Earnings Call Transcript
Everforth Inc (EFOR)
Earnings Call Transcript - ASGN Q4 2021
Operator, Operator
Greetings. Welcome to the ASGN Incorporated Fourth Quarter and Full Year 2021 Earnings Call. Please note, this conference is being recorded. I will now turn the conference over to your host, Kimberly Esterkin, Investor Relations. Thank you. You may begin.
Kimberly Esterkin, Investor Relations
Thank you, operator. Good afternoon, and thank you for joining us today for ASGN's Fourth Quarter and Full Year 2021 Conference Call. With me are Ted Hanson, Chief Executive Officer; Rand Blazer, President; and Ed Pierce, Chief Financial Officer. Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call. For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com. Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income, and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between 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.
Ted Hanson, CEO
Thank you, Kimberly, and thank you for joining ASGN's Fourth Quarter 2021 Earnings Call. The fourth quarter capped off an extremely productive year for ASGN, with momentum building throughout Q4 and positioning us very well for 2022. I want to express my gratitude to all of my teammates at ASGN for your exceptional performance and dedication to our company and our clients this year. Your efforts are the reason why ASGN is a market leader. Beginning with the fourth quarter, revenues totaled $1.1 billion, up 17% year-over-year and ahead of the top end of our guidance range. Adjusted EBITDA totaled $130.3 million, an improvement of 26% year-over-year and also surpassing the high end of guidance. Outperformance of the Commercial segment led by our consulting business, along with higher productivity across the company, drove our progress in the quarter. Our Federal Government segment experienced an improving business mix, resulting in impressive EBITDA and gross margins. More on that shortly. Our success in the final quarter of 2021, combined with the strength of the prior three quarters, resulted in record full-year revenues of $4 billion and adjusted EBITDA of $483.1 million, increases of 14.5% and 23% year-over-year, respectively. Our Commercial segment accounted for $2.9 billion, or 73% of consolidated revenues in 2021, while our Federal Government segment accounted for $1.1 billion, or 27% of total annual revenues. Free cash flow from continuing operations totaled $246.9 million for 2021. Over the past year, we maintained a very balanced and flexible approach to capital allocation, investing in our organic growth, making strategic acquisitions that support our long-term growth strategy and providing returns to our shareholders. During 2021, we spent $181.3 million on the repurchase of our common stock, of which $13 million went under the new two-year $350 million repurchase plan approved by our Board of Directors in December of last year. While we will leverage our share buyback program this year, we continue to believe that M&A remains our best use of and highest return on invested capital, and I will provide an update on our recent acquisitions momentarily. Ultimately, the acceleration of our revenue growth throughout Q4, the momentum we are witnessing in Q1 to date, and our first-quarter 2022 guidance, which Ed Pierce will discuss shortly, all indicate that our business remains on an upward trajectory. While nearly all of our employees continue to work remotely, we are not experiencing any impacts of note from the recent surge in the pandemic. Our productivity and volume of work remains very high. Keep in mind that as a leading provider of IT services and solutions, our business has very steady and predictable trends. These predictable trends include not just our revenue growth which remains above market, but also our continued margin and cash flow expansion. In other words, ASGN is not at the whims of fleeting technology trends. Our job is to implement technology and business solutions that are in demand by our clients. These digitization and transformational trends are in their early innings of growth and have long trajectories ahead of them. This type of work provides us with a strong pathway for continued success across the end markets we serve. With that said, let's turn to more detail on our segment performance for the fourth quarter, beginning with our largest segment, Commercial, which services large enterprise and Fortune 1000 companies. Our Commercial segment had a fantastic fourth quarter driven by strength in all service areas. For the fourth quarter of 2021, the Commercial segment generated revenue of $790.5 million, up 24.1% year-over-year and up 22.7% organically. Growth in this segment reflected double-digit growth in commercial consulting, creative marketing, and permanent placement services. Apex Systems continued to report very strong growth, and for the second time, Creative Circles and CyberCoders surpassed their 2019 quarterly revenues. From an industry perspective, all five commercial industry verticals for Apex Systems experienced growth during the quarter with every vertical achieving double-digit growth on a year-over-year basis. Apex System's commercial and industrial accounts were up double digits both year-over-year and sequentially due to the continued strength across all sectors with particularly high growth in retail, energy, utilities, airlines, and airfreight