Q1 2026 ASGN Inc Earnings Call

April 22, 2026

Operator 3: Greetings, and welcome to the ASGN Incorporated Q1 2026 earnings call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Kimberly Esterkin, Vice President of Investor Relations. Thank you. You may begin.

Operator: Greetings, and welcome to the ASGN Incorporated Q1 2026 earnings call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Kimberly Esterkin, Vice President of Investor Relations. Thank you. You may begin.

Speaker #2: If anyone should require operating assistance, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Kim Esterkin, Vice President of Investor Relations.

Speaker #2: Thank you. You may begin.

Speaker #1: Good afternoon. Thank you for joining us today for ASGN's fourth quarter 2026 conference call. With me are Ted Hanson, Chief Executive Officer; Shiv Iyer, President; and Marie Perry, Chief Financial Officer.

Kimberly Esterkin: Good afternoon. Thank you for joining us today for ASGN's, soon to be Everforth's, Q1 2026 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.

Speaker #1: 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: Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call.

Kimberly 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 #1: For your convenience, our prepared remarks and supplemental materials can be found in the Investor Relations section of our website at investors.asgn.com. Please also note that on this call, we will be referencing certain non-GAAP measures, such as adjusted EBITDA, adjusted net income, and free cash flow.

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 #1: 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: Thank you, Kim, and thank you for joining our first quarter 2026 earnings call. Today marks an important milestone for our company. This will be our final earnings call under the ASGN name, and on Friday, we will officially begin operating as ever fourth.

Theodore S. Hanson: Thanks, Kim, and thank you for joining our Q1 2026 earnings call. Today marks an important milestone for our company. This will be our final earnings call under the ASGN name, and on Friday, we will officially begin operating as Everforth and trading under our new stock ticker, EFOR, E-F-O-R. This transition reflects the continued transformation of our business, bringing our capabilities together under the Everforth brand to support a more integrated operating model focused on higher value solutions and deeper client relationships. By pursuing this path, we will unlock further scale and increase our cross-selling opportunities. As part of this evolution, we are also updating our commercial segment reporting to more clearly reflect how we are evolving the business, which is by industry rather than mode of delivery.

Ted Hanson: Thanks, Kim, and thank you for joining our Q1 2026 earnings call. Today marks an important milestone for our company. This will be our final earnings call under the ASGN name, and on Friday, we will officially begin operating as Everforth and trading under our new stock ticker, EFOR, E-F-O-R. This transition reflects the continued transformation of our business, bringing our capabilities together under the Everforth brand to support a more integrated operating model focused on higher value solutions and deeper client relationships. By pursuing this path, we will unlock further scale and increase our cross-selling opportunities. As part of this evolution, we are also updating our commercial segment reporting to more clearly reflect how we are evolving the business, which is by industry rather than mode of delivery.

Speaker #2: And trading under our new stock ticker, EFOR E4. This transition reflects the continued transformation of our business, bringing our capabilities together under the Everforth brand to support a more integrated operating model, focused on higher-value solutions and deeper client relationships.

Speaker #2: By pursuing this path, we will unlock further scale and increase our cross-selling opportunities. As part of this evolution, we are also updating our commercial segment reporting to more clearly reflect how we are evolving the business, which is by industry rather than mode of delivery.

Speaker #2: This change is intentional and aligns with our next wave growth strategy, and industry-led approach which we previewed at our. Investor Day this past November.

Theodore S. Hanson: This change is intentional and aligns with our NextWave growth strategy and industry-led approach, which we previewed at our Investor Day this past November. Ultimately, the delivery structure of our engagements is much less meaningful than the outcomes we drive and the strong value we create for our clients. We will therefore provide color through the lenses that matter most to how we compete in the commercial space, our five industries, and our six solution capabilities. In addition, to help track demand for our higher value work and our ability to win in the marketplace, we will disclose our commercial consulting book-to-bill consistent with what we've shared in prior quarters. With that as background, let's discuss our Q1 results. Revenues for Q1 were $968.3 million, in line with the prior year and our guidance.

Ted Hanson: This change is intentional and aligns with our NextWave growth strategy and industry-led approach, which we previewed at our Investor Day this past November. Ultimately, the delivery structure of our engagements is much less meaningful than the outcomes we drive and the strong value we create for our clients. We will therefore provide color through the lenses that matter most to how we compete in the commercial space, our five industries, and our six solution capabilities. In addition, to help track demand for our higher value work and our ability to win in the marketplace, we will disclose our commercial consulting book-to-bill consistent with what we've shared in prior quarters. With that as background, let's discuss our Q1 results. Revenues for Q1 were $968.3 million, in line with the prior year and our guidance.

Speaker #2: Ultimately, the delivery structure of our engagements is much less meaningful than the outcomes we drive and the strong value we create for our clients.

Speaker #2: We will, therefore, provide color through the lenses that matter most to how we compete in the commercial space—our five industries and our six solution capabilities.

Speaker #2: In addition, to help track demand for our higher-value work and our ability to win in the marketplace, we will disclose our commercial consulting book-to-bill, consistent with what we've shared in prior quarters.

Speaker #2: With that as background, let's discuss our first quarter results. Revenues for the first quarter were $968.3 million, in line with the prior year and our guidance.

Speaker #2: Commercial segment revenues were driven by demand in AI and data, cloud and infrastructure, and application, engineering, and modernization. Our AI and data and cloud and infrastructure pipelines continue to build, reinforcing momentum in these areas of our business.

Theodore S. Hanson: Commercial segment revenues were driven by demand in AI and data, cloud and infrastructure, and application engineering and modernization. Our AI and data and cloud and infrastructure pipelines continued to build, reinforcing momentum in these areas of our business. Commercial consulting book-to-bill was 1.1 times on a trailing 12-month basis. Federal segment new contract awards totaled $151.3 million, or a book-to-bill of 0.7 times on a trailing 12-month basis. Federal contract backlog was approximately $2.8 billion at quarter end or a coverage ratio of 2.4 times the segment's trailing 12-month revenues. Similar to the commercial segment, AI and data work was a solid contributor to revenues, bookings, and pipeline within our federal business. Cybersecurity contracts also nicely contributed to revenue and bookings in the quarter.

Ted Hanson: Commercial segment revenues were driven by demand in AI and data, cloud and infrastructure, and application engineering and modernization. Our AI and data and cloud and infrastructure pipelines continued to build, reinforcing momentum in these areas of our business. Commercial consulting book-to-bill was 1.1 times on a trailing 12-month basis. Federal segment new contract awards totaled $151.3 million, or a book-to-bill of 0.7 times on a trailing 12-month basis. Federal contract backlog was approximately $2.8 billion at quarter end or a coverage ratio of 2.4 times the segment's trailing 12-month revenues. Similar to the commercial segment, AI and data work was a solid contributor to revenues, bookings, and pipeline within our federal business. Cybersecurity contracts also nicely contributed to revenue and bookings in the quarter.

Speaker #2: Commercial consulting book-to-bill was 1.1 times on a trailing 12-month basis. Federal segment new contract awards totaled $151.3 million, or a book-to-bill of 0.7 times on a trailing 12-month basis.

Speaker #2: Federal contract backlog was approximately $2.8 billion at quarter-end, or a coverage ratio of 2.4 times the segment's trailing 12-month revenues. Similar to the commercial segment, AI and data work was a solid contributor to revenues, bookings, and pipeline within our federal business.

Speaker #2: Cybersecurity contracts also nicely contributed to revenue and bookings in the quarter. We are beginning to see award activity at many government agencies pick up following the passage of the federal budget in early February.

Theodore S. Hanson: We are beginning to see award activity at many government agencies pick up following the passage of the federal budget in early February. That said, we experienced some funding delays at the Department of Homeland Security, which is navigating both a shutdown and a leadership transition. Importantly, we have not seen any disruption to award funding related to the conflict in Iran. Instead, we are seeing evolving requirements of partner collaboration, particularly around cyber threat analysis, data management, and analytics as agencies seek to strengthen decision-making expertise. While our revenues were within guidance, Adjusted EBITDA margin of 8.6% was below our expectations for the quarter. This miss was driven largely by business mix related to lower than expected contribution of some of our higher margin solutions within the commercial segment. Nevertheless, we continue to closely manage our expenses.

Ted Hanson: We are beginning to see award activity at many government agencies pick up following the passage of the federal budget in early February. That said, we experienced some funding delays at the Department of Homeland Security, which is navigating both a shutdown and a leadership transition. Importantly, we have not seen any disruption to award funding related to the conflict in Iran. Instead, we are seeing evolving requirements of partner collaboration, particularly around cyber threat analysis, data management, and analytics as agencies seek to strengthen decision-making expertise. While our revenues were within guidance, Adjusted EBITDA margin of 8.6% was below our expectations for the quarter. This miss was driven largely by business mix related to lower than expected contribution of some of our higher margin solutions within the commercial segment. Nevertheless, we continue to closely manage our expenses.

Speaker #2: That said, we experienced some funding delays at the Department of Homeland Security, which is navigating both a shutdown and a leadership transition. Importantly, we have not seen any disruption to award funding related to the conflict in Iran.

Speaker #2: Instead, we are seeing evolving requirements of partner collaboration, particularly around cyber threat analysis, and data management and analytics as agencies seek to strengthen decision-making expertise.

Speaker #2: While our revenues were within guidance, adjusted EBITDA margin of 8.6% was below our expectations for the quarter. This was driven largely by business mix related to lower-than-expected contribution of some of our higher-margin solutions within the commercial segment.

Speaker #2: Nevertheless, we continue to closely manage our expenses. As discussed during our Investor Day, we are making strategic pivots in our business that will position us well for the long term.

Theodore S. Hanson: As discussed during our Investor Day, we are making strategic pivots in our business that will position us well for the long term. Those changes are being shaped by how our clients themselves are evolving and the expectations they have for partners that can support them through that change. Our clients are navigating a very volatile macro environment with continued uncertainty around how technologies such as AI and enterprise software will ultimately impact the technology landscape and influence their IT spending. While this dynamic can create some near-term variability, we are focused on strengthening our foundation by building a more unified brand, enhancing our go-to-market approach, and maintaining disciplined expense management and capital allocation. These actions give us conviction that we are building a stronger, more resilient platform aligned with client demand, and positioned to drive top-line growth and margin expansion.

