Q4 2023 ASGN Incorporated Earnings Call

Operator: Greetings, and welcome to the ASGN Incorporated 4th quarter 2023 earnings call. At this time, all participants are to listen only. 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.

Greetings and welcome to the a S. G N incorporated fourth quarter 2023 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.

Operator: I will now turn the conference over to your host, Kimberly Esterkin, Vice President of Investment Relations. You may begin. Good afternoon.

I will now turn the conference over to your host Kimberly <unk>, Vice President of Investor Relations you may begin.

Kimberly: Good afternoon. Thank you for joining us today for <unk> fourth quarter and full year 2023 conference call.

Kimberly Esterkin: Thank you for joining us today for ASGN's fourth quarter and full year 2023 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 four forward-looking statements. Although we believe these statements are reasonable, they are subject to risk and uncertainty. 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.

Kimberly: With me are catching Hanson, Chief Executive Officer ran blazer, President and Marie Perry Chief Financial Officer.

Kimberly: Before we get started I would like to remind everyone that our commentary contains forward looking statements.

Kimberly: Although we believe these statements are reasonable they are subject to risks and uncertainty and as such our actual results could differ materially from those statements.

Kimberly: Sure.

Kimberly: Risks and uncertainties are described in today's press release.

Kimberly: And our SEC filings, we do not assume any obligation to update statements made on this call.

Kimberly Esterkin: For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com. Please also note that on this call, we will be referencing certain non-GAAP measures such as adjusted EBITDA, adjusted net income, and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measure.

Kimberly: For 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.

Kimberly: These non-GAAP measures are intended to supplement the comparable GAAP measure.

Kimberly Esterkin: Reconciliations between GAP 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, Tim, and thank you for joining ASGN on its fourth quarter and full year 2023 earnings call. ASGN achieved solid results in the fourth quarter, with revenues, gross margin, and adjusted EBITDA margin all at the top end of, or above, our guidance range. During 2023, revenues totaled approximately $4.5 billion, of which $2.4 billion was in commercial and government IT consulting work. A highlight of our annual performance, commercial consulting revenues reached a new high-water mark, surpassing $1 billion. From a profitability perspective, ongoing expense management, along with our business stabilizers, contributed to an adjusted EBITDA margin of 11.6% for the year.

Kimberly: Reconciliations between GAAP and non-GAAP measures are included in today's press release.

Kimberly: I will now turn the call over to Ted Hanson, Chief Executive Officer.

Theodore S. Hanson: Thank you Jim and thank you for joining <unk> fourth quarter and full year 2023 earnings call.

Theodore S. Hanson: <unk> achieved solid results in the fourth quarter with revenues gross margin and adjusted EBITDA margin at the top end or above our guidance ranges. During 2023 revenues totaled approximately $4 5 billion of which $2 4 billion within commercial and government.

Theodore S. Hanson: To work highly.

Theodore S. Hanson: <unk> of our annual performance commercial consulting revenues reached a new high watermark, surpassing $1 billion from a profitability perspective ongoing expense management, along with our business stabilizers contributed to an adjusted EBITDA margin of 11, 6% for the year with that.

Theodore S. Hanson: With that as background on our results, I'd like to highlight a few key themes to keep in mind as we review our segment performance. To start, 2023 was the first time we tested our current revenue mix and operating model in a difficult economy. Today's business is not the same as during the Great Financial Crisis or the pandemic. Therefore, we have yet to witness our current operations in an economic slowdown.

Theodore S. Hanson: As background on our results I'd like to highlight a few key themes to keep in mind as we review our segment performance to start 2023 was the first time, we tested our current revenue mix and operating model in a difficult economy. Today's business is not the same as during the great financial crisis or the pandemic. Therefore.

Theodore S. Hanson: We have yet to witness our current operations in an economic slowdown.

Theodore S. Hanson: However, as evidenced by our full-year results, I can confidently say that ASGM made solid progress despite macro challenges. Our unique go-to-market strategy and variable cost structure supported the business and our margins throughout the year. Second, not only do we demonstrate that our operating model works, but we also show that we have the right mix of businesses. Our federal government services provide counter-cyclical support to balance out our five diverse commercial industry verticals.

Theodore S. Hanson: However, as evidenced by our full year results I can confidently say that <unk> made solid progress. Despite macro challenges are unique go to market strategy and variable cost structure supported the business and our margins throughout the year.

Theodore S. Hanson: Not only do we demonstrate that our operating model works, but we also showed that we had the right mix of businesses. Our federal government services provided counter cyclical support to balance out our five diverse commercial industries articles.

Theodore S. Hanson: Third, our long-standing, trusted client relationships drove the growth of our IT consulting revenues. And in the fourth quarter, we officially surpassed 55% of consolidated revenues in IT consulting, a full year ahead of our target. These achievements resulted from proactive efforts to strategically shape and purposefully build a business that could perform well throughout the market cycle. Our federal government services offer counter-cyclical ballots for our more cyclical commercial businesses.

Theodore S. Hanson: Third our long standing trusted client relationships, but the growth of our it consulting revenues and in the fourth quarter, we officially surpassed 55% of consolidated revenues in consulting a full year ahead of our target.

Theodore S. Hanson: These achievements resulted from proactive efforts to strategically shape and purposefully built a business that can perform well throughout market cycles, our federal government services all of her counter cyclical balance to start more cyclical and commercial businesses.

Theodore S. Hanson: These cyclical commercial businesses, while leaving indicators on the downside, have historically seen more sustained rallies as the economy improves. Importantly, we are evolving our revenue mix, moving our way up the pyramid to provide higher-end, higher-value IT consulting work that is typically longer in duration and provides us with greater visibility and margin potential. I am certain that our operating model is well positioned as IT services demand recovers.

Theodore S. Hanson: These cyclical commercial businesses, while leading indicators on the downside has historically seen more sustained rally as the economy improves.

Theodore S. Hanson: Importantly, we are evolving our revenue mix, leaving their way up the pyramid to provide higher and higher value consulting work that is typically longer in duration and provides us with greater visibility and margin potential I am certain that our operating model is well positioned as it services demand recover.

Theodore S. Hanson: Yeah.

Theodore S. Hanson: With these themes in mind, let's turn to our segment performance, beginning with our largest segment, our revenue commercial. Our commercial segment services large enterprises and Fortune 1000 companies across five diverse industry verticals. Commercial segment revenues for the quarter declined by low teens year over year.

Theodore S. Hanson: With these themes in mind, let's turn to our segment performance beginning with our largest segment by revenue commercial.

Theodore S. Hanson: Yeah.

Theodore S. Hanson: Our commercial segment services large enterprises unfortunate 1000 companies across five diverse industry verticals commercial segment revenues for the quarter declined by low teens year over year revenues for the segment.

Theodore S. Hanson: Revenues for the segment benefited from growth in our consulting business offset by double-digit declines in the more cyclical areas of our assignment business. Commercial consulting revenues increased roughly 2% for the quarter compared to the year-ago period. Solid growth given the macro challenges and a difficult year-over-year comparison. Favorable commercial consulting bookings of approximately $312 million translated to a book-to-bill of 1.2 times on a trailing 12-month basis. Another positive is that we continue to add new Fortune 1000 clients to our consulting roster. Beyond new work, client retention rates on existing contracts remain strong, and customers are engaging our teams on longer consulting projects. Similar to the third quarter, we saw bookings weighted slightly more towards renewals than new work opportunities.

Theodore S. Hanson: Growth in our consulting business offset by double digit declines in the more cyclical areas of our side of the business.

Theodore S. Hanson: Commercial consulting revenues increased roughly 2% for the quarter compared to the year ago period, the all in growth given the macro challenges and a difficult year over year comparison.

Theodore S. Hanson: Favorable commercial consulting bookings of approximately 312 million translated to a book to Bill of one two times on a trailing 12 month basis.

Theodore S. Hanson: Another positive we continue to add new fortune 1000 clients through our consulting roster.

Theodore S. Hanson: Yeah.

Theodore S. Hanson: Beyond new work client retention rates on existing contracts remain strong and customers are engaging our teams on board longer consulting projects.

Theodore S. Hanson: Similar to the third quarter, we saw bookings weighted slightly more towards renewals the new work opportunities.

Theodore S. Hanson: As we enter the first quarter of 2024, many of our clients remain deliberate in their IT investments for the year, but their spending on certain consulting contracts remains high. Nevertheless, the growth in our bookings during the fourth quarter clearly indicates that our clients continue to recognize the value of ASDN services. Our teams and operating model are well-positioned to support our clients' IT roadmaps as they ramp up their spend. However, according to our vertical performance, all five commercial industry verticals declined year-over-year.

Theodore S. Hanson: As we enter the first quarter of 2020 for many of our clients remain deliberate and their IP investments for the year because they are spending on certain consulting contracts remain extended.

Theodore S. Hanson: Nevertheless, the growth in our bookings during the fourth quarter clearly indicates that our clients continue to recognize the value of AAC and services.

Theodore S. Hanson: Our teams and operating model are well positioned to support our clients' IP roadmaps as they ramp up their spend.

Theodore S. Hanson: Turning to our vertical performance all five commercial industry verticals declined year over year that said, we saw sequential growth on a billable day adjusted basis.

Theodore S. Hanson: That said, we saw sequential growth on a billable day-adjusted basis in two verticals, consumer and industrial, and TMT, and relatively flat sequential performance on a billable day-adjusted basis in the healthcare vertical. Sequential improvements and subverticals included utilities, consumer discretionary, healthcare providers, telecom, media, e-commerce, and software and services accounts. Our commercial bookings remain solid with work one across multiple service areas.

Basis in two verticals consumer industrial and TMT.

Theodore S. Hanson: And relatively flat sequential performance on a billable day adjusted basis in the health care vertical.

Theodore S. Hanson: Sequential improvement in sub verticals, including utilities consumer discretionary health care providers Telecom media E Commerce and software and services accounts.

Theodore S. Hanson: Our commercial bookings remained solid with work one across multiple service areas. Our pipeline today I work continues to grow as our clients focus on data preparation developing use cases and implementing their AI platforms.

