does that represent in the business if maybe that describes a couple of points of impact? Is there much that remains, or does that sort of zero out category?

Yeah. It's a small piece of what we do, Tobey. I mean, most of our work is kind of categorized as, you know, real good technical work in AI, data, cybersecurity, helping manage IT systems and operations. We did very little work on the general management consulting side and in the regulatory type federal civilian agencies.

Thanks, Ted.

Next question is from Mark Marcon from Baird. Please go ahead.

Hey, good afternoon. Ted, Rand, Shiv, and Marie. You've done a really impressive job in terms of maintaining the margins, you know, here during the quarter. You know, I'm wondering if you could talk a little bit about, and the guide also reflects strong margins. And so I'm wondering if you could talk a little bit about how you've been able to raise the margins, the gross margins through the mix. If we were to look at things from an apples-to-apples perspective in terms of project to project, would it also show that the consulting margins are holding steady in terms of like-for-like type projects? And how should we think about the SG&A, you know, going forward, particularly if, you know, things soften a little bit? I think most people are still at an early stage in terms of trying to determine what the environment's gonna be like.

Great. Well, Mark, if you think about the nature of the commercial consulting work, as we do more, it becomes a bigger percentage of the business. Obviously, that's gonna lever up our gross margins and will continue to contribute to expanding EBITDA margin. If you think about adding capabilities like TopBloc and Workday, what we do in ServiceNow, more work that we're doing in AI and data, those are all areas where we can get an expanded gross margin. So on a like-for-like basis, just based on the nature of the work and the value proposition for the customer, you're seeing that expand in and of itself, you know, to your first question. And then as it relates to SG&A, you know, our model, which is bringing the talent for this work on a contingent basis, is gonna continue to support the business whether, you know, revenues move up or down. We have business stabilizers that will help us, you know, both at the gross profit and gross margin level. And then, you know, with the highly variable cost structure in SG&A, and that's gonna continue to be an important stabilizer of the business. So you see all this working in real time. Remember, it doesn't always happen in the moment. So in the month or the quarter, we may have a little bit of a leader lag as it relates to the business stabilizers kind of flowing through. But if you look over a period of quarters, you can kind of consistently see that the SG&A, you know, and the stabilizers therein around our model are working as they should.

It certainly is evident. Just for my follow-up real quickly, can you talk a little bit, maybe this is a question for Ted or Shiv or Rand, but what are you hearing from your commercial clients with regards to not the ongoing projects, but, you know, projects that they may have been, you know, starting up, you know, a month from now, six months from now, later on, like, what's the level of certainty that some of those projects are gonna go through versus we're kind of in a wait-and-see mode? And how variable do you think that could be based on your cumulative experience through multiple cycles?

Sure. Mark, well, so far, what we're seeing is, you know, clients are still continuing to expand in the areas of strategic importance like data, AI, and cybersecurity. I don't think there's enough evidence of them slowing some of that down. Obviously, with the macros that we see with some of the uncertainty around, we're waiting and watching across all sectors. But so far, we're not seeing evidence in strategic areas of technology investment, whether it's around cloud, innovation on cloud, data, AI, cybersecurity, of any sort of slowdown.

So, Mark, if you think about the commercial customers by industry, they're all a little bit in a wait-and-see mode just to add to what Shiv said, which ultimately is gonna make them cautious here and there. They're gonna stick with it in certain areas, and I think to Shiv's point, they're gonna play their cards here for a little while before they dive in at higher levels of spend. I mean, if you even look at a third-party data point like ISG, I think they've come out and said that basically, IT services right now are gonna be kind of flat, you know, based on the cautiousness and the wait-and-see mode, if you will, around tariffs. What's going on in the market. So they're, and look, we think about our business the same way. There are certain critical areas of advancement that we need to make in our own systems around data, the use of generative AI, and other things that we think are gonna be critical for the future. And then there are some areas that are more discretionary, and we can hold back on right now. So I always think our clients are thinking about this and managing it the same way we look at our own business.

That's great. Thanks for the color, and congrats on the market.

Next question is from Kevin McVeigh from UBS. Please go ahead.

