# Everforth Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Everforth Inc](/companies/efor.md) (CIK 890564)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 1, 2023, 18:25 ET
- Period: 2023-09-30
- Accession: 0000890564-23-000020
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/890564/000089056423000020/asgn-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/890564/000089056423000020/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.12bn | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.38bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $794.4m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.40bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $322.4m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $975.1m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $206.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $640.6m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $98.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $280.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $18.5m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $49.7m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $20.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $62.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $59.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $169.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.23 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $3.43 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $1.23 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $3.46 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 48,400,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 49,200,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $340.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $32.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $197.7m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2023-09-30 | $993.9m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $3.58bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $443.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $1.67bn | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $1.04bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $1.91bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 20,054 characters.

*The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations, as well as management's beliefs and assumptions, and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words "believes," "anticipates," "plans," "expects," "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences include those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022 ("2022 10-K"). In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q and we assume no obligation to update any forward-looking statements or the reasons why our actual results may differ.*

### OVERVIEW

ASGN provides information technology ("IT") services and professional solutions to the commercial and government sectors. We operate through two segments, Commercial and Federal Government. The Commercial Segment, which is the largest segment, provides consulting, creative digital marketing and permanent placement services primarily to large enterprises and Fortune 1000 companies. Our Federal Government Segment provides mission-critical solutions to the Department of Defense, the intelligence community and federal civilian agencies. Virtually all of the Company's revenues are generated in the United States.

Billable Days are business days (calendar days for the period less weekends and holidays) adjusted for other factors, such as the day of the week a holiday occurs, additional time taken off around holidays, year-end client furloughs and inclement weather. Revenues calculated on a same Billable Days basis provide more comparable information by removing the effect of differences in the number of Billable Days on a year-over-year basis. Revenues on a same Billable Days basis are adjusted for the following items: differences in Billable Days during the period by taking the current-period average revenue per Billable Day, multiplied by the number of Billable Days from the same period in the prior year.

### RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 2022

### Revenues

Revenues for the quarter were $1.1 billion, down 6.8 percent over the third quarter of last year. The table below shows our revenues by segment for the three months ended September 30, 2023 and 2022 (in millions).

| Commercial | 2023 | 2022 | Change | % of Total 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Assignment | $508.2 | $631.4 | (19.5%) | 45.5% | 52.7% | (7.2%) |
| Consulting | 274.2 | 268.6 | 2.1% | 24.6% | 22.4% | 2.2% |
|  | 782.4 | 900.0 | (13.1%) | 70.1% | 75.1% | (5.0%) |
| Federal Government | 334.4 | 297.9 | 12.3% | 29.9% | 24.9% | 5.0% |
| Consolidated | $1,116.8 | $1,197.9 | (6.8%) | 100.0% | 100.0% |  |

From an industry perspective, the Company operates in six broad industry verticals. Commercial Segment revenues (70.1 percent of total revenues) were down 13.1 percent year-over-year and are categorized in five verticals: (i) Financial Services, (ii) Consumer and Industrial, (iii) Technology, Media and Telecom ("TMT"), (iv) Healthcare, and (v) Business and Government Services. Consumer and Industrial and Healthcare verticals saw low single-digit revenue declines year-over-year and the remaining three verticals saw double-digit declines year-over-year. Federal Government Segment revenues (29.9 percent of total revenues), the sixth industry vertical, were up 12.3 percent year-over-year and included $24.6 million from Iron Vine Security, LLC ("Iron Vine"), which was acquired in October 2022.

Total IT consulting services revenues were $608.6 million (54.5 percent of total revenues), up 7.4 percent year-over-year. Federal Government Segment revenues, which are all consulting revenues, were $334.4 million, up 12.3 percent year-over-year as stated above, and Commercial Segment consulting revenues were $274.2 million, up 2.1 percent year-over-year. The growth in IT consulting services revenues was offset by a 19.5 percent year-over-year decline in assignment revenues which totaled $508.2 million (45.5 percent of total revenues), reflecting continued softness in the more discretionary and cyclical portions of the Commercial Segment business. On a same Billable Day basis, adjusting for 1.5 fewer Billable Days in the third quarter of 2023 compared to the third quarter of 2022, assignment revenues declined 17.6 percent.