Theodore S. Hanson: Our pipeline of AI work continues to grow as our clients focus on data preparation, developing use cases, and implementing their AI platforms. As such, we continue to hire subject matter experts, train our current teams, and develop AI accelerator programs, each with our customer needs in mind. For example, Apex Systems' application development team is leveraging our partnership with Microsoft to train our developers to become even more productive for our clients. Microsoft technology, in another example, enabled us to significantly shorten new code generation timelines for an automotive and aerospace parts manufacturer. In another instance, with the help of Microsoft Copilot, our team substantially reduced data review time as a digital health services provider.

Theodore S. Hanson: We continue to hire subject matter experts.

Theodore S. Hanson: Train our current teams and develop AI accelerator programs each with our customer needs in mind for example, apex systems application development team is leveraging our partnership with Microsoft to Upskill, our developers to become even more productive for our clients.

Theodore S. Hanson: Croissant technology and another example enabled us to significantly shorten new cogeneration timelines or in automotive and aerospace parts manufacturer.

Theodore S. Hanson: In another instance, with the help of Microsoft Co pilot our team substantially reduce data review time is a digital health services provider.

Theodore S. Hanson: In addition to Microsoft, Apex Systems is collaborating with several other companies on generative AI technology. Leveraging both Salesforce and ServiceNow's generative AI technologies, we've been able to gain a holistic view of our customers' IT journeys, to refine their AI roadmaps, automate solutions, and build personalized, data-driven marketing campaigns and IT schedules with improved productivity. Our team of data scientists, engineers, developers, and technical project managers has also used a combination of Microsoft Azure, Databricks, and Snowflake to help a Fortune 50 telecom company with personalization, predictive modeling, and increased revenue generation for its mass marketing campaign. With AI gaining traction, cyber security needs are also increasing.

Theodore S. Hanson: In addition to Microsoft Apex systems is collaborating with several other companies generally with AI technology <unk>.

Theodore S. Hanson: <unk> does salesforce and service announced generative.

Theodore S. Hanson: Balance sheet, we've been able to gain a holistic view of our customers I T journeys.

Theodore S. Hanson: And I read them, perhaps automate solutions and build personalized data driven marketing campaigns.

Theodore S. Hanson: At G schedules with improved productivity.

Our team of data scientists engineers developers and technical project managers have also used a combination of Microsoft Azure data bricks.

Theodore S. Hanson: Like to help a fortune 50 telecom company with personalization predictive modeling and increase revenue generation for its mass marketing campaigns.

Theodore S. Hanson: With <unk>, gaining traction cyber security needs are also increasing in the fourth quarter. We worked with a fortune 25 healthcare insurer to mitigate cyber security risks associated with its newly acquired entities.

Theodore S. Hanson: In the fourth quarter, we worked with a Fortune 25 healthcare insurer to mitigate cyber security risks associated with its newly acquired entities. We partnered closely with our client's IT integration team to rapidly assess and remediate over 1,000 vulnerabilities in cloud platforms ahead of their planned integration timeline. By leveraging our deep expertise in Amazon Web Services, Microsoft Azure, and hybrid cloud environments, we meaningfully reduced our clients' regulatory compliance and data breach risk during this critical transaction period. We've also integrated our public sector cybersecurity DNA to help grow our commercial work. Our professionals at ECS have developed proprietary methods for intelligence gathering, security instrumentation, and incident response, each of which has been battle-tested by the Department of Defense and is now being leveraged by our commercial clients.

Theodore S. Hanson: We partner closely with our clients I T integration team to rapidly assess and remediate over a thousand vulnerabilities in cloud plus platforms ahead of their planned integration timeline.

Theodore S. Hanson: By leveraging our deep expertise in Amazon Web services, Microsoft Azure and hybrid cloud environments, we meaningfully reduced our clients regulatory compliance and data breach risk during this critical transaction here.

Theodore S. Hanson: We've also integrated our public sector cyber security DNA to help grow our commercial work our professionals that ECS has developed proprietary methods for intelligence gathering security instrumentation and then so that's response each of which has been battle tested by the department of defense and its now being leveraged by our.

Theodore S. Hanson: Commercial clients.

Theodore S. Hanson: We believe that our combined credentials, expertise, and past qualifications will continue to drive our cybersecurity efforts across our Fortune 1000 client list. Speaking of our public sector services, let's now turn to our federal government segment, our sixth industry vertical, which provides mission-critical solutions to the Department of Defense, the intelligence community, and federal civilian agencies. Federal segment revenues for the fourth quarter were up 9.2% year-over-year. Contract backlog was $3 billion at the end of the quarter, or a healthy coverage ratio of 2.4 times the segment's trailing 12-month revenues. The awards were approximately $56 million, translating to a book-to-bill of 0.8 times on a trailing 12-month basis.

Believe that our combined credentials expertise and pass qualifications will continues to drive our cyber security efforts to cross sell for Fortune 1000 clients.

Theodore S. Hanson: Speaking of our public sector services, let's now turn to our federal government segment are six industry vertical which provides mission critical solutions to the department of Defense intelligence community and federal civilian agencies.

Theodore S. Hanson: Federal segment revenues.

Theodore S. Hanson: First quarter were up nine 2% year over year.

Theodore S. Hanson: Contract backlog was 3 billion at the end of the quarter or a healthy coverage ratio of two four times the segment's trailing 12 months revenues.

Theodore S. Hanson: The awards were approximately 56 billion translating to a book to Bill of <unk> eight times on a trailing 12 month basis.

Theodore S. Hanson: Bookings this past quarter were soft due to a combination of traditional seasonality and greater than anticipated award deferrals into the first half of 2024, our pipeline as well as the bids submitted and awaiting award are each near the highest levels they've ever been.

Theodore S. Hanson: Bookings this past quarter were soft due to a combination of traditional seasonality and greater-than-anticipated award deferrals into the first half of 2024. However, our pipeline, as well as the bids submitted and awaiting award, are each near the highest levels they have ever been. The lower bookings in Q4 resulted from a timing issue rather than lost work opportunities, and we already see a pickup in contract activity in the mid-year. We expect stronger bookings in the first half of 2024. In the fourth quarter, bookings were led by work with the U.S. intelligence community and several civilian agencies. For example, we continue to manage the FBI's cybersecurity red and blue programs, and in Q4, we want additional work under this contract. This mission-based work is designed to secure and monitor FBI networks from external threats and internal vulnerabilities.

Theodore S. Hanson: The lower bookings in Q4 resulted from a timing issue rather than lost work opportunity and we already see a pickup in contract activity in the new year, we expect stronger bookings in the first half of 2024.

Theodore S. Hanson: In the fourth quarter bookings were led by work with the U S intelligence community and several civilian agencies. For example, we continue to manage the FBI cyber security Red and Blue program and in Q4, we won additional work under this contract.

Theodore S. Hanson: Michigan based work is designed to secure and monitor the FBI networks from external threats and internal vulnerability.

Theodore S. Hanson: In addition to work booked in the fourth quarter, ECS also announced two large multiple award IDIQ contracts this past November that allow our government team to bid on new work in the future. With the Veterans Affairs Office of Information and Technology, we won a $60.7 billion prime IDIQ contract. ECS has partnered with the VA since 2009, but this is the first time ECS has won a prime contract with this office. Under this contract, ECS will provide a full range of IT services, including technical support, project management, strategy planning, systems software engineering, enterprise networking, and cybersecurity, amongst other services.

Theodore S. Hanson: In addition to work booked in the fourth quarter ECS also announced two large multiple award <unk> contracts. This past September that allow our government team to bid on new work in the future.

Theodore S. Hanson: With the Veterans Affairs office of information technology, we want a 67 billion prime idea I keep contract Dcfs's partner with the VA since 2009, but this is the first time, we won a prime contract with this office.

Theodore S. Hanson: Under this contract ECS will provide a full range of services, including technical support project management strategy planning system software engineering enterprise networking and cyber security amongst other services.

Theodore S. Hanson: Task orders under this IDIQ are expected to come out in the third quarter of this year and be awarded in the fourth quarter. We also won a $1.25 billion prime IDIQ contract with the Defense Advanced Research Projects Agency, DARPA. To provide technical, analytical, and program support. As an agency of the U.S. Department of Defense, DARPA's mission is to develop breakthrough technologies for national security by working with partners inside and outside the federal government.

Theodore S. Hanson: Task orders under decided yet you are expected to come out in the third quarter of this year and be awarded in the fourth quarter.

Theodore S. Hanson: We also won a 1.25 billion prime.

Theodore S. Hanson: Contract with the Defense Advanced research projects Agency DARPA.

Theodore S. Hanson: It provides technical analytical and program support.

Theodore S. Hanson: And the agency of the US Department of Defense Darkens initiatives to Bill develop breakthrough technologies for National security by working with partners inside and outside the federal government.

Theodore S. Hanson: DCS has been a well-respected partner of DARPA for more than 30 years and, in 2018, was one of seven awardees on an $850 million IDIQ. Success under this previous contract helped lead to our award under this new, large-prime contract. With that, I'll now turn the call over to Marie to discuss the fourth quarter results and our first quarter 2024 guidance. Thanks, Ted. It's great to speak with you all this afternoon.

<unk> has been a well respected partner DARPA for more than 30 years and in 2018 was one of seven Awardees on a 850 million IDI cues.

Theodore S. Hanson: Success under the previous contract help leader to our award under this new large prime contracts.

Theodore S. Hanson: With that I'll now turn the call over to Marie to discuss our fourth quarter results and our first quarter 2020 for Guy.

Marie Perry: Thanks, Ted it's great to speak with everyone. This afternoon at.

Marie: As Ted noted, revenue exceeded our expectations for the quarter. Fourth quarter revenues of $1.1 billion were above the top end of our guidance range due to continued commercial contract engagement during the holiday season, growth in our commercial consulting business, and continued strength in our federal government segment. However, revenues from the commercial segment were $748.6 million, down 12.2% compared to the prior year quarter.

Marie Perry: As Ted noted revenue exceeded our expectations for the quarter.

