ASGN at William Blair Conference: Strategic Growth in IT Consulting

ASGN Inc. (NYSE:ASGN) presented its strategic vision at the 45th Annual William Blair Growth Stock Conference on Wednesday, 04 June 2025. The company highlighted its shift towards high-value IT consulting amidst economic uncertainty. While the conference underscored ASGN’s strong market position, challenges such as macroeconomic pressures were also acknowledged.

Key Takeaways

• ASGN is focusing on high-value IT consulting, with strategic acquisitions like TopLock enhancing capabilities.
• The company achieved its EBITDA margin target ahead of schedule, driven by commercial consulting growth.
• ASGN is investing in AI, data, and cloud services to meet increasing client demands.
• The government sector remains a significant revenue source, with strong bookings.
• ASGN aims to maintain a balanced capital allocation strategy, including M&A and share repurchases.

Financial Results

• Revenue: ASGN reported approximately $4 billion in revenues, concentrated in the U.S.
• Gross Margin: Margins are influenced by business mix, with commercial segments outperforming government segments.
• SG&A: 70% of SG&A costs are variable, adjusting with business results.
• Free Cash Flow: The company targets 60-65% EBITDA conversion into free cash flow.
• Net Leverage Ratio: Post-TopLock acquisition, the ratio stands at 2.6x, with a goal of 2.5x.
• Commercial Consulting: Growth of 4.7% last quarter boosted margins.

Operational Updates

• IT Services: Focused on large enterprise accounts in commercial and federal sectors.
• Industry Vertical Mix: Spans financials, consumer, industrials, TMT, business services, and healthcare.
• Client Base: 70% of revenue from Fortune 500 and large accounts.
• Government Sector: 30% of revenue from federal contracts, primarily with defense and security departments.
• Service Offerings: Includes AI, machine learning, data, cybersecurity, and cloud solutions.
• M&A Activity: The TopLock acquisition aims to enhance Workday ecosystem solutions.

Future Outlook

• Strategic Growth Driver: Moving up the IT services pyramid for higher value work.
• Margin Expansion: Continued growth through organic initiatives and acquisitions.
• Technology Investment: Prioritizing AI, data, and cloud services investments.
• Demand Drivers: Clients seek modernization of data infrastructure and AI security solutions.
• Government Spending: Expected support for national protection services.

Q&A Highlights

• Commercial Consulting Demand: Driven by AI, application development, and cybersecurity.
• Government Segment: Strong bookings with over one times book-to-bill ratio.
• Macro Impact: Clients are cautious with discretionary spending due to economic uncertainty.
• AI Focus: Investments in AI to enhance technical capabilities and insights.

In conclusion, ASGN’s presentation at the William Blair Growth Stock Conference underscores its strategic focus on high-value IT consulting and technology investments. For further insights, readers are encouraged to refer to the full conference call transcript.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Maggie Nolan, Research Analyst, William Blair: Hello, everyone. Thank you for joining. I’m Maggie Nolan. I’m the research analyst here at William Blair who covers IT services, and that includes ASGN along with my colleague, Trevor Romeo. I’m required to inform you that for a complete list of research disclosures or potential conflicts of interest, please visit our website at williamblair.com.

So we’re very excited to have ASGN here with us today, Ed Hansen, the CEO Shiv, the President Marie, the CFO and Chris from their TopLock acquisition. So thank you all for joining us. We’ll go through some of the, near term opportunities and a quick overview of the company and then we’ll jump into a little bit of a fireside chat.

Ted Hansen, CEO, ASGN: With that Maggie, thanks for having us. And Trevor, maybe just a couple minutes on ASGN. About 4,000,000,000 in revenues, all concentrated here in The US. If you think about ASGN, it’s IT services at scale, large enterprise accounts both in the commercial and the federal government industries. So about 70% of the revenue, Fortune 501,000 accounts serving IT needs of big enterprise clients across financials, consumer and industrials, TMT business services, and then about 30% health care, and then about 30% of the revenues in the federal government, mostly serving Department of Defense, National Intelligence, and Department of Homeland Security and Justice with solutions of AI machine learning, data, cyber, application development, software engineering, cloud, and other, what I’ll call, digital transformation capabilities.

