|
|
|
|
|||||
|
|
|
New: Instantly spot drawdowns, dips, insider moves, and breakout themes across Maps and Screener.
Image source: The Motley Fool.
Wednesday, February 4, 2026 at 4:30 p.m. ET
Need a quote from a Motley Fool analyst? Email [email protected]
ASGN (NYSE:ASGN) reported $980.1 million in quarterly revenue at the top of guidance, driven by a record $444.4 million in commercial consulting bookings and a higher IT consulting revenue mix. Net income was $25.2 million, with adjusted EBITDA of $107.9 million and margin at 11%, benefiting from strong free cash flow conversion and leading to substantial share repurchases. The company announced a $290 million cash acquisition of Quinox, projected to add nine months’ revenue in 2026 at a low to mid-teens growth rate, expanding its offshore and digital engineering capabilities. Management introduced the “Everforth” brand to unify its commercial and federal presence, targeting enhanced cross-selling and improved operational scale. Fiscal 2026 guidance included $960 million to $980 million in revenue and 9.7%-10.1% adjusted EBITDA margin, excluding Quinox for Q1, based on stability in market conditions and moderate benefit from structural cost savings.
Theodore S. Hanson: Thank you, Kim. Thank you for joining our fourth quarter and full year 2025 earnings call. As we begin 2026, I want to thank everyone who joined us for our Investor Day this past November. If you have not had a chance to view the presentation, a replay of the webcast is available on our website. Our Investor Day provided a valuable platform to showcase our next wave growth strategy and the significant progress we made in our transition toward higher value, higher margin, technology and digital engineering solutions. At this event, we also had the opportunity to introduce several of our solutions leaders, with presentations brought to life by our advanced capabilities in AI, cybersecurity, and enterprise platforms.
AI is now a dominant driver of demand, with nearly 80% of enterprises planning to increase their AI spending in 2026. These investments are driving growth in solution capabilities vital to the successful deployment of AI enterprise-wide. Sadasivam Iyer, our president, will speak more on that shortly. Turning to our fourth quarter 2025 results, which we previewed with you in our recent Quinox announcement, ASGN delivered solid results for the quarter. Revenues of $980.1 million were at the top end of our guidance range, with IT consulting revenues comprising 63% of the total, up from 59% in the prior year. Adjusted EBITDA margin was 11%, exceeding our expectation.
Commercial consulting bookings had a record $444.4 million, translating to a book to bill of 1.3 times for the quarter, and 1.2 times on a trailing twelve-month basis. Volume of new consulting work continues to grow, as our customers increasingly recognize the importance of preparing data, building infrastructure, and deploying enterprise platforms to harness the full potential of AI. In our federal segment, new contract awards totaled $144.2 million, or a book to bill of 0.9 times on a trailing twelve-month basis. Federal contract backlog was approximately $3 billion at quarter end, or a coverage ratio of 2.5 times the segment's trailing twelve-month revenue.
In addition to traditional high holiday-related seasonality, the lengthy government shutdown delayed award activity in the fourth quarter. Nonetheless, we are seeing solid pent-up demand in Q1, and increased defense, intelligence, and national security budgets position our federal business strongly for the future. As we discussed at our Investor Day, our clients are increasingly seeking us out as one of their strategic technology partners. To meet this demand, we have been proactively transforming our business, advancing our solution capabilities, developing proprietary assets and accelerators, and partnering with leading technology companies to better serve our clients' IT needs.
Continuing this transformation momentum in 2026, we will be adopting a new customer and investor-facing brand, Everforth, unifying our commercial and federal brands under a single dynamic identity. Our transition to Everforth, a name rooted in forward progress, is designed to unlock our scale as an enterprise and increase cross-selling by bringing the breadth of our solutions to our enterprise clients, all while supporting continued revenue growth and margin expansion. While organic revenue growth remains a primary focus, we will also pursue strategic acquisitions that enhance our solutions capabilities and technology partnerships. I am pleased to report that just two weeks ago, we announced our intent to acquire Quinox, an agile, results-driven digital solutions provider.
As an acquirer of choice, we employ a proven, repeatable acquisition strategy, our M&A playbook, which is guided by well-defined strategic filters and rigorous financial criteria. The acquisition of Quinox followed this disciplined approach. From a strategic standpoint, joining forces with Quinox represents a key step forward in our long-term strategy to enhance our digital engineering and global delivery capabilities. Like ASGN, Quinox is exceptionally client-centric, maintaining customer relationships for well over a decade. We are excited to leverage their established client connections to broaden our market presence, and as we did with GlideFast and TopLock, pull Quinox's capabilities across our gold nugget commercial client base.
