Q2 2024 ASGN Inc Earnings Call

Operator: Greetings. Welcome to the ASGN Incorporated second quarter 2024 earnings call. At this time, all participants are on 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. I will now turn the conference over to your host, Kimberly Esterkin, of Investigations. You may begin.

Speaker Change: Greetings. Welcome to the ASGN Incorporated second quarter 2024 earnings call. At this time, all participants are on 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.

I will now turn the conference over to your host, Kimberly Esterkin, of Investigations. You may begin.

Kimberly Esterkin: Good afternoon. Thank you for joining us today for ASGN's second quarter 2024 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 looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our FCC filing. We do not assume any obligation to update statements made on this call.

Speaker Change: Good afternoon. Thank you for joining us today for ASGN's second quarter 2024 conference call. With me are Ted Hanson, Chief Executive Officer, Rand Blazer, President, and Marie Perry, Chief Financial Officer.

Speaker Change: Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements.

Speaker Change: 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.

Speaker Change: For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com.

Speaker Change: Please also note that on this call, we will be referencing certain non-GAAP measures such as Adjusted EBITDA, Adjusted Net Income, and Pre-Cash Flow.

Speaker Change: These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release.

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 pre-cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. 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.

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

Theodore S. Hanson: Thank you, Ken, and thank you for joining ASGN's second quarter 2024 earnings call. ASGN's results for the second quarter confirmed our expectations that macro conditions in Q2 would be consistent with Q1.

Theodore S. Hanson: Thank you, Kim, and thank you for joining ASGN's second quarter 2024 earnings call.

Theodore S. Hanson: ASGN's results for the second quarter confirmed our expectations that macro conditions in Q2 would be consistent with Q1.

Theodore S. Hanson: Revenues were $1,035,000,000, while just even a margin of 11.3% was at the top of our expectations. Consistent with the first quarter, in Q2, our clients continue to focus acutely on where and when to spend against their IT budgets. Their long-term IT roadmaps and priorities have not changed. However, concerns about protecting their bottom lines continue to drive cautious execution. This behavior is not unique to ASGN's customer base.

Theodore S. Hanson: Revenues were $1,035,000,000 while adjusted EBITDA margin of 11.3% was at the top of our expectation.

Theodore S. Hanson: Consistent with the first quarter, in Q2, our clients continued to acutely focus on where and when to spend against their IT budget.

Theodore S. Hanson: Their long-term IT roadmaps and priorities have not changed. However, concerns about protecting their bottom lines continue to drive cautious execution. This behavior is not unique to ASGN's customer base.

Theodore S. Hanson: On a recent call hosted by the Global ISG Index for the second quarter of 2024, their team of experts concluded that new bookings and hiring remain muted, and headwinds such as high interest rates, inflation, geopolitical unrest, and the impending U.S. presidential election continue to hinder increased IT spend. IT consulting revenues totaled 57.1% of consolidated revenues for the second quarter of 2024, up from 53.1% in the The evolution of our revenues is not only reflected in our financial statements, but it's also been acknowledged by equity market indices.

Speaker Change: On a recent call hosted by the Global ISG Index for the second quarter of 2024, their team of experts concluded that new bookings and hiring remain muted, and headwinds such as high interest rates, inflation,

Speaker Change: Geopolitical unrest in the impending U.S. presidential election continue to hinder increased IT spend.

Speaker Change: IT consulting revenues totaled 57.1% of consolidated revenues for the second quarter of 2024, up from 53.1% in the prior year quarter.

Speaker Change: The evolution of our revenues is not only reflected in our financial statements, but it's also been acknowledged by equity market indices.

Theodore S. Hanson: In May, in recognition of the pivot in our strategy, the joint S&P and MSCI committee responsible for the GICS code classification officially switched ASGN's GICS code from the industrial sector under human resources and employment services to the information technology sector under IT consulting and other services.

Speaker Change: In May, in recognition of the pivot in our strategy, the joint S&P and MSCI committee responsible for the GICS code classification

Speaker Change: officially switched ASDN SCICS code from the industrial sector under human resources and employment services to the information technology sector under IT consulting and other services.

Theodore S. Hanson: With each accomplishment, whether that be increasing our IT consulting revenues and ultimately overall company margins or receiving a new GICS code, we're making measured strategic progress toward our goal of moving up the IT services pyramid into higher-end, higher-value IT consulting solutions. Our progress toward this goal will be driven by continuing to nurture our longstanding trusted client relationships, which, like our variable cost structure, are a cornerstone of our business model. Our large account portfolio across six diverse industry verticals offers us first-hand insight into our clients' investments and long-term IT roadmaps.

Speaker Change: With each accomplishment, whether that be increasing our IT consulting revenues and ultimately overall company margins or receiving a new GICS code, we're making measured strategic progress toward our goal of moving up the IT services pyramid into higher-end, higher-value IT consulting solutions.

Speaker Change: Our progress towards this goal will be driven by continuing to nurture our long-standing, trusted client relationships, which, like our variable cost structure, are a cornerstone of our business model.

Speaker Change: Our large account portfolio across six diverse industry verticals offers us first-hand insight into our clients' investments and long-term IT roadmaps.

Theodore S. Hanson: As we position ourselves for the future, we remain committed to fostering these relationships and supporting our clients with critical IT needs. I'll provide some more details about how we are staying ahead of our clients' IT needs, and in particular, those related to AI, as we discuss our segment performance. So let's begin with our largest segment by revenue, commercial. Our commercial segment services Fortune 1000 and large mid-market companies. Commercial segment revenues for the quarter declined by low double digits year-over-year due to continued softness in the more cyclical areas of our assignment business.

Speaker Change: As we position ourselves for the future, we remain committed to fostering these relationships and supporting our clients with critical IT needs.

Speaker Change: I'll provide some more details about how we are staying ahead of our client's IT needs, and in particular, those related to AI as we discuss our segment performance. So let's begin with our largest segment by revenue commercial.

Speaker Change: Our commercial segment services Fortune 1000 and large mid-market companies.

Speaker Change: Commercial segment revenues for the quarter declined by low double digits year-over-year due to continued softness in the more cyclical areas of our assignment business.

Theodore S. Hanson: Despite a softer macroeconomy, our strategy to expand our IT commercial consulting business is working. Commercial consulting revenues were essentially flat year over year on a difficult prior year comparison, but improved 1.6% sequentially. Commercial consulting bookings of $327.4 million put our book-to-bill at 1.2 times on a trailing 12-month basis.

Speaker Change: Despite a softer macroeconomy, our strategy to expand our IT commercial consulting business is working.

Speaker Change: Commercial consulting revenues were essentially flat year-over-year on a difficult prior year comparison, but improved 1.6% sequentially.

Speaker Change: Commercial consulting bookings of $327.4 million puts our book-to-bill at 1.2 times on a trailing 12-month basis.

Theodore S. Hanson: From an industry perspective, we saw year-over-year growth in one of our five commercial verticals. TMT revenues improved 7.2% compared to the second quarter of 2023, led by double-digit growth in telecommunications and e-commerce. Sequentially, TMT revenues improved 8%, while consumer and industrial revenues increased 3.1%. Taking into account the additional billable day in Q2 2024, we also saw sequential growth in 10 sub-verticals, including regional banks, diversified financials, utilities, materials, consumer discretionary, telecommunications, e-commerce, tech hardware, software, and services, and business services. Although it remains encouraging to see these sequential improvements, we believe we have not yet seen an inflection point for IT spending.

Speaker Change: From an industry perspective, we saw year-over-year growth in one of our five commercial verticals.

Speaker Change: PMT revenues improved 7.2% compared to the second quarter of 2023.

Speaker Change: led by Double-Digit Growth in Telecommunications and E-Commerce.

Speaker Change: Sequentially, TMT revenues improved 8%, while consumer and industrial revenues increased 3.1%.

Speaker Change: Taking into account the additional billable day in Q2 2024, we also saw sequential growth in 10 sub-verticals, including regional banks,

Speaker Change: Diversified Financials, Utilities, Materials, Consumer Discretionary, Telecommunications, E-Commerce, Tech Hardware, Software and Services, and Business Services.

Speaker Change: Although it remains encouraging to see these sequential improvements, we believe we have not yet seen an inflection point in IT spending.

Theodore S. Hanson: As we move up the IT services pyramid toward higher-end consulting work, we're adding new skill sets to our project teams, including solution architects. Our ability to add advanced skill sets to our project teams offers the opportunity to improve our margins, expand our contract sizes and links, and enhance our industry vertical performance. It also reflects the high value our clients attribute to ASGM to solve their complex IT problems. Identifying use cases for Gen-AI is one of those complex problems.

Speaker Change: As we move up the IT services pyramid toward higher-end consulting work, we're adding new skill sets to our project teams, including solution architects.

Speaker Change: Our ability to add advanced skill sets to our project teams offers the opportunity to improve our margins, expand our contract sizes and lengths, and enhance our industry vertical performance.

Speaker Change: It also reflects the high value our clients attribute to ASGN to solve their complex IT problems.

Speaker Change: Identifying use cases for Gen-AI is one of those complex problems. While use cases are growing, we are still in the early stages of AI implementation.

Theodore S. Hanson: While use cases are growing, we are still in the early stages of AI implementation. ASGN's solution capabilities across disciplines enable us to differentiate our AI services, and so we are deploying a multi-layered approach to our AI new business effort. Data is the fuel for AI.

Speaker Change: HCN solution capabilities across disciplines enables us to differentiate our AI services, and so we're deploying a multi-layered approach to our AI new business efforts.

