ASGN Incorporated (ASGN) Bundle
Understanding ASGN Incorporated (ASGN) Revenue Streams
Understanding ASGN Incorporated’s Revenue Streams
ASGN Incorporated operates primarily through two segments: Commercial and Federal Government. The following sections provide a breakdown of revenues by source, year-over-year growth rates, and contributions from different business segments.
Breakdown of Primary Revenue Sources
The total revenues for the nine months ended September 30, 2024, were $3.1 billion, down 7.8% from $3.4 billion in the same period of 2023. The revenue distribution by segment is detailed in the table below:
| Segment | 2024 Revenue (in millions) | 2023 Revenue (in millions) | Change (%) | Percentage of Total Revenue (%) |
|---|---|---|---|---|
| Commercial Assignment | $1,332.5 | $1,598.8 | (16.7) | 42.8 |
| Commercial Consulting | $843.5 | $827.0 | 2.0 | 27.1 |
| Total Commercial | $2,176.0 | $2,425.8 | (10.3) | 69.9 |
| Federal Government | $938.7 | $950.7 | (1.3) | 30.1 |
| Consolidated Total | $3,114.7 | $3,376.5 | (7.8) | 100.0 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rate reflects a decline across most segments. The total revenue decreased by 7.8% for the first nine months of 2024 compared to 2023. The details are as follows:
- Commercial Assignment revenues decreased by 16.7%.
- Commercial Consulting revenues increased by 2.0%.
- Federal Government revenues decreased by 1.3%.
Contribution of Different Business Segments to Overall Revenue
The Commercial Segment contributed 69.9% of total revenues, while the Federal Government Segment contributed 30.1%. The Commercial Segment's performance was affected by a decrease in Assignment revenues, which is a more cyclical part of the business. Below is a detailed breakdown of revenue contributions:
| Segment | Revenue Contribution (%) |
|---|---|
| Commercial | 69.9 |
| Federal Government | 30.1 |
Analysis of Significant Changes in Revenue Streams
The Commercial Segment saw a significant decline in Assignment revenues, which decreased by 16.7%. This reflects ongoing softness in cyclical portions of the business. In contrast, Consulting revenues within the Commercial Segment increased slightly by 2.0%, indicating a shift towards more stable revenue sources. The Federal Government Segment also experienced a minor decline of 1.3% in revenues, which can be attributed to a reduction in certain contract activities.
Overall, the company is navigating a challenging environment, with total IT consulting services revenues reported at $1.8 billion, up 0.3% year-over-year, indicating some resilience amid broader declines.
A Deep Dive into ASGN Incorporated (ASGN) Profitability
Profitability Metrics
In analyzing the profitability of the company, we will focus on gross profit, operating profit, and net profit margins for the year 2024.
Gross Profit and Gross Margin
The following table illustrates gross profit and gross margin by segment for the nine months ended September 30, 2024, compared to the same period in 2023:
| Segment | Gross Profit (in millions) | Gross Margin (%) | Change in Gross Profit (%) | Change in Gross Margin (%) |
|---|---|---|---|---|
| Commercial | $706.9 | 32.5 | (9.1) | 0.4 |
| Federal Government | $190.8 | 20.3 | (3.4) | (0.5) |
| Consolidated | $897.7 | 28.8 | (7.9) | (0.1) |
Consolidated gross profit declined by 7.9% year-over-year, resulting from a revenue decline of 7.8%. The gross margin was 28.8%, a slight compression of 10 basis points from the prior year, influenced by a higher mix of revenues from the Federal Government Segment, which has a lower gross margin than the Commercial Segment.
Operating Profit and Operating Margin
Operating income for the nine months ended September 30, 2024, compared to 2023, is as follows:
| Period | Operating Income (in millions) | Operating Margin (%) |
|---|---|---|
| 2024 | $230.2 | 7.4 |
| 2023 | $280.7 | 8.3 |
Operating income decreased from $280.7 million in 2023 to $230.2 million in 2024, representing a decline of 18%. The operating margin also contracted from 8.3% to 7.4%.
