Q3 2021 ASGN Inc Earnings Call
[music].
Greetings welcome to ask Jan Incorporated's third quarter 2021 earnings 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 during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
At this time I'll turn the conference over to Kimberley Astrachan with Investor Relations Kimberly you may now begin.
Thank you operator, good afternoon, and thank you for joining us today for ask Jan third quarter, 2021 conference call.
With me are Todd Hanson, President and Chief Executive Officer.
Blazer President of Apex systems, George Wilson, President of ECS, and Ed Pierce Chief Financial Officer.
Before we get started I would like to remind everyone that our commentary contains forward looking statements.
Although we believe these statements are reasonable they are subject to risks and uncertainties and as such our actual results could differ materially from those statements.
Certain of these risks and uncertainties are described in today's press release and in our SEC filings we.
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 Investor <unk> Dot com.
Please also note that on this call we will be referencing certain non-GAAP measure such as adjusted EBITDA adjusted net income and free cash flow.
These non-GAAP measures are intended to supplement the comparable GAAP measure reckon.
Reconciliations between the GAAP and non-GAAP measures are included in today's press release.
I will now turn the call over to Ted Hanson, President and Chief Executive Officer.
Thank you Kimberly and thank you for joining <unk> third quarter 2021 earnings call.
ESPN reported very strong results for the third quarter.
Thanks to our entire team for their incredible effort, which contributed to such strong performance.
I am pleased to report that we came in above the high end of our revenue and adjusted EBITDA guidance ranges for Q3.
Which we raised from our initial guidance during our Investor and Analyst Day Conference last month.
Indicating a continued acceleration of our business.
Importantly, all of our businesses with the exception of cyber coders achieved record revenues for the quarter with cyber kudos revenues, increasing the levels above the third quarter of 2019.
Given the strong results, we will be raising our guidance estimates for Q4 2021 appear so our CFO will discuss our updated guidance shortly.
Revenues for the third quarter totaled approximately $1 1 billion up 18, 7% year over year.
Excluding acquisition contributions revenues improved 14, 1% year over year.
Adjusted EBITDA of $136 6 million improved 34, 1% from the prior year period.
ESPN has significant capital resources to support investments in our organic growth M&A and share repurchases.
In the third quarter acquisitions contributed $47 $2 million in revenue.
We continue to believe that M&A generates the highest return of capital for all of our stakeholders.
Our M&A pipeline remains robust and we recently added a senior vice president of corporate development to our team to support our companywide acquisition efforts.
Year to date, we also spent $118 4 million and the repurchase of shares and have 131 6 million remaining under our $250 million share repurchase plan.
With that said, let's turn to more detail on our segment performance for the quarter, beginning with our largest segment commercial which serves large enterprise and fortune 1000 companies across multiple end markets.
For the third quarter of 2021, the commercial segment generated revenue of $774 9 million up 25, 8% year over year and up 24, 1% organically.
Opex systems continued to report very strong growth.
And for the first time creative circle, and Cybercode or surpass 2019 quarterly revenues.
Each of these operating units also reported their fifth quarter of sequential growth.
From an industry perspective, all five commercial industry verticals for apex systems, our commercial it services and solution division experienced growth during the quarter with every vertical accept the financial services industry accounts, achieving double digit growth on a year over year basis.
Apex systems 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 energy utilities Airlines and air freight.
It's technology and telecommunications or TMT vertical was up double digits year over year.
Within the vertical technology accounts saw significant growth over Q3 2021.
Telecommunications accounts were up high single digits year over year.
Government and business services was up double digits with aerospace and defense and government accounts up mid single digits for the third quarter.
While business service accounts grew double digits year over year.
Financial services accounts were up mid single digits.
With growth in regional banks wealth management in Fintech accounts.
Revenues and applications and project management, including agile digital ERP in cloud <unk>.
<unk> to perform well.
Systems' top accounts and retail and branch accounts achieved double digit growth rates for Q3.
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.
