Good afternoon. Thank you for joining us today for ASGN's Fourth Quarter and Full Year 2023 Conference Call.

With me are Ted Hanson, Chief Executive Officer; Rand Blazer, 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 uncertainty. 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 these 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.asgn.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, and thank you for joining ASGN's fourth quarter and full-year 2023 earnings call. ASGN achieved solid results in the fourth quarter with revenues, gross margin and adjusted EBITDA margin all at the top end of or above our guidance ranges.

During 2023, revenues totaled approximately $4.5 billion, of which $2.4 billion was in commercial and government IT consulting work. Highlights of our annual performance, commercial consulting revenues reached a new high-water mark, surpassing $1 billion.

From a profitability perspective, ongoing expense management, along with our business stabilizers contributed to an adjusted EBITDA margin of 11.6% for the year. With that as background on our results, I'd like to highlight a few key themes to keep in mind as we review our segment performance.

To start, 2023 was the first time we tested our current revenue mix and operating model in a difficult economy. Today's business is not the same as during the Great Financial Crisis or the pandemic.

Therefore, we had yet to witness our current operations and an economic slowdown. However, as evidenced by our full year results, I can confidently say that ASGN made solid progress despite macro challenges.

Our unique go-to-market strategy and variable cost structure supported the business and our margins throughout the year. Second, not only do we demonstrate that our operating model works, but we also showed that we have the right mix of businesses.

Our federal government services providing countercyclical support to balance out our five diverse commercial industry verticals. Third, our long-standing, trusted client relationships drove the growth of our IT consulting revenues.

And in the fourth quarter, we officially surpassed 55% of consolidated revenues in IT consulting, a full year ahead of our target. These achievements resulted from proactive efforts to strategically shape and purposely build a business that can perform well throughout market cycles.

Our federal government services offered countercyclical balance to our more cyclical commercial businesses. These cyclical commercial businesses, while leading indicators on the downside, have historically seen more sustained rallies as the economy improves.

Importantly, we are evolving our revenue mix, leaving our way up the pyramid to provide higher end, higher value IT consulting work that is typically longer in duration and provides us with greater visibility and margin potential. I am certain that our operating model is well positioned as IT services demand recovers.

With these themes in mind, let's turn to our segment performance, beginning with our largest segment by revenue, Commercial. Our Commercial Segment services large enterprises and Fortune 1000 companies across five diverse industry verticals.

Commercial Segment revenues for the quarter declined by low teens year-over-year. Revenues for this segment benefitted from growth in our consulting business, offset by double-digit declines in the more cyclical areas of our assignment business.

Commercial consulting revenues increased roughly 2% for the quarter, compared to the year ago period, solid growth given the macro challenges and a difficult year-over-year comparison. Favorable commercial consulting bookings of approximately $312 million translated to a book-to-bill of 1.2x on a trailing 12-month basis.

Another positive, we continue to add new Fortune 1000 clients through our consulting roster. Beyond new work, client retention rates on existing contracts remain strong, and customers are engaging our teams on longer consulting projects.

Similar to the third quarter, we saw bookings weighted slightly more towards renewals than new work opportunities. As we enter the first quarter of 2024, many of our clients remain deliberate in their IT investments for the year that their spending on certain consulting contracts remain extended.

Nevertheless, the growth in our bookings during the fourth quarter clearly indicates that our clients continue to recognize the value of ASGN’s services. Our teams and operating model are well positioned to support our clients' IT roadmaps as they ramp up their spend.

Turning to our vertical performance. All five commercial industry verticals declined year-over-year.

That said, we saw sequential growth on a billable-day adjusted basis in two verticals, Consumer & Industrial and TMT, and relatively simply flat sequential performance on a billable-day adjusted basis in the Healthcare vertical. Sequential improvements in sub-verticals included Utilities, Consumer Discretionary, Healthcare Providers, Telecom, Media, E-Commerce, and Software and Services accounts.

Our commercial bookings remained solid, with work won across multiple service areas. Our pipeline of AI work continues to grow as our clients focus on data preparation, developing use cases and implementing their AI platforms.

As such, we continue to hire subject manner experts, train our current teams and develop AI accelerator programs, each with our customer needs in mind. For example, Apex Systems’ Application Development Team is leveraging our partnership with Microsoft to upscale our developers to become even more productive for our clients.