Marie Perry: Fourth quarter revenue of $1 1 billion were above the top end of our guidance range due to continued commercial contract engagement during the holiday season growth in our commercial consulting.

Marie Perry: And continued strength in our federal government.

Marie Perry: Revenue from the commercial segment were $748 6 million down 12, 2% compared to the prior year quarter revenues for our commercial consulting the largest of our high margin revenues totaled.

Marie: Revenues for commercial consulting, the largest of our high-margin revenues, totaled $268.5 million, up 1.7% year-over-year despite difficult market conditions and a tough comparison of 37.8% growth in the fourth quarter of 2022. For the full year, commercial consulting revenues improved 14.2% on an as-reported basis and improved 8.6% organically. With this solid growth in our commercial consulting revenues for the year, we reached over $1 billion in commercial consulting revenues in 2023, as Ted previously noted. However, growth in commercial consulting revenues was offset by an 18.4% year-over-year decline in assignment revenues, reflecting continued softness in the more cyclical parts of our business. For the full year, assignment revenues declined 16% compared to 2022.

Marie Perry: Totaled 268 five.

Marie Perry: One 7% year over year, despite difficult market condition, and a tough comparison of 30.

Marie Perry: And then 8% growth in the fourth quarter of 2022.

Marie Perry: On a full year commercial consulting revenues improved 14, 2% on an as reported basis.

Marie Perry: And improved eight 6% organically.

Marie Perry: The solid growth in our commercial consulting revenues for the year, we reached over $1 billion commercial consulting revenues in 2023, and Ted previously known yet.

Speaker Change: Well I think you mentioned consulting that was offset by an 18, 4% year over year decline in assignment revenues, reflecting continued softness in the more cyclical parts of our businesses.

Speaker Change: For the full year assignment revenues declined 16% compared to 2022.

Speaker Change: Revenues from Federal Government segment were 325 sites.

Speaker Change: 92% European here for the full year Federal government segment revenue increased by 11, 4% on an as reported basis.

Speaker Change: Four 9% organically.

Speaker Change: Turning to margins on it.

Marie: Revenues from our federal government segment were $325.5 million, up 9.2% year-over-year. For the full year, federal government segment revenue improved by 11.4% on an as-reported basis and 4.9% organically. Turning to margins, on a consolidated basis, growth margin was 28.4%, down 120 basis points over the fourth quarter of last year. The year-over-year compression in growth margin was largely related to business mix, including a lower mix of certain high-margin revenues within our commercial segment and a higher mix of lower-margin revenues from our federal government segment. Growth margin for the commercial segment was 32.1%, down 10 basis points year-over-year, primarily due to the lower mix of certain high-margin assignment revenue streams, mainly Creative Digital Marketing and Permanent Placement Revenue, which was mostly offset by a higher mix of high-margin IT consulting revenue.

Speaker Change: Validating basis gross margin was 28, 4%.

Speaker Change: 120 basis points over the fourth quarter of last year.

Speaker Change: Year over year compression in gross margin was largely related to business mix.

Speaker Change: A lower mix of certain high margin revenue within our commercial segment and a higher mix of lower margin revenues from our federal government segment.

Speaker Change: Gross margin for the commercial segment was 32, 1% down 10 basis points year over year, primarily due to the.

A lower mix of certain high margin assignment revenue stream.

Speaker Change: Mainly creative digital marketing and permanent placement revenue.

Speaker Change: Mostly offset by a higher mix of high margin in consulting banking.

Speaker Change: Gross margin for the federal government segment with 19, 9% down 220 basis points year over year due to a higher mix of lower margin licensing revenues.

Speaker Change: SG&A expenses for the fourth quarter were $203 6 million or 19% of revenue compared to $229 9 million or 20% of revenues in the prior year.

Marie: Growth margin for the federal government segment was 19.9%, down 220 basis points year-over-year due to a higher mix of lower-margin licensing revenues. SG&A expenses for the fourth quarter were $203.6 million, or 19% of revenues, compared to $229.9 million, or 20% of revenues, in the prior year. This improvement was mainly due to lower incentive compensation expenses. SG&A expenses also included $1.6 million in acquisition, integration, and strategic planning expenses that were not included in our guidance estimate. As expected, interest expense increased year-over-year related to rising interest rates and refinancing this past August.

This improvement was mainly due to lower incentive compensation.

Speaker Change: SG&A expenses also included one 6 million in acquisition integration and strategic planning expenses.

Speaker Change: Not included in our guidance estimates.

Speaker Change: As expected interest expense increased year over year with eight inch of rising interest rates and a refinancing this past August.

Speaker Change: Net income was $50 3 million adjusted EBITDA was $121 million and adjusted EBITDA margin was 11, 3%.

Speaker Change: At quarter end cash and cash equivalents were $175 9 million and we had full availability under our new 500 million senior secured revolver.

Speaker Change: Cash flow for the quarter was $109 2 million an increase of 68, 5%.

Speaker Change: Sure.

Speaker Change: We deployed $75 4 million in cash on the repurchase of approximately 872000 shares during the fourth quarter at an attractive price at $86 and Thursday.

Marie: Net income was $50.3 million. Adjusted EBITDA was $121 million. Adjusted EBITDA margin was 11.3%. At quarter end, cash and cash equivalents were $175.9 million, and we had full availability under our new $500 million Senior Secure revolver. Free cash flow for the quarter was $109.2 million, an increase of 68.5% year-over-year.

Speaker Change: For the full year free cash flow totaled 417 million, an increase of 54, 3% year over year, we deployed $273 $1 million in cash in 2023.

Speaker Change: <unk> purchased three 4 million shares.

Speaker Change: Strength at $79.

Speaker Change: <unk>.

Speaker Change: We have roughly $273 7 million remaining under our share repurchase authorization.

Speaker Change: The strong free cash flow generation and full availability under our revolver, we have ample dry powder to make strategic acquisition once the M&A market increase.

Marie: We deployed $75.4 million in cash on the repurchase of approximately 872,000 shares during the fourth quarter at an attractive price of $86.37. For the full year, free cash flow totaled $417 million, an increase of 54.3% year-over-year. We deployed $273.1 million in cash in 2023 on the repurchase of 3.4 million shares at an average price of $79.89. We have roughly $273.7 million remaining under our share repurchase authorization. With strong free cash flow generation and full availability under our revolver, we have ample dry powder to make strategic acquisitions once the M&A market improves. Turning to guidance, Our financial estimates for the first quarter of 2024 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions. Our estimates assume 62.75 billable days in the first quarter, 0.25 billable days fewer than the year-ago period, and 2.75 billable days more than Q4 of 2023. Guidance also considers seasonality, with the first quarter traditionally the lowest of the year.

Speaker Change: Turning to guidance.

Speaker Change: Our financial estimates for the first quarter of 2024 are set forth in our earnings release and supplemental materials.

Speaker Change: These estimates are based on current market conditions are.

Speaker Change: Our estimates assume 60 to 75 billable days in the first quarter.

Speaker Change: Two five billable days fewer than a year ago period, and $2 75 billable day more in Q4 of 2023.

Speaker Change: Guidance also consider seasonality with the first quarter traditionally the lowest of the year.

It's also important to remember and the payroll tax reset occurred at the beginning of every calendar year, having approximately 100 basis points of downward impact on adjusted EBITDA margin as we move from the <unk>.

Speaker Change: For the first quarter.

Speaker Change: We expect market conditions to remain challenging in the first quarter.

Speaker Change: In our commercial segment, we anticipate revenues will remain soft across assignment and consulting.

Speaker Change: Declines in commercial revenues are expected to be partially offset by continued growth in our federal government segment.

Speaker Change: We expect gross margins decline year over year due to business mix similar to current trends.

Speaker Change: Including a greater mix of federal government revenues and continued softness in our more cyclical and commercial businesses.

Speaker Change: Our cash SG&A margin will remain relatively consistent year over year.

Marie: It is also important to remember that the payroll tax reset occurs at the beginning of every calendar year, having approximately 100 basis points of downward impact on adjusted EBITDA margins as we move from the fourth to the first quarter. We expect market conditions to remain challenging in the first quarter. In our commercial segment, we anticipate revenues will remain soft across assignment and consulting. Declines in commercial revenues are expected to be partially offset by continued growth in our federal government segment. We expect gross margins to decline year-over-year due to a business mix similar to current trends.

Speaker Change: In lieu of M&A, we expect to continue to allocate our free cash flow towards share repurchase.

Speaker Change: With this background. We are estimating revenue of 1.032 billion 1.052 dividend finished first quarter. We are estimating net income at $38 7 million to $41.

Adjusted EBITDA of $104 5 million to 109, five and adjusted EBITDA margin of 10, 1% at 10, 4%.

Speaker Change: I'll now turn the call back to Ted for some closing.

Theodore S. Hanson: Thanks brief while we are positive about the future all signs indicate continued softness in the near term. However, it's difficult market does not mean, we taken a back seat to our client relationships rather as is evidenced in a resilient financial performance this past year.

Marie: Including a greater mix of federal government revenues and continued softness in our more cyclical commercial business, our CAST SG&A margin will remain relatively consistent year-over-year. In lieu of M&A, we expect to continue to allocate our free cash flow towards share repurchase.

Theodore S. Hanson: Ever harder proactively staying close to each of our clients.

Theodore S. Hanson: With this background, we are estimating revenues of $1.032 billion to $1.052 billion for the first quarter. We are estimating net income of $37.7 million to $41.3 million, adjusted EBITDA of $104.5 million to $109.5 million, and adjusted EBITDA margins of 10.1% to 10.4%. Thank you. I'll now turn the call back to Ted for some closing remarks. Thanks, Marie.

Theodore S. Hanson: Similar to hold regular strategic discussions about their IP roadmaps.

Theodore S. Hanson: Cannot thank our teams enough for your hard work these past 12 months.

Theodore S. Hanson: Each and every one of US help position ESPN is a 19 industry leader continuing to develop yourselves and our service offerings.

Theodore S. Hanson: We are proud to support our clients' ongoing digital transformation needs.

Theodore S. Hanson: And while certain projects have naturally been pushed to the right theyre not completely off the table.