accounts. Our Technology and Telecommunications or TMT vertical was up double digits year-over-year. Within the vertical, technology and telecommunications accounts saw significant growth over Q4 2020. Government and Business Services was up double digits led by business services with high double-digit growth, while aerospace, defense, and government accounts were down roughly 1% versus Q4 2020. Financial Services accounts were up high single digits with the largest growth across insurance, fintech, and wealth management accounts. Healthcare continued with double-digit growth driven by provider and payer accounts. Revenues derived from our work in applications and project management, including agile, digital, ERP, and cloud continued to perform well. Apex Systems top accounts and retail and branch accounts all achieved double-digit growth rates for Q4. From an industry perspective for the quarter, top account revenue at Apex Systems was up in all five industry verticals we target, while Creative Circle also posted positive growth across their top accounts. Permanent placements at CyberCoders exceeded our expectations. Gross margin for the Commercial segment was 32.5%, up 130 basis points from Q4 of last year due to growth across our high-margin commercial consulting, creative digital marketing, and permanent placement businesses. EBITDA margins were flat compared to Q4 2020. Higher gross margin and higher productivity in our workforce was offset by higher variable incentive compensation due to the outperformance of our expectations for the quarter, as well as investments in new headcount to support demand opportunities across our account portfolio. We also continue to expand our commercial consulting revenues during the quarter. Commercial consulting revenues totaled $191.7 million in Q4 2021, a significant increase of 75.2% year-over-year and up 67.2% organically. As you may recall at our Investor and Analyst Day conference this past September, we projected to reach $595 million in commercial consulting revenues for 2021. I'm pleased to report with our strong close to the year, commercial consulting revenues totaled $641.2 million. Growth in consulting revenues was primarily driven by existing accounts, and our pipeline of future opportunities continues to grow at high double-digit rates and is trending positively in the first quarter. ASGN's consulting offerings remain an important source of value we provide our clients. So we continue to build out solution strengths and identify acquisition opportunities that expand our consulting capabilities and service to our clients. To illustrate our solution capabilities and growth, our recent acquisition of the Avaap Infor business unit gave us added capability in healthcare and manufacturing ERP solutions. With this added strength, we won a major opportunity in Q4 to support a prestigious hospital's ERP process and move to the cloud. While this account was a long-standing account for Apex Systems, the added ERP solution strength gave us the opportunity to expand our relationship by bringing this solution to one of our existing clients. This is a great example of how we are building and acquiring new solutions and taking that strength to the market. Now let's turn to the Federal Government segment, which provides mission-critical solutions to the Department of Defense, intelligence agencies, and other civilian agencies. Revenues for the Federal Government segment totaled $263.3 million for the fourth quarter, consistent with the prior year period on a very tough comparison. Flat year-over-year revenue was a result of the discontinuation of a low-margin contract, offset by revenue generated from our IndraSoft and ERPi acquisitions. Importantly, even with this difficult revenue comparison, we saw an improving business mix that resulted in an adjusted EBITDA margin of 11.3% for the quarter, up 230 basis points year-over-year. Gross margin also improved and was up an impressive 560 basis points year-over-year. The Federal Government segment's new business pipeline remained strong with $131.1 million in new business awarded during the quarter and a book-to-bill of 1.1 to 1 on a trailing 12-month basis. Contract backlog totaled $3 billion at the end of the fourth quarter, a healthy coverage ratio of 2.6 times the segment's 12-month revenues. In Q4, examples of some of the contracts awarded to our Federal Government segment included three contracts that were plus-ups for important mission-critical work, including an award to support activities in the development, fielding, and sustainment of AI solutions for the DoD Combatant Command mission; a second award that focuses on licenses, training, and experience in AI-related analytical toolkits for the Air Force; and a third award for AI-related labeling and expertise for classified mission activities. Also during the quarter, we won a contract to provide system engineering, technical, and advisory services to the Defense Advanced Research Projects Agency's Tactical Technology office; a contract to provide software engineering and application modernization to the Air Force; and a follow-on contract to provide mobile application development and mobile device management for a premier law enforcement customer. With that, I will now turn the call over to Ed Pierce, our CFO, to discuss the fourth quarter financial results and our first quarter 2022 guidance. Ed?