Ted Hanson: As discussed during our Investor Day, we are making strategic pivots in our business that will position us well for the long term. Those changes are being shaped by how our clients themselves are evolving and the expectations they have for partners that can support them through that change. Our clients are navigating a very volatile macro environment with continued uncertainty around how technologies such as AI and enterprise software will ultimately impact the technology landscape and influence their IT spending. While this dynamic can create some near-term variability, we are focused on strengthening our foundation by building a more unified brand, enhancing our go-to-market approach, and maintaining disciplined expense management and capital allocation. These actions give us conviction that we are building a stronger, more resilient platform aligned with client demand, and positioned to drive top-line growth and margin expansion.

Speaker #2: Those changes are being shaped by how our clients themselves are evolving, and the expectations they have for partners that can support them through that change.

Speaker #2: Our clients are navigating a very volatile macro environment, with continued uncertainty around how technologies such as AI and enterprise software will ultimately impact the technology landscape and influence their IT spending.

Speaker #2: While this dynamic can create some near-term variability, we are focused on strengthening our foundation by building a more unified brand, enhancing our go-to-market approach, and maintaining

Speaker #1: We need disciplined expense management and capital allocation. These actions give us conviction that we are building a stronger, more resilient platform aligned with client demand and positioned to drive top-line growth and margin expansion. Against this backdrop, I want to step back and revisit our next wave growth strategy.

Theodore S. Hanson: Against this backdrop, I want to step back and revisit our NextWave growth strategy. We continue to make progress executing our long-term initiatives, and during Q1, we took several important actions that reinforce our strategic priorities. First, we announced key leadership appointments across both our Commercial and Federal Government segments to support our next phase of growth. We welcome Ashish Jandial as President of Commercial North America, Sangita Singh as President of India and International, and Donnie Scott as President of our Federal Government segment. Each leader brings deep experience scaling global services organizations, driving AI-enabled digital transformations, and building delivery platforms designed for long-term value creation. Collectively, this team enhances our ability to execute our strategy while building on the solid foundation already in place.

Ted Hanson: Against this backdrop, I want to step back and revisit our NextWave growth strategy. We continue to make progress executing our long-term initiatives, and during Q1, we took several important actions that reinforce our strategic priorities. First, we announced key leadership appointments across both our Commercial and Federal Government segments to support our next phase of growth. We welcome Ashish Jandial as President of Commercial North America, Sangita Singh as President of India and International, and Donnie Scott as President of our Federal Government segment. Each leader brings deep experience scaling global services organizations, driving AI-enabled digital transformations, and building delivery platforms designed for long-term value creation. Collectively, this team enhances our ability to execute our strategy while building on the solid foundation already in place.

Speaker #1: We continue to make progress executing our long term initiatives . And during the first quarter , we took several important actions that reinforced our strategic priorities First , we announced key leadership appointments across both our commercial and federal government segments to support our next phase of growth We These actions enhance our ability to support growing client demand for AI led transformation .

Theodore S. Hanson: We also successfully closed the acquisition of Quinnox, marking another important milestone in advancing our strategy toward enhancing our solutions, capabilities, and margins. Quinnox meaningfully expands our ability to deliver technical end-to-end application engineering and modernization solutions for our commercial clients, while establishing a strong foundation for our offshore delivery platform in India. Although still early, integration is progressing well, and we are already co-selling their services. Ultimately, these actions enhance our ability to support growing client demand for AI-led transformation, scalable delivery, and outcomes-based solutions across industries. We remain focused on executing with discipline and building a higher value, more integrated Everforth. With that, I'll turn the call over to Shiv.

Ted Hanson: We also successfully closed the acquisition of Quinnox, marking another important milestone in advancing our strategy toward enhancing our solutions, capabilities, and margins. Quinnox meaningfully expands our ability to deliver technical end-to-end application engineering and modernization solutions for our commercial clients, while establishing a strong foundation for our offshore delivery platform in India. Although still early, integration is progressing well, and we are already co-selling their services. Ultimately, these actions enhance our ability to support growing client demand for AI-led transformation, scalable delivery, and outcomes-based solutions across industries. We remain focused on executing with discipline and building a higher value, more integrated Everforth. With that, I'll turn the call over to Shiv.

Speaker #1: Scalable delivery , and outcomes based solutions across industries . We remain focused on executing with discipline and building a higher value , more integrated .

Speaker #1: Ever forth, with that, I'll turn the call over to Shiv.

Speaker #2: Thanks , Ted , and good afternoon , everyone . As Ted noted , we go to market through a combination of industry and solutions , expertise .

Shiv Iyer: Thanks, Ted, and good afternoon, everyone. As Ted noted, we go to market through a combination of industry and solutions expertise. We believe industry is the most meaningful lens for understanding where client demand is emerging and how our customers are prioritizing their IT investments. With that in mind, I will begin with our industry performance for Q1. Within our Commercial Segment, we delivered year-on-year growth in the Healthcare, Consumer and Industrial, and TMT industries, reflecting broad-based demand for AI and data, cloud and infrastructure, application engineering and modernization, and enterprise platforms. Healthcare grew at a high single-digit rate, driven by increased engagement from healthcare payers, while the Consumer and Industrial and TMT industries achieved mid-single digit growth supported by software, utilities, and industrial customers, leveraging our capabilities across AI and data, cloud, experience, and cybersecurity.

Speaker #2: We believe industry is the most meaningful lens for understanding where client demand is emerging and how our customers are prioritizing their IT investments.

Speaker #2: With that in mind , I will begin with our Industry performance for the first quarter . Within our commercial segment , we delivered year on year growth in the healthcare , consumer and industrial and TMT industries , reflecting broad based demand for AI and data .

Speaker #2: Cloud and infrastructure . Application engineering and modernization and enterprise platforms Healthcare grew at a high single digit rate , driven by increased engagement from healthcare payers , while the consumer and industrial and TMT industries achieved mid-single digit growth , supported by software , utilities and industrial customers .

Speaker #2: Leveraging our capabilities across AI and data , cloud experience and cybersecurity . Though the financial services industry , one of the biggest spenders in IT , declined mid-single digits year over year We saw high single digit growth amongst insurance customers where application engineering and AI engagements continue to gain traction Consistent with the typical first quarter seasonality in which certain projects conclude at year end Most industries soften sequentially with TMT relatively flat That said , we saw pockets of strength within several industries in consumer and industrial .

Shiv Iyer: Though the financial services industry, one of the biggest spenders on IT, declined mid-single digits year over year, we saw high single-digit growth amongst insurance customers, where application engineering and AI engagements continued to gain traction. Consistent with the typical Q1 seasonality in which certain projects conclude at year-end, most industries softened sequentially with CMT relatively flat. That said, we saw pockets of strength within several industries. In consumer and industrial, for example, utilities delivered low double-digit growth supported by demand in application engineering, cloud and infrastructure, and AI and data. Turning to our Federal segment, we track our Federal revenues across four customer types, including defense and intelligence, national security, civilian, and other clients. Defense, intelligence, and national security customers continue to comprise approximately 70% of our total Federal revenues, with the remaining balance coming from civilian agencies, government-sponsored entities, state and local agencies, and select commercial customers.

Speaker #2: For example , utilities delivered low single digit growth , supported by demand in application engineering , cloud and infrastructure , and AI and data .

Speaker #2: Turning to our federal segment , we track our federal revenues across four customer types , including defense and intelligence , national security , civilian , and other clients Defense .

Speaker #2: Intelligence and national security customers continue to comprise approximately 70% of our total federal revenues . With the remaining balance coming from civilian agencies , government sponsored entities , state and local agencies , and select commercial customers National security customers delivered the strongest growth for the segment both year over year and sequentially This was primarily driven by cybersecurity work supporting the continuous diagnostics and mitigation , or CDM service program within DHS .

Shiv Iyer: National security customers delivered the strongest growth for the segment both year over year and sequentially. This was primarily driven by cybersecurity work supporting the Continuous Diagnostics and Mitigation, or CDM service program within DHS. We also saw mid-single-digit growth in our other clients year over year, led by the USPS, where we deployed a purpose-built AI application designed to significantly reduce undeliverable mail and improve operational efficiency. Building on the industry discussion, I'd like to transition to our solutions performance, which provides a clear view of where the client demand is strongest today and how it is evolving. AI and data remain a significant driver of demand across our portfolio. Our clients are increasingly focused on modernizing data foundations to support analytics, AI-enabled decision-making, and operational agility. Let me provide a few examples.

Speaker #2: We also saw mid-single digit growth in our other clients year over year , led by the USPS , where we deployed a purpose built AI application designed to significantly reduce undeliverable mail and improve operational efficiency Building on the industry discussion , I'd like to transition to our solutions performance , which provides a clear view of where the client demand is strongest today and how it is evolving .

Speaker #2: AI and data remain a significant driver of demand across our portfolio . Our clients are increasingly focused on modernizing data foundations to support analytics , AI enabled decision making , and operational agility .

Speaker #2: Let me provide a few examples . In the consumer industry . We partnered with a leading global athletic apparel and footwear company to design and deploy a unified analytics platform powered by Databricks , Genie and Agentic AI interface that enables secure access to governed data by consolidating product assortment , planning , demand , bookings , and sales into a single governed experience .

Shiv Iyer: In the consumer industry, we partnered with a leading global athletic apparel and footwear company to design and deploy a unified analytics platform powered by Databricks GenAI and Agentic AI interface that enables secure access to governed data. By consolidating product assortment planning, demand, bookings, and sales into a single governed experience, our client improved product creation decisioning and speed to market, while also establishing a reusable foundation to scale across broader demand planning and supply chain use cases. Databricks is one of our core strategic partners, and during the quarter, our commercial business was recognized as a Databricks Silver Tier partner. Leveraging that partnership, our industrial team supported a Fortune 100 energy and utilities company in migrating from legacy architectures to a Databricks-based integration. This effort aligned the client with enterprise data strategy while also reducing long-term risk and strengthening governance.