From a financial perspective, Quinox is an accretive transaction that strengthens our market position without compromising the strength of our balance sheet or our financial flexibility. Our disciplined approach to capital allocation enables us to make strategic acquisitions like Quinox while still investing organically and buying back our shares. In the fourth quarter, we generated $93.7 million in free cash flow and bought back $64.2 million in shares. We continue to repurchase shares in the first quarter, and with a newly approved $1 billion share repurchase program, we are well-positioned to provide sustainable shareholder returns.
To build upon our discussion, let me now turn the call over to our president, Sadasivam Iyer, to speak about Quinox's digital engineering capabilities and global delivery strength.
Sadasivam Iyer: Thanks, Ted. It's great to speak with everyone this afternoon. It has certainly been a busy and productive start to the New Year, and I share Ted's enthusiasm about the acquisition of Quinox. Over the past few months, I've had the opportunity to meet with Quinox's executive team. It is very clear from our meetings that there is a strong cultural fit between our organizations. Cultural alignment is at the heart of a successful acquisition and integral to the comprehensive process that shapes the M&A playbook Ted discussed. During our Investor Day, we spoke about our journey towards becoming a top-tier technology and digital engineering company.
I'm proud to report that we're well on our way, expanding our digital engineering capabilities. Fourth quarter bookings for application engineering and services practice nearly doubled quarter over quarter. By integrating Quinox's deep expertise in application management and modernization, analytics, and enterprise platforms into our existing practice, we will immediately expand our market share. In addition, Quinox's alliance partnerships with companies such as AWS, Databricks, Salesforce, SAP, and Calypso complement our own partner network and will enable us to co-create agile, future-ready solutions that accelerate value for our customers. The ability to deliver complex digital engineering capabilities is key for us to be competitive.
Quinox significantly enhances our delivery capability and broadens our delivery footprint with its highly global capability centers in India. These centers will form the foundation of our offshore delivery platform and complement our best-in-class nearshore operations in Mexico. As a leader in offshore delivery, Quinox deploys cutting-edge technologies, including AI, across its delivery model. Quinox's proprietary assets combined with an AI-first workforce help promote automation, compliance, and speed to value for every single client. As Ted emphasized, we are an acquirer of choice, and I'd like to believe that part of that strong reputation comes from our unique market positioning. We have the scale of a large IT services player but also the velocity and agility of a startup.
An agile, results-driven digital technology company like Quinox aligns seamlessly with our business objectives and supports our long-term growth strategy. With that as background, let's turn to our industry performance for the fourth quarter. In our commercial segment, year-over-year growth was driven by a combination of improvements in healthcare accounts, which improved by mid-teens, and consumer and industrial accounts, which improved by low teens. Growth in the healthcare industry was seen across our provider, pharmaceutical, and biotech clients. In the consumer and industrial space, industrial saw the largest improvement, followed by materials and utilities accounts. We also achieved low single digits revenue growth in the TMT vertical as compared to the prior year.
Looking sequentially, on a billable day adjusted basis, we saw growth in four of our five commercial segment industries. Healthcare accounts posted mid-single digit improvements with growth in payers, providers, and pharmaceutical accounts. TMT also improved mid-single digits with telecom, e-commerce, and software and services all increasing. In addition, as we anticipated on our last quarter's call, the financial services industry returned to sequential growth on a billable day adjusted basis, picking up low single digit improvements from 2025. Within this industry, we achieved sequential improvements in wealth management, regional banks, diversified financials, and insurance accounts. In our federal segment, we track our revenues across four types of customers, which are defense and intelligence, national security, civilian, and other clients.
Defense, intelligence, and national security accounts continue to comprise approximately 70% of our total government revenues. Government-sponsored entities such as USPS, state and local customers, and commercial entities comprise our other clients category. The other clients category saw mid-teens growth year over year due to expansion of our data, AI, and modernization efforts for USPS, as well as increases in cybersecurity work for commercial clients. Defense and intelligence revenues improved low single digits year over year due in part to additional funding for Project Maven, a flagship geospatial AI contract for the Department of War.
For those who have not had a chance to view our Investor Day presentation, I'd highly recommend watching the video on Project Maven, an incredible case study in mission-ready AI. Moving from industries to solutions, as Ted highlighted at the beginning of today's call, we continue to secure projects that strengthen technology infrastructure and enable governance readiness for enterprise-wide AI usage. Let me provide a few examples from the fourth quarter. For a top five US bank, our financial service industry experts were engaged to improve the bank's testing automation and governance ecosystem.