Ed Pierce, CFO
Thanks, Ted. Good afternoon, everyone. As Ted mentioned earlier, our financial performance for the fourth quarter and full year 2021 exceeded our guidance estimates. This performance reflected double-digit growth of our Commercial segment, solid performance of our Federal Government segment, the contribution from acquisitions, and the expansion in gross and adjusted EBITDA margins in both business segments. For the quarter, revenues were slightly above $1 billion, up 17% year-over-year and included $41 million from acquisitions made after Q3 of 2020. Gross profit, operating income, and adjusted EBITDA were all up year-over-year and grew at higher rates than revenues. Revenues from our Commercial segment were $790.5 million, up 24.1% year-over-year. And for the fourth straight quarter, all commercial divisions were up year-over-year. The revenue contribution from businesses acquired earlier in 2021 was approximately $8.8 million. Revenues from our Federal Government segment were $263.3 million, in line with last year and our guidance estimates. The revenue consistency for the quarter was achieved despite a difficult prior year comparison, which had benefited from higher program spending on certain cost-reimbursable contracts and from revenues on the web services project that was not renewed in Q3 of 2021. Revenues for the quarter included a contribution of $32.2 million from acquisitions made after Q3 of 2020. Gross margin of 29.8% exceeded the high end of our guidance estimates and was up 310 basis points over Q4 last year. Both business segments reported year-over-year expansion in gross margin driven by improvements in business mix. Gross margin for the Commercial segment was 32.5%, up 130 basis points year-over-year. This expansion was a result of double-digit growth of our high-margin commercial consulting and creative digital marketing services. Gross margin for the Federal Government segment was 21.6%, up 560 basis points as a result of changes in business mix. This improvement resulted from one, a lower level of revenues from certain cost-reimbursable contracts that had revenue surges in 2020; two, the contribution from high-margin businesses acquired in 2021; and three, higher profitability on certain firm-fixed-price contracts whose initial term ended during the year. SG&A expenses were $202.4 million, up 32.3% year-over-year. The increase related to high year-over-year growth in the business, including double-digit growth of high-margin commercial revenue streams, which carry a higher level of expense than IT staffing and federal government services, higher headcount investments to support growth, and higher incentive compensation and healthcare expenses that were both down in 2020 from historical levels. Income from continuing operations was $65.4 million, up 35.4% year-over-year. Adjusted EBITDA was up 26% year-over-year, reflecting an expansion of 90 basis points in our adjusted EBITDA margin to 12.4%. At year-end, cash and cash equivalents were $529.6 million, and there were no outstanding borrowings under our $250 million revolving credit facility. Our senior secured debt leverage ratio was 1.02 to 1. Our financial estimates for the first quarter 2022 are set forth in our earnings release and supplemental earnings materials. These estimates are based on current production trends, assume 63 billable days in the quarter, which is 1 more day than Q1 of 2021, and include an estimated revenue contribution of $39.6 million from acquisitions made after Q4 of 2020. Our estimates also consider the payroll tax reset, which occurs at the beginning of every year, resulting in lower gross and adjusted EBITDA margins in the first quarter. For the first quarter of 2022, we estimate revenues of $1,033 million to $1,053 million, income from continuing operations of $54.8 million to $58.4 million, and adjusted EBITDA of $117.3 million to $122.3 million. With respect to the full year 2022, we expect revenues will grow above market rates and gross margin will expand primarily due to double-digit growth of our high-margin commercial consulting and creative digital marketing services. We expect our adjusted EBITDA margin for the year will be in line with last year as we continue to invest in our operating platform to support high sustainable growth of the business. Thank you for your time, and I'll turn it back over to Ted for some closing remarks. Ted?
