Q1 2025 ASGN Inc Earnings Call
Speaker Change: Greetings and welcome to the ASGN Incorporated, first quarter 2025 earnings conference call. At this time all participants are in a listen on the mode. A question and answer session will follow the formal presentation.
Speaker Change: If anyone should acquire Alberta assistance, please verse 3-0 on your telephone keybed. As a reminder, this conference is being recorded. It is not my pleasure to introduce your host, Kimberly Esterkin, the Vice President of Invest Relations. Thank you, you may begin.
Speaker Change: Good afternoon. Thank you for joining us today for ASGN's First Quarter 2025 Conference Call.
Speaker Change: With me, Artette Hanson, Chief Executive Officer, Shiv Eyer, President, Marie Perry, Chief Financial Officer, and Rand Blazer, Executive Vice Chairman Theodore Hanson, Chief Executive Officer, Shiv Eyer,
Speaker Change: Before we get started, I would like to remind everyone that our commentary contains four-looking 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: Please also note that on this call, we will be referencing certain non-GAAP measures , such as Adjustity Bada, Adjusted Net Income, and Precash Flow.
Speaker Change: These non-GAAP measures are intended to supplement the comparable GAAP measures where conciliations between gap and non-GAAP measures are included in today's press release
Speaker Change: I will now turn the call over to Ted Hanson, Chief Executive Officer
Ted Hanson: Thank you, Kim, and thank you for joining ASTN's first quarter 2025 earnings call.
Ted Hanson: It's him noted, I'm pleased to welcome our new president, Chiv I, to his very first ASTN earnings fault. Chiv will make some brief remarks at the close and join us for the Q&A session.
Ted Hanson: Despite macro uncertainty, revenues of 968.3 million, and adjusted EBITDA Marchion at 9.7% were in line with our guidance expectations for the quarter.
Ted Hanson: We continue to deliver solutions that cater to our clients' IT modernization, efficiency, and cost-containment requirements, leading to strong, quarterly bookings for both our commercial and government settings.
Ted Hanson: RIT Consulting Revenues also grew reaching roughly 61% of total revenues for the first quarter up from 57% in the prior year period.
Ted Hanson: As I noted last quarter, we entered the year with a renewed sense of business optimism from our client base. Disimprovement and confidence faded as the quarter progressed, the clients remained cautious about increasing their IT spending.
Ted Hanson: Nonetheless, HTN's unique business model demonstrates resilience across economic cycles, primarily due to our business stabilizers that support our gross margin, along with our variable cost structure which aims in safeguarding our operating leverage.
Ted Hanson: Further, our business model also provides flexible, unsure and near-short teams that help reduce our clients' costs while maintaining commitment to providing high-value IT services.
Ted Hanson: Speaking of providing high value services in March, we successfully closed our acquisition of top blocks, a preferred started by the Workday Services Partner, and recently named Workday Business Impact Partner of the Year.
Ted Hanson: The integration of top block is going well, and in the short period of time since the acquisition closed, our apex and top block teams have already partnered on a number of new consulting opportunities.
Ted Hanson: Importantly, Todd Block is tracking ahead of our bookings revenue and adjust to the bidot I expect
Iyer,
While market conditions remain bowled.
We are confident that nurturing our long-stated client relationships [inaudible]
Ted Hanson: Expanding our technology partnerships and enhancing our solution capabilities organically and through strategic acquisitions like top lot, we will position ASTN favorably for the future.
Ted Hanson: So, let me provide some examples of our differentiated IT solution capabilities and discuss our segment performance for the first quarter of the getting with commercial.
Our Commercial Segment Services, Fortune 1,000, and Lawrence-Mid-Fargett Companies
Ted Hanson: Revenues for this segment were again driven by growth in our consulting business which can prove 4.7% every year.
Ted Hanson: Consulting blockings of $336.9 million, improved 4.2% as compared to the first quarter of 2024 and put our book to bill at 1.2 times for the quarter and 1.1 times on a trailing 12 months basic.
Ted Hanson: From an industry perspective we saw rise in our consumer and industrial vertical, which improved mid-single digits every year.
Ted Hanson: Improvement in this article was driven by double-digit growth in materials, utilities, and consumer discretionary counts along with mid-single-digit growth and industrial
Ted Hanson: While revenues for the remaining four commercial verticals were down year-to-year, without our health air vertical, pharmaceutical and biotech accounts were up, less single digits as compared to the first quarter of 2024.
Within our TMT Vertical e-commerce accounts, we're up this team to year-over-year
Ted Hanson: Finally, within the financial services vertical, the first five financials saw mid single digit threads in regional banks saw slight threads as compared to the first quarter of 2024.
Ted Hanson: Although financial services industry is one of the highest vendors on IT, macroeconomic factors such as higher inflation and uncertainty regarding tariffs had driven cautiousness to spend on new projects across the banking sector.
