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AI

ASGN Inc (ASGN)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 performance was in line with guidance: revenue $0.97B and Adjusted EBITDA $93.6M (9.7%) as mix shifted further toward higher-margin IT consulting (61% of revenue) despite macro caution and a federal spending efficiency initiative (DOGE) creating modest headwinds .
  • Versus S&P Global consensus, revenue was a slight beat ($968.3M vs $966.0M*) while Adjusted EPS was a modest miss ($0.92 vs $0.945*) as mix and one-time SG&A items (software cost write-off, integration costs) weighed on profitability .
  • Q2 2025 guidance introduced a wider revenue range of $985M–$1,015M and Adjusted EBITDA of $101M–$108M (10.3%–10.6%) to reflect macro and small DOGE-related impacts (<2% revenue), with gross margin anticipated at 29.0%–29.3% .
  • Strategic catalysts: TopBloc acquisition closed March 4 and is tracking ahead of bookings, revenue and EBITDA expectations; consulting mix and commercial gross margins expanded; TTM book-to-bill 1.1x commercial and 1.2x federal signal demand resilience into recovery .

What Went Well and What Went Wrong

What Went Well

  • Mix upgrade and margins: IT consulting reached ~61% of revenue (vs ~57% a year ago), expanding consolidated gross margin 20 bps YoY to 28.4% and commercial gross margin to 32.4% (+40 bps) .
  • Bookings strength: TTM commercial bookings $1.3B (book-to-bill 1.1x) and federal new awards $1.5B (book-to-bill 1.2x) demonstrate healthy pipeline despite cautious spend .
  • Management execution and M&A: “TopBloc is tracking ahead of our bookings, revenue and adjusted EBITDA expectations,” and consulting capabilities in AI, data, cybersecurity, and cloud continued to win new opportunities .

What Went Wrong

  • Revenue declined YoY and sequential profitability pressure: Revenue fell 7.7% YoY; assignment revenue declined 16% YoY; Adjusted EBITDA margin compressed to 9.7% (from 11.1% in Q4), reflecting payroll tax reset and mix .
  • Federal softness and DOGE effects: Federal revenue declined 6.7% YoY with modest DOGE-driven cancellations affecting some higher-margin federal work; Q2 margin outlook reflects this mix headwind .
  • One-time SG&A items: $4.4M software costs write-off and $3.3M acquisition/integration/strategic costs were not in guidance and weighed on GAAP profitability .

Financial Results

Consolidated results vs prior year, prior quarter, and S&P Global consensus

MetricQ1 2024Q4 2024Q1 2025Vs YoYVs SeqQ1 2025 ConsensusBeat/Miss
Revenue ($M)1,049.0 985.0 968.3 -7.7%-1.7%965.99*Beat (small)
Gross Margin %28.2% 29.0% 28.4% +20 bps-60 bps——
Adjusted EBITDA ($M)108.3 109.7 93.6 -13.6%-14.7%——
Adjusted EBITDA Margin %10.3% 11.1% 9.7% -60 bps-140 bps——
GAAP Diluted EPS ($)0.81 0.95 0.48 -40.7%-49.5%——
Adjusted EPS ($)1.16 1.28 0.92 -20.7%-28.1%0.945*Miss (modest)

Note: Consensus values marked with * are from S&P Global.

Segment revenue and gross margin

SegmentQ1 2024 Revenue ($M)Q4 2024 Revenue ($M)Q1 2025 Revenue ($M)Q1 2024 GM%Q4 2024 GM%Q1 2025 GM%
Commercial731.5 692.7 672.2 32.0% 32.6% 32.4%
Federal Government317.5 292.3 296.1 19.7% 20.5% 19.5%
Total1,049.0 985.0 968.3 28.2% 29.0% 28.4%

KPIs and balance sheet

KPIQ1 2024Q4 2024Q1 2025
IT Consulting Revenue ($M) (mix %)594.5 (56.7%) 577.0 (58.6%) 586.2 (61.0%)
Assignment Revenue ($M) (mix %)454.5 (43.3%) 408.0 (41.4%) 382.1 (39.0%)
Commercial Consulting Bookings (TTM)n/a$1.3B; B/B 1.1x $1.3B; B/B 1.1x
Federal New Awards (TTM)n/a$1.3B; B/B 1.1x $1.5B; B/B 1.2x
Federal Contract Backlogn/a>$3.1B; 2.5x TTM rev >$3.1B; 2.6x TTM rev
Free Cash Flow ($M)62.5 88.9 6.6
Share Repurchasesn/a0.5M shares; $43.9M 0.6M shares; $50.4M
Net Leveragen/a1.86x 2.6x
Cash and Equivalents ($M)n/a205.2 107.0
Long-term Debt ($M)n/a1,033.5 1,282.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q2 2025—985–1,015 First issuance; range widened due to macro/DOGE
Gross Margin %Q2 2025—29.0–29.3 First issuance
Adjusted EBITDA ($M)Q2 2025—101–108 First issuance
Adjusted EBITDA Margin %Q2 2025—10.3–10.6 First issuance
Adjusted Net Income ($M)Q2 2025—45.5–50.5 First issuance
Adjusted EPS ($)Q2 2025—1.03–1.14 First issuance
Net Income ($M)Q2 2025—29.3–34.3 First issuance
GAAP EPS ($)Q2 2025—0.66–0.78 First issuance
Effective Tax Rate %Q2 2025—28% First issuance
SG&A ($M)Q2 2025—209.8–214.2 First issuance

Additional context: Management widened Q2 revenue range given macro uncertainty and modest DOGE-related impacts (<2% revenue) and noted the loss of certain higher-margin federal work may pressure Q2 margins; TopBloc expected to be accretive but only partial quarter in Q1 .