You know, obviously, we’re an IT business that prides itself on a diverse account portfolio, those large enterprise accounts into the diverse industries that I’ve mentioned. I think one of the unique differentiators of our business is our flexible cost structure inside of the business allows us to have resiliency as a firm, both in good times and in more difficult times. I’ll leave, that for Marie to talk about in a in a second. We are, so fortunate to have a business that has tremendous free cash flow attributes to it as well as a healthy balance sheet. So at the right times, we can make strategic acquisitions and find partners like we found in Chris and his firm at Top Lock serving Workday ecosystem, which enhances the solution capability of our overall firm.

I mentioned these end markets. You can see that the industry vertical mix here is fairly diversified. I think that’s really important. You know, if you think about large enterprise customers, they’re the largest and most consistent spenders on IT. So obviously, that’s a place that you want to be.

I think you also want those enterprise customers to be diversified by industry and market, which gives you stability in the business over the course of time. We’ve been moving up the IT services pyramid over a period of years. The history of our business is in the IT staffing. We’ve developed these Fortune 1,000 relationships with clients over years and decades that led for them to pull us into higher end, what I’ll call consulting, opportunities to provide solutions with some type of deliverable, which is more important to them ultimately as an end outcome and also for us provides us with better economics because it’s a higher value proposition to the client. This, while we our IT staffing heritage kinda, you know, kinda gives us these these relationships and have put us in this market, the real strategic growth driver of the firm over the coming years is gonna be moving up the pyramid and doing higher value, higher margin work for our customers.

Shiv, President, ASGN: Marie? So

Marie, CFO, ASGN: Ted already mentioned the variable model that we have, and so we do have ASGN has a unique and differentiated business model that demonstrates resilience in economic environments, and so we have two levers in our our model. The first one under gross margin, we have a contingent labor structure, And, basically, from a contingent labor structure, we have a very thin base, and then we use our staffing arm to actually build and support a very talented qualified team at a competitive price, and that really helps us support our gross margin. From a a gross margin change or compression or expansion, that is really driven by business mix, and what I mean by that is so from each business line, the margins basically are consistent. They’re stable. And so what we’re seeing is and what we’re seeing now even in the second quarter guidance is that as our government segment, which has typically a slightly lower margin than our commercial, as that is slightly higher on a year over year basis, we’re actually seeing some compression, but on the other side, our commercial consulting that actually has a slightly higher, not a slightly, but a higher margin profile, than some of our other lines of business, we’re seeing expansion.

And so, really, when you see changes in our gross margin, it is attributable to our business mix. The other lever that we have as it relates to our business model is in s g and a. 70% of our s g and a is variable or semi variable. That is modest base, and then we have an in variable incentive structure. So commission bonus, it’s tied directly to our gross profit and our revenues.

So it moderates with our results. So you actually see from a gross margin perspective, directly tied to our revenue, and then from a, s g and a, we have our our variable compensation that moderates with our results. The one thing to highlight is in a given quarter, we will see either expansion or softness in our revenues. We like to talk about our automatic stabilizers. Well, not everything is automatic, and so we will see kind of maybe a quarter later, whether that be attrition or other areas of our business, that will catch up to the business results.

Last on the list, Ted mentioned this, our free cash flow. Our free cash flow continues to be strong and solid. We actually have a track record, and we have a measurement, if you will, that says 60 to 65% of EBITDA conversion into free cash flow. How do we use that free cash flow? And so when you look at our capital allocation, our focus is to allocate capital to the best use of our shareholders.