Speaker #2: Our client improved product creation , decisioning and speed to market , while also establishing a reusable foundation to scale across broader demand planning and supply chain use cases Databricks is one of our core strategic partners , and during the quarter , our commercial business was recognized as a Databricks silver tier partner .

Speaker #2: Leveraging that partnership, our industrial team supported a Fortune 100 energy and utilities company in migrating from legacy architectures to a Databricks-based integration.

Speaker #2: This effort aligned the client to its enterprise data strategy, while also reducing long-term risk and strengthening governance. Following the success of this project, our client is engaging our teams to support legacy migrations into Databricks across other areas of the organization.

Shiv Iyer: Following the success of this project, our client is engaging our teams to support legacy migrations into Databricks across other areas of the organization. We're also helping customers unlock the full value of modern hyperscaler AI services in the cloud. In the TMT vertical, for example, our AI and cloud teams partnered with AWS to support a Fortune 50 media company in building a digital twin of its streaming platform. This solution combines advanced cloud engineering with AI-powered simulations to help our client proactively identify performance risks ahead of some of the largest global streaming sporting events that commonly draw over 100 million viewers. A successful project, we now have a repeatable use case that can be extended across TMT clients with similar streaming and gaming environments. As AI adoption and data volumes accelerate, cybersecurity has become an increasingly integral component of nearly every client engagement.

Speaker #2: We're also helping customers unlock the full value of modern hyperscaler AI services in the cloud. In the TMT vertical, for example, our AI and cloud teams partnered with AWS to support a Fortune 50 media company in building a digital twin of its streaming platform.

Speaker #2: This solution combines advanced cloud engineering with AI powered simulations to help our client proactively identify performance risks ahead of some of the largest global streaming sporting events that commonly draw over 100 million viewers .

Speaker #2: A successful project . We now have a repeatable use case that can be extended across TMT clients with similar streaming and gaming environments as AI adoption and data volumes accelerate .

Speaker #2: Cybersecurity has become an increasingly integral component of nearly every client engagement in the healthcare industry. We secured an extension with a large national insurance payer to modernize their identity governance using SailPoint. This work established a central identity framework that supports regulatory compliance.

Shiv Iyer: In the healthcare industry, we secured an extension with a large national insurance payer to modernize their identity governance using SailPoint. This work established a central identity framework that supports regulatory compliance while safeguarding sensitive patient and member data. Alongside this modernization work, we continue to provide ongoing SailPoint platform support, reinforcing our long-term client relationship. In the federal market, we're supporting the Cybersecurity and Infrastructure Security Agency, or CISA, through the aforementioned CDM program by delivering security information and event management as a service. This capability standardizes security data collection across federal agencies and enables real-time threat detection and rapid response. We also delivered a first of its kind ATO-accredited development environment for the US Navy, a secure, government-approved workspace where teams can safely build, test, and manage software and data.

Speaker #2: While safeguarding sensitive , patient and member data Alongside this modernization work , we continue to provide ongoing sailpoint platform support , reinforcing our long term client relationship in the federal market .

Speaker #2: We're supporting the cybersecurity and infrastructure Security Agency , or Cisa , through the aforementioned CDM program . By delivering security information and event management as a service .

Speaker #2: This capability standardizes security data collection across federal agencies and enables real time threat detection and rapid response We also delivered a first of its kind ATO accredited development environment for the US Navy , a secure government approved workspace where teams can safely build , test and manage software and data .

Speaker #2: By combining our dev labs and software factory with elastic cloud infrastructure and AI enabled automation , we created a development environment that aligns with the DoD zero trust requirements Enterprise platforms also remain central to our clients digital transformation , particularly as organizations look to embed AI into their systems of record .

Shiv Iyer: By combining our dev labs and software factory with Elastic's cloud infrastructure and AI-enabled automation, we created a development environment that aligns with the DoD's Zero Trust requirements. Enterprise platforms also remain central to our clients' digital transformation, particularly as organizations look to embed AI into their systems of record. We continue to advance co-selling and co-development efforts across our partner ecosystem with a focus on accelerating time to value through automation, data readiness, and agent-enabled workflows. In our commercial business, we're helping clients embed agentic capabilities across core data platforms, hyperscaler cloud environments, and enterprise systems of record. During the quarter, we became a Snowflake Cortex preferred partner, working closely with Snowflake to build hands-on labs, develop AI readiness case studies, and create customer-facing applications leveraging Cortex, Snowflake's native agentic engineering capability.

Speaker #2: We continue to advance Co-selling and co-development efforts across our partner ecosystem , with a focus on accelerating time to value through automation , data readiness , and agent enabled workflows in our commercial business , we're helping clients embed Agentic capabilities across core data platforms , Hyperscaler cloud environments , and enterprise systems of record During the quarter , we became a snowflakes cortex code preferred partner , working closely with snowflake to build hands on labs , develop AI readiness case studies , and create customer facing applications .

Speaker #2: Leveraging cortex , Snowflake's native Agentic engineering capability Similarly , with AWS , we're partnering to build a workday . Data loading agent that combines AWS Agentive technology with top blocks , proprietary smart loader tools with Salesforce , we're investing in Agent Force to enable AI driven digital work that supports faster delivery cycles and improved testing outcomes , and with ServiceNow , we were one of the top ten global partners selected for the launch of employee works , a new offering that integrates AI assistance with workflow automation Although we're seeing progress in our enterprise platforms work , we're operating in a more deliberate buying environment .

Shiv Iyer: Similarly, with AWS, we're partnering to build a Workday data loading agent that combines AWS's agentic technology with TopBloc's proprietary smart loader tools. With Salesforce, we're investing in Agentforce to enable AI-driven digital work that supports faster delivery cycles and improved testing outcomes. With ServiceNow, we were one of the top 10 global partners selected for the launch of EmployeeWorks, a new offering that integrates AI assistance with workflow automation. Although we're seeing progress in our enterprise platforms work, we're operating in a more deliberate buying environment. Decision cycles have lengthened as customers take a more measured approach to large long-term initiatives while they assess how AI fits into their broader technology roadmaps. The enterprise software market is also undergoing change, from evolving go-to-market models focused on consumption rather than perpetual, to organizational realignments with changes in sales and executive leadership.

Speaker #2: Decision cycles have lengthened as customers take a more measured approach to large, long-term initiatives, while they assess how AI fits into their broader technology roadmaps.

Speaker #2: The enterprise software market is also undergoing change from evolving go to market models focused on consumption rather than per seat , to organizational realignments .

Speaker #2: With changes in sales and executive leadership, that said, we view this as a moment in time while customers are being more deliberate about how, when, and where they invest.

Shiv Iyer: That said, we view this as a moment in time. While customers are being more deliberate about how, when, and where they invest, we do not see them stepping away from enterprise platforms, nor do we see AI displacing these systems of record. In fact, AI is increasing their relevance. Enterprise platforms remain where data workflows and governance reside, and without that foundation, AI lacks context and scale. Our role is to help clients modernize, integrate, and optimize these platforms while enabling practical AI applications that drive measurable business outcomes. As spending normalizes and ID programs move forward, we're well-positioned to support our clients across this ecosystem. With that, I'll turn the call over to our CFO, Marie Perry, to discuss our Q1 2026 performance and Q2 guidance.

Speaker #2: We do not see them stepping away from enterprise platforms , nor do we see AI displacing these systems of record . In fact , AI is increasing their relevance and enterprise platforms remain where data , workflows and governance reside , and without that foundation , AI lacks context and scale .

Speaker #2: Our role is to help clients modernize, integrate, and optimize these platforms while enabling practical AI applications that drive measurable business outcomes.

Speaker #2: As spending normalizes and ID programs move forward, we're well positioned to support our clients across this ecosystem. With that, I'll turn the call over to our CFO, Marie Perry, to discuss our first quarter 2026 performance and second quarter guidance.

Speaker #3: Thanks, Shiv. For the first quarter, revenues totaled $968.3 million, within our guidance range and consistent with the prior year period.

Marie Perry: Thanks, Shiv. For Q1 2026, revenues totaled $968.3 million, within our guidance range and consistent with the prior year period. Given the timing of the acquisition close, Quinnox contributed less than one month to the quarterly results. Revenues from our Commercial segment were $675.5 million, an increase of 0.5% compared to the prior year. Revenues from our Federal Government segment were $292.8 million, a decrease of 1.1% year over year. Turning to margins, gross margins for Q1 2026 were 27.5%, a decrease of 90 basis points from the prior year. Commercial segment gross margins totaled 31%, a decrease of 140 basis points year over year. Gross margins for the Federal Government segment were 19.6%, an increase of 10 basis points year over year, but slightly lower than our expectations due to a higher than anticipated contribution of cost-plus revenues in the quarter.

Speaker #3: Given the timing of the acquisition close, Quinnox contributed less than one month to the quarterly results. Revenues from our commercial segment were $675.5 million, an increase of 0.5% compared to the prior year.

Speaker #3: Revenues from our federal government segment were 292.8 million , a decrease of 1.1% year over year . Turning to margins , gross margins for the first quarter of 26 were 27.5% , a decrease of 90 basis points from the prior year Commercial segment gross margins totaled 31% , a decrease of 140 basis points .

Speaker #3: Year over year Gross margins for the federal government segment were 19.6% . An increase of ten basis points year over year . But slightly lower than our expectations due to a higher than anticipated contribution of cost plus revenues in the quarter As Ted mentioned , this decline in margin was primarily driven by business mix related to a lower than expected contribution from some of our higher margin solutions within the commercial segment We also experienced headwinds from changes in our foreign exchange rate related to our delivery center in Mexico G&A for the quarter was 224.4 million , compared to 214.5 million in the first quarter of 2025 .

Marie Perry: As Ted mentioned, this decline in margin was primarily driven by business mix related to a lower than expected contribution from some of our higher margin solutions within the commercial segment. We also experienced headwind from changes in our foreign exchange rate related to our delivery center in Mexico. SG&A for the quarter was $224.4 million, compared to $214.5 million in Q1 2025. SG&A expenses included $12.8 million in acquisition, integration, and strategic planning expenses that were not included in our previously announced guidance estimates. Excluding these expenses, SG&A expenses were relatively consistent with prior year. For Q1, net income was $5.5 million, adjusted EBITDA was $83.6 million, and adjusted EBITDA margin was 8.6%. Adjusted EBITDA margin was below our guidance range due to the lower gross margins just discussed. In addition, our estimates assume an effective tax rate of 28%.