Ted Hanson, CEO
Thanks, Ed. As many of you are aware, over the past several months, we've announced a number of leadership changes, each of which has been part of our long-term succession planning. I'd like to provide a brief update on these changes, beginning with the promotion of Rand Blazer to President of ASGN. Rand is approaching his tenth anniversary with ASGN and 15 years leading Apex Systems. Since joining ASGN, Rand has been integral to our company's growth and, in particular, the expansion of our Commercial Consulting business. As President of ASGN, Rand will be well positioned to continue to provide leadership across our units and drive our growth strategies. We are also installing ready-made leaders at the helm of each of our operating units. Sean Casey, with more than 25 years in successive roles within the business, has assumed Rand's former role as President of Apex Systems. While John Heneghan, whom we spoke about in detail last quarter, has become President of ECS. Both Sean and John have worked hand in hand with our executive management team since joining ASGN and are well equipped to succeed in their new positions. Along with these previously announced promotions, we continue to make investments in adding professionals to our team who will help drive our revenue growth and margin expansion. Some of these professionals have joined us organically, some from peer firms, and others arrived through acquisitions. ASGN's ability to not only identify and fund strategic acquisitions but to also integrate them quickly and efficiently is a competitive advantage. I'm pleased to note that as of December 31, all of our previously announced acquisitions have been fully integrated. This then ultimately brings you back to where we began our discussion today - our sustainable business model. ASGN has evolved its business to be well aligned with multiyear IT and digital transformation trends. Each of these trends are in their early innings of growth and present strong tailwinds going forward. As evident in our financial performance, our business has already benefited from these secular trends, and we are well positioned to continue on an upward trajectory. In fact, we are tracking ahead of the model in which our three-year targets introduced this past September were set. It is these favorable industry tailwinds that will provide us with a consistent pipeline of higher-margin consulting work going forward and help to grow our historically strong free cash flow generation capabilities. We will deploy this capital into further expanding our higher-margin consulting services to boost our growth and ultimately our profitability for the long term. ASGN is in the right end markets with the right capabilities and has the right team in place to maintain our leadership in the commercial and government spaces. I'm confident that our unique business model, strong cash flow generation, and strategic capital deployment will continue to position us for success going forward. With that said, this concludes our prepared remarks. On behalf of the Board of Directors and the entire ASGN team, we thank you for your continued support of our company. We will now open up the call to your questions.
Operator, Operator
Our first question comes from Tim Mulrooney with William Blair.
Timothy Mulrooney, Analyst
Yes. Congrats on the nice quarter, and Rand and everyone else, congrats on the promotion. Just a couple for me on margins. So I mean, your EBITDA margin guide for the fourth quarter, I mean it was looking for something close to 11.7% at the midpoint, and you came in well ahead of that. Now you listed some of the reasons for why you saw margin expansion. But can you talk about the primary factors that drove the outperformance relative to your internal expectations?
Ted Hanson, CEO
The performance was largely driven by our business mix. We experienced a stronger outcome in the Commercial segment than we anticipated, with significant contributions from Creative Circle, CyberCoders, and our consulting business. These factors, particularly the consulting segment's overperformance, helped boost our gross margin, which in turn improved our EBITDA margin. In the Federal Segment, Ed pointed out two key factors: our strategic decision to bid on some lower-margin contracts, which contributed to our results, and the better-than-expected performance from our new acquisitions, IndraSoft and ERPi, in the latter half of the year. This faster growth in the Commercial segment provided insights into specific areas that exceeded our initial expectations.
Timothy Mulrooney, Analyst
Yes. That's really helpful. And then my second question, this might be for John if he's on the call. On the government side of the business, have you continued to see more RFPs released that were delayed in 2021? This is something that I know you've talked about the last several quarters. Have you seen more releases there on those delays? And then how would you characterize the pipeline now versus a year ago?
John Heneghan, President of ECS
Yes, it's improved compared to before, Tim. However, the market still isn't functioning quite as well as it did prior to COVID. We're noticing a few more opportunities opening up and we are responding to them. Yet, we're still somewhat limited by the challenges of having the right personnel in place to make government decisions. In these situations, they're opting to extend contracts rather than re-bid large multiyear awards. Nonetheless, I believe each month and quarter shows some progress. We expect that this year we will have opportunities to start bidding on larger projects, so we need to keep an eye on developments in the federal marketplace.
Operator, Operator
Our next question comes from the line of Tobey Sommer with Truist Securities.
Tobey Sommer, Analyst
I was wondering if you could dig into that hospital customer example that you had, just to frame things sort of how much revenue would Apex in its traditional form or legacy form garner from a customer like that. I don't expect you to name them, of course, versus what that looks like when you sort of add consulting to the mix?