We actually use the balanced strategy, so we’ll invest organically, share repurchase, and then m and a use capital for m and a. M and a is by far the best and most effective use of our capital, and again, as Ted mentioned, just more recently, our acquisition of TopLock in the first quarter. So after that acquisition, our net leverage ratio was 2.6 times, and our target is about 2.5 times. So our intent over probably the next quarter is to delever, but back to the idea of the strong free cash flow, we still have the opportunity to opportunistic buyback shares. So, again, the focus really for us is a balanced capital allocation structure, and we have, the resources to do that.

Maggie Nolan, Research Analyst, William Blair: And with that, I’ll hand it over to Maggie. Great. Thank you. So maybe, Ted, we’ll kick it off with you. A lot has changed in the macro since we were here last June, but there’s, you know, been a, continued progression in your business in terms of the evolution further into consulting.

So can you talk about that a little bit, where you are in the journey and what you see in in the future for A

Ted Hansen, CEO, ASGN: and I think, you know, even though we’ve got, some some headwinds out here in some of the end markets that we serve, The strategic positioning of the business today is as strong as it’s ever been. You know, I I believe that our clients are being more and more, thoughtful about what, partners they go to to choose to execute work. And more and more, as it relates to newer technologies, we’re gonna be looked at very favorable here because of a couple reasons. One number, one is we have deep technical domain expertise and talent in all these critical areas like data, like AI, like security, application development, software engineering, and modernization, move to the cloud that we can bring teams together that are more custom fit through our contingent labor model and actually execute these projects for our clients at a better, more productive price point. I think that’s a winning outcome, if you will, for our customers.

So I think even though we’ve been, you know, maybe not seeing the revenue growth here that we would typically see as a business, we haven’t lost any time on the positioning of the firm around these opportunities.

Maggie Nolan, Research Analyst, William Blair: Very good. And, Shiv, you’re a newer face as the President. You came from Accenture, which is obviously a larger scale business in the industry. So what did you find compelling about ASGN as you made the switch over, and their strategy and their go to market?

Shiv, President, ASGN: Thanks, Peng. It’s great to be here. One of the things, as we’ve spoken about, ASGN is on a journey in its own evolution, right, that’s as a consulting organization. But when you combine that with what you see in the market around the pace of technological change, right, there’s gone are the days when you would implement enterprise systems and then you could figure out how to add on some things on top of it to run your business. Today, if you have to drive competitive advantages in enterprise, there is a myriad of technologies out there that you have to be part of your architecture.

What that is doing is it’s putting a strain on the talent side of the house in the sense of the pace of change is so fast that it’s hard for organizations to create a bench to support that need for that talent at the rate at which our clients want that talent. So to me, that’s the natural evolution in the services model where clients access to a breadth of talent, they want access to the breadth of talent at a competitive price point, and they want that to be supported by an organization that can put the pieces together in a very, very agile manner. And I think that is a very, very big structural advantage for ASGN. And I believe given where we are in the journey and some of the market dynamics that you see, which is not reversible, this is a trend that is only going to accelerate, there’s an opportunity to create a very unique technology services business.

Maggie Nolan, Research Analyst, William Blair: Very good. And you’ve always had a legacy of being able to take that talent, that access to talent and then kind of craft the right team for your Correct. So you’re always looking for new capabilities and so you do a lot of M and A. Maybe Chris, if you could kind of comment a little bit on the journey integrating Top Block into ASGN, of the strategic imperative there, then what are you most excited about?

Chris, TopLock: Yeah. Thank you, Maggie. Hello, everyone. I think that, you know, where we’ve found success over the last ten years has certainly established establishing ourselves as a technology leader within the Workday ecosystem. What we’re most excited about here is we’ve historically been very successful in the medium enterprise space and has been more or less an uphill battle going up against the strategics.

But what we’re excited about is ASGN’s existing customer base where we’ve historically only been a Workday company obviously, but now we have access to their commercial sales and account team. So I think that that’ll be obviously our first priority from an integration standpoint and, no complaints thus far.

