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© 2019 ASGN Incorporated. All rights reserved. Macquarie Business Services Conference May 2, 2019

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Page 1: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

© 2019 ASGN Incorporated. All rights reserved.

Macquarie Business Services Conference

May 2, 2019

Page 2: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

1

Safe Harbor

Certain statements made in this news release are “forward-looking statements” within the meaning ofSection 21E of the Securities Exchange Act of 1934, as amended, and involve a high degree of risk anduncertainty. Forward-looking statements include statements regarding our anticipated financial andoperating performance.

All statements in this release, other than those setting forth strictly historical information, are forward-looking statements. Forward-looking statements are not guarantees of future performance, and actualresults might differ materially. In particular, we make no assurances that the estimates of revenues,gross margin, SG&A, amortization, effective tax rate, net income, diluted shares outstanding, contractbacklog, book-to-bill ratio, Adjusted EBITDA, Adjusted Net Income, and related per share amounts (asapplicable) set forth above will be achieved. Factors that could cause or contribute to such differencesinclude actual demand for our services, our ability to attract, train and retain qualified staffingconsultants, our ability to remain competitive in obtaining and retaining clients, the availability ofqualified contract professionals, management of our growth, continued performance and improvementof our enterprise-wide information systems, our ability to manage our litigation matters, the successfulintegration of our acquired subsidiaries, and other risks detailed from time to time in our reports filedwith the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2018, as filedwith the SEC on March 1, 2019. We specifically disclaim any intention or duty to update any forward-looking statements contained in this news release.

Page 3: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

2

ASGN At a Glance

2

$

Addressable Market of $280B

Favorable Industry and Secular

Trends

Attractive End Markets

TRACK RECORD OF

FINANCIAL EXCELLENCEDEEP RELATIONSHIPS

& TRUSTED RESOURCE

Revenues of $3.5B in 20181

21 Consecutive Quarters Above

Industry Growth

Adjusted EBITDA of $420M in 20181

Free Cash Flow of $258.8M in 2018

~15,000 Customer Relationships

Relationships with 350 Fortune

500 Companies

Averaging over 26,000 Billable

Professionals

PATH TO $5B IN

REVENUE

Leverage Market Position

Scale Value-Added Services

Expand Presence in

Government IT Services

Strategic Acquisitions

1 Pro forma to include acquisitions of ECS and Creative Circle as if these acquisitions occurred at the beginning of 2015. Does not include DHA pre-acquisition.

LARGE ADDRESSABLE

MARKET

Page 4: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

3

Competitive Differentiators & Growth Drivers

Expand value-added services and increased

adoption of delivery model

Continueabove-industry growth

Maintaingross margins while growing at

above-industry rates

Improve operating leverage through

higher economies of scale

Generatestrong free cash flow as a result

of above-industry growth rates

and improved operating

leverage

Createhigher stockholder value

through a combination of

strategic acquisitions, stock

repurchases and deleveraging

Acquirebusinesses that enhance our value-added

service offerings and delivery model while

being immediately accretive to free cash

flow and Adjusted Net Income

21 Consecutive Quarters of Above Industry Revenue Growth

Page 5: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

4

Well-Positioned to Benefit from Market Forces

TOTAL

ADDRESSABLE

MARKET

$151 BillionTAM triples with expansion

into addressable commercial

IT consulting market with

value-added services

$51 BillionIT, digital, engineering,

& scientific staffing

The World of Work is Changing

• More task and project-based work

• Variable human capital cost to improve productivity

• Increased adoption of shared resources delivery model

• Increasing client demand for value-added services

Increasing Technology Adoption & Specialization

• Increasing demand for specialized technical talent

• Specialized in skillsets and specific industry technologies

• Cybersecurity, Analytics, AI, Cloud & Digital are fastest-growing

Favorable Labor and Immigration Legislation

• Increasing risk of worker misclassification

• Ever-changing laws impacting worker usage

• Increasing demand for domestic technical resources

Position

Improving U.S. Government Market

• Federal spending raised by $300B over two years, increasing both military

and non-defense spending

• Large, pent-up demand for modernization of high-visibility IT systems

Page 6: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

5

Segment Overview

CONSOLIDATED REVENUESQ1 2019 REVENUES

$149.6 Million16.2% of Consolidated Revenues

2.0% Growth Year-Over-Year

APEX SEGMENT OXFORD SEGMENT ECS SEGMENT

SERVICE OFFERINGS

Critical Government IT services and solutionsInfrastructureAgile Software & Cloud SolutionsAdvance Science & Engineering