Theodore S. Hanson: So our data and analytics practice is naturally at the forefront of our AI engagement. AI is also compute-intensive, so our cloud and infrastructure team is working diligently to create AI solutions that can scale. Finally, AI must be secure, so our cyber practice plays an integral role in use case development.

Speaker Change: Data is the fuel for AI, so our data and analytics practice is naturally at the forefront of our AI engagement.

Speaker Change: AI is also compute intensive, so our cloud and infrastructure team is working diligently to create AI solutions that can scale. Finally, AI must be secure, so our cyber practice plays an integral role in use case development.

Theodore S. Hanson: Our clients are readily relying on us to conduct business case and technical assessments to understand where to apply this novel technology. So, let me provide some examples of the projects won during the quarter. We provide these engagement examples to give a sense of the work we are performing and ASDN's ability to bring a combination of IT and AI to address our clients' needs. In Q2, for our multinational beauty company, we began implementing a pilot Microsoft Fabric to enhance our client's cloud-based FinOps management solution.

Speaker Change: Our clients are readily relying on us to conduct business case and technical assessments to understand where to apply this novel technology.

Speaker Change: So let me provide some examples of the projects won during the quarter. We provide these engagement examples to give a sense of the work we are performing and ASDN's ability to bring a combination of IT and AI to address our clients' needs.

Speaker Change: In Q2, for a multinational beauty company, we began implementing a pilot Microsoft Fabric to enhance our client's cloud-based FinOps management solution.

Theodore S. Hanson: By piloting this AI-powered analytics and data platform, our client is gaining actual insights to better forecast and control their cloud efficiency. Microsoft Fabric is a critical priority across our customer base, and we recently launched our first listing in the Microsoft Azure Marketplace, a consulting workshop on Microsoft Fabric. Participating in the Microsoft Azure Marketplace provides our commercial consulting practice with the opportunity to accelerate growth, increase brand awareness, and importantly, build new client relationships.

Speaker Change: By piloting this AI-powered analytics and data platform, our client is gaining actual insights to better forecast and control their cloud efficiency.

Speaker Change: Microsoft Fabric is a critical priority across our customer base.

Speaker Change: and we recently launched our first listing on the Microsoft Azure Marketplace, a consulting workshop on Fabric.

Speaker Change: Participating in the Azure Marketplace provides our commercial consulting practice with the opportunity to accelerate growth, increase brand awareness, and importantly, build new client relationships.

Theodore S. Hanson: In another contract won during the quarter, our data and AI team in Mexico was engaged by a lifestyle brand to develop a roadmap to implement a data solution on Google Cloud. This project involves expertise across several technologies, such as GitHub, BigQuery, and a Gemini-based accelerator. By following an Agile approach and deploying an AI-powered accelerator, our consulting team improved their velocity of implementation by three times without sacrificing quality of service. This project is on track to hit its first milestone in Q3, a complete migration to Google Cloud.

Speaker Change: In another contract won during the quarter, our data and AI team in Mexico was engaged by a lifestyle brand to develop a roadmap to implement a data solution on Google Cloud.

Speaker Change: This project involves expertise across several technologies such as GitHub, BigQuery, and a Gemini-based accelerator. By following an Agile approach and deploying an AI-powered accelerator,

Speaker Change: Our consulting team improved their velocity of implementation by three times without sacrificing quality of service.

Speaker Change: This project is on track to hit its first milestone in Q3, a complete migration to Google Cloud.

Theodore S. Hanson: Also, during the second quarter, our Mexico Delivery Center supported a Fortune 500 gaming company with application development and modernization. Our technical architects, GitHub-trained co-pilot developers, and program managers all collaborated closely with our client to develop a roadmap for the creation of a custom in-gaming tool.

Speaker Change: Also, during the second quarter, our Mexico Delivery Center supported a Fortune 500 gaming company with application development and modernization. Our technical architects, GitHub-trained co-pilot developers,

Theodore S. Hanson: This is a three-year engagement with our delivery team scalating over the project life cycle. Finally, another consulting project during the quarter was a threat and vulnerability management assessment performed for one of our large healthcare payer clients. Our client was looking to enhance their vulnerability management capabilities and ensure that their operating systems were up to industry standards. By migrating their primary threat scanning tool from on-premise to a hybrid cloud solution, our commercial team helped our client mitigate future risks.

Speaker Change: and program managers all collaborated closely with our client to develop a roadmap for the creation of a custom in-gaming tool. This is a three-year engagement with our delivery team scaling up over the project lifecycle.

Speaker Change: Finally, another consulting project, one during the quarter, was a threat and vulnerability management assessment performed for one of our large healthcare payer clients.

Speaker Change: Our client was looking to enhance their vulnerability management capabilities and ensure that their operating systems were up to industry standards.

Speaker Change: By migrating our client's primary threat scanning tool from on-premise to a hybrid cloud solution, our commercial team helped our client mitigate future risks.

Theodore S. Hanson: This cloud solution broadened our client's scanning scope and significantly reduced threat scanning time. Let's now turn to our federal government segment, which provides advanced IT solutions to the Department of Defense, the intelligence community, and federal civilian agencies. Federal segment revenues for the quarter declined by low single digits year-over-year but improved on a year-to-date basis.

Speaker Change: This cloud solution broadened our client's scanning scope and significantly reduced threat scanning time.

Speaker Change: Let's now turn to our federal government segment, which provides advanced IT solutions to the Department of Defense, the intelligence community, and federal civilian agencies.

Speaker Change: Federal segment revenues for the quarter declined low single digits year-over-year, but improved on a year-to-date basis.

Theodore S. Hanson: Contract backlog was $2.8 billion at the end of the second quarter, or a coverage ratio of 2.2 times the segment's trailing 12-month revenue. New contract awards were $194.3 million, putting our book-to-bill at 0.7 times on a trailing 12-month basis. Task orders under IDIQs 1 and Q4 2023 have not materialized as quickly as we originally anticipated. In addition, while our core government services revenues continue to grow, lower-than-expected pass-through licensing fees impacted our second quarter results.

Speaker Change: Contract backlog was $2.8 billion at the end of the second quarter, or a coverage ratio of 2.2 times the segment's trailing 12-month revenues.

Speaker Change: New contract awards were $194.3 million, putting our book-to-bill at .7 times on a trailing 12-month basis.

Speaker Change: Task orders under IDIQs 1 and Q4 2023 have not materialized as quickly as we originally anticipated.

Speaker Change: In addition, while our core government services revenues continue to grow, lower-than-expected pass-through licensing fees impacted our second quarter results.

Theodore S. Hanson: Marie will speak further on this topic later in today's call. On a positive note, we are already seeing a greater flow of task orders begin to be released in the third quarter. I'll provide an update on those shortly.

Speaker Change: Marie will speak further about this topic later in today's call.

Marie: On a positive note, we are already seeing a greater flow of task orders begin to be released in the third quarter. I'll provide an update on those shortly.

Theodore S. Hanson: As we prepare for new task orders, like with our commercial segment, we are actively upskilling our federal government professionals in Gen AI. Through our Data and AI Center of Excellence, we are training our professionals in our proprietary large language models, along with publicly available Gen AI services such as ChatGPT, Gemini, and Copilot. Our government teams are also earning in-demand AI professional certifications. These training and certification opportunities expand our professional skill sets, enhance our technology partnerships, and provide us with the ability to create internal use cases to improve ASGN's overall efficiency.

Marie: As we prepare for new task orders, like with our commercial segment, we are actively upskilling our federal government professionals in Gen-AI.

Marie: Through our Data and AI Center of Excellence, we are training our professionals in our proprietary large-language models.

Marie: along with publicly available Gen AI services such as ChatGPT, Gemini, and Copilot. Our government teams are also earning in-demand AI professional certifications.

Marie: These training and certification opportunities expand our professional skill sets, enhance our technology partnerships, and provide us the ability to create internal use cases to improve ASGM's overall efficiencies.

Theodore S. Hanson: During the second quarter, we began receiving task orders under the $1.25 billion ReCompete DARPA IDIQ awarded to our federal government segment at the end of 2023. Our team is supporting DARPA with acquisition lifecycle solutions, program oversight, and expert advice to meet their dynamic research and development missions. At the start of July, we began receiving task orders on an $88 million single award re-compete contract with the Missile Defense Agency, in which we are providing business operation and modernization support services, along with business intelligence and analytic solutions.

Marie: During the second quarter, we began receiving task orders under the $1.25 billion ReCompete-DARPA-IDIQ awarded to our federal government segment at the end of 2023.

Marie: Our team is supporting DARPA with acquisition lifecycle solutions, program oversight, and expert advisory to meet their dynamic research and development missions.

Marie: At the start of July , we began receiving task orders on an $88 million single award recompete contract with the Missile Defense Agency, in which we are providing business operation and modernization support services, along with business intelligence and analytic solutions.

Theodore S. Hanson: While work began under this contract in Q3, it is reflected in our Q2 2024 backlog. In addition to those contracts already booked in the backlog in Q2 2024, our Justice Solutions team won a prime spot on a recompete award with the FBI. This $8 billion, 8-year information technology supplies and support services contract is the largest contract vehicle ever established by the FBI. This contract allows our federal government segment to expand the critical IT services and technology solutions it provides to the FBI to include AI-infused IT and cybersecurity solutions.

Marie: While work began under this contract in Q3, it is reflected in our Q2 2024 backlog.