Ted Hanson, CEO
Sure. I'll let Rand take that one. Rand?
Rand Blazer, President
Yes, I believe these consulting opportunities significantly enhance our potential, Tobey. We previously had a consistent amount of staffing business with this account, but now it has escalated to a much higher level. This represents a major undertaking and is vital for that account. You could say that in this case, it likely exceeds a mere doubling. Does that address your question?
Tobey Sommer, Analyst
It does. It does. And with respect to sort of an average customer in the portfolio, I don't know how special this one is in terms of size and the amplification of the opportunity from consulting. Is that a fair benchmark on an average customer basis in terms of the opportunity?
Rand Blazer, President
I think the opportunity is there, Tobey. Let me say, first of all, that this is what we envision. This is exactly what we envision, being able to fulfill the staffing requirements and then do the important, even more value-added driven work for them, which can add to the revenue stream, okay? And in this case, maybe it's doubling. I wouldn't expect in every case. I think we've reported in the past, we've penetrated only a portion of our account base with consulting work. Over time, that work started as, I think, more than nibbles, Tobey, but now it's seven-figure engagements that go a year and sometimes even multiyear. So I think you're going to see the consulting work grow in an account as we go, plus we have to increase the number of accounts we do that work for. Does that give you some sense?
Tobey Sommer, Analyst
It does. Regarding the CyberCoders business, could you provide more details about the revenue growth and discuss how you are managing hiring to capitalize on this market?
Ted Hanson, CEO
So Tobey, we don't release the growth rates of the individual units. But certainly, CyberCoders' contribution is up. They're well over 2019 levels. They're consistently growing sequentially. And that's just a factor of the labor market, the permanent placement offering. But as you know, it's not a large part of what we're doing here, but it's certainly contributing not as much on the top line but to the margin profile at the gross margin level. So we are certainly investing in it organically so that they can take advantage of the market opportunity as our clients ask us for that service. But also, we're very focused on investing in the other parts of the business where we have a larger end market opportunity, consulting services in the federal space and other places.
Rand Blazer, President
Tobey, it is worth mentioning too, the CyberCoders approach to the market is more of an electronic approach. So they're scouring digital fields to see where the opportunities are and then jumping in to fill them. So they give us, if you will, an adjunct to our rest of our business in that they are an electronic component to identifying opportunities and responding to them. And in this day and age, right now, the electronic means or digital means they're critically important to clients because they're looking for people.
Tobey Sommer, Analyst
Makes perfect sense. I wanted to ask a broad question about capital deployment as my last one. Ted, are you seeing opportunities for larger acquisitions than you've done recently, which has primarily been small tuck-ins? Because that share repurchase that you authorized, some clients were wondering whether that was indicative of a smaller opportunity set in front of you.
Ted Hanson, CEO
No, I don't think so, Tobey. Look, the authorization is bigger because we're a bigger company than two years ago when we put our last authorization out there. So I don't think it's a reflection on what we believe the opportunity is in M&A. We are definitely seeing all flavors of acquisition opportunities. We're seeing things in the strategic tuck-in category that are sub-$100 million. We're actively looking at things that are larger than that, that would also be strategic tuck-ins, but they would be at more scale, call it $100 million and above. And so we feel good about the pipeline. There's definitely been a coming into the end of the year and in January, a little bit of a lull in new businesses coming to market from an M&A standpoint. But I think that was just a small moment in time as deals were rushed to get done at 12/31 because what we're seeing here in January and now building into February and later in the first quarter is a pretty good flow of opportunities. So we're pleased with that part of it, and we just have to keep working on one-by-one.
Tobey Sommer, Analyst
Great. So it sounds like that's a kind of seasonal phenomenon. I appreciate the color.
Operator, Operator
Our next question comes from the line of Jeff Silber with BMO Capital Markets.
Jeffrey Silber, Analyst
I just wanted to go back to the federal government segment. Actually, I had a two-part question. You mentioned the lower growth rate, not only because of tough comps but also the decision to discontinue a low-margin contract. Are there any more contracts like this to come? And then also, gross margins were extraordinarily high. I know that's one of the reasons. Is that the new basis we should be using going forward for this segment? I know there's some seasonality but just excluding that?