High-end IT and Engineering skills and solutionsInformation Technology, HCIT, Engineering

Clinical & Scientific skills and solutions in EuropeScience, Clinical Research, Engineering

Permanent Placement solutionsInformation Technology, Engineering, F&A, Healthcare

Mission critical IT skills and solutionsInfrastructure, App Dev., Security, PMO

Clinical and Scientific skills and solutionsScience, Engineering, Clinical Research

Creative/Digital skills and solutionsUX, UI, SEO, Design

POSITION AND MARKETS

• Exposure to large company/high volume segment of the IT, Clinical/Scientific and Creative/Digital contingent labor and professional services markets

• Growth potential in value-added services

• Addressable end market of $143B

• Serves the U.S. and Canadian markets

• Exposure to higher end of the IT, Engineering and Scientific contingent labor and professional services Markets

• Growth potential in value-added services and selective opportunities in Europe

• Serves U.S., Canadian and European markets

• Exposure to large and stable Government IT services market

• Long-term contracts provide significant revenue & profitability visibility

• One of the leading, fastest-growing, mid-tier, government IT contractors

• Addressable end market of $129B

• Serves the U.S. market

$606.1 Million65.6% of Consolidated Revenues

12.5% Growth Year-Over-Year

$168.0 Million1

18.2% of Consolidated Revenues1

12.7% Growth Year-Over-Year2

1 Includes DHA revenues from the date of acquisition of January 25, 2019. 2 Pro forma to include ECS as if the acquisition occurred at the beginning of 2017. Does not include DHA pre-acquisition.

Page 7: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

6

Delivery Model Client FlexibilityCompetitive

Pricing Policy

Access to Highly

Skilled Labor

Strong Project

Control

Traditional Staffing

Offshore Labor

IT Consulting Firm

Internal Resources

• Talent that meets

specific project needs

• Adaptable resources;

not locked into

predetermined

contracts

• Generally higher

utilization rates

• Lowers fixed costs

without sacrificing

quality

• Removes costs to

repurpose employees

• Reduces recruiting,

onboarding & training

fees

• Deep database of

local candidates

• Access to highly-

skilled, agile labor

pool in high-demand

areas

• Talent selection that

meets secular work

drivers, not economic

cycles

• Greater control over

project visibility &

quality

• Decreased project

ramp-up time

• Prequalified, vetted

resources

Competitive Differentiator Gets the Green Light:

The ASGN Model

KeyColor Category Representation

Fully

Likely

Not Likely

Page 8: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

7

Proven Track Record of Acquisitions

1992

ASGN Initial

Public Offering

2007

Entered the IT Market

2012

Comprehensive IT Staffing & Services Provider

2015

Entered the Digital/Creative Market

2004

Comprehensive Scientific Staffing Provider

• Peter Dameris Appointed CEO

• Implemented Revitalization Plan

Scientific Staffing

Expanded Professional / IT

Services Focus

2013

Expanded Permanent IT Capabilities

Further Expansion of

Professional IT Services &

Digital Capabilities

1985

ASGN Founded

2018

Entered the

Government IT

Services & Solutions

Page 9: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

8

5-Year Growth Plan to $5 Billion in 2022

Leverage

Market Position

Expand Presence

in Government IT

Services

Scale Value-

Added Services

• Leverages vast

contingent labor

pool rather than full-

time bench

resources

• Value-added

services have grown

and will continue to

grow faster than

staffing

• Broad contract vehicle

access to facilitate

continued growth

• Capitalize on

improving federal

market dynamics

• Focus efforts on

cybersecurity,

infrastructure, science

& engineering,

NextGen IT

• Geographic

footprint, sales

driven platform

and long-

standing

customer

relationships

$3.2B$4.3B

to

$4.5B $5.0BTargeted CAGR of 6 to 7 percent

(3 to 4 percentage points above industry growth rates)