Marie: In addition to those contracts already booked in the backlog in Q2 2024, our Justice Solutions team won a prime spot on a recompete award with the FBI.

Marie: This $8 billion, 8-year information technology supplies and support services contract is the largest contract vehicle ever established by the FBI.

Marie: This contract allows our federal government segment to expand the critical IT services and technology solutions it provides to the FBI to include AI-infused IT and cybersecurity solutions.

Theodore S. Hanson: Our federal government segment has supported the FBI for over three decades, and we look forward to receiving task orders under this contract, which will add to our bookings performance. With that, I'll now turn the call over to Marie to discuss the second quarter results and our third quarter guidance.

Marie: Our federal government segment has supported the FBI for over three decades, and we look forward to receiving task orders under this contract, which will add to our bookings performance.

Marie: With that, I'll now turn the call over to Marie to discuss the second quarter results and our third quarter guidance.

Marie L. Perry: Thanks, Ted. It's great to speak with you all this afternoon.

Marie: Thanks, Ted. It's great to speak with everyone this afternoon.

Marie L. Perry: Second quarter revenues were $1.035 billion and reflect the sequential steadiness we expected in our commercial segment, offset by lower than expected license revenues in our federal government segment. Revenues from the commercial segment were $725.7 million, down 10.6% compared to the prior year and flat sequentially. Revenues from commercial consulting, the largest of our high-margin revenue streams, totaled $281.5 million, essentially flat year-over-year and up 1.6% sequentially. Revenues from our federal government segment were $309 million, a decrease of 3.3% year-over-year.

Marie: Second quarter revenues were $1.035 billion and reflect the sequential steadiness we expected in our commercial segment, offset by lower-than-expected license revenues in our federal government segment.

Marie: Revenues from the commercial segment were $725.7 million, down 10.6% compared to the prior year, and flat sequentially.

Marie: Revenues from commercial consulting, the largest of our high-margin revenue streams, total $281.5 million, essentially flat year-over-year and up 1.6% sequentially.

Marie: Revenues from our federal government segment were $309 million, a decrease of 3.3% year-over-year.

Marie L. Perry: When we spoke last quarter, I noted that we anticipated our federal government segment's performance in the second quarter of 2024 would be similar to the prior year quarter. This assumption was based on the belief that we would have a consistent level of software license revenues year over year. While our core services revenue for this segment continued to grow, as Ted noted, licensing revenues in the second quarter of 2024 were lower than our expectations, which resulted in a revenue shortfall for the quarter. Our commercial segment, on the other hand, performed as anticipated.

Marie: When we spoke last quarter, I noted that we anticipated our federal government segment's performance in the second quarter of 2024 would be similar to the prior year quarter.

Marie: This assumption was based on the belief that we would have consistent level of software license revenues year over year.

Marie: While our core services revenue for this segment continued to grow, as Ted noted, licensing revenues in the second quarter of 2024 were lower than our expectations.

Ted: This resulted in the revenue shortfall for the quarter. Our commercial segment, on the other hand, performed as anticipated.

Marie L. Perry: Turning to margins, gross margins for the second quarter of 2024 were 29.1%, an increase of 20 basis points from the second quarter of last year. Gross margin for the commercial segment was 32.7%, up 50 basis points year-over-year, reflecting a higher mix of consulting revenues as well as margin expansion from both consulting and assignment revenues. Gross margin for the federal government segment was 20.6 percent, up 10 basis points year-over-year, primarily due to lower licensing revenues, which carry a lower gross margin.

Ted: Turning to margins, gross margins for the second quarter of 2024 was 29.1%, an increase of 20 basis points from the second quarter of last year.

Ted: Gross margin for the commercial segment was 32.7 percent, up 50 basis points year-over-year, reflecting a higher mix of consulting revenues as well as margin expansion from both consulting and assignment revenues.

Ted: Gross margin for the federal government segment was 20.6%, up 10 basis points year-over-year, primarily due to lower licensing revenues, which carry a lower gross margin.

Marie L. Perry: SG&A expenses for the quarter were $205.6 million, compared to $210.5 million in the second quarter of 2023. SG&A expenses also included $1.2 million of acquisition, integration, and strategic planning expenses that were not included in our guidance estimate.

Ted: SG&A expenses for the quarter were $205.6 million compared to $210.5 million in the second quarter of 2023.

Ted: SG&A expenses also included $1.2 million of acquisition, integration, and strategic planning expenses that were not included in our guidance estimate.

Marie L. Perry: For the quarter, net income was $47.2 million, adjusted EBITDA was $117.1 million, and adjusted EBITDA margin was 11.3%. Adjusted EBITDA margin was at the top end of our guidance range due to an improved business mix and higher gross margin. At quarter end, cash and cash equivalents were $132.2 million, and we had full availability under our $500 million Senior Secured Revolver, and our net leverage ratio was 1.89 times. Turning to our cash flow statement,

Ted: For the quarter, net income was $47.2 million, adjusted EBITDA was $117.1 million, and adjusted EBITDA margin was 11.3 percent.

Ted: Adjusted EBITDA margins was at the top end of our guidance range due to improved business mix and higher gross margins.

Ted: At quarter end, cash and cash equivalents were $132.2 million, and we had full availability under our $500 million Senior Secured Revolver, and our net leverage ratio was 1.89 times.

Marie L. Perry: Free cash flow for the quarter was $85.4 million, or a conversion rate of approximately 73% of adjusted EBITDA. Given the market opportunity, we deployed $108 million in a combination of free cash flow and excess cash on the balance sheet for share repurchase. This is the second quarter in a row that share repurchases exceeded our free cash flow. We have $667 million remaining under our $750 million share repurchase authorization. With solid free cash flow generation and full availability under the revolver, we have ample dry powder to make strategic acquisitions when the M&A market improves. In the meantime, we expect to continue to repurchase ASGN shares. Turning to guidance,

Speaker Change: Turning to our cash flow statement.

Speaker Change: Free cash flow for the quarter was $85.4 million, or a conversion rate of approximately 73% of adjusted EBITDA. Given the market opportunity, we deployed $108 million in a combination of free cash flow and excess cash on the balance sheet for share repurchase.

Speaker Change: This is the second quarter in a row that share repurchases exceeded our free cash flow. We have $667 million remaining under our $750 million share repurchase authorization.

Speaker Change: With solid free cash flow generation and full availability under the revolver, we have ample dry powder to make strategic acquisitions when the M&A market improves. In the meantime, we expect to continue to repurchase ASGN shares.

Marie L. Perry: Our financial estimates for the third quarter of 2024 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions and assume 63.5 billable days in the third quarter. We expect market conditions and demand for our services in the third quarter to be similar to that of the second quarter. As it relates to federal government segment revenues, we had a large amount of pass-through licensing revenues in Q3 of 2023, which we are not expecting to repeat.

Speaker Change: Turning to Guidance. Our financial estimates for the third quarter of 2024 are set forth in our Earnings Release and Supplemental Materials. These estimates are based on current market conditions and assume 63.5 billable days in the third quarter.

Speaker Change: We expect market conditions and demand for our services in the third quarter to be similar to that of the second quarter. As it relates to federal government segment revenues, we had a large amount of pass-through licensing revenues in Q3 of 2023, which we are not expecting to repeat.

Marie L. Perry: With this background, for Q3 2024, we are estimating revenues of $1.024 billion to $1.044 billion, net income of $45.8 million to $49.4 million, adjusted EBITDA of $114 million to $119 million, and adjusted EBITDA margin of 11.1% to 11.4%. Thank you. I'll now turn the call back to Ted for some closing remarks.

Speaker Change: With this background, for Q3 2024, we are estimating revenues of $1.024 billion to $1.044 billion.

Speaker Change: Net income of $45.8 million to $49.4 million. Adjusted EBITDA of $114 million to $119 million and Adjusted EBITDA margin of 11.1% to 11.4%.

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

Theodore S. Hanson: We began today's discussion with a review of the macroenvironment. The second quarter proved much like the first, with clients continuing to position themselves more cautiously than in prior cycles.

Ted: Thanks, Marie.

Ted: We began today's discussion with a review of the macroenvironment. The second quarter proved much like the first, with clients continuing to position themselves more cautiously than in prior cycles.

Theodore S. Hanson: As evident from the guidance Marie just discussed, we anticipate continued steadyness in the third quarter. On a positive note, as I mentioned previously, government bookings have begun to pick up in the third quarter. In July, we received funding under a recompete contract with the NYPD for cybersecurity and other system support. In addition, I'm pleased to announce that we just last week were awarded a $1.1 billion IDIQ contract with the National Institutes of Health, or NIH. Our federal government segment is one of seven awardees who have been tasked to support the NIH over a five-year period with its critical IT needs.

Ted: As evident from the guidance Marie just discussed, we anticipate a continued steadiness in the third quarter. On a positive note, as I mentioned previously, government bookings have begun to pick up in the third quarter.

Ted: In July , we received funding under a recompete contract with the NYPD for cybersecurity and other system support.

Ted: In addition, I'm pleased to announce that we just last week were awarded a $1.1 billion IDIQ with the National Institutes of Health.

Ted: or NIH, our federal government segment is one of seven awardees who have been tasked to support the NIH over a five-year period with its critical IT needs.

Theodore S. Hanson: Once task orders begin to be released, our team's scope of work will include developing data management and analytic solutions using AIML, visualizations, and other advanced analysis techniques. As evident from these recent awards, despite the current market conditions, we have not shifted our strategy or core belief system. At ASGM, we believe in the IT services sector. We believe in being more consultative, and we believe in large, industry-diverse enterprise accounts. These three focal areas, along with our variable cost structure, provide support to our business throughout the economic cycle; market headwinds will ultimately reverse.