### Gross Profit and Gross Margin

The table below shows gross profit and gross margin by segment for the three months ended September 30, 2023 and 2022 (in millions).

|  | Gross Profit 2023 | 2022 | Change | Gross Margin 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial | $254.2 | $297.8 | (14.6%) | 32.5% | 33.1% | (0.6%) |
| Federal Government | 68.2 | 61.1 | 11.6% | 20.4% | 20.5% | (0.1%) |
| Consolidated | $322.4 | $358.9 | (10.2%) | 28.9% | 30.0% | (1.1%) |

Gross profit is comprised of revenues less costs of services, which consist primarily of compensation for our contract professionals, other direct costs and reimbursable out-of-pocket expenses. Consolidated gross profit was down 10.2 percent year-over-year on a revenue decline of 6.8 percent.

Gross margin was 28.9 percent, a compression of 110 basis points from the third quarter of 2022. The compression mainly related to business mix: (i) within the Commercial Segment, a lower mix of certain high-margin assignment revenues, namely, creative digital marketing and permanent placement revenues, which was partially offset by a higher mix of high-margin IT consulting revenues with a year-over-year expansion in margin and (ii) a higher mix of revenues from the Federal Government Segment, which have a lower gross margin than commercial revenues.

### Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses consist primarily of compensation expense for our field operations and corporate staff, rent, information systems, marketing, telecommunications, public company expenses and other general and administrative expenses. SG&A expenses were $206.0 million (18.4 percent of revenues), compared with $232.6 million (19.4 percent of revenues) in the third quarter of 2022. This improvement was primarily due to lower incentive compensation expense.

### Amortization of Intangible Assets

Amortization of intangible assets was $17.8 million, compared with $17.9 million in the third quarter of 2022.

### Interest Expense

Interest expense was $18.5 million, up from $12.1 million in the third quarter of 2022, primarily as a result of higher interest rates on the senior secured credit facility, and also included $2.3 million of costs related to the August 2023 amendments to the senior secured credit facility. The weighted-average outstanding borrowings and cash-based interest rate in the third quarter of 2023 and 2022 were $1.0 billion and 6.0 percent (excluding costs related to aforementioned amendments), and $1.0 billion and 4.4 percent, respectively.

### Provision for Income Taxes

The provision for income taxes was $20.7 million, down from $25.2 million in the third quarter of 2022 due to lower income before income taxes. The effective tax rate was 25.8 percent, down from 26.2 percent in the third quarter of 2022.

### Income from Continuing Operations

Income from continuing operations was $59.4 million, down from $71.1 million in the third quarter of 2022.

### Income from Discontinued Operations

Income from discontinued operations was $2.1 million in the third quarter of 2022.

### Net Income

Net income was $59.4 million, down from $73.2 million in the third quarter of 2022.

### RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2022

### Revenues

Revenues for the first nine months of the year were $3.4 billion, down 1.6 percent year-over-year. Revenues for the period included approximately $128.0 million from businesses acquired during the last 12 months. Excluding the contributions from acquisitions, revenues declined 5.3 percent year-over-year. The table below shows our revenues by segment for the nine months ended September 30, 2023 and 2022 (in millions).

| Commercial | 2023 | 2022 | Change | % of Total 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Assignment | $1,598.8 | $1,888.0 | (15.3)% | 47.3% | 55.0% | (7.7%) |
| Consulting | 827.0 | 695.5 | 18.9% | 24.5% | 20.3% | 4.2% |
|  | 2,425.8 | 2,583.5 | (6.1)% | 71.8% | 75.3% | (3.5%) |
| Federal Government | 950.7 | 847.2 | 12.2% | 28.2% | 24.7% | 3.5% |
| Consolidated | $3,376.5 | $3,430.7 | (1.6)% | 100.0% | 100.0% |  |

Commercial Segment revenues (71.8 percent of total revenues) were down 6.1 percent year-over-year and included $53.6 million of revenues from the GlideFast business through its acquisition date anniversary, which was at the beginning of July 2023. From an industry vertical perspective: Consumer and Industrial and Healthcare verticals saw low single-digit revenue increases year-over-year. Financial services saw low single-digit revenue decline year-over-year. TMT and Business and Government Services saw double-digit declines year-over-year. Federal Government Segment revenues (28.2 percent of total revenues), the sixth industry vertical, were up 12.2 percent year-over-year and included $74.3 million from Iron Vine, which was acquired in October 2022.