Acquired Revenues

5-Year CAGR of 9.3 Percent

Pursue Strategic

Acquisitions

• Leverage track

record of successful

integrations

• Acquirer of choice

• Target $500 - $700

million of acquired

revenue through

2022

1 Pro forma to include ECS as if the acquisition occurred at the beginning of 2017.

Page 10: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

Financial Review

Page 11: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

2015 2016 2017 2018

Gross Profit & MarginUSD in millions

$827

$899

$962

$1,050

31.3% 30.5% 29.9% 29.6%

$99

$172 $172

$259

2015 2016 2017 2018

Free Cash Flow & Margin

2015 2016 2017 2018

Adjusted EBITDA & Margin

$309$341

$379$420

USD in millions

2015 2016 2017 2018

Revenues

$2,640$2,947

$3,214$3,549

USD in millions

10

Summary of Pro Forma Financial Results

Consistent above industry growth, stable margins and high free cash flow generation

Note: Results are presented on a pro forma basis, which assumes the acquisitions of Creative Circle and ECS occurred at the beginning of 2015, except Free Cash Flow & Margins, which are presented on a reported basis.

11.7% 11.6% 11.8% 11.8%

4.8%

7.1% 6.6%

7.6%

Page 12: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

11

Free Cash Flow Allows for Quick Deleveraging

Maintained Strong Credit Rating Throughout Periods of Leveraging & Deleveraging

3.7x

3.1x

2.8x2.6x

3.8x

3.0x

2.7x2.5x

3.7x3.5x

3.2x3.0x

2.8x

2.5x

3.7x

3.2x

2.9x2.7x 2.65x

2.5x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

1Q07 2Q07 3Q07 3Q12 4Q12 1Q13 2Q15 3Q15 4Q15 1Q16 2Q16 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19

2.45x1

2007 2012 2015 2018

Leverage

Ratio

Decreased

1.1x

Leverage

Ratio

Decreased1.3x

Leverage Ratio

Decreased 1.2x

Projected Leverage

Ratio Decrease 1.2x

1 Q2 2019 leverage ratio is projected to be below the Q4 2019 target.

Page 13: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

12

Summary Comparative Financial ResultsThree Months Ended

March 31,

2019 2018 2018 Y-Y Chg.

($'s in millions) Actual Pro Forma 1 Actual Pro Forma

Revenues 923.7$ 685.2$ 834.2$ 34.8% 10.7%

Gross Profit2 263.9 217.7 244.4 21.2% 8.0%

SG&A Expenses:

Cash SG&A 169.4 143.0 155.8 18.5% 8.7%

Non-Cash SG&A3 16.6 11.7 13.5 41.8% 22.6%

Acquisition-Related Expenses 1.4 9.8 0.4 -85.3% 289.5%

187.5 164.4 169.7 14.0% 10.5%

Amortization of Intangible Assets4 13.7 7.6 13.6 79.7% 0.7%

Interest Expense 14.5 6.5 14.7 121.3% -1.8%

Net Income 34.9$ 29.2$ 34.6$ 19.4% 0.9%

Earnings per Share 0.66$ 0.55$ 0.65$ 18.7% 1.1%

Adjusted EBITDA2 97.1$ 74.8$ 91.2$ 29.9% 6.5%

Adjusted Net Income5,6 49.4$ 44.0$ 48.2$ 12.2% 2.5%

Adjusted EPS5,6 0.93$ 0.83$ 0.90$ 11.9% 2.6%

Margins:

Gross 28.6% 31.8% 29.3% -3.2% -0.7%

Adjusted EBITDA 10.5% 10.9% 10.9% -0.4% -0.4%

SG&A as a % of Revenues 20.3% 24.0% 20.3% -3.7% -0.1%1 Pro forma is presented on the basis that assumes the acquisition of ECS occurred at the beginning of 2017, but does not include DHA. 2 Includes depreciation related to an ECS project that is included in cost of services ($2.5 million in Q1 2018 and $2.6 million in Q1 2019). 3 Depreciation and stock based compensation.4 Includes estimate for DHA, which was acquired in January 2019. Estimated amortization for 2019 is $50.4 million, $38.0 million in 2020, $32.5 million

in 2021, and $24.8 million in 2022, but subject to change during the measurement period. Amortization is "added back" to GAAP Net Income in

the determination of Adjusted Net Income (a non-GAAP measure).5 Difference between GAAP Net Income and Adjusted Net Income (a non-GAAP measure) mainly relates to certain acquisition-related items: such as

amortization of intangible assets (e.g. customer relationships, non-compete agreements, etc.) and acquisition and integration related expenses.