Ted: Once task orders begin to be released, our team's scope of work will include developing data management and analytic solutions using AIML, visualizations, and other advanced analysis techniques.

Ted: As is evident from these recent awards...

Ted: Despite the current market conditions, we have not shifted our strategy or core belief system.

ASGM: At ASGM, we believe in the IT services sector, we believe in being more consultative, and we believe in large industry diverse enterprise accounts.

ASGM: These three focal areas, along with our variable cost structure, provide support to our business throughout economic cycles.

Theodore S. Hanson: And ASGN's business is better positioned than it has ever been to capture in-demand IT consulting opportunities. As we expand our IT consulting business, we are adding directors and advisors to our board who enhance the strategic vision and operational expertise necessary to forge our path forward. In June, we welcome Patty Obermeyer to our board of directors. Patty is the Chief Growth Officer for Microsoft's Global Health Life Sciences Division. She has served as an advisor to our board since January, and we are excited to officially welcome her and her more than three decades of IT consulting experience to ASGN. Speaking about the topic of governance, in June, ASGN released its fifth annual Environmental Social Governance Report.

ASGM: Market headwinds will ultimately reverse, and ASGN's business is better positioned than it has ever been to capture in-demand IT consulting opportunities.

ASGM: As we expand our IT consulting business, we are adding directors and advisors to our board who enhance the strategic vision and operational expertise necessary to forge our path forward. In June , we welcome Patty Obermeyer to our board of directors.

Speaker Change: Patty is the Chief Growth Officer for Microsoft's Global Health Life Sciences Division. She has served as an advisor to our board since January , and we are excited to officially welcome her and her more than three decades of IT consulting experience to ASGN.

Speaker Change: Speaking about the topic of governance, in June , ASGN released its fifth annual Environmental Social Governance Report.

Theodore S. Hanson: We have made great strides in our ESG reporting over the past year, building upon the foundation we established in prior years while also evolving our capabilities with key sustainability frameworks and regulatory standards. That concludes our prepared remarks. I'd like to express my gratitude to the entire ASGM family for your support this past quarter. Industry dynamics may shift, and the macroeconomy will fluctuate.

Speaker Change: We've made great strides in our ESG reporting over the past year.

Speaker Change: Building upon the foundation we established in prior years, while also evolving our capabilities with key sustainability frameworks and regulatory standards.

Speaker Change: That concludes our prepared remarks. I'd like to express my gratitude to the entire ASGM family for your support this past quarter. Industry dynamics may shift and the macroeconomy will fluctuate, but your commitment to being one of our clients' most trusted IT partners has not wavered.

Theodore S. Hanson: But your commitment to being one of our clients' most trusted IT partners has not wavered. Thank you again for joining our second quarter 2024 call. Operator, please open the call to questions.

Speaker Change: Thank you again for joining our second quarter 2024 call. Operator, please open the call to questions.

Operator: Thank you. 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 keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the... For participants using speaker equipment, it may be necessary to pick up your handset before pressing any of the start keys.

Speaker Change: Thank you. 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 keypad. A confirmation tone will indicate your line is in the question queue.

Speaker Change: You may press star 2 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 any of the star keys. One moment please as we poll 4 questions.

Operator: One moment, please, as we poll for questions. And our first question comes from the line of Jeff Silber with BMO Capital Markets. Please proceed with your question. Hey, thanks a lot. This is Ryan on behalf of Jeff. Just a quick question on someone.

Speaker Change: And our first question comes from the line of Jeff Silber with BMO Capital Markets. Please proceed with your question.

Theodore S. Hanson: Yeah, so Ryan, thanks for the question. I think, you know, obviously, we've said before, but those software licenses aren't flowing through the quarter. So the timing of that is uncertain. You know, I think Marie said during the script that we had planned on a similar amount of licenses to the past quarter, prior year quarter, excuse me, and they just didn't come. I mean, they'll come in future quarters.

Speaker Change: Hey, thanks a lot. This is Ryan on for Jeff. Just a quick question.

Ryan: On some of the dynamics around the federal government, sounds like there's maybe a timing shift in some of the software revenues you didn't get in the quarter and then...

Speaker Change: It sounds like a tough comp on the pass-through licenses and 3Q. Can you just tell us how we should be thinking about the magnitude of all those together?

Ryan: Yes, so Ryan, thanks for the question. I think, you know, obviously we've said before, but those software licenses are, they have been flowed through the quarters, so the timing of that is uncertain.

Ryan: Script that we had planned on a similar amount of licenses to the past quarter, prior year quarter, excuse me.

Speaker Change: And they just didn't come. I mean, they'll...

Theodore S. Hanson: They're always a certain amount of software licenses are a part of our solutions. And so it's always a, you know, a component of that, if you will. So, you know, I think the good news is here, our core business and, you know, what we generate through direct labor is growing. That's certainly positive. That's the most profitable part, you know, of the business that we provide. And these software licenses are needed with this solution, but they generate very little gross margin and even negative net margin.

Speaker Change: come in future quarters there.

Speaker Change: Always, a certain amount of software licenses are a part of our solutions, and so...

Speaker Change: It's always a, you know, a component of that, if you will, so.

Speaker Change: Yeah, I think the good news is here, our core business and...

Speaker Change: You know, what we generate through direct labor is growing, that's certainly positive, that's the most profitable part.

Speaker Change: All of the business that we provide and the software licenses are needed with the solution, but they generate very little gross margin and even down margin.

Theodore S. Hanson: So, you know, but I think the positive thing for ECS here during the quarter was even though they were off a little bit on what their expectations were in licenses, they delivered all their EBITDA and a little bit more than that. That was what was expected during the quarter. And so, you know, I think you just have to expect a little bit of ebb and flow in the licensing business. Got it. Thank you.

Speaker Change: You know, but I think the positive thing for UCS here during the quarter, even though they were

Speaker Change: They were off a little bit on what their expectations were in licenses. They delivered all their EBITDA and a little bit more than was expected during the quarter. You just have to expect a little bit of ebb and flow in the license revenue.

Theodore S. Hanson: And then just for the follow-up, can you give any color on the sequential trends during the quarter and exit rates across your business? You know, coming through the first three weeks here in July, business is pretty steady. So, you know, I think we had a steady Q2 to Q1. We basically, here in the guide that Marie's given you, are looking for a similar steadiness in Q3 to Q2. What we saw during the first three weeks has been not marginally up or down for the first three weeks of July. So, you know, market conditions are not changing. They are what they are here. And so the numbers reflect that, if you will, not only quarter to quarter but even for the first few weeks.

Speaker Change: Got it. Thank you. And then just for the follow-up, can you give any color on the sequential trends during the quarter and exit rates across your business?

Speaker Change: You know, coming through the first three weeks here of July , business is pretty steady.

Speaker Change: So, you know, I think we...

Speaker Change: We have the study Q2 to Q1. We basically are here in the guide.

Marie: that Marie's given you. We're looking for a similar steadiness in Q3 to Q2.

Speaker Change: What we saw during the first three weeks has been

Speaker Change: Not marginally up or down for the first three weeks of July , so You know market conditions are not changing. They are what they are here And so the numbers reflect that if you will not only quarter quarter, but even for the first few weeks here

Speaker Change: Understood. Thank you so much.

Operator: Thank you. Our next question comes from the line of Trevor Romeo with William Blair. Please proceed with your question.

Speaker Change: Thank you. Our next question comes from the line of Trevor Romeo with William Blair. Please proceed with your question.

Trevor Romeo: Hi, good evening.

Trevor Romeo: Hi, good evening. Thanks for taking the questions. Um, first one I had was just on the

Trevor Romeo: Thanks for taking the questions. The first one I had was just on the commercial consulting bookings and the pipeline there. Just wondering if there are any trends you'd call out as far as the size and the scope of projects coming in and the weightings to renewals versus new project activity or any share you might be taking from competitors. And then, just finally, I guess, are there any forward-looking indications in your bookings that would suggest any of the kind of sluggishness or caution among clients could change as we move through the next few quarters?

Trevor Romeo: Commercial consulting bookings in the pipeline there, just wondering if there are kind of any trends you'd call out as far as the, you know, the size and the scope of projects coming in, and, you know, the weightings to renewals versus new project activity, or any share you might be taking from competitors. And then just finally, I guess.

Speaker Change: Are there any forward-looking indications in your bookings that would suggest any of the kind of sluggishness or caution among clients could change as we move through the next few quarters?

Theodore S. Hanson: Well, look, I'll let Rand take that one. I'll just pass it to him by saying, you know, well, 1.2 is a solid book to build on for commercial consulting. It's consistent with the past quarters in the trailing 12 months. You know, there's nothing in there that would portend anything that is better news, if you will, than what we've been seeing today in the future or worse. I think they're more of the same, right, Rand?

Speaker Change: Well, look, I'll let Rand take that one. I'll just pass it to him by saying, you know, well, 1.2 is a solid book to build for commercial consulting. It's consistent with the past quarters and the trailing 12 months.

Rand: You know, there's nothing in there that would portend anything that is better news, if you will, than what we've been seeing today in the future, or worse. I think they're more of the same, right Rand?