Working hand in hand with our client, we deployed a bank-wide modernization program across online banking, mobile platforms, and partner integrations, vastly improving our client's enterprise-wide functionality and governance. Also, within financial services, our team helped a major US online banking and credit card company maintain its system performance as it underwent the merger with another major financial institution. As a part of this DevOps project, our engineering and applications team coordinated infrastructure changes, monitored system health, and managed the building, testing, and deploying of software to ensure a smooth transition as the two banks joined forces.
On the theme of data migration, during the fourth quarter, our telecom industry experts partnered with Snowflake, for whom we are an elite AI data and cloud services partner, to enable a major US connectivity and communications company to centralize marketing data from a variety of external vendor systems in Snowflake. Now in 2026, we are laying a governed foundation for Snowflake's Cortex, Snowflake's native AI ML capability that will enable our client to securely run built-in features such as large language models, AI-powered apps, and GenAI Insights. AI's explosive growth, powered by soaring energy demands, is driving unprecedented expansion in data center capacity worldwide.
Our cloud and infrastructure team is actively collaborating with clients and rapidly scaling their AI data center fleets. For example, we are currently partnering with a major hyperscaler to operationalize multiple data centers on what is already one of the largest AI data center campuses in the world. For this project, we are responsible for managing the hyperscaler's critical environments and leading the complex logistics required to deploy and integrate the data center's advanced system. Ultimately, scaling AI from concept to production requires addressing long-standing challenges of fragmented tools, governance complexity, and resource constraints.
In response to these inherent challenges, in November, we launched our AI Factory, a unified framework designed by our joint commercial and government AI teams to empower organizations to integrate AI seamlessly into their core business strategies. Understanding the challenges around safe and secure AI deployments, our teams have been particularly focused on our solutions related to AI governance. Our federal cybersecurity experts have been busy demoing our AI Factory's Watchtower, a monitoring tool with built-in TrustOps, to both our federal and commercial clients. In addition to building our own assets and accelerators, we are partnering with enterprise platforms to co-deliver high-impact solutions to our commercial and federal clients.
Starting with our federal segment, in the fourth quarter, we were awarded additional funding by the Department of Homeland Security and the agency's Continuous Diagnostic and Mitigation Program Office to deploy Elastic's AI capabilities at scale. Our federal team boasts more Elastic certified engineers than any other organization other than Elastic itself and was recently named Elastic's top services partner of the year. In addition to Elastic, we continue to be a leading ServiceNow provider in the federal space, leveraging ServiceNow's agentic capabilities in new initiatives across the Departments of Homeland Security, War, and Energy. We also recently established a strategic partnership with Wiz, a rapidly growing cloud security company in the process of being acquired by Google.
In the fourth quarter, we won our first engagement with Wiz for the Centers for Medicare and Medicaid Services, establishing our footprint in the high-value federal healthcare market. On the commercial side of our business, we continue to make great progress in advancing our positioning with Workday. During the fourth quarter, we were selected as one of the first partners approved to deploy Paradox, Workday's candidate experience agent. Paradox uses conversational AI to simplify interactions and deliver better experiences. Conversational AI use cases are growing rapidly. As a part of our Salesforce 360 partnership, for example, we are integrating AgentForce into Slack to enable clients to search their Salesforce CRM with ease.
As we expand our value proposition as Everforth, Salesforce, ServiceNow, and Workday will all be central to our cross-platform AI strategy. These are just a few of the many advanced solutions capabilities we deployed in the fourth quarter. We are excited about the future and look forward to continuing to advance our next wave growth strategy. With that, I'll turn the call over to our CFO, Marie L. Perry, to discuss ASGN's fourth quarter 2025 performance and first quarter 2026 guidance.
Marie L. Perry: Thanks, Shiv. For the fourth quarter, revenues totaled $980.1 million, at the top end of our guidance range, and relatively consistent with the prior year period. Revenues from our commercial segment were $698.6 million, an increase of 0.9% compared to the prior year and up 2.2% sequentially on a billable day adjusted basis. Assignment revenue totaled $359.2 million, a decline of 12% year over year, reflecting continued softness in portions of our commercial segment that are more sensitive to changes in the macroeconomic cycle. Revenue from our commercial consulting, the largest of our high-margin revenue streams, totaled $339.4 million, an increase of 19.2% year over year.
Excluding TopLock, which we acquired in March 2025, consulting revenues improved mid-single digits year over year. Revenues from our federal government segment were $281.5 million, a decrease of 3.7% year over year. Turning to margin, gross margin for 2025 was 28.9%, consistent with the prior year. Gross margin for our commercial segment was 32.6%, which is in line with the prior year. Gross margins from our federal government segment were 19.9%, a decline of 60 basis points year over year due primarily to the loss of higher margin contracts related to Doge. The impact of Doge will anniversary in March 2026. SG&A for the quarter was $210.5 million compared to $197.9 million in 2024.