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
AI/Data InitiativesBuilding data platforms; early GenAI pilots; AI use cases in forecasting and automation Continued AI/chatbot and data infra projects; alliances with AWS/Azure/ServiceNow; announced Workday/TopBloc acquisition Consulting focused on AI/data solutions (co-pilots, SDLC acceleration, IT ops); AI workshops and literacy; agent assistants Broadening scope and implementation depth
Macro CautionStable demand; clients cautious on IT spend Confidence improving but turnaround not yet materialized Client optimism faded through Q1; cautious spend persists Caution persists despite pipeline
Federal (DOGE)Book-to-bill 2.1x; backlog >$3.1B; resilient mission IT DOGE priorities potentially supportive of AI/cyber/digital modernization long-term <2% revenue impact embedded in Q2; small cancellations in lower-margin civilian consulting; backlog >$3.1B; coverage 2.6x Near-term noise; long-term aligned
Consulting Mix/MarginsIT consulting ~58%; GM expansion IT consulting 59%; margins above plan IT consulting 61%; commercial GM +40 bps YoY; consolidated GM +20 bps YoY Continued mix upgrade supports margins
Financial Services VerticalBig banks flat QoQ in Q3 Big banks, fintech, diversified financials improved low-single-digit on billable-day adjusted basis Diversified financials mid-single-digit growth; regional banks slight growth; big banks cautious Gradual improvement; still cautious
Nearshore/DeliveryMexico delivery building Scaled nearshore/offshore, India for ServiceNow Expect continued demand for Mexico nearshoring to support cost takeout Structural support for cost efficiency
M&A/TopBloc—Announced TopBloc ($340M), high-teens EBITDA margin outlook Closed Mar 4; tracking ahead on bookings, revenue, EBITDA Positive integration and synergy potential

Management Commentary

  • “Revenues of $968.3 million and adjusted EBITDA margin of 9.7% were in line with our guidance expectations for the quarter.”
  • “Our IT consulting revenues also grew, reaching roughly 61% of total revenues for the first quarter up from 57% in the prior year period.”
  • “TopBloc is tracking ahead of our bookings, revenue and adjusted EBITDA expectations.”
  • “Given the overall macro uncertainty, we are widening our revenue guidance range for the quarter… [and] margins will be negatively impacted by the loss of some of our higher gross margin federal work as a result of DOGE cancellations.”
  • “ASGN’s unique business model… business stabilizers that support our gross margin, along with our variable cost structure, which aids in safeguarding our operating leverage.”

Q&A Highlights

  • DOGE impact and federal mix: Management characterized DOGE effects as modest and more concentrated in small civilian program management/oversight tasks rather than core technical AI/data/cyber projects; guidance embeds <2% revenue impact for Q2 .
  • Margin dynamics: Consulting mix expansion and capabilities (TopBloc/Workday, ServiceNow, AI/data) support higher gross margins; SG&A is highly variable with stabilizers, though near-term federal mix and DOGE reduce Q2 margin uplift .
  • Intra-quarter visibility and wider range: Range widened for prudence amid macro headlines (tariffs, DOGE); commercial remains steady with strategic areas (cloud, data/AI, cyber) still funded .
  • Financial services: Big banks and select sub-sectors showing stabilization; pipeline healthy but spend decisions remain cautious .
  • Nearshoring: Mexico delivery continues to grow as clients pursue cost efficiency; integral to digital engineering across domains .

Estimates Context

  • Q1 2025 results vs S&P Global consensus: Revenue $968.3M vs $965.99M* (beat), Adjusted/Primary EPS $0.92 vs $0.945* (miss). Expect estimate revisions to nudge revenue slightly higher and EPS slightly lower to reflect mix and one-time SG&A .
  • Q2 2025 guidance vs consensus context: Company guided revenue $985M–$1,015M and Adj EPS $1.03–$1.14; consensus at the time of retrieval shows revenue ~$996.6M* and EPS (normalized/primary) ~$1.082*—mid-range alignment with modest uncertainty from federal mix/DOGE .

Consensus values marked with * are from S&P Global.

Key Takeaways for Investors

  • Mix shift to consulting is intact and supportive for gross margin/EBITDA over time; near-term margin puts/ takes relate to federal mix and payroll tax seasonality .
  • Federal book-to-bill and backlog remain strong; DOGE presents short-term noise but strategic alignment (AI, cyber, digital modernization) is favorable over the medium term .
  • Commercial demand is steady with targeted AI/data/cyber projects; financial services stabilizing but still cautious—watch for conversion from pipeline to projects as macro clarity improves .
  • TopBloc integration is an incremental growth and margin tailwind; cross-sell potential into enterprise and federal plus Workday ecosystem exposure expand TAM .
  • Q2 2025 guide widened; upside if federal program timing normalizes and commercial assignments recover; downside if DOGE expands or macro/tariff headlines delay projects .
  • Capital allocation remains balanced: active buybacks ($50.4M in Q1), leverage manageable (2.6x) after TopBloc; FCF seasonality should improve as DSO timing normalizes .

Appendix: Documented Sources

  • Q1 2025 earnings 8-K/press release: revenue, segment mix/margins, Adjusted EBITDA, FCF, cash/debt, guidance .
  • Q1 2025 earnings call transcript: strategic commentary, DOGE impact, bookings/backlog, Q&A details -.
  • Prior quarters for trend: Q4 2024 press release and call - -; Q3 2024 press release and call - -.
  • S&P Global consensus: Q1 2025 Primary EPS and Revenue consensus; Q2 2025 consensus context (values marked with * are from S&P Global).