Randolph C. Blazer: Yeah, I think Trevor, a lot of questions there, but the size and shape of engagements are about the same as we've had. You heard about four of the engagements we cited in the text. There's some pretty meaty work there, more tending toward what we call AI or AI extended work, getting the data and data prep ready for AI, more AI inclusion.

Rand: Yeah, I think Trevor, a lot of questions there, but size and shape of engagements about the same as we've had. You heard about four of the engagements we cited in the text.

Speaker Change: There's some pretty meaty work there, more tending toward what we call AI or AI extended work, getting the data and data prep ready for AI, more AI inclusion. You know, I think it's steady as we go. Are we beating competitors?

Randolph C. Blazer: You know, I think as steady as we go, are we beating competitors? You know, we're watching the peer numbers the same as you are. And I think we're steady with them in the consulting world. The fact that we're sequentially up a little bit in the book to bill is pretty, you know, pretty solid. I think we feel good about it. And if you look at the nature of the work, and in fact, one of them is a three-year project that we're seeing, you know, obviously, any of that we see is good. And it helps us in the long term.

Speaker Change: You know, we're watching the peer numbers the same as you are, and I think we're steady to them in the consulting world. The fact that we're sequentially up a little bit in the book-to-bill is pretty surprising.

Speaker Change: You know pretty solid. I think we feel good about it And if you look at the nature of the work and in fact one of them is a three-year project That's we're seeing you know obviously any of that we see is good, and it helps us in the long term

Trevor Romeo: Trevor, that

Theodore S. Hanson: Yes, Rand, thank you. That was helpful, and thanks, Ted, too. Hey, Trevor, could I also add that we were facing a 26 percent growth comp in Q3 of 2023, so even though we're kind of flattish here on a year-over-year basis for the quarter in commercial consulting, we did see a couple points of sequential growth, and the comps are going to kind of change dramatically. They're going to drop down into single digits as we get into Q3 and Q4, so the picture there is changing, but the business is growing, and it's growing steadily, and yeah, we'll see what we get here.

Trevor Romeo: Trevor, does that give you color?

Trevor Romeo: Yes, Rand, thank you. That was helpful, and thanks, Ted, too. Hey, Trevor, could I also add that

Speaker Change: You know, we were facing a 26% growth comp in Q3 of 2023, so even though we're kind of flattish here on a year-over-year basis for the quarter in commercial consulting, we did see a couple points of sequential growth, and the comps are going to kind of change here dramatically. They're going to drop down into the single digits.

Speaker Change: As we get into Q3 and Q4, so the picture there is, you know, is changing here, but the business is growing, and it's growing steadily, and yeah, we'll see what we get here.

Theodore S. Hanson: Yep, I appreciate that. And you can see it in our margins, right? Gross margins as consulting increases. Right?

Speaker Change: Yep, appreciate that.

Speaker Change: And you can see it in our margins, right, gross margins.

Trevor Romeo: Right. Okay. Thank you both for that.

Speaker Change: As consulting increases.

Speaker Change: Thank you.

Speaker Change: Right. Okay. Thank you both for that. And then just maybe a quick follow-up on the assignment business. Is there any kind of way to parse out –

Trevor Romeo: Then maybe a quick follow-up on the assignment business. Is there any kind of way to parse out, you know, the performance between kind of the core IT and the more discretionary creative digital and perm businesses? I think we've heard from a few others in the industry about some incremental softness on the perm side. So just kind of curious how that's trended as a percentage of your revenue and how that's performed

Speaker Change: The performance between the core IT and the more discretionary creative digital and perm businesses. I think we heard from a few others in the industry about some incremental softness on the perm side, so just kind of curious how that's trended as a percentage of your revenue and how that's performed.

Theodore S. Hanson: Yeah. So term.

Speaker Change: [inaudible]

Theodore S. Hanson: The permanent percent of total revenue for the quarter was 2.5%, and honestly, that was pretty consistent with prior quarters.

Speaker Change: Permanent percent of total revenue for the quarter was 2.5%, and honestly that was pretty consistent with prior quarters.

Theodore S. Hanson: So, I wouldn't expect too much more than that. I think I've seen the same thing, so there's some reporting of a kind of softness in that number. Ours is already soft.

Speaker Change: So, I wouldn't expect too much more than that. I think I've seen the same thing, so there's some reporting of kind of softness in that number. Ours is already soft. It's gotten down to a historic low here.

Theodore S. Hanson: It's gotten down to a historic low here. You know, the sum of our creative digital marketing and our permanent placement business, which is predominantly made up of cyber coders, is still, you know, just under 10%, so you're not seeing a lot of change there. So, I would just say in the assignment business overall, Trevor, you're just seeing just a little bit of weakness, and our guide would imply just a little bit of weakness in those numbers going forward.

Speaker Change: You know the

Speaker Change: The sum of our creative digital marketing and our permanent placement business, which is predominantly cyber coders, is still...

Trevor Romeo: The assignment business overall, Trevor, you're just seeing a little bit of weakness. Our guide would imply just a little bit of weakness in those numbers going forward.

Trevor Romeo: Okay, understood. Thank you all for the color.

Operator: Thank you. Our next question comes from the line of Joseph Vafi with Canaccord. Please proceed with your question.

Trevor Romeo: Okay, understood. Thank you all for the color.

Speaker Change: Thank you. Our next question comes from the line of...

Speaker Change: Joseph Vafi with Canaccord, please proceed.

Joseph Anthony Vafi: Uh, guys, good afternoon. Um, like, nice to see just the, the steady results here. Just, you know, maybe, you know, we've seen some... You know, incremental pivot and enterprise spend, you know, kind of at least in software towards kind of AI-centric projects, and I know you're working on a lot of that stuff. Just kind of wondering how you're thinking about maybe some of your other service offerings here and maybe some commentary on, you know, steady funding, you know, in areas away from projects that have kind of an And then I'll have a quick follow up.

Joseph Anthony Vafi: Thank you. It was a pleasure.

Joseph Anthony Vafi: Hey guys, good afternoon. Like, nice to see just the steady results here. Just, you know, maybe, you know, we've seen some

Joseph Anthony Vafi: You know incremental pivot and enterprise spend You know kind of at least in software towards kind of AI centric projects And I know you're working on a lot of that stuff

Speaker Change: Just kind of wondering how you're thinking about maybe some of your other service offerings here and maybe some commentary of.

Speaker Change: you know, steady funding, you know, in areas away from projects that have kind of an AI kind of focus to them, and if, you know, if you're worried about sustaining that business. And then I'll have a quick follow-up.

Theodore S. Hanson: Yeah, so I'll let Rand take that one. Not a big ramp-up in spending, Joe, on AI, which may be distracting, if you will, from what I'll call core and normal IT spending. Randy, anything you'd add to that? No, no, I think, Kate, as you said.

Rand: Yeah, so I'll let Rand take that one. Not a big ramp up in spending, Joe, in AI, which may be distracting, if you will, from what I'll call core and normal IT spending. Rand, anything you'd add to that?

Randolph C. Blazer: No, no, I think Ted, as you said, is smart. You know, the clients are pretty good. Look, we've got good chips. You see the enterprise software guys, like ServiceNow, in today's report, where they're embedding more AI in their software. We obviously are astute and smart about that capability and can help clients bring it to their businesses. The same is true with Microsoft, and those were some of the case studies we featured. So Joe, I would say a lot of our work is, as Ted said in his remarks, preparation work for further AI use cases, which are still being thought through.

Rand: No, no, I think Ted, as you said, parks.

Rand: You know the clients are pretty good. Look, we've got good chips.

Speaker Change: You see the enterprise software guys, like ServiceNow, today's report, where they're embedding more for AI in their software. We obviously are students, smart on that capability, can help clients.

Speaker Change: bring it to their businesses. The same is true with Microsoft and those were some of the case studies we featured. So, Joe, I would say a lot of our work

Joe: is, as Ted said in his remarks, prep work.

Joe: for further AI use cases, which are still being thought through, but all of this is going to contribute toward greater, if you will, enterprise efficiency around these big software products.

Randolph C. Blazer: But all of this is going to contribute toward greater, if you will, enterprise efficiency around these big software products. And then the individual projects will come after that, you know, when they begin to translate that into, you know, a very operating-specific need or problem. That's being put on the table for now. It's really dealing with their enterprise systems, which again, whether it's Salesforce, ServiceNow, the ERP systems, financial systems, Microsoft, Google, they're all cloud providers. They're all busy embedding the capability needed in their software, and now it's our job to help the client take advantage of that.

Joe: And then the individual projects will come after that, you know, when they begin to translate that into...

Joe: a very operating specific need or problem. That's being put on the table for now.

Joe: It's really dealing with their enterprise systems, which again, whether it's Salesforce, ServiceNow, the ERP systems, financial systems, Microsoft, Google, they're all cloud providers. They're all busily embedding the capability needed in their software. And now it's our job to help the client take advantage of that.

Randolph C. Blazer: Okay. Bye. everybody.

Theodore S. Hanson: Sorry about that, Kev. I was on mute. Yeah, sorry about that. I was on mute.

Speaker Change: Okay, everybody

Joseph Anthony Vafi: Just, and then, thanks for that, Rand. Much appreciated. And then, just on, and then maybe any incremental update you might have on Mexico delivery, you know, in terms of headcount, you know, additional client volumes, you know, how you're kind of thinking about that. Is there any kind of, you know, update for us there? Thanks very much.

Speaker Change: Sorry about that. I was on mute. Yeah, sorry about that. I was on mute. Justin, thanks for that, Rand. Much appreciated.