Speaker #3: SG&A expenses included $12.8 million in acquisition, integration, and strategic planning expenses that were not included in our previously announced guidance estimates. Excluding these expenses, G&A expenses were relatively consistent with the prior year. For the first quarter, net income was $5.5 million.

Speaker #3: Adjusted EBITDA was 83.6 million , and adjusted EBITDA margin was 8.6% . Adjusted EBITDA margin was below our guidance range due to the lower gross margin , just discussed in addition , our estimates assume an effective tax rate of 28% for the quarter .

Marie Perry: For the quarter, the effective tax rate was 48.1%, reflecting the one-time discrete items not included in our guidance. As previously noted in March, we completed our acquisition of Quinnox for $290 million. We also deployed $39 million in cash to repurchase 0.8 million shares at an average share price of $47.69. At quarter end, we had approximately $934 million remaining under our $1 billion share repurchase authorization. Cash and cash equivalents were $143.6 million at quarter end. We had approximately $160 million available on our $500 million senior secured revolver. Our net leverage ratio was 3.1 times at the end of the quarter. We are committed to reducing our debt over time in order to bring our net leverage ratio closer to 2.5 times target.

Speaker #3: The effective tax rate was 48.1% , reflecting the one time discrete items not included in our guidance . As previously noted , in March , we completed our acquisition of Quinnox for 290 million .

Speaker #3: We also deployed $39 million in cash to repurchase 0.8 million shares at an average share price of $47.69 at quarter end. We had approximately $934 million remaining under our $1 billion share repurchase authorization. Cash and cash equivalents were $143.6 million at quarter end.

Speaker #3: We had approximately $160 million available on our $500 million senior secured revolver. Our net leverage ratio was 3.1 times at the end of the quarter.

Speaker #3: We are committed to reducing our debt over time in order to bring our net leverage ratio closer to our 2.5 times target. We will continue to opportunistically balance capital deployment with organic investment and share repurchase, and have remained active in buying back our shares in the second quarter.

Marie Perry: We will continue to opportunistically balance capital deployment with organic investment and share repurchase, and have remained active in buying back our shares in Q2. Free cash flow was $9.1 million. While free cash flow is generally seasonally softer in Q1, it was lower than we typically see in past quarters, primarily due to an increase in DSO. Turning to guidance, our financial estimates for Q2 of 2026 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions and assume no further deterioration in the markets that we serve. As we execute against our strategic plan, we expect some continued upfront investments. Our Q2 estimates include $8 million to $10 million in strategic planning expenses related to the execution of our NextWave growth strategy, which we expect will decline over the coming quarters.

Speaker #3: Free cash flow was 9.1 million , while free cash flow was generally seasonally softer in the fourth quarter . It was lower than we typically see in past quarters , primarily due to an increase in DSOs Turning to guidance , our financial estimates for the second quarter of 2026 are set forth in our earnings release and supplemental materials .

Speaker #3: These estimates are based on current market conditions and assume no further deterioration in the markets that we serve as we execute against our strategic plan.

Speaker #3: We expect some continued upfront investments. Our second quarter estimates include $8 million to $10 million in strategic planning expenses related to the execution of our next wave growth strategy, which we expect will decline over the coming quarters.

Speaker #3: Alongside these investments, as we highlighted at Investor Day, we are implementing targeted initiatives that will generate meaningful structural cost savings for the business.

Marie Perry: Alongside these investments, as we highlighted at Investor Day, we are implementing targeted initiatives that will generate meaningful structural cost savings for the business. These efforts are progressing as planned. As that is background, for Q2 2026, we are estimating revenues of $970 million to $1 billion, net income of $8 million to $13.7 million, Adjusted EBITDA of $85 million to $95 million, and Adjusted EBITDA margin of 8.8% to 9.5%. Thank you. I'll now turn the call back over to Ted.

Speaker #3: These efforts are progressing as planned, as that is background for the second quarter of 2026. We are estimating revenues of $970 million to $1 billion.

Speaker #3: Net income of $8 million to $13.7 million. Adjusted EBITDA of $85 million to $95 million and adjusted EBITDA margin of 8.8% to 9.5%.

Speaker #3: Thank you. I'll now turn the call back over to Ted.

Speaker #1: Thanks, Marie. As we step back from the quarter, the most important takeaway is that consistency between our strategy and our actions.

Theodore S. Hanson: Thanks, Marie. As we step back from the quarter, the most important takeaway is the consistency between our strategy and our actions. The projects Shiv walked through today illustrate how our industry depth and solution capabilities are translating into meaningful outcomes for clients navigating increasingly complex environments.

Ted Hanson: Thanks, Marie. As we step back from the quarter, the most important takeaway is the consistency between our strategy and our actions. The projects Shiv walked through today illustrate how our industry depth and solution capabilities are translating into meaningful outcomes for clients navigating increasingly complex environments.

Speaker #1: The project ship walkthrough today illustrates how our industry depth and solution capabilities are translating into meaningful outcomes for clients navigating increasingly complex environments.

Speaker #1: The acquisition of Quinnox strengthens our ability to deliver end to end application engineering and modernization , at scale . While the leadership additions we made earlier this year further align our company to execute our next wave of growth strategy .

Theodore S. Hanson: The acquisition of Quinnox strengthens our ability to deliver end-to-end application engineering and modernization at scale, while the leadership additions we made earlier this year further align our company to execute our NextWave growth strategy. These are deliberate actions focused on building a higher value, more unified company positioned for durable long-term growth and expanded margins. This long-term orientation is a central theme in our annual shareholder letter, which will be released later this week. This letter discusses the evolution of enterprise technology and how those shifts are shaping our strategic priorities. As AI moves from experimentation towards broader enterprise adoption, it is driving greater integration and modernization across IT environments and increasing the need for sophisticated services to support that transition.

Ted Hanson: The acquisition of Quinnox strengthens our ability to deliver end-to-end application engineering and modernization at scale, while the leadership additions we made earlier this year further align our company to execute our NextWave growth strategy. These are deliberate actions focused on building a higher value, more unified company positioned for durable long-term growth and expanded margins. This long-term orientation is a central theme in our annual shareholder letter, which will be released later this week. This letter discusses the evolution of enterprise technology and how those shifts are shaping our strategic priorities. As AI moves from experimentation towards broader enterprise adoption, it is driving greater integration and modernization across IT environments and increasing the need for sophisticated services to support that transition.

Speaker #1: These are deliberate actions focused on building a higher value , more unified company positioned for durable , long term growth and expanded margins This long term orientation is a central theme in our annual shareholder letter , which will be released later this week .

Speaker #1: This letter discusses the evolution of enterprise technology and how those shifts are shaping our strategic priorities. As AI moves from experimentation towards broader enterprise adoption, it is driving greater integration and modernization across IT environments and increasing the need for sophisticated services to support that transition. Solution providers that can modernize data and infrastructure and embed AI into real-life business processes and workflows are best positioned to succeed.

Theodore S. Hanson: Solution providers that can modernize data and infrastructure and embed AI into real-life business processes and workflows are best positioned to succeed, and these are the areas where we have a clear position and right to win. Our diversified client base, differentiated delivery models, deep industry relationships, and portfolio of in-demand solutions collectively create structural advantages in an AI-driven world. Before we open the call for questions, I want to thank our employees for their dedication this past quarter. Your adaptability and commitment to our clients is the foundation of our progress and our future. As I noted at the start of today's discussion, this call marks an important transition as we prepare to operate and report as Everforth. I look forward to continuing the conversation with you next quarter under our new name. With that, let's open the call to questions.

Ted Hanson: Solution providers that can modernize data and infrastructure and embed AI into real-life business processes and workflows are best positioned to succeed, and these are the areas where we have a clear position and right to win. Our diversified client base, differentiated delivery models, deep industry relationships, and portfolio of in-demand solutions collectively create structural advantages in an AI-driven world. Before we open the call for questions, I want to thank our employees for their dedication this past quarter. Your adaptability and commitment to our clients is the foundation of our progress and our future. As I noted at the start of today's discussion, this call marks an important transition as we prepare to operate and report as Everforth. I look forward to continuing the conversation with you next quarter under our new name. With that, let's open the call to questions.

Speaker #1: And these are the areas where we have a clear position and right to win our diversified client base Differentiated delivery models . Deep industry relationships and portfolio of in-demand solutions collectively create structural advantages in an AI driven world Before we open the call for questions , I want to thank our employees for their dedication this past quarter Your adaptability and commitment to our clients is the foundation of our progress and our future As I noted at the start of today's discussion , this call marks an important transition as we prepare to operate and report as ever forth I look forward to continuing the conversation with you next quarter under our new name With that , let's open the call to questions

Speaker #4: 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.

Operator 3: 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 from the line of Jeff Silber with BMO Capital Markets. Please proceed with your questions.

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 from the line of Jeff Silber with BMO Capital Markets. Please proceed with your questions.

Speaker #4: A confirmation tone will indicate your line is in the question queue. You may press *2 to remove yourself from the queue.

Speaker #4: 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 from the line of Jeff Silber with BMO Capital Markets.

Speaker #4: Please proceed with your question

Speaker #5: Thank you so much . A couple times in your prepared comments , you talked about lower than expected contribution from some higher margin commercial solutions .

Jeff Silber: Thank you so much. A couple times in your prepared comments, you talked about lower than expected contribution from some higher margin commercial solutions. Can we get a little bit more color on that? I'm just curious because you typically have really good visibility. I'm just wondering what happened here.

Speaker #5: Can we get a little bit more color on that? And I'm just curious because you typically have really good visibility. I'm just wondering what happened here.

Speaker #1: Thanks , Jeff . Yeah , I think look , coming out of the fourth quarter , you naturally have certain projects come to their conclusion and you have a start up of new work during the first quarter .