Ted Hanson: Despite these headliners, our differentiated IT solutions remain into May and Byron Diverse, US Bates Fortune 1000 clients.
Ted Hanson: Consulting engagements for the quarter focused on AI and data solutions, GNAI, Cybersecurity Cloud and Digital Engineering with projects specifically aimed at permitting cost savings and efficiency
Let me provide a few examples.
Ted Hanson: For Fortune 200 consumer and industrial clients, in the process of modernizing their supply chains, our industry and tentacle leaders are helping develop and operational as a data and A.S. threat.
Ted Hanson: We are providing a near-short team of consultants to support the implementation for client supply chain optimization solutions, using Informatica's Cloud Native and AI Augmented platform to support data and machine learning operations.
Ted Hanson: Although enterprise-wide applications of GNI are still to come, we continue to see AI missions like this that focus on high-impact use cases to improve efficiency, reduce cost, and provide deeper data insights.
Ted Hanson: In another example for a large health services company, we help build a scalable, secure, and efficient identity and access management platform that supports our client's growth, compliance, and evolving business needs.
by migrating to a new IAM platform.
Ted Hanson: Our client will be able to better manage data controls that provide appropriate access and governance across their organization.
Ted Hanson: Our scope of work encompasses the application and integration basis of the new IAM platform, including integration across hundreds of different applications while optimizing workflows and performing very testing and validation.
Ted Hanson: Through innovative optimization techniques with the enhanced automation, risk management, and user experience for our point.
Ted Hanson: Improving data processing while at the same time driving efficiency and cost savings remain top priorities across our client base.
Ted Hanson: For a Fortune 100 oil and gas client, for example, we successfully implemented the Databricks Unity catalog, the unified governance solution.
Ted Hanson: To Optimize and Compute Resources, And Negally Processing Times, And Significantly Reduced Our Clients Databricks Costs
Ted Hanson: Driving Innovation and Automation on Cloud-based platforms is also a high debate. In the first quarter we collaborated with the US Bank and clients to create a cloud-first automation framework, integrating APIs and modern engineering practices.
Ted Hanson: By eliminating manual file handling, our climate achieve end-to-end automation of their costing process, but we say assign fees to their products and services, thereby enhancing their overall workflow efficiency.
Ted Hanson: Each of these consulting projects involves aspects of intelligent data management and the usage of AI is increasingly becoming a central to successfully managing enterprise data.
Ted Hanson: The UNICE company's limit their IT's been, her clients continue to scale their investments in AI.
Ted Hanson: Clients early in their AI journeys are investing in AI workshops and AI literacy trainings to prepare their organization for future AI usage.
Ted Hanson: Clients further along in their journeys are partnering with us on broad leadership pieces in the Innovation Studies to drive competitive advantages.
Ted Hanson: The most common AI use cases we are currently seeing include the development of age and assistance, or co-pilot, the implementation of Gen AI to accelerate the software development life cycle [inaudible]
Ted Hanson: The usage of AI tools for code conversion and documentation, especially in banking and leveraging AI for IT operation.
With that, let's turn to discuss our federal government segment.
Ted Hanson: Our federal government segment provides advanced IT solutions for the Department of Defense, the intelligence community, and other critical agencies in support of national security.
Ted Hanson: Although the segments quarterly revenues declined year-to-year, bookings were strong, with new contractor awards totaling 343.1 million for the first quarter.
Ted Hanson: This put our book to bill at 1.2 times on both a quarterly and trailing 12 month basis.
Ted Hanson: In addition, contract backlog was over 3.1 billion at quarter end, for a coverage ratio of 2.6 times the segment's trailing 12 month revenues.
Ted Hanson: We are not immune to doge. In our first quarter federal government segment, Revenants and Marches saw a slight impact from judges cost-cutting efforts.
Ted Hanson: That said, our solution capabilities and agency focus remain well aligned with the administration's priority.
Ted Hanson: The government will gain efficiency through IT modernization that leverages AI, automation and a commercial delivery model. ASGN brings those exact services in delivery best practices to our customers.
Ted Hanson: with our core solution capabilities in AI, Cyber Security, and Digital Modernization for Mission Critical Defense, National Security, and Law Enforcement Programs.
Ted Hanson: Our government teams consistently led the charge in IT innovation and during the quarter we won a new five year firm fixed price contract with the FBI's laboratory division to provide IT modernization services
Ted Hanson: As the prime awardee on this contract, our team will centralize and modernize information and operational technology, or IT and OT, by streamlining technology usage, powering FBI services with AI tools.
Ted Hanson: and the automating key processes that enhance the FBI's ability to solve cases and prevent acts of crime and terror.
Ted Hanson: Our services to the FBI include infrastructure support, cloud integration and modernization, enhanced cybersecurity protection, and improved data governance.
Ted Hanson: The FBI is a long-standing client of ASTM, and this contract represents an additional opportunity to promote the agency's essential missions.
