ASGN 2026 Q3 Earnings Call

Good afternoon. Thank you for joining us today for Everforth's third quarter 2026 conference call. With me are Ted Hanson, Chief Executive Officer, Shiv Iyer, President, and Marie Perry, Chief Financial Officer. Before we get started, I would like to remind everyone that our commentary contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties, and as such, our actual results could differ materially from those statements. Certain of these risks and uncertainties are described in today's press release and in our SEC filings. We do not assume any obligation to update statements made on this call. For your convenience, our prepared remarks and supplemental materials can be found in the investor relations section of our website at investors.everforth.com.

Please also note that on this call, we will be referencing certain non-GAAP measures such as adjusted EBITDA, adjusted net income, and free cash flow. These non-GAAP measures are intended to supplement the comparable GAAP measures. Reconciliations between GAAP and non-GAAP measures are included in today's press release. I will now turn the call over to Ted Hanson, Chief Executive Officer.

Thank you, Kim. Thank you for joining Everforth's third quarter 2026 earnings call. Our third quarter results demonstrated continued momentum. Revenues of $1.03 billion and adjusted EBITDA of $106.3 million surpassed the high end of our guidance, while adjusted EBITDA margin of 10.3% was at the top end of our guidance range. Commercial segment revenue growth reflected sustained customer investment in AI, IT modernization, and cloud transformation services. Strength in our data and AI, security and risk, and enterprise platform solutions helped drive a commercial consulting book-to-bill of 1.1x on a trailing 12-month basis. In our federal government segment, new contract awards totaled $584.4 million, representing a book-to-bill of 1.9x for the quarter and 0.9x on a trailing 12-month basis.

Strength in federal bookings for the quarter reflected planned awards and extensions, indicating continued demand for our services. Federal contract backlog was approximately $2.9 billion at quarter end or a coverage ratio of 2.5 times trailing 12-month revenues, with particular strength across AI and data, cybersecurity, cloud, and mission modernization. Shiv will discuss our performance and recent customer wins in more detail shortly. With that context, I want to focus on two themes shaping enterprise technology investment and strengthening Everforth's position in the market. First, AI investments remain significant, but its focus is evolving. Enterprises are moving beyond experimentation to scale deployment, but much of the investment to date has centered on the infrastructure, platforms, and software required to support that growth. We have consistently believed that enterprise software platforms would become a primary channel for deploying AI across the enterprise.

That is increasingly what we are seeing. AI is not replacing these platforms, it's expanding their role as AI becomes embedded into ERP, CRM, and workflow environments. This is important for Everforth. Our partnerships with Workday, Salesforce, ServiceNow, and other technology leaders provides us with platform expertise required to move these AI-enabled technologies into production. Our implementation track record has earned us the opportunity to serve as forward deployed partners with early access to new capabilities that we can bring into customer environments. We're an official member of the Salesforce Forward Deployed Engineering Partner Network, and among the first Workday partners to be certified to implement Paradox and HiredScore, Workday's unified AI-powered talent acquisition platform. As these platforms evolve, we are positioned to help customers turn these new AI-enabled capabilities into practical business outcomes. Second, scaling AI requires more than technology itself.

Infrastructure and software are only part of the investment. Successful deployment also requires data integration, security, governance, change management, and the right operating processes. In other words, AI is not only a technology investment, it's part of a broader business transformation. That is where IT services become increasingly important. Moving from pilots to scale deployment introduces challenges around cost, governance, and security that require both technology and execution expertise. According to ISG, more than 60% of enterprise customers surveyed measured AI success by cost savings generated, while nearly 80% identified centralized governance and cybersecurity as the best way to manage costs. We are seeing the same priorities amongst our customers.

Our security and risk bookings are up over 40% year to date compared to the first nine months of 2025, while our security and risk pipeline has increased in the mid-teens since the end of the third quarter. Agentic AI illustrates why these capabilities matter. As agents access data and execute tasks autonomously, they must be governed and monitored. Technology providers, including Microsoft and AWS, are developing capabilities to address these emerging cybersecurity needs, but the market is still developing. Everforth helps clients assess, select, and implement the best-suited technologies for their environments, which is particularly important in AI governance, where no single technology addresses every security requirement. We are also investing in governance as a service for highly regulated industries like healthcare and financial services, and bringing together capabilities across Everforth under a unified set of offerings supported by our proprietary assets and accelerators.

