ASGN Q4 2025 ASGN Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 ASGN Inc Earnings Call
Operator: Greetings, and welcome to the ASGN Incorporated Fourth Quarter and Full Year 2025 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 operating assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Kimberly Esterkin of Investor Relations. Thank you. You may begin.
Speaker #1: Greetings, and welcome to the ASGN Incorporated Fourth Quarter and Full Year 2025 Earnings Call. At this time, all participants are in a listen-only mode.
Speaker #1: A question and answer session will follow the formal presentation . If anyone should require operator assistance , please press Star Zero on your telephone keypad .
Kimberly Esterkin: Good afternoon. Thank you for joining us today for ASGN's, soon to be Everforth, Fourth Quarter and Full Year 2025 conference call. With me are Ted Hanson, Chief Executive Officer, Shiv Iyer, President, and Marie Perry, Chief Financial Officer. Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call. For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com.
Kimberly Esterkin: Good afternoon. Thank you for joining us today for ASGN's, soon to be Everforth, Fourth Quarter and Full Year 2025 conference call. With me are Ted Hanson, Chief Executive Officer, Shiv Iyer, President, and Marie Perry, Chief Financial Officer. Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements.
Speaker #1: now my It is pleasure to introduce your host Kimberly Esterkin Investor Relations . Thank you . You may begin .
Speaker #2: Good afternoon . Thank you for joining us today for ASGN , soon to be advocates . Fourth quarter and full year 2025 conference call .
Speaker #2: With me . Are Ted Hansen , Chief Executive officer , Shiv Iyer , president . And Marie Perry chief financial officer . Before we get started , I would like to remind everyone that our commentary contains forward Although statements .
Speaker #2: 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.
Kimberly Esterkin: 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. 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 #2: 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 #2: For your convenience , our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors . Please also note that on this call , we will be referencing certain non-GAAP measures , such as adjusted EBITDA , adjusted Net income and free cash flow .
Kimberly Esterkin: Please also note that on this call, we will be referencing certain non-GAAP measures, such as Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release. I will now turn the call over to Ted Hanson, Chief Executive Officer.
Kimberly Esterkin: Please also note that on this call, we will be referencing certain non-GAAP measures, such as Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release. I will now turn the call over to Ted Hanson, Chief Executive Officer.
Speaker #2: 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.
Ted Hanson: Thank you, Kim, and thank you for joining our Q4 and full year 2025 earnings call. As we begin 2026, I want to thank everyone who joined us for our Investor Day this past November. If you've not had a chance to view the presentation, a replay of the webcast is available on our website. Our Investor Day provided a valuable platform to showcase our next wave growth strategy and the significant progress we made in our transition toward higher value, higher margin, technology, and digital engineering solutions. At this event, we also had the opportunity to introduce several of our solutions leaders whose presentations brought to light our advanced capabilities in AI, cybersecurity, and enterprise platforms. AI is now a dominant driver of demand, with nearly 80% of enterprises planning to increase their AI spending in 2026.
Ted Hanson: Thank you, Kim, and thank you for joining our Q4 and full year 2025 earnings call. As we begin 2026, I want to thank everyone who joined us for our Investor Day this past November. If you've not had a chance to view the presentation, a replay of the webcast is available on our website. Our Investor Day provided a valuable platform to showcase our next wave growth strategy and the significant progress we made in our transition toward higher value, higher margin, technology, and digital engineering solutions.
Speaker #2: I will now turn the call over to Ted Hanson, Chief Executive Officer.
Speaker #3: Thank you , Kim , and thank you joining our fourth quarter and full year 2025 earnings call . As we begin want to 2026 , I everyone who joined thank us for our Investor Day this past November .
Speaker #3: And if you have not chance to view the had a a replay of the webcast presentation , available is on our website . Our Investor Day provided a valuable platform to showcase our next wave of growth strategy and the significant progress we made in our transition toward higher value , higher margin technology and digital engineering solutions .
Ted Hanson: At this event, we also had the opportunity to introduce several of our solutions leaders whose presentations brought to light our advanced capabilities in AI, cybersecurity, and enterprise platforms. AI is now a dominant driver of demand, with nearly 80% of enterprises planning to increase their AI spending in 2026.
Speaker #3: At this event, we also had the opportunity to introduce several of our solutions leaders, whose presentations brought to life our advances in capabilities in AI, cybersecurity, and enterprise platforms.
Speaker #3: AI is now a dominant driver of demand , with nearly 80% of enterprises planning to increase their AI spending in 2026 . These investments are driving growth in solution capabilities vital to the successful deployment enterprise of AI wide Shibuya .
Ted Hanson: These investments are driving growth in solution capabilities vital to the successful deployment of AI enterprise-wide. Shiv Iyer, our president, will speak more on that shortly. Turning to our Q4 2025 results, which we previewed with you in our recent Quinnox announcement, ASGN delivered solid results for the quarter. Revenues of $980.1 million were at the top end of our guidance range, with IT consulting revenues comprising 63% of the total, up from 59% in the prior year. Adjusted EBITDA margin was 11%, exceeding our expectations. Commercial consulting bookings hit a record $444.4 million, translating to a book-to-bill of 1.3x for the quarter and 1.2x on a trailing twelve-month basis.
Ted Hanson: These investments are driving growth in solution capabilities vital to the successful deployment of AI enterprise-wide. Shiv Iyer, our president, will speak more on that shortly. Turning to our Q4 2025 results, which we previewed with you in our recent Quinnox announcement, ASGN delivered solid results for the quarter. Revenues of $980.1 million were at the top end of our guidance range, with IT consulting revenues comprising 63% of the total, up from 59% in the prior year. Adjusted EBITDA margin was 11%, exceeding our expectations. Commercial consulting bookings hit a record $444.4 million, translating to a book-to-bill of 1.3x for the quarter and 1.2x on a trailing twelve-month basis.
Speaker #3: Our more on shortly speak president will that . Turning fourth quarter 2020 results , which we previewed with you in our recent announcement ASGN delivered solid .
Speaker #3: Results for the quarter: Revenues of $980.1 million were at the top end of our guidance range, with IT consulting revenues comprising 63% of the total, up from 59% in the prior year.
Speaker #3: Adjusted EBITDA margin was 11% , exceeding our expectations . Commercial consulting bookings hit a record 444.4 million , translating to a book to bill of 1.3 times for the quarter and 1.2 times on a trailing 12 month basis .
Ted Hanson: Volume of new consulting work continues to grow as our customers increasingly recognize the importance of preparing data, building infrastructure, and deploying enterprise platforms to harness the full potential of AI. In our federal segment, new contract awards totaled $144.2 million, or a book-to-bill of 0.9 times on a trailing twelve-month basis. Federal contract backlog was approximately $3 billion at quarter end, or a coverage ratio of 2.5 times the segment's trailing twelve-month revenues. In addition to traditional holiday-related seasonality, the lengthy government shutdown delayed new award activity in the fourth quarter. Nonetheless, we are seeing solid pent-up demand in Q1, and increased defense, intelligence, and national security budgets position our federal business strongly for the future. As we discussed at our Investor Day, our clients are increasingly seeking us out as one of their strategic technology partners.
Ted Hanson: Volume of new consulting work continues to grow as our customers increasingly recognize the importance of preparing data, building infrastructure, and deploying enterprise platforms to harness the full potential of AI. In our federal segment, new contract awards totaled $144.2 million, or a book-to-bill of 0.9 times on a trailing twelve-month basis. Federal contract backlog was approximately $3 billion at quarter end, or a coverage ratio of 2.5 times the segment's trailing twelve-month revenues. In addition to traditional holiday-related seasonality, the lengthy government shutdown delayed new award activity in the fourth quarter. Nonetheless, we are seeing solid pent-up demand in Q1, and increased defense, intelligence, and national security budgets position our federal business strongly for the future. As we discussed at our Investor Day, our clients are increasingly seeking us out as one of their strategic technology partners.
Speaker #3: Volume of new consulting continues to grow as our customers increasingly recognize the importance of preparing data, building infrastructure, and deploying enterprise platforms to harness the full potential of AI in our federal segment.
Speaker #3: New awards contract totaled $144.2 million for a book-to-bill of 0.9 times on a trailing bill basis. Federal contract backlog was approximately $3 billion at quarter end, or a coverage ratio of 2.5 times the segment's trailing 12-month revenues.
Speaker #3: In addition to traditional holiday related seasonality , the lengthy government shutdown delayed new award activity in the fourth quarter . Nonetheless , we are seeing solid pent up demand in Q1 and increased defense , intelligence and national security budgets position our federal business strongly for the future as we discussed at our Day , our Investor clients are increasingly seeking us out as one of their strategic technology partners .
Ted Hanson: To meet this demand, we've been proactively transforming our business, advancing our solution capabilities, developing proprietary assets and accelerators, and partnering with leading technology companies to better serve our clients' IT needs. Continuing this transformation momentum in the first half of 2026, we will be adopting a new customer and investor-facing brand, Everforth, unifying our commercial and federal brands under a single dynamic identity. Our transition to Everforth, a name rooted in forth progress-... is designed to unlock our scale as an enterprise and increase cross-selling by bringing the breadth of our solutions to our enterprise clients, all while supporting continued revenue growth and margin expansion. While organic revenue growth remains a primary focus, we will also pursue strategic acquisitions that enhance our solutions, capabilities, and technology partnerships. I'm pleased to report just two weeks ago, we announced our intent to acquire Quinnox, an agile, results-driven digital solutions provider.
Ted Hanson: To meet this demand, we've been proactively transforming our business, advancing our solution capabilities, developing proprietary assets and accelerators, and partnering with leading technology companies to better serve our clients' IT needs. Continuing this transformation momentum in the first half of 2026, we will be adopting a new customer and investor-facing brand, Everforth, unifying our commercial and federal brands under a single dynamic identity. Our transition to Everforth, a name rooted in forth progress-... is designed to unlock our scale as an enterprise and increase cross-selling by bringing the breadth of our solutions to our enterprise clients, all while supporting continued revenue growth and margin expansion. While organic revenue growth remains a primary focus, we will also pursue strategic acquisitions that enhance our solutions, capabilities, and technology partnerships. I'm pleased to report just two weeks ago, we announced our intent to acquire Quinnox, an agile, results-driven digital solutions provider.
Speaker #3: To meet this demand , we've been proactively transforming our business , advancing our solution capabilities , developing proprietary assets and accelerators , and leading technology partnering with to better serve our clients .
Speaker #3: It needs continuing this transformation momentum in the first half of 2026. We will be adopting a new customer and investor-facing brand, Ever Forth, unifying our commercial and brands federal under a single dynamic identity.
Speaker #3: Our transition to EverForth, a rooted name in forward progress, is designed to unlock our scale as an enterprise and increase cross-selling by bringing the breadth of our solutions to our enterprise clients, all while supporting continued revenue growth and margin expansion.
Speaker #3: While organic revenue growth remains a primary focus, we will also pursue strategic acquisitions that enhance our solutions, capabilities, and technology partnerships.
Speaker #3: I'm pleased to report , just two weeks ago , we announced our intent to acquire Quinnox , an agile , results driven digital solutions provider , as an choice , we proven employ a , repeatable acquisition M&A Our strategy .
Ted Hanson: As an acquirer of choice, we employ a proven, repeatable acquisition strategy, our M&A playbook, which is guided by well-defined strategic filters and rigorous financial criteria. The acquisition of Quinnox followed this disciplined approach. From a strategic standpoint, joining forces with Quinnox represents a key step forward in our long-term strategy to enhance our digital engineering and global delivery capabilities. Like ASGN, Quinnox is exceptionally client-centric, maintaining customer relationships for well over a decade. We're excited to leverage their established client connections to broaden our market presence, and as we did with GlideFast and TopBloc, pull Quinnox's capabilities across our Gold Nugget commercial client base. From a financial perspective, Quinnox is an accretive transaction that strengthens our market position without compromising the strength of our balance sheet or our financial flexibility.
Ted Hanson: As an acquirer of choice, we employ a proven, repeatable acquisition strategy, our M&A playbook, which is guided by well-defined strategic filters and rigorous financial criteria. The acquisition of Quinnox followed this disciplined approach. From a strategic standpoint, joining forces with Quinnox represents a key step forward in our long-term strategy to enhance our digital engineering and global delivery capabilities. Like ASGN, Quinnox is exceptionally client-centric, maintaining customer relationships for well over a decade. We're excited to leverage their established client connections to broaden our market presence, and as we did with GlideFast and TopBloc, pull Quinnox's capabilities across our Gold Nugget commercial client base. From a financial perspective, Quinnox is an accretive transaction that strengthens our market position without compromising the strength of our balance sheet or our financial flexibility.
Speaker #3: playbook , which is guided by well-defined strategic filters and rigorous financial criteria . The acquisition of Quinnox followed this disciplined approach from a strategic standpoint , joining forces with Quinnox represents a key step forward in our long term strategy to enhance our digital engineering and global delivery capabilities like ASGN , Quinnox is exceptionally kind centric , maintaining customer relationships for well over a decade .
Speaker #3: We're excited to leverage their established client connections to broaden our market presence . And as we did with Glad Fast and Top Plot Hole Quinnox capabilities across our gold nugget commercial client base from a financial perspective , Quinnox is an accretive transaction that strengthens our market position without compromising the strength of our balance sheet or our Our financial flexibility .
Ted Hanson: Our disciplined approach to capital allocation enables us to make strategic acquisitions like Quinnox, while still investing organically and buying back our shares. In Q4, we generated $93.7 million in free cash flow and bought back $64.2 million in shares. We continued to repurchase shares in Q1, and with a newly approved $1 billion share repurchase program, we are well positioned to provide sustainable shareholder returns. To build upon our discussion, let me now turn the call over to our president, Shiv Iyer, to speak about Quinnox's digital engineering capabilities and global delivery strength.
