Q4 2022 ASGN Inc Earnings Call
Greetings and welcome to the ESG and incorporated fourth quarter 2022 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 I will now turn the conference over to your host Kimberly Astrachan of Investor Relations you may begin.
Thank you operator, good afternoon, and thank you for joining us today for a S. Yes fourth quarter and full year 2022 conference call with me are Ted Hanson, Chief Executive Officer, Rand Blazer, President and Marie Perry Chief Financial Officer.
Before we get started I would like to remind everyone that our commentary contains forward looking statements.
Although we believe these statements are reasonable they are subject to risks and uncertainties and as such our actual results could differ materially from those statements.
Certain of these risks and uncertainties are described in today's press release and in our SEC filings, we do not assume any obligation to update statements made on this call.
Your convenience our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors got a S. G M Dot 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 Kimberly and thank you for joining <unk> fourth quarter 2022 earnings call.
As we kicked off 2023 I'm pleased to report that the past year represented another topline record for ESG.
Our results for the fourth quarter and full year 2022 are indicative of the continued demand for IP services and solutions in the commercial and government end markets we serve.
I want to sincerely. Thank our entire team for your continued efforts, which are the reason ASTM as the leader. We are today, we embarked upon the new year positioned exactly where we wanted to be with a great team in place strong balance sheet and proven operational strategy.
After a strong fourth quarter that surpassed our revenue expectations full year revenues of approximately $4 6 billion were up 14, 3% year over year and represented a new company record.
Included in the annual revenues were $2 1 billion from commercial and federal it consulting on an organic basis revenues improved 10, 3% versus the prior 12 months. The commercial segment, our largest segment represented $3 4 billion or 75% of <unk>.
Revenues for 2022.
While the federal government segment comprised the remaining $1 1 billion or 25% of revenues from a profitability perspective, adjusted EBITDA for the year improved 15, 8% as compared to 2021 at a margin of 12, 2% <unk>.
These results put us on track to achieve our three year financial targets laid out in September of 2021.
As will be apparent in our segment commentary today.
<unk> business has had a positive inflection point with <unk> consulting and services revenues, representing 49% of total revenues in Q4, we are now quickly approaching 50% of our total revenues derived from high end higher margin consulting work. This.
Movement up the pyramid will remain our focus with that as a background, let's review Q4.
Our commercial segment, which predominantly services large enterprises and fortune 1000 companies had another solid quarter driven largely by growth in consulting revenues segment revenues increased seven 8% over Q4 of last year on a difficult comparison.
<unk> systems, our largest division accounted for 84, 9% of the commercial segments revenues with top and retail accounts, both achieving double digit growth rates for the quarter.
As expected creative digital marketing and permanent placement revenues experienced year over year declines compared with their high growth rates in the prior year period.
From an industry perspective, three out of our five commercial segment industry verticals achieved double digit revenue growth year over year, including the technology media and telecom industry.
Sumer and industrial in this industry and the health care industry, the financial services industry vertical achieved mid single digit growth year over year, while business and government services declined low single digits.
Growth in technology media, and telecommunications or TMT industry was again led by double digit growth across telecommunications as well as media and entertainment channels.
Progress in our commercial and industrial accounts reflected growth across all sectors as compared to the fourth quarter of 2021 with the exception of materials in particular, we achieved double digit year over year growth in energy and consumer Staples.
The health care industry revenues also grew double digits driven by provider accounts.
Financial services had solid performance in banking with the largest growth year over year amongst our fintech and wealth management accounts finally, our business and government services vertical saw a slight decline for the quarter year over year within this vertical we achieved mid single digit growth in aerospace.
In defense accounts, which was offset by a decline in amongst our business services accounts.
Our consulting offerings also remain an important source of the value we provide clients and for the fourth quarter commercial consulting revenues increased 37, 8% year over year and up 25, 7% organically.
Bookings, which totaled $299 8 million also increased and were up 33, 3% year over year. This translates into a book to bill of roughly one two to one on a trailing 12 months basis.