Great. Thank you so much, and thanks for the detail. Could you just drill down and help us understand how much TopBloc contributed to the first quarter in terms of revenue and how it impacts the Q2 guidance, I guess, in terms of revenue, EPS? I want to start there if I could.

Yeah. So Kevin, we gave when we made the acquisition, what our expectations were for the year for TopBloc, so just refer you back to that. We only had it for a few weeks during March, so its contribution was kind of immaterial, if you will, to the broader results. And again, as it relates to what may entail for the second quarter or the rest of the year, I mean, pretty easy to do the math on what we laid out before.

Okay. Then I guess, you know, I know you talked about some initial DOGE impact, Ted, but do you think we're through the process at this point? Or do you think there could be more potential adjustments? Or, you know, how are you thinking about that, and, you know, have the conversations changed at the federal level at all?

Yeah. Rand, do you want to take that one?

Yeah. I mean, I think we've all kept in touch with this day to day, and we think that, listen, DOGE will still continue to seep into clients' environments. But most of our discussions are with the clients and around the technology and what they're spending money on. So, I mean, I guess I would say, Ted, that DOGE is not the premier person that's second-guessing anything at this point. Clients are trying to do a good job of controlling their own spend, and that's been true for a while, and that's kind of what continues on. So I think we're not looking over our shoulder. We're just trying to do good work that provides cost efficiency and modernization of their systems. And remember, on the federal side, Kevin, we're very involved in what I call the enablement of mission systems. As Ted alluded earlier, we do very little in just the general program management consulting area of the business. So we're much more close to the mission, the systems, and even the weapon systems around security, around connectivity of the technology.

Very helpful. Thank you.

Next question is from Trevor Romeo from William Blair. Please go ahead.

Hi. Thank you very much for taking the questions. The first one I had was just on the guidance, I guess. Appreciate certainly being a bit wider than normal in this environment. And thanks, Marie, for the comment on the DOGE impact. But I was just wondering if you could maybe speak a bit more specifically to what's embedded in the guidance for each segment and maybe, you know, where some of the upside or downside could be there?

Hi, Trevor. So from a guidance perspective, you know, the information that we give is really on a consolidated basis. So to your point, we did highlight the potential impact of DOGE, which was less than 2% on total revenues, and then provided the other factors for the guidance perspective.

If you just think about the kind of commentary around all of it, Trevor, I mean, I think you we would say things are pretty steady. So as you, you know, maybe as you just think about, you know, we've been in kind of a pretty stable environment here as it relates to revenue per billable day, coming out of the second half of the year and into the first half of the year. We had kind of a normal viewpoints of adjustment that we would always see at the beginning of the year, especially in our commercial business, that's just natural as projects kind of come to an end and then begin to ramp up. And I don't think our outlook on the go-forward here is gonna, you know, we would say anything different, but continued stability here. So if you just think about that, our revenue per billable day basis, that's probably the best way just to give it some color.

Okay. Thanks, Ted and Marie. That's helpful. And then for the follow-up, just thinking, I guess, as clients may even look to go further into cost-cutting mode, potentially here, how are you thinking about the opportunity for your Mexico nearshoring capability? Is that an area where you're either seeing or you would expect to see a little bit more resilience in demand in this type of environment?

Yeah. Well, the answer is yes. We've seen that over the past year, year and a half, two years we've had and built Mexico up. So the fact that it continues to grow is indicative of the cost, you know, the cost pursuit the clients have. But I think the future is really around our ability to weave technology together. Shiv used the word digital engineering across the different data domains, cloud domains, and technologies. So will Mexico be a part of all that? Yes, it will be.

Okay. Thank you very much. Appreciate it.

Next question is from Jeff Silber from BMO Capital Markets. Please go ahead.

Thank you so much. Wanted to shift back to the federal government segment. If we could just step back, maybe you can just describe what are the mechanics if an agency, you know, wanted to cut a contract short before it expires, how much notice do they have to give you? You know, any details around that and the implications would be great.