Theodore S. Hanson: Thanks, Jeff. Yeah, I think, look, coming out of Q4, you naturally have certain projects come to their conclusion and you have a start-up of new work during Q1. Excuse me. I think in this quarter, what we found was, while that's always a thing, the ramp up of higher margin solutions, especially in our enterprise software areas, was slower and later into the quarter than what our expectation was when we set the guidance. Really what we're seeing here in terms of the EBITDA margin miss is a gross margin issue. It's not an expense issue. We were kind of on an adjusted basis below our expectations on the cash SG&A side. On the commercial side, within our consulting business, we did see a larger change than normal of the profile of the margin of the projects that contributed during the quarter.

Ted Hanson: Thanks, Jeff. Yeah, I think, look, coming out of Q4, you naturally have certain projects come to their conclusion and you have a start-up of new work during Q1. Excuse me. I think in this quarter, what we found was, while that's always a thing, the ramp up of higher margin solutions, especially in our enterprise software areas, was slower and later into the quarter than what our expectation was when we set the guidance. Really what we're seeing here in terms of the EBITDA margin miss is a gross margin issue. It's not an expense issue. We were kind of on an adjusted basis below our expectations on the cash SG&A side. On the commercial side, within our consulting business, we did see a larger change than normal of the profile of the margin of the projects that contributed during the quarter.

Speaker #1: Excuse me . And I think in this quarter , what we found was while that's well , that's always a thing . The ramp up of higher margin solutions , especially in our enterprise software areas Was slower and later into the quarter than what our expectation was when we set the guidance .

Speaker #1: So , you know , really what we're seeing here in terms of the EBITDA margin , miss , is gross margin issue . It's not an expense issue .

Speaker #1: We were kind of on an adjusted basis below our expectations on the cash G&A side , but but on the on the commercial side , within our consulting business , we did see a larger change in normal of the profile of the margin of the projects that contributed during the quarter Second piece of that , Jeff , was in our federal business .

Theodore S. Hanson: Second piece of that, Jeff, was in our Federal business. We overperformed the revenue expectation. The meat of that was in the cost-plus area. You've heard us say before that cost-plus contracts come at a lower gross margin. Typically, we run 20% to 20.5% gross margins overall. Those cost-plus contracts can be high single digit to low double digit kind of gross margins. That was certainly an influence. While we did a good job on the revenue on the Federal side, the gross margin came in lower than what our expectations were at the forecast. As Marie said, we had a little bit of contribution of negative impact from FX. It's really the sum of those three things, if you will.

Ted Hanson: Second piece of that, Jeff, was in our Federal business. We overperformed the revenue expectation. The meat of that was in the cost-plus area. You've heard us say before that cost-plus contracts come at a lower gross margin. Typically, we run 20% to 20.5% gross margins overall. Those cost-plus contracts can be high single digit to low double digit kind of gross margins. That was certainly an influence. While we did a good job on the revenue on the Federal side, the gross margin came in lower than what our expectations were at the forecast. As Marie said, we had a little bit of contribution of negative impact from FX. It's really the sum of those three things, if you will.

Speaker #1: We overperformed the revenue expectation The the meat of that was in the cost plus area . You've heard us say before that cost plus contracts come at a lower gross margin .

Speaker #1: You know , typically we run 20 to 20.5% gross margins overall . You know , those cost plus contracts can be high single digit to low double digit kind of gross margins .

Speaker #1: And so that was certainly an influence. And so, while we did a good job on the revenue on the federal side, you know, the gross margin came in lower than what our expectations were at the forecast.

Speaker #1: And then, as Marie said, we had a little bit of contribution of negative impact from FX. So it's really the sum of those three things, if you will.

Jeff Silber: Okay, that's helpful. Let me play devil's advocate here. You mentioned in your prepared remarks or, excuse me, in answering this past question about some softness in the enterprise software area, and I know the stock market seems to be that there's a lot of AI disruption risk there. How do we know that that's not an issue? It's more of a structural issue than anything else.

Speaker #5: Okay , that's helpful . Let me play devil's advocate here . You mentioned in your prepared remarks or excuse me , in answering this last question about , you know , some softness in the enterprise software area .

Speaker #5: And I know the stock market seems to be that there's a lot of AI disruption risk there. How do we know that that's not an issue?

Speaker #5: It's more of a structural issue than anything else.

Theodore S. Hanson: Well, look, I think our customers, I mean, we came out of Q4 with really what I would call record bookings, especially in the Workday area and solid bookings in ServiceNow and our Salesforce practice, which is our three primary enterprise software practices. We just didn't see the conversion to revenue at historical rates. Those are our highest margin solution areas. The delta between what we expected through the quarter and what actually happened was that ramp up of those was a lot slower from the bookings that we came out of Q4. I do think that customers are watching very closely the AI story and making sure that if they're doing a new implementation or a significant upgrade or taking on new SKUs. That's money well invested.

Ted Hanson: Well, look, I think our customers, I mean, we came out of Q4 with really what I would call record bookings, especially in the Workday area and solid bookings in ServiceNow and our Salesforce practice, which is our three primary enterprise software practices. We just didn't see the conversion to revenue at historical rates. Those are our highest margin solution areas. The delta between what we expected through the quarter and what actually happened was that ramp up of those was a lot slower from the bookings that we came out of Q4. I do think that customers are watching very closely the AI story and making sure that if they're doing a new implementation or a significant upgrade or taking on new SKUs. That's money well invested.

Speaker #1: Well , look , I think our customers . I mean , we came out of the fourth quarter with really what I would call record bookings , especially in the workday area .

Speaker #1: And solid bookings in ServiceNow and Salesforce and our Salesforce practice, which is three primary enterprise software practices. And we just didn't see the conversion to revenue at historical rates.

Speaker #1: So, those are our highest margin solution areas. And the delta between what we expected through the quarter and what actually happened was that the ramp-up of those was a lot slower from the bookings that we came out of the fourth quarter.

Speaker #1: I do think that customers are watching , you know , very closely the AI story and making sure that they're if they're doing a new implementation or a significant upgrade or taking on new SKUs , that that's money .

Speaker #1: Well invested . I think what we saw at the end of the quarter , kind of exiting , if you will , the quarter and into the first part of April is a little bit more normal patterns in terms of both getting bookings and beginning to see the conversion of that .

Theodore S. Hanson: I think what we saw at the end of the quarter, exiting, if you will, the quarter, and into the first part of April, is a little bit more normal patterns in terms of both getting bookings and beginning to see the conversion of that. I think it was temporary, Jeff, because there was a lot of negative commentary and obviously a lot of negative play on those enterprise software stocks. I think customers kind of reacted accordingly. We're looking for better contribution here. The first few weeks of the quarter here in April are telling us that'll be the case. I don't think it's going to be a rubber band, but I think it'll build, and we'll see a better margin profile.

Ted Hanson: I think what we saw at the end of the quarter, exiting, if you will, the quarter, and into the first part of April, is a little bit more normal patterns in terms of both getting bookings and beginning to see the conversion of that. I think it was temporary, Jeff, because there was a lot of negative commentary and obviously a lot of negative play on those enterprise software stocks. I think customers kind of reacted accordingly. We're looking for better contribution here. The first few weeks of the quarter here in April are telling us that'll be the case. I don't think it's going to be a rubber band, but I think it'll build, and we'll see a better margin profile.

Speaker #1: And so I think it was temporary, Jeff, because there was a lot of negative commentary, and obviously a lot of negative play on those enterprise software stocks.

Speaker #1: And I think the customers , you know , kind of reacted accordingly . But we're looking for better contribution here . The first few weeks of the quarter here in April are telling us that'll be the case .

Speaker #1: I don't think it's going to be a rubber band , but I think it'll build and we'll see a better margin profile Obviously , we gave you a better margin profile in our Q2 guidance , which is solely on the back of , you know , improving gross margins in both commercial consulting and federal consulting .

Theodore S. Hanson: Obviously, we gave you a better margin profile in our Q2 guidance, which is solely on the back of improving gross margins in both commercial consulting and federal consulting in Q2.

Ted Hanson: Obviously, we gave you a better margin profile in our Q2 guidance, which is solely on the back of improving gross margins in both commercial consulting and federal consulting in Q2.

Speaker #1: In the second quarter .

Jeff Silber: All right. Appreciate the color. Thanks so much.

Speaker #5: I appreciate the color. Thanks so much.

Operator 3: 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 #4: Thank you. Our next question comes from the line of Maggie Nolan with William Blair. Please proceed with your question.

Maggie Nolan: Hi, thank you. What should we read into the financial services year-over-year decline as it relates to maybe the balance of the year? Have you seen any change in the first couple of weeks of Q2 here? Just given that's a segment with typically large spend on IT, any read through to the other segments?

Speaker #6: Hi . Thank you . What should we read into the financial services year over year decline as it relates to maybe the balance of the year ?

Speaker #6: And have you seen any change in the first couple of weeks of the second quarter here ? And then just given that that's , you know , a segment with typically large spend on it .

Speaker #6: Any read through to the other segments

Shiv Iyer: Yeah. Maggie, look, as we mentioned in the remarks, what we're seeing is just continued tight management of expenditure in the largest piece of financial services for us, which is the big banks. If you think about it, they have stabilized, but there is really not an increase in spending that we're seeing at any measurable rate in that segment. That being said, we are seeing some green shoots in insurance and also some green shoots in diversified financials, which we expect will turn into revenue upticks for us in Q2. The continued compression or rather lack of uptick we see in the big banks is why we see the continued decline because they are the largest spender in the financial services industry.

Speaker #2: Yeah . Maggie As we mentioned in the remarks . What we're seeing is just continued tight management of expenditure in the largest piece of financial services for us , which is the big banks So if you think about it , they have stabilized , but there is really not an increase in spending that we're seeing at any measurable rate in that in that segment .

Speaker #2: That being said , we are seeing some green shoots in insurance and , you know , also some green shoots in diversified financials , which we expect will turn into , you know , revenue upticks for us in the , in the in the second quarter .

Speaker #2: But the continued compression or rather lack of uptick we see in the big banks is , is why we see the continued decline in because they are the largest vendor in the , in the financial services industry .