Ted Hanson: We also support the essential missions of the Department of Defense, and during the first quarter, our defense and intel unit won additional work with the DOD's Chief Digital and AI Office to operate the department.
Ted Hanson: Premier AI Development Environment, or Innovation at Speed and Scale. As a mission critical partner, we will collaborate with the DOD on AI Innovation Workstreams that provide improved operational insight and decision-making capabilities.
As well as enhanced value across global war fighting domains.
Ted Hanson: Also, during the quarter, we secured a large recompete contract for the strategic logistics customer.
Ted Hanson: by providing technical expertise and solutions to our customer's engineering and technical support center. We will help them reduce their costs while at the same time drop quality and innovation across their operations.
Ted Hanson: As illustrated by these three examples, we continue to see a steady flow of work consistent with those who are sufficient to see an IT modernization missions.
Ted Hanson: Nonetheless, this is prudent. We are actively tracking gojectivities and identifying ways to support our customers with additional work or to move essential work onto contracts with available sealants.
Ted Hanson: Although we remain in a continuing resolution through September , customers are extending current projects
Ted Hanson: We expect to defend the national security programs, along with essential citizen services, which together constitutes the vast majority of our federal government support. We'll remain priorities in the new government this whole year.
Ted Hanson: With that, I'll turn the call over to Marie to discuss the first quarter results in our second quarter 2025 diamonds.
Marie Perry: Thanks Ted, for the first quarter, revenue total 968.3 million, a decrease of 7.7% your and in line with our guidance expectations.
Marie Perry: Given the timing of the acquisition close on March 4th, hot block contributed less than one month to our first quarter results.
Revenings from our commercial segment were 672.2 Moon.
Marie Perry: A Decrease of 8.1% as compared to the prior year Assignment Revenue Total 382.1% A Decrease of 16% at your rear, reflecting continued softness in portions of our commercial segment that are more sensitive to changes in macroeconomic cycles.
Marie Perry: Revenues from Commercial Consulting, The Highest of Archive Margin, Ready Extraments
Total 290.1 mil, an increase of 4.7% your over year.
Revenue from Arstato, government segment, for 296.1 minutes
A Decrease of 6.7% Your Regional [inaudible]
Marie Perry: Mainly due to a few programs in me and a slight impact of Doge, as Ted previously noticed.
Marie Perry: Turning to margin, gross margin for the first quarter of 2025 was 28.4%, an increase of 20 basis points on the first quarter of last year.
Marie Perry: Gross Margin for the commercial segment was 32.4%, up 40 basis points year over year, reflecting a higher mix of consulting reference, as well as margin expansion in each residence.
Marie Perry: Gross margins for the federal government segment was 19.5% a decline of 20 basis points primarily due to higher rates of average benefits.
Marie Perry: S&A expense for the quarter was $200.5 million, compared to $210.2 million in the first quarter of 2024.
Marie Perry: SNA Expensive, Inc. 3.3 million, and Acquisition Integration, and Strategic Climate Expenses.
Marie Perry: And at 4.4 million, one-time write-off related to previously kept life costs for software enhancements that will no longer be placed into service.
Marie Perry: As a reminder, these types of costs are not included in our guidance as well [inaudible]
Marie Perry: Excluding these one-time items as well as non-cash expenses such as depreciation and stock-based compensation.
S.G. Nate Decline, by approximately six million euros a year. [inaudible]
Marie Perry: For the first quarter, net income was 20.9 million, Adjustity Vadaw was 93.6 million, and Adjustity Vadaw margin was 9.7%.
Marie Perry: In the quarter, as discussed, we completed our Acquisition of Top Lock.
for $340,000.
consisting of 10% equity and 90% cash.
Marie Perry: Of which, approximately 56 million came from our cash balance, and the rest was a drawdown on our revolver. In addition, we deployed 50.4 million to the refurchase approximately 0.6 million shares at an average share price of $78.44.
Marie Perry: At quarter end, we had approximately 478.6 million remaining on our 750 million share of repurchase
Marie Perry: Also a quarter and cash and cash of the ones were 107.00. [inaudible]
Marie Perry: and we had 250 millions available on our 500 million senior secures available. This brings our high leverage ratio to 2.6 times at the end of the first floor.
Marie Perry: Freakashlow totaled 6.6 million for the first quarter. Freakashlow was lower than we typically see in the corner, primarily due to an increase in DSO driven by timing issues from certain enterprise
We expect DSO to improve on a go-forward basis.
Marie Perry: Turning to guidance, our financial estimates for the second quarter of 2025 are set forward in our earnings release in supplemental materials.
Marie Perry: The estimates are based on current market movements and it's no further deterioration than the market's we serve.
Guidance also assumes 63.25 billable days in the second floor
Marie Perry: which is 0.25 fillable days seer than a year ago period, and 1.25 days more than the first quarter.