Ted Hanson, CEO
I'll address the first part of your question and then let Ed respond to the second. Jeff, thank you for your question. We don't see any additional concerns. We are highly focused on ensuring revenue quality and how effectively that translates to our EBITDA. Therefore, this decision was not difficult. Occasionally, we pursue opportunities that offer potential for greater value in the future, but in this instance, that did not materialize. I believe the team made the correct choice not to bid in this case, and you can see the effects in our bottom line. Ed, could you discuss gross margins moving forward?
Edward Pierce, CFO
Yes. I mean, look, I think Q4 was a high watermark, Jeff. As you probably read in our earnings release, they benefited also from some adjustments related to firm fixed-price contracts that ran their initial terms in the year. And so there was a pickup in gross profit related to that in Q4. So on an ongoing basis, again, this is probably higher than what they're going to perform, okay? And anyway, I think it's probably about 1 to 2 points higher if you look at it over the course of the full year.
Jeffrey Silber, Analyst
Yes. I appreciate that. My follow-up question is about the recruiting environment. But I want to focus on your internal recruiters. I know we've talked a lot of companies in the space, both private and publicly held, about the higher-than-normal turnover in those positions, given everything that's going on. I'm just wondering if you can comment on what you're seeing.
Ted Hanson, CEO
Rand, do you want to take that one?
Rand Blazer, President
Well, Jeff, it's a good question and comment. Those firms are trying to pluck our recruiters because they're so good. So we are having some turnover in our recruiters, particularly though, in the first year or so of them being with us because of our compensation system. We're a high incentive comp business, and you can make some great money, but you've got to build that book of business, if you will, over a period of 12 to 18 months. So we are experiencing some turnover probably like it's going across the industry. But this has been going on for a couple of years now with us, where instead of in the 20% turnover range, we're higher than that. Having said that, the productivity of our force has just been astronomical this past year and all the combination of things we do, including automation, more automation of the recruiting process, making it easier for our recruiters to handle more workload, leveraging the more senior recruiters with junior, the handoff between the account managers. I mean, there's a whole host of things we can do to improve the requisition flow, where the requirements to us can make it easier for our recruiters and make it more profitable because they're going to hit on them, okay, by virtue of the quality of the requisition, all right? So we are facing turnover. It hasn't hurt us in terms of overall performance but it's not something you want to see forever. We've also made some adjustments in compensation for those first-year recruiters to help them out a little bit. So we're very mindful. We're very much watching. I wish the others would stop tapping into our team, but I'm not sure that's going to happen.
Operator, Operator
Our next question comes from the line of Surinder Thind with Jefferies.
Surinder Thind, Analyst
I'd like to start with a question about the success of the Commercial Consulting business. Obviously, the healthcare example that you guys provided. Can you talk a little bit more about how the consulting service fits into the overall picture of IT services consulting in general? Like who are you taking market share from at this point? And in the case of the healthcare example, did you displace an existing consulting firm? Or how should we think about that dynamic?
Ted Hanson, CEO
So Surinder, I'll begin with a broad overview and then let Rand provide additional insights. One way to consider this is that there's a significant shift in how Chief Information Officers approach their tasks. While there is movement in market share, we believe we're well positioned to emerge as the leading beneficiary. Clients are choosing which firms to partner with to achieve their goals, and we have a unique ability to offer both consulting services and the necessary resources. This means clients are increasingly bringing us into their projects. It doesn't mean they aren't still collaborating with some of the major consulting firms, as they do. However, this process is driven by client preferences. Given our positioning, we are experiencing success in this area.
Surinder Thind, Analyst
Yes, I understand. Please continue. Sorry.
Rand Blazer, President
No, no. You go ahead. Go ahead.
Surinder Thind, Analyst
I wanted to ask if the client is essentially breaking down what would have been a larger project that would typically go to a major IT consulting firm. Is that what's actually occurring? It seems like there's a part of this that you can address. I'm trying to get a clearer picture, especially since your Commercial Consulting business also utilizes temporary staffing professionals. They might offer a different type of intellectual property compared to a consulting firm, which brings its own established expertise and culture. It seems like you are assembling teams, and I'm trying to grasp that dynamic.