Ted Hanson: Our disciplined approach to capital allocation enables us to make strategic acquisitions like Quinnox, while still investing organically and buying back our shares. In Q4, we generated $93.7 million in free cash flow and bought back $64.2 million in shares. We continued to repurchase shares in Q1, and with a newly approved $1 billion share repurchase program, we are well positioned to provide sustainable shareholder returns. To build upon our discussion, let me now turn the call over to our president, Shiv Iyer, to speak about Quinnox's digital engineering capabilities and global delivery strength.
Speaker #3: Our approach to allocating capital enables us to make strategic acquisitions like Quinnox, while still investing organically and buying back our shares. In the fourth quarter, we generated $93.7 million in free cash flow and bought back $64.2 million in shares.
Speaker #3: We continue to repurchase the shares in first quarter , and with a newly approved 1 billion share repurchase program , we are well positioned to provide sustainable shareholder returns to build upon our discussion .
Speaker #3: Let me now turn the call over to our Shiv president , Iyer , to speak about Quinnox digital engineering capabilities and global delivery strength .
Shiv Iyer: Thanks, Ted. It's great to speak with everyone this afternoon. It has certainly been a busy and productive start to the new year, and I share Ted's enthusiasm about the acquisition of Quinnox. Over the past few months, I've had the opportunity to meet with Quinnox's executive team. It is very clear from our meetings that there is a strong cultural fit between our organizations. Cultural alignment is at the heart of a successful acquisition, and integral to the comprehensive process that shapes the M&A playbook Ted discussed. During our Investor Day, we spoke about our journey towards becoming a top-tier technology and digital engineering company, and I'm proud to report that we're well on our way to expanding our digital engineering capabilities. Q4 booking for our Application Engineering and Services practice nearly doubled quarter-over-quarter.
Shiv Iyer: Thanks, Ted. It's great to speak with everyone this afternoon. It has certainly been a busy and productive start to the new year, and I share Ted's enthusiasm about the acquisition of Quinnox. Over the past few months, I've had the opportunity to meet with Quinnox's executive team. It is very clear from our meetings that there is a strong cultural fit between our organizations. Cultural alignment is at the heart of a successful acquisition, and integral to the comprehensive process that shapes the M&A playbook Ted discussed.
Speaker #4: Thanks , Ted . It's great to speak with this everyone afternoon . It has certainly been a busy and productive start to the new year , and I share Ted's enthusiasm about the acquisition of Quinnox over the past few months , I've had the opportunity to meet with Quinnox executive team .
Speaker #4: It is very clear from our strong fit there is a cultural alignment between our organizations. Alignment is at the heart of a successful, integral, and comprehensive acquisition and process that shapes the M&A playbook.
Shiv Iyer: During our Investor Day, we spoke about our journey towards becoming a top-tier technology and digital engineering company, and I'm proud to report that we're well on our way to expanding our digital engineering capabilities. Q4 booking for our Application Engineering and Services practice nearly doubled quarter-over-quarter.
Speaker #4: Ted discussed during our Investor Day . We spoke about our journey towards becoming a top tier technology and digital engineering company , and I'm report that we're well proud to on our way to expanding our digital engineering capabilities quarter .
Shiv Iyer: By integrating Quinnox's deep expertise in application management and modernization, analytics, and enterprise platforms into our existing practice, we will immediately expand our market share. In addition, Quinnox's alliance partnerships with companies such as AWS, Databricks, Salesforce, SAP, and Calypso complement our own partner network and will enable us to co-create agile, future-ready solutions that accelerate value for our customers. The ability to deliver complex digital engineering capabilities is key for us to be competitive. Quinnox significantly enhances our delivery capability and broadens our delivery footprint with its highly mature Global Capability Centers in India. These centers will form the foundation of our offshore delivery platform and complement our best-in-class nearshore operations in Mexico. As a leader in offshore delivery, Quinnox deploys cutting-edge technologies, including AI, across its delivery model. Quinnox's proprietary assets, combined with an AI-first workforce, help promote automation, compliance, and speed to value for every single client.
Shiv Iyer: By integrating Quinnox's deep expertise in application management and modernization, analytics, and enterprise platforms into our existing practice, we will immediately expand our market share. In addition, Quinnox's alliance partnerships with companies such as AWS, Databricks, Salesforce, SAP, and Calypso complement our own partner network and will enable us to co-create agile, future-ready solutions that accelerate value for our customers. The ability to deliver complex digital engineering capabilities is key for us to be competitive. Quinnox significantly enhances our delivery capability and broadens our delivery footprint with its highly mature Global Capability Centers in India. These centers will form the foundation of our offshore delivery platform and complement our best-in-class nearshore operations in Mexico. As a leader in offshore delivery, Quinnox deploys cutting-edge technologies, including AI, across its delivery model. Quinnox's proprietary assets, combined with an AI-first workforce, help promote automation, compliance, and speed to value for every single client.
Speaker #4: bookings for Both our application engineering and services practice nearly doubled quarter over quarter by integrating deep expertise in application management and modernization , analytics and enterprise platforms into our existing practice , we will immediately expand our market share .
Speaker #4: In addition , Quinnox is Alliance partnerships with companies such AWS , Databricks as , Salesforce , SAP , and Calypso complement our own partner network and will enable us to co-create agile , future ready solutions that accelerate value for our customers .
Speaker #4: The ability to deliver complex digital engineering is key for us to be significantly competitive. Quinnox enhances our delivery capability and broadens our delivery footprint with its highly mature global capability centres in India.
Speaker #4: These centers will form the foundation of our offshore delivery platform and our best in class nearshore operations in Mexico . As a leader in offshore delivery , Quinnox deploys cutting edge technologies including AI , across its delivery model , proprietary assets combined AI with an first workforce helped promote automation , compliance and speed to value for every single client .
Shiv Iyer: As Ted emphasized, we are an acquirer of choice, and I'd like to believe that part of that strong reputation comes from our unique market positioning. We have the scale of a large IT services player, but also the velocity and agility of a startup. An agile, results-driven digital technology company like Quinnox aligns seamlessly with our business objectives and supports our long-term growth strategy. With that as background, let's turn to our industry performance for Q4. In our commercial segment, year-over-year growth was driven by a combination of improvements in healthcare accounts, which improved by mid-teens, and consumer and industrial accounts, which improved by low teens. Growth in the healthcare industry was seen across our provider, pharmaceutical, and biotech clients. In the consumer and industrial space, industrials saw the largest improvement, followed by materials and utilities accounts.
Shiv Iyer: As Ted emphasized, we are an acquirer of choice, and I'd like to believe that part of that strong reputation comes from our unique market positioning. We have the scale of a large IT services player, but also the velocity and agility of a startup. An agile, results-driven digital technology company like Quinnox aligns seamlessly with our business objectives and supports our long-term growth strategy. With that as background, let's turn to our industry performance for Q4. In our commercial segment, year-over-year growth was driven by a combination of improvements in healthcare accounts, which improved by mid-teens, and consumer and industrial accounts, which improved by low teens. Growth in the healthcare industry was seen across our provider, pharmaceutical, and biotech clients. In the consumer and industrial space, industrials saw the largest improvement, followed by materials and utilities accounts.
Speaker #4: As Ted emphasized, we are an acquirer of choice, and I'd like to believe that part of that strong reputation comes from our unique market positioning.
Speaker #4: We have the scale of a large IT services player , but also the velocity and agility of startup a , an agile , results driven digital company like Quinnox .
Speaker #4: Aligns seamlessly with our business objectives and long term growth . strategy With that , as background , let's turn to our industry performance for the fourth quarter .
Speaker #4: commercial In our segment , year over year growth was driven by a combination of improvements in health care accounts , which improved by mid-teens , and consumer and industrial accounts , which improved by low teens .
Speaker #4: Growth in the healthcare was seen industry across our provider pharmaceutical and biotech clients in the consumer and industrial space . Industrials saw the largest improvement , followed by materials and utilities accounts .
Shiv Iyer: We also achieved low single digits revenue growth in the TMT vertical as compared to the prior year. Looking sequentially, on a billable day adjusted basis, we saw growth in four of our five commercial segment industries. Healthcare accounts posted mid-single-digit improvements, with growth in payers, providers, and pharmaceutical accounts. TMT also improved mid-single digits, with telecom, e-commerce, and software and services all increasing. In addition, as we anticipated on our last quarter's call, the financial services industry returned to sequential growth on a billable day adjusted basis, picking up low single-digit improvements from the third quarter of 2025. Within this industry, we achieved sequential improvements in wealth management, regional banks, diversified financials, and insurance accounts. In our federal segment, we track our revenues across four types of customers, which are defense and intelligence, national security, civilian, and other clients.
Shiv Iyer: We also achieved low single digits revenue growth in the TMT vertical as compared to the prior year. Looking sequentially, on a billable day adjusted basis, we saw growth in four of our five commercial segment industries. Healthcare accounts posted mid-single-digit improvements, with growth in payers, providers, and pharmaceutical accounts. TMT also improved mid-single digits, with telecom, e-commerce, and software and services all increasing. In addition, as we anticipated on our last quarter's call, the financial services industry returned to sequential growth on a billable day adjusted basis, picking up low single-digit improvements from the third quarter of 2025. Within this industry, we achieved sequential improvements in wealth management, regional banks, diversified financials, and insurance accounts. In our federal segment, we track our revenues across four types of customers, which are defense and intelligence, national security, civilian, and other clients.
Speaker #4: We also achieved low single digit revenue growth in the TMT vertical as compared to the prior year . Looking sequentially on a billable day , basis , adjusted we saw growth in four of our five commercial segment industries healthcare accounts posted mid-single digit improvements , with growth payers , providers and pharmaceutical accounts in .
Speaker #4: TMT also improved mid-single digits , with telecom and , e-commerce software and services . all In increasing addition , as we anticipated on our last quarter's call , the financial services industry returned to sequential growth on a billable day .
Speaker #4: Adjusted basis , picking up low single digit improvements from the third quarter of 2025 . Within this industry , we sequential achieved wealth management banks , diversified , regional and financials accounts in our federal segment , we track insurance our revenues across four types of customers , which are defense and intelligence , National security , civilian and other clients , defense , intelligence , and national security accounts continue to comprise approximately 70% of our total government revenues .
Shiv Iyer: Defense, intelligence, and national security accounts continue to comprise approximately 70% of our total government revenues. Government-sponsored entities, such as USPS, state and local customers, and commercial entities, comprise our other clients category. The other clients category saw mid-teens growth year-over-year due to expansion of our data, AI, and modernization efforts for USPS, as well as increases in cybersecurity work for commercial clients. Defense and intelligence revenues improved low single digits year-over-year, due in part to additional funding for Project Maven, a flagship geospatial AI contract for the Department of Defense. For those who have not had a chance to view our Investor Day presentation, I'd highly recommend watching the video on Project Maven, an incredible case study in mission-ready AI. Moving from industries to solutions.
Shiv Iyer: Defense, intelligence, and national security accounts continue to comprise approximately 70% of our total government revenues. Government-sponsored entities, such as USPS, state and local customers, and commercial entities, comprise our other clients category. The other clients category saw mid-teens growth year-over-year due to expansion of our data, AI, and modernization efforts for USPS, as well as increases in cybersecurity work for commercial clients. Defense and intelligence revenues improved low single digits year-over-year, due in part to additional funding for Project Maven, a flagship geospatial AI contract for the Department of Defense. For those who have not had a chance to view our Investor Day presentation, I'd highly recommend watching the video on Project Maven, an incredible case study in mission-ready AI. Moving from industries to solutions.
Speaker #4: Government sponsored entities such as USPS , state and local customers , and commercial entities comprise our other clients category . The other clients categories saw mid-teens growth year year over due to expansion of our , AI and data efforts for modernization USPS , as well as cybersecurity work commercial for clients .
Speaker #4: intelligence Defense and revenues improved low single digits year over year . Due in part to additional funding for Project Maven , a flagship geospatial AI contract for the Department of War those who .
Speaker #4: If you have not had a chance to view our Investor Day presentation, I'd highly recommend the video on watching Project Maven. An incredible case study in mission-ready AI.
Shiv Iyer: As Ted highlighted at the beginning of today's call, we continue to secure projects that strengthen technology infrastructure and enable governance readiness for enterprise-wide AI usage. Let me provide a few examples from Q4. For a top five US bank, our financial service industry experts were engaged to improve the bank's testing, automation, and governance ecosystem. Working hand-in-hand with our client, we deployed a bank-wide modernization program across online banking, mobile platforms, and partner integrations, vastly improving our client's enterprise-wide functionality and governance. Also, within financial services, our team helped a major US online banking and credit card company maintain its system performance as it underwent a merger with another major financial institution.
Shiv Iyer: As Ted highlighted at the beginning of today's call, we continue to secure projects that strengthen technology infrastructure and enable governance readiness for enterprise-wide AI usage. Let me provide a few examples from Q4. For a top five US bank, our financial service industry experts were engaged to improve the bank's testing, automation, and governance ecosystem. Working hand-in-hand with our client, we deployed a bank-wide modernization program across online banking, mobile platforms, and partner integrations, vastly improving our client's enterprise-wide functionality and governance. Also, within financial services, our team helped a major US online banking and credit card company maintain its system performance as it underwent a merger with another major financial institution.
Speaker #4: Moving from industries to solutions. As Ted highlighted at the beginning of the call, we continue to secure projects that strengthen today's technology infrastructure and enable governance readiness for enterprise-wide AI usage.
Speaker #4: Let me provide a few examples from the fourth quarter for a top five US bank . Our financial service industry experts were engaged to improve the bank's testing , automation and governance ecosystem .
Speaker #4: Working hand in hand with our we deployed a client , bank wide modernization across program online mobile platforms and partner banking , integrations , vastly improving our clients enterprise wide functionality and governance .
Speaker #4: Also, within the Financial Services team, our group helped a major U.S. online banking and credit card company maintain its system performance as it underwent a merger with another major financial institution.