Speaker Change: Just on and then maybe any incremental update you might have on Mexico delivery You know in terms of headcount, you know additional client volumes, you know

Speaker Change: how you're kind of thinking that. Is there any kind of, you know, update for us there? Thanks very much.

Theodore S. Hanson: So not a lot of change quarter to quarter there, Joe. Headcounts kind of remained where they were.

Rand: So not a lot of change quarter to quarter there, Joe. Headcounts kind of remained where they were. Utilization, very high.

Speaker Change: We mentioned some work in the script that was actually assigned to our Mexico Delivery Center. They're very focused on development of some of the things that Ray just talked about right now.

Theodore S. Hanson: Utilization is very high. We mentioned some work in the script that was actually assigned to our Mexico Delivery Center. They're very focused on the development of some of the things that Ray just talked about right now in the AI enhanced area, especially in the data world. So it continues to be a good story, but I wouldn't say there's been a lot of change here from last quarter to this quarter.

Speaker Change: You know, in the AI enhanced area, especially in the data world, so, you know, it continues to be a good story, but I wouldn't say there's been a lot of change here from last quarter to this quarter.

Joseph Anthony Vafi: Got it. And then maybe I'll just sneak one in on cash flow for the year. Maybe, Marie, if you've got some commentary of kind of where we are, if there's any kind of puts and takes we should be thinking about, kind of relative to kind of a normalized model on the free cash flow generation for the year. Thanks a lot.

Speaker Change: Got it. And then maybe I just sneak one in on cash flow for the year, maybe, Marie, if you've got some commentary of kind of where we are, if there's any kind of puts and takes we should be thinking about kind of relative to kind of a normalized model on free cash flow generation for the year. Thanks a lot.

Marie L. Perry: Absolutely, Joe. So, our cash flow for the quarter was approximately $85 million. The conversion rate to EBITDA was 73%. More traditionally, it's like 60% to 65%, and so it was a little north of that, but it was really related this quarter to fluxes in working capital, so we would probably anticipate kind of some of that, more that target, that 60% to 65%.

Marie: Absolutely, Joe. So, our cash flow for the quarter was approximately $85 million. The conversion rate to EBITDA was 73%.

Speaker Change: More traditionally, it's like 60 to 65 percent, and so it was a little north of that, but that was related this quarter to fluxes in working capital, so we would probably anticipate more that target, that 60 to 65.

Joseph Anthony Vafi: Great. Thanks very much, guys.

Operator: Thank you. Our next question comes from the line of Heather Balsky with Bank of America. Please proceed with your question.

Speaker Change: Great, thanks very much, guys.

Speaker Change: Thank you. Our next question comes from the line of Heather Balsky with Bank of America. Please proceed with your question.

Emily Marzo: Hi, this is Emily Marzo on behalf of Heather Balsky. Thank you for taking the question. I was wondering if you could touch on federal really quick.

Speaker Change: Hi, this is Emily Marzo on for Heather Balsky. Thank you for taking the question. I'm wondering if you could touch on

Emily Marzo: And I realize it came in a little bit softer than expected. Book-to-bill was a little bit lower, and ITIQ came in late. What's going on here? How should we think about this? Are projects being delayed, or is it more bureaucratic idiosyncrasies?

Emily Marzo: on Federal really quick, and realized it came in a little bit softer than I expected. Book-to-bill was a little bit lower, and ITIQ came in late. What's going on here? How should we think about this? Are projects being delayed, or is it more bureaucratic video sequences?

Theodore S. Hanson: Look, like I said earlier on the licenses, we were about $10 million off the midpoint of our range for the quarter. Our commercial units delivered at or slightly above what we said.

Emily Marzo: To

Speaker Change: Look, like I said earlier on the licenses, we were about $10 million off the midpoint of our range for the quarter, our commercial units delivered at or slightly above what we said. So that's kind of the delta, if you will, that we were light.

Theodore S. Hanson: So that's kind of the delta, if you will, that we were in the software license area for the quarter. It didn't affect EBITDA. It was just purely an impact on revenues, which will ebb and flow a little bit.

Speaker Change: In the software license area for the quarter, it didn't affect EBITDA, it was just...

Speaker Change: that wasn't really having purely an impact on revenue that'll come and that'll even flow a little bit. Bookings during the quarter were below our expectations but we noted in the first three weeks here in July that we're really seeing some

Theodore S. Hanson: Bookings during the quarter were below our expectations, but we noted in the first three weeks here in July that we're really seeing the velocity pick up and some awards being made. Q2 wasn't about lost business, if you will. We just, you know, I think everyone's pursuing certain work, and it's getting adjudicated at different times. Q2 was not our moment. We didn't have a lot of stuff that was won or lost. It was just pushed off to the right a little bit.

Speaker Change: Q2 wasn't about lost business, if you will, we just, you know, I think everyone's

Speaker Change: pursuing certain work and it's getting adjudicated at different times. Q-Tube was not our moment. We didn't have a lot of stuff that was

Theodore S. Hanson: But the good news is we see a good start here in the third quarter, you know, just in the first three weeks. And so, you know, it portends that we'll get through some stuff here from a booking standpoint. So we're expecting a good booking quarter here in Q3.

Speaker Change: One award lost, it was just pushed off to the right a little bit, but the good news is, we see a good start here in the third quarter, you know, just in the first three weeks, and so, you know, it portends that we'll get through some stuff here from a booking standpoint. So we're expecting a good bookings quarter here in Q3.

Emily Marzo: Thank you. And if I could ask a follow-up on how you see the M&A environment and if you've seen any changes in the challenges in the environment, or if it's pretty steady now. Now, I think the same things that are

Speaker Change: Thank you, and if I could ask a follow-up on how you see the M&A environment, and if you've seen any changes in the challenges in the environment, or if it's pretty steady?

Theodore S. Hanson: No, I think the same things that are affecting the M&A environment remain the same. It's spending, so the targets aren't feeling great about their numbers. We're questioning their numbers. You've got higher interest rates, so the hurdle rates are higher on what returns need to be in order to support certain multiples, so you have a discount within multiples.

Speaker Change: No, I think the same things that are affecting the M&A environment remain the same.

Speaker Change: It's you know spending so the targets aren't feeling great about their numbers. We're questioning their numbers

Speaker Change: You've got higher interest rates. So the hurdle rates are higher on what returns need to be in order to support certain multiples. So you have a discount there within multiples.

Theodore S. Hanson: And I think for now, still, founders or private equity firms that want to sell their businesses have decided to batten down the hatches here and have some, you know, can sustain this for a little bit longer, so there's really no new news there, if you will. I mean, we clearly know what we are doing. I want to add by acquisition. We're monitoring those companies that we've identified that bring certain solution capabilities that we're going to acquire in the future.

Speaker Change: And I think for now, still, you know, founders or private equity firms that want to sell their businesses have decided to batten down the hatches here and have some...

Speaker Change: You know, can sustain this for a little bit longer. So, there's really no new news there, if you will. I mean, we clearly know what we...

Speaker Change: I want to add by acquisition we're monitoring those companies that we've identified that bring certain solution capabilities that we're going to acquire in the future. We're building relationships with the

Theodore S. Hanson: We're building relationships with the principals of those organizations. So we're acquisition ready for sure, Eileen, and have the balance sheet to do it. It's just we need the right environment here. We need that to improve a little bit so that things can come together.

Speaker Change: We're acquisition ready, for sure, Eileen, and have the balance sheet to do it. It's just we need the right environment here. We need that to improve a little bit so that things can come together.

Operator: Thank you. Our next question comes from the line of Surinder Thind with Jeffrey's. Please proceed with your question.

Eileen: Thank you.

Eileen: Thank you. Our next question comes from the line of Surinder Thind with Jeffrey's. Please proceed with your question.

Surinder Singh Thind: Thank you. When I think about just the last few quarters and some of the trends, I think the general high-level commentary has been that not a lot has really changed. So when I look back over that, is that another way to characterize that maybe things are troughing at this point or just any color from client conversations about what's holding them back versus maybe what would get them to spend a little bit?

Surinder Singh Thind: Thank you. When I think about just the last few quarters and some of the trends, I think the general high-level commentary has been that not a lot has really changed.

Surinder Singh Thind: So when I look back over that, is that another way to characterize that maybe things are troughing at this point or just any color from client conversations in what's holding them back versus maybe what would get them to spend a little bit more?

Randolph C. Blazer: So I'll let Rand take the second half of that on client trends and conversations, but our number surrender would tell you that things are flat. It almost looks like the first half of a bathtub, if you will.

Rand: So let Rand take the second half of that on client trends and conversations, but our numbers to Render would tell you that things...

Rand: are flat. It almost looks like the first...

Rand: half of a bathtub, if you will, you know, we've

Rand: If you go back into the middle part of last year...

Rand: You know, revenue growth was decelerating and then not growing.

Rand: We got into the third to the fourth quarter and things kind of flattened out.

Theodore S. Hanson: You know, if you go back into the middle part of last year, revenue growth was decelerating and then not growing. We got into the third to the fourth quarter, and things kind of flattened out. We had kind of a seasonably normal opening to the year in the first quarter, where we took a slight step down, and things have just been flat here, first to second and second to third on a day adjusted basis, if you will.

Rand: We had kind of a seasonal, seasonably normal.

Rand: Opening to the year in the first quarter where we take a slight step down, and things have just been flat here, first to second and second to third on a day-adjusted basis, if you will.

Theodore S. Hanson: And I would say that's not even true for the whole business, but it's certainly true for the units individually. So there's not much change there. So if you want to call that a trough, I'd say it looks like a bathtub, if you will.