Gross margin for the commercial segment was 32, 4% up 150 basis points from Q3 of last year due to growth across our high margin commercial consulting creative marketing and permanent placement businesses EBITDA margins were also up due to the associated growth in gross margin.
Along with higher productivity in our workforce.
We also continued to expand our commercial consulting revenues during the quarter.
Commercial consulting revenues totaled $187 6 million a significant increase of 94, 2% year over year, virtually all of which was organic growth.
Our pipelines are booked revenue and future opportunities each continue to grow at high double digit rate and are trending positively in the fourth quarter.
Consulting offerings, our commercial segment remains an important source of the value we provide our clients and so we continue to identify acquisition opportunities that expand our capabilities in the areas in high demand such as cloud data analytics, and AI agile development digital transformation and enterprise application.
Patients.
In the consulting space, we're seeing an increasing amount of work in digital innovation and moderate and enterprise solutions that enable us to implement many of the elements of our clients' individual digital roadmap.
Work in agile and Dev ops in particular is the large component of the support we provide our clients tied together applications and their cloud environment and strengthen their customer support with real time data update.
For example, our ability to build dashboards and software interfaces to propel the customer experience and internal management of business operations have been key drivers of our revenues of late.
Now, let's turn to our 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 $298 9 million for the third quarter up three 6% year over year EBITDA.
EBITDA margin also improved during the quarter to a total of 11, 4% up 230 basis points from the third quarter of 2020.
The federal government segment, New business pipeline remains strong with $432 million in new business awarded during the third quarter and a book to Bill ratio up 1.44 to one.
Contract backlog totaled $3 1 billion at the end of the third quarter were a healthy coverage ratio of two six times the segment's trailing 12 month revenues.
In Q3 examples of some of the contracts awarded to our Federal government segment included and legacy data consolidation solution contract with the Naval information warfare Center to support this work for the defense Health agency, including achieving new efficiencies and cost savings.
Three task orders to support the National Oceanic and atmospheric administration with the development of decision support tools, such as economic impact models.
Our five year prime contract with the U S centcom to provide personnel supervision and services necessary to support critical missions in operation.
And a five year multiple award prime contract with the General services administration to aid the development of manned and unmanned systems for their department of defense.
With that I will now turn the call over to Ed Pierce, our CFO to discuss the third quarter financial results and our fourth quarter guidance.
Thanks, Ted Good afternoon, everyone as Ted mentioned, our financial performance for the third quarter exceeded our updated guidance estimate that we announced during our investor and analyst.
Conference last month.
This performance was driven by year over year double digit organic revenue growth the contribution from businesses acquired after Q3 of last year.
And expansion in the gross and adjusted EBITDA margins in both business segments.
The quarter revenues were $1 74 million up 18, 7% over Q3 of last year.
Up 10, 1% sequentially. The revenue contribution from acquisitions made after Q3 of last year was 42 million or four six percentage points of the year over year growth rate for the quarter.
Net income and adjusted EBITDA were both up year over year and sequentially and grew at a higher rate than revenues. Our adjusted EBITDA margin of 12, 7% was 140 basis points higher.
Q3 of last year, reflecting among other things the improvement in the business mix and expansion in the gross margins.
Our two business segments.
Revenues from our commercial segment were $774 9 million up 25, 8% year over year.
The fifth straight quarter, our commercial divisions were up both year over year and sequentially acquisitions made after Q3 of last year contributed $10 4 million in revenues for the quarter or one seven percentage points of the year over year growth rate.
Revenues for all of our Federal government segment were $298 9 million up three 6% year over year and in line with our guidance estimate.
This growth was driven by a number of factors, including the effects of new contract awards and the revenue contribution from businesses acquired after Q3.
2020, $31 6 million as you may recall from prior calls revenues in Q3 of last year benefited from a high level spending under two.
And our cost Reimbursable contracts normalizing for the revenue surge in Q2.
Q3 of last year, and excluding the contribution from acquisitions.
Revenue growth for the quarter was low single digits year over year.