Reconciliation of the GAAP to the non-GAAP measures are included in the SEC filings.6 Does not include the "Cash Tax Savings on Indefinite-lived intangible Assets." These savings total $7.0 million each quarter, or $0.13 per diluted share,

and represent the economic value of the deduction that we receive from the amortization of goodwill and trademarks.

Page 14: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

13

Selected Cash Flow and Balance Sheet Data

1As reported. Pro forma Adjusted EBITDA was $91.2 million for the quarter ended March 31, 2018, which is presented on the basis that assumes the acquisition of ECS occurred at the beginning of 2017, but does not include DHA.

($'s in millions)

Cash Flows Data: 2019 2018 % Chg

Adjusted EBITDA1 97.1$ 74.8$ 29.9%

Cash Flows Before Changes In Operating

Assets and Liabilities70.6$ 50.9$ 38.7%

Changes in Operating Assets and Liabilities (26.6) 3.8 -800.3%

Cash Flows from Operating Activities 44.0$ 54.7$ -19.7%

Capital Expenditures 7.5 6.2 21.4%

Free Cash Flow 36.5$ 48.5$ -24.9%

Free Cash Flow as a Percent of:

Revenues 3.9% 7.1% -3.1%

Adjusted EBITDA 37.5% 64.9% -27.4%

Debt Repayment -$ 10.0$ -100.0%

Cash Paid to Repurchase Shares -$ -$ N/A

Balance Sheet Data: 2019 2018

Cash and Cash Equivalents 35.6$ 41.8$

Working Capital 377.7 378.1

Long-term Debt 1,107.7$ 1,100.4$

Leverage Ratio (debt to trailing 12-months EBITDA) 2.65x 1.80x

Stockholders' Equity 1,227.5$ 1,182.1$

Quarter Ended March 31,

March 31,

Page 15: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

(In millions, except per share amounts) Low High

Revenues 967.0$ 977.0$

Y-Y Growth Rate 10.1% 11.2%

Gross Margin 29.3% 29.7%

SG&A Expenses 190.1$ 191.9$

Amortization of Intangible Assets

Net Income:

GAAP 48.6$ 52.3$

Adjusted 1,2 61.3$ 65.0$

EPS (Diluted):

GAAP 0.91$ 0.98$

Adjusted 1,2 1.15$ 1.22$

Adjusted EBITDA3 113.7$ 118.7$

Adjusted EBITDA Margin 11.8% 12.1%

Diluted Shares

$13.0

53.4

14

Financial Estimates for Q2 2019

1 Adjusted Net Income, a non-GAAP financial measure, is defined as net income adjusted for (i) acquisition, integration and strategic planning expenses, (ii) amortization of identifiable intangible assets and (iii) creditfacility amendment expenses.

2 Does not include the “Cash Tax Savings on Indefinite-lived Intangible Assets.” These savings total $7.0 million per quarter ($0.13 per diluted share) and represent the economic value of the tax deduction that we receive from the amortization of goodwill and trademarks.

3 Adjusted EBITDA, a non-GAAP financial measure, is defined as EBITDA (earnings before interest, income taxes, depreciation and amortization) adjusted for, among other things, acquisition, integration, strategic planning expenses and stock based compensation.

Page 16: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

15

Progress on 5-Year Plan Targets

,

5-Year Plan Financial & Operating Targets (2018 – 2022)

Annual Revenue growth of 6 to 7 percent1

Revenues from acquisitions $0.5 to $0.7 billion2

Maintain Gross Margins3

Increase Adjusted EBITDA margin from 11.8% in 2017 to 12.0% - 12.5% in 2022

2018 Progress Relative to 5-Year Plan

2018 growth rate above the 5-year CAGR to achieve 2022 target

In-line with Year 1 TargetMargin difference related to future improvement in operating leverage

In-line with TargetDoes not include FCF for ECS for Q1 2018 (pre-acquisition period)

1 Adjusted EBITDA and Free Cash Flow amounts and margins are at the mid-point of the 2022 targets.2 2018 FCF and related margins are on an as-reported basis for 2018.

1 Approximately 3 to 4 percentage points above current estimated industry growth rate.2 Estimate necessary to close gap between organic growth and 2022 revenue target of $5.0 billion.3 Before the effects of new Acquisitions.

2

Page 17: Macquarie Business Services Conference€¦ · Macquarie Business Services Conference May 2, 2019. 1 Safe Harbor Certain statements made in this news release are “forward-looking

© 2019 ASGN Incorporated. All rights reserved.