Shiv Iyer: As a part of this DevOps project, our engineering and applications team coordinated infrastructure changes, monitored system health, and managed the building, testing, and deploying of software to ensure a smooth transition as the two banks joined forces. On the theme of data migration, during Q4, our telecom industry experts partnered with Snowflake, for whom we are an elite AI data and cloud services partner, to enable a major US connectivity and communications company to centralize marketing data from a variety of external vendor systems in Snowflake. Now, in Q1 of 2026, we are laying a governed foundation for Snowflake's Cortex, Snowflake's native AI ML capability that will enable our client to securely run built-in features such as large language models, AI-powered apps, and GenAI insights. AI's explosive growth, powered by soaring energy demands, is driving unprecedented expansion in data center capacity worldwide.
Shiv Iyer: As a part of this DevOps project, our engineering and applications team coordinated infrastructure changes, monitored system health, and managed the building, testing, and deploying of software to ensure a smooth transition as the two banks joined forces. On the theme of data migration, during Q4, our telecom industry experts partnered with Snowflake, for whom we are an elite AI data and cloud services partner, to enable a major US connectivity and communications company to centralize marketing data from a variety of external vendor systems in Snowflake. Now, in Q1 of 2026, we are laying a governed foundation for Snowflake's Cortex, Snowflake's native AI ML capability that will enable our client to securely run built-in features such as large language models, AI-powered apps, and GenAI insights. AI's explosive growth, powered by soaring energy demands, is driving unprecedented expansion in data center capacity worldwide.
Speaker #4: As a part of this DevOps project , our engineering and applications team coordinated infrastructure changes , monitored system health and managed the building , testing and deploying of software to ensure a smooth transition .
Speaker #4: As the two banks joined forces on the theme of data migration during the fourth quarter, our telecom industry experts partnered with Snowflake, for whom we are an elite AI, data, and cloud services partner, to enable a major US connectivity and communications company to centralize marketing and a variety of data from vendor systems in external.
Speaker #4: snowflake Now , in the first quarter of 2026 , we are laying a governance foundation for snowflakes . Cortex snowflakes , native AI , ML enable our capability that will client to securely run built in features such as language large models , AI powered apps , and AI insights .
Speaker #4: is AI explosive growth powered by soaring energy demands . Is driving unprecedented expansion in data center capacity worldwide . Our cloud and infrastructure team actively collaborating with clients on rapidly scaling their AI data center fleets for example , we're currently partnering with a major Hyperscaler to operationalize multiple data centers on what is already one of the largest AI data center campuses in the world .
Shiv Iyer: Our cloud and infrastructure team actively collaborating with clients on rapidly scaling their AI data center fleets. For example, we're currently partnering with a major hyperscaler to operationalize multiple data centers on what is already one of the largest AI data center campuses in the world. For this project, we are responsible for managing the hyperscaler's critical environments and leading the complex logistics required to deploy and integrate the data center's advanced system. Ultimately, scaling AI from concept to production requires addressing long-standing challenges of fragmented tools, governance complexity, and resource constraints. In response to these inherent challenges, in November, we launched our AI Factory, a unified framework designed by our joint commercial and government AI teams to empower organization to integrate AI seamlessly into their core business strategies.
Shiv Iyer: Our cloud and infrastructure team actively collaborating with clients on rapidly scaling their AI data center fleets. For example, we're currently partnering with a major hyperscaler to operationalize multiple data centers on what is already one of the largest AI data center campuses in the world. For this project, we are responsible for managing the hyperscaler's critical environments and leading the complex logistics required to deploy and integrate the data center's advanced system. Ultimately, scaling AI from concept to production requires addressing long-standing challenges of fragmented tools, governance complexity, and resource constraints. In response to these inherent challenges, in November, we launched our AI Factory, a unified framework designed by our joint commercial and government AI teams to empower organization to integrate AI seamlessly into their core business strategies.
Speaker #4: For this project , we are responsible for managing the hyperscalers critical environments and leading the complex logistics required to deploy and integrate the data system centers advanced .
Speaker #4: Ultimately , scaling AI concept to from production requires addressing long standing challenges of fragmented tools , governance , complexity , and resource constraints .
Speaker #4: In response to these inherent challenges , in November , we launched our AI factory , a unified framework designed by our joint commercial and government AI teams to empower organizations to integrate AI seamlessly into their core business strategies .
Shiv Iyer: Understanding the challenges around safe and secure AI deployments, our teams have been particularly focused on our solutions related to AI governance. Our federal cybersecurity experts have been busy demoing our AI Factory's Watchtower, a monitoring tool with built-in trust ops, to both our federal and commercial clients. In addition to building our own assets and accelerators, we're partnering with enterprise platforms to co-deliver high-impact solutions to our commercial and federal clients. Starting with our federal segment, in Q4, we were awarded additional funding by the Department of Homeland Security and the agency's Continuous Diagnostics and Mitigation Program office to deploy Elastic's AI capabilities at scale. Our federal team boasts more Elastic-certified engineers than any other organization other than Elastic itself, and was recently named Elastic's Top Services Partner of the Year.
Shiv Iyer: Understanding the challenges around safe and secure AI deployments, our teams have been particularly focused on our solutions related to AI governance. Our federal cybersecurity experts have been busy demoing our AI Factory's Watchtower, a monitoring tool with built-in trust ops, to both our federal and commercial clients. In addition to building our own assets and accelerators, we're partnering with enterprise platforms to co-deliver high-impact solutions to our commercial and federal clients. Starting with our federal segment, in Q4, we were awarded additional funding by the Department of Homeland Security and the agency's Continuous Diagnostics and Mitigation Program office to deploy Elastic's AI capabilities at scale. Our federal team boasts more Elastic-certified engineers than any other organization other than Elastic itself, and was recently named Elastic's Top Services Partner of the Year.
Speaker #4: Understanding the challenges around safe and secure AI deployments , our have been teams particularly focused on our solutions related to AI governance . Our federal Cyber security experts have been busy demoing our AI factories .
Speaker #4: monitoring a Watchtower , tool with built in ops to both our federal and trust commercial clients . In addition to building our own assets and accelerators , we're partnering with enterprise platforms high impact Co-deliver to solutions to our commercial and clients , starting with federal our federal segment in the quarter , we were awarded additional fourth funding Department of by the Homeland Security and the agency's continuous Diagnostic and Mitigation Program Office to deploy elastic AI capabilities at scale .
Speaker #4: Our federal team boasts elastic certified engineers than any other organization other than elastic itself , recently named the Elastic Top Services partner of the year .
Shiv Iyer: In addition to Elastic, we continue to be a leading ServiceNow provider in the federal space, leveraging ServiceNow's agentic capabilities in new initiatives across the Departments of Homeland Security, Defense, and Energy. We also recently established a strategic partnership with Wiz, a rapidly growing cloud security company in the process of being acquired by Google. In the fourth quarter, we won our first engagement with Wiz for the Centers for Medicare and Medicaid Services, establishing our footprint in the high-value federal healthcare market. On the commercial side of our business, we continue to make great progress in advancing our positioning with Workday. During the fourth quarter, we were selected as one of the first partners approved to deploy Paradox, Workday's candidate experience agent. Paradox uses conversational AI, simplify interactions, and deliver better experiences.... Conversational AI use cases are growing rapidly.
Shiv Iyer: In addition to Elastic, we continue to be a leading ServiceNow provider in the federal space, leveraging ServiceNow's agentic capabilities in new initiatives across the Departments of Homeland Security, Defense, and Energy. We also recently established a strategic partnership with Wiz, a rapidly growing cloud security company in the process of being acquired by Google. In the fourth quarter, we won our first engagement with Wiz for the Centers for Medicare and Medicaid Services, establishing our footprint in the high-value federal healthcare market. On the commercial side of our business, we continue to make great progress in advancing our positioning with Workday. During the fourth quarter, we were selected as one of the first partners approved to deploy Paradox, Workday's candidate experience agent. Paradox uses conversational AI, simplify interactions, and deliver better experiences.... Conversational AI use cases are growing rapidly.
Speaker #4: In addition to elastic , we continue to be a leading ServiceNow provider in Federal the Space , leveraging ServiceNow Agentic capabilities in new initiatives across the departments of Homeland Security , War and Energy .
Speaker #4: We also recently established a strategic partnership with Wiz , a rapidly growing cloud security company in the process of being acquired by Google in the fourth we won our engagement first Wiz with for the centers for Medicare and Services Medicaid , establishing our footprint in the value federal market on the high commercial side of our health care business , we continue to make great progress in advancing our positioning with workday .
Speaker #4: During the fourth quarter , we were selected as one of the first partners approved to deploy Paradox Workday's candidate Experience Agent . Paradox uses conversational AI , simplify interactions , and deliver better experiences .
Shiv Iyer: As a part of our Salesforce 360 partnership, for example, we are integrating Agentforce into Slack to enable clients to search their Salesforce CRM with ease. As we expand our value proposition as Everforth, Salesforce, ServiceNow, and Workday will all be central to our cross-platform AI strategy. These are just a few of the many advanced solutions capabilities we deployed in Q4. We're excited about the future and look forward to continuing to advance our next wave growth strategy. With that, I'll turn the call over to our CFO, Marie Perry, to discuss ASGN's Q4 2025 performance and Q1 2026 guidance.
Shiv Iyer: As a part of our Salesforce 360 partnership, for example, we are integrating Agentforce into Slack to enable clients to search their Salesforce CRM with ease. As we expand our value proposition as Everforth, Salesforce, ServiceNow, and Workday will all be central to our cross-platform AI strategy. These are just a few of the many advanced solutions capabilities we deployed in Q4. We're excited about the future and look forward to continuing to advance our next wave growth strategy. With that, I'll turn the call over to our CFO, Marie Perry, to discuss ASGN's Q4 2025 performance and Q1 2026 guidance.
Speaker #4: Conversational AI cases are growing rapidly as a part of our 360 partnership with Salesforce. For example, we are integrating Agent Force into Slack to enable clients to search their Salesforce CRM with ease.
Speaker #4: As we expand our value proposition . As ever . Salesforce , ServiceNow , and workday will all central to be our cross-platform AI strategy .
Speaker #4: These are just a few of the many advanced solutions and capabilities we deployed in the fourth quarter. We're future-focused about this and look forward to continuing to advance our next wave of growth strategy.
Speaker #4: With I'll turn the that , call over to our CFO , Marie Perry , to discuss ASGN fourth quarter 2025 performance and first quarter 2026 guidance .
Marie Perry: Thanks, Shiv. For Q4, revenues totaled $980.1 million, at the top end of our guidance range and relatively consistent with the prior year period. Revenues from our commercial segment were $698.6 million, an increase of 0.9% compared to the prior year, and up 2.2% sequentially on a billable day adjusted basis. Assignment revenue totaled $359.2 million, a decline of 12% year-over-year, reflecting continued softness in portions of our commercial segment that are more sensitive to changes in the macroeconomic cycle. Revenue from our commercial consulting, the largest of our high-margin revenue streams, totaled $339.4 million, an increase of 19.2% year-over-year.
Marie Perry: Thanks, Shiv. For Q4, revenues totaled $980.1 million, at the top end of our guidance range and relatively consistent with the prior year period. Revenues from our commercial segment were $698.6 million, an increase of 0.9% compared to the prior year, and up 2.2% sequentially on a billable day adjusted basis.
Speaker #5: Jim, thanks. For the fourth quarter, revenues totaled $980.1 million, at the top end of our guidance range, and were relatively consistent with the prior year period.
Speaker #5: from our Revenues commercial segment were 698.6 million , an increase of 0.9% compared to the year , and up 2.2% sequentially on a billable day .
Marie Perry: Assignment revenue totaled $359.2 million, a decline of 12% year-over-year, reflecting continued softness in portions of our commercial segment that are more sensitive to changes in the macroeconomic cycle. Revenue from our commercial consulting, the largest of our high-margin revenue streams, totaled $339.4 million, an increase of 19.2% year-over-year.
Speaker #5: Adjusted basis . Assignment revenue 359.2 million , a decline of 12% year over year , reflecting continued softness in portions of our commercial segment that are more sensitive to changes in the macroeconomic cycles .
Speaker #5: Revenue from our consulting , the largest commercial of our high margin revenue totaled streams 339.4 million , an increase of 19.2% year over year .
Marie Perry: Excluding TopBloc, which we acquired in March 2025, consulting revenues improved mid-single digits year over year. Revenues from our federal government segment were $281.5 million, a decrease of 3.7% year over year. Turning to margin, gross margin for the fourth quarter of 2025 was 28.9%, consistent with the prior year. Gross margin for our commercial segment was 32.6%, which is in line with the prior year. Gross margins from our federal government segment was 19.9%, a decline of 60 basis points year over year, due primarily to the loss of higher-margin contracts related to DOGE. The impact of DOGE will anniversary in March 2026.
Marie Perry: Excluding TopBloc, which we acquired in March 2025, consulting revenues improved mid-single digits year over year. Revenues from our federal government segment were $281.5 million, a decrease of 3.7% year over year. Turning to margin, gross margin for the fourth quarter of 2025 was 28.9%, consistent with the prior year. Gross margin for our commercial segment was 32.6%, which is in line with the prior year. Gross margins from our federal government segment was 19.9%, a decline of 60 basis points year over year, due primarily to the loss of higher-margin contracts related to DOGE. The impact of DOGE will anniversary in March 2026.
Speaker #5: Excluding top block , which we acquired in March of 2025 . Consulting revenues improved mid-single digits year over year . Revenues from our federal government segment were 281.5 million , a decrease of 3.7% year over year .
Speaker #5: Turning to margins , gross margin for the fourth quarter of 2025 was 28.9% , consistent with the prior year gross margin for our commercial segment was 32.6% , which is in line with the year prior gross margins from our federal government segment was 19.9% , a decline of 60 basis points year over year , due primarily to the loss of higher margin contracts related to dosage .