Gross margin of 28, 7% exceeded the high end of our updated guidance and was up 260 basis points year over year.
Both business segments reported year over year expansion in gross margin.
Gross margin for the commercial segment was 32, 4% up 150 basis points year over year.
The expansion was a result of the double digit growth of our high margin commercial consulting creative marketing and permanent placement services.
Gross margin for the Federal government segment was up 340 basis points, mainly as a result of changes in business mix.
Which included a lower level of revenues from certain cost reimbursable contracts. The contribution from high margin businesses acquired after Q3 of last year.
Higher profitability to firm fixed price contracts through the initial contract term.
During the quarter.
SG&A expenses were $192 7 million and were above our updated guidance estimate because of acquisition related expenses, which we do not include in our guidance estimates.
The year over year increase in SG&A expenses was commensurate with the growth in the business.
The higher mix of high margin commercial revenues, which carry a higher SG&A expense component and federal government services.
Higher head count and investments to support future growth in the business and higher incentive compensation and healthcare expenses, which were both down in 2020 from historical levels.
Income from continuing operations was $66 3 billion up 42% year over year.
Adjusted EBITDA was up 34, 1% year over year on revenue growth of 18, 7% alright.
Adjusted EBITDA margin of 12, 7% was up 140 basis points from Q3 of last year related to the expansion in gross margin.
At quarter end cash and cash.
Equivalents were $679 4 million there were no outstanding borrowings under our $250 million revolving credit facility and our senior secured debt leverage ratio was 1.08 to one.
As noted in today's release, we are updating our guidance estimates for the fourth quarter from the estimate we announced during our Investor and Analyst Day Conference last month.
Relative to our earlier guidance, we are increasing our revenue estimates by $20 million.
Our adjusted EBITDA estimate by $5 million, our updated estimates for the fourth quarter as set forth in our earnings release and supplemental materials.
For the fourth quarter of 2021, we estimate revenues of $1 billion $10 billion to $1 billion $30 million income from continuing operations up 52, 5% to $56 2 million.
Adjusted EBITDA of $116 five to 121 5 million.
We are estimating all divisions will be up year over year at the midpoint of our financial estimates year over year revenue growth for the fourth quarter is approximately 13, 3% on a sequential basis, we expect revenues will be down as the fourth quarter has three fewer billable days in the third quarter. However for the commercial side.
We expect revenues per billable day will be up sequentially.
Or federal government segment, we expect revenues per available day will be down.
We will be down because of lower expected revenues from certain cost reimbursable contracts and our decision not to renew two low margin web services contracts that expired at the end of the third quarter. Thank.
Thank you for your time and I'll turn the call back over to Ted for some closing remarks.
Thanks, Ed.
<unk> success continues to be driven by an incredible team effort across our company before we open up the call to your questions I'd like to speak about one of our team members in particular, our president of ECS George Wilson.
Georgia as many of you know has spearheaded our government business since the ESG and acquired ECS in 2018 ECS.
Yes, now referred to as our federal government segment.
Had a long history of delivering excellent financial results.
George and his leadership team have expertly navigated the federal government marketplace to meet the most critical and complex needs of our clients to reach $1 billion in revenues well ahead of our initial expectations.
After much planning and internal discussion George has decided to retire at the end of this calendar year.
And while Georgia as official role as President of ECS will come to an end at the close of this year. He will remain in consultancy role with ESPN through April 2022.
In Georgia is place John Hanigan ECS as current Chief operating officer will assume the role of President.
George and John have worked closely together for over two decades and.
John has been preparing for this new role as part of our planned succession process over the past two years, John has more than 20 years of experience in emerging technology and digital transformation IP product development managed services.
<unk> strategy and corporate development.
This transition into this new role will be seamless.
On behalf of our board of directors and the entire ESG team I want to personally thank George for his incredible service to ECS and ESPN I'd also like to congratulate John on his promotion John will join us for today's Q&A session.