Rand: And I would say that's not even, is that true for the whole business, but it's certainly true for the units individually.

Rand: There's not much change there, so if you want to call that a trough, I'd say it looks like a bathtub, if you will, and we're wondering, you know, do we get a slope up from here and when that is, but obviously there are things here in the macro that need to improve.

Randolph C. Blazer: And we're wondering, you know, do we get a slope up from here and when that will be? But obviously, there are things here in the macro that need to improve. Rand, on the client budget and conversation side?

Rand: Rand on the client budget and conversation side.

Randolph C. Blazer: I think the best way to characterize the conversations is that there are two levels of conversations. The first is questions our clients have within their businesses about what's the roadmap for AI, what are the things I need to do, what's the best practice in the industry, what's working, what's not, where should we be going and thinking about it. The second question, and it's part of that question, is what are the things we need to do to be ready to go and implement the capability we're seeing from the software vendors, the enterprise vendors, as well as our own needs?

Speaker Change: I think the best way to characterize the conversations are there's two levels of conversations.

Randolph C. Blazer: The second level of questions is, I've got some individual projects we just can't stop on. We just need to keep moving. You read about, you heard about four of them in our text. And when those projects, particularly when they're affecting security, when they're, you know, when they're instrumental to what maybe I would call a longer-term path, they're acting on it. At least what we see.

Speaker Change: The first is...

Speaker Change: Questions our clients have within their businesses for what's the road map for AI, what are the things I need to do, what's the best practice in industry, what's working, what's not.

Randolph C. Blazer: But I wouldn't say overall they're going full force because of the nature of the first set of questions. Still a lot of questions in building the roadmap as to where we're really going as a business. I think ISG, Ted mentioned ISG in his opening remarks, they've said the same thing.

Speaker Change: Where should we be going and thinking about it? The second question is, and part of that question is, what are the things we need to do to be ready to go and implement the capability we're seeing in the software vendors, the enterprise vendors, as well as our own needs?

Speaker Change: The second level of questions are, I've got some individual projects we just can't stop on. We just need to keep moving. You read about, you heard about four of them in our text.

Speaker Change: When those projects, particularly when they're affecting security, when they're you know, when they're instrumental to what maybe I would call longer-term path, they're acting on it, at least what we see. But I wouldn't say overall they're going full force because the nature of the first set of questions.

Speaker Change: Still a lot of questions in building the roadmap as to where we're really going as a business. I think ISG, Ted mentioned ISG in his opening remarks. They've said the same thing. They had a certain outlook for when they thought things would take root, but I think

Randolph C. Blazer: They had a certain outlook for when they thought things would take root, but I think our conversations reflect that thinking. Some things have to get going, and we're doing them, and you've read about those. And other than that, it's a question of really laying out a roadmap for the future based on what really is working. Listen, there's a lot of change. Every day, the software enterprise vendors are touting new capability, new investment in AI capability, the fabric capability in Microsoft, for example, which is relatively new. And they're all trying to take hold of that and say, how does this piece together into a true roadmap? So I think the fact that the Quest clients are still there is indicative that they're

Speaker Change: Our conversations reflect that thinking. Some things have to get going, and we're doing them.

Speaker Change: And you read about those.

Speaker Change: And other than that, it's a question of really laying out a roadmap for the future based on what really is working. Listen, there's a lot of change. Every day, the software enterprise vendors are touting new capability, new investment in AI capability.

Speaker Change: The fabric capability in Microsoft, for example, which is relatively new, and it's, you know, they're all trying to take hold of that and say, how does this piece together into a true roadmap? So I think the fact that the Quest clients are still there is indicative that they're not going full force yet.

Surinder Singh Thind: Yeah, that does it. I mean, I appreciate the color there.

Speaker Change: That's helpful. Yeah.

Surinder Singh Thind: And then when we think about more the near term and where clients are, in terms of just Mexico delivery, how should we think about the booking numbers? Is there increased demand or requests for resources out of Mexico at this point? How should we think about that as a percentage of bookings or just other colors that you can provide?

Speaker Change: Yeah, that does it. I mean, I appreciate the color there.

Speaker Change: And then when we think about...

Speaker Change: more the near term and where clients, in terms of just Mexico delivery.

Speaker Change: How should we think about the bookings numbers? Is there increased demand or request for resources out of Mexico at this point? How should we think about that as a percentage of bookings or just other color that you can provide?

Theodore S. Hanson: Yeah, so we don't segment bookings by the Mexico Delivery Center, Surinder. The Mexico Delivery Center is working on U.S.-based projects and commercial consulting, so when we give it to you for commercial consulting, that includes that group of delivery professionals, if you will. But, you know, demand remains high because clients are really focused on total cost of ownership, and so now more than ever, you know, they're looking at the mix of resources and the price points of those resources, and, you know, that's a positive, if you will, for us.

Speaker Change: Yeah, so we don't segment bookings by the Mexico Delivery Center, Surinder. The Mexico Delivery Center are working on U.S.-based projects and commercial consulting. So when we give it to you for commercial consulting,

Speaker Change: That includes that group of delivery professionals, if you will. But, you know, demand remains high because clients are really focused on total cost of ownership. And so, now more than ever,

Speaker Change: You know, they're looking at the mix of resources and the price points of those resources, and

Speaker Change: You know, that's a...

Theodore S. Hanson: Clients, many times, would rather access that as an alternative to offshore. They're still sending stuff offshore, but they get a lot of advantages here with the nearshore, whether it's communication, really good technical capabilities, and the same time zone. So, you know, we think this is something that's going to continue to grow for us, and sometimes the client knows that the team in Mexico is deployed on a certain project, and they've asked for it and, you know, received the benefits that just went through. Other times, we mix them in as just a part of the project team, and that's up to us in terms of how we, you know, put the project team together and execute the

Speaker Change: You know, that's a positive, if you will, for us.

Speaker Change: Clients, many times, would rather access that as an alternative to offshore. They're still sending stuff offshore, but they get a lot of those advantages here with the near shore, whether it's communication, really good technical capabilities, same time zone.

Speaker Change: So, you know, we think.

Speaker Change: This is something that's going to continue to build for us.

Speaker Change: And sometimes the client knows that that team in Mexico is deployed.

Speaker Change: on a certain project, and they've asked for it and, you know, received the benefits that just went through. Other times, we mix them in as just a part of the project team, and that's up to us in terms of how we, you know, put the project team together and execute the work.

Randolph C. Blazer: Hey Ted, could I add also a little bit that Mexico's doing great and we've got it very involved in certain technologies like Copilot, GitHub, and Fabric. We've also begun, as Ted mentioned, this past quarter to build up a little bit of an Indian offshore capability and the expertise there really around ServiceNow and AI insertion on the ServiceNow platform, which is also building and adding headcount. So to us, we're beginning to build a multi-dimensional offshore, near shore capability that's in the benefit of our client, but it's very much tied to the technology that we can build in each of those locations. So I just didn't want to ignore the Indian piece on this, okay?

Randolph C. Blazer: He said, "Could I have...

Speaker Change: He said, can I add also a little bit that...

Speaker Change: Mexico's doing great, and we've got it very involved in certain technologies like Copilot, GitHub, Fabric. We've also begun, I think Ted's mentioned, past quarter to build up a little bit of an Indian offshore capability.

Speaker Change: and the expertise there really around ServiceNow and AI Insertion and ServiceNow Platform.

Speaker Change: which is also building and adding headcounts.

Speaker Change: To us, we're beginning to build a multidimensional offshore-nearshore capability that's in benefit of our client, but it's very much tied to the technology that we can build in each of those locations. So, I just didn't want to ignore the Indian piece on this, okay?

Speaker Change: Thank you.

Operator: Thank you. Our next question comes from the line of Tobey Sommer with Chewist Securities; please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Tobey Sommer.

Speaker Change: [inaudible]

Tobey O'Brien Sommer: Thanks. On the government consulting business, is there anything you're changing in the way you manage that? And I ask in the context of the book to bill kind of being stubbornly below. And I understand you exclude IDIQs, and maybe this is picking up this quarter, but it's a seasonally strong quarter for forecasting, revenue licensing. Any changes there internally that you think are gonna improve your sort of predictability of that business?

Speaker Change: Please proceed with your questions.

Speaker Change: and others.

Tobey O'Brien Sommer: Thanks. On the government consulting business, anything you're changing in the way you manage that, and I ask in the context of the

Tobey O'Brien Sommer: The book to bill kind of being stubbornly below and I understand you exclude IDIQs and maybe this is picking up this quarter, but it's a seasonally strong quarter and

Speaker Change: The forecasting, the revenue licensing, any changes there internally that you think are going to improve your sort of the predictability of that business?

Theodore S. Hanson: Well, look, Toby, we're always adding resources to the team where we think they need to be added. If we see a performance issue, we're addressing it. So that's always been the case. I don't think that there's any kind of change there.

Speaker Change: Well, look, Toby, we're always adding resources to the team where we think they need to be added. If we see a performance issue, we're addressing it. So that's always been the case. I don't think that there's any kind of change there. I mean, look, I think we're really well positioned on some of these opportunities.

Speaker Change: We just need for them to get adjudicated and we agree with you, it's been, you know, the book to build there, it's been stubbornly low, but, you know, I won't dismiss the backdrop here has been, you know, kind of stubborn to deal with, if you will.