SG&A expenses included $10.7 million in acquisition integration and strategic planning expenses. These items were not included in our previously announced guidance estimate. Also relative to guidance, our estimates assumed an effective tax rate of 28%. In the fourth quarter, our effective tax rate was 36.4%, above the 28% forecast, driven primarily by discrete one-time items not included in our guidance. For the fourth quarter, net income was $25.2 million, adjusted EBITDA was $107.9 million, and adjusted EBITDA margin was 11%, above our guidance range driven mainly by a greater mix of commercial segment revenue. At quarter end, cash and cash equivalents were $161.2 million, and we had approximately $455 million available on our $500 million senior secured revolver.
Our net leverage ratio was 2.4x at the end of the quarter. As Ted previously mentioned, we had very strong free cash flow generation in the fourth quarter. Free cash flow was $93.7 million, a conversion rate of approximately 87% of adjusted EBITDA, well above our conversion target rate of 60% to 65%. We continue to deliver value to our shareholders, and in the quarter, we deployed roughly $64.2 million of our free cash flow to repurchase 1.4 million shares at an average share price of $46.5. On a full-year basis, free cash flow was also strong and totaled $288.1 million, or 68.2% of adjusted EBITDA.
We deployed $170.1 million of free cash flow to repurchase 3.1 million shares in 2025 at an average price of $55. We have approximately $972 million remaining on our $1 billion share repurchase authorization. Reemphasizing Ted's prior commentary, our strong free cash flow is a hallmark of our business model. It provides a strategic advantage that enables us to fund growth initiatives, opportunistically repurchase shares, and invest in strategic M&A, all while maintaining a healthy balance sheet. By following a disciplined and balanced approach to capital allocation, we can invest in high-return opportunities and prudently manage our leverage, driving sustainable long-term value for our shareholders.
With that in mind, in January, we signed a definitive purchase agreement to acquire Quinox for $290 million in cash. The acquisition, which remains subject to HSR approval, is anticipated to close in March. Post-close, we anticipate our net leverage ratio will be approximately 2.9 times after funding the acquisition with cash and borrowings on our revolver. We are committed to reducing our debt over time to bring our net leverage closer to our 2.5 times target. We will, however, continue to opportunistically balance capital deployment with organic investment and share repurchases. Turning to guidance, our financial estimates for 2026 are set forth in our earnings release and supplemental material.
These estimates are based on current market conditions and assume no further deterioration in the markets we serve. Guidance also assumes 62 billable days in the first quarter, which is the same number of billable days as the year-ago period, and one more day than 2025. We typically see a low single-digit decline in revenue from the fourth quarter to the first quarter despite the increase in the sequential billable day due to a seasonal reset that occurs annually. Our quarterly estimates do not include any acquisition and strategic planning expenses. As we highlighted during our Investor Day, we are streamlining our technology systems and deploying strategic efforts to generate sizable structural cost savings for our business.
These cost savings are progressing as planned and will ramp up further over the coming quarters. Our first quarter guidance incorporates two additional considerations. With regards to adjusted EBITDA margin, the first quarter typically sees an approximate 100 basis point decrease sequentially related to our annual payroll tax reset. In addition, our first quarter guidance does not include a contribution from Quinox. Quinox is expected to generate low to mid-teens revenue growth in 2026 over 2025 revenues of approximately $100 million. We anticipate nine months of Quinox's 2026 revenues will be incorporated into our full-year financials. Quinox also anticipates adjusted EBITDA margin in the low 20% range for the year.
With that as background, for 2026, we are estimating revenues of $960 million to $980 million, net income of $25.8 million to $29.4 million, adjusted EBITDA of $93.5 million to $98.5 million, and adjusted EBITDA margin of 9.7% to 10.1%. Thank you. I'll now turn the call back over to Ted.
Theodore S. Hanson: Thanks, Marie. We entered the New Year energized by the progress we've achieved and the robust foundation we've established. Our strategic initiatives are firmly in place, and our strong balance sheet and disciplined approach to capital allocation empower us to pursue growth opportunities with confidence. The acquisition of Quinox is a great example of our M&A playbook in action and directly aligns with the strategy to enhance our digital engineering and global delivery capabilities, as we highlighted at our recent Investor Day.