Thank you again for your time this afternoon and for your continued support of ESG. In this concludes our prepared remarks for the third quarter. We will now open up the call to your questions.
Okay.
Thank you.
Now be conducting a question and answer session if.
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One moment, please when we pull for questions once again Thats star one.
Thank you and our first question coming from the line of Gary Bisbee with Bank of America. Please proceed with your questions.
Hey, guys good afternoon.
I guess I wanted to ask a question about the commercial segment gross margins, obviously up quite strongly year over year and also ahead of.
Pre pandemic third COVID-19, when I think back a few years ago.
We intend to talk a lot about stable margins is the right expectation, but clearly with the mix shift going on in the business.
This seems to be a good case for margin expansion I guess.
You talked about certain extent at the Investor day, but as you think out.
Beyond these easy comps you've had for the next few quarters and looking forward how should we think about.
Margins.
And on the gross margin line.
Yeah.
Well, Gary I'll, let Rand hop in here and talk about this but there's some proof points. If you will underneath the strategy here that we see that our.
Working one is where in the commercial.
Segment, as we've talked about a lot and they've been up into higher margin work.
We're also seeing.
Where.
On the backs of that getting expansion in pay to build margins.
And so.
All these kind of underlying the strategy of where we are I mean, obviously there can.
It can be headwinds in certain skill sets.
Large accounts.
But I think the progress that we're making here is.
Incrementally, adding to gross margin here.
We go forward, we've set the guidance for you on a forward basis that they could.
It could be stable based on one being a larger firm, but then to offset that with moving into higher margin work streams here, but.
I kind of refer you back to the analyst day materials or anything on a forward basis, Randy thing you'd add to that.
Great.
<unk>.
Oh, I'm, sorry, yes, I wouldn't add anything to it I think the tailwind you've commented on are great I think.
Obviously, they're a resurgence of creative circle and cyber coders within our commercial unit is helping the consulting business is healthy by the way our staffing gross margins have always been best in class. So.
Think steady.
Certainly what we did at least that we would expect right.
Okay, and then just a follow up I'd ask on the commercial consulting business.
I know you've had you've had relatively easier comps, but the growth has been terrific. If we were to think about.
The number of acquisitions, you've done in the last couple of years that added capabilities and how important those have been to the organic growth you've been delivering versus.
Penetrating clients more with these services or any other sort of relevant driver how.
How important is the M&A band and continuing to add those capabilities versus just your views of how you are penetrating the market well, it's been very important Randy I'll, let you talk to that.
Yeah, I think look there is.
We have an excellent reputation with our clients. We've always said that our past experiences and staffing firm is critical the account relationships. We've built over the last decade has put us in good stead with the client and make make us present in the discussion about future needs. The muscle that we've added to the acquisitions has been unbelievable.
Really propelled us in areas like cloud agile development.
Overall integration and ERP implementation. So they have all contributed its a combination of things. So it's I think they have been instrumental to our strengths in consulting and if you look at the numbers and consulting by the way I mean, it really has jumped up right since.
Even 2019 to 20, if you look back in all the revenue numbers.
We've more than doubled these numbers this year and so right time right place and unfortunately for US we have the right set of technical strength to step up.
Thank you and terrific performance.
Yeah.
Our next question comes from the line of Tim Mulrooney with William Blair. Please proceed with your questions.
Hey, this is Sam filling in for Tim Thanks for taking our questions here.
We've seen strong growth, both organic and total growth coming out of the ECS in the broader federal business for several years now.
I'm not asking for guidance on fiscal 2022, specifically, but just more broadly speaking I'm curious under a more normalized environment. How you think about the organic growth rate potential for this business based on the portfolio as it stands today.
So Sam if you go back to the 2018, the acquisition date and still kind of holds true today I mean, we've kind of got into the mid to high single digits for organic growth rates for ECS.
They porcelli have gotten much higher growth rates in that.
Here in the past.
Very difficult comps are kind of catching up with us, but I think for your.