Given the overall macro uncertainty,
You're a widening or revenue guy who's running. [inaudible]
Marie Perry: A revenue estimates incorporate less than a 2% impact from those.
Marie Perry: In terms of our second quarter margins, while we no longer have as large of an impact from our payroll tax reset that we did in the first quarter, we anticipate that margins will be negatively impacted by the loss of some of our higher gross margin federal as a result of those capital issues.
With that, it's that route.
for Q2 2020 Fox. We're estimating revenues of $900.85 million.
to $1.015 million, net income of $29.3 million.
to 34.3 minutes, a Jessedy Bada of 101 minutes.
Marie Perry: To 108 Millions, An Adjusted But Our Margin of 10.3% to 10.6%
Tess: Thanks. I'll now try to call back over to test. [inaudible]
Thanks, Perry.
Tess: Even in the face of macroeconomic uncertainty and factors beyond our control, ACM performed in line with our revenue and adjust city to die expectations for the first quarter.
Tess: Our unique operating bottle positions us for sustained progress in delivering higher-end, high-value IT services.
Tess: And despite client IT spending hesitations, a commitment to innovation, customer satisfaction enabled us to deliver strong bookings.
Tess: The appointment of SHIB as president and the acquisition of top blocks are pivotal developments that underscore our adapted and forth thinking approach. And as I know to previously, top is already seeing our bookings removed in adjusted EBITDA expectations.
Tess: Looking ahead, the resiliency and versatility of our operating and AI data and cybersecurity in particular continue to drive demand and affirm our good market approach in these critical areas of clients needs.
Tess: Our ability to maintain robust quiet relationships while expanding our technology partnerships provide its confidence that we are well prepared to capture each opportunity and enhance shareholder
Tess: We remain cautious, but hopeful about to go forth, knowing that our unique delivery model is the fastest and best way for our clients to accelerate their IT investment.
Speaker Change: It is precisely our innovative contingent labor model and the vast prospects it provides that inspires you among all the reasons to join the ASTM team.
Tess: Let me pass the call over to Sheriff to share his insights and wrap up our prepared remarks.
Tess: Thanks, Ted. I'm excited to be part of my first beer gym at the school.
Shiv Iyer: It's a great time for me to join the team and immediately make progress in our company. Over the past seven weeks, I think the ground running is operating closely with our segment teams and engaging with our dynamic leadership [inaudible]
Shiv Iyer: The pace of technological change is staggering, and our clients are constantly looking for the right talents to see targeted skills [inaudible]
Shiv Iyer: Unconfident there are models to leverage the combination of internal capabilities and a highly skilled contingent labor force is the optimal approach in this rapidly evolving technologic of landscape.
for maintaining the right IT skill sets.
Speaker Change: is exceedingly challenging for permanent bench models. In my initial weeks at ASGM, I've been immersing myself with our commercial consulting team.
Speaker Change: Rapidly climbing the dirty curve, while inserting my own expertise benefit [inaudible]
Speaker Change: Where's the past two decades in the consulting industry? I'm thrilled to bring my experience to ASDN, help evolve our strategy and differentiation.
Speaker Change: Unfortunately, we are at a point in time where clients must exercise caution with their ideas spent. Nonetheless, I've been through these economic cycles before, each time learning something new, throwing my knowledge base, rumors even stronger on the other end.
Speaker Change: While we may be experiencing increased market volatility at the present moment, there is no doubt my mind that having access to a diverse pool of talent.
Speaker Change: Consider it to focus on our strong count days and providing the right solutions will allow our company to stay ahead of the competition. I look forward to seeing ASGM's community take market care.
Speaker Change: Thank you again for joining AADD first quarter 2025 earnings call. You will now open up the call to your questions.
Speaker Change: Great, thank you. We'll now be conducting a question and answer session.
Speaker Change: If you'd like to ask a question, please press star one on your telephone keypad. A confirmation toll will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys.
One moment, political report for questions.
Speaker Change: First question here is from Tobey Sommer, from Shoei Securities, please go ahead [inaudible]
Toby Sommer: Thank you. It wanted to ask about your bookings in the quarter across the different businesses.
Speaker Change: Could you characterize them from a new customer and new project, kind of new work perspective versus renewal of existing work?
And then I'll have a follow up. Thanks
Sorry, heavy said, thanks for the question.
Speaker Change: If you think about the commercial side of things where we continue to see consistently good bookings
Speaker Change: There a mix of renewal work and the work then renewal is still a larger percentage than the new but the new is progressing so
that the trend there hasn't really changed. [inaudible]
Speaker Change: On the federal side, our bookings this border was very strong, keep us
Speaker Change: Moving up, if you will, I'm up to Bill now, one point.