<unk> continues to be favored by our clients in the consulting space due to our intimate relationships, which span decades, our solutions portfolio, which continues to expand and our solutions delivery model, which enables us to meet our clients' demands with the necessary skilled workforce at economical.
Price points.
Beginning with our work and service now through our glad fast acquisition in the first six months as part of the S. G. N glad fast is driven twenty-three nephew wins for apex systems. While at the same time continues to actively service its existing client base.
As an additional benefit glidepath customers are beginning to embrace apex systems other solution strengths as well our clients remained pleased with the work. The glass first team has been providing and at the end of January glide fast was recognized as of 2023 service now America's.
Elite segment partner of the year for achieving overall excellence and certification and revenue growth.
Reviewing our broader consulting work during the fourth quarter, we wanted to data and analytics contracts. The first contract was with a large national banking institution for whom apex systems. It's been expanding its scope of work for the past three years now as a part of our new contract we will help our client excel.
Alright, its growth through process improvements and the development of security in architecture frameworks surrounding their co branded credit card operations.
In addition, we want a second data and analytics contract with a large energy company, a new customer with whom apex systems is partnering to assist in the migration and modernization of its data analytics platform and the cloud this.
This project will enable our clients have more reliability in their processes as well as to optimize their databases.
Also along the lines of cloud implementations, we weren't very pleased to win a consulting contract with a large regional health care provider during the fourth quarter. This healthcare company will be conducting a cloud ERP implementation in 2023 that covers the finance supply chain human resources.
And payroll departments.
Let's now turn to our federal government segment, which provides mission critical solutions to the department of defense.
Telegent community and federal civilian agencies Federal segment revenues for the quarter were up 13.3% compared to the fourth quarter of 2021, driven by a combination of organic growth license revenues and the impact of our recent iron Fine acquisition.
New contract awards for the quarter, where approximately 172 million, which translates to a book to Bill 0.9 to one on a trailing 12 months basis.
Contract backlog was 3.3 billion at the end of the fourth quarter or healthy coverage ratio of 2.9 times the segments trailing 12 month revenues.
Our pipeline of opportunities is at an all time high an indication that our government segment is well positioned to benefit from the government new budget priorities. The recently passed federal omnibus Bill for 2023 is 10% higher than that of 2022, including an additional 16.
Percent allocated towards the department of defense and incremental 6% allocated toward the department of Homeland Security and a 20% increase in budget for the department of veteran affairs as compared to the prior year budget. These three agencies are a few of the government.
Agencies, and which ECS continues to win contracts. So let me provide some examples of work one during the past quarter.
In the fourth quarter, we secured a new contract providing the air force with open source intelligence or us and analytic tools and training.
C. S provides analyst operators and commercially available Oh sent tools to the Air Force, which are integrated specifically to meet the department's mission E.
C. S also began to execute on a sizable amount of new funding for innovative cloud technology applications that help accelerate a I M. L activities and smart sensor work for the department of defense in the U S and overseas.
Speaking of the D O D and the fourth quarter E. C S. When a new contract with the defense manpower data center to.
To provide full enterprise's deployment of service now. This contract is an example of our service now capabilities and our federal government segment, which we gained through the 2020 acquisition of I assume.
Lastly, our acquisition of Iron bi is progressing as planned.
Iron bound team of cyber security experts is now fully integrated into a C S and actively pitching new business together.
Over the past three months ironbound and ECS had begun to pursue multiple large scale cyber security deals leveraging the full capabilities of both teams with that I will turn the call over to Marie Perria are CFO to discuss a fourth quarter results and our first quarter 20 twenty-three guidance.
Thanks, 10, it's great to speak with everyone again for.
For the fourth quarter revenues were 1.2 billion at 9.2% year over year, and and as reported basis, excluding $47.3 million from businesses acquired in the past 12 months and on the same billable day basis.
Revenue growth was 6.4%.
Revenues for the quarter were about the high end of our guidance estimates with both segments contributing to the Overperformance and included 7.7 million in license revenues and a federal contract that were not included in our estimates.