Theodore S. Hanson: The need for it services will be strong and ASC and it's one of the fastest ways for our clients to ramp up their investments and we engage more fully in their Iot roadmap.

Theodore S. Hanson: While we are positive about the future, all signs indicate continued softness in the near term. However, a difficult market does not mean we've taken a backseat to our client relationships. Rather, as is evident in our resilient financial performance this past year, we've worked ever harder, proactively staying close to each of our clients and continuing to hold regular strategic discussions about their IT readiness. I cannot thank our teams enough for their hard work these past 12 months.

Theodore S. Hanson: Our domestic footprint is as solid as it has ever been and now with our nearshore capabilities in Mexico also at scale, we are able to provide a deep talent pool that is highly skilled and competitively priced across multiple geographies.

Theodore S. Hanson: As I highlighted at the start of today's call Acm's business today.

Theodore S. Hanson: As the result of several years of thoughtful and proactive play and we've.

Theodore S. Hanson: We've shaped our service offerings and business segments to reflect increasing demand and our competitive industry position and differentiated go to market strategy are aligned with our clients' needs.

Theodore S. Hanson: Each and every one of you has held a position at ASGN as an IT industry leader, continuing to develop yourselves and our service offerings so that we are proud to support our clients' ongoing digital transformation needs. And while certain IT projects have naturally been pushed to the right, they are not completely off the table. The need for IT services will be strong, and ASDN is one of the fastest ways for our clients to ramp up their investments and re-engage more fully in their IT roadmap.

Theodore S. Hanson: We will focus our efforts in 2024 and further strengthening our it consulting capabilities, taking advantage of opportunities as we pursue higher and higher value projects that drive our clients IC efforts and position <unk> for success.

Speaker Change: Thank you again for joining our fourth quarter and full year 2023 call. Operator, please open the call to questions.

Operator: Our domestic footprint is as solid as it has ever been, and now with our nearshore capabilities in Mexico also at scale, we are able to provide a deep talent pool that is highly skilled and competitively priced across multiple geographies. As I highlighted at the start of today's call, ASGM's business today is the result of several years of thoughtful and proactive planning. We've shaped our service offerings and business segments to reflect increasing IT demand, and our competitive industry position and differentiated good market strategy are aligned with our clients' needs. We will focus our efforts in 2024 on further strengthening our IT consulting capabilities, taking advantage of opportunities as we pursue higher-end, higher-value projects that drive our clients' IT efforts and position ASGN for success. Thank you again for joining our fourth quarter and full year 2023 call. Operator, please open the call to questions. Thank you. And at this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is... Mayfair begins. Participants are using speakers.

Speaker Change: Thank you and at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.

Speaker Change: And our first question comes from the line of Maggie Nolan with William Blair.

Maggie Nolan: Proceed with your question.

Maggie Nolan: Hi, Thank you.

Maggie Nolan: I'm wondering if you can give us any additional information on how demand and revenue.

Maggie Nolan: Cadence of that from October through January here, and what you've seen.

Speaker Change: Hey, Matt.

Speaker Change: Ted Thanks for the question I would say demand throughout the fourth quarter. You said October through January was pretty steady.

Matt: We had program maybe for a little.

Matt: Softer last couple of weeks of Afirma furloughs or slowing in spending and I would say is that for the most part it hung together better than we thought and therefore, we were a little bit ahead of our number.

Matt:

Matt: You know not a whole lot other than that I think the quarter was a similar demand quarter to the third quarter and as you can see in our guidance and.

Matt: Although seasonally it's a little slower start always in the first quarter. We're predicting about the same based on what we can see right now.

Maggie Nolan: It may be necessary to pick up your handset. And our first call is from Maggie Nolan with William Blair, for C.E. one none. Hi, thank you. I'm wondering if you can give us any additional information on demand and revenue, the cadence of that from October through January here and what you've seen. Hey Maggie.

Speaker Change: Got it. Thank you and then maybe I think in your prepared remarks, you mentioned some of the gross margin impact from.

The next within the commercial segment in particular.

Speaker Change: What surprised you about that next and what is your outlook for how mix may impact margins over the coming quarters here.

Theodore S. Hanson: It's Ted. Thanks for the question. I would say demand throughout the fourth quarter, you said October through January, was pretty steady. We had programmed maybe for a little softer last couple weeks in the firm due to furloughs or slowing and spending. And I would say that for the most part, it hung together better than we thought.

Speaker Change: Hey, Maggie and a couple of things as it relates to mix and so there are some things that will definitely kind of carried forward from what we saw in the fourth quarter to the first quarter and the first is really the higher government segment.

Maggie Nolan: Which has a lower mix and then the commercial and so on with the counter cyclical aspect of the government and we are just seeing that and then on the commercial side, we've just highlighted especially those discretionary areas.

Theodore S. Hanson: And therefore, we were a little bit ahead of our, You know, not a whole lot other than that. I think the quarter was a similar demand quarter to the third quarter, and as you can see in our guidance, although seasonally it's a little slower start in the first quarter, we're predicting about the same based on what we can see right now.

Maggie Nolan: I'm just softer from a.

Maggie Nolan: Margin perspective, Mark market demand.

Maggie Nolan: Yeah, and some of those areas.

Maggie Nolan: The creative digital marketing in the Perm, but yeah I would highlight flip Murray you said, it's mostly being driven by a higher.

Marie: And then, Maria, I think in your prepared remarks, you mentioned some of the gross margin impacts from the mix within the commercial segment, in particular. What surprised you about that mix and what is your outlook for how mix may impact margins over the coming quarters here? Hey Maggie, a couple things as it relates to mix. And there's some things that we'll definitely kind of carry forward from what we saw in the fourth quarter to the first quarter. The first is really the higher government segment, which has a lower mix than the commercial, and so with the counter-cyclical aspect of the government, you know, we are just seeing that, and then on the commercial side, you know, we've just highlighted, especially those discretionary areas, just softer in March. Mark market demand. Yeah, in some of those areas.

Maggie Nolan: Higher than expected growth in the federal segment.

Maggie Nolan: You'll see that in the first quarter.

Speaker Change: Thank you.

Speaker Change: Yeah.

Thank you. Our next question comes from the line of Jeff Silber with BMO capital markets. Please proceed with your question.

Jeffrey Marc Silber: Thanks. So much you cited a couple of verticals I think it was commercial industrial and.

Jeffrey Marc Silber: PMT segments, I might've gotten those wrong, but forgive me that soft sequential growth on a billable day basis until the day adjusted basis.

Jeffrey Marc Silber: What's going on in those markets that are different from some of the other verticals that youre seeing.

Jeffrey Marc Silber: Yeah, Randy you want to take that one.

Randy: Yeah, well I think first of all if you look within those sectors.

Randy: Yes, and you see what what comprises them for example, utilities and energies.

Randy: It remains strong and grew sequentially in that quarter, we actually had 12 of our sectors growing mostly in consumer industrial and seeing the TMT area of care also kind of held it down particularly in the provider space. So I think when you look further at below just the general industry and you look at specific areas, which we've enumerated.

Marie: We're going to start with a little bit of creative digital marketing in the perm, but yeah, I would highlight what Marie said. It's mostly being driven by higher than expected growth in the federal segment, and you'll see that in the first quarter. Thank you. Thank you. Our next question comes from Jeff... BMO Capital. Please. Thanks so much.

Randy: Some in the tax you can see that those sectors are fairly healthy and continuing to move along and it was nice to see more of them grow in the fourth quarter sequentially over the third quarter than we saw in previous quarter.

Jeff: You cited a couple of verticals. I think it was commercial, industrial, and PMT segments. I might have gotten those wrong, but forgive me.

Speaker Change: Okay. That's helpful.

Speaker Change: The federal government sector, you talked about some some projects or some timing of starts being deferred and hopefully you're not going to catch up on those but I'm. Just curious as we go through the rest of the year considering it is an election year.

Theodore S. Hanson: That saw sequential growth on a billable day basis, bill-to-day-adjusted basis. What's going on in those markets that is different from some of the other verticals? Yeah, Rand, do you want to take that one?

Speaker Change: With all the uncertainty going down in Washington, do you think that kind of mindset will continue should we expect those kind of deferrals and delays in the rest of the year.

Randolph C. Blazer: Yeah, well, Jeff, if you look within those sectors, for example, utilities and energy, remain strong and grew sequentially in that quarter. We actually had 12 of our sectors growing, mostly in the consumer industrial and the TMT areas. Healthcare also kind of held its own, particularly in the provider space.

Speaker Change: Well I think on the one hand, the administration would like to get as much out on the street to say parcel does good job on the other hand, there they're dealing with a continuing resolution and to the extent they continue to deal with that we will continue to perform on the work that we have but some of the bigger disk.

Speaker Change: And on new work may be.

Randolph C. Blazer: So I think when you look further below just the general industry and you look at specific areas, which we've enumerated some in the text, you can see that those sectors are fairly healthy and continuing to move along. And it was nice to see more of them grow in the fourth quarter sequentially over the third quarter than we saw in previous quarters. Okay, that's helpful. And if I can move on to the federal government sector, you talked about some projects or some timings of starts being deferred. And hopefully, you're not going to catch up on those.

Speaker Change: I think we saw the start of that here in.

Speaker Change: In the fourth quarter. So as we said in our remarks. It wasn't an issue of loss work are submitted awaiting awards.

Speaker Change: Part of our pipeline is.

Speaker Change: It is highest its ever been but we're gonna see most of those saves adjudicated we hope.

First two quarters here some of those that did not get decided on in the fourth.

Speaker Change: Okay really appreciate the color. Thanks, so much.

Speaker Change: Thank you. Our next question comes from the line of Tobey Sommer with Chewy Securities. Please proceed with your question.

Tobey Sommer: Yeah, Thanks within the commercial consulting area.

Tobey Sommer: You didn't say that.

Tobey Sommer: The renewals running better but more than 50% of new business with them is that the same as the recent quarter or two or is the mix closer to parity there with new business doing a little bit better than it had a three to six months ago.