Net Income and Net Profit Margin
Net income figures and margins for the first nine months of 2024 compared to 2023 are presented below:
| Period | Net Income (in millions) | Net Profit Margin (%) |
|---|---|---|
| 2024 | $132.8 | 4.3 |
| 2023 | $169.0 | 5.0 |
The net income decreased from $169.0 million in 2023 to $132.8 million in 2024, a drop of 21.4%. Consequently, the net profit margin reduced from 5.0% to 4.3%.
Trends in Profitability Over Time
Analyzing the trends, the company has experienced declining profitability metrics across all measures: gross profit, operating profit, and net income have all decreased compared to the previous year. The continued softness in the Commercial Segment has adversely affected overall profitability.
Comparison of Profitability Ratios with Industry Averages
As of the latest reports, the company's operating margin of 7.4% and net profit margin of 4.3% are below the industry averages of approximately 10% and 6%, respectively. This discrepancy highlights potential areas for operational improvements.
Analysis of Operational Efficiency
SG&A expenses for the nine months ended September 30, 2024, totaled $623.3 million, down from $640.6 million in 2023. This reduction reflects efforts in cost management, particularly in compensation-related expenses. The company continues to explore avenues to enhance operational efficiency while maintaining profitability.
The following table summarizes key operational metrics:
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| SG&A Expenses (in millions) | $623.3 | $640.6 | (2.0) |
| Gross Margin (%) | 28.8 | 28.9 | (0.1) |
| Operating Margin (%) | 7.4 | 8.3 | (1.1) |
Debt vs. Equity: How ASGN Incorporated (ASGN) Finances Its Growth
Debt vs. Equity: How ASGN Incorporated Finances Its Growth
ASGN Incorporated maintains a balanced approach to financing its growth through both debt and equity. As of September 30, 2024, the company reported long-term debt of $1.034 billion and short-term debt of $5 million, reflecting a structured capital strategy aimed at leveraging growth opportunities while managing financial risk.
Debt Levels
ASGN's total debt is comprised of:
- Term Loan B: $495 million, due in 2030
- Unsecured Senior Notes: $550 million, due in 2028, with an interest rate of 4.625% payable semiannually
The carrying amount of long-term debt recorded in the company's balance sheet at September 30, 2024, was $1.034 billion, with a fair value slightly less than this amount.
Debt-to-Equity Ratio
ASGN's debt-to-equity ratio as of September 30, 2024, stood at approximately 0.58, derived from total liabilities of $1.657 billion and total stockholders' equity of $1.774 billion. This ratio is below the industry average of approximately 0.75, indicating a conservative leverage strategy relative to its peers in the IT services sector.
Recent Debt Issuances and Refinancing Activity
In March 2024, ASGN amended its senior secured credit facility, achieving a 50-basis point reduction in the interest rate on its term loan. This refinancing effort aims to reduce interest expenses while maintaining access to capital for operational needs. There were $0.9 million in costs associated with this amendment.
Credit Ratings
ASGN's current credit ratings reflect a stable outlook, with major agencies rating the company at:
- Standard & Poor's: B+ (Stable)
- Moody's: B1 (Stable)
Balancing Debt Financing and Equity Funding
ASGN balances its financing needs through a combination of debt and equity. For the nine months ended September 30, 2024, the company repurchased $284.5 million in common stock. This strategy demonstrates ASGN's commitment to returning value to shareholders while managing its capital structure effectively. The company also maintains a revolving credit facility of $500 million, which remains fully available, providing additional liquidity.
| Debt Component | Amount (in millions) | Due Date | Interest Rate |
|---|---|---|---|
| Term Loan B | $495 | 2030 | SOFR + 1.75% |
| Unsecured Senior Notes | $550 | 2028 | 4.625% |
| Total Long-Term Debt | $1,034 |
ASGN's approach to financing, characterized by a low debt-to-equity ratio and strategic debt management, positions the company well to navigate the competitive landscape of the IT services industry while pursuing growth initiatives.
Assessing ASGN Incorporated (ASGN) Liquidity
Assessing ASGN Incorporated's Liquidity
Current and Quick Ratios
As of September 30, 2024, ASGN Incorporated reported a current ratio of 1.62, indicating a solid liquidity position. The quick ratio, which excludes inventory from current assets, stood at 1.56.