Modeling purposes, I would look to mid to high single.
Single digits and I think.
I'd refer you back to Ed Pierce is.
Numbers for our three year targets.
In the Investor and Analyst day presentation.
Perfect I appreciate it.
Switching gears, a little bit here, our team read an article from 2008.
Every day, but shared outside for security accounted for more than 20% of all IC job posting for this year.
I'm curious if this is what you've been seeing on your side of things and in particular cyber securities had a larger impact on your growth this year than in previous years and if so is that something you might expect to carry forward over the next few years here.
Yes, I'll, let Randy answer the commercial side of this and John comment on federal.
I would say on the commercial side, Sam Cyber security, we look at it as it's embedded in every solution. We provide so you always have to consider the security aspects of whatever youre doing in the technology area. If you looked at our actual what we call counted revenue towards the cyber security skill area or solution.
Area. It has increased definitely but it's not our fastest growing or largest solution area, but I go back and say again cyber security we view it as an important element in everything we do so you can be working with the cloud you can work in the ERP to be working with.
Co development dashboard, you have got to consider cyber security or security and all of that so it's embedded in everywhere.
George.
Yeah.
Hey, Ramsey.
John.
Yes, John here and Sam with Cyber security makes up about 20% of the ECS segment.
Mrs.
Rand said stop security really is in and then.
And around everything that we do with the big part of our ops model. So.
<unk> also is an area, where we are highly invested and is a big part of our future growth, we're kind of leading the space and zero Trust and then cyber analytics.
And managed cyber security offerings. So it's a place that we're highly invested we have great depth of capability and look for that has that continued.
Mark has priority for federal customers and so we are prepared for that and excited about where sub security has gone into the business.
I appreciate it guys.
Oh.
Our next question is from the line of Tobey Sommer with <unk> Securities. Please proceed with your question.
Thanks, I had a question on wage inflation.
<unk> certainly have a broad topic.
Are there today.
So.
Both internally and externally in your business.
There's a higher rate of wage inflation over the next several years to make it easier or harder for you to hit your multiyear goals.
Could you explain how it might impact.
The attainment of those goals.
Yes, well good good question Tobey I mean look we've always lived in wage inflation and technology skill set and our business.
We're in typical years, maybe it's a couple three points.
We kind of plan on that both in the current period and forecasting.
Pricing for the future periods today, it's maybe in the maybe more in the mid single digits I don't think that that necessarily hinge.
Hinders or.
Helps if you will I guess you could make an argument for we're doing a good job today, passing that through to higher bill rates with our customers. They understand that they want the best tablet, so they're making the appropriate accommodations in order for that to happen. So maybe if bill rates are a little higher than it is.
Easier to get to our targets, but I think that those are kind of just.
Incremental problems kind of around the edges.
I think the story is here that there's wage inflation for sure.
We always experience.
We have been adapted.
Passing that to the customer because they have the desire to get the best talent and you can see that in the.
The performance of our gross margin profile. So you know we've got some incremental expansion here.
Yeah.
Shifting gears to the ECS in the federal government segment due.
<unk>.
Or do you see a good pipeline.
Awards pending adjudication and that kind of thing even as we.
Stare at a continuing resolution.
I haven't really had a lot of what seems like tangible progress on the multiple appropriations bills that are floating around Congress right now.
Right. So we've had a good quarter for bookings this quarter.
Here in the third.
John do you want to talk to Tobey about future bookings.
What's the kind of just what's in the pipeline and what our customer is interacting with us.
Sure Yes.
We do have a very strong and healthy pipeline and as we articulated earlier with you in the Investor day.
Presentation last month, we have seen a delay in RFP releases over the first first half of the year.
We've seen that accelerate in our.
Expecting Q4, a lot of Rfps too.
And then Andy as you know in this space you wait for those rfps to be awarded in this potential post us on all of that.
But we.
We do see that acceleration, that's finally picked up post COVID-19 and compounded by the presidential transition so excited about 2022 and beyond.
<unk> strong.