Theodore S. Hanson: But I'm just curious, as we go through the rest of the year, considering it is an election year. With all the uncertainty going down in Washington, do you think that kind of mindset will continue? Should we expect those kind of deferrals and delays the rest of the year? Well, I think, on the one hand, the administration would like to get as much out on the street as they possibly can, Jeff.

Speaker Change: Randy it's pretty much the same as the previous quarter right.

Randy: That's correct.

Randy: A little bit more.

Randy: It's always been imbalance between 60, 40, or 40 60, and maybe earlier in the year 23, there was a little bit new work, which probably is typical at the beginning of a business cycle, but for the year, but yes. It was consistent with Q3.

Randolph C. Blazer: On the other hand, they're dealing with a continuing resolution, and to the extent that they continue to deal with that, we'll continue to perform the work that we have. But some of the bigger decisions on new work may be delayed, and I think we saw the start of that in the fourth quarter. So, as we said in our remarks, it wasn't an issue of lost work. Our weighting awards as a part of our pipeline are as high as they've ever been. But we're going to see most of those things adjudicated, we hope, in the first two quarters here, and some of those that did not get decided on in the fourth quarter.

Randy: Project sizes, having any variance in there.

Randy: Year 18 months ago, you saw.

Randy: <unk> size coming down maybe its customers, where piecemeal it out projects rather than do a stolen it out all at once to any changes that you foresee.

Randy: Right.

Randy: And I would say project side.

Randy: Still on a slight upward trend.

Randy: How much have elongated the spend that is stretching out the project that had started at the end of last year in the last couple of quarters and continued through the fourth quarter. So so yes. The project size, you're certainly fine in fact, I think Ted mentioned in the AI side, we've won some.

Theodore S. Hanson: Okay, I really appreciate the call. Thanks. Thank you. Our next question comes from the line of, "Thanks." Within the commercial consulting area, you did say that renewals were running better, more than 50% of new business, but is that the same as the recent quarter or two? Or is the mix closer to parity there with new business doing a little bit better than it had, you know, three or six months ago? Rand, it's pretty much the same as the previous quarter, right? That's correct. It was just a little bit more. It's always been in balance between 60-40 and 40-60.

Randy: Work in this in the third quarter, we won some work in the fourth quarter and we're looking at some larger projects in AI.

What I call. The you move up the totem pole from La.

Randy: Looking at we have not processing power with chip technology, we have the apps embedding AI into their apps you have a lot of data migration and cloud building infrastructure going on so we know we see more data prep use cases and building algorithms. So we're getting closer to closer to real insertion of AI.

Randy: Into our clients' business areas and the more work in the data prep area and use cases and the execution of use cases, the more we're going to see work.

Randolph C. Blazer: And maybe earlier in the year, 23, there was a little bit of new work, which probably is typical of the beginning of a business cycle, but for the year. But yes, it was consistent with Q3. Project sizes, are there any variance in there?

Randy: Okay.

Randy: Kind of double click on the government ECS business.

Randy: Your treasury outlays and actually been good and.

Randolph C. Blazer: You know, a year, 18 months ago, you saw project size coming down. Maybe it's just a little piece-meal project rather than doling it out all at once. Any changes that you've perceived?

Randy: Several of the.

Randy: Larger focused companies on that trade publicly they've had substantially better book to bills and underlying contracts and friends.

Randy: You're seeing how do I square the discrepancy between.

Randolph C. Blazer: That I would say project size is still on a slight upward trend. How much elongating the spend that is stretching out the project a bit started at the end of last year, the last couple quarters and continued through the fourth quarter. So, so yes, the project size, they're certainly fine.

Randy: The performance here and what you've seen.

Randy: From a broader level.

Randy: So it would be I think you know we haven't seen all the government appears release, but for some of the ones that we track there are seasonably below one like we are for Q4.

Tobey Sommer: In fact, I'm I think Ted mentioned in the AI side, we've won some work in the third quarter, we won some work in the fourth quarter, and we're looking at some larger projects in AI, is what I call the, you move up the totem pole from, you know, looking at, we have now processing power with chip technology, we have the apps embedding AI into their apps, you have a lot of data migration and cloud building infrastructure going on, so now we see more data prep, use cases, and building algorithms, so we're getting closer to closer to real insertion of AI into our clients' business areas, and the more work in the data prep area and use cases, in the execution of use cases, the more we're going to see work. Okay, and I want to kind of double click on the government ECS business, your treasury outlays have actually been good and several of the larger focus companies on that trade publicly have had potentially better book to bills and underlying contracting trends than you're seeing. How do I square the discrepancy between the performance here and what we've seen from a broader lens?

Randy: I think it's the bakery of what are we bidding on versus what are they are bidding on and where our relationships versus theirs, but.

Randy: It takes a lot of confidence in this and the size of our submitted awaiting award number and in places, where we have real relationships and so while you know we might've been a little closer to one in a typical quarter, we still would have been below it in our fourth quarter. So we're positive about the things that we have out.

They're in that we're waiting.

Randy: To be adjudicated and we'll have to see how they go here in the first quarter and into the second.

Randy: Okay.

Randy: Yeah.

Randy: Thank you. Our next question comes from the line of Joseph a.

Joseph: Canaccord Genuity. Please proceed with your question.

Joseph: Okay.

Joseph: Hey, everyone. Thanks for taking my call are and taking my questions. Here. This afternoon I just maybe we just start on the assignment side and.

Joseph: Looking at maybe green shoots or if it's a little early for that you know on a sequential basis I know, it's a leading indicator maybe you know some more commentary there of what you're seeing on assignment across verticals.

Joseph: And the like and then I'll have some follow ups.

Speaker Change: So Joe I think that I'll start and Ray can chip in here I wouldn't say there are green shoots there stay there steadiness, if you will so.

Joe: We can see that in a couple ways one we see our our order flow and then we can index that against industry performance.

Ray: As Ram mentioned it earlier you know we now have two industries that are growing.

Theodore S. Hanson: Tobey, I think, you know, we haven't seen all the government peers released, but for some of the ones that we track, they are seasonably below one, like we are for Q4. I think it's the vagary of what are we bidding on versus what are they bidding on, and where are our relationships versus theirs. But I take a lot of confidence in the size of our Submitted Weighting Award number and in places where we have real relationships. And so while we might have been a little closer to one in a typical quarter, we still would have been below it in a fourth quarter.

Sequentially on an adjusted basis.

One that's flat so that's an improvement from done out of five but we need more than just too so.

So I would say study not not green shoots and.

Ray: We will have to see how this quarter develops I mean this typically in the assignment part of the business.

Ray: Come across seas that I believe at a slightly lower level coming out of Q4 and into Q1 and that's what we saw and it's about what we saw in the prior year. So I'd say really no difference there and then you spend the first quarter of kind of reclaiming ground. If you will as clients release budgets and begin to spend and so that's kind of.

Theodore S. Hanson: We're positive about the things that we have out there and that we're waiting to be adjudicated, and we'll have to see how they go here in the first quarter and into the second. Thank you.

Ray: What we're monitoring here as we go.

Ray: Yeah.

Joe: Our next question comes from the line of, Hey everyone, thanks for taking my call and taking my questions here this afternoon. I just, maybe we just start on the assignment side and look at maybe green shoots, or if it's a little early for that, you know, on a sequential basis, I know it's a leading indicator, maybe, you know, some more commentary there of what you're seeing on assignment, you know, across verticals and the like, and then I'll have some follow-ups. So, Joe, I think that I'll start, and then Ray can chip in. I wouldn't say there are any green shoots there.

Ray: Who else to that.

Ray: Well, Joe Let me, let me just comment.

Joe: In consulting we see green shoots because theres discussion with clients about their roadmaps about what the next projects are you know there is some process leading up to release of an RFP. If you will or piece of work that we can bid on and go head end and potentially win in the staffing you Simon decided that.

Joe: <unk>, it's a very quick transaction type environment.

Joe: Clients are sitting there with requirements that they will once budgets are approved and once they get the green light from corporate if you will they'll release requirements and boom, we will see a rep flow much different than we've seen for the past year.

Theodore S. Hanson: I'd say there's steadiness, if you will. So, we can see that in a couple ways. One, we see our order flow, and then we can index that against industry performance. As Rand mentioned earlier, we now have two industries that are growing sequentially on an adjusted basis and one that's flat, so that's an improvement from nine out of five, but we need more than just two. So I would say steady, not green shoots.

Joe: It's more transactional and more quick based green.

Joe: Green shoots really come from where we can see a buildup of thought and and proactive working toward in the end if that helps at all Joe in your and your question certainly Perm placement part of revenue is going to be nobody's going to do anything until corporate gets the go ahead.

Theodore S. Hanson: You know, we'll have to see how this quarter develops. I mean, typically, in the assignment part of the business, you come across seasonally at a slightly lower level coming out of Q4 and into Q1, and that's what we saw, and it's about what we saw in the prior year, so I'd say really no difference there. And then you spend the first quarter kind of reclaiming ground, if you will, as clients release budgets and begin to spend, and so that's kind of what we're monitoring here as we go. Rand, would you add anything else to that? Well, Ted and Joe, let me just comment.

Joe: Right.

Joe: And says we can hire internal people.

Speaker Change: Sure that's great color. Thank you and then they were just drill down a little bit on the Mexico delivery.

Speaker Change: Center and you know, obviously digital transformation can't stand still because the world is not standing still.

Speaker Change: Enterprises need to move forward and you know maybe.

Speaker Change: Some some more you know any evolution.

Speaker Change: Lucian and the business model and we're seeing you know others in and services lead with lower cost Geos and how that is maybe helping keeping consulting moving forward on an upward trajectory.

Theodore S. Hanson: In consulting, we see green shoes because there's discussion with clients about their roadmaps, about what the next projects are, you know. There's some process leading up to the release of an RFP, if you will, or a piece of work that we can bid on and go ahead and look at it. Thank you. In the staffing, the assignment side of the business, it's a very quick transaction-type environment. So clients are sitting there with requirements that they will, once budgets are approved, once they get the green light from corporate, if you will, they'll release requirements, and boom, we'll see a rep flow much different than we've seen for the past year. So it's more transactional and more quick based. Green shoots really come from where we can see a build-up of thought and proactive working toward an end. If that helps at all, Joe, in your question.