The upcoming launch of Everforth, our new unified customer and investor-facing brand debuting in the first half of this year, also marks a transformative step in our Next Wave growth strategy and will enhance our operational efficiency and scale. Ultimately, by integrating cutting-edge technology, world-class engineering, and deep expertise, we are very well positioned to adapt and thrive in today's rapidly evolving AI-driven business landscape. That concludes our prepared remarks. I want to thank all our employees for your incredible efforts this past year. Your unwavering commitment to our clients is evident and will most certainly guide us to success in 2026. With that, let's open up the call to questions.
Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. One moment please while we poll for questions. Our first question comes from the line of Jeffrey Marc Silber with BMO Capital Markets. Please proceed with your question.
Jeffrey Marc Silber: Thanks so much. I wanted to focus on, I guess, your M&A strategy. If you can tell us what is your focus? I know you've been a little bit more acquisitive over the past. What are you looking for? How comfortable are you in terms of continued leverage?
Theodore S. Hanson: So, Jeff, thanks for the question. I'll just go back to the Investor Day. Obviously, organic growth first, that's always the primary focus. We're beginning sequentially and soon here year over year to get back to organic growth rates here on a positive basis. If you think about the acquisition strategy, you know, overall, at the highest level, it's identifying solution capabilities that we see are in the greatest need of our enterprise clients, and then pulling those acquired solution capabilities across our enterprise account base. Our acquisition of GlideFast and ServiceNow ecosystem was a great example of that. Our acquisition of most recently of TopLock within the Workday ecosystem, another example of that.
And now with Quinox, real digital engineering capabilities, deep and complex systems, and being able to deploy that across this account base and with it getting an offshore platform delivery capability was really the point here. But again, it's solution capabilities that we see are in demand. And, you know, I think the good thing about this, Jeff, is we get to see these because we're sitting at the table with our clients understanding their strategic IT roadmaps, and then we can pull back from that and say, can we position for that organically or is this an opportunity to buy versus build, if you will, from an M&A standpoint? And I'm sorry.
The second part of the question was comfortable being with leverage. Yeah. Well, look. I think we're post-acquisition gonna be at 2.9. I mean, I would say that's still very modestly leveraged. So one, we have to have confidence in our numbers going forward, which we have visibility to. Two, we have to have confidence in the target and their ability to generate the revenues and EBITDA they expect coming in. And then three, we have to have a pathway if we're gonna take on a modest amount of leverage to get the acquisition done to see a path to delever back below our target of two and a half.
And so I think all three of those things are in alignment, if you will, this time. And, you know, Jeff, from past acquisitions, when we've made larger platform acquisitions, we've levered up to 3.8 times probably on six different occasions. And within eighteen to twenty-four months, delevered right back down below our target of two and a half.
Jeffrey Marc Silber: Okay. Great. Thanks so much.
Operator: Thank you. Our next question comes from the line of Tobey O'Brien Sommer with Truist Securities. Please proceed with your question.
Tobey O'Brien Sommer: Thanks. Along the same lines of acquisitions, how do you think about the capital allocation tension between buying back your stock, which is at a multiple that you can see, and buying commercial IT consulting businesses that carry higher margin and usually are growing more quickly than sort of the mothership but also fetch a premium to the aggregate multiple of the company?
Theodore S. Hanson: Yeah. Well, look, Tobey, I think on the one hand, you know, doing share repurchases is a very accretive thing, where the stock is trading today. But we have to be mindful that's also a permanent retirement of capital, right? And there's some investment that needs to go into the firm both organically and pointed towards M&A, to position the firm to where we need to be for the future. And we're very fortunate that at this scale, we can do both. Both are accretive. As you said, the acquisition is accretive to growth rates, to gross margins, to EBITDA margins, to cash flow, and to strategy.
And so, you know, I think the two of those work hand in hand. So we're certainly mindful of that. But you can't be all one or the other. You have to have a strategy around both.
Tobey O'Brien Sommer: Okay. Then for the government consulting business, what's your outlook for that? ODBA funding has been sort of slow to percolate through and work its way into actual contracts and revenue and profit. We do have a budget behind us. What do you think there's an opportunity for your book to bill to kind of materially improve with the convergence of those items over the next two or three quarters?
Theodore S. Hanson: Yeah. I said, you know, we kind of are where we were coming out of the third quarter. The only difference was we had a shutdown, which kind of slowed things down for a number of weeks longer than anyone anticipated. But I think in the back half of the quarter, award activity was moving along. I think here in January, we've obviously been dealing with, you know, getting past a shutdown, which by and large we have except for, you know, on the Department of Homeland Security side. And I think as that gets resolved, the cycle is moving here.
And I expect award activity to be strong in the areas that are getting budget support, which is Department of Defense and security and intelligence. And I think we're well-positioned for that. So as always, something comes up in this industry segment that seems to push things down the road a bit, but the budget is certainly there now. We feel good about our positioning there. From a solution capability, I mean, we play exactly where dollars are being shifted towards. So I think all those things lined up.