Theodore S. Hanson: I think, Maggie, if you look at the sequential growth in the supplemental for that industry, it's kind of -3.5 Q4 to Q1. We always have a kind of 3% to 5% decline coming out of Q4 to Q1 for all the seasonal reasons that we talk about all the time. I'd say Shiv's right on. There's a lot of caution there, I think, on behalf of those customers. Also, it's kind of in line with what we would see seasonally. I think the real message is you're not seeing a surge or a pickup there. It's less about a sequential decline.

Ted Hanson: I think, Maggie, if you look at the sequential growth in the supplemental for that industry, it's kind of -3.5 Q4 to Q1. We always have a kind of 3% to 5% decline coming out of Q4 to Q1 for all the seasonal reasons that we talk about all the time. I'd say Shiv's right on. There's a lot of caution there, I think, on behalf of those customers. Also, it's kind of in line with what we would see seasonally. I think the real message is you're not seeing a surge or a pickup there. It's less about a sequential decline.

Speaker #1: And I think , Maggie , if you look at the sequential growth in the supplemental for that industry , it's kind of negative three and a half Q4 to Q1 .

Speaker #1: We always have a kind of 3% to 5% decline coming out of Q4 to Q1 for all the seasonal reasons that we talk about all the time.

Speaker #1: So I would say ships , right on . There's a lot of a lot of caution there . I think on behalf of those customers , but also , you know , it's kind of in line with what we would see seasonally .

Speaker #1: So I think the real message is you're not seeing a surge or a pickup there It's it's less about a sequential decline

Operator 1: Okay, great. Thank you. On the commercial IP book-to-bill of 1.1, I thought was encouraging. Can you give a little bit more color on that, maybe the quality and duration of recent wins? Are you seeing shorter cycle projects versus what mix is kind of longer-term solution-led work? Just how that translates into your visibility for the remainder of the year.

Maggie Nolan: Okay, great. Thank you. On the commercial IP book-to-bill of 1.1, I thought was encouraging. Can you give a little bit more color on that, maybe the quality and duration of recent wins? Are you seeing shorter cycle projects versus what mix is kind of longer-term solution-led work? Just how that translates into your visibility for the remainder of the year.

Speaker #6: Okay , great .

Speaker #7: Thank you .

Speaker #6: And then on the the commercial IT book to bill of of 1.1 I thought was encouraging Can you give a little bit more color on that ?

Speaker #6: Maybe the quality and duration of recent wins ? Are you seeing shorter cycle projects versus what mix is kind of longer term solution led work ?

Speaker #6: And then that translates into your visibility for the remainder of the year.

Shiv Iyer: Maggie, I think if you think about the strength that we're seeing from a bookings perspective, it's relatively broad-based across several areas other than sort of some of the enterprise platform dynamic that Ted alluded to. We're seeing a pretty big uptick in some of our cloud and infrastructure type work in the technology verticals, especially around the services we provide to our software companies. Those are generally longer-term bookings. That's healthy from a mix perspective. We're also seeing longer-term bookings in cybersecurity and a little bit more strength in our continued strength, I should say, in our application modernization and application engineering capabilities, so to speak. I don't believe the durations on those have materially shifted, but overall durations are shifting rightwards and lengthening because of some of the cloud and infrastructure work, the volumes we see associated with that with our software providers.

Speaker #2: So , Maggie , I think if you think about the strength that we're seeing from a bookings perspective , it's , it's relatively broad based across several areas other than sort of some of the , the enterprise platform dynamic that Ted alluded to .

Speaker #2: We're seeing a pretty big uptick in some of our cloud and infrastructure-type work in the technology verticals, especially around the services we provide to our software companies.

Speaker #2: Those are generally longer term bookings . So that's healthy from a mix perspective . We're also seeing longer term bookings in cybersecurity and a little bit of more strength in our continued strength , I should say , in our application modernization and application engineering capability , so to speak .

Speaker #2: I don't believe the durations on those have materially shifted , but overall durations are shifting rightwards and longer lengthening because of some of the cloud and infrastructure work .

Speaker #2: The volumes we see associated with that , with our software providers

Maggie Nolan: Thank you.

Speaker #6: Thank you

Operator 3: Thank you. Our next question comes from the line of Kevin McVeigh with UBS. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Kevin McVeigh with UBS. Please proceed with your question.

Speaker #4: Thank you. Our next question comes from the line of Kevin McVeigh with UBS. Please proceed with your question.

Kevin McVeigh: Great. Thanks so much. Hey, I think you alluded to some unanticipated expenses in the quarter in Q4. Can you help us dimensionalize that a little bit? The Q1 and just coming out of Investor Day, I don't remember them being referenced. Is that something new, or was that maybe I missed it at Investor Day?

Speaker #8: Great . Thanks so much . Hey , I think you alluded to some unanticipated expenses in the quarter In Q4 . Can you help us dimensionalize that a little bit ?

Speaker #8: And then , you know , the Q1 and , you know , just coming out of Investor Day , I don't remember them being referenced .

Speaker #8: Is that something new, or was that maybe something I missed at Investor Day?

Marie Perry: Right. Kevin, hi, this is Marie.

Speaker #3: Right . So , Kevin , hey , this is Marie . So the 12.8 12 , the 12.8 million that we referenced , those are add backs to EBITDA .

Kevin McVeigh: Hey, Marie.

Marie Perry: The $12.8 million that we referenced, those are add backs to EBITDA. When we talked about the $80 million of savings that we are going to achieve over the three-year period, those dollars that we provided on the call for Q1 relate to the implementation of those. When you think about the 12.8, there's a component that's Quinnox, right? There's cost associated with the Quinnox transaction. Also our go-to-market, our back office outsourcing, and then our ERP. We gave in our guide for Q2 a range of $8 to $10 million, and those costs will come down right throughout 2026.

Speaker #3: And so, when we talked about the $80 million of savings that we are going to achieve over the three-year period, those dollars that we provided on the call for Q1 relate to the implementation of those.

Speaker #3: So when you think about the 12.8, there's a component that's Quinnox, right? So there's cost associated with the Quinnox transaction.

Speaker #3: Also , our go to market , our back office outsourcing , and then our ERP . So we gave in our guide for Q2 a range of 8 to $10 million .

Speaker #3: And those costs will come down throughout 26 .

Theodore S. Hanson: Typically, Kevin, those strategic integration acquisition expenses are immaterial. Since they're a little higher now for a few quarters, and because we have better visibility, they're more known. Marie's just been able to call them out and also give you a range for the guidance for the next quarter.

Ted Hanson: Typically, Kevin, those strategic integration acquisition expenses are immaterial. Since they're a little higher now for a few quarters, and because we have better visibility, they're more known. Marie's just been able to call them out and also give you a range for the guidance for the next quarter.

Speaker #1: So typically , Kevin , those , those strategic integration , acquisition expenses are immaterial since they're a little higher now for a few quarters .

Speaker #1: And because we have better visibility, they're more known, Maurice. Just been able to call them out and also give you a range for the guide for the next quarter.

Kevin McVeigh: Okay. I guess, Marie, can you remind us how much did Quinnox contribute to the Q2 guidance on the revenue and EBITDA?

Speaker #8: Okay . And then I guess just . Marie , can you remind us how much did Quinnox contribute to the Q2 guidance on the revenue and EBITDA

Theodore S. Hanson: We only had them for a few weeks, so just $ a few million.

Ted Hanson: We only had them for a few weeks, so just $ a few million.

Speaker #1: We only had them for a couple, few weeks. So, just a few million.

Kevin McVeigh: No, for the next quarter, Ted.

Speaker #8: No, no, for the next quarter. Ted

Theodore S. Hanson: Oh, for the next quarter, Marie?

Ted Hanson: Oh, for the next quarter, Marie?

Speaker #1: Oh , for the next quarter . Marie .

Marie Perry: Yeah. Similar to how we treated TopBloc, Kevin, we gave the full year revenue contribution. For Quinnox, it's $100 million, with growth of low to mid-teens, and then EBITDA margin of low 20%.

Speaker #3: Yeah . Similar to how we treated top block . Kevin . We gave the full year revenue contribution . So for Quinnox , it's 100 million .

Speaker #3: With growth of mid low to mid teens . And then EBITDA margin of low 20% .

Theodore S. Hanson: Yeah. 25, just at or just under $100 million.

Ted Hanson: Yeah. 25, just at or just under $100 million.

Speaker #1: Yeah . So 25 just at or just under 100 million . And we're expecting low double digit growth rate in 26 . Right

Marie Perry: Yeah.

Theodore S. Hanson: We're expecting low double-digit growth rate in 2026.

Ted Hanson: We're expecting low double-digit growth rate in 2026.

Marie Perry: Right.

Kevin McVeigh: You figure about $25 million in Q2. Is that fair?

Speaker #8: You figure about 25 million in Q2 . Is that is that fair

Theodore S. Hanson: That's about the math.

Ted Hanson: That's about the math.

Speaker #1: That's about the math

Rachel Smith: Thank you.

Kevin McVeigh: Thank you.

Speaker #8: Thank you

Marie Perry: Thank you.

Speaker #3: Thank you .

Operator 3: Thank you. Our next question comes from the line of Tobey Sommer with Truist Securities. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Tobey Sommer with Truist Securities. Please proceed with your question.

Speaker #4: Thank you. Our next question comes from the line of Toby Sommer with Truist Securities. Please proceed with your question.

Tobey Sommer: Thanks. I was wondering if you could give us some color on the assignment business and get a sense for the trends there. Yeah, I'll just start with that. Thank you.

Speaker #9: Thanks. I was wondering if you could give us some color on the assignment business and get a sense for the trends there.

Speaker #9: Yeah , I'll start with that . Thank you

Theodore S. Hanson: Yeah. Toby, just kind of Q4 to Q1, I would say sequentially, it performed about like we expected. It was down mid-single digits, low to mid-single digits quarter to quarter. That's seasonally about what we see every year, so no surprises there. Pay-to-bill margins, pretty steady. Contribution of perm, pretty flat. I don't think any. No surprises, if you will, on the assignment side.

Ted Hanson: Yeah. Toby, just kind of Q4 to Q1, I would say sequentially, it performed about like we expected. It was down mid-single digits, low to mid-single digits quarter to quarter. That's seasonally about what we see every year, so no surprises there. Pay-to-bill margins, pretty steady. Contribution of perm, pretty flat. I don't think any. No surprises, if you will, on the assignment side.