Speaker Change: I think well look I think that's right Joe I mean, our clients are looking for things to either continue that are critical for things that haven't started that are critical away to get them done even in the face of a tight.

Speaker Change: Tight budgets I mean, they're very wary here that haven't kind of fully released things and so they've tried to deliver.

Speaker Change: Delivery opportunities like our Mexico delivery et cetera, we've seen full utilization plus and.

Speaker Change: And that center and even the hero of our short time in the last.

Speaker Change: A few years I mean, our accounts have grown by 10 X. So I think it's a really good example.

Speaker Change: Here in the U S. You can see clients much more willing to look broadly across the U S to other lower cost markets.

Speaker Change: Willing to get a project teams.

Randolph C. Blazer: Certainly, the perm placement part of climate revenue is going to be nobody's going to do anything until corporate gives the go-ahead, right? Says we can hire internal. Sure. That's a great color.

Speaker Change: That are in lower cost areas that don't have to have certain developers sitting right in Jersey city at a certain.

Speaker Change: Exorbitant price per hour, there just thinking differently about all that stuff. So there's such there's movement going on around that.

Joe: And then maybe we can drill down a little bit on the Mexico Delivery Center. And, you know, obviously, digital transformation can't stand still because the world is not standing still, and enterprises need to move forward. And, you know, maybe, you know, some more, you know, any evolution in the business model. And, you know, we're seeing others in services lead with lower cost geos and how that is maybe helping keep consulting moving forward on an upward trajectory. Well, look, I think that's right, Joe. I mean, our clients are looking for things to either continue that are critical or things that haven't started that are critical, a way to get them done, even in the face of tight budgets. I mean, they're very wary here.

Speaker Change: That for sure, but I would just reinforce fear that clients are taking a longer here to fully adjudicate their budgets and their plans for this year and then to begin to release that but I think it's only a matter of time.

Speaker Change: Hey, Ted Ted can I add something to that.

Speaker Change: Joe.

Theodore S. Hanson: Yes, sure absolutely wrong.

Theodore S. Hanson: Yeah, there is AI insertion and our clients.

Theodore S. Hanson: Price architecture, and then there is AI insertion and our own services that we have to do to stay competitive cost competitive.

Speaker Change: For our clients and everything Ted said is correct, we made a big investment in Mexico.

Speaker Change: He talked about all of that that we've seen since we've done that in the growth of our Mexican development Center, but we're now implementing better techniques AI techniques with which to code into new languages. The modern language in the large large language. So the fact that our Mexican centers moving out and these AI adoption in these AI technique.

Theodore S. Hanson: They haven't kind of fully released things, and so they've turned to delivery opportunities like our Mexico Delivery Center. We've seen full utilization plus in that center, and even here, over a short time in the last few years, I mean, our accounts there have grown by 10x. So I think it's a really good example.

Speaker Change: <unk> makes us even more competitive in Mexico, and it's interesting our clients you're asking about that they wanted to talk about that and understand that which I think is a good is a good sign for us that we're on the right path not just because we have the center, but we're keeping the center up to date with the latest technologies, which makes them more efficient.

Theodore S. Hanson: Here in the U.S., you can see clients much more willing to look broadly across the U.S. to other lower-cost markets. They're willing to get project teams that are in lower-cost areas. They don't have to have certain developers sitting right in Jersey City at a certain exorbitant price per hour. They're just thinking differently about all that stuff.

Speaker Change: For our clients.

Speaker Change: Okay. That's helpful. Thank you and then maybe I'll just sneak one more in on capital allocation here that the free cash flow is really great here and its great to see the share buybacks.

Theodore S. Hanson: So there's movement going on around that for sure, but I would just reinforce here that clients are taking longer here to fully adjudicate their budgets and their plans for this year and then to begin to release that, but I think it's only a matter of time. Hey, Ted. Ted, can I add something to that, if you wouldn't mind? Joe?

Just wondering you know it.

Speaker Change: It feels like I I know I heard Barry say that the market wasn't that good for M&A right. Now is it just are you seeing targets not really wanting to kind of sell down here or what is the dynamic there because it you know it feels like it might be a nice time to to do some bolt.

Speaker Change: Thanks, a lot guys.

Speaker Change: Okay.

Barry: Let me take it so hey, Joe So I think that.

Speaker Change: Youre right I mean, we would love to be allocating capital right now to strategic acquisition opportunities I think it's the dearth of opportunities in the real quality opportunities in the market right now, but where we have a very defined.

Randolph C. Blazer: Yeah, sure. Absolutely, Rand. There is AI insertion in our clients, you know, enterprise architect. And then there's AI insertion in our own services that we have to do to stay competitive, cost competitive for our clients. And everything Ted said is correct.

Speaker Change: Shopping list. If you will we know what we can fulfill and invest in organically. We know what we would like to invest in inorganically to support all of the things that Rand was mentioning here earlier around what our clients are thinking about and it's going to take just a better flow, which means you know of.

Randolph C. Blazer: We made a big investment in Mexico. He talked about all that we've seen since we did that and the growth of our Mexican Development Center. But we're now implementing better techniques, AI techniques with which to code in new languages, modern languages, and large languages.

Speaker Change: A little bit more time and theres.

Speaker Change: All kinds of underlying reasons, whether it's you.

Speaker Change: Private equity is still holding on tight and.

Randolph C. Blazer: So the fact that our Mexican Center is moving out in these AI adoptions and these AI techniques makes us even more competitive in Mexico. And it's interesting; our clients are asking about that. They want to talk about that and understand that, which I think is a good sign for us that we're on the right path, not just because we have the center, but we're keeping the center up to date with the latest technologies, which makes it more efficient for our clients. That's helpful.

Speaker Change: Not quite ready to trade assets, because evaluations, where the debt markets are.

Speaker Change: At a whole bunch of other things, but when kind of remain committed here, we're just gonna be ready and in the meantime, we're gonna stay focused on share repurchases, which you've seen us do in our board is supporting wholeheartedly, and we'll kind of watch and measure this out.

Speaker Change: Great. Thanks, a lot guys much appreciate it.

Speaker Change: Thank you. Our next question comes from the line of Andre Childress with Baird. Please proceed with your question.

Andre Childress: Hey, this is Andre on for Mark Mark on Thank you for taking our question. So my first question is just a follow up to something ran said earlier about the.

Joe: And then maybe I'll just sneak one more in on capital allocation. The free cash flow is really great here, and it's great to see the share buybacks. Just wondering, you know, and I know I heard Marie say that the market wasn't that good for M&A right now. Is it just, are you seeing targets not really wanting to kind of sell down here, or what is the dynamic there? Because it, you know, it feels like it might be a nice time to do some bolt-ons. Thanks a lot, guys. Want me to take it?

Andre Childress: Some of the green shoots on the consulting side it sounds like your clients in general have you know road maps that they want to execute on but based on your conversations with those clients what needs to change in the environment for them to actually you know on the some of those rfps and execute on those roadmaps.

Andre Childress: Ryan do you want to follow up on that.

Ryan: Uh huh.

Ryan: Yeah, I mean, our thesis has been ever since we've been a public company that I've spent a function of corporate earnings.

Theodore S. Hanson: So, hey, Joe, I think that you're right. I mean, we would love to be allocating capital right now to strategic acquisition opportunities. I think there is a dearth of opportunities and real quality opportunities in the market right now. But we have a very defined shopping list, if you will.

Ryan: So I think when companies feel like your corporate earnings are secure and they have good runway ahead, theyre going to spend more on it.

Ryan: Hi.

Ryan: Ted I think we would say our hope is that what we saw from the industrial side of our sectors and the health care providers as well as.

Theodore S. Hanson: We know what we can fulfill and invest in organically. We know what we would like to invest in organically to support all the things that Rand was mentioning here earlier around what our clients are thinking about. And it's going to take just a better flow, which means a little bit more time. And there are all kinds of underlying reasons, whether it's private equities still holding on tight and not quite ready to trade assets because of valuations, where the debt markets are, and a whole bunch of other things.

Ryan: Yeah.

Theodore S. Hanson: The TMP segment that they're feeling more secure and they're going to start spending more we saw that sequentially.

Theodore S. Hanson: The small data point, it's not conclusive, but I think it all goes back to corporate earnings and the security they feel about that.

Speaker Change: How do you want to add to that.

Speaker Change: That's great.

Speaker Change: Makes a lot of sense. Thank you for that and then I guess.

Speaker Change: Switching over to margins you guys did a fantastic job at preserving your margin you can considering you know the mix shifts and you know you guys talk about your NAV.

Theodore S. Hanson: But we kind of remain committed here. We're just going to be ready. And in the meantime, we're going to stay focused on share repurchases, which you've seen us do. And our board is supporting wholeheartedly. And we'll kind of watch and measure this. Great. Thanks a lot, guys.

Speaker Change: Real or automatic stabilizers, but how should we think about margins for 2024 should we expect them to be relatively steady as the stabilizers continue to kick in or is there anything to call out for the full year. Thank you.

Theodore S. Hanson: Much appreciated. Thank you. Our next question comes from the line of... Hey, this is Andreon from Mark Marcon. Thank you for taking our questions. So my first question is just to follow up on something Rand said earlier about some of the green shoots on the consulting side. It sounds like your clients, in general, have, you know, roadmaps that they want to execute on. But based on your conversations with those clients, what needs to change in the environment for them to actually, you know, unleash some of those RFPs and execute on those roadmaps? Rand, do you want to follow up on that?

Right.

Speaker Change: Yeah, so kind of be implied in our guidance for Q1, our cash SG&A margins at 18% and so as.

Speaker Change: As we think about the full year of 2024, and that's probably a pretty good.

Speaker Change: Run rate if you will from a margin perspective, you do in the first quarter had the payroll tax reset right that's going to influence it.

Speaker Change: Higher.

Speaker Change: But look I mean.

Speaker Change: Our SG&A margins here has been fairly consistent outside of the first quarter. So you know look.