Thank you if I could just kind of apply my first question that Ted answered to the ECS business and new John is there anything about your contracts mix cost plus PNM fixed price in which there is a sort of a distinct negative or positive implications from higher.
Wage.
Inflation over the next several years.
No I think that I think.
You know Ted answer that appropriately.
<unk> seen that our customers understand the market.
Want the talent, we bring to bear and we've been able to find ways to increase the wages.
I mean increase the bill rates as appropriate to match the labor as you know.
A third of our businesses cost reimbursable and that makes that a little bit easier and some of our some of our most.
High value type of work is in that cost Reimbursable space.
Thank you very much.
Our next question is from the line of Jeff Silber with BMO capital markets. Please proceed with your questions.
Thanks, So much I was wondering if we could focus on the assignment business within your commercial segment and I'm just curious how still rates are running.
Care to what they normally run because of all the supply constraint issues do you think thats holding back a little bit business there.
Yeah.
Right.
Well I mean, let me understand the question, Jeff are the bill rates holding us back from sorry ever.
Phil Phil F. The fill rate failure accelerates.
Sorry about that.
No I am sorry, our fill rates are no I don't think that's holding us back where our fill ratios have gone up.
This past year quite significantly more importantly, the quality of the requisitions are the requirements were getting our what we call higher quality Rex.
What we find a lot of our bigger clients in the Fortune 500 clients is they're working with fewer people fewer number of vendors and they expect us to step up and to deliver.
Our clients are very concerned about building their own workforces and so this is not a time to digital and data. If you will they are anxious to work with the best and get the best results and so.
Our fill ratios have moved up very nicely and it's part of our success this year.
Okay. That's great to hear and then just a question about the near term guidance I know at your Investor and Analyst Day last month, you positively pre announced and yet you beat those expectations. A few weeks later did I hear you say that the changes have actually accelerated since that point in time.
Well, Jeff I don't know if they've accelerated more than the pace that they were odd but it accelerated through the end of the quarter.
So I would just I would just say that pace continues as probably the best way to put it.
<unk>.
Was there any meaningful I'm, sorry, just any meaningful business that different in terms of that acceleration.
No.
Just just steady acceleration across the board.
Okay, great that's great to hear alright, thanks, so much.
Our next question is coming from the line of Surinder <unk> with Jefferies. Please proceed with your questions.
Hello, This is bank.
Sure.
Thank you for taking my question and congratulation on the quarter in.
In terms of just a few housekeeping item given M&A has become a bigger part of your strategy you just want to have a better understanding on how much inorganic revenue is embedded in the guide.
Peter you want to take that.
Yes.
As it relates to the contribution from acquisitions.
This past quarter. It was $42 million would be acquisitions that we made up to Q3 of last year.
Estimating its going to be roughly $42 million.
In Q4 so.
In our earnings release and in our supplemental you can see us set out separately, what the organic growth rate is not only for the consolidated enterprise, but also by segment.
Then the information that we agree with that.
Got it. Thank you and then just switching gears a little bit in terms of client demand trends in terms of how many positioning not being sell in.
Capacity now versus pre pandemic is there any sort of meaningful changes versus the height of the pandemic.
Almost all the jobs where remote.
You've seen an incremental return to onsite work I wouldn't say it's been.
<unk> half or more than half by any means but certain clients in certain industries, where it's more important to be on site you've seen some return to work there, but more than half of our resources to continue to work on a remote basis.
Yes.
Got it thank you.
Okay.
Next question comes from the line of Kevin Mcveigh with Credit Suisse. Please proceed with your questions.
Great. Thanks again.
This quarter.
Hey, you talked about Ted.
M&A in the highest return of capital and it sounds like you hired a relatively senior person.
Any thoughts around that and is that purely addition, or.
Maybe cyber coders areas like that's starting to scale do you still look to refine a little bit or would it primarily be.
Targeted M&A.