I think it's just a matter of timing and what we said coming out of, you know, the third quarter was we thought there would be heavy award in the first half of the year, and those would begin to be realized in terms of growth in the second half of the year. And I think that's still the case.
Tobey O'Brien Sommer: Okay. The last one for me, if I can sneak it in. With respect to gross margin, within government consulting, what's a reasonable sustainable range for gross margin here in a, hopefully, a post-Doge world?
Marie L. Perry: Certainly. So to your point, with Doge, we will lap in March '26. And so we've really seen consistently what we've talked about, less than 2% total revenues. Probably equates to about $15 million. On a steady state, for federal gross margin, it's probably closer to the 20% gross margin and maybe a little more to that.
Operator: Thank you. Our next question comes from the line of Surinder Singh Thind with Jefferies. Please proceed with your question.
Surinder Singh Thind: Thank you. Ted, can you provide maybe a bit more color on this idea that, you know, the client demand for AI is beginning to pick up, and you're starting to see demand drive there on the consulting side of the business and maybe talk about the push-pull versus are there maybe offsets within the staffing business or how should we think about the clients' desire to really transform and use your on the consulting side, but then maybe internally, they want to use some of the tools to be more efficient. And the impact on staffing.
Theodore S. Hanson: Yeah. Well, let me take the second. I'll let Shiv take the first. I think what's going on in the staffing program is two things, Surinder. I mean, obviously, that business is, you know, kind of sequentially steady, so I don't see a lot of movement either way. On the program opening up wider or having less volume sent through it. It's certainly at a moderated level. And I think it's because, really, there's a buying behavior change going on with our clients, where they used to open up that staffing spigot very wide and let resources flood in to work on internal projects, I think they're being very judicious about that.
So way that they control spend also, it's a way they further control outcomes. Right? As if the client more and more is making investments in certain technology outcomes they want to get to, but they're doing it on an outcome basis where there's real scope, real delivery, that they can see what the investment is and what the return is. You know? And with that being impacted by AI, I really don't think that it's not what we view, but you know, I think it's more around the two things I just mentioned. Shiv, on the first part of that?
Sadasivam Iyer: Yeah. Look. I think you're right. AI is a big driver of demand on a number of dimensions. You know, if I were to put a spectrum to it all the way from using AI for different use cases are either industry-specific or sort of horizontal. Customer service, any of those. So a lot of work around readiness and modernization of the application stack as well as data. And what we're actually seeing is even for clients that have done some of the readiness work, they're finding that scaling is still challenging because of interoperability considerations, because of just not having a framework to manage this massive AI applications that are being developed.
And to be into production, govern, traceability, all of those elements. So demand across the spectrum, whether clients are getting ready or if they're ready, how do you actually take advantage of the technology at scale?
Surinder Singh Thind: That's helpful. And then as a follow-up with Marie, could you maybe elaborate on the cost savings plan and what it means for 2026? I think in the prepared comments, you talked about generating, you know, sizable structural cost savings. And that, you know, these are gonna ramp up over the coming quarters. So just any color around magnitudes, run rates, anything like that, that would be helpful.
Marie L. Perry: So as we kind of noted with respect to the cost savings, so we gave a net $80 million of cost savings, if you will, over the three-year period. Indicated that cost savings would be kind of moderate in '26 but really building in '27 and '28. The reference in the prepared remarks was really around the acquisition integration and strategic planning cost of $10.7 million.
Operator: Thank you. Our next question comes from the line of Maggie Nolan with William Blair. Please proceed with your question.
Maggie Nolan: Thank you. The commercial consulting growth, I think it was nearly 20% year over year. Can you talk about the mix of that? Like what was project-based versus maybe longer duration manager platform-led work? And then tie that into your thinking about revenue visibility in the coming year 2026?
Sadasivam Iyer: Oh, so we've seen growth across the board, Maggie. It's a lot of transaction or project-based implementation work, whether it's around our platforms. We've seen a pretty significant growth, as I mentioned, in the prepared remarks in our application engineering and services space, which has been growing pretty rapidly. Our data and AI work is actually also growing pretty rapidly from that perspective. And so we're seeing demand across the board for our solution set. It's a mix of sort of, as you rightly pointed out, more longer-term projects. And, you know, I would say, implementation-driven projects. We're seeing a pretty healthy mix of both of those.