Speaker Change: Look for this year I think they were kind of right at adjusted for blood borne stuff just over 17% and you should expect about the same thing Andre.

Randolph C. Blazer: Well, yeah, I mean, our thesis has been ever since we've been a public company that IT spending is a function of corporate earnings. So I think when companies feel like their corporate earnings are secure and that they have a good runway ahead, they're going to spend more on IT. I said, I think we would say our hope is that what we saw from the industrial side of our sectors and the health care providers, as well as the TMV segment, that they're feeling more secure, and they're gonna start spending more. We saw that sequentially.

Andre Childress: Perfect. Thank you so much and thank you for answering the questions.

Andre Childress: Yeah.

Andre Childress: Yes.

Andre Childress: Thank you. Our next question comes from the line of Seth Weber with Wells Fargo. Please proceed with your question.

Andre Childress: Hi, This is John on for Seth. Thanks for taking my question, maybe if we could just talk a little bit more about XI and XI. It sounds like the cyber efforts have been bearing fruit and maybe if you could just give us some more information about kind of the cross pollination between kind of the federal side and the commercial side with cyber and maybe what clients are <unk>.

Randolph C. Blazer: You know, that's a small data point. It's not conclusive, but I think it all goes back to corporate earnings. Hey, do you want to add to that? That's great; it makes a lot of sense. Thank you for that. And then, I guess, Switching over to margins, you guys did a fantastic job of preserving your margins, even considering, you know, the mixed shifts, and, you know, you guys talk about your natural or automatic stabilizers, but how should we think about margins for 2024? Should we expect them to be relatively steady as the stabilizers continue to kick in, or is there anything to call out for the full year?

Andre Childress: For as we enter the new year.

Andre Childress: Randy you want to talk about that.

Randy: Well sorry.

You know I think the man on the Street, which say the federal government is probably stronger cyber security and protection of our systems and our data.

Randy: Then more in the commercial segment, if you look at the past years.

Randy: There have been breaches of commercial big commercial companies, So I guess I'm laying the groundwork here for.

Randy: The federal government has great calls and great track record on cyber security or.

Randy: Our ECS team has had great quality, great track record in cyber security for some very important agencies in the federal government.

Marie: On Assignment On Assignment, So this kind of implied in our guidance for Q1, our cash SG&A margins are about. So as we think about the full year of 2024, that's probably pretty good. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/policies. So, you know, I would look to this year. I think they were kind of right at, you know, adjusted for below-the-line stuff, just over 17%.

Randy: That's transferable to the commercial sector.

Randy: And I think when we take our technologies over in our center over to them.

Randy: It's resonating.

Randy: With them because of that backdrop that I just mentioned.

Speaker Change: I would say, it's simple as that okay.

Yeah.

Speaker Change: Great. Thanks, and then maybe a quick follow up on creative Circle can you just comment on any trends youre seeing in the digital marketing space and potentially any confuse any outlook in terms of 24, given the election year or anything we should be cognizant of.

Right.

Speaker Change: Yeah.

Speaker Change: It's funny I, just got off a call with a CMO like a company a fortune 1000 company couple of hours ago and.

Marie: You should expect about the same thing. Perfect. Thank you so much and thank you for answering the question. Thank you. Our next question comes from the line of Seth Weber with Wells Fargo. Hi, this is John. I'm on behalf of Seth.

Speaker Change: It was interesting to talk to him I think first of all cmo's.

Are also being held tight and their spend.

Speaker Change: And it's a function of corporate earnings and also depending on what their market position is but I think that talks to the marketplace that are creative circle plays in.

John: Thanks for taking my question. Maybe if we could just talk a little bit more about TMT. It sounds like the cyber efforts have been bearing fruit. And maybe if you could just give us some more information about kind of the cross-pollination between the federal side and the commercial side with cyber and maybe what clients are looking for as we enter the new year. Randy, do you want to talk about that?

Speaker Change: It is clear that some of the bread and butter kinds of things like creating or being creative is still part of our great service.

Speaker Change: Translating that through AI.

Speaker Change: AI allows you to mass produce it or to personalize it.

Speaker Change: And I think there are technologies, there that we're well aware of that we're talking to our clients about imposing.

Randolph C. Blazer: Well, I'll start. You know, I think the man on the street would say the federal government is probably stronger at cybersecurity and protection of our systems and our data than more in the commercial segment. If you look at the past years, you know, there have been breaches of commercial, big commercial companies. So, I guess I'm laying the groundwork here for the federal government, which has great qualifications and a great track record on cybersecurity. Our ECS team has had great qualifications and a great track record in cyber security for some very important agencies in the federal government, and that's transferable to the commercial sector. And I think when we take our technologies over and our center over to them, it's responding with them because of that backdrop that I just mentioned. So I would say it's simple as that, okay? All right, thanks. And then maybe a quick follow-up on Creative Circle.

Speaker Change: There's also the whole question of which channels do I used to get my message out there and to make it personal and do I have to give it to multiple.

Speaker Change: Medium mediums for that one client so there's a lot of opportunity out there I think they're they're all trying to work their way through it and understand it and figure out the best path I think you can see that in some of the reporting from technology companies in some cases, yet dollars are up in some cases, they're not.

Speaker Change: You know the whole streaming world is changing and how they're charging for whether you want streaming with AD advertisement or without advertisement. So there is a lot going on in the market in the world. It has to be digested and recalculate. It if you will and I think we're going to see.

Speaker Change: You know a plethora of opportunity once we get past one companies feel that there there aren't good solid footing and they can move forward and as I said before in consumer and utilities and then.

Randolph C. Blazer: Could you just comment on any trends you're seeing in the digital marketing space and potentially any kind of views on the outlook in terms of 24, given the election year. Anything we should be cognizant of? RANDOLPH BLAZER: It's funny, I just got off a call with a CMO of a company, a Fortune 1000 company, a couple hours ago. It was interesting to talk to him.

Speaker Change: In.

Speaker Change: In certain media companies, they're starting to get there.

Speaker Change: Thank you again.

Speaker Change: Thank you. Our next question comes from the line of surrender then with Jefferies. Please proceed with your question.

Surrender: Thank you.

Surrender: Thank you.

Jefferies: Picture question here in terms of the.

Jefferies: The delivery model as you continue to build up the commercial consulting part of the business.

Jefferies: Can you maybe talk about.

Jefferies: How you're thinking about head count growth versus the use of.

Randolph C. Blazer: I think, first of all, CMOs are also being held tight in their spend, and as a function of corporate earnings, and also depending on what their market position is. But I think that speaks to the marketplace that our Creative Circle plays in. It is clear that some of the bread and butter kinds of things like creating or being creative is still a part of our great service, translating that through AI. AI allows you to mass produce it or to personalize it. And I think there are technologies there that we're well aware of that we're talking to our clients about imposing. There's also the whole question of which channels do I use to get my message out there and to make it personal? And do I have to give it to multiple mediums for that one client?

Jefferies: Temporary resources in terms of delivering those projects and the reason I ask that is just from a competitive positioning perspective in the sense that you talked earlier about <unk>.

Jefferies: Vesting in kind of building out your talent pool, but it's a large percentage of your deliveries.

Jefferies: He is not owned by you guys. How do you how do you guys manage that.

Speaker Change: Well looks around there first of all we've got.

Speaker Change: You know.

Speaker Change: Today 600 plus feet on the street.

Speaker Change: With relationships directly into these fortune 1000 enterprises and it's that group that have had these client relationships from.

Speaker Change: The traditional staffing business all the way through all of our customers, our ICEE business, including consulting so that doesn't change and we don't need to build that up if you will we just need to address client opportunities and so if it takes a little more we could I. Please please scale into that and always always have on the consulting.

Randolph C. Blazer: So there's a lot of opportunity out there. I think they're all trying to work their way through it and understand it and figure out the best path. I think you can see that in some of the reporting from technology companies. In some cases, the ad dollars are up. In some cases, they're not.

Speaker Change: Scientists, we've put project teams together and again, you know that our delivery model is a little different I mean, we have about 80% to 85% of our.

Randolph C. Blazer: The whole streaming world is changing and how they're charging for whether you want streaming with an ad, an advertisement, or without an ad. So there is a lot going on in the marketing world that has to be digested and recalculated, if you will. And I think we're going to see... You know, a plethora of opportunity once we get past when companies feel that they're on a good solid footing and they can move forward. As I said before, in consumer and utilities, and in, in, certain media companies, they're starting to get, Thank you again.

Speaker Change: Team members on these projects come from our contingent workforce or our it staffing capabilities and we've got a very smart solution oriented with industry expertise team on the top which are helping architect the solutions to meet the industry needs of the customer.

Speaker Change: And that's working just great and so those will continue to build but I think our model is gonna be here that we're definitely on the project teams could bring our contingent labor to bear on it because they are a more perfect fit you know there they're in the right place at the right.

Operator: Thank you; our next question comes from the line of Surinder Thind with Jeffrey Silber. Thank you. The big picture question here in terms of the delivery model is you continue to build up the commercial consulting part of the business. Can you maybe talk about how you're thinking about headcount growth versus the use of temporary resources in terms of delivering those projects? And the reason I ask that, from a competitive positioning perspective, in the sense that you talked earlier about, you know, investing in kind of building out your talent pool, but if a large percentage of your delivery Well, look, Surinder, first of all, we've got, you know, today, 600 plus feet on the street with relationships directly into these Fortune 1000 enterprises, and it's that group that has had these client relationships from, you know, the traditional IT staffing business all the way through all of the customers' IT business, including consulting. So that doesn't change.

Speaker Change: <unk> point with a more perfect skill set the right industry experience and so we can craft that then every team as we go here. So you know that's been a winning proposition for our customer and the all in cost of that is really competitive you know and you can see that we wouldn't work you know not only bid.

Speaker Change: Because of you know our price point, but also the expertise we bring to bear so well.

Speaker Change: Well, we're going to stay the course there.

Speaker Change: Excellent.

Speaker Change: In terms of just I guess following up on the price point question here.

Speaker Change: How much of a difference is there between what youre able to bill.