Marie Perry: SG&A for the quarter was $210.5 million, compared to $197.9 million in Q4 2024. SG&A expenses included $10.7 million in acquisition, integration, and strategic planning expenses. These items were not included in our previously announced guidance estimates. Also, relative to guidance, our estimates assumed an effective tax rate of 28%. In the fourth quarter, our effective tax rate was 36.4%, above the 28% forecast, driven primarily by discrete one-time items not included in our guidance. For the fourth quarter, net income was $25.2 million. Adjusted EBITDA was $107.9 million. Adjusted EBITDA margin was 11% above our guidance range, driven mainly by greater mix of commercial segment revenues.
Marie Perry: SG&A for the quarter was $210.5 million, compared to $197.9 million in Q4 2024. SG&A expenses included $10.7 million in acquisition, integration, and strategic planning expenses. These items were not included in our previously announced guidance estimates. Also, relative to guidance, our estimates assumed an effective tax rate of 28%. In the fourth quarter, our effective tax rate was 36.4%, above the 28% forecast, driven primarily by discrete one-time items not included in our guidance. For the fourth quarter, net income was $25.2 million. Adjusted EBITDA was $107.9 million. Adjusted EBITDA margin was 11% above our guidance range, driven mainly by greater mix of commercial segment revenues.
Speaker #5: The impact of dosage will anniversary in March of the 2026 quarter was $210.5 million, compared to $197.9 million in the fourth quarter of 2020.
Speaker #5: For SG&A, expenses included $10.7 million in acquisition, integration, and strategic planning expenses. These items were not included in our previously announced guidance.
Speaker #5: Also , relative to guidance , our estimates assumed an effective tax estimates rate of 28% in the fourth quarter . Our effective tax rate was 36.4% , above the 28% forecast , driven primarily by discrete one time items not included in our guidance .
Speaker #5: For the fourth quarter , net income was 25.2 million , adjusted EBITDA was 107.9 million . Adjusted EBITDA margin above was 11% our guidance range mainly by , driven greater mix of commercial segment revenues at , cash quarter end and cash equivalent was 161.2 million and we had approximately 455 million available on our 500 million senior secured revolver .
Marie Perry: At quarter end, cash and cash equivalents was $161.2 million, and we had approximately $455 million available on our $500 million senior secured revolver. Our net leverage ratio was 2.4 times at the end of the quarter. As Ted previously mentioned, we had very strong Free Cash Flow generation in the fourth quarter. Free Cash Flow was $93.7 million, a conversion rate of approximately 87% of Adjusted EBITDA, well above our conversion target rate of 60% to 65%. We continue to deliver value to our shareholders, and in the quarter, we deployed roughly $64.2 million of our Free Cash Flow to repurchase 1.4 million shares at an average share price of $46.05.
Marie Perry: At quarter end, cash and cash equivalents was $161.2 million, and we had approximately $455 million available on our $500 million senior secured revolver. Our net leverage ratio was 2.4 times at the end of the quarter. As Ted previously mentioned, we had very strong Free Cash Flow generation in the fourth quarter. Free Cash Flow was $93.7 million, a conversion rate of approximately 87% of Adjusted EBITDA, well above our conversion target rate of 60% to 65%. We continue to deliver value to our shareholders, and in the quarter, we deployed roughly $64.2 million of our Free Cash Flow to repurchase 1.4 million shares at an average share price of $46.05.
Speaker #5: Our net leverage ratio was 2.4 times at the end of the quarter previously mentioned. As Ted, we had very strong free cash flow generation in the fourth quarter.
Speaker #5: Free cash flow was 93.7 million , a conversion rate of approximately 87% of adjusted EBITDA , well above our conversion target of rate We 60 to 65% .
Speaker #5: continued to deliver value to our shareholders , and in the quarter , we deployed roughly 64.2 million of our free cash flow to repurchase at 1.4 million shares an average share price of $46.05 on a full year basis .
Marie Perry: On a full year basis, free cash flow was also strong and totaled $288.1 million, or 68.2% of adjusted EBITDA. We deployed $170.1 million of free cash flow to repurchase 3.1 million shares in 2025 at an average price of $55. We have approximately 972 million remaining on our $1 billion share repurchase authorization. Re-emphasizing Ted's prior commentary, our strong free cash flow is a hallmark of our business model. It provides a strategic advantage that enables us to fund growth initiatives, opportunistically repurchase shares, and invest in strategic M&A, all while maintaining a healthy balance sheet. By following a disciplined and balanced approach to capital allocation, we can invest in high return opportunities and prudently manage our leverage, driving sustainable long-term value for our shareholders.
Marie Perry: On a full year basis, free cash flow was also strong and totaled $288.1 million, or 68.2% of adjusted EBITDA. We deployed $170.1 million of free cash flow to repurchase 3.1 million shares in 2025 at an average price of $55. We have approximately 972 million remaining on our $1 billion share repurchase authorization. Re-emphasizing Ted's prior commentary, our strong free cash flow is a hallmark of our business model. It provides a strategic advantage that enables us to fund growth initiatives, opportunistically repurchase shares, and invest in strategic M&A, all while maintaining a healthy balance sheet. By following a disciplined and balanced approach to capital allocation, we can invest in high return opportunities and prudently manage our leverage, driving sustainable long-term value for our shareholders.
Speaker #5: Free cash flow was also strong . In total , 288.1 million , or 68.2% of adjusted EBITDA . We 170.1 million of free cash flow to repurchase 3.1 million shares in 2025 at an average price of $55 .
Speaker #5: We have approximately $972 million remaining on our $1 billion share repurchase authorization. Re-emphasizing Ted's prior commentary, our strong free cash flow is a hallmark of our business model.
Speaker #5: It provides a strategic advantage that enables us to fund growth initiatives, opportunistically repurchase shares, and invest in strategic M&A, all while maintaining a healthy balance sheet by following a disciplined and balanced approach to capital allocation.
Speaker #5: We can invest in high return opportunities and manage our leverage , driving sustainable long term value for our shareholders . With that in mind , January , signed a purchase agreement we to in acquire definitive Quinnox for The acquisition , which remains subject to HSR $290 million in cash .
Marie Perry: With that in mind, in January, we signed a definitive purchase agreement to acquire Quinnox for $290 million in cash. The acquisition, which remains subject to HSR approval, is anticipated to close in March. Post-close, we anticipate our net leverage ratio will be approximately 2.9 times after funding the acquisition with cash and borrowings on our revolver. We are committed to reducing our debt over time to bring our net leverage closer to our 2.5 times target. We will, however, continue to opportunistically balance capital deployment with organic investment and share repurchases. Turning to guidance. Our financial estimates for Q1 2026 are set forth in our earnings release and supplemental material. These estimates are based on current market conditions and assumes no further deterioration in the markets we serve.
Marie Perry: With that in mind, in January, we signed a definitive purchase agreement to acquire Quinnox for $290 million in cash. The acquisition, which remains subject to HSR approval, is anticipated to close in March. Post-close, we anticipate our net leverage ratio will be approximately 2.9 times after funding the acquisition with cash and borrowings on our revolver. We are committed to reducing our debt over time to bring our net leverage closer to our 2.5 times target. We will, however, continue to opportunistically balance capital deployment with organic investment and share repurchases. Turning to guidance. Our financial estimates for Q1 2026 are set forth in our earnings release and supplemental material. These estimates are based on current market conditions and assumes no further deterioration in the markets we serve.
Speaker #5: approval , is anticipated to close in March . Post-close . We our net anticipate leverage ratio will be approximately 2.9 times after funding the acquisition with cash and borrowings on our revolver , we are committed to reducing our debt over time to bring our net leverage closer to our 2.5 times target .
Speaker #5: We will , however , continue to opportunistically balance capital deployment with organic investment and share repurchases . Turning to our guidance , financial estimates for the first quarter of forth in our earnings release and supplemental 2026 are set material .
Marie Perry: Guidance also assumes 62 billable days in Q1, which is the same number of billable days as a year ago period, and one more day than Q4 of 2025. We typically see a low single-digit decline in revenue in Q4 to Q1, despite the increase in the sequential billable day, due to a seasonal reset that occurs annually. Our quarterly estimates do not include any acquisition, integration, and strategic planning expenses. As we highlighted during our Investor Day, we are streamlining our technology systems and deploying strategic efforts to generate sizable structural cost savings for our business. These cost savings are progressing as planned and will ramp up further over the coming quarters. Our Q1 guidance incorporates two additional considerations.
Marie Perry: Guidance also assumes 62 billable days in Q1, which is the same number of billable days as a year ago period, and one more day than Q4 of 2025. We typically see a low single-digit decline in revenue in Q4 to Q1, despite the increase in the sequential billable day, due to a seasonal reset that occurs annually. Our quarterly estimates do not include any acquisition, integration, and strategic planning expenses. As we highlighted during our Investor Day, we are streamlining our technology systems and deploying strategic efforts to generate sizable structural cost savings for our business. These cost savings are progressing as planned and will ramp up further over the coming quarters. Our Q1 guidance incorporates two additional considerations.
Speaker #5: These estimates are based on current market conditions assumes no and further deterioration in the markets we serve . Guidance also assumes 62 billable days in the first quarter , which is the same number of billable days as a year ago period , day and one more than the fourth quarter of 2025 .
Speaker #5: typically see a low single decline in digit in the fourth quarter to the first quarter . Despite the increase in the sequential day due to a seasonal reset that occurs annually , our quarterly estimates do not include any acquisition , integration , and expenses strategic as we highlighted during our Investor Day , we are streamlining our technology systems and deploying strategic efforts to generate sizable cost structural savings for our business .
Speaker #5: These are cost savings progressing as planned and ramp up will further over the coming quarters . first quarter Our guidance incorporates two additional considerations , with regards adjusted EBITDA to margin .
Marie Perry: With regards to adjusted EBITDA margin, the first quarter typically sees an approximate 100 basis points decrease sequentially related to our annual payroll tax reset. In addition, our first quarter guidance does not include a contribution from Quinnox. Quinnox is expected to generate low to mid-teens revenue growth in 2026 over 2025 revenues of approximately $100 million. We anticipate nine months of Quinnox 2026 revenues will be incorporated into our full year financials. Quinnox also anticipates adjusted EBITDA margins in the low 20% range for the year.
Marie Perry: With regards to adjusted EBITDA margin, the first quarter typically sees an approximate 100 basis points decrease sequentially related to our annual payroll tax reset. In addition, our first quarter guidance does not include a contribution from Quinnox. Quinnox is expected to generate low to mid-teens revenue growth in 2026 over 2025 revenues of approximately $100 million. We anticipate nine months of Quinnox 2026 revenues will be incorporated into our full year financials. Quinnox also anticipates adjusted EBITDA margins in the low 20% range for the year.
Speaker #5: The first quarter typically sees an approximate 100 basis point decrease related to our sequentially annual payroll tax reset addition , . In our first quarter not guidance does include a from contribution Quinnox .
Speaker #5: is expected to Quinnox generate low to teens mid in 2026 growth over 2025 . Revenues of approximately 100 million . We anticipate nine months of Quinnox 2026 .
Speaker #5: Revenues will be incorporated into our financials . Quinnox also anticipates adjusted EBITDA margins in the 20% range for year the . With that as full year background , for the low first quarter of 2026 , we are estimating revenues of 960 million to 980 million net income of 25.8 million to 29.4 million .
Marie Perry: With that as background, for Q1 2026, we are estimating revenues of $960 million to $980 million, net income of $25.8 million to $29.4 million, Adjusted EBITDA of $93.5 million to $98.5 million, and Adjusted EBITDA margin of 9.7% to 10.1%. Thank you. I'll now turn the call back over to Ted.
Marie Perry: With that as background, for Q1 2026, we are estimating revenues of $960 million to $980 million, net income of $25.8 million to $29.4 million, Adjusted EBITDA of $93.5 million to $98.5 million, and Adjusted EBITDA margin of 9.7% to 10.1%. Thank you. I'll now turn the call back over to Ted.
Speaker #5: Adjusted EBITDA of 93.5 million to 98.5 million , and adjusted EBITDA margin of 9.7% to 10.1% . Thank you . I'll now back turn the call Ted .
Ted Hanson: Thanks, Marie. We enter the new year energized by the progress we've achieved and the robust foundation we've established. Our strategic initiatives are firmly in place, and our strong balance sheet and disciplined approach to capital allocation empowers us to pursue growth opportunities with confidence. The acquisition of Quinnox is a great example of our M&A playbook in action and directly aligns with the strategy to enhance our digital engineering and global delivery capabilities, as we highlighted at our recent Investor Day. The upcoming launch of Everforth, our new unified customer and investor-facing brand, debuting in the first half of this year, also marks a transformative step in our next wave growth strategy and will enhance our operational efficiency and scale. Ultimately, by integrating cutting-edge technology, world-class engineering, and deep expertise, we are very well positioned to adapt and thrive in today's rapidly evolving AI-driven business landscape.
Ted Hanson: Thanks, Marie. We enter the new year energized by the progress we've achieved and the robust foundation we've established. Our strategic initiatives are firmly in place, and our strong balance sheet and disciplined approach to capital allocation empowers us to pursue growth opportunities with confidence.
Speaker #3: Marie, thanks. We now enter the year buoyed by the progress we've achieved and the robust, energized foundation we've established. Our strategic initiatives are firmly in place, and our strong balance sheet and disciplined approach to capital allocation empower us to pursue growth opportunities with confidence.
Ted Hanson: The acquisition of Quinnox is a great example of our M&A playbook in action and directly aligns with the strategy to enhance our digital engineering and global delivery capabilities, as we highlighted at our recent Investor Day. The upcoming launch of Everforth, our new unified customer and investor-facing brand, debuting in the first half of this year, also marks a transformative step in our next wave growth strategy and will enhance our operational efficiency and scale.