Total IT consulting services revenues were $1.78 billion (52.6 percent of total revenues), up 15.2 percent year-over-year. Federal Government Segment revenues, which are all consulting revenues, were $950.7 million, up 12.2 percent year-over-year as stated above, and Commercial Segment consulting revenues were $827.0 million, up 18.9 percent year-over-year. The growth in IT consulting services revenues was offset by a 15.3 percent year-over-year decline in assignment revenues which totaled $1.60 billion (47.4 percent of total revenues), reflecting continued softness in the more discretionary and cyclical portions of the Commercial Segment business. On a same Billable Day basis, adjusting for 1.75 fewer Billable Days in the first nine months of 2023 compared to the same period in 2022, assignment revenues declined 14.5 percent.

### Gross Profit and Gross Margin

The table below shows gross profit and gross margin by segment for the nine months ended September 30, 2023 and 2022 (in millions).

|  | Gross Profit 2023 | 2022 | Change | Gross Margin 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial | $777.5 | $852.1 | (8.8%) | 32.1% | 33.0% | (0.9%) |
| Federal Government | 197.6 | 177.4 | 11.4% | 20.8% | 20.9% | (0.1%) |
| Consolidated | $975.1 | $1,029.5 | (5.3%) | 28.9% | 30.0% | (1.1%) |

Consolidated gross profit declined 5.3 percent on revenue decline of 1.6 percent. Gross margin was 28.9 percent, a compression of 110 basis points over the first nine months of 2022. The compression mainly related to business mix: (i) within the Commercial Segment, a lower mix of certain high-margin assignment revenues, namely, creative digital marketing and permanent placement revenues, which was partially offset by a higher mix of high-margin IT consulting revenues with a year-over-year expansion in margin, and (ii) a higher mix of revenues from the Federal Government Segment, which have a lower gross margin than commercial revenues.

### Selling, General and Administrative Expenses

SG&A expenses were $640.6 million (19.0 percent of revenues), compared with $665.1 million (19.4 percent of revenues) in the first nine months of 2022. This improvement was primarily due to lower incentive compensation expense.

### Amortization of Intangible Assets

Amortization of intangible assets was $53.8 million, up from $45.3 million in the first nine months of 2022. This increase reflects amortization expense related to businesses acquired in the second half of last year.

### Interest Expense

Interest expense was $49.7 million up from $31.5 million in 2022, primarily as a result of higher interest rates on the senior secured credit facility, and also included $2.3 million of costs related to the August 2023 amendments to the senior secured credit facility. The weighted-average outstanding borrowings and cash-based interest rate in the first nine months of 2023 and 2022 were $1.1 billion and 5.8 percent (excluding costs related to aforementioned amendments), and $1.0 billion and 3.8 percent, respectively.

### Provision for Income Taxes

The provision for income taxes was $62.0 million, down from $76.3 million in the first nine months of 2022 due to lower income before income taxes. The effective tax rate was 26.8 percent, up from 26.5 percent in the first nine months of 2022.

### Income from Continuing Operations

Income from continuing operations was $169.0 million, down from $211.3 million in the first nine months of 2022.

### Income from Discontinued Operations

Income from discontinued operations was $1.2 million in the first nine months of 2022.

### Net Income

Net income of $169.0 million, down from $212.5 million in the first nine months of 2022.

### Commercial Segment - Consulting Metrics

Commercial consulting bookings are the value of new contracts entered into during a specified period, including adjustments for the effects of changes in contract scope and contract terminations ("Bookings"). The underlying contracts are terminable by the client on short notice with little or no termination penalties. The book-to-bill ratio for our commercial consulting revenues is the ratio of Bookings to commercial consulting revenues for a specified period. The average duration of commercial consulting projects is one year.

*(Dollars in millions)*

|  | Three Months Ended September 30, 2023 | 2022 | Trailing-Twelve-Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Bookings | $291.0 | $254.3 | $1,340.0 | $1,117.3 |
| Book-to-Bill Ratio | 1.1 to 1 | 0.9 to 1 | 1.2 to 1 | 1.3 to 1 |

### Federal Government Segment Metrics

Contract backlog for our Federal Government Segment represents the estimated amount of future revenues to be recognized under awarded contracts, including task orders and options, at a point in time ("Contract Backlog"). These estimates are subject to change and may be affected by the execution of new contracts, the extension or early termination of existing contracts, the non-renewal or completion of current contracts and adjustments to estimates for previously included contracts. The timing of the execution of new contracts and other changes are affected by the funding cycles of the government and can vary from quarter to quarter. New contract awards are the estimated amount of future revenues to be recognized under contracts awarded during a specified period, including adjustments to estimates for contracts awarded in previous periods (“New Contract Awards”). Due to variability, New Contract Awards are presented on a trailing-twelve-months (“TTM”) basis. The book-to-bill ratio for our Federal Government Segment is the ratio of New Contract Awards to revenues for a specified period. Contract backlog coverage ratio is calculated as total Contract Backlog divided by TTM revenues.