Now, let's turn to the segments revenue from our commercial segment, where $852.2 million at 7.8% as reported and 4.9% organically.
Difficult year over year comparisons.
Revenues from commercial consulting the largest ever harm high margin revenue streams, where 264.1 million.
37.8% year over year.
Excluding the contribution of $23.2 million from glad theft consulting services revenue improved 25.7% year over year.
Revenues from our federal government segment, where $298 $2 million at 13.3% year over year.
Excluding the contribution from iron buying of 24.1 million revenues for this segment increased 4.1%.
Moving onto margins on a consolidated basis gross margin was 29.6% down 20 basis points over the fourth quarter of last year.
Right compression and gross margin was mainly related to business next including a slightly higher mix of federal revenues, which carrying lower gross margin and commercial revenues and the expected decline in the mix a permanent placement revenues, which declined 90 basis points as a percentage of total revenues year over year.
Gross margin from the commercial segment was 32.2% down 30 basis points year over year due to less contribution impermanent placement work as noted by.
By contrast, gross margin for the federal government sentiment was 22.1% a 50 basis points year over year, primarily due to the contribution from iron fine.
SG&A expenses for the fourth quarter of 2022 with $229 9 million.
13.6% year over year this.
This increase in expense is commensurate with the growth in the business and also reflects investment and head count and technology to support future grabbed.
SG&A expenses also included 1.5 million and acquisition integration and strategic planning expenses that we do not include in our guidance estimates.
Excluding these expenses SG&A is within our guidance estimates for the fourth quarter.
As expected interest expense increase related to rising interest rates, which impact roughly half of our debt outstanding Amber.
Amortization of intangible assets was hired due to our recent acquisitions.
Income from continuing operations with 55.6 million and adjusted EBITDA margin was 11.5% both are within our guidance estimates for the quarter.
At quarter end <unk>.
Cash and cash equivalents, where 73 million and we had 31.5 million outstanding on our 460 million revolver.
Which was increased during the quarter from its previous commitment level of 250 million free.
Free cash flow for the year totaled 273 million an improvement at 9.5% over 2021.
We also deployed 53.8 million on repurchases of approximately 621000 shares at the company's common stock during the fourth quarter for the full year. We were purchased 2.8 million shares for a total of 281.4 minutes.
Approximately 313.9 million remained available at year end for the repurchases of shares ended the boards prior authorization.
Turning to guidance are financial estimates for the first quarter of 2023 are set forth in the earnings release and supplemental materials.
These estimates are based on our current production trends assumed sixty-three billable days in the first quarter, which is three days more than the fourth quarter of 2022, but consistent with our Q1 2022.
And include an estimated revenue contribution of 54 million from acquisitions made after Q4 of 2021.
It is also important to keep in mind that the first quarter faces a tough comparison to the first quarter of 2022 in which both revenues and margins outperform their traditional seasonality.
In addition, the payroll tax reset occurs at the beginning of every year absent the first quarter of 2022, when the impact of the payroll tax on margins with math by the outperformance as permanent placement revenues and lower teeny expense coming out of the pandemic historically <unk>.
EBITDA March and has declined each year when moving from the fourth quarter to the first quarter due to the payroll tax reset.
With that background for the first quarter. We are estimating revenues of 1.140 billion to 1.160 billion and implied revenue growth rate of 4.5% to $6, 3% on the same number available days in a different.
Comparable.
We are estimating net income of $51.2 million to 54.8 million and adjusted EBITDA of $128.5 million to $133.5 million, we're expecting gross and adjusted EBITDA margins to decline sequentially from.
From the fourth quarter of 2022 to the first quarter of 2023, primarily due to previously mentioned payroll tax reset.
We do have one for expect to benefit from improved operating leverage over time. Thank you I'll now turn the call back over to 10 for some closing remarks Ted.
Thanks, Mary 2022 was another record year performance for a history of our fourth quarter and full year results are an indication that demand across a commercial and government and markets remain solid.