Two on a 12 month basis. Again, same characterization
Speaker Change: We had some recompete work that we won, we had some new work that we won, and in addition, some of that, which has said some of that recompete work also had expansions of work. So it varied, but I wouldn't say any different trends there Tobey than what we've seen in the latter quarters.
Speaker Change: Okay, thank you. And then if I could pivot based on that response and ask a question about
Speaker Change: and the Impact in the Federal Business. Is there a way to characterize, I mean, you put some numbers there, but from a type of work or type of customer perspective, is there a way to describe where you're seeing the impact and how? I don't know, I don't know.
Toby Sommer: Sure, so Toby, I don't think this will be inconsistent with maybe whoever's what we're seeing in other across the industry with other players, but where we've had small interruptions of work, it's been much more on the bed to the alien side.
Toby Sommer: Not so much on the defensive intel side. It may have been just green pieces of work where we were doing more, what I'll call maybe traditional management consulting program oversight.
Toby Sommer: The highest propensity of our work that's been steady remains in place and hopefully that gives you a little bit of a flavor . . . . . . . .
Toby Sommer: It does. With respect to that program management, consultative work, how much does that represent in the business? Maybe that describes a couple of points of impact. Is there much that remains or does that sort of zero out category?
Speaker Change: Yeah, it's a small piece of what we do, Tobey. I mean, most of our work is kind of categorized as, you know, real good technical work in AI, data, cybersecurity, helping manage IT systems and operations.
Toby Sommer: We did very little work on the general management consulting side and in the regulatory type federal civilian agencies.
Thanks, Ted.
Next question is from Mark Monk.
Thank you.
from Beard, please go ahead.
Hey, good afternoon, Ted Ranshiv and movie on it.
Speaker Change: You've done a really impressive job in terms of maintaining the margins.
Speaker Change: You know, here during the quarter, you know, I'm wondering if you can talk a little bit about and the guide also reflects, you know, strong margins and so I'm wondering if you can talk a little bit. [inaudible]
Speaker Change: about how you've been able to raise, you know, the margins, the gross margins through the mix. If we were to look at things from an apples perspective in terms of. [inaudible]
Speaker Change: Project to Project. Would it also show that the consulting margins are holding steady in terms of like for like type projects? And how should we think about
Speaker Change: The S-GNA going forward particularly if things soften a little bit. I think most people are still at an early stage in terms of trying to determine what the environment is going to be like.
Speaker Change: Great. Well, Mark, if you think about the nature of the commercial control you were...
Speaker Change: As we do more, and it becomes a bigger percentage of the business, obviously that's going to lever up our gross margins and will continue to contribute to expanding even down margins.
Thank you.
If you think about...
Speaker Change: Adding capabilities like top lock and work day, what we do in service now, more work that we're doing in AI and data, those are all areas where we can get and expand gross margin. So on a life or life basis, just based on the nature of the work and the value proposition for the customer.
Speaker Change: You're seeing that expanded in of itself, you know, to your first question.
Speaker Change: And then it's a place to ask DNA, you know, we this will, you know, our model, which is
bringing the talent.
Speaker Change: And then, you know, with the highly variable cost structure and SG&O, and that's going to continue to be an important stabilizer.
Speaker Change: So, you see all this working time and real time. Remember, it doesn't always happen in the moment. So, in the month of the quarter, we may have a little bit of a lead or a lag as it relates to the business stabilizers kind of flowing through. But if you look over our period of quarters, you can kind of consistently...
Speaker Change: See that the SDNA, you know, and the stabilizers they're in around our model are working as they should.
It certainly is evident. Just for my follow-up real quickly.
Um, um, Theodore Hanson, Theodore Hanson, Theodore Hanson, Theodore Hanson,
Speaker Change: What are you hearing from your commercial clients with regards to...
Speaker Change: Not the ongoing projects but you know projects that they may have been contemplating you know starting up you know a month from now six months from now later on like how
Speaker Change: What's the level of certainty that some of those projects are going to go through versus we're kind of in a weight and sea mode and how variable do you think that could be based on your cumulative experience through multiple cycles?
Speaker Change: Mark, well, so far, what we're seeing is, you know, lines are still continuing to continue as a strategic portion of that data, AI and cyber security, and I don't think.
Speaker Change: There's enough evidence of them slowing some of that down, obviously with the macros that we see with some of the uncertainty around.
Speaker Change: We're waiting and watching across all sectors, but so far we're not seeing evidence in strategic areas of technology and investment, whether it's around cloud, innovation on cloud data, AI, cyber security, does any sort of slow down?
Speaker Change: So, Mark, if you think about the commercial customers by industry, they're all a little bit in a wait-and-see mood just to add to what you'd said, which...
Speaker Change: Ultimately it's going to make them cautious here. They're going to stick with it in certain areas and I think to ship's point they're going to play their cards here for a little while before they dive in at higher levels of spin.
Speaker Change: I mean, even if you look at a third party data point, like ISG, I think they'd come out and said that the day to play ISG services right now are going to be kind of flat, you know, based on...