Yeah. Well, look, a lot of this is new, Jeff. Right? So we're kind of seeing this for the first time. I think that, you know, if you think about what's been going on, there's maybe two levels that the DOGE group has been pursuing certain contracts that happen to be on the radar screen for whatever reason that they are. Right? And there was an initial wave of that. And then following that, there was an edict to the agency heads to find certain cost savings or efficiencies and report back on those, and they've been going through that for the last few months. On the second part of that that I mentioned, we've been engaged with our customer on a one-by-one basis as they, you know, look at the contracts and look at the, you know, the delivery and whether they're getting the value that they're getting for those. And then, you know, once they make those decisions, they'll, you know, decide to, you know, make a what I'll just call modification to that arrangement or to leave it in place. And so we do that real-time with them as that comes up. And so, you know, I think that it's, I don't mean to be overly vague about your question, but I don't think that there's a very specific set of rules here to follow as they go through this. Obviously, they can do what they say is terminate a contract for convenience and give a certain time period in order for that to come to an end, and that gives us, you know, time to react as well as the other contractors to react on that. But, again, I think as the client goes through this, it's kind of real-time contemplate.

Okay. I understand. And, obviously, you know, a lot has changed since you set your budget for 2025. And I'm just curious about your own internal plans in terms of investing, hiring, capital allocation. Any changes being made to that for the rest of the year?

Look. I guess we're making real-time assessments about where to allocate investment inside of the business. Where we see that there's real opportunity. I think Shiv did a great job going through areas where we still see good solid demand with our clients and new bookings. And so we're making sure that if there are areas where, you know, we're not getting the bang for the buck in investment that we're reallocating it to those areas. I think that's probably the most important thing. Our principles around capital allocation don't change too much here. I mean, those are kind of longer-term thoughts about what is the best allocation of capital for the business and for investors. And, you know, we talked about strategic M&A. We talk about, you know, next to that, the opportunity to repurchase shares and return capital to investors, and so those things don't change on just a one or two-quarter basis. I mean, that's kind of a principle of the business, if you will, going forward. So anyway, hopefully, that helps. And, you know, I think we just have to play this as we go, you know, through the year because obviously things are developing real-time here. And so, you know, being really smart about recognizing every expense in the business, making sure that it's pointed towards a place where we can get a good productive outcome and ultimately EBITDA margin for that is critical.

I understand. Thanks so much for the color.

The next question is from Surinder Thind from Jefferies. Thank you. One of the questions I'd like to start with is just kind of how we should be thinking about intra-quarter visibility at this point and the willingness of clients to change minds, start projects, delay projects relative to how they've maybe been behaving over the last six months or so, given that you guys did widen the range. Like, I would have assumed intra-quarter visibility would have been very high. Right? Ninety-five, ninety-eight percent.

Yeah. Well, thanks, Surinder. I mean, I'll let Rand take the overall question. I will tell you that, you know, I think it's just the right thing to do here to widen the range because there's a new piece of news almost daily here that all of our clients are reacting to. Is it either like the tariffs or DOGE. So I think just good caution is what's behind widening the range. Rand, on the first part of that in terms of what you're seeing start starting, stopping projects.

Listen. On the government side, we just discussed with Jeff. It's, you know, they have provisions in the contracting process to be able to stop work for convenience, and that can be pretty quickly or real-time as Ted said. On the commercial side, I think we, Surinder, we've seen for the last six months cautiousness and ensure that when they're going to spend money on IT, that they're going to get some value and return and cost saving. Driven toward cost saving. I don't think we've seen a change in the behavior of the client on the commercial side on that side. So, you know, it's just prudence, if you will, to be focused on their costs, and I think they're very focused on their cost today just as much as they were six months ago. So it's, I'd say it's pretty steady.

Got it. That's helpful. So I think the interpretation would that be is the caution is coming more from the government side or the ECS side of the business then. In terms of widening the range, that's where the greater amount of uncertainty is. I think that's the way it would interpret your comment.

Well, I don't know if there's no change in commercial. So, yeah, I don't know if I would interpret it that way, Surinder. I think, generally, there are macro issues in both market segments. And so, you know, we're just recognizing that, look, if we were having a problem with projects and commercial being stopped, we would report it to you. You would see low bookings because we would have the bookings and we're not seeing that. But we are seeing a lot of customers, you know, think hard about the go-forward because they're wondering how they may be impacted either by tariffs, inflation remaining high, or other things that affect their ultimate marketplace and then could in turn affect their investment. So I would just interpret it as just general caution. And, look, we only expanded the range by $10 million on the top and a few million on the bottom. So it wasn't like this. This is not as draconian as you will as maybe if you think back to COVID, we actually didn't give guidance for the second quarter. We gave a pretty dramatic two scenario set of ranges or potential outcomes, I shouldn't call it a range, potential outcomes. So this is nowhere near that.