On the commercial side with a trailing 12 month book to Bill of over 1.2 to one portends well for the current year. Nevertheless, commercial market demand did moderate somewhat from the third to the fourth quarter.
And the government space, the new federal budget combined with our strong pipeline of work, which remains at an all time high opens up an abundance of opportunities.
We remain aware of the developing market conditions and should macro conditions worsen and we found ourselves in a more difficult position than we are experiencing today I am very confident that our business is well prepared to continue to succeed.
Importantly.
We have a number of automatic stabilisers and place a strong and diversified U S focus customer base counter cyclical federal government work and a variable cost structure that supports our continued strong free cash flow generation and margins.
Macroeconomic conditions are naturally outside of our control what is in our control. However is the quality of service we provide the high in talent with source.
Solutions, we offer and the strategic positioning we maintain.
When it comes to those factors a S G N as in control.
After a record year performance that has is quickly approaching the inflection point of 50 per cent I T consulting revenues, our company's future is bright we're projecting another year of growth and our tracking in the right direction to achieve our three year targets.
Operator.
Thank you.
At this time, we will.
At this time, we will be conducting a question and answer session.
You'd like to ask a question. Please press star one on your telephone keypad and confirmation call will indicate your line and then the question queue.
You may <unk> like to remove your question from the queue.
Participants, usually speaker equipment and may be necessarily pick up your answering before persons eastern keys.
One moment, please let me pull for questions.
And our first question comes from the line of Maggie No one with William there.
You can proceed with your question.
Thank you.
You know, it's it's great to hear that you're progressing while towards the three are targets.
It does feel like you know I think I'm, just maybe September of 2021 sounds like a long time ago. At this point. So my question is you do you feel like there was perhaps some buffer included when you laid out those expectations for a changing economy are how're you considering that I can.
<unk> that bring your timeline that you cut out there.
Right [noise], thanks, baggy it's Ted.
I can.
Think about that November because it was September of 21 timeframe. When we put the targets out there I think they were responsible targets we finished that year frogger.
And so we were naturally ahead, just a bit.
When we came into the first year of clam.
I think the second thing is obviously, we've gotten better organic growth in 2022, then we programmed into the model and we're about on pace as it relates to M&A for the first few years. So.
You know [noise].
Think we'll we'll figure out what we get what we get in this particular year, but I think being well ahead on an organic basis and also being on pays from a M&A standpoint here I think we feel like we're still tracking towards the target until we put out there.
Once they all have to unlock Martin Maggie once they all Adam sorry on the margins inside which is an important thing here I mean, probably ended up into this would continue to see kind of incremental improvements a margin just based on the mix of business or consulting services and commercial brings US you know.
[noise] higher margin.
Then the legacy part of our business and so that's approved coin here that that continues to work.
That's helpful and I know Marie you had mentioned, maybe some operating leverage that you're expecting to materialize.
Hi, Thank you referred to it and maybe the near term can you kind of talk about the extent of that that you expect to materialize maybe over the course of the next year and and the cadence over this year and then added the future as well.
I think what we wanted to really highlight there was and and it was really related to the SG&A expenses and so when you look at SG&A. The non-cash SG&A, we ended as a percent of revenue at 18.1, 18%.
In Q1, and when you look at the guidance for the midpoint, it's around the same as well and so the idea that these SG&A expenses are willing to support future growth and so the idea is as we can kind of go throughout the year.
Those expenses would help with the operating leverage yeah, now, it's coming into the or through the second half of the year of the market.
And an opportunity was there and we saved invested in terms of head count and we'll have to monitor that going forward, but we certainly have some productivity to ring out of.
What we've invested in here in the second half of 2022 and again, that's just a part of who we are we're always each year gaming and productivity, whether it's in the the IP staffing more of the solutions part of our business and and then you have the the mix of consulting working together with that.
To continue to lever up are more tunes and.
I think that flower.
A good place here as we move towards the targets that we laid out.
Two months ago.
Understood. Thank you.
Our next question comes from the line of masks.