Speaker #3: The acquisition of Quinnox is a great example of our playbook. It directly aligns with the strategy to enhance our digital engineering action capabilities, as we highlighted at our recent Investor Day. The upcoming launch of our Everfi, the unified customer and investor-facing new brand, supports this strategy.
Speaker #3: Debuting in the first half of year . Also marks transformative step in our next wave of growth strategy and will this enhance our operational efficiency and scale .
Ted Hanson: Ultimately, by integrating cutting-edge technology, world-class engineering, and deep expertise, we are very well positioned to adapt and thrive in today's rapidly evolving AI-driven business landscape.
Speaker #3: by integrating cutting edge technology Ultimately , , world class and deep expertise , engineering we are positioned to adapt and in today's rapidly , AI evolving business thrive driven .
Ted Hanson: That concludes our prepared remarks. I want to thank all our employees for your incredible efforts this past year. Your unwavering commitment to our clients is evident and will most certainly guide us to success in 2026. With that, let's open up the call to questions.
Ted Hanson: That concludes our prepared remarks. I want to thank all our employees for your incredible efforts this past year. Your unwavering commitment to our clients is evident and will most certainly guide us to success in 2026. With that, let's open up the call to questions.
Speaker #3: That concludes our remarks . want to I thank all our employees for incredible efforts this Your unwavering your clients is and evident commitment to our guide us to success With in 2026 .
Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone 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 the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes to the line of Jeff Silber with BMO Capital Markets. Please proceed with your question.
Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone 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 the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes to the line of Jeff Silber with BMO Capital Markets. Please proceed with your question.
Speaker #3: let's open up the call to questions .
Speaker #1: you . We will now be conducting a Thank question and answer session . If you would like to ask a question , please press star one on your telephone keypad .
Speaker #1: A confirmation tone 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 the handset before pressing the star key.
Speaker #1: A confirmation tone will indicate your line is in the question You may press star two to remove yourself from the queue . queue for participants using speaker equipment , and may be necessary to pick up the before pressing the key star handset One moment while we poll please , question for .
Speaker #1: Our first question comes from the line of Jeff Silber with BMO Capital Markets . Please with your question .
Speaker #1: Our first question comes from the line of Jeff Silber with BMO Capital Markets . Please with your question proceed so
Jeff Silber: Thanks so much. Wanted to focus on, I guess, your M&A strategy. If you can tell us, you know, what is your focus? I know you've been a little bit more acquisitive over the past year. What are you looking for? How comfortable are you in terms of continued leverage?
Jeff Silber: Thanks so much. Wanted to focus on, I guess, your M&A strategy. If you can tell us, you know, what is your focus? I know you've been a little bit more acquisitive over the past year. What are you looking for? How comfortable are you in terms of continued leverage?
Speaker #6: . I wanted to focus guess , your M&A strategy , if you can tell us on , I your what is focus ? I know you've been a more little bit acquisitive over the past year .
Ted Hanson: So, Jeff, thanks for the question. I'll just go back to the Investor Day. Obviously, organic growth, first, that's always the primary focus. We're beginning sequentially and soon here year over year to get back to organic growth rates here on a positive basis. If you think about the acquisition strategy, you know, overall, at the highest level, it's identifying solution capabilities that we see are in the greatest need of our enterprise clients, and then, pulling those acquired solution capabilities across our enterprise account base. Our acquisition of GlideFast and ServiceNow ecosystem was a great example of that. Our acquisition of, most recently of TopBloc within the Workday ecosystem, another example of that.
Ted Hanson: So, Jeff, thanks for the question. I'll just go back to the Investor Day. Obviously, organic growth, first, that's always the primary focus. We're beginning sequentially and soon here year over year to get back to organic growth rates here on a positive basis. If you think about the acquisition strategy, you know, overall, at the highest level, it's identifying solution capabilities that we see are in the greatest need of our enterprise clients, and then, pulling those acquired solution capabilities across our enterprise account base.
Speaker #6: What are you looking for ? How you in comfortable are continued leverage ?
Speaker #3: So Jeff , thanks for the question . I'll just go back to the Investor Day . Obviously , organic growth . First . That's always the primary focus .
Speaker #3: We're beginning and soon sequentially here year over year to get back to organic growth rates here on a positive basis . If you think about the acquisition strategy , you know , at overall the level , highest it's identifying solution capabilities that we see are in the need greatest enterprise of our clients then .
Speaker #3: And those solution acquired pulling capabilities our across enterprise account base , our acquisition of fast and ecosystem was example of that . Our acquisition of most ServiceNow recently block of top workday within the ecosystem .
Ted Hanson: Our acquisition of GlideFast and ServiceNow ecosystem was a great example of that. Our acquisition of, most recently of TopBloc within the Workday ecosystem, another example of that.
Ted Hanson: And now with Quinnox, real digital engineering capabilities, deep and complex systems, and being able to deploy that across this account base, and with it, getting a offshore platform delivery capability was really the point here. But again, it's solution capabilities that we see are in demand. And you know, I think the good thing about this, Jeff, is we get to see these because we're sitting at the table with our clients, understanding their strategic IT roadmaps, and then we can pull back from that and say: Can we position for that organically, or is this an opportunity to buy versus build, if you will, from an M&A standpoint?
Ted Hanson: And now with Quinnox, real digital engineering capabilities, deep and complex systems, and being able to deploy that across this account base, and with it, getting a offshore platform delivery capability was really the point here. But again, it's solution capabilities that we see are in demand. And you know, I think the good thing about this, Jeff, is we get to see these because we're sitting at the table with our clients, understanding their strategic IT roadmaps, and then we can pull back from that and say: Can we position for that organically, or is this an opportunity to buy versus build, if you will, from an M&A standpoint?
Speaker #3: Another example of that . now with And Equinox digital Engineering capabilities real , deep and complex systems and being able to deploy that across this account base it and getting a offshore platform delivery capability was point here .
Speaker #3: really the again , But it's solution it's capabilities that we see are demand and in , you know , I good thing think the about this , Jeff , is we get to see these we're sitting at the table because clients , understanding their strategic IT roadmaps .
Speaker #3: And then back from we can and say , can we pull that position for that organically , or is this a opportunity buy versus build , if you will , M&A standpoint to .
Jeff Silber: I'm sorry, the second part of the question was comfortable being with leverage?
Jeff Silber: I'm sorry, the second part of the question was comfortable being with leverage?
Ted Hanson: Yeah. Well, look, I think we're post-acquisition gonna be at 2.9. I mean, I would say that's still very modestly leveraged. So, one, we have to have confidence in our numbers going forward, which we have this ability to. Two, we have to have confidence in the target and their ability to generate the revenues and EBITDA they expect coming in. And then three, we have to have a pathway if we're gonna take on a modest amount of leverage, to get the acquisition done, to see a path to deliver back below our target of 2.5. And so I, I think all three of those things are in align, if you will, this time.
Ted Hanson: Yeah. Well, look, I think we're post-acquisition gonna be at 2.9. I mean, I would say that's still very modestly leveraged. So, one, we have to have confidence in our numbers going forward, which we have this ability to. Two, we have to have confidence in the target and their ability to generate the revenues and EBITDA they expect coming in.
Speaker #3: ?
Speaker #6: second part of the question And I'm sorry , the comfortable being with leverage
Speaker #3: Well , look , I
Speaker #3: think we . Yeah . are acquisition going to post at 2.9 . I mean , I be would say that's still modestly leveraged .
Speaker #3: one we have to So have confidence in our numbers going forward , which we have visibility to . Two , we have to have confidence in the target their ability to and generate the revenues and They EBITDA .
Ted Hanson: And then three, we have to have a pathway if we're gonna take on a modest amount of leverage, to get the acquisition done, to see a path to deliver back below our target of 2.5. And so I, I think all three of those things are in align, if you will, this time.
Speaker #3: expect coming in . And then three , we have to have a pathway to a modest amount of take on leverage get the if we're going done , to see a acquisition to deliver back below our target of two and a half .
Ted Hanson: And you know, Jeff, from past acquisitions, when we've made larger platform acquisitions, we've levered up to 3.8 times, probably on 6 different occasions, and within 18 to 24 months, delevered right back down below our target of 2.5.
Ted Hanson: And you know, Jeff, from past acquisitions, when we've made larger platform acquisitions, we've levered up to 3.8 times, probably on 6 different occasions, and within 18 to 24 months, delevered right back down below our target of 2.5.
Speaker #3: And so I all three of those things are in alignment , think will . This time . And you know , Jeff , from past acquisitions , when we've made platform larger acquisitions , we've levered up 3.8 times , probably occasions six different to within .
Speaker #3: on And right back , the levered below our down 18 to 24 months target of two and a half .
Jeff Silber: Okay, great. Thanks so much.
Jeff Silber: Okay, great. Thanks so much.
Operator: Thank you. Our next question comes from the line of Toby Sommer with Truist Securities. Please proceed with your question.
Operator: Thank you. Our next question comes from the line of Toby Sommer with Truist Securities. Please proceed with your question.
Speaker #6: so Great . much Okay . .
Speaker #1: . Our next Thank question you comes from the line of Toby Selmer with Truist Securities . proceed with your question Please .
Tobey Sommer: Thanks. Along the same lines of acquisitions, how do you think about the capital allocation tension between buying back your stock, which is at a multiple that you can see, and buying commercial IT consulting businesses that carry higher margin and usually are growing more quickly than sort of the mothership, but also fetch a premium to the aggregate multiple of the company?
Tobey Sommer: Thanks. Along the same lines of acquisitions, how do you think about the capital allocation tension between buying back your stock, which is at a multiple that you can see, and buying commercial IT consulting businesses that carry higher margin and usually are growing more quickly than sort of the mothership, but also fetch a premium to the aggregate multiple of the company?
Speaker #7: Thanks . Along the same lines of acquisitions , how do you how do you think about the capital allocation tension between buying back your which is a multiple that you can see and buying commercial ?
Speaker #7: IT consulting businesses that carry higher margin and usually are growing more quickly stock , than sort of mothership the the . But fetch also a premium the aggregate company multiple of the
Ted Hanson: Yeah. Well, look, Toby, I think on the one hand, you know, doing share repurchases is a very accretive thing, especially where the stock is trading today. But we have to be mindful that that's also a permanent retirement of capital, right? And there's some investment that needs to go into the firm, both organically and pointed towards M&A, to position the firm to where we need to be for the future. And we're very fortunate that at this scale, we can do both. Both are accretive. As you said, the acquisition is accretive to growth rates, to growth margins, to EBITDA margins, to cash flow, and to strategy. And so, you know, I think the two of those work hand in hand. So we're certainly mindful of that, but, but you can't be all one or the other.
Ted Hanson: Yeah. Well, look, Toby, I think on the one hand, you know, doing share repurchases is a very accretive thing, especially where the stock is trading today. But we have to be mindful that that's also a permanent retirement of capital, right? And there's some investment that needs to go into the firm, both organically and pointed towards M&A, to position the firm to where we need to be for the future. And we're very fortunate that at this scale, we can do both. Both are accretive.
Speaker #3: look , Well , I
Speaker #3: Think, on one hand, you know, on the... Yeah. Share repurchases is a creative thing, especially where the stock is trading at a very...
Speaker #3: But we have to be mindful that that's permanent also a retirement of capital . Right . And some investment that needs to go into the firm .
Speaker #3: Both organically and pointed towards M&A to position the firm to where we need to be for the future .
Ted Hanson: As you said, the acquisition is accretive to growth rates, to growth margins, to EBITDA margins, to cash flow, and to strategy. And so, you know, I think the two of those work hand in hand. So we're certainly mindful of that, but, but you can't be all one or the other.
Speaker #3: fortunate that at this do both scale , we can . Both are creative . As acquisition is growth creative to rates , to said , the gross you to margins , to cash flow and to strategy so , you know , .
Speaker #3: I think the two of those work hand in hand . So we're certainly mindful of that . But but can't And you all one or the be other .
Ted Hanson: You have to have a strategy around both.
Ted Hanson: You have to have a strategy around both.
Tobey Sommer: Okay. And then for the government consulting business, what's your outlook for that? OBDA funding has been sort of slow to percolate through and be work its way into actual contracts and revenue and profit. We do have a budget behind us. Do you think there's an opportunity for your book-to-bill to kind of materially improve with the convergence of those items over the next two or three quarters?
Tobey Sommer: Okay. And then for the government consulting business, what's your outlook for that? OBDA funding has been sort of slow to percolate through and be work its way into actual contracts and revenue and profit. We do have a budget behind us. Do you think there's an opportunity for your book-to-bill to kind of materially improve with the convergence of those items over the next two or three quarters?
Speaker #3: You have to have a strategy both.
Speaker #7: And okay. Then, the government— for consulting business, your outlook for that, what's funding been— has sort of slowed to percolate through and be— work into actual its way.
Speaker #7: revenue . And around . We do have budget behind What do you think us . an opportunity contracts for your book to to bill kind of materially improve the convergence of those items over the next 2 or 3 quarters
Ted Hanson: Yeah, I think, you know, we kind of are where we were coming out of Q3. The only difference was we had a shutdown, which kind of slowed things down for a number of weeks longer than anyone anticipated. But I think in the back half of the quarter, award activity was moving along. I think here in the first month of January, we've obviously been dealing with, you know, getting past a shutdown, which by and large, we have, except for, you know, on the Department of Homeland Security side. I think as that gets resolved, the cycle is moving here, and I expect award activity to be strong in the areas that are getting budget support, which is Department of Defense, Security, and Intelligence, and I think we're well positioned for that.
Ted Hanson: Yeah, I think, you know, we kind of are where we were coming out of Q3. The only difference was we had a shutdown, which kind of slowed things down for a number of weeks longer than anyone anticipated. But I think in the back half of the quarter, award activity was moving along.