Rand Blazer, President
First, I want to emphasize that our consulting unit delivers methodology, intellectual property, expertise, and leadership for our projects. We operate similarly to a consulting firm by providing more than just personnel; we also focus on assembling teams with the necessary experience and technical skills. Often, we can do this at a more competitive price compared to traditional consulting firms. This combination offers CIOs high-quality work, a manageable risk profile, and a favorable price point which instills confidence in their ability to achieve project goals. We are effectively communicating this value, which has resulted in continued engagements with most of our consulting clients, as is typical in a successful consulting business. It’s important to recognize that our role extends beyond merely providing personnel; we are assembling teams that incorporate intellectual property and technology expertise along with proven methodologies that can be applied to various projects. Regarding the evolution of our consulting approach, we've been developing this for 8 to 10 years. Initially, our focus was on workforce management consulting, assisting clients in building effective teams and ensuring productivity while being accountable for outcomes. Now, we have shifted towards digital transformation within modern enterprises like healthcare, providing dedicated teams to implement new ERP systems. This involves simultaneously maintaining existing ERP systems while transitioning to new software, cloud environments, and security measures. CIOs have acknowledged our understanding of their technological landscape, as well as our ability to assemble teams with the right credentials, experience, and methodologies needed to handle these extensive workloads. Given the complexity of these projects, which often take a significant amount of time to complete, we possess the expertise required for both existing and new cloud environments, cybersecurity, and integration with other systems. Our knowledge of user requirements in adapting to new technology also positions us uniquely to fill these gaps effectively.
Surinder Thind, Analyst
Yes. I think that's actually really quite helpful. And then it's a slightly different question just in terms of where we are Creative Circle, permanent placement in the prepared comments, you guys talked about double-digit growth, strong performance. Are both of those subsegments above pre-pandemic levels in terms of revenues at this point? Or where are we in that cycle? It seems like everything else is obviously very significantly above pre-pandemic levels.
Ted Hanson, CEO
I think for the past two quarters, they have been above 2019 levels.
Operator, Operator
Our next question comes from the line of Andre Childress with Baird.
Andre Childress, Analyst
This is Andre Childress, on for Mark Marcon. So my first question is just about wage inflation. Obviously, it's prevalent everywhere. How did you see that trend in Q4? How is your ability to pass that along to your clients? And if markets stay as tight and wage inflation remains as prevalent on a go-forward basis, how do you think that could impact your go-forward revenue and staffing margins, particularly on the Apex side of things?
Ted Hanson, CEO
Yes, wage inflation is definitely present. We have managed it and are able to pass those costs on to our customers through bill rates. I don't anticipate this trend changing anytime soon. Historically, we have always balanced supply and demand for highly skilled IT professionals, and we have consistently dealt with some level of inflation while communicating with our clients about it. Currently, the situation is a bit more pronounced, but our growth is primarily driven by an increase in the volume of work, along with a moderate rise in bill rates. Looking ahead, I believe we will continue to have discussions with our clients to address any increases in bill rates, as the technology and digital strategies we support are crucial to their operations. The talent required to execute these strategies is extremely important to them, which is why we have been able to maintain open communication and effectively navigate this situation. Rand, do you have anything else to add?
Rand Blazer, President
No, I think that's great. Yes, I want to make a point. A client is a client. I don't care if it's an existing client. I don't care if it's staffing or consulting, it's an existing client. And obviously, a lot of our clients were existing staffing clients. And yes, we are penetrating that base to bring new value solutions to them. And our growth is coming both from expansion of work with our existing client base, both the ones doing staffing or consulting as well as new clients. And oftentimes, consulting can be a new entree into a client where staffing may not be the entree, okay? So it's multidimensional here in terms of. And we see clients' clients. And if we can provide value to them through any of our solutions, staffing or consulting, we're happy to do that. And we're always after new clients.
Operator, Operator
Ladies and gentlemen, we have reached the end of the question-and-answer session. I will now turn the call over to Ted Hanson, Chief Executive Officer, for closing remarks.
Ted Hanson, CEO
Well, thank you again for listening to today's call. We hope everyone is staying healthy and look forward to speaking with you in April at the close of the first quarter. Be well.
Operator, Operator
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.