<unk> Bank of America. Please proceed with your question.
Hi, Thank you I was hoping you could talk a little bit of some moderation in demand on the commercial side between three Q in Fork, you and what you're sharing from customers and and kind of how that factors into your outlook for for 2023 for the full year alright as long as your first quarter guide.
Well look I think you can see that we're back to the typical seasonality of the business and so coming from the third quarter of the fourth quarter. This year.
As we saw in the pre Covid years, you begin to kind of level of power part way through the fourth quarter and.
Then you have the holidays and everything kind of seven so it's natural for us to kind of moderate.
Down just a bit though so the so the one thing I'd like to point out is we're back to that if you will the COVID-19 years of 2021, and 22, where we were bumping up every quarter. I think is is part of what we're speaking to there in terms of the sequential moderation and then ran do you Wanna talk about it in terms.
Of you know marketplace and customers.
Yeah, I mean, that's the 60 million dollar question right and we say every every quarter, but we read the newspapers like our clients too and we hear a lot about what's going on in the economy, but Gardner put out a report today that said overall Ikea spending was up and 22 over the.
Previous year and.
C I O responses than that they expect to continue to invest in I T and so you know.
When we look at our consulting unit in the bookings and when we look at our relationships and the staffing side and and even in the government side.
We see a lot of people focused on trying to get.
I T projects underway and completed in order to improve <unk>.
Multiple things worker productivity big part of it you can see a lot of work still around the cloud you can see that with Microsoft and Amazon and their sales service now we believe it's been a big transformational tool to help with the with a commercial clients. When you Ted pointed out we grew and three of the five.
Industry report double digit as we go forward one of the strengths we have inside of S. G. N is there's always gonna be a sector or if you will it's not performing but there are other sectors that are so as you can expect our energy M as Ted pointed out.
Energy Transportation Airlines, a consumer material, all that's still roaring pretty strongly.
We we watched information technology clients are technology clients, obviously, big banks have better revenue opportunity with higher interest rates. So you know they continued to grow and spend so you know I think we're watching all the parts of the economy.
See what's up what's down and I think for the most part we see what you can see in the press that there are parts of the economy, they're doing very well and the parts that are a little bit more tenuous in terms of our solution offerings.
Highly and cloud highly in cyber security highly digital transformation, it's kind of the right place to be in support of our clients. So I don't know what I gave you enough of a flavor there.
What's that.
Thanks for the help and <unk> <unk> <unk> <unk> <unk> quarter how.
How much of that.
<unk>, Alright collection, the economy and potentially a tougher 20th 23 environment versus normalization given that her.
With the labor market Kinda, where it is can you help us trying to think about that.
Yeah, Yeah, I have always tell again I think that one one part of that is just incredibly difficult comps from the fourth quarter of last year I mean on a commercial basis, we were.
24% year over year on the fourth quarter of 21, and those parts of our business that you mentioned or up even more so I think that that for right. Now is the main thing and then I think naturally you have is Ram pointed out you have clients being cautious you know so they're watching that slowed down.
Some of those activities on permanent placement, that's natural that happens first.
We call that out and our guidance.
As we built our guidance for the fourth quarter. So I I just think it's it's a little it's a little bit of cautiousness in the world and it's a little bit what you said, which is in the labor market. That's how how these things reactors could get into a different difficult business cycle.
Alright, thanks for the calories.
Our next question comes from the line of Toby Sama, which was securities. Please proceed with your questions.
[noise] thanks in.
<unk> area.
Oh it was the your ability to make acquisitions and then based on the.
Customer kind of proximity in relationship.
Two or three years ago. When you know everything was very vibrant chain grocery store, even higher <unk>.
<unk> I'm Gonna, let raiment answer this one if I understood you right I think you're talking about the synergy part of this which is apex fast playing together versus versus over our per our acquisitions ramp.
That's right and your your ability to to submit your customer base accelerate the growth of the acquired businesses.