Microsoft technology, in another example, enabled us to significantly shorten new code generation timelines for an automotive and aerospace parts manufacturer. In another instance, with the help of Microsoft CoPilot, our team substantially reduced data review time at a digital health services provider.

In addition to Microsoft, Apex Systems is collaborating with several other companies’ generative AI technologies. Leveraging both Salesforce and ServiceNow's generative AI technologies, we've been able to gain a holistic view of our customers' IT journeys to refine their AI roadmaps, automate solutions and build personalized data-driven marketing campaigns and IT schedules with improved productivity.

Our team of data scientists, engineers, developers and technical project managers, have also used the combination of Microsoft Azure, Databricks and Snowflake to help a Fortune 50 telecom company with personalization, predictive modeling and increased revenue generation for its mass marketing campaigns. With AI gaining traction, cybersecurity needs are also increasing.

In the fourth quarter, we worked with a Fortune 25 healthcare insurer to mitigate cybersecurity risk associated with its newly acquired entities. We partnered closely with our clients' IT integration team to rapidly assess and remediate over 1,000 vulnerabilities in cloud platforms ahead of their planned integration timeline.

By leveraging our deep expertise in Amazon Web Services, Microsoft Azure and hybrid could environments, we meaningfully reduced our clients' regulatory compliance and data breach risk during this critical transaction period. We've also integrated our public sector cybersecurity DNA to help grow our commercial work.

Our professionals at ECS have developed proprietary methods for intelligence gathering, security instrumentation, and incident response, each of which has been battle-tested by the Department of Defense and is now being leveraged by our commercial clients. We believe that our combined credentials, expertise, and past qualifications will continue to drive our cybersecurity efforts across our Fortune 1000 client list Speaking of our public sector services, let's now turn to our Federal Government Segment, our sixth industry vertical, which provides mission-critical solutions to the Department of Defense, the intelligence community, and federal civilian agencies.

Federal Segment revenues for the fourth quarter were up 9.2% year-over-year. Contract backlog was $3 billion at the end of the quarter, or a healthy coverage ratio of 2.4x the segment's trailing twelve-month revenues.

New awards were approximately $56 million, translating to a book-to-bill of 0.8x on a trailing twelve-month basis. Bookings this past quarter were soft due to a combination of traditional seasonality and greater-than-anticipated award deferrals into the first half of 2024.

Our pipeline, as well as bids submitted and awaiting award, are each near the highest levels they have ever been. The lower bookings in Q4 resulted from a timing issue rather than lost work opportunities, and we already see a pickup in contract activity in the New Year.

We expect stronger bookings in the first half of 2024. In the fourth quarter, bookings were led by work with the U.S.

Intelligence Community and several civilian agencies. For example, we continue to manage the FBI's Cybersecurity Red and Blue Program and in Q4 we won additional work under this contract.

This mission-based work is designed to secure and monitor the FBI networks from external threats and internal vulnerabilities. In addition to work booked in the fourth quarter, ECS also announced two large multiple-award IDIQ contracts this past November that allow our government team to bid on new work in the future.

With the Veterans Affairs Office of Information and Technology, we won a $60.7 billion prime IDIQ contract. ECS has partnered with the VA since 2009, but this is the first time we won a prime contract with this office.

Under this contract, ECS will provide a full range of IT services, including technical support, project management, strategy planning, systems/software engineering, enterprise networking, and cybersecurity, amongst other services. Task orders under this IDIQ are expected to come out in the third quarter of this year and be awarded in the fourth quarter We also won a $1.25 billion prime IDIQ contract with the Defense Advanced Research Projects Agency, DARPA, to provide technical, analytical, and program support.

An agency of the U.S. Department of Defense, DARPA’s mission is to develop breakthrough technologies for national security, by working with partners inside and outside the federal government.

ECS has been a well-respected partner of DARPA for more than 30 years, and in 2018, was one of seven awardees on a $850 million IDIQ. Success under this previous contract helped lead us to our award under this new, larger prime contract.

With that, I'll now turn the call over to Marie to discuss the fourth quarter results and our first quarter 2024 guidance.

Thanks, Ted. It's great to speak with everyone this afternoon.

