ASGN Incorporated (NYSE:ASGN) Q4 2022 Results Conference Call February 8, 2023 4:30 PM ET

Company Participants

Kimberly Esterkin - Investor Relations

Ted Hanson - Chief Executive Officer

Rand Blazer - President

Marie Perry - Chief Financial Officer

Conference Call Participants

Maggie Nolan - William Blair

Heather Balsky - Bank of America

Tobey Sommer - Truist Securities

Jeff Silber - BMO Capital Markets

Surinder Thind - Jefferies

Operator

Greetings. Welcome to the ASGN Incorporated Fourth Quarter 2022 Earnings Call [Operator Instructions]. Please note, this conference is being recorded.

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

Kimberly Esterkin

Thank you, operator. Good afternoon. And thank you for joining us today for ASGN's fourth quarter and full year 2022 conference call. With me are Ted Hanson, Chief Executive Officer; Rand Blazer, President; and Marie Perry, Chief Financial Officer. Before we get started, I would like to remind everyone that our commentary contains 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 Web site 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. 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.

Ted Hanson

Thank you, Kimberly, and thank you for joining ASGN's fourth quarter 2022 earnings call. As we kick off 2023, I'm pleased to report that the past year represented another top line record for ASGN. Our results for the fourth quarter and full year 2022 are indicative of the continued demand for IT services and solutions in the commercial and government end markets we serve. I want to sincerely thank our entire team for your continued efforts, which are the reason ASGN is the leader we are today. We embarked upon the new year positioned exactly where we want to be, with a great team in place, strong balance sheet and proven operational strategy. After a strong fourth quarter that surpassed our revenue expectations, full year revenues of approximately $4.6 billion were up 14.3% year-over-year and represented a new company record. Included in the annual revenues were $2.1 billion from Commercial and Federal IT consulting. On an organic basis, revenues improved 10.3% versus the prior 12 months. The Commercial segment, our largest segment, represented $3.4 billion or 75% of total revenues for 2022, while the Federal Government segment comprised the remaining $1.1 billion or 25% of revenues. From a profitability perspective, adjusted EBITDA for the year improved 15.8% as compared to 2021 at a margin of 12.2%. These results put us on track to achieve our three year financial targets laid out in September of 2021. As will be apparent in our segment commentary today, ASGN's business has hit a positive inflection point, with IT consulting services revenues representing 49% of total revenues in Q4. We are now quickly approaching 50% of our total revenues derived from high end, higher margin consulting work. This movement up the pyramid will remain our focus. With that as a background, let's review Q4.