Right I I think I think Ted did in his remarks feature three of our acquisitions the glide fast the iron Vine and then the health care E. R. P job, which is meant for and for technology, which is another acquisition. We did just prior to glide fast so I'd say our acquisitions are doing very.
Well from what he showed you in both glide fast and iron fine the ability to bring the apex client to the table for four glides fast support and service now with technology that's been.
Better than we could have even expected we've only had them for.
Six months I guess, when we finished the fourth quarter and they achieve their numbers with their client base, but we've generated an awful lot of bookings and pipeline out of the apex client base. So Toby that's going very well <unk> same thing or a joint bids I think Ted also featured the ice another one.
The federal acquisitions, we made that also has a service now capability, which we've been winning work and ECS with them.
To some of the ECS client base so.
No. We didn't we expected that we're going to do that that's part of I think the strength of having an account based that we do that we can bring them to the table and the results are I think very featured in these in the words of Ted Hughes previously.
Yeah, and I think ran that's Toby Toby that's exactly right and it ran said the fastest certainly add a pace here in terms of what with a thought from our revenues energy basis, together with apex, which is good to see.
Okay.
<unk> you're comfortable.
<unk> in a you know this year in a potentially softer environment, where.
New project starts may not be occurring at the same pace or is it something where you feel.
Feel more comfortable pausing for a bed to get more.
More solid footing with even stronger visibility before replicating.
Well look good question both of these businesses as well as all of our other acquisitions are fully integrated so thank readiness is not an issue it's more situational around watching areas of the <unk>.
Demand here and are there M&A opportunities that support that and then just where are things. So it's a little tough to look forward Toby and say, we would or we wouldn't I think we're open minded we're working pipelines were looking or thinking.
Are people that I spend more on cyber security this year than they did last absolutely or they're going to be more services.
Always moving things to the cloud and continuing the March to get all your appetite application to live with Clough absolutely you know are there certain.
Enterprise software solutions that are needed in the digital transformation game and.
This is not about one quarter of one year as a multiyear kind of effort and our clients are still investing absolutely. So I think we have to watch those things and then have an opportunity. If you will to find the right partner I mean is rahn said.
Eloquently many times it took us two years to kind of identify the opportunity not in service now we knew that but to find God fast and.
Good thing we waited you know we really found the right partner in that so we'll we'll have to play it as it comes.
Hey, Ted Cry, and all that and Toby Toby you'll anticipate what I'm Gonna say, but we're very positive about this play in our playbook right you can see that from the results and so just had said there's other ways to also.
Unfold things, but this one has worked and it's working again and again for us so.
Obviously part of our playbook.
Thank you and if I could ask one last question about D. C S.
The trailing a book to Bill is 0.9.
Are you.
Comfortable does that is that indicative grow because you.
You seem to be growing and you may be getting things mid stream or drawing down on a backlog kind of help us square. That's that's shop, one book to bill and whatever sort of growth outlook of momentum you see in the in the government.
Yeah, I think it says it's a little bit of a Squirrelly 2022, you know for us at ECS been together with other peers and the common space I mean, we had two quarters where.
Two quarters, where you saw it coming but you just couldn't get the procurement wheels running fast enough to give stuff out on the street finally in third quarter, we saw a nice a.
A nice push of awards at the end of the third quarter and I'm, hoping to get some more of the board, but I think what we're seeing in the fourth quarter and.
Is just to get a little bit Ah stickiness here. So yeah, there's a lot of focus in the Gulf com industry around procurement the cycle encouraging things to move a little bit faster and so.
I think that's what's mostly behind this Toby I would say our you know our burn rates on our backlog or there's not anything abnormal there we are picking stuff up as we go that's not abnormal.
It's just getting back to the kind of more normal pace of getting the budget dollars out there distributed.
And Ah available for us to books and create revenues.
Thank you very much.
Our next question comes from the line of Jeff.
Homer with BMO capital markets. Please proceed with your inquiry.
Thanks, So much wanted to start on the commercial consulting side the numbers, you've been putting up I've been really strong a lot stronger than a lot of the other ickes services companies out there.