Speaker #3: think , you know , we kind of are where we were coming out of the The only difference was we had shutdown , a which kind of slowed things a number of third quarter .
Speaker #3: weeks longer than anyone anticipated . But I think back half of the award activity was moving quarter , along . in the I here in the first month of January , obviously we've been dealing with , know , getting past shutdown , which by and large , we for except , you on the know , Department of Homeland side .
Ted Hanson: I think here in the first month of January, we've obviously been dealing with, you know, getting past a shutdown, which by and large, we have, except for, you know, on the Department of Homeland Security side. I think as that gets resolved, the cycle is moving here, and I expect award activity to be strong in the areas that are getting budget support, which is Department of Defense, Security, and Intelligence, and I think we're well positioned for that.
Speaker #3: Security I think as that And gets a this cycle is moving here . have , expect And award activity to be the areas that are getting budget support , which is strong in Defense and Security and intelligence .
Ted Hanson: So, as always, something comes up in this industry segment that seems to push things down the road a bit, but the budget is certainly there now. We feel good about our positioning there. And from a solution capability, I mean, we play exactly where dollars are being shifted towards. So I think all those things lined up. I think it's just a matter of timing. And what we said coming out of, you know, Q3 was we thought there would be heavy award activity in the first half of the year, and those would begin to be realized in terms of growth in the second half of the year, and I think that's still the case.
Ted Hanson: So, as always, something comes up in this industry segment that seems to push things down the road a bit, but the budget is certainly there now. We feel good about our positioning there. And from a solution capability, I mean, we play exactly where dollars are being shifted towards. So I think all those things lined up. I think it's just a matter of timing. And what we said coming out of, you know, Q3 was we thought there would be heavy award activity in the first half of the year, and those would begin to be realized in terms of growth in the second half of the year, and I think that's still the case.
Speaker #3: we're we're well you positioned for And I that . So as always , something comes up in industry segment this that seems to push down the road things a bit .
Speaker #3: But the budget is certainly there now . We feel our good about positioning . There from a solution capability . I mean , we play exactly dollars where are being shifted towards .
Speaker #3: So think all those things lined up , I think it's just a matter of and we said out of , you know , the third quarter was we thought there would be heavy award activity first half of the in the year .
Speaker #3: And and what to be realized in terms of the second half of the growth in year . And I think that's still the case .
Tobey Sommer: Okay. The last one for you, if I can. With respect to gross margin within government consulting, what's a reasonable, sustainable range for gross margin here in a, hopefully, a post-OGS world?
Tobey Sommer: Okay. The last one for you, if I can. With respect to gross margin within government consulting, what's a reasonable, sustainable range for gross margin here in a, hopefully, a post-OGS world?
Speaker #7: Okay begin one for you . sneak it If I could respect to in with margin coming what's a , sustainable range for gross gross a ?
Ted Hanson: Yeah. Marie, you want to take that one?
Ted Hanson: Yeah. Marie, you want to take that one?
Speaker #7: Hopefully, you're in post-IF world?
Marie Perry: Certainly. So to your point, with those, we will lap in March 2026. And so we've really seen consistently what we've talked about, less than 2% of total revenues, which probably equates to about $15 million. On a steady state for federal gross margin, it's probably closer to the 20% gross margin and maybe a little more to that.
Marie Perry: Certainly. So to your point, with those, we will lap in March 2026. And so we've really seen consistently what we've talked about, less than 2% of total revenues, which probably equates to about $15 million. On a steady state for federal gross margin, it's probably closer to the 20% gross margin and maybe a little more to that.
Speaker #3: that one .
Speaker #5: Certainly . So point , those we will lap in to your March so of 26 . really seeing consistently we reasonable talked what we've about less than 2% of total revenues , which probably equates to about state steady for federal 15 million on a gross margin .
Speaker #5: It's probably closer to the 20% gross margin and maybe a little north of that .
Operator: Thank you. Our next question comes from the line of Surinder Thind with Jefferies. Please proceed with your question.
Operator: Thank you. Our next question comes from the line of Surinder Thind with Jefferies. Please proceed with your question.
Speaker #8: Thank you .
Speaker #1: you Thank next from the . Our line of with Jefferies . proceed with your question .
Surinder Thind: Thank you. Ed, can you provide maybe a bit more color on this idea that, you know, the client demand for AI is beginning to pick up, and you're starting to see demand drive there on the consulting side of the business, and maybe talk about the push-pull versus are there maybe offsets within the staffing business? Or how should we think about the client's, you know, desire to really transform and use your services on the consulting side, but then maybe internally, they wanna use some of the tools to be more efficient and the impact on staffing?
Surinder Thind: Thank you. Ed, can you provide maybe a bit more color on this idea that, you know, the client demand for AI is beginning to pick up, and you're starting to see demand drive there on the consulting side of the business, and maybe talk about the push-pull versus are there maybe offsets within the staffing business? Or how should we think about the client's, you know, desire to really transform and use your services on the consulting side, but then maybe internally, they wanna use some of the tools to be more efficient and the impact on staffing?
Speaker #9: you . Can you
Speaker #9: a bit more color on this idea that demand for AI question comes is beginning to the client pick up and you're starting to demand drive on there consulting side the business of the and maybe talk about the push pull versus are there maybe offsets see the staffing or business within how should we think about the ?
Speaker #9: You know , desire to really transform and services on the consulting clients side ? But then internally , to use some tools to they want of the maybe be efficient the impact on .
Ted Hanson: Yeah, well, let me take the second. I'll let Shiv take the first. I think what's going on in the staffing program is two things, Surinder. I mean, obviously, that business is, you know, kind of sequentially steady, so I don't see a lot of movement either way, on, on the program opening up wider or having less volume sent through it. It's certainly at a moderated level, and I think it's because really there's a buying behavior change going on with our clients, where they used to open up that staffing spigot very wide and let resources flood in to work on internal projects. I think they're being very judicious about that. It's a way that they control spend, and also it's a way they further control outcomes, right?
Ted Hanson: Yeah, well, let me take the second. I'll let Shiv take the first. I think what's going on in the staffing program is two things, Surinder. I mean, obviously, that business is, you know, kind of sequentially steady, so I don't see a lot of movement either way, on, on the program opening up wider or having less volume sent through it.
Speaker #9: And .
Speaker #9: staffing Yeah .
Speaker #3: me take Well , let a second . I'll let Shiv take the first . I , I
Speaker #3: what's going on in the program is two things . staffing I mean , obviously that business is know , , you kind of sequentially use your movement steady .
Speaker #3: see a lot of So way . On , Surrender . on the either opening up wider or having program less volume sent through It's it .
Ted Hanson: It's certainly at a moderated level, and I think it's because really there's a buying behavior change going on with our clients, where they used to open up that staffing spigot very wide and let resources flood in to work on internal projects. I think they're being very judicious about that. It's a way that they control spend, and also it's a way they further control outcomes, right?
Speaker #3: certainly at a moderated level , and it's because I think really there's a buying change going on with our where they clients used to open up that staffing very wide behavior and let spigot to flood in work on internal projects .
Speaker #3: I think they're being judicious about It's a that . way very can control spend and also it's a way resources they further control outcomes .
Ted Hanson: As if the client more and more is making investments in certain technology outcomes they wanna get to, but they're doing it on an outcome basis, where there's real scope, real delivery, that they can see what the investment is and what the return is, you know? And is that being impacted by AI? I really don't think... That's not what we view, but, you know, I think it's more around the two things I just mentioned. Shiv, on the first part of that?
Ted Hanson: As if the client more and more is making investments in certain technology outcomes they wanna get to, but they're doing it on an outcome basis, where there's real scope, real delivery, that they can see what the investment is and what the return is, you know? And is that being impacted by AI? I really don't think... That's not what we view, but, you know, I think it's more around the two things I just mentioned. Shiv, on the first part of that?
Speaker #3: Right . And I think the client more and more is is making investments in certain technology They want to get they're doing it on an outcome there's to , but real basis where scope , real outcomes .
Speaker #3: that they can see what the delivery investment is and what the return is . You know , is that being and impacted by AI or really don't that's not think we view , it's I think more you know , around the two Shiv , on the first part of .
Shiv Iyer: Yeah, look, I think you're right. AI is a big driver of demand on a number of dimensions. You know, if I were to put a spectrum to it, all the way from using AI for different use cases, which are either industry specific or sort of horizontal, customer service, any of those, to a lot of work around readiness and modernization of the application stack as well as data. And what we're actually seeing is an even for clients that have done some of the readiness work; they're finding that scaling is still challenging because of interoperability considerations, because of just not having a framework to manage this massive AI applications that are being developed and to be put into production, governed, traceability, all of those elements.
Shiv Iyer: Yeah, look, I think you're right. AI is a big driver of demand on a number of dimensions. You know, if I were to put a spectrum to it, all the way from using AI for different use cases, which are either industry specific or sort of horizontal, customer service, any of those, to a lot of work around readiness and modernization of the application stack as well as data.
Speaker #4: Yeah .
Speaker #4: Yeah .
Speaker #4: Look , I think what that right .
Speaker #4: AI
Speaker #4: dimensions . if I were You know , number of put a , put a spectrum to it way from all the using AI for different use cases , which are either industry specific sort but , horizontal customer or of those to a lot of work around the the of application readiness and data and what we're seeing is an even for some of the clients that actually work , they're finding that still because of scaling is considerations , because of just not having a framework to manage this massive challenging AI applications that are being developed and to be put into production , governance , traceability , those elements .
Shiv Iyer: And what we're actually seeing is an even for clients that have done some of the readiness work; they're finding that scaling is still challenging because of interoperability considerations, because of just not having a framework to manage this massive AI applications that are being developed and to be put into production, governed, traceability, all of those elements.
Shiv Iyer: So, demand across the spectrum, whether clients are getting ready or if they're ready, how do you actually take advantage of the technology at scale?
Shiv Iyer: So, demand across the spectrum, whether clients are getting ready or if they're ready, how do you actually take advantage of the technology at scale?
Speaker #4: So spectrum , clients are whether ready across the demand they're ready , do you how all of at technology actually take ?
Surinder Thind: That's helpful. Then as a follow-up, Marie, could you maybe elaborate on the cost savings plan and what it means for 2026? I think in the prepared comments you talked about generating, you know, sizable structural cost savings and that, you know, these are gonna ramp up over the coming quarters. So just any color around magnitudes, run rates, anything like that, that would be helpful.
Surinder Thind: That's helpful. Then as a follow-up, Marie, could you maybe elaborate on the cost savings plan and what it means for 2026? I think in the prepared comments you talked about generating, you know, sizable structural cost savings and that, you know, these are gonna ramp up over the coming quarters. So just any color around magnitudes, run rates, anything like that, that would be helpful.
Speaker #9: That's helpful . then And as a follow up . Marie , could you maybe elaborate on the plan and what savings for I think in 2026 ?
Speaker #9: it means cost savings structural and that these are going up over sizable the coming quarters . So just any color magnitude around . to ramp Run rates , that , that would be anything like helpful
Marie Perry: So as we kind of noted in the as it relates to the cost savings, so we gave a net $80 million of cost savings, if you will, over the three-year period, indicated that that cost savings would be kind of moderate in 2026, but really building in 2027 and 2028. The reference in the prepared remarks was really around the acquisition, integration, and strategic planning cost of $10.7 million.
Marie Perry: So as we kind of noted in the as it relates to the cost savings, so we gave a net $80 million of cost savings, if you will, over the three-year period, indicated that that cost savings would be kind of moderate in 2026, but really building in 2027 and 2028. The reference in the prepared remarks was really around the acquisition, integration, and strategic planning cost of $10.7 million.
Speaker #9: . as we
Speaker #5: So kind of the as it relates to the cost savings , so we gave 80 a net $80 million of cost you will , the three year period over indicated that that cost savings would be kind of in 26 .
Speaker #5: But moderate really 27 building in and 28 . reference prepared the was around really acquisition , integration strategic planning cost of 10.7 million .
Surinder Thind: Thank you.
Surinder Thind: Thank you.
Operator: Thank you. Our next question comes from the line of Maggie Nolan with William Blair. Please proceed with your question.
Operator: Thank you. Our next question comes from the line of Maggie Nolan with William Blair. Please proceed with your question.
Speaker #10: Thank you .
Speaker #1: Thank you . Our next question comes from the line of Maggie Nolan Please with your William .
Maggie Nolan: Thank you. The commercial consulting growth, I think it was nearly 20% year-over-year. Can you talk about the mix of that? Like, what was project-based versus maybe longer duration, managed or platform-led work, and then tie that into how you're thinking about revenue visibility in the coming year, 2026.
Maggie Nolan: Thank you. The commercial consulting growth, I think it was nearly 20% year-over-year. Can you talk about the mix of that? Like, what was project-based versus maybe longer duration, managed or platform-led work, and then tie that into how you're thinking about revenue visibility in the coming year, 2026.
Speaker #11: Thank you . The consulting growth , I think Commercial it was nearly
Speaker #11: 20% year over year . Can you talk about of that ? What was the based versus maybe longer duration manage or platform led work and then Blair .
Shiv Iyer: Well, we've seen growth across the board, Maggie. It's a lot of transaction or project-based implementation work, whether it's around our enterprise platforms. We've seen a pretty significant growth, as I mentioned in the prepared remarks, in our Application Engineering and Services space, which has been growing pretty rapidly. Our data and AI work is actually also growing pretty rapidly from that perspective. We're seeing demand across the board for our solution set. It's a mix of sort of, as you rightly pointed out, more longer term projects and, you know, I would say implementation-driven projects. We're seeing a pretty healthy mix of both of those. We're also seeing more fixed- and fixed-price improvements in our pricing from a project perspective.
Speaker #11: tie that into how you're thinking about mix revenue in the visibility coming year 2026 ?