Maggie Nolan, Research Analyst, William Blair: So maybe, Marie, while we’re on the the topic of TopBlock and kind of that shift in general towards higher value IT consulting. Can you talk about what that’s done in terms of the margin trajectory and growth profile?

Marie, CFO, ASGN: Absolutely. So, to your point, I mean, we look at commercial consulting, it just has a higher margin profile. And so as we continue to grow, last quarter, we grew 4.7% in commercial consulting, and it has a positive impact on our both our gross margin, EBITDA margin. When I think about it, Maggie, when we put our when you look at where our margins are today and, when we put our three year targets out in 2021 that ended in ’24, we talked about having an EBITDA margin of 12 to 12.5%, and we actually got there within eighteen months. And, really, a lot of that had to do with our strategic move to commercial consulting, but it was also from a macro perspective and, basically, the rest of the business, whether it be the the perm, the commercial consult, or the, the creative digital, even assignment, you know, kind of all the flywheel working.

And so as we continue to look whether organic, drive commercial consulting or through acquisition, there’s really no ceiling as it relates to the margin.

Maggie Nolan, Research Analyst, William Blair: So good continued runway for the margins over Very good. And then maybe switching back to Ted and talking about the clients for a moment. Can you talk about how they’re positioning themselves to achieve these important IT priorities, you know, particularly in light of the current environment where there’s a lot of uncertainty, there’s budget constraint, the macro is not necessarily working in many industries’ favor?

Ted Hansen, CEO, ASGN: I think that I mean, if you look at, our clients industry by industry, they all have their own unique challenges, but they’re all embedded somehow in concern for what’s going on in the macro and making sure that they’re positioned if we were gonna have a further deterioration in the backdrop. And so, really critical work continues and you can see that within our commercial consulting unit as we continue to get 1.2 book to bills and see even though more modest growth than maybe we saw in the past still having growth in that area. But if it’s discretionary, if it can be deferred, you know, I think there’s more and more evidence that says clients are holding back on that discretionary spend until they have a certain amount of business confidence in what we’re gonna get here in the future. I think an interesting data point was coming out of the third quarter and into the fourth, there was definitely an improvement in business confidence post the election. And you could begin to see all the metrics, forward metrics in our business slope up.

Our bookings in commercial consulting sloped up. Our bookings in the federal space sloped up, and even our metrics, in IT staffing begin to percolate. I wouldn’t say they were inflecting hard, but they were definitely improving. As we crossed into the first quarter and as the new administration took on and they began to deal with trade and tariff talk in the commercial marketplace, where was the economy headed in the commercial marketplace, and then the Doge activities in the federal marketplace. I think a lot of those things kinda dissipated.

So the bookings that we won are still good. They’re being worked on, and so we haven’t seen project cancellations or changes. But I think if you just though, if you kind of trace back through that and look forward, you can see how, you know, kind of uncertain macro can influence how clients think about pushing harder on new investment, you know, as it relates to IT spending.

Maggie Nolan, Research Analyst, William Blair: Certainly an important factor, but there’s also, you know, the competitive urgency that your clients face around, you know, being savvy with AI and using that to drive revenue or cut costs or whatever their objectives may be. So maybe can you talk about that a little bit? You know, you’ve said AI is a driver for the business. Why is that the case for ASGN?

Ted Hansen, CEO, ASGN: Do want to take that?

Shiv, President, ASGN: Sure. Look. I think, you got it right. Like, wants to be left behind, right, in in the AI race, so to speak. And companies are out there experimenting, trying to do a lot of proofs of concepts.

And what that is driving is a myriad of different reach outs to us. There are some clients who come to us and say, help us think about use cases to solve some issues in our customer service. There are other clients who come in and say, help us think about how can we automate some part of coding. Right? But where this why this is good for us overall is these things haven’t hit the point of scaling.