Theodore S. Hanson: I mean, look, I think we're really well-positioned on some of these opportunities. We just need them to be adjudicated. And we agree with you, it's been, you know, the book to build there has been stubbornly low. But, you know, I won't dismiss the backdrop here, which has been, you know, kind of stubborn to deal with, if you will. And so the, you know, the pieces around the government contracting offices not working as quickly as they once did, the trend towards putting large amounts of work together on IDIQ so that the government customer can get them out there and avoid, you know, along and, you know, difficult, a long and difficult, what's the word I'm looking for, protest period.

Speaker Change: You know, the pieces around the government contracting offices not working as quickly as they once did.

Speaker Change: The trend towards putting these large amounts of work together on IDIQ so that the government customer can get them out there and avoid a long and difficult process.

Speaker Change: A long and difficult, what's the word I'm looking for, protest period, you know, so, you know, there are things that are going on in that market that are a little bit of a headwind, but still, we're winning our, our work and we're pleased to see that we're going to get.

Theodore S. Hanson: So, you know, there are things that are going on in that market that are a little bit of a headwind, but we're still winning our work, and we're pleased to see that we're going to get, you know, some things done here early in July that are already kind of hit landing, and we're looking forward to getting press releases out on those things. It's a little bit too soon now, but they'll be coming. So, you know, I think we feel good about this quarter, and we're going to have a good bookings quarter.

Speaker Change: You know, some things done here early in July that are already kind of hit landing, and we're looking forward to getting press releases out on those things. It's a little bit too soon now, but they'll be coming. So, you know, I think we feel good about this quarter, and we're going to have a good bookings quarter.

Tobey O'Brien Sommer: Two follow-ups for me on another part of the business. In the assignment business... What's this esprit de corps like? It's a lot of pretty long string of consecutive quarters of sequential decline, and then separately, but also on the assignment business, if we were to see an uptick in demand. How much capacity do you have, recruiting and sales capacity, to generate growth before you have to hire an earner? Right, well...

Speaker Change: Two follow-ups for me on another part of the business. In the assignment business, what's the esprit de corps like? It's a lot of pretty long...

Speaker Change: string of consecutive quarters of sequential decline and then separately but also on the assignment business, if we were to see an uptick in demand

Speaker Change: How much capacity do you have, recruiting and sales capacity, to generate growth before you have to hire in earnest?

Theodore S. Hanson: Right. Well, look, this has been a long and protracted downturn. There's no doubt about it. And I'd say it's worn on the team, and the team, I say all of us, you know, it's worn on all of us. At the same time, this group has more fighting and stick-to-itiveness and is in it to help their customers win, whether the business is at its highest point today or not.

Speaker Change: Well, look, this has been a long and protracted downturn, there's no doubt about it. And I'd say it's wearing on the, it is worn on the team.

Speaker Change: The team, I say all of us, you know, was worn on all of us. At the same time, this group has more fight and stick-to-it-iveness.

Speaker Change: and are in it to help their customer win, whether the business is at its highest point today or not.

Theodore S. Hanson: And we talk a lot around here about, you know, most of the time, you're not doing your best work the moment that revenue or EBITDA is at its highest point because that's just a reflection of everything you did when you were in the more difficult times, which is now. So I think everyone's got their heads on right.

Speaker Change: And we talk a lot around here about...

Speaker Change: You know, most of the time, you're not doing your best work the moment that that revenue or EBITDA is at its highest point.

Speaker Change: because that's just a reflection of everything you did when you were in the more difficult times, which is now.

Theodore S. Hanson: Everybody's in it for their client and for each other. The amount of work, even though the revenue picture may not be there, and the relationship building and the execution for clients are very strong. You know, and we have capacity, Toby. I think, look, we're kind of letting our head count ebb down naturally in places where we don't think the demand picture is there. Right now, but we're leaving enough of it in place that we're maintaining great relationships with these clients, that we know exactly what's going on, that we know where their heads are in terms of when they'll be spending, to the extent we can understand that, and when it ticks up, we have capacity.

Speaker Change: So I think everyone's got their head on right, everybody's in it for their client and for each other. The amount of work, even though the revenue picture may not be there, and the relationship building and the execution for clients is very strong.

Speaker Change: You know, and we have capacity, Tobey, I think.

Tobey O'Brien Sommer: Look, we're kind of letting our head count down naturally.

Tobey O'Brien Sommer: In places where we don't think the demand picture is there right now, but we're leaving enough of it in place that we're maintaining great relationships with these clients, that we know exactly what's going on.

Tobey O'Brien Sommer: that we know where their head is in terms of when they'll be spending.

Tobey O'Brien Sommer: To the extent we can understand that.

Tobey O'Brien Sommer: And when it ticks up, we have capacity. Now, when would we have to add? Well, that's a...

Tobey O'Brien Sommer: That's a question that needs a crystal ball, because we'd have to know how...

Tobey O'Brien Sommer: You know, what's the slope up in...

Tobey O'Brien Sommer: the velocity of that. But we do believe we're kind of picking the right spot here as we let our model work, if you will, but also make sure we're there for clients because that's critical when the...

Theodore S. Hanson: When the spending comes, we are the first and fastest way that clients can engage with more effort and intensity on their IT projects, and we need to be ready for that, and we are, and our next

Tobey O'Brien Sommer: You know, spending comes, we are the first and fastest way that clients can engage with more effort and intensity on their IT projects, and we need to be ready for that, and we are.

Theodore S. Hanson: Thank you. And our next question comes from the line of Margaret Nolan. Mark Marcon said, Hi, this is Allison for Mark.

Speaker Change: Thank you. And our next question comes from the line of Mark Marcon with Baird. Please proceed with your question.

Allison: Hi, this is Allison from Mark. First off, I was just looking at the margins, and obviously you've had some decline in federal and some, you know, increase otherwise, and I was just kind of wondering if we could get some more color on that, as well as some key drivers with that.

Mark Steven Marcon: Yeah, margins are steady sequentially here, but year over year, there's a little bit of a decline in margins. Now, really, what's going on. The primary driver of that is business mix. So, you're seeing a lower contribution from some of our higher margin units, which is our creative digital marketing service, our permanent placement services, and you're seeing Federal, which is our lower EBITDA margin business, do a better job of maintaining and growing revenues here in the first half versus the mix last year. And so all of that is the primary driver, if you will, of how the EBITDA margin is moving.

Speaker Change: Margins.

Speaker Change: Yeah, margins are steady sequentially here, but year over year, there's a little bit of decline in margins.

Speaker Change: Now, really, what's going on, the primary driver of that is business mix.

Speaker Change: So, you're seeing a lower contribution of some of our higher margin units, which is our creative digital marketing service, our permanent placement services.

Speaker Change: And you're seeing federal, which is our lower EBITDA margin of business, you know, do a better job of maintaining and growing revenues here in the first half versus the mix last year. And so all of that is the primary driver, if you will, of how the EBITDA margin is moving around.

Speaker Change: Okay, thanks. And then, really quickly, I was just kind of wondering, you know, looking forward a little bit farther, we have an election year coming up, and we were kind of wondering where you think the election would take IT and federal spending going forward.

Theodore S. Hanson: Yeah, well, look, I don't think it matters to us so much about who's in office. I mean, that's a political question for another conversation.

Speaker Change: Yeah, well look, I think it doesn't, I don't think it matters to us so much about who's in office. I mean, that's a political question for another conversation, but I think the criticality around

Speaker Change #100: Spending on IT for big corporate enterprise and government agencies to accomplish their strategic initiatives that all involve IT in one shape or form of another is very strong. It's the spending's not there on it yet, but it's very strong.

Theodore S. Hanson: But I think the criticality around spending on IT for big corporate enterprises and government agencies to accomplish their strategic initiatives that all involve IT in one shape or form of another is very strong. The spending's not there on it yet, but it's very strong. So I think the most important thing is getting the election behind us so that the uncertainty of who's going to be in office is not a part of the headlines every day and the second guessing that goes along with that.

Speaker Change #100: So, I think the most important thing is getting the election behind us so that the uncertainty of who's going to be in office is

Speaker Change #100: is not a part of the headlines every day, and the second guessing that goes along with that.

Theodore S. Hanson: And once we get that, I think, behind us, then, hopefully, we get, you know, a little bit better interest rate environment here, and you get, most importantly, from all that, more business confidence where our customers feel like they understand what the environment looks like and where it's going. Then they will begin to return to more normal levels of IT spending, and that's what drives our business.

Speaker Change #100: And once we get that, I think, behind us, then...

Speaker Change #100: You know, hopefully we get, you know, a little bit better interest rate environment here and you get, most importantly, from all that, more business confidence where our customers

Speaker Change #100: feel like they understand what the environment looks like and where it's going, then they will begin to return to more normal levels of IT spending and that's what drives our business.

Speaker Change #101: Okay, thank you.

Theodore S. Hanson: And we have reached the end of the question and answer session. I'll now turn the call back over to Ted Hanson for closing remarks.

Speaker Change #102: Thank you.

Speaker Change #102: And we have reached the end of the question and answer session. I'll now turn the call back over to Ted Hanson for closing remarks.

Theodore S. Hanson: Well, just wanted to say thank you to everyone, for your attention today, and for your questions on ASCN, and we look forward to reporting our third quarter here in another 90 days.

Theodore S. Hanson: Well just wanted to say thank you for everyone your attention today and your questions on ASGN and we look forward to reporting our third quarter here in another 90 days. Be well.

Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Theodore S. Hanson: [inaudible]

Theodore S. Hanson: ?? ??