As Ted noted, revenue exceeded our expectations for the quarter. Fourth quarter revenues of $1.1 billion were above the top end of our guidance range due to continued commercial contract engagement during the holiday season, growth in our commercial consulting business, and continued strength in our Federal Government Segment Revenues from the Commercial Segment were $748.6 million, down 12.2% compared to the prior-year quarter.

Revenues from commercial consulting, the largest of our high-margin revenue streams, totaled $268.5 million, up 1.7% year-over-year despite difficult market conditions and a tough comparison of 37.8% growth in the fourth quarter of 2022. For the full year, commercial consulting revenues improved 14.2% on an as-reported basis and improved 8.6% organically.

With this solid growth in our commercial consulting revenues for the year, we reached over $1 billion in commercial consulting revenues in 2023, as Ted previously noted. Growth in commercial consulting revenues was offset by an 18.4% year-over-year decline in assignment revenues, reflecting continued softness in the more cyclical parts of our businesses.

For the full year, assignment revenues declined 16.0% compared to 2022. Revenues from our Federal Government Segment were $325.5 million, up 9.2% year-over-year.

For the full year, Federal Government Segment revenues improved by 11.4% on an as-reported basis, or 4.9% organically. Turning to margins.

On a consolidated basis, gross margin was 28.4%, down 120 basis points over the fourth quarter of last year. The year-over-year compression in gross margin was largely related to business mix, including a lower mix of certain high-margin revenues within our Commercial Segment and a higher mix of lower-margin revenues from our Federal Government Segment.

Gross margin for the Commercial Segment was 32.1%, down 10 basis points year-over-year primarily due to the lower mix of certain high-margin assignment revenue streams, namely creative digital marketing and permanent placement revenues, mostly offset by a higher mix of high-margin IT consulting revenues. Gross margin for the Federal Government Segment was 19.9%, down 220 basis points year-over-year due to a higher mix of lower margin licensing revenues.

SG&A expenses for the fourth quarter were $203.6 million, or 19% of revenues, compared to $229.9 million, or 20% of revenues, in the prior year. This improvement was mainly due to lower incentive compensation expenses.

SG&A expenses also included $1.6 million in acquisition, integration, and strategic planning expenses that were not included in our guidance estimates. As expected, interest expense increased year-over-year related to rising interest rates and our refinancing this past August.

Net income was $50.3 million, adjusted EBITDA was $121 million, and adjusted EBITDA margin was 11.3%. At quarter end, cash and cash equivalents were $175.9 million, and we had full availability under our new $500 million senior secured revolver.

Free cash flow for the quarter was $109.2 million, an increase of 68.5% year-over-year. We deployed $75.4 million in cash on the repurchase of approximately 872,000 shares during the fourth quarter at an attractive average price of $86.37.

For the full year, free cash flow totaled $417 million, an increase of 54.3% year-over-year. We deployed $273.1 million in cash in 2023 on the repurchase of 3.4 million shares at an average price of $79.89.

We have roughly $273.7 million remaining under our share repurchase authorization. With strong free cash flow generation and full availability under our revolver, we have ample dry powder to make strategic acquisitions once the M&A market improves.

Turning to guidance. Our financial estimates for the first quarter of 2024 are set forth in our earnings release and supplemental materials.

These estimates are based on current market conditions. Our estimates assume 62.75 Billable Days in the first quarter, 0.25 Billable Days fewer than the year-ago period and 2.75 Billable Days more than Q4 of 2023.

Guidance also considers seasonality, with the first quarter traditionally the lowest of the year. It is also important to remember that the payroll tax reset occurs at the beginning of every calendar year, having approximately 100 basis points of downward impact on adjusted EBITDA margins as we move from the fourth to the first quarter.

We expect market conditions to remain challenging in the first quarter. In our Commercial Segment, we anticipate revenues will remain soft across assignment and consulting.

Declines in commercial revenues are expected to be partially offset by continued growth in our Federal Government Segment. We expect gross margins to decline year-over-year due to a business mix similar to current trends, including a greater mix of federal government revenues and continued softness in our more cyclical commercial businesses.

Our cash SG&A margin will remain relatively consistent year-over-year. In lieu of M&A, we expect to continue to allocate our free cash flow toward share repurchase.

With this background, we are estimating revenues of $1.032 billion to $1.052 billion for the first quarter. We are estimating net income of $37.7 million to $41.3 million, adjusted EBITDA of $104.5 million to $109.5 million, and adjusted EBITDA margin of 10.1% to 10.4%.