Speaker Change: The cautiousness and the weight and steam mode, if you will, around terror, so what's going on?
Speaker Change: The use of gender in the Bay Eye and other things that we think are going to be critical for the future and then there are some areas that is more discretionary and we can hold back on right now and so I always think our clients are thinking about this and managing it the same way we look at our own business.
Speaker Change: That's great. Thanks for the color and congrats on the margin.
For more information visit www.FEMA.gov
Kevin Mcveigh: Next question, Kevin McVeigh from UBS, please go ahead.
Great. Thank you so much. And thanks for the detail.
Kevin Mcveigh: Could you just drill down and help us understand how much top block contributed to the first quarter in terms of revenue and how it impacts the Q2 guidance, I guess, in terms of revenue EPS.
Speaker Change: Yes, so Kevin, we gave, when we made the acquisition, what our expectations were for the year for top lots, I'd just refer you back to that. We only owned it for a few weeks during March, so it was...
Kevin Mcveigh: Contribution was kind of immaterial, if you will, to the broader results
Kevin Mcveigh: And again, it relates to what may entail for the second quarter of the rest of the year, I mean pretty easy to do the math and what we laid out before.
Okay, and then I guess...
Speaker Change: You know, you talked about some initial doge impacted, but
Speaker Change: Do you think we're through the process at this point or do you think there could be more potential adjustments or how are you thinking about that and have the conversations changed to federal level at all?
You're random. You want to take that one? [inaudible]
Speaker Change: Yeah, I mean, I think we've all keep in touch with this day to day. And we think that listen, doge will still continue to seep into clients environment, but most of our discussions are with the clients.
and around the technology and what they're spending money on. So,
Ted Hanson: I mean I guess I would say Ted that Doge is not the premier person that's second guessing anything at this point clients are trying to do a good job of controlling their own spend and that's been true for a while and that's kind of what continues on [inaudible]
Ted Hanson: We're, as Ted alluded earlier, we do very little in just the general program management consulting area.
Ted Hanson: of the business. So we're much more close to the mission, the systems and even the weapons systems around security, around connectivity of the technology.
Very awful. Thank you.
Ted Hanson: Next question from Trevor Romeo from William Blair. Please go ahead.
Sheva Romeo: Hi, thank you very much for taking the questions. First one I have was just on the guidance, I guess appreciate certainly being a bit wider than the normal in this environment.
Speaker Change: And thanks, Marie, for the comment on the Doge impact. But I was just wondering if you could maybe speak a bit more specifically to what's embedded in the guidance for each segment and maybe, you know, where some of the outsider downside could be there.
Hi Trevor, so from a guidance perspective.
Trevor: You know, the information that we give is really on a consolidated basis. So to your point, we did highlight the potential impact it does, which was less than 2% on total revenues.
Trevor: and then provided the other factors for the guidance process.
Thank you for having me.
Trevor: If you just think about the kind of commentary around all of it, Trevor, I mean I think you...
we would say things are pretty steady.
Trevor: So as you, you know, maybe as you just think about, you know, we've been in kind of a pretty stable environment year.
Trevor: Is it related to revenue per billable day coming out the second half of the year and into the first half of the year? We've had kind of a normal...
Trevor: A few points of adjustment that we would always see at the beginning of a year, especially in our commercial business that's just natural as projects, kind of come to an end and then begin to ramp up. And I don't think our outlook on the go-forward here is gonna...
Trevor: You know, we would say anything different, but continued stability here. So if you just think about that on a revenue pervailable day basis, that's probably the best way just to give it some color.
Thank you for watching!
Speaker Change: How are you thinking about the opportunity for your mexico nearest foreign capability? Is that an area where you're either seeing or you would expect to see a little bit more resilience in the man in this type of environment? Yes, I am.
Rand, you want to take that one? [inaudible]
Rand: Well, the answers yes, we've seen that over the past year, you're going to have two years we've had and built Mexico up, so the fact that it continues to grow
Speaker Change: is indicative of the cost, you know, the cost pursuit the clients have. But I think the the future is really around our ability to weave technology together. She would use the word digital engineering across the different data domains, cloud domains, and technology. So will Mexico be a part of all that? Yes, it will be. Thank you.
Okay. Thank you very much. Appreciate it.
Speaker Change: Our next question is from Jeff Silber from VML Capital Markets. Please go ahead Thank you very much.
Speaker Change: If we can just step back, maybe you can just describe one of the mechanics if an agency wanted to cut a contract short before it expires. How much notice do they have to give you? Any details around that and the implications would be great.
Speaker Change: Yeah, well look, a lot of this is new Jeff, right? So we're kind of seeing this for the first time. I think that, you know, if you think about what's been going on, there's, it's maybe at two levels that
The Dutch Group has been...