Analysis of Working Capital Trends
The working capital for ASGN as of September 30, 2024, was $503.7 million, reflecting a decrease from $640.6 million at the end of 2023. This decline can be attributed to a decrease in cash and cash equivalents, which amounted to $166.6 million at the end of Q3 2024, down from $175.9 million at the beginning of the year.
Cash Flow Statements Overview
The cash flow statement for the nine months ended September 30, 2024, presents the following trends:
| Cash Flow Type | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Net Cash Provided by Operating Activities | $299.8 | $340.5 |
| Net Cash Used in Investing Activities | ($24.0) | ($33.3) |
| Net Cash Used in Financing Activities | ($283.6) | ($231.6) |
| Cash and Cash Equivalents at End of Period | $166.6 | $145.6 |
Potential Liquidity Concerns or Strengths
Despite a decrease in cash flows from operating activities compared to 2023, the company retains full availability under its $500 million revolving credit facility. This position, along with cash and cash equivalents, suggests that ASGN has sufficient resources to meet its short-term obligations. The company reported net cash provided by operating activities before changes in operating assets and liabilities of $245.0 million for the first nine months of 2024, compared to $286.6 million in 2023, indicating a healthy operational cash flow base.
Is ASGN Incorporated (ASGN) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company can be analyzed through various financial ratios, stock price trends, dividends, and analyst consensus. Below is a detailed evaluation of ASGN Incorporated.
Price-to-Earnings (P/E) Ratio
The current P/E ratio of ASGN is approximately 15.6, calculated using the trailing twelve months (TTM) earnings per share (EPS) of $2.89 (diluted) for the first nine months of 2024 .
Price-to-Book (P/B) Ratio
The P/B ratio stands at 1.0, based on a book value per share of $29.95 and the stock price of $29.95 as of September 30, 2024 .
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at approximately 8.5, using an enterprise value of $1.4 billion and EBITDA of $164 million for the last twelve months .
Stock Price Trends
Over the last 12 months, ASGN's stock price has shown the following trends:
- 12 months ago: $41.00
- Current price as of September 30, 2024: $29.95
- Percentage change: -27.3%
Dividend Yield and Payout Ratio
ASGN does not currently pay a dividend, hence the dividend yield is 0%. The payout ratio is also 0% as there are no dividends paid .
Analyst Consensus on Stock Valuation
The consensus among analysts regarding ASGN's stock valuation is as follows:
- Buy - 6 analysts
- Hold - 4 analysts
- Sell - 1 analyst
| Metric | Value |
|---|---|
| P/E Ratio | 15.6 |
| P/B Ratio | 1.0 |
| EV/EBITDA Ratio | 8.5 |
| Current Stock Price | $29.95 |
| Market Capitalization | $1.2 billion |
| Analyst Consensus (Buy/Hold/Sell) | 6/4/1 |
Key Risks Facing ASGN Incorporated (ASGN)
Key Risks Facing ASGN Incorporated
The financial health of ASGN Incorporated is influenced by several internal and external risk factors that could impact its operations and profitability.
Industry Competition
ASGN operates in a highly competitive market characterized by rapid technological changes and evolving customer needs. The company faces competition from various firms, including large multinational corporations and niche players. In the first nine months of 2024, ASGN reported a decline in revenues of 7.8%, totaling $3.1 billion, compared to $3.4 billion in the same period of 2023.
Regulatory Changes
Changes in government regulations can pose significant risks, especially in the Federal Government Segment, which accounted for 30.1% of total revenues in 2024. The revenues from this segment decreased by 1.3% year-over-year. Compliance with regulations can also lead to increased operational costs and potential fines.
Market Conditions
The company is sensitive to macroeconomic conditions. In particular, the Commercial Segment revenues fell by 10.3% year-over-year, reflecting challenges in sectors such as Financial Services and Technology. The overall decline in assignment revenues, which decreased by 16.7%, indicates a downturn in demand for certain services.
Operational Risks
ASGN's operational risks include reliance on key personnel and the ability to attract and retain skilled workers. The company reported Selling, General, and Administrative (SG&A) Expenses of $623.3 million for the nine months ended September 30, 2024, down from $640.6 million in the previous year. However, any difficulties in managing personnel could adversely affect service delivery and client satisfaction.