Yes, it's really targeted M&A, Kevin you know the addition of some bringing more muscle to the table. If you will to help us prosecute M&A here, it's important in my view.
<unk> over the next three years, given the amount of capital that we have the opportunity to deploy there and <unk>.
Number of targets and the size of targets that are out there and that opportunity set. So I think that this is a while.
While we are historically very capable of executing M&A.
You know this is the time to invest there and.
You know I would say the pipeline right now where we're in the mode of building pipeline and the pipeline is becoming more robust and there are target rich opportunities out here in both the commercial and federal segments and we have to continue to plod through that to find the right technical capabilities with the right <unk>.
For Ts.
So that fits with what our current view is that we want to add into the business.
And just not only obviously you can do it inorganically, but as you think about sourcing candidates in the current environment. Ted how do you think about today versus is it tougher today versus.
Yeah.
If we lose Kevin.
Oh, yes.
Plus Kevin's line moving on to our next question is from the line of.
Operator hang on one second I think Oh sure. Sir go ahead together no no okay.
Oh good.
So Randy you want to sort of that Kevin was asking about difficulty to source candidates today versus past I believe right Kevin Yeah.
Sorry about that my phone yes.
Yep.
Yes.
Well I guess, you expect me Kevin to say, it's more difficult today, but I'm not going to say that.
It's always been difficult we have a large database of candidates that we you know.
Engaging to us.
Have an alumni network, that's very strong we have obviously churn in the Canada is coming off jobs and going on jobs that sort of thing, but I think it's the automation of all of that that we have that makes it.
It makes it a little easier to get to the right candidate and to respond to the clients. If you look at our fill ratios and our growth and everything else, there's nothing that points to we're having more difficulty.
I think sometimes we have said in the past when you want a certain person with Java skills in New Jersey, and you only want to pay $50 an hour for them, that's a difficult Phil okay.
There are something things like that that that jump into it but today with remote work with using labor across the country or or even near shore. We found that.
We have more avenues now to address the needs.
You know it's.
No more no less difficult than it was before.
Kevin just to emphasize Kevin just emphasize that last point with clients more open now to bring on.
Remote workers.
Open their aperture here quite quite a bit across the country and nobody is better positioned here than we are and it's one of the largest providers of IP resources to identify that across the country find the right skill set but in a more precise match on experiences and industry expertise and bring that to bear so.
Well, while there is a balance here demand and supply. There's also kind of a new view here around remote work and then.
Obviously, we're the best positioned here to bring that to bear for our clients.
That makes sense and then just one quick one if I could one follow up.
<unk> been any on the government side.
<unk>.
Any kind of subcontract awards like with the Jedi contract or is that still too early for that.
John I'll take that one.
We've had several subcontract awards not so much Jedi, but.
But diaz is the one where we've seen that as well as a few others.
A part of our business that remains healthy.
Hope that answers your question Kevin.
Yep that helps thank you.
Okay.
Our next question comes from the line of Mark Marcon with Robert W. Baird. Please proceed with your questions.
Good afternoon, everybody and congratulations on a terrific quarter I'm wondering can you.
This is a question for Randy or Ted.
Can you talk a little bit about the <unk>.
Consulting business on the commercial side and your ability to continue to transition some of the apex systems clients over to consulting assignments I'm just wondering what percentage.
Of your top enterprise clients are typically using you for consulting services and how is the nature.
All of those consulting assignments changed or evolved over the last few.
Q quarters as you think about just the size of them the number of consultants on assignment the length of the projects et cetera.
Right.
Yeah.
It's a good question Mark I'm, please to answer it first of all.
We do about a third of our enterprise clients are also consulting clients. If you will so you know with that.
Propelled our growth with but it also shows we have a lot of room to go.
If you look at the three major groupings of solutions, we have and offerings, we have to the client workforce mobilization modern enterprise and digital transformation.
All three are growing off solutions in all three areas have grown over this past year quarter to quarter digital transformation solution and sales had been highest okay. They've grown the most workforce mobilization actually declined a bit and now it's starting to come back and that's around companies who are.