Speaker Change: pursuing certain contracts that happened to be on the radar screen for whatever reason that they are right and there was an initial wave of that and then...
Speaker Change: And then following that there was a, there was a edict to the agency heads to find certain cost savings or efficient seeds.
Speaker Change: And report back on those and they've been going through that for the last few months.
On the second part of that that I mentioned.
Speaker Change: We've been engaged with our customer on a one basis, is they look at the contracts and look at the...
Speaker Change: You know, the delivery and whether they're getting the value that they're getting for those and then, you know, once they make those decisions they'll...
Speaker Change: You know, decide to, you know, make a, well, I'll just call modification to that.
Speaker Change: Arrangement, or to leave it in place, and so we do that real time with them as that comes up, and so...
Speaker Change: You know, I think that it's a, I don't mean to be overly vague about your question, but I don't think that there's a very specific set of rules here to follow as it goes through this. Obviously they can do what they say is terminated contract for convenience and give a certain time period. [inaudible]
Speaker Change: In order for that to come to an end, that gives us, you know, time to react with wealthy other contractors.
Speaker Change: to react on that. But again, I think it's a client goes through this, it's kind of real-time contemplation.
Speaker Change: Okay, I understand. And obviously, you know, a lot has changed since you set your budget for 2025 and I'm just curious about your own internal plans in terms of investing hiring capital allocation. Any changes being made to that for the rest of the year?
Speaker Change: Look, I guess we're making real-time assessments about where to allocate investment inside of the business where we see that there's real opportunity. I think SHIB did a great job going through areas where we still see good solid demand with our clients and new bookings and soap.
Speaker Change: We're making sure that if there are areas where we're not getting the bank for the buck and investment that we're reallocating into those areas, I think that's probably the most important.
Speaker Change: Things you have, our principles around capital allocation don't change too much here. I mean those are kind of longer term boxed about what is the best allocation capital for the business and for investors and you know we talk about
Strategic Committee, we talk about.
Speaker Change: You know, next to that, the opportunity to read purchase shares and return capital to investors and
Speaker Change: So those things don't change on just one or two quarter basis. I mean that's kind of a principle of the business, if you will, going forward. So...
Speaker Change: Anyway, hopefully that helps and you know, I think we just have to play this as we go Let's go.
Speaker Change: You know through the year because obviously things are developing real-time here and so you know being really smart about. Now, let's get started.
Speaker Change: recognizing every expense in the business, making sure that it's pointed towards a place where we can get a good productive outcome and ultimately need to die March and for that is critical.
I understand. Thanks so much for the call.
Speaker Change: Our next question is from Sunrender Finn from Jeffries, please go ahead.
Sunrender Finn: Thank you. One of the questions I'd like to start with is just kind of [inaudible]
How we should be thinking about...
Sunrender Finn: Intracorder Visibility at this point and the willingness of clients to . . . . .
Sunrender Finn: Change minds, start projects, delayed projects relative to how they've maybe been behaving over the last six months or so.
Sunrender Finn: Given that you guys did widen the range, like I would have assumed inter-quarter visibility would have been very high, right? 95, 98 percent?
Speaker Change: Well, thanks Surinder. I mean, I'll let Rand take the overall question. I will tell you that...
Speaker Change: You know, I think it's just the right thing to do here to widen the range because...
Speaker Change: There's a new piece of news almost daily here that all of our clients are reacting to as either like the tariffs or Joe's so I think just good caution is what's behind widening the range
Speaker Change: Rand, all the first part of that in terms of what you're seeing, starting, stopping projects.
Speaker Change: Listen on the government's side as we just discussed with Jeff, it's...
Speaker Change: You know, they have provisions in the contracting process to be able to-
Speaker Change: Stop Work for Convenience, and that can be pretty quickly a real time as Ted said. On the commercial side, I think we surrender we've seen for the last six months.
Speaker Change: Cautiousness and ensure that when they're going to spend money on IT, that they're going to get some value in return and cost saving, drive driven toward cost saving. I don't think we've seen a change in the behavior of the client on the commercial side on that side. So, you know, I...
Speaker Change: It's just prudence, if you will, to be focused on their cost and I think they're very focused on their cost today just as much as they were six months ago. So I'd say it's pretty steady.
Speaker Change: That's helpful. So I think the interpretation with that B is the caution is coming more from the government side or the CS side of the business now.
Speaker Change: In terms of widening the range, that's where the greater amount of uncertainties is I think that's the way it would interpret your comments [inaudible]
Thank you.
Speaker Change: Well, I don't know if there's no change in commercial somehow
Speaker Change: Yeah, I don't know if I would interpret it that way Surinder. I think generally there are macro issues.
Speaker Change: in both market segments. And so, you know, we're just recognizing that, look, if we were having a problem with projects and commercial being stopped, we would report it to you. You would have seen love bookings, but there's a lot of people at the bookings.