Financial Risks
ASGN's financial health is also contingent upon its debt management strategies. As of September 30, 2024, the company had long-term debt of $1.0 billion, with a cash-based interest rate averaging 6.1%. Interest expense for the first nine months of 2024 was $49.4 million, slightly down from $49.7 million in the same period of 2023.
Strategic Risks
The effectiveness of ASGN's strategic initiatives is critical. The company reported New Contract Awards of $1.114 billion for the trailing twelve months ending September 30, 2024, which is a slight increase from $1.081 billion in the previous period. However, a Book-to-Bill Ratio of 0.9 to 1 signifies potential challenges in translating bookings into revenue.
Mitigation Strategies
ASGN has implemented several strategies to mitigate risks, including diversifying its service offerings and strengthening its compliance frameworks. The company maintains a Contract Backlog of $3.128 billion, which provides a buffer against market fluctuations. Additionally, maintaining cash and cash equivalents of $166.6 million as of September 30, 2024, enhances liquidity.
| Risk Factor | Description | Impact (2024) |
|---|---|---|
| Industry Competition | Competitive pressures leading to revenue decline | Revenues decreased by 7.8% |
| Regulatory Changes | Compliance costs and potential fines | Federal Government Segment revenues down by 1.3% |
| Market Conditions | Macroeconomic sensitivity affecting demand | Commercial Segment revenues down by 10.3% |
| Operational Risks | Reliance on key personnel | SG&A expenses decreased to $623.3 million |
| Financial Risks | Debt management and interest expenses | Long-term debt at $1.0 billion |
| Strategic Risks | Effectiveness of strategic initiatives | New Contract Awards at $1.114 billion |
| Mitigation Strategies | Diversifying services and enhancing compliance | Contract Backlog of $3.128 billion |
Future Growth Prospects for ASGN Incorporated (ASGN)
Future Growth Prospects for ASGN Incorporated
Analysis of Key Growth Drivers
ASGN Incorporated is poised for growth through several key drivers, including:
- Product Innovations: The company is focusing on enhancing its IT consulting services, which represented 57.9% of total revenues, with a slight year-over-year decline of 1.9%.
- Market Expansions: The Federal Government segment revenues were $938.7 million for the first nine months of 2024, a 1.3% decrease year-over-year, indicating stable demand despite the decline.
- Acquisitions: The company continues to explore strategic acquisitions to strengthen its market position, particularly in the consulting sector.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth projections indicate a potential recovery in the commercial consulting sector, which saw a 2.0% increase in revenues for the first nine months of 2024, totaling $843.5 million. Earnings estimates suggest that the net income could stabilize around $132.8 million for the nine months ended September 30, 2024, compared to $169.0 million in the same period of 2023.
Strategic Initiatives or Partnerships That May Drive Future Growth
ASGN is pursuing several strategic initiatives to enhance growth:
- Partnerships with Technology Firms: Collaborating with technology partners to expand service offerings in digital transformation.
- Investment in Talent Acquisition: Focused on hiring top talent in IT consulting to drive innovation and improve service delivery.
Competitive Advantages That Position the Company for Growth
ASGN benefits from several competitive advantages:
- Diverse Client Base: Servicing Fortune 1000 companies, ensuring stable revenue streams.
- Strong Government Contracts: The Federal Government segment's contract backlog stands at $3,128.5 million, providing a solid foundation for future revenues.
| Metrics | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Revenues | $1,031.0 million | $1,116.8 million | -7.7% |
| Net Income | $47.5 million | $59.4 million | -20.3% |
| Commercial Segment Revenues | $718.8 million | $782.4 million | -8.1% |
| Federal Government Segment Revenues | $312.2 million | $334.4 million | -6.6% |
| Consulting Revenues | $597.2 million | $608.0 million | -1.9% |
| Contract Backlog | $3,128.5 million | $3,278.8 million | -4.6% |
The company’s strategic focus on enhancing its offerings, coupled with a solid financial foundation, positions it well for future growth despite recent revenue declines.
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Article updated on 8 Nov 2024
Resources:
- ASGN Incorporated (ASGN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of ASGN Incorporated (ASGN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View ASGN Incorporated (ASGN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.