Shiv Iyer: Well, we've seen growth across the board, Maggie. It's a lot of transaction or project-based implementation work, whether it's around our enterprise platforms. We've seen a pretty significant growth, as I mentioned in the prepared remarks, in our Application Engineering and Services space, which has been growing pretty rapidly.
Speaker #4: well Oh . , it's we've seen growth across the board , Maggie . It's it's a lot of transaction or project based whether it's work , around our platforms .
Speaker #4: We've implementation a seen pretty mentioned growth . in the in the prepared remarks in application engineering and As I services space , which has been growing pretty rapidly .
Shiv Iyer: Our data and AI work is actually also growing pretty rapidly from that perspective. We're seeing demand across the board for our solution set. It's a mix of sort of, as you rightly pointed out, more longer term projects and, you know, I would say implementation-driven projects. We're seeing a pretty healthy mix of both of those. We're also seeing more fixed- and fixed-price improvements in our pricing from a project perspective.
Speaker #4: Our data and AI our is actually growing pretty also rapidly . From that perspective . And we're seeing demand so across the board for our solution set .
Speaker #4: It's it's a mix as you rightly of sort of , pointed out , more longer term projects . And , you know , I would say implementation driven projects , we're seeing a pretty healthy mix of those also seeing more fixed , fixed price of both in our .
Shiv Iyer: So as you look forward from a revenue outlook perspective, we also noted our booking, bookings for Q4, which were a pretty significant number, ending up at a very healthy Book-to-Bill of about, you know, 1.3+, which really gives us a pretty good platform to build on. Now, keep in mind, as we continue to pivot our business, we're constantly trying to improve the more long-term piece of the consulting business. We're still wrapping up that curve, so we still have a lot of work that has finite starts and ends, which sometimes results in bookings converting into revenue over time, right? Typically happens at the end of Q4 to Q1, where we see revenues wrap up a little bit more slower than usual.
Shiv Iyer: So as you look forward from a revenue outlook perspective, we also noted our booking, bookings for Q4, which were a pretty significant number, ending up at a very healthy Book-to-Bill of about, you know, 1.3+, which really gives us a pretty good platform to build on. Now, keep in mind, as we continue to pivot our business, we're constantly trying to improve the more long-term piece of the consulting business. We're still wrapping up that curve, so we still have a lot of work that has finite starts and ends, which sometimes results in bookings converting into revenue over time, right? Typically happens at the end of Q4 to Q1, where we see revenues wrap up a little bit more slower than usual.
Speaker #4: our pricing from a project improvements perspective . So as you look forward from a outlook revenue , we also booking noted our bookings for the fourth quarter , which were a pretty perspective significant number , ending very up at a book to bill of about We're 1.3 plus , which really gives us a pretty good build platform to on as we mind , in pivot our business continue to healthy constantly trying to improve .
Speaker #4: The more long-term piece of the consulting business, we're still wrapping up. We still have a lot of work that has a learning curve. So, we have work that has finite ends, which sometimes results in starts and bookings converting into revenue over time.
Shiv Iyer: But, that makes us constantly improving, and that's what we're striving to do, is to get more secure, longer-term projects, so we don't have to deal with ebbs and flows.
Shiv Iyer: But, that makes us constantly improving, and that's what we're striving to do, is to get more secure, longer-term projects, so we don't have to deal with ebbs and flows.
Speaker #4: Right ? Typically the end of Q4 happens at Q1 , where we see revenues ramp up a little bit more slower usual . But than that constantly improving , and that's what we're to get more do is secure longer term projects so we don't have to deal with ebbs and flows striving to .
[Analyst]: Thank you. That's helpful. Can you talk a little bit as well from an end market perspective? You know, obviously, healthcare and consumer and industrial looked pretty good. What are you seeing in terms of financial services or TMT? And, you know, any early commentary on budgets for 2026 from clients now that they've finished their budgeting processes?
Maggie Nolan: Thank you. That's helpful. Can you talk a little bit as well from an end market perspective? You know, obviously, healthcare and consumer and industrial looked pretty good. What are you seeing in terms of financial services or TMT? And, you know, any early commentary on budgets for 2026 from clients now that they've finished their budgeting processes?
Speaker #11: Thank you . That's helpful . Can you talk a little bit as well from a market perspective ? Obviously healthcare and consumer industrial and looked pretty good .
Speaker #11: What are you seeing in financial services or TMT, and any early commentary on 2026 from clients now that they've finished their budgeting processes?
Shiv Iyer: Look, I think, we're seeing a pretty steady demand, I would say. And it's not like we're, as we've said before, and I said in my prepared remarks, our sequential improvement in financial services was outside of the big banks. So those are the ones we're actually waiting and watching in terms of a pivot. So we're still trying to get an early read. As Ted said before, some of the flow of demand that we're seeing on the staffing side from requisitions and everything else is holding steady. So still trying to get a better handle. So we've not seen what I would call a massive inflection in demand. I think demand is holding steady to moderately positive.
Shiv Iyer: Look, I think, we're seeing a pretty steady demand, I would say. And it's not like we're, as we've said before, and I said in my prepared remarks, our sequential improvement in financial services was outside of the big banks. So those are the ones we're actually waiting and watching in terms of a pivot. So we're still trying to get an early read.
Speaker #4: Look , I think I think we're seeing a pretty steady demand . I would say , and it's not we're like as said before , we've and my prepared remarks , our sequential improvement in financial was I said in outside of the big banks .
Shiv Iyer: As Ted said before, some of the flow of demand that we're seeing on the staffing side from requisitions and everything else is holding steady. So still trying to get a better handle. So we've not seen what I would call a massive inflection in demand. I think demand is holding steady to moderately positive.
Speaker #4: So those are the ones we're actually waiting and watching in terms of a pivot. So we're still trying to get an early read.
Speaker #4: As before , some of Ted said the the flow of demand that we're seeing on the staffing side requisitions and everything is else holding steady .
Speaker #4: So still trying to get a better handle . So I'm have not seen what I would call a massive inflection in demand . I think demand is holding steady to moderately We are positive .
Shiv Iyer: We are seeing more uptick in demand in both TMT and software and services, as I noted, because of all the work that is happening around data centers and data center build-out and the demand for those services.
Shiv Iyer: We are seeing more uptick in demand in both TMT and software and services, as I noted, because of all the work that is happening around data centers and data center build-out and the demand for those services.
Speaker #4: seeing more uptick in demand in both TMT and services . As noted work that all the , because of happening is around data centers and data build out and the demand for those services .
Ted Hanson: So, Maggie, if you think about it sequentially, four or five industries up, Q3 to Q4, that's certainly a positive. That's a better progress than we've had from an industry standpoint. And then for the fourth quarter, three industries of the five up year-over-year.
Ted Hanson: So, Maggie, if you think about it sequentially, four or five industries up, Q3 to Q4, that's certainly a positive. That's a better progress than we've had from an industry standpoint. And then for the fourth quarter, three industries of the five up year-over-year.
Speaker #3: So , Maggie , think about
Speaker #3: sequentially , 4 or 5 industries up Q3 to Q4 , that's certainly a positive . better progress than we've had from an industry standpoint .
Speaker #3: That's a And then for the fourth quarter , of five up year over year the I three industries , right , kind of help back by , you know , what's going on with big banks and and also going on in the what's services space .
Shiv Iyer: Year-over-year.
Shiv Iyer: Year-over-year.
Ted Hanson: Right? Kinda held back by, you know, what's going on with big banks and, and also what's going on in the services space.
Ted Hanson: Right? Kinda held back by, you know, what's going on with big banks and, and also what's going on in the services space.
Shiv Iyer: Correct.
Shiv Iyer: Correct.
Ted Hanson: So, you know, it's progress, if we'll say, and so we're cautiously optimistic, but we do. You know, I would say we need to see some inflection in the big bank area to really contribute to the total, to move forward at a little hotter pace than what we're seeing right now.
Ted Hanson: So, you know, it's progress, if we'll say, and so we're cautiously optimistic, but we do. You know, I would say we need to see some inflection in the big bank area to really contribute to the total, to move forward at a little hotter pace than what we're seeing right now.
Speaker #3: you So know it's progress if if we'll say . And so we're cautiously it's optimistic . But we do you know I to would say we see some inflection in the big bank need area to really contribute to the total to move forward at a little hotter than what pace we're seeing right now .
[Analyst]: Okay. Thanks, Ted, and thanks, Shiv.
Maggie Nolan: Okay. Thanks, Ted, and thanks, Shiv.
Operator: Thank you. Our next question comes from the line of Kevin McVeigh with UBS. Please proceed with your questioning.
Operator: Thank you. Our next question comes from the line of Kevin McVeigh with UBS. Please proceed with your questioning.
Speaker #11: Thanks , Ted . Thanks . Okay .
Speaker #1: you Thank . Our next question comes from of Kevin with McVeigh UBS . Please proceed with your question the line .
Kevin McVeigh: Great. Thank you so much. Hey, I just wanna clarify, was there any impact in the quarter from the government shutdown?
Kevin McVeigh: Great. Thank you so much. Hey, I just wanna clarify, was there any impact in the quarter from the government shutdown?
Speaker #12: Great . Thank you so much . Hey , I just want to clarify , was there any impact in the quarter from the government shutdown ?
Ted Hanson: So there was a small impact from the government shutdown during the quarter. Well, we mostly had it programmed in at the beginning. It went on for a few weeks longer, obviously, than we thought, but, you know, it wasn't material to the outcome for the entire quarter.
Ted Hanson: So there was a small impact from the government shutdown during the quarter. Well, we mostly had it programmed in at the beginning. It went on for a few weeks longer, obviously, than we thought, but, you know, it wasn't material to the outcome for the entire quarter.
Speaker #3: So there was a small impact from the government shutdown during the quarter ? Well , we mostly had it programmed in at the beginning .
Speaker #3: It went on for a few weeks longer . Obviously , than we thought . But , you know , it was a material to the outcome for the entire quarter .
Kevin McVeigh: Got it. It's helpful. And then a few comments on the offshore capabilities through Quinnox were interesting. Is that enhancing what you have, or is that just new capabilities that you're bringing offshore?
Kevin McVeigh: Got it. It's helpful. And then a few comments on the offshore capabilities through Quinnox were interesting. Is that enhancing what you have, or is that just new capabilities that you're bringing offshore?
Speaker #12: Got it . And then the comments on the offshore capability through Quinn , we're interesting . Is that enhancing what you is have , or that just new capabilities that you're bringing offshore ?
Shiv Iyer: Well, it's, it's all new capabilities we're bringing offshore. You know, we have a very small presence in India, driven by some of our past acquisitions, largely in the realm of those platforms of ServiceNow and Infor. But this brings a whole new set of complex, mature delivery capabilities across sort of the application lifecycle, whether it's, you know, application modernization management, whether it's, you know, modern application development, a lot of strong digital integration capabilities, which are critical, as, you know, clients are looking to make some of these, the AI solutions work from an interoperability perspective. And also some very specific capabilities around platforms, around Salesforce, Calypso, and even SAP. So it's, frankly, a lot of truly incremental net new, but in a much more advanced, complex footprint, global delivery model.
Shiv Iyer: Well, it's, it's all new capabilities we're bringing offshore. You know, we have a very small presence in India, driven by some of our past acquisitions, largely in the realm of those platforms of ServiceNow and Infor.
Speaker #4: Well , it's all new capabilities . We're bringing offshore . You know , we have a small presence in driven by some of India very past acquisitions , largely in the realm of those platforms of ServiceNow and infor .
Shiv Iyer: But this brings a whole new set of complex, mature delivery capabilities across sort of the application lifecycle, whether it's, you know, application modernization management, whether it's, you know, modern application development, a lot of strong digital integration capabilities, which are critical, as, you know, clients are looking to make some of these, the AI solutions work from an interoperability perspective.
Speaker #4: But a this brings whole new set of complex , mature delivery capability across sort of the application lifecycle , whether it's our , application modernization management , whether it's , you know , modern application development , a lot of digital integration capabilities , which are critical as clients are looking to make some of these , the AI solutions work from an interoperability perspective and also some very specific capabilities around platforms , around Salesforce , Calypso and SAP .
Shiv Iyer: And also some very specific capabilities around platforms, around Salesforce, Calypso, and even SAP. So it's, frankly, a lot of truly incremental net new, but in a much more advanced, complex footprint, global delivery model.
Speaker #4: So it's even a frankly , a lot of truly incremental net new . But in a much more advanced complex global delivery model .
Kevin McVeigh: That's helpful. And then just my last one, real quick: Do you have any contracts with DHS?
Kevin McVeigh: That's helpful. And then just my last one, real quick: Do you have any contracts with DHS?
Ted Hanson: We do. So they're, they're obviously a pillar customer of ours, an important customer, a lot of important cybersecurity work and other work. I think that, look, as we go through this, obviously, they're gonna be adjudicating the, you know, the funding here for DHS, and there are certain things at odds. I don't think any of that affects our work. We don't do a lot, or anything that touches some of the areas that are kinda at odds in the conversation, in the further funding of DHS going forward.
Ted Hanson: We do. So they're, they're obviously a pillar customer of ours, an important customer, a lot of important cybersecurity work and other work. I think that, look, as we go through this, obviously, they're gonna be adjudicating the, you know, the funding here for DHS, and there are certain things at odds. I don't think any of that affects our work. We don't do a lot, or anything that touches some of the areas that are kinda at odds in the conversation, in the further funding of DHS going forward.
Speaker #12: That's helpful . And then just Do you have any contracts with quick . DHS my last one real ?
Speaker #3: We do . So we're there obviously a pillar customer of ours , an customer . lot A important of important cybersecurity work and other work , I think that look , as we go through this they're going to , obviously be you the , know , the funding for DHS .
Speaker #3: And and there things adjudicating at odds . I don't think any of that affects our work . We don't do a lot or anything that touches some of the areas that are kind here conversation , in the further funding of DHS going forward .
Kevin McVeigh: Great. Thank you.