We're also seeing more fixed and fixed-price improvements in our pricing from a project perspective. So as you look forward from a revenue outlook perspective, we also noted our bookings for the fourth quarter, which were a pretty significant number ending up at a very healthy book to bill of about, you know, 1.3 plus, which really gives us a pretty good platform to build on. Now keep in mind, as we continue to pivot our business, we're constantly trying to improve the more long-term piece of the consulting business. It's still ramping up that curve. So we still have a lot of work that has finite starts and ends, which sometimes results in bookings converting into revenue over time.
Right? Typically happens at the end of Q4 to Q1 where we see revenues ramp up a little bit more. Slower than usual. But that mix is constantly improving, and that's what we're striving to do is to get more secure longer-term projects we don't have to deal with ebbs and flows.
Maggie Nolan: Thank you. That's helpful. Can you talk a little bit as well from an end market and perspective? You know, obviously, healthcare and consumer and industrial look pretty good. What are you seeing in terms of financial services or TMT? And, you know, any early commentary on budgets for 2026 from clients now that they finished their budgeting processes?
Sadasivam Iyer: Look. I think we're seeing a pretty steady demand, I would say. And it's not like we're, as we've said before, and I said in my prepared remarks, our sequential improvement in financial services was outside of the big banks. So those are the ones we're actually waiting and watching in terms of a pivot. So we're still trying to get an early read. As Ted said before, some of the flow of demand that we're seeing on the staffing side from requisitions and everything else is holding steady. So still trying to get a better handle. So we've not seen what I would call a massive inflection in demand. I think demand is holding steady to moderately positive.
We are seeing more uptick in demand in both TMT and software and services, as I noted, because of all the work that is happening around data centers and data center build-out and the demand for those services.
Theodore S. Hanson: So, Maggie, if you think about it sequentially, four or five industries up, Q3 to Q4. That's certainly a positive. That's a better progress we've had from an industry standpoint. And then for the fourth quarter, three industries of the five up year over year. Right? Kinda held back by, you know, what's going on with big banks and also what's going on in the services space. Correct. So, you know, it's progress that pulls it will say, and so we're cautiously optimistic.
But we do, you know, I would say we need to see some inflection in the big bank area to really contribute to the total to move forward at a little hotter pace than what we're seeing right now.
Maggie Nolan: Okay. Thanks, Ted. Thanks, Ted.
Operator: Thank you. Our next question comes from the line of Kevin McVeigh with UBS. Please proceed with your question.
Kevin McVeigh: Great. Thank you so much. Hey. I just want to clarify. Was there any impact in the quarter from the government shutdown?
Theodore S. Hanson: So there was a small impact from the government shutdown during the quarter. Well, we mostly had it programmed in. At the beginning. It went on for a few weeks longer, obviously, than we thought. But, you know, it wasn't material to the outcome for the entire quarter.
Kevin McVeigh: Got it. It's helpful. And then if you could on the offshore capability through Quinox were interesting. Is that enhancing what you have, or is that just new capabilities that you're bringing offshore?
Sadasivam Iyer: Well, it's all new capabilities we're bringing offshore. You know, we have a very small presence in India, driven by some of our past acquisitions, largely in the realm of those platforms ServiceNow and Infor. But this brings a whole new set of complex, mature delivery capability across sort of the life cycle, whether it's, you know, application modernization management, whether it's, you know, modern application development, a lot of new digital integration capabilities, which are critical as, you know, clients are looking to make some of these AI solutions work from an interoperability perspective. And also some very specific capabilities around platforms, around Salesforce, Calypso, and even SAP.
So it's frankly, a lot of truly incremental net new, but a much more advanced complex for, global delivery model.
Kevin McVeigh: That's helpful. And then just my last one real quick. Do you have any contracts with DHS?
Theodore S. Hanson: We do. So where? They're obviously a pillar customer of ours. An important customer, a lot of important cybersecurity work and other work. I think that look. As we go through this, obviously, they're gonna be adjudicating the, you know, the funding here for DHS, and there are certain things at odds. I don't think any of that affects our work. We don't do a lot or anything that touches some of the areas that are kinda at odds in the conversation in the further funding of DHS forward.
Kevin McVeigh: Great. Thank you.
Operator: Thank you. Our next question comes from the line of Mark Marcon with Baird. Please proceed with your question.
Mark Marcon: Hey. Good afternoon, and thanks for taking my questions. Kevin, Shiv, I'd just like to step back to some of your initial commentary with regards to, you know, AI. Obviously, there's been a lot in the news about AI regarding, you know, fast companies, data retrieval services, that's And what I'm wondering is, you know, when you're taking a look at your client base writ large, to what extent are you seeing them just focus on AI?