Speaker #1: Yeah . So , Toby , just kind of Q4 to Q1 , I would say sequentially it performed about like we expected . It was down kind of mid-single digits , low to mid single digits , quarter to quarter .

Speaker #1: That's seasonally about what we year . So no surprises there . Pay the bill . Margins pretty steady . And contribution of perm pretty flat .

Speaker #1: So I don't think any—no surprises, if you will, on the assignment side.

Tobey Sommer: On the government consulting side with the presidential budget request, what are the implications for the business, if you could? Maybe think about from a defense and intel, and then also a civil perspective where there are some agencies with cuts. Thanks.

Speaker #9: Okay. And then on the government consulting side, with the Presidential Budget Request, what are the implications for the business, if you could?

Speaker #9: And I — maybe think of it from a defense and Intel, and then also a civil perspective, where there are some agencies with cuts.

Speaker #9: Thanks .

Theodore S. Hanson: Yeah. I think we feel like we're pretty well-positioned here with where the budget money is flowing. Obviously, there's a watch item for us with DHS. Although all our contracts are being supported, but I don't think there's going to be a net increase, if you will, there, commensurate with what's going on in defense. But on the defense side, obviously, there's a big new chunk coming there. AI is going to be a big part of that. Data is going to be a big part of that. Cybersecurity is going to continue to be a big part of that. I think in those areas where we play, we're pretty well-positioned. I would say the money has been slow to roll out.

Ted Hanson: Yeah. I think we feel like we're pretty well-positioned here with where the budget money is flowing. Obviously, there's a watch item for us with DHS. Although all our contracts are being supported, but I don't think there's going to be a net increase, if you will, there, commensurate with what's going on in defense. But on the defense side, obviously, there's a big new chunk coming there. AI is going to be a big part of that. Data is going to be a big part of that. Cybersecurity is going to continue to be a big part of that. I think in those areas where we play, we're pretty well-positioned. I would say the money has been slow to roll out.

Speaker #1: Yes , I think I think we're pretty I mean , we feel like we're pretty well positioned here with where the budget money is flowing .

Speaker #1: Obviously , there's a watch item for us with DHS , although all our contracts are being supported , but I don't think there's going to be a net increase , if you will .

Speaker #1: There commensurate commensurate with what's going on in defense . But on the defense side , obviously , there's a big , big new chunk coming there .

Speaker #1: It's definitely going to AI. It's going to be a big part of that. Data is going to be a big part of that.

Speaker #1: Cybersecurity is going to continue to be a big part of that. And so I think in those areas where we play, we're pretty well positioned.

Speaker #1: I would say the money has been slow to roll out . I think in the in the first quarter for the at least the first two months of the quarter , there was not a lot of activity because it really didn't happen until the middle of the quarter .

Theodore S. Hanson: I think in Q1, for at least the first two months of the quarter, there was not a lot of activity because it really didn't happen until the middle of the quarter. Not a lot happened in the second half of the quarter, because there was plenty of other things the government was focused on. I think now you're seeing a better release. We're seeing the cycle on new award activity to get out on the street pick up with volume. I think we're expecting, at least in our projected pipeline of bookings, a better Q2 than Q1 for sure in that area.

Ted Hanson: I think in Q1, for at least the first two months of the quarter, there was not a lot of activity because it really didn't happen until the middle of the quarter. Not a lot happened in the second half of the quarter, because there was plenty of other things the government was focused on. I think now you're seeing a better release. We're seeing the cycle on new award activity to get out on the street pick up with volume. I think we're expecting, at least in our projected pipeline of bookings, a better Q2 than Q1 for sure in that area.

Speaker #1: Not a lot happened in the second half of the quarter, as we, you know, because there was plenty of other things the government was focused on.

Speaker #1: But I think now you're seeing a better release . We're seeing the cycle . On new award activity to get out on the street , pick up with with volume .

Speaker #1: And so I think , you know , we're expecting at least in our , you know , projected pipeline of bookings , a better second quarter than first quarter for sure .

Speaker #1: In that area

Tobey Sommer: Thanks. Last question, if I could, on the transition towards consulting more broadly throughout the organization. You've had several executive hires announced recently, and I'm wondering how is the sales force absorbing that? Are there any changes that you're making internally to, I don't know, better align incentives and compensation to drive that change throughout the organization going forward?

Speaker #9: Thanks . And then last question , if I could , on your the transition towards consulting more broadly throughout the organization , you've had several executive hires announced recently .

Speaker #9: And I'm wondering if how is the the , the sales force absorbing that ? Are there any changes that you're making internally to , I don't know , better align incentives and compensation to drive that change throughout the organization going forward ?

Theodore S. Hanson: Yeah. Look, I think we've got a normal amount of change going on. Certainly we're bringing more to bear for all these accounts. The sales team is having to, if you will, adapt to that. We're doing a lot more than just bringing IT staffing to bear to these big clients. Our sales teams are getting used to bringing everything that's in the toolbox. Incentives change every year based on what we're trying to attack. To a large degree, how we allocate bonuses to certain objectives, what commission schemes may be, how we resource against account opportunities. If you have a certain industry or industries that have really good growth prospects, then you're feeding resources into that.

Ted Hanson: Yeah. Look, I think we've got a normal amount of change going on. Certainly we're bringing more to bear for all these accounts. The sales team is having to, if you will, adapt to that. We're doing a lot more than just bringing IT staffing to bear to these big clients. Our sales teams are getting used to bringing everything that's in the toolbox. Incentives change every year based on what we're trying to attack. To a large degree, how we allocate bonuses to certain objectives, what commission schemes may be, how we resource against account opportunities. If you have a certain industry or industries that have really good growth prospects, then you're feeding resources into that.

Speaker #1: Yeah . Look , I think we're we've got a normal amount of change going on . I mean , certainly we're bringing more to bear for all these accounts .

Speaker #1: So the sales team is having to kind of , if you will , kind of adapt to that , you know , we're doing a lot more than just bringing it staffing to bear to these big clients .

Speaker #1: So , you know , our sales teams are getting used to kind of , you know , bringing , bringing everything that's in the toolbox .

Speaker #1: Incentives change every year based on what we're trying to attack to a large degree . You know , how we how we allocate bonuses to certain objectives , what commission schemes may be , you know , how we resource against account opportunities .

Speaker #1: If you have a certain industry or industries that have really good growth prospects , then you're feeding resources into that . If you have other industries that look like , you know , it's somewhere you want to be for the long haul , but not working as well right now , you may subtract resources from that equation .

Theodore S. Hanson: If you have other industries that look like it's somewhere you want to be for the long haul, but not working as well right now, you may subtract resources from that equation. I think at the beginning of the year, that activity is always going on. You would talk to people, and they say they see the normal ebb and flow of all of that.

Ted Hanson: If you have other industries that look like it's somewhere you want to be for the long haul, but not working as well right now, you may subtract resources from that equation. I think at the beginning of the year, that activity is always going on. You would talk to people, and they say they see the normal ebb and flow of all of that.

Speaker #1: So , so I think at the beginning of the year , that activity is always going on . So , you know , you would , you would talk to people and they say they see the , the normal ebb and flow of all of that .

Tobey Sommer: Okay, nothing like stark where you're in assignment. Typically, I think the producers are getting paid on weekly GP dollars. Nothing more fundamental in terms of changes.

Speaker #9: Okay . But nothing like stark where your , you know , in assignment typically , I think the producers are getting a paid on weekly GP dollars , nothing more like fundamental in terms of changes .

Shiv Iyer: No. As Ted said, you're always looking to make tweaks and adjustments to incent the right sets of behaviors and the right sets of things you want aligned to your strategy. A core tenet of that plan hasn't shifted.

Speaker #10: Yeah . No , no , no .

Speaker #2: As Ted said , you're always looking to , to make tweaks and adjustments to incent the right sets of behaviors and the right sets of things you want align to your strategy .

Speaker #2: But a core tenet of that plan hasn't shifted.

Tobey Sommer: Thank you.

Operator 3: Thank you. Our next question comes from the line of Jason Haas with Wells Fargo. Please proceed with your question.

Operator: Thank you. Our next question comes from the line of Jason Haas with Wells Fargo. Please proceed with your question.

Speaker #9: Thank you .

Speaker #7: Thank you

Speaker #4: Thank you. Our next question comes from the line of Jason Haas with Wells Fargo. Please proceed with your question.

Jason Haas: Great. Thanks for taking my question. We've seen the Nonfarm Payrolls index for temporary help has bounced off the bottom a little bit in Q1. I'm curious if you're seeing any green shoots in your business. Thank you.

Speaker #11: Great . Thanks for taking my question . We've seen the the nonfarm payrolls index for temporary help has bounced off the bottom a little bit in one .

Speaker #11: I'm curious if you're seeing any green, green shoots in your business. Thank you.

Theodore S. Hanson: Can you say that one more time? You said

Ted Hanson: Can you say that one more time? You said

Speaker #1: Can you say it one more time ? You said the .

Jason Haas: Yeah. We track, I don't know how helpful it is, but we track this Nonfarm Payrolls index for temporary help, and it's been in decline for a number of honestly, years now, and it's bounced back a bit in Q1. I don't know if it's something that you look at as an indicator, but curious if you've seen any signs of demand increasing to be on the assignment side.

Speaker #11: Yeah . Yeah . We track I don't know , I don't know how helpful it is , but we track this nonfarm payrolls index for temporary help .

Speaker #11: And it's it's been in decline for a number of honestly years now . And it's bounced back a bit in one . Q I don't know , it's something that you look at as an indicator , but curious if you've seen any any signs of demand increasing , this would be on the assignment side .

Theodore S. Hanson: Yeah. Honestly, my experience is the IT really tracks IT spending, right? If our clients are spending on their tech stack, then that's a driver of our business. If they're more muted, then that's a tougher environment. If what you've seen go on broadly in staffing, if you went down to the lower end, like commercial, you would see that that's been resilient, I would say, through all this. On the white collar piece, and especially on the IT piece, it hasn't followed the same trend.