For example, our teams developed a repeatable platform called our Enclave Factory for rapidly deploying secure, compliant environments across classified and unclassified networks. Our Enterprise Security Operations Center, or SOC, developed an AI-driven security triage capability that helps reduce false alarms and prioritize high-risk concerns. Through our Everforth AI Studio, we built an AI-driven regulatory change management and compliance platform that enables financial institutions to continuously monitor evolving regulations and streamline their compliance workflows. Our view remains clear. Enterprise AI is advancing, but many of the hardest implementation challenges are still ahead. As customers move from experimentation to production and scale, they need partners that understand their tech environments, industries, governance, and security requirements. Everforth is well-positioned to bring those capabilities together and help customers successfully navigate the next phase of enterprise AI adoption.

With that, I'll turn the call over to Shiv to discuss our industry performance and how we're applying these capabilities across our customer base.

Thanks, Ted, and good afternoon, everyone. Let's begin with our commercial industry performance. Sequential growth for the segment was led by TMT and business services verticals, both up high single digits from the second quarter, while the consumer and industrial financial services and healthcare verticals remained relatively stable. TMT benefited from strong double-digit growth in the software and interactive sub-industry, driven by work with the frontier AI labs and hyperscalers. The business services vertical benefited from expanded work in the aerospace and defense and professional services sub-industries. Year over year, TMT and business services grew mid-teens and high single digits, respectively. Within the consumer and industrial verticals, we achieved high teens growth among utilities customers, including growth in our work with large regional and national energy providers.

In the financial services industry, insurance accounts grew high single digits, driven by contracts with global carriers, while diversified financials grew low double digits with growth amongst our investment management accounts. Turning to federal, national security drove the segment's growth with strong double-digit revenue improvement year over year and mid-single-digit growth sequentially. Strength in national security was primarily driven by our cybersecurity contracts with the Department of Homeland Security and the Cybersecurity and Infrastructure Security Agency, CISA. We also saw solid growth among civilian agencies with technology infrastructure work for the Department of Veterans Affairs and managed cybersecurity work for the Centers for Medicare and Medicaid Services. Building on that performance, I'd like to turn to our solutions portfolio. As Ted highlighted, the infrastructure required to scale AI securely and responsibly remains a significant driver of demand. But customers are looking for more than standalone technology support.

They are turning to Everforth to bring together our AI and data cybersecurity, cloud, and engineering expertise to solve their complex operational challenges. As I highlighted last quarter, we are engaged in data center services across the world's four largest hyperscalers, and the pace of that work continues to accelerate. Our hyperscaler customers consistently identify people, power, and equipment as the three factors limiting AI build-out. The people constraint plays directly to Everforth's strengths. We can quickly assemble specialized teams across data, AI, and digital engineering and deploy them at scale to bring critical infrastructure online on time. As an example, we recently secured a multi-year data center contract in a highly competitive labor market and assembled the engineering team in a matter of a few weeks.

Our professionals are playing a critical role in this hyperscaler's infrastructure build-out, helping bring new AI capacity online while demonstrating Everforth's differentiated combination of expertise and agility. Speaking of our agility, Everforth increasingly operates across the full AI technology stack, from the foundational infrastructure through applications. We are also growing our capabilities in physical AI, and our hyperscaler work now extends to robotics. As a strategic supplier across the full program life cycle, our engineers are helping a global hyperscaler install, commission, and bring its robotic systems into production across North America and Europe. We apply that same AI and engineering expertise in secure government environments. For the Department of War, we are building secure data platforms and applications to operationalize AI and autonomous capabilities. Under our recent SUNet expansion, we are supporting the Department of War's existing secure environment while advancing the SUNet 2.0 platform for AI and machine learning development.