And to what extent are you also seeing like, we've had other companies that have basically said, that they felt like some of their clients, you know, were basically stalling on some, you know, legacy or more traditional kind of SaaS implementations because they wanted to see how AI was going to, you know, shake out and what needed to be done. And now that they've some of them have come to the conclusion that, you know, maybe they're not quite ready, and so they're proceeding with some projects that they previously stalled and that there was some releasing of pent-up demand. Are you seeing any of that?
And when we think about the industry groups that are picking up, and are seeing good sequential growth, to what extent of that is, you know, pure AI type projects as opposed to more legacy or traditional projects?
Sadasivam Iyer: Look. I think, Mark, let me start by saying we're not seeing that. Right? I don't think we're seeing large client signals that say they're stopping implementation projects because they think AI can do what those platforms can do for them. Right? And, you know, as Ted and I have repeatedly maintained, these enterprise platforms, at least for our large client, don't we don't believe are going anywhere anytime soon because of just the nature of those systems and how interconnected they are to the workflows and the processes. And where the canonical data truth resides within those organizations. So that's sort of the first part of the question.
In terms of your second part, look, we're seeing healthy demand across, as I said, all our capability areas. Look. If you think about I talked about application engineering services. A lot of that is focused on both legacy technologies as well as new product development that these companies are doing. I talked about, you know, data and AI growing very, very fast for us. So a lot of work both in data but data, but also pure AI around use cases. Around governance, around, you know, scalability and trust, in AI. So the demand pattern is pretty healthy across the solution stack.
Mark, I don't think there's a we're seeing any massive shift of funds or other stop some things and go fund en masse AI projects at scale.
Mark Marcon: Great. That's what I thought. I just wanted to confirm that. And then with regards to Quinox, if I'm getting the right information, it looks like they have between fifteen hundred and eighteen hundred and eighty-eight people. Is that kind of a bench model? And how quickly can that business scale with some of the cross-selling that you're gonna end up bringing in? And what sort of gross margins do they typically produce?
Sadasivam Iyer: Yeah. So great questions. So, typically, let me start with the numbers you have are accurate. They're roughly somewhere between the eight to around the 2,000 number, if you may, Mark. It's a very, very robust platform and can actually scale pretty rapidly depending on how we choose to sort of and the speed at which we want to take it and deploy it across our base, if you may.
And, because, you know, it's a very well-run machine in terms of its talent supply chain, the ability to scale, and, you know, I may have mentioned it in previous it runs at an attrition level that is half of what the industry average is, which is great because part of the challenge in scaling up tends to be just the ability to replace and replenish talent in India. So all pretty positives. Positive. The gross margins are in the high close high I would say, low forties. And EBITDA margins in the twenties.
Theodore S. Hanson: And I think, Mark, if we if there's maybe something of note, I'd say different about this. Versus our past acquisitions. They come into the first year, we really think that because of their ability to scale on their platform, in India from a resource standpoint, and the need from our client base to engage in the opportunities here with them that we can go a little faster on the revenue synergy side. Than maybe we would in a typical acquisition in the first year. So, you know, our hope is that those synergies appear a little sooner.
You know, but that'll we'll be careful about picking, you know, a finite number of opportunities and really engaging thoughtfully as we do that. But one of the most attractive things about this acquisition beyond their solution capabilities and their global delivery footprint was the fact that they could naturally scale up very quickly. And if you'll remember, we did the same thing, in our nearshore operation when we acquired EnerSys, which had, you know, maybe about a thousand resources that we moved pretty quickly up to about 2,000 on an organic basis. So we think the same opportunity exists here.
Mark Marcon: That's great. Thank you.
Operator: Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to CEO Theodore S. Hanson for closing remarks.
Theodore S. Hanson: Great. Well, thank you, everyone, for attending our fourth quarter and 2025 earnings release, and we look forward to speaking with you in a short number of weeks in April on our Q1 2026 earnings call. Have a great evening.
Operator: Thank you. And this concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.
Before you buy stock in ASGN Incorporated, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and ASGN Incorporated wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $431,111!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,105,521!*
Now, it’s worth noting Stock Advisor’s total average return is 906% — a market-crushing outperformance compared to 195% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of February 4, 2026.
This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.
The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
| 2 hours | |
| 4 hours | |
| 4 hours | |
| 4 hours | |
| 5 hours | |
| 6 hours | |
| Feb-03 | |
| Feb-02 | |
| Feb-02 | |
| Jan-29 | |
| Jan-29 | |
| Jan-28 | |
| Jan-28 | |
| Jan-28 | |
| Jan-28 |
Join thousands of traders who make more informed decisions with our premium features. Real-time quotes, advanced visualizations, backtesting, and much more.
Learn more about FINVIZ*Elite