Are you seeing any kind of a slowdown or our clients taking longer to make decisions. Some of the other companies have been talking about that.
I think that's fair, Jeff how May I think when we say that the pace of growth moderating from the third into the fourth as part of that is behind it we're definitely fighting tough calm so I always.
Right that out I mean, that's the thing right now, but I think you guys clients or I mean look in the on the commercial consulting side, we booked 300 billion of new opportunity and the.
And the last quarter some of that as extensions of current work in some of that is new work on a balance always but that that that's just indicative Arab clients are sticking with it if you will and we'll have to see where that goes.
As it relates to January our bookings in that area, where as we would expect.
For the quarter and for the Guy that we put out there. So you know I think again, that's just another data point that tells us that clients are watching their worry, but they need to get things done they're not they're not gonna get a cold pull something off the shelf here.
Across the board if you will.
And so you know.
That gives us confidence that there's gonna that it's gonna be a market place we can continue to work and.
Okay. That's helpful. And then if I can just shift gears can we talk about your internal head calm plans by three major lines of business with <unk> assignment consulting and federal government for this year.
Well I think if you just look you always investing where where you see there's opportunity right and so naturally we see opportunity in the commercial consulting and so we're investing into that we did.
And the second half of the year when continue to do that.
Improving market and the federal space and so we're continuing to invest into that opportunity and then as it relates to the legacy part of the business to staffing part of the business, it's an industry by industry and in the account by account kind of analysis and so we've got.
Kind of always kind of watch where we're allocating head count in but you know where again I think if you just look at our SG&A. There was there was opportunity through the second half of the fourth quarter and so we stuck with it and we're here we are sticking with it because we see the same thing and we'll have to monitor it as we go.
Okay. That's helpful. Thanks, so much.
Our next question comes from the line of surrender and with.
With Jeffries to proceed with your question.
Thank you I'd like to start with a question about the consulting business can you maybe talk about the level of penetration that you have in terms of overlap with the staff and clients at this point.
And in terms of some of the new project wins or the accelerated groceries that you've seen over the past couple of years to where you are at this point.
Is there any cannibalism occurring or how should we think about that dynamic with the staffing business.
Yeah random gonna take that one.
Well first of all I think 10 and your comments you commented that were growing with greater penetration of our staffing clients into consulting. So I think we reported in the past we were in like a 20 per cent penetration of staffing accounts for consulting services that number continues to go up.
And we focused on the Fortune 1000, now as opposed to 500, we've expanded out and and we are definitely getting more penetration.
Into that client base at staffing client base in terms of Cannibal sedation.
Sandra I don't I I I understand the way you're asking the question I don't think that's what's going on I think clients are getting smarter smarter.
And how they buy things so do I need a body or do I need a work product do I, what's the best way for me to get this particular problem solved and Jeff on the previous call had asked about workforce. We don't have a staffing were forced in a consulting work force. We have a group of account managers that service all of our accounts <unk>.
<unk> or consultative services, and they're supported by the technical muscle that we have in Arkansas and units and supported by all of our recruiters. So when we're approaching a client we're approaching the client from the point of view of what are you trying to accomplish how can we best accomplish that and that will end up with a work package it could be a staffing work package or it could be a consultant.
Work package and it it's really the best way to solve the clients ultimate problem and gives a client credit they're sitting back saying what is the best way for me to get results out of this piece of work. So I I see it as a maturing of the industry and the maturing of our role in this industry you know where.
Not 100 year old consulting business like we were a KPMG or accenture is that sort of thing. So we're 10 years into it we're getting smarter with a client and we're having them sit down and that's why we always kind of know what they're thinking about what they're trying to accomplish so does that answer. Your question does that give you a feel for.
Yeah, I think I think that's helpful. Just as a point of clarification.
Pulling up on the on the 20 per cent penetration comment is the idea that is there a number that may be giving you have clients of all sorts of different sizes.
Consulting I assume tends to be bigger projects. So is there maybe you can get to a 50 per cent penetration rate or if that was kind of the the context of where we are not sure yet I realized there's still a.