Okay. That's actually quite helpful. And then as a follow-up, just in terms of when I think about the 2Q margins, at least relative to my expectations that the quarter-over-quarter improvement isn't, you know, quite as significant as it has been in the past. You've kind of walked through the puts and takes of, you know, the loss of some high-margin contracts and so forth. I would have expected TopBloc to offset that. And so can you help me understand the margin dynamic here? Because I think unlike the second person that asked the question on the call, I view it as there's more margin weakness here than anticipated. Relative to the second person's comments. For the second Q&A person.

Right. Go ahead. Yeah. Surinder, when you think about the Q2, there's a couple of factors to consider. First, from a business mix perspective, so we have a slightly higher mix of federal revenue, as you know, carries a lower margin than commercial. And then what you just referenced and we've been talking about, even on the federal side, it multiplies slightly because of the impact of DOGE, and those DOGE revenues have higher margins. So the combination of that offset by the incremental forward TopBloc gets us to where our range is.

Got it. So I guess put it another way, then 2Q should be kind of the average run rate going forward. Or that starting point on a go-forward basis.

Yes.

Next question is from Joseph Vafi from Canaccord Genuity. Please go ahead.

Hey, everyone. Good afternoon. Welcome on board, Shiv. Just could we drill down a bit on financial service commentary, Ted? I know at least last quarter, it sounded like some of the bigger banks were starting to act just a bit better. Heard your commentary, but just wondering kind of how you see the cadence of momentum with those larger bank customers here kind of real-time versus kind of what we saw in Q1? Now I have a quick follow-up.

Yeah. Joseph, Joe, Ted did mention, I think, in the last quarter that we saw an uptick in rec flow, for example, from big banks that's on the assignment side. And some good pipeline in the consulting side. What we've seen in the first quarter was it just leveled off. Just stayed pretty consistent from the first week to the last week. That basically showed flatness in the business flow, if you will, from the big banks. Actually, we've talked to some of the big banks, and I think some of them are just doing what we've just talked about in the last couple of minutes with Jeff and Surinder. They're just waiting to see how the macros go, make sure they have their things lined up on individual projects, and we haven't seen any major movement back up yet from the financial from the big banks. Other sectors, other parts of the sector, I think Ted commented on during the script, but not from the big banks.

Got it. Thanks for that, Rand. And then just one more on DOGE. I mean, we kind of talked about some scope changes and other things. Areas where there's focus, areas where it's not. Just in general, I was wondering if you have commentary on kind of the velocity of adjudications going on. If you know, if you're seeing that, the DOGE effect kind of ripple into slower decision-making on adjudications, or is it just really more in the existing book and backlog? Thanks a lot.

Yeah. That's a really good question. And what we've seen is in the velocity from DOGE to our end clients, I mean, agency heads, that velocity is less visible to us. What we have seen is agencies making sure that up and down the chain of command that they're in alignment with what they're doing, whether it's curtailing work or more importantly, continuing work as Ted mentioned, we've won a few pieces of work in this quarter and a couple of key client areas, and every piece of work that gets funded out through the contract is getting checked off by more levels in the agency. So it's more in the agency, I think, is what we would say to you, Joseph. Joe, not so much the DOGE interaction with the agency. And, of course, that's where we wouldn't be privy to that at any rate.

Sure. That makes sense. And thanks for that color. Thanks, Rand. Thanks, everybody.

This concludes the question and answer session. I'd like to turn the floor back to Ted Hanson, CEO, for any closing comments.

As we conclude, I'd like to express my gratitude to the entire fabulous ASGN Incorporated team for your dedication and hard work throughout the past quarter. We have an exceptional team, and together, we'll continue to advance our business. Thank you again for joining us today. We look forward to speaking in July on our second quarter call.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.