Speaker Change: For your consulting services versus the staffing services I assume is it material at this point.

Speaker Change: How should we think about the difference and then maybe just some commentary.

Speaker Change: On kind of the bill rate trends I guess at this point in terms of.

Theodore S. Hanson: We don't need to build that up, if you will; we just need to address client opportunities. And so if it takes a little more, we can obviously scale into that, and we always have. On the consulting side, we put project teams together. And again, you will note our delivery model is a little different. I mean, we have about 80% to 85% of our team members on these projects come from our contingent workforce or our IT staffing capabilities. And then we've got a very smart solution-oriented, industry expertise team on the top, which is helping architect the solutions to meet the industry needs of the customer. And that's working just great.

Speaker Change: <unk>.

Speaker Change: How that BB trended over 'twenty, three and what's your outlook for 'twenty for us.

Speaker Change: Well for sure the Bill rate is better and it's evidenced by the fact, we can get a better margin right. So we would tell you that our margin in consulting is three or 400 basis points better than what we get in it staffing and it is because we're taking on.

Speaker Change: Some you know responsibility here for a certain amount of light or deliverables are milestones and so from that we're able to get a better bill rates I mean, there's there's no question about that and what was the second part of your question.

Speaker Change: In terms of the outlook for 'twenty for pricing and in the conversations that you're having with clients.

Theodore S. Hanson: And so we will continue to build, but I think our model is going to be here that we're definitely, on project teams, going to bring our contingent labor to bear on it because they are a more perfect fit. They're in the right place at the right price point with the more perfect skill set, and the right industry experience. And so we can craft that in every team as we go here.

Speaker Change: I mean, our clients are asking for better rates or are you able to kind of hold rates steady or is or as you talked about wanting to do more AI projects.

Speaker Change: That you can maybe use that to your advantage too.

Speaker Change: Maybe you can get a little bit better right because those are harder skill sets to find well.

Theodore S. Hanson: So that's been a winning proposition for our customer, and the all-in cost of that is really competitive. And you can see that we win work not only because of our price point but also the expertise we bring to bear. So we're going to stay the course.

Speaker Change: Well look I think anytime it's harder skill sets are fine and we can get a better rate and it doesn't matter, whether it's in you know and as Trillium.

Speaker Change: Trillium is a solution orientation right. If it's a higher end solution orientation, we can get a better rate. So all that stands Pat R. R.

Surinder Thind: And then in terms of just, I guess, following up on the price point question here. How much of a difference is there between what you're able to bill for your consulting services versus the staffing services? I assume it is material at this point. How should we think about the difference?

Speaker Change: Our margins are Mark ups, if you will have been pretty steady here and our bill rates are slightly rising and I think that is part and parcel with the mix of more consultative work that we're doing in and yes or work with you and AI here, though.

Theodore S. Hanson: And then maybe just some commentary on kind of bill rate trends, I guess, at this point in terms of, you know, how that may have trended over 23 and what your outlook for 24. Well, for sure, the bill rate is better, and it's evidenced by the fact we can get a better margin, right? So we tell you that our margin in consulting is 300 or 400 basis points better than what we get in IT staffing, and it is because we're taking on some, you know, responsibility here for a certain amount of light or deliverables or milestones. And so from that, we're able to get a better bill rate. I mean, there's no question about that.

Speaker Change: That will always to support and improve those.

Speaker Change: Got it so I apologize if I didn't ask the question I wasn't referring to the mix I was actually referring to the actual apples to apples comparison.

Speaker Change: What you could charge for a certain level of engineer in 'twenty three versus what you think you may be able to charge them in 'twenty four.

Speaker Change: Yeah, we're not seeing a trend that has is down I mean I expect the typically you know we will get a slight increase in our bill rates year over year I would expect it in 24 versus 23.

Theodore S. Hanson: What was the second part of your question? Sorry. I'm sorry.

Surinder Thind: Just in terms of the outlook for 24 pricing in the conversations that you're having with clients. I mean, are clients asking for better rates, or are you able to kind of hold rates steady, or is, or, you know, as you talk about clients wanting to do more AI projects, you can maybe use that to your advantage to, you know, maybe get a little bit better rates because those are harder skill sets to find? Well, look, I think any time it's a harder skill set to find, we can get a better rate, and it doesn't matter whether it's in, you know, it's really in the solution orientation, right? If it's a higher-end solution orientation, we can get a better rate.

Speaker Change: We don't see anything underlying that would tell us any different right now.

Theodore S. Hanson: Hey, Ted.

Theodore S. Hanson: Ed.

Theodore S. Hanson: Thanks, Brenda keep in mind is our consulting business grows and grows its cost per job not cost per hour and staffing its cost per hour and there are built in.

Speaker Change: Escalators to bill rates and there are exceptions to the bill rates, depending on skill types.

Speaker Change: That is the availability of skills importance of projects, but.

Speaker Change: A lot of what you are asking applies more staffing where bill rates for an individual hour a highly discussed and its consulting as that grows with us.

Speaker Change: Just discussing what the cost of the job is and what are the benefits associated with that.

Speaker Change: But I just I.

Speaker Change: I guess, maybe to help me clarify just want to be trailing misinterpret that comment.

Surinder Thind: So, while that stands, Pat, our margins, our markups, if you will, have been pretty steady here, and our bill rates are slightly rising, and I think that is part and parcel with the mix of more consultative work that we're doing, and yes, the more work we do in AI here, you know, that will only support and improve that. So I apologize if I didn't ask the question. I wasn't referring to the recipe.

Speaker Change: Is that implying that you're doing a lot more fixed price projects and because generally most consulting firms do not want to do fixed price projects. They want to bill by the hour. So you have engineers.

Speaker Change: All right.

Speaker Change: It does not it does not imply that but the cost the conversations with the clients start around what's the total cost of doing taking on this job. When we you can build it by looking at each time and materials type work, we can build it by time and material, but the ultimate conversation and decision around the competitive choices around the <unk>.

Theodore S. Hanson: I was actually referring to the actual apples to apples comparison of what you could charge for a certain level of engineer in 23 versus what you think you may be able to charge them in 24. Yeah, we're not seeing a trend that is down. I mean, I expect that typically, you know, we'll get a slight increase in our bill rates year to year; I would expect it in 24 versus 23, but we don't see anything underlying that would tell us any difference. Hey Ted, can I add one thing to Render?

Speaker Change: Cost and the risks associated with delivering that work and where the benefit of that work.

Got it thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Heather <unk> with Bank of America. Please proceed with your question.

Speaker Change: Hi, This is Marshall on for Heather Belsky I was wondering if you could talk to us about what you're seeing and permanent staffing.

Randolph C. Blazer: Keep in mind as our consulting business grows and grows; it's cost per job, not cost per hour. Staffing at Cost Per Hour, and there are built-in escalators to bill rates, and there are exceptions to the bill rates depending on skill types. Including the status of the availability of skills, and importance of projects, but, you know, a lot of what you're asking applies more to staffing, where bill rates for an individual hour are highly discussed. It's consulting, as that grows with us, it's discussing what the cost of the job is and what the benefits associated with it are. But I just, I guess maybe to help me clarify, I just want to make sure I don't misinterpret that comment. Is that implying that you're doing a lot more fixed price projects then? Because, generally, most consulting firms do not want to do fixed price projects.

Marshall: And what was the percentage of sales you suffer from staffing this quarter.

Speaker Change: Thank you.

Speaker Change: Yes, absolutely.

Speaker Change: Hello, Hello, So, yes for the fourth quarter, we actually.

Speaker Change: <unk> as a percent of total revenue was two 4%.

Speaker Change: And I think what Youre seeing there Heather again.

Fair study I mean, I would say, it's at a historic low percent of the mix and there's really no.

Speaker Change: No change if you will from the third to the fourth are our expectation here for the first quarter is in similar ranges.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: We have reached the end of our question and answer session I'll now turn the call back over to Ted Hanson for closing remarks.

Theodore S. Hanson: Great well I appreciate everyone's attention here today for the release of our fourth quarter and the Q&A that follows and we look forward to being with you very soon to discuss our first quarter 2024 results.

Surinder Thind: They want to build by the hour. So you have engineers, and you look at all the- It does not imply that. But the cost, the conversations with a client start around, "what's the total cost of taking on this job? You can build it by looking at time and material type work. You can build it by time and materials, but the ultimate conversation and decision around a competitive choice is around the cost and the risk associated with delivering that work and where the benefits of that are.

Theodore S. Hanson: Thank you. This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.

Ted Hanson: Yeah.

Ted Hanson: Okay.

Ted Hanson: Yes.

Ted Hanson: [music].

Ted Hanson: Yeah.

Ted Hanson: [music].

Randolph C. Blazer: Got it, thank you. Thank you. And our next question comes from the line of Heather Balsky, America.

Ted Hanson: Okay.

Ted Hanson: [music].

Heather Balsky: Hi, this is Emily Marzullan on behalf of Heather Balsky. I was wondering if you could talk to us about what you're seeing in permanent staffing and what was the percentage of sales you saw? Staffing, T.S.

Ted Hanson: Yeah.

Ted Hanson: Yeah.

Ted Hanson: Okay.

T.S.: Hello, hello. So yes, for the fourth quarter, we actually, Terms of Total Revenue. And I think what you're seeing there, Heather, again, is... Very steady. I mean, I would say it's at a historic low percent of the mix, and there's really no change, if you will, from the third to the fourth, or our expectation here for the first quarter is in a similar range.

Ted Hanson: [music].

Ted Hanson: Okay.

Ted Hanson: Okay.

Ted Hanson: Okay.

Ted Hanson: Okay.

Ted Hanson: [music].

Operator: Thank you. We have reached the end of our question and answer session. Now, over to Ted Hanson. Great, well, I appreciate everyone's attention here today for the release of our fourth quarter and the Q&A that followed. And we look forward to being with you very soon to discuss our first quarter 2024 results. Thank you, this concludes today's conference, and you may disconnect your lines at this time. For you, I can arrange for you to visit www. The BusinessProfessor.com

Ted Hanson: Yeah.

Ted Hanson: [music].