Long Road ahead, but it's just some sort of idea of.
What what the current <unk>.
Okay. That's all you want I think 20 per cent was the number we put out many many quarters ago and I will tell you. We're north of that number now and I think the goal is why would we stop at 50 per cent.
Right.
Why wouldn't we keep driving I mean every client I'm sure. There are services, we can provide value we can provide our clients every one of them. So.
Got it and surrender you know the the procurement process as such with these large enterprise accounts that they have an IP staffing.
Approved.
Vendor opportunity your list and then they have a professional services or consulting and sometimes those are knitted together more tightly sometimes they're dramatically separate and where.
Pursuing both with them on the icy staffing side pursuing.
That vendor opportunities for.
I've lost count of the year is 28 years now or whatever the number is it only like Grand theft for the last 10 or are we pursuing this other than where wedding, where women pretty well and there's no reason to stop at a certain number it's a wide open opportunity, we just have to keep at it.
There is clearly surrender.
Clearly room to grow and by the way by growing this kind of work were improving an increase in the value. We bring you the client, helping our own margins, giving our people career opportunities and career path and our people are trained to <unk> more widespread than just the staffing component if you will <unk>.
<unk> as well too many of our clients and we want to make sure we pay attention to that as well.
Got it and then in terms of a related question here any color on maybe the scale at which you're comfortable taking on projects.
Within the consulting business were there any revenue concentration elements that we should be aware of.
So low revenue concentration, but raised in terms of that type of opportunities.
I think <unk> said in the past, there's this pyramid of services and on the top as architecture, and then below that you begin to get into applications and and the data formats and the the the <unk> the datasets and that sort of thing.
And the implementations.
I would say a complicated architecture for Fortune 500 company, we need to be a little careful okay. That's let accenture do that but we can certainly implement helped implement that architecture, so and it you know.
Most clients have an architecture and they have a path forward, we had our own ideas on digital transformation of different industries, we've shared that with the clients. So I you.
No I think we have to be careful we don't get over our skis. If you will and a piece of work or in a technology that we're not familiar with but.
We can also ramp up pretty quickly because we have a recruiting for second to none.
Right, and which we can find talent and build that talent base for the client industry specific so but I think we're also mindful of the risks surrendered the issue. The only thing that would keep US is is the big risks can we really deliver on that and maybe the architecture level is the area that we would certainly ask ourselves a lot of questions.
First.
Yeah, and I think it depends on the type of work too obviously and services now we have that capability.
And so we're very comfortable in that area around digital get upgrading that digital enterprise layer.
As an example in really good on architecture of that in the federal business. We're really good on architecture in certain areas cyber cloud.
Work in a machine learning and so those are areas, where very comfortable there are others that are just not our sweet spot and so I think we're gonna put that exactly right.
Excellent Uhm that's it for me thank you.
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Hi, Thank you I put myself back in the queue with just one other follow up uhm. So he'll laugh here you guys schemes. Some framework for full year in terms of Martin and <unk> and you didn't do it on this call, but I just wanted to ask if there is any sort of.
I get higher last level framework, you can provide for Howard how you're thinking about the ear or just kind of.
Any help with that.
Hi, Heather this is Marie I you know the one thing that we will say around the full here is that we are tracking toward are three your targets and so it's just a great tool to have these three your targets to know kind of where you're going and so at Ted mentioned earlier, you know we started out.
Out.
2022, we ended 2020th stronger slug, it out 2022 with more panic growth.
And so we feel very comfortable where we're tracking and so we haven't really changed is through your targets.
Okay got it thank you.
And we have reached D N. A the question and answer session I'll turn the call back over to to enhancing foreclose remarks.
Thank you I appreciate everyone's time. This evening are interested E. S. P N and we look forward to speaking with you. After our first quarter comes to an end and we announced results. Shortly thereafter have a great evening.
And this concludes today's conference and you may disconnect Tonight at this time. Thank you for your participation.
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