And the reason they haven’t hit the point of scaling is because a lot of these companies, contrary to popular belief, still carry a whole bunch of technical debt around their data and their infrastructure, which isn’t allowing them to monetize this and scale this. And when that happens, that is a wide and large swath of work to to to get rid of that, modernize, improve their data infrastructure. Along with it comes a lot of security that needs to be in place around responsible AI. So it just opens up a whole new world of opportunities in that space. So it’s it’s gonna be a driver, but not AI as a standalone, but everything that comes with it.

Maggie Nolan, Research Analyst, William Blair: Very good. And then as you think about making sure ASGN is prepared to capture that technology wave, how are you all thinking about balancing those investments in AI and data and cloud services with the fact that, you know, the revenue might not materialize quite yet because of some of the caution on the matter?

Ted Hansen, CEO, ASGN: So I think it’s a good question. I mean, I think that we’re definitely drilling in in the areas to ship points that we think are gonna be critical in these two technologies, make sure we have the right technical muscle and capabilities and insights, and and then not try to be everything to everyone. Right? And so in in all of that, we see areas of the business we may not just think are gonna be as productive next quarter or the quarter after. We’ll redirect investment out of there.

There are places where we’re deploying AI to reduce our internal costs that gives us investment freed up into to invest in some of these areas, and then ultimately leverage our account relationships and our deep domain expertise in these places where we think are gonna be critical to AI in the future and put those together so that we have the right opportunity to do this work and be a solution partner for our client.

Maggie Nolan, Research Analyst, William Blair: Very good. And so, I mean, you’re probably somewhat early days in in some of those things like injecting AI into your own business, but from the client perspective, how far along do you think clients are in embracing this and injecting it into their business? And then, you know, maybe talk about how you actually monetize it.

Ted Hansen, CEO, ASGN: Yeah. I think I’ll let Shiv handle the last part of that, but I think he hit it right. Like, our clients are coming to us to have conversations about use cases for sure. They have a laundry list of use cases and they wanna think through what how do you get to those use cases, what’s the return opportunity and all that, and then they’re picking one or two to pilot and see what happens. As it relates to enterprise systems, like in Chris’s world, they’re calling them saying, hey, you’re my expert in Workday.

I know Workday is implementing Agenic AI capabilities within the product. Where are those and how could they help me? So we’re doing customer meetings and webinars and other things in order to educate the customer that’s happening in Workday, that’s happening in ServiceNow and then some of the other enterprise systems like Salesforce and others that we serve. Ultimately, for customers to monetize these things, they have to get the scale, to Shiv’s point. You know, and I think what that takes is a better, one, seeing successful pilots where they actually get to productive use cases, And then two, being in a in a investment environment where they feel ready to go, and not only deal with the new opportunities in those technologies, but to shift point, also deal with some of the past ends of either their technology stack or their data situation or what have you.

Maggie Nolan, Research Analyst, William Blair: Very good. Maybe talking a little more specifically about the business and performance starting first with the commercial consulting growth. Can you talk about what drove that growth? What’s really in demand now? Is it, you know, early days of AI?

Is it cost containment types of projects?

Shiv, President, ASGN: Yeah. It’s it’s, you know, two or three major areas, right, that I could talk about. Obviously, data and AI is a big part of it. Right? So I would say there’s a lot of demand, a lot of continued interest in that space.

The second area I would say is what I would call, a combination of application, development, software engineering modernization because companies are still trying to figure out how to integrate those technologies into their architecture, which requires us to come in and help them think about how to build all of that and and integrate all of that. There there is a lot of continued, demand in the enterprise platform space, which is, you know, whether it’s ServiceNow, whether it’s Workday, in different segments of the market, and then I would say cybersecurity. There’s a lot of active interest in cybersecurity as well, in terms of a demand, profile. So I would say those are probably some of the bigger areas where you see demand for on the commercial consulting side.