Ted Hanson: Yeah. Honestly, my experience is the IT really tracks IT spending, right? If our clients are spending on their tech stack, then that's a driver of our business. If they're more muted, then that's a tougher environment. If what you've seen go on broadly in staffing, if you went down to the lower end, like commercial, you would see that that's been resilient, I would say, through all this. On the white collar piece, and especially on the IT piece, it hasn't followed the same trend.

Speaker #1: Yeah . Honestly , my experience is that it it really tracks it spending , right . So if our client or are spending on , you know , their tech stack , then that's a driver of our business .

Speaker #1: If they're more muted, then that's a tougher environment. If you look at what you've seen go on broadly in staffing, if you went down to the lower end, like commercial, you would see that that's been resilient.

Speaker #1: I would say through all this . But on the white collar piece and especially on the IT piece , it has a followed the same trend .

Jason Haas: Okay. Got it. That's helpful. As a follow-up, you mentioned earlier that some of the sales of these higher margin solutions were slower and later in the quarter. Does any of that push into Q2 here?

Speaker #11: Okay . Got it . That's that's .

Speaker #7: Helpful .

Speaker #11: And then as a follow up , you mentioned earlier that some of the sales of these higher margin solutions were slower . And later in the quarter , does any of that push into into two ?

Speaker #11: Q here ?

Shiv Iyer: Yeah, I think just to clarify, what we said was we had record bookings in Q4, and our guide for Q1 assumed historical conversion of those things. There are two dynamics in Q1, right? You can see this pattern where the ramp-up time for those projects was slower than anticipated. How quickly those sales turned into revenue wasn't exactly at the rate we expected, which is what you saw in Q1. That being said, from a sales perspective in Q1, again, similar dynamic coming out, where clients, I would say, sales cycles are getting slightly longer, as in, clients are deliberating longer before they pull the trigger on projects. We're not seeing a material impact, and some of that has been factored into the guide for Q2. We see the recovery happening throughout the year.

Speaker #2: Yeah, I think just to clarify, what we said was we had record bookings in Q4, and our forecast for Q1 assumed historical conversion of those things.

Speaker #2: So there are two dynamics in Q1 , right ? And you know , you can , you can see this pattern where the ramp up time for those projects was slower than anticipated .

Speaker #2: So how quickly those sales turned into revenue wasn't exactly at the rate we expected , which is what you saw in Q1 . That being said , from a sales perspective , in Q1 , again , similar dynamic coming out where clients , I would say sales cycles are getting slightly longer , as in clients are deliberating longer before they pull the trigger on projects .

Speaker #2: We're not seeing a material impact in some of that, which has been factored into the guide for Q2, but we see the recovery happening throughout the year.

Shiv Iyer: as Ted said, it's not a rubber band because there's still a lot of uncertainty around some of the topics we talked about in the macros, and that's what we're seeing both in buying cycles and conversion cycles.

Speaker #2: So as Ted said , it's not a rubber band because , you know , there's still a lot of uncertainty around some of the topics we talked about in the macros , and that's what we're seeing both in buying cycles and conversion cycles

Jason Haas: Got it. That makes sense. Very helpful. Thank you.

Speaker #11: Got it . That makes sense . Very helpful .

Speaker #7: Thank you

Operator 3: 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 #4: Thank you . Our next question comes from the line of Mark Marcin with Baird . Please proceed with your question .

Mark Marcon: Good afternoon, and thanks for taking my question. Just following up on the last point, Shiv or Ted, you mentioned the gross margins are down. It seems like on the consulting side, we clearly had a deceleration and financial services was a weak spot. Coming off of these high bookings, I'm just wondering, aside from, is there any way to disaggregate the gross margin compression and EBITDA margin compression that we saw on the commercial side between pure mix versus, was there any change with regards to the bill rates or how profitable the actual contracts that were actually executed against? Are you seeing any sort of pricing pressure from that perspective, and how do you expect that to flow as these clients become more deliberative? How do you think that's going to shape up as the year unfolds?

Speaker #12: Good afternoon and thanks for taking my questions . Just following up on the last point , Shiv or Ted , you know , you mentioned the gross margins are down .

Speaker #12: Seems like , you know , on the consulting side , we clearly had a deceleration . And , you know , financial services was a weak spot .

Speaker #12: But coming off of these high bookings, I'm just wondering, aside from that, is there any way to disaggregate the gross margin compression and EBIT margin compression that we saw on the commercial side between pure mix, versus was there any change with regards to the bill rates or how profitable the actual contracts that were actually executed against?

Speaker #12: Are you seeing any sort of pricing pressure from from that perspective ? And how do you expect that to flow ? As you know , these clients become more deliberative ?

Speaker #12: How do you think that's going to shape up as the year unfolds?

Shiv Iyer: Mark, I think just to give you more color, let me start by saying we're not seeing a material compression in pricing. The most important thing that drove the gross margins down for us was really timing in many cases. Some of our higher margin pieces of the business didn't ramp up at the same rate, you notice that from a timing perspective, the solutions mix that drives our consulting revenue was different than what we thought it would be. Short answer is we're not seeing a material compression. That being said, there is volume in a lot of, as you would expect as a normal ebb and flow, we have higher margin solutions, lower margin solutions. When the mix gets off kilter on some of the higher margin pieces, it drives this down.

Speaker #2: Mark . I think just to give you more color , I like let me start by saying we're not seeing a material compression in pricing .

Speaker #2: It is simply the most important thing that drove the gross margins down for us was really timing . In many cases . And as some of our higher margin pieces of the business didn't ramp up at the same rate , you notice that , you know , from a timing perspective , the solutions mix that drives our consulting revenue was different than what we thought it would be .

Speaker #2: So short answer is , we're not seeing a material compression . That being said , there is volume in a lot of , you know , as you would expect , as a normal ebb and flow , we have higher margin solutions , lower margin solutions .

Speaker #2: So when the mix gets off-kilter on some of the higher margin pieces, it drives this down.

Mark Marcon: Okay. If we're taking a look at whether it's GlideFast or your Workday practice, in terms of your actual pricing for those, in terms of the projects that are actually-

Speaker #12: Okay . But if we're if we're taking a look at whether it's glide fast , you know , or your work day , you know , practice in terms of your , your actual pricing for those in terms of the , projects that are actually taking place , those are not changing .

Theodore S. Hanson: No

Theodore S. Hanson: taking place, those are not changing.

Shiv Iyer: No

Ted Hanson: taking place, those are not changing.

Theodore S. Hanson: No, they're not. Which is why we said we will see the recovery in margin gradually throughout the year. It won't rubber band it, but the unit pricing and pricing on those things, we're not seeing any deterioration.

Shiv Iyer: No, they're not. Which is why we said we will see the recovery in margin gradually throughout the year. It won't rubber band it, but the unit pricing and pricing on those things, we're not seeing any deterioration.

Speaker #2: No , they're not . And which is why we said we will see the recovery in margin gradually throughout the year . It won't rubber band it , but you know , the the unit pricing and pricing on those things were not seeing any deterioration .

Operator 2: Okay. Can you explain a little bit about what's going on with the DSO? Marie, how should we think about the Free Cash Flow conversion relative to EBITDA over the course of this year?

Mark Marcon: Okay. Can you explain a little bit about what's going on with the DSO? Marie, how should we think about the Free Cash Flow conversion relative to EBITDA over the course of this year?

Speaker #12: Okay . And then can you explain a little bit about what's going on with the DSO and Marie , how should we think about , you know , the free cash flow conversion relative to to EBITDA over the course of this year ?

Marie Perry: Mark, I think still a good rule of thumb is 60% of our Adjusted EBITDA converting. If you think about last year, Q1 of 2025, our Free Cash Flow was actually slightly lower than what we're reporting this quarter. There is absolutely a seasonality around Free Cash Flow and DSO. As we ended the year of 2025, we actually ended the full year, I think it was at 68% conversion. It's not 60% every quarter. It just gradually gets there for the full year.

Speaker #3: So , Mark , I think still a good rule of thumb is 60% of our adjusted EBITDA , converting . If you think about last year , Q1 of 25 , our free cash flow was actually slightly lower than what we're reporting this quarter .

Speaker #3: So, there is absolutely a seasonality around free cash flow, and DSO. And as we ended the year of '25, we actually ended the full year.

Speaker #3: I think it was at 68% conversion . So it it's not 60% every quarter . And so it just kind of gradually gets there for the full year .

Operator 2: Okay. The DSO is just a normal seasonal thing, you're not seeing any change in behavior with regards to how quickly the clients are paying?

Mark Marcon: Okay. The DSO is just a normal seasonal thing, you're not seeing any change in behavior with regards to how quickly the clients are paying?

Speaker #12: Okay . So the DSO is this a normal seasonal thing ? Not you're not seeing any change in behavior with regards to how quickly the clients are paying .

Theodore S. Hanson: No.

Ted Hanson: No.

Theodore S. Hanson: No.

Marie Perry: No.

Theodore S. Hanson: No change in behavior, no increase in bad debt.

Ted Hanson: No change in behavior, no increase in bad debt.

Speaker #1: Yeah. No, no change in behavior. No increase in that debt.

Marie Perry: That's correct.

Speaker #3: That's correct .

Mark Marcon: Okay, great. Thank you.

Speaker #12: Okay . Great . Thank you

Operator 3: Thank you. We have reached the end of the question and answer session. I would like to turn the floor back over 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 over to CEO, Ted Hanson, for closing remarks.

Speaker #4: Thank you . And we have reached the end of the question and answer session . I would like to turn the floor back over to CEO Ted Hansen for closing remarks

Theodore S. Hanson: Great. Well, I want to thank everyone for being here with us today and for your questions, and we look forward to speaking to you next quarter on 4 September for our Q2 earnings release. Have a great evening.

Ted Hanson: Great. Well, I want to thank everyone for being here with us today and for your questions, and we look forward to speaking to you next quarter on 4 September for our Q2 earnings release. Have a great evening.

Speaker #1: Well, I want to thank everyone for being here with us today and for your questions. We look forward to speaking to you next quarter.

Speaker #1: As ever . For for our second quarter earnings release . Have a great evening

Operator 3: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.

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

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