And the need to build a workforce strategy. They are concerned about the shortage of labor and they are starting to think differently about how they build.
Their workforces for now and for the future with sustained power around that so we're benefiting from that and then in modern enterprise.
A lot of that is ERP work for example.
Our new acquisition.
<unk> gives us a strong position there with a package, we think is up and coming and doing very well in the marketplace and the health care and manufacturing sector called Infor. So I mean, I think there are things that we're doing that are helping us propel growth for digital transformation definitely has been the biggest grower.
That's great.
I appreciate that you all have.
Lots of consulting experience.
If you think about.
Just you know the types of assignments that you're winning relative to the other bidders that are out there can you just talk about like who you're going head to head against in like.
Some of the wins that you are kind of the most proud of that exemplify.
The progress that the overall consulting practice is making.
Oh go ahead.
Go ahead Mark.
Yeah, Mark I would say first of all the good news is now as we've been at this for a number of years as we're starting to get multi year contracts and awards as well as seven figure or higher awards per year.
So we've migrated up to bigger jobs and longer term jobs and jobs that go over a period of time of years, who are we competing with.
It varies there are a couple of staffing firms that offer consultative solutions, but not really I wouldn't say, they're our principle competition and that's where I'd say, it's generally a boutique consulting business.
<unk> some of the big players some of the accounting firms.
Some of the bigger players, we one I'm not going to mention the account or who we beat but they actually we won an architecture job building a card a cloud architecture for our clients and it was a fortune 500 client who wanted to rethink their cloud environment and the way they were.
Distributing that cloud and embedding security and.
We had a better answer and a and a quicker answer because we could pull the workforce together and get on it more quickly. So there are different reasons why we win the good news is because of our account relationships through the staffing business over the last two decades, where in the dialogue and as long as we are in the dialogue that gives us a chance to muscle up.
And present and remember because we build teams that are industry specific we do use contingent labor along with our own tools and artifacts and technical expertise to lead. These engagements. So we found a what I call a unique way of putting together the right team of people to address.
The need and move them forward and I think that wins.
Today, particularly when some of the consulting firms are having a hard time getting talent.
That's great.
If you look out a few years like 234 years, what do you think of the remaining two thirds of the enterprise apex clients that you have like what percentage do you think those could you know.
Migrating towards using you for consulting services.
Hi, Ted.
Go ahead, I don't want to be too bold.
We haven't if we have 300 of the Fortune 500, I expect all 300, we can do an array of services for them.
I'm sure, we'll Miss a few but I'm also sure Theres some of the other 200, where we do not provide staffing services that we can provide consulting services. So I think we see a big wide open market and by the way we pointed ourselves towards the Fortune 1000, now I mean, we have a strong enough footprint and the sales team that can step.
Up to that so we have a lot of markets still go after.
That's great and then one last one just with Randy Phillips joining.
Can you just talk a little bit more about the size of the acquisitions that you might end up looking at or just the cadence of the acquisitions.
It's obviously, a robust environment and our big pipeline, but just wondering how we should think about it relative to recent history.
Yeah, well look I think Randy brings.
Years, and decades long expertise in M&A, both in the commercial marketplace and the government marketplace.
And while we are able to build pipeline on our own.
Randy just enhances that if you will and then accelerates our ability to prosecute that while we're all on the day job as well, which is serving our clients. So I mean, you should just think about Randy is an experienced piece of incremental muscle to.
To help us prosecute pipeline build pipeline and they get to final outcomes here. So we're excited to have him on board.
This is the right time to make an investment in this part of the business.
Perfect. Thank you.
Thank you at this time, we've reached the end of the question and answer session I'll now turn the call over to Ted Hanson for closing remarks.
Great well I want to thank everyone for being on the call today, and we look forward to discussing our fourth quarter results with you in.
The first part of 2022, thank you and be well.
Thank you. This will conclude today's conference you may disconnect. Your lines at this time, we thank you for your participation.