*(Dollars in millions)*

|  | TTM Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| New Contract Awards | $1,080.8 | $1,089.6 |
| Book-to-Bill Ratio | 0.9 to 1 | 1.0 to 1 |

15

*(Dollars in millions)*

|  | September 30, 2023 | December 31, 2022 | September 30, 2022 |
| --- | ---: | ---: | ---: |
| Funded Contract Backlog | $701.0 | $582.3 | $548.0 |
| Negotiated Unfunded Contract Backlog | 2,577.8 | 2,681.2 | 2,564.6 |
| Contract Backlog | $3,278.8 | $3,263.5 | $3,112.6 |
| Contract Backlog Coverage Ratio | 2.6 to 1 | 2.9 to 1 | 2.8 to 1 |

### Liquidity and Capital Resources

Our working capital, which is current assets less current liabilities, at September 30, 2023 was $550.7 million, and our cash and cash equivalents were $145.6 million. Our cash flows from operating activities have been our primary source of liquidity and have been sufficient to meet our working capital and capital expenditure needs. At September 30, 2023, we had full availability under the $500.0 million revolving credit facility. We believe that our cash and cash equivalents on hand, expected operating cash flows and availability under our revolving credit facility will be sufficient to fulfill our obligations, working capital requirements and capital expenditures for the next 12 months.

Net cash provided by operating activities was $340.5 million for the first nine months of 2023, compared with $232.5 million in the same period of 2022. Net cash provided by operating activities before changes in operating assets and liabilities was $286.6 million, compared with $320.0 million in the same period of 2022. Changes in operating assets and liabilities resulted in net cash generation of $53.9 million, compared with net cash usage of $87.5 million in the same period of 2022. This year-over-year change primarily related to lower accounts receivable due to decreasing revenues in the first nine months of 2023 as well as improvement in accounts receivable days sales outstanding ("DSO"), compared with the same period of 2022 which had increasing accounts receivable due to revenue growth as well as an increase in DSO.

Net cash used in investing activities was $33.3 million for the first nine months of 2023 and was primarily comprised of $32.7 million for capital expenditures. Net cash used in investing activities in the first nine months of the prior year was $366.6 million and included $351.8 million for the acquisition of GlideFast and $27.0 million for capital expenditures, partially offset by $9.8 million from the sale of a business.

Net cash used in financing activities was $231.6 million for the first nine months of 2023 and included $197.7 million to repurchase the Company's common stock, net repayments of borrowings under the revolving credit facility totaling $31.5 million, and the effects of the August 2023 amendments to the Company's senior secured credit facility which generated net proceeds of $8.0 million that were offset by related amendment costs. Net cash used in financing activities in the first nine months of the prior year was $183.7 million and was primarily comprised of $227.6 million for stock repurchases, partially offset by $46.0 million of borrowings under the revolving credit facility.

For details on the Company’s senior secured credit facility, comprised of a revolving credit facility and term loan B, and unsecured senior notes, see *Note 3. Long-Term Debt* in Part I Item 1.

### Recent Accounting Pronouncements

There have been no recent accounting pronouncements that significantly impact the Company.

### Critical Accounting Policies

There were no significant changes to our critical accounting policies and estimates during the third quarter of 2023 compared with those disclosed in *Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations* of our 2022 10-K.

### Commitments

There were no material changes to the significant commitments or contractual obligations that were disclosed in our 2022 10-K.

## Market risk

As filed, 402 characters.

With respect to our quantitative and qualitative disclosures about interest rates risks, there have been no material changes to the information included in our 2022 10-K. A hypothetical 100 basis-point change in interest rates on variable-rate debt would have resulted in an interest expense fluctuation of approximately $5.0 million based on $500.0 million of debt outstanding for any 12-month period.

## Controls and procedures

As filed, 1,510 characters.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on this evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report. The term "disclosure controls and procedures" means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within required time periods. We have established disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal controls over financial reporting that occurred during the three months ended September 30, 2023 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000890564-23-000020. Last ingested by Listed: Oct 31, 2026, 12:55 ET. No prices; not investment advice.