Maggie Nolan, Research Analyst, William Blair: Very good. And then if we could hit on the government segment, I think it’s important for people to understand what’s going on there and what makes up your business. So can you kind of talk about the the civilian exposure, the breakdown between defense and civilian agencies, any concentrations that you have?

Ted Hansen, CEO, ASGN: So federal overall is about 30% of our revenue mix. If you looked inside of that 30%, you would see that nearly 70% of our, revenues are in customers, in Department of Defense, National Intelligence, Homeland Security, and Justice. And, if you’re kinda looking at the landscape of Doge and government efficiency and all that, most of the attention has been in the Fed civilian marketplace and, specifically, in regulatory accounts or areas that the administration have say say are less critical to the nation’s mission. If you look at the services we’re providing, which I mentioned earlier, those are critical to, the nation’s protection, and so they continue to get support. And you can see that both in where the government spends money today and even in the conversation around the new legislation that went from the house to the senate, there’s less money allocated or appropriated to Fed civilian, more to defense and inside of defense into these new technology issue areas that are gonna be critical for the nation and its security kinda as we go forward.

The Doge conversation has changed a little bit. Would say I would call it phase two. Right? Phase one was come in slash and burn, look for less critical fed civilian agencies where you can cut management consulting and other, I would say, based consulting arrangements, and so you saw that happen. Now phase two is the GSA, the government’s flag contracting agency is taking this responsibility on now and is working with each major federal contractor, including us, to say, how can you help us be more efficient?

Where can you point to that maybe we have some waste, fraud, or abuse that we could deal with? Would it be a better outcome for the government and for you if we modified a contract from cost plus to more outcome based? And so I would say there’s very normal and business like conversations now going on between the GSA office and our team and the federal government around those issues. I think, you know, mostly we view that as positive based on where we were in phase one and also positive in terms of where we play and what we do for the government.

Maggie Nolan, Research Analyst, William Blair: Very good. Maybe Marie, could you comment a little bit on what you saw in in q one in terms of, you know, bookings, versus revenue in the government space as well.

Marie, CFO, ASGN: Absolutely. I mean, that’s kind of the great news that is really and you said versus government? Or just Yeah.

Maggie Nolan, Research Analyst, William Blair: Broadly or something to that.

Marie, CFO, ASGN: Really, I mean, honestly, for government, it’s probably been the last three quarters, where government has been over one times book to bill. And so, you know, continue to see that, and that just portends, you know, future revenue growth. What we’ve seen, and I’ll be honest in terms of government and the commercial, is just a slightly slower conversion from the bookings into revenue. And right? And you think about everything that’s going on in the government world, you would just kind of expect a little bit of that, but, having those strong bookings is definitely a benefit for the future.

Maggie Nolan, Research Analyst, William Blair: There’s a lot of other different kind of parts of your business as well to to keep track of, so maybe we’ll end with you, Ted, on kind of the overall, demand environment, what you’re looking for, in terms of the recovery, any indicators you’re, you know, watching for, for a signal that clients will really start spending?

Ted Hansen, CEO, ASGN: So as clients decide to invest heavily more aggressively in all these new technologies that we mentioned, we are the first and fastest way for them to ramp up into those investments. And I think that thesis has always been a part of the business and still kind of rings true today. I think in the commercial side, easing of the macro, which would consist of more clarity on the tariff picture, a view that rate the rate picture is going to be in a regime that is lower rates, not higher rates for longer is gonna be important. And then I think to Shiv’s point, that’s gonna unshackle our corporate enterprise clients to go out there and adopt some of these technologies so they don’t become uncompetitive within their industry.

Maggie Nolan, Research Analyst, William Blair: Very good. It’s a great place to leave it. We are gonna continue in a breakout room for more q and a. That would be in Room Jenny B, and we’ll be heading there right now. Thank you all, and thank you to the ASGN team.

Ted Hansen, CEO, ASGN: Thank you,

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