Thank you; I'll now turn the call back to Ted for some closing remarks.

Thanks, Marie. While we are positive about the future, all signs indicate continued softness in the near term.

However, a difficult market does not mean we've taken a backseat to our client relationships. Rather, as is evident in our resilient financial performance this past year, we've worked ever harder, proactively staying close to each of our clients and continuing to hold regular strategic discussions about their IT roadmaps.

I cannot thank our teams enough for your hard work these past twelve months. Each and every one of you has helped position ASGN as an IT industry leader, continuing to develop yourselves and our service offerings so that we are primed to support our clients' ongoing digital transformation needs.

And while certain IT projects have naturally been pushed to the right, they are not completely off the table. The need for IT services will be strong, and ASGN is one of the fastest ways for our clients to ramp up their investments and reengage more fully in their IT roadmaps.

Our domestic footprint is as solid as it has ever been, and now, with our nearshore capabilities in Mexico also of scale, we are able to provide a deep talent pool that is highly skilled and competitively priced across multiple geographies. As I highlighted at the start of today's call, ASGN's business today is the result of several years of thoughtful and proactive planning.

We've shaped our service offerings and business segments to reflect increasing IT demand, and our competitive industry position and differentiated go-to-market strategy are aligned with our clients' needs. We will focus our efforts in 2024 on further strengthening our IT consulting capabilities, taking advantage of opportunities as we pursue higher-end, higher-value projects that drive our clients' IT efforts and position ASGN for success.

Thank you again for joining our fourth quarter and full year 2023 call. Operator, please open the call to questions.

I'm wondering if you can give us any additional information on how demand and revenue -- the cadence of that from October through January here and what you've seen?

Maggie, this is Ted. Thanks for the question.

I would say demand throughout the fourth quarter, you said October through January was pretty steady. We had program maybe for a little softer last couple of weeks in the firm of furloughs or slowing in spending.

And I would say that for the most part, it hung together better than we thought. And therefore, we were a little bit ahead of our number.

Not a whole lot other than that. I think the quarter was a similar demand quarter to the third quarter.

And as you can see in our guidance, then -- although seasonally, it's a little slower start always in the first quarter, we're predicting about the same based on what we can see right now.

Got it. And then, Marie, I think in your prepared remarks, you mentioned some of the gross margin impacts from the mix within the Commercial segment, in particular.

What surprised you about that mix? And what is your outlook for how mix may impact margins over the coming quarters here?

Maggie, a couple of things as it relates to mix. And so there are some things that will definitely kind of carry forward from what we saw in the fourth quarter to the first quarter.

The first is really the higher government segment, which has a lower mix than the Commercial. And so with the countercyclical aspect of the government, we are just seeing that.

And then on the commercial side, we've just highlighted especially those discretionary areas just softer from a margin perspective.

Market demand is softer in some of those areas. And the creative digital marketing in the perm.

But yes, I would highlight what Marie said, it’s mostly being driven by higher-than-expected growth in the federal segment, and you’ll see that in the first quarter.

You cited a couple of verticals. I think it was Commercial, Industrial and TMT segments.

I might have gotten those wrong, but forgive me. That saw sequential growth on a billable-day base, still a day adjusted basis.

What's going on in those markets that are different from some of the other verticals that you're seeing?

Yes. Rand, do you want to take that one?

Yes. Well, I think, first of all, if you look within those sectors, Jeff, and you see what comprises them, for example, utilities and energies remain strong and grew sequentially in that quarter.

We actually had 12 of our sectors growing mostly in the consumer industrial and the TMT area. Healthcare also kind of held its own, particularly in the provider space.

So I think when you look further below just the general industry and you look at specific areas, which we've enumerated some in the text, you can see that those sectors are fairly healthy and continuing to move along. And it was nice to see more of them grow in the fourth quarter sequentially over the third quarter than we saw in previous quarter.

Okay. That's helpful.

And I can move on to the federal government sector, you talked about some projects or some timing of starts being deferred, and hopefully, you're not going to catch up on those. But I'm just curious, as we go through the rest of the year, considering it is an election year, with all the uncertainty going down in Washington, do you think that kind of mindset will continue?