Kevin McVeigh: Great. Thank you.
Operator: Thank you. Our next question comes from the line of Mark Marcon with Baird. Please proceed with your question.
Operator: Thank you. Our next question comes from the line of Mark Marcon with Baird. Please proceed with your question.
Speaker #12: Great . Thank you .
Speaker #1: Thank you. Our next question comes from the line of Mark Morrison Baird. Please proceed with your question.
[Analyst]: Hey, good afternoon, and thanks for taking my questions. Ted and Shiv, I'd just like to step back to some of your initial commentary with regards to, you know, AI. Obviously, there's been a lot in the news about AI, regarding, you know, fast-
Mark Marcon: Hey, good afternoon, and thanks for taking my questions. Ted and Shiv, I'd just like to step back to some of your initial commentary with regards to, you know, AI. Obviously, there's been a lot in the news about AI, regarding, you know, fast-
Speaker #13: Hey , good afternoon and thanks for taking my questions . Kevin . I'd just like to step back to some of your initial commentary with regards , you know , AI .
Speaker #13: Obviously , there's been a the news about AI regarding , you know , SaaS lot in companies , data retrieval , etc. wondering what I'm and is know , when you're taking a look , you at your base writ large to client what extent are you seeing them focus on AI and to what extent are you also seeing , like we've had other companies that have basically said felt like some of their clients , you know , were basically stalling on some , you ? legacy or more kind of traditional SaaS implementations wanted to because they see how AI was going to , you know , out and shake what needed to be done .
Mark Marcon: ... companies, data retrieval services, et cetera. And what I'm wondering is, you know, when you're taking a look at your client base writ large, to what extent are, are you seeing them just focus on AI? And to what extent are you also seeing, like, we've had other companies that have basically said that they, they felt like some of their clients, you know, were basically stalling on some, you know, legacy or more traditional kind of SaaS implementations because they wanted to see how AI was going to, you know, shake out and what needed to be done. And now that they've, some of them have come to the conclusion that, you know, maybe they're not quite ready, and so they're proceeding with some projects that they previously stalled and that there was some releasing of pent-up demand.
Mark Marcon: ... companies, data retrieval services, et cetera. And what I'm wondering is, you know, when you're taking a look at your client base writ large, to what extent are, are you seeing them just focus on AI? And to what extent are you also seeing, like, we've had other companies that have basically said that they, they felt like some of their clients, you know, were basically stalling on some, you know, legacy or more traditional kind of SaaS implementations because they wanted to see how AI was going to, you know, shake out and what needed to be done. And now that they've, some of them have come to the conclusion that, you know, maybe they're not quite ready, and so they're proceeding with some projects that they previously stalled and that there was some releasing of pent-up demand.
Speaker #13: And now that some of them have come to the they've conclusion that , you know , they they're not quite And ready . maybe so they're proceeding with some projects that they previously stalled and that there was some releasing pent up demand .
Mark Marcon: Are you seeing any of that? And when we think about, you know, the industry groups that are picking up and are seeing good sequential growth, to what extent of it, of that is, you know, pure AI-type projects as opposed to more legacy or traditional projects?
Mark Marcon: Are you seeing any of that? And when we think about, you know, the industry groups that are picking up and are seeing good sequential growth, to what extent of it, of that is, you know, pure AI-type projects as opposed to more legacy or traditional projects?
Speaker #13: Are you seeing of any of that ? And when we think about , you know , the , the industry groups that up are picking and are seeing good growth , to what extent is sequential it of that ?
Speaker #13: Is , you know , you pure AI type know , projects as opposed to more legacy or traditional projects ?
Shiv Iyer: Look, I think, Mark, let me start by saying we're not seeing that, right? I don't think we're seeing large client signals that say they're stopping implementation projects because they think AI can do what those platforms can do for them, right? And, you know, as Ted and I have repeatedly maintained, these enterprise platforms, at least for our large clients, don't, we don't believe are going anywhere anytime soon because of just the nature of those systems and how interconnected they are to the workflows and the processes, and where the canonical data truth resides within those organizations. So that's sort of the first part of the question. In terms of your second part, look, we're seeing healthy demand across, as I said, all our capability areas. Look, if you think about... I talked about application engineering services.
Shiv Iyer: Look, I think, Mark, let me start by saying we're not seeing that, right? I don't think we're seeing large client signals that say they're stopping implementation projects because they think AI can do what those platforms can do for them, right?
Speaker #4: Look , I think , Mark , start by saying we're seeing right . I that don't think we're seeing not large client signals they're stopping projects because they that say think AI what those can do platforms can do for them .
Shiv Iyer: And, you know, as Ted and I have repeatedly maintained, these enterprise platforms, at least for our large clients, don't, we don't believe are going anywhere anytime soon because of just the nature of those systems and how interconnected they are to the workflows and the processes, and where the canonical data truth resides within those organizations.
Speaker #4: Right . And , you know , as Ted and I have repeatedly maintained , these enterprise platforms , at least for our large don't we don't believe clients , are going anywhere soon because of anytime just the nature of those of the interconnected they are to the workflows and the processes and where the canonical implementation data truth resides within those organizations .
Shiv Iyer: So that's sort of the first part of the question. In terms of your second part, look, we're seeing healthy demand across, as I said, all our capability areas. Look, if you think about... I talked about application engineering services.
Speaker #4: So that's sort of the first part of the question in terms of your second part . Look , we're seeing healthy demand across , said , all our capability areas .
Shiv Iyer: A lot of that is focused on both legacy technologies as well as new product development that these companies are doing. I talked about, you know, data and AI growing very, very fast for us. So a lot of work both in data, also pure AI, around use cases, around governance, around, you know, scalability and trust in AI. So the demand pattern is pretty healthy across the solution stack. Mark, I don't think there's, we're seeing any massive shift of funds or other, stop some things and go fund en masse AI projects at scale.
Shiv Iyer: A lot of that is focused on both legacy technologies as well as new product development that these companies are doing. I talked about, you know, data and AI growing very, very fast for us. So a lot of work both in data, also pure AI, around use cases, around governance, around, you know, scalability and trust in AI. So the demand pattern is pretty healthy across the solution stack. Mark, I don't think there's, we're seeing any massive shift of funds or other, stop some things and go fund en masse AI projects at scale.
Speaker #4: Look, if you think about what I talked about in application engineering, it's a service that is focused on both legacy technologies as well as a lot of new product development that these companies are doing.
Speaker #4: I talked about , you know , AI growing very , very fast us . So a lot for around use , around governance , around , you know , scalability and trust in AI .
Speaker #4: data and So the demand pattern is pretty healthy across the solution stack . Mark , I don't think there is a we're seeing any massive shift of funds or other cases stops .
Mark Marcon: Great. That's, that's what I thought. I just wanted to confirm that. And then with regards to Quinnox, if I'm, if I'm getting the right information, it looks like they have between 1,500 and 1,888 people. Is that, is that kind of a bench model? And how quickly can that business scale with some of the cross-selling that, you're gonna end up bringing in? And what sort of gross margins do they typically produce?
Mark Marcon: Great. That's, that's what I thought. I just wanted to confirm that. And then with regards to Quinnox, if I'm, if I'm getting the right information, it looks like they have between 1,500 and 1,888 people. Is that, is that kind of a bench model? And how quickly can that business scale with some of the cross-selling that, you're gonna end up bringing in? And what sort of gross margins do they typically produce?
Speaker #4: Some things and go fund at projects scale .
Speaker #13: Great . That's Nrma's AI I thought . I just wanted to that confirm . And then with regards to Quinnox , if I'm if I'm getting the right information , it looks like they have between 1500 and 1888 people .
Speaker #13: that is of a Is that kind benchmark model ? And how business that quickly can scale with some of the cross-selling that you're going to end up bringing in ?
Shiv Iyer: Yeah. So, great questions. So typically, let me start with the, the numbers you have are accurate. They're roughly somewhere between the two, around the 2,000 number, if you may, Mark. It's a very, very robust platform and can actually scale pretty rapidly depending on how we choose to sort of, and the speed at which we wanna take it and deploy it across our base, if you may. And because, you know, it's a very well-run machine in terms of its talent supply chain, the ability to scale. And, you know, I may have mentioned it in previous, it runs at an attrition level that is half of what the industry average is, which is great, because part of the challenge in scaling up tends to be just the ability to replace and replenish talent in India.
Shiv Iyer: Yeah. So, great questions. So typically, let me start with the, the numbers you have are accurate. They're roughly somewhere between the two, around the 2,000 number, if you may, Mark. It's a very, very robust platform and can actually scale pretty rapidly depending on how we choose to sort of, and the speed at which we wanna take it and deploy it across our base, if you may.
Speaker #13: And what sort of gross margins do they typically produce?
Speaker #4: So Yeah . great . So typically let me start with the the numbers you have are accurate . They're roughly somewhere the between two around the 2000 number .
Speaker #4: If you may mark it's it's a very , very robust platform . And can actually scale pretty rapidly depending on how we choose to sort of and the speed at which we want to take it and deploy it our across base , if you may , and because , you know , it's very well machine in terms of its talent , supply chain , the ability to scale .
Shiv Iyer: And because, you know, it's a very well-run machine in terms of its talent supply chain, the ability to scale. And, you know, I may have mentioned it in previous, it runs at an attrition level that is half of what the industry average is, which is great, because part of the challenge in scaling up tends to be just the ability to replace and replenish talent in India.
Speaker #4: you know , I And , may have mentioned it in previous it runs in an attrition level that is half of what the industry average is , which is great because part of the challenge in scaling up be to tends just the ability to In talent .
Shiv Iyer: So all pretty positive. The gross margins are in the high, close to high, I would say, mid- to low forties, and EBITDA margins in the twenties.
Shiv Iyer: So all pretty positive. The gross margins are in the high, close to high, I would say, mid- to low forties, and EBITDA margins in the twenties.
Speaker #4: replace and India . replenish So all pretty positives positive . The the gross margins are in the are in the high close high .
Speaker #4: I would say low 40s . And EBITDA margins in the in the 20s .
Ted Hanson: I'd say, Mark, if there's maybe something of note, I'd say different about this versus our past acquisitions as they come into the first year, we really think that because of their ability to scale on their platform in India from a resource standpoint, and the need from our client base to engage in the opportunities here with them, that we can go a little faster on the revenue synergy side than maybe we would in a typical acquisition in the first year. So, you know, our hope is that those synergies appear a little sooner. You know, but that'll we'll be careful about picking, you know, a finite number of opportunities and really engaging thoughtfully as we do that.
Ted Hanson: I'd say, Mark, if there's maybe something of note, I'd say different about this versus our past acquisitions as they come into the first year, we really think that because of their ability to scale on their platform in India from a resource standpoint, and the need from our client base to engage in the opportunities here with them, that we can go a little faster on the revenue synergy side than maybe we would in a typical acquisition in the first year.
Speaker #3: think , Mark , And I we if there's maybe note , I'd something of say different about this versus our acquisitions as they come past in in the first year , we really think that because of their ability to scale on their platform in India from a resource standpoint and the need from our client base to engage in opportunities here with them we can go a little faster on the revenue synergy side , then maybe we would in a typical acquisition year .
Ted Hanson: So, you know, our hope is that those synergies appear a little sooner. You know, but that'll we'll be careful about picking, you know, a finite number of opportunities and really engaging thoughtfully as we do that.
Speaker #3: So , in the first our hope is those that synergies appear a little sooner but , you know , that'll we'll we'll careful be about picking , you know , a finite number of opportunities and really engaging thoughtfully as we do that .
Ted Hanson: But one of the most attractive things about this acquisition, beyond their solution capabilities and their global delivery footprint, was the fact that they could naturally scale up very quickly.
Ted Hanson: But one of the most attractive things about this acquisition, beyond their solution capabilities and their global delivery footprint, was the fact that they could naturally scale up very quickly.
Speaker #3: But but one of the most attractive things about this acquisition , beyond their solution capabilities and their global delivery footprint , was the fact that they could naturally scale up very And if remember , we did the quickly .
Shiv Iyer: Yeah.
Ted Hanson: If you'll remember, we did the same thing in our nearshore operation when we acquired Intersys, which had, you know, maybe about 1,000 resources that we moved pretty quickly up to about 2,000 on an organic basis. We think the same opportunity exists here.
Shiv Iyer: Yeah.
Ted Hanson: If you'll remember, we did the same thing in our nearshore operation when we acquired Intersys, which had, you know, maybe about 1,000 resources that we moved pretty quickly up to about 2,000 on an organic basis. We think the same opportunity exists here.
Speaker #3: Same thing you'll see in our nearshore operation when we acquired Enersis, which had, you know, maybe about 1,000 resources that we moved pretty quickly up to about 2,000 on an organic basis.
Mark Marcon: That's great. Thank you.
Mark Marcon: That's great. Thank you.
Speaker #3: So we think the same opportunity exists here .
Operator: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to CEO Ted Hanson for closing remarks.
Operator: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back to CEO Ted Hanson for closing remarks.
Speaker #13: That's great . Thank you .
Speaker #1: Thank you . And we have reached the end of the question and answer session . I would like to turn the floor back to CEO Ted Hansen for closing remarks .
Ted Hanson: Great. Well, thank you everyone for attending our Q4 in 2025, earnings release, and we look forward to speaking with you in a short number of weeks, in the latter half of April, on our Q1 2026 earnings call. Have a great evening.
Ted Hanson: Great. Well, thank you everyone for attending our Q4 in 2025, earnings release, and we look forward to speaking with you in a short number of weeks, in the latter half of April, on our Q1 2026 earnings call. Have a great evening.
Speaker #3: Great . Well , thank you everyone for attending our fourth quarter and 2025 . Earnings release . And we look forward to speaking with you a short in number of weeks in the latter half of April on our Q1 2026 earnings call .
Operator: Thank you, and this concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
Operator: Thank you, and this concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