Speaker Change: We're not seeing that, but we are seeing a lot of customers [inaudible]
Speaker Change: You know, think hard about the go-for because they're wondering how they may be impacted either by terrorists, as inflation remaining high, or other things that affect their ultimate marketplace and then could in term.
In turn, back there, investment. So I would just interpret it as just general caution.
And look, we only expanded the range by...
Speaker Change: Marie, $10 million on the top, and a few million on the bottom. So it wasn't like this. This is not as draconian as you will as maybe. If you think back to COVID, we actually didn't give guidance for the second quarter. We gave a pretty dramatic two scenario. The first scenario.
Speaker Change: A set of ranges or potential outcomes, I shouldn't call it a range, potential outcomes. So this is nowhere near that.
Speaker Change: Okay, that's actually quite helpful. And then is a follow-up just in terms of what I think about the 2Q margins.
at least relative to my expectations, that the quarter of recorder improvement isn't...
Quite a significant as it has been in the past
Speaker Change: You kind of walk through the puts and takes of...
Speaker Change: You know, the law system, high margin contracts and so forth. I would have expected top block to offset that.
And so can you help me understand? And...
Speaker Change: I think unlike the second person that asked the question on the call, I view it as there's more margin weakness here than anticipated.
relative to the second persons comments. [inaudible]
for the second arm.
The Q&A Person
All right.
Speaker Change: Go ahead. Yeah Surrender. When you think about the Q2, there's a couple factors to consider from a business mix perspective.
Speaker Change: So we have a slightly higher mix of federal revenue as you know carries a lower margin than commercial and then what you just referenced and we've been talking about even on the federal side, it multiply slightly because of the impact of dose and those dose revenues have higher margins.
Speaker Change: So, the combination of that offset by the incremental for pop-flop gets us to where our range is.
Thank you for watching!
Speaker Change: Got it. So I guess put another way, then 2Q should be kind of the the average run rate going forward or that starting point on a go forward basis.
Yes.
Okay. Thank you.
Next question is from Joseph Vafi from...
from Ken Accordionary, Police Collette. [inaudible]
Thank you for watching!
Speaker Change: Hey everyone, good afternoon, welcome on board shift. Can we drill down a bit on the Financial Services Commentary Cat? I know.
Speaker Change: At least last quarter, it sounded like some of the bigger banks were starting to act just a bit better.
Speaker Change: I've heard you're a commentary but just wondering kind of how you see the cadence of momentum with those larger bank customers here kind of real-time versus kind of what we saw and two-one quick follow-up.
Great.
Yeah.
Speaker Change: Joseph did mention, I think, in the last quarter that we saw an uptick in Rec flow, for example, from big banks that's on the Simon side, and some good pipeline in the consulting side. What we've seen in the first quarter was it just leveled off.
Kiss
Speaker Change: To stay pre-consistent from the first week to the last week, they basically showed flatness in the business flow, if you will, from the big banks.
Speaker Change: Actually, we've talked to some of the big banks and I think some of them are just doing what we've just talked about in the last couple of minutes with Jeff and Surrender.
Speaker Change: They're just waiting for, see how the macros go, make sure they have their things lined up on individual projects and we haven't seen any major movement back up yet from the financials from the big banks.
Speaker Change: Other parts of the sector I think Ted commented on during the script, but not from the big banks.
Got it. Thanks for that, Rand. And then, And, um.
Speaker Change: Just one more on Doge, I mean we kind of talked about some scope changes and other things, areas where there's focus area where it's not.
Speaker Change: Just in general, I was wondering if you have commentary on kind of velocity of adjudications going on if, you know, if you're seeing that the doge effect kind of ripple into
Speaker Change: slower decision making on adjudications or is it just really more from the existing book and backlog? Thanks a lot.
Speaker Change: That velocity is less visible to us. What we have seen is agencies making sure that up and down the chain of command that they're in alignment with what they're doing.
Speaker Change: Whether it's curtailing work or more importantly continuing work. As Ted mentioned, we've won a few pieces of work in this quarter in a couple key client areas.
Speaker Change: and every piece of work that gets funded through the contract is getting checked off by more levels in the agency. So it's more in the agency, I think, is what we would say to you, Joseph, Joe, not so much.
Speaker Change: We, The Doge, Interaction with the Agency, and of course that's we wouldn't be privy to that at any rate.
Speaker Change: Sure, that makes sense, and thanks for that call. Thanks, Rand. Thanks, everybody.
Speaker Change: This concludes the question and answer session. I'd like to turn the floor back to Ted Hanson, CEO for any closing comments.
Thank you.
Speaker Change: As we conclude, I'd like to express my gratitude to the entire fabulous ASTN team for your dedication and hard work throughout the past quarter. We have an exceptional team and
Speaker Change: Together, we'll continue to advance our business. Thank you again for joining us today with a forward to speaking in July on our second quarter call
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation. Thank you very much.