Should we expect those kinds of deferrals and delays in the rest of the year?

Well, I think on the one hand, the administration would like to get as much out on the street to say possible to good job. On the other hand, they're dealing with a continuing resolution.

And to the extent they continue to deal with that, we'll continue to perform on the work that we have. But some of the bigger decisions on new work may be delayed.

And I think we saw the start of that year in the fourth quarter. So as we said in our remarks, it wasn't an issue of loss work, our submitted waiting awards as a part of our pipeline is as high as it's ever been, but we're going to see most of those things adjudicated, we hope in the first two quarters here, some of those that do not get decided on in the fourth.

Within the Commercial consulting area, you did say that renewals running better, more than 50% of new business. But -- is that the same as the recent quarter or two?

Or is the mix closer to parity there with new business growing a little bit better than it had three or six months ago?

Rand, it's pretty much the same as the previous quarter, right?

That's correct. It was a little bit more.

It's always been in balance between 60-40 and 40-60. And maybe earlier in the year '23, there was a little bit of new work, which probably is typical of the beginning of a business cycle, but for the year.

But yes, it was consistent with Q3.

Project sizes having any variance in there? 18 months ago, you saw project size coming down, maybe as customers were piecemealing out projects rather than doing it out all at once.

Any changes that you perceive?

I would say project size is still on a slight upward trend. How much elongating the spend that is stretching out the project a bit has started at the end of last year and the last couple of quarters and continued through the fourth quarter.

So yes, the project size, they're certainly fine. In fact, I think Ted mentioned in the AI side, we won some work in the third quarter.

We won some work in the fourth quarter, and we're looking at some larger projects in AI is what I call the -- you move up the totem pole from looking at -- we have now processing power with chip technology. We have the apps embedding AI into their apps.

You have a lot of data migration and cloud building infrastructure going on. Tobey, now we see more data prep, use cases and building algorithms.

So we're getting closer to closer to real insertion of AI into our clients' business areas. And the more work in the data prep area and use cases in the execution of use cases, the more we're going to see work.

Okay. And I want to kind of double-click on the government ECS business.

Your treasury outlays have actually been good and several of the larger focused companies on that, that trade publicly had substantially better book-to-bills and underlying contracting trends than you're seeing. How do I square the discrepacy between the performance here and what we've seen from a broader lens?

Tobey, I think we haven't detailed the government peers release, but for some of the ones that we track, they are seasonally below one like we are for Q4. I think it’s the vagary of what are we bidding on versus what are they bidding on and where our relationships versus theirs.

But I take a lot of confidence in the size of our submitted weighting award number and in places where we have real relationships. And so while we might have been a little closer to one in a typical quarter.

We still would have been below it in our fourth quarter. So we’re positive about the things that we have out there and that we’re waiting to be adjudicated and we’ll have to see how they go here in the first quarter and into the second.

I just -- maybe we just start on the assignment side and looking at maybe green shoots or if it's a little early for that, on a sequential basis. I know it's a leading indicator, maybe some more commentary there what you're seeing on assignment across verticals and the like?

And then I have some follow-ups.

So Joe, I think that I'll start and Rand can chip in here. I wouldn't say there are green shoots there.

They're steadiness, if you will. So -- we can see that in a couple of ways when we see our order flow and then we can index that against industry performance.

As Rand mentioned it earlier, we now have two industries that are growing sequentially on an adjusted basis and one that's flat. So that's an improvement from 9 out of 5, but we need more than just 2.

So I would say steady, not green shoots, and we'll have to see how this quarter develops. I mean it's typically in the assignment part of the business.

You come across seasonally at a slightly lower level coming out of Q4 and into Q1, and that's what we saw. And it's about what we saw in the prior year.

So I'd say really no difference there. And then you spend the first quarter kind of reclaiming ground, if you will, as clients release budgets and begin to spend.

And so that's kind of what we're monitoring here as we go. Rand, would you add anything else to that?

Well, Ted, and Joe, let me just comment. In consulting, we see green shoots because there's discussion with clients about their roadmaps, about what the next projects are.

There's some process leading up to release of an RFP, if you will, or a piece of work that we can bid on and go ahead and potentially win. In the staffing assignment side of the business, it's a very quick transaction type environment.

So clients are sitting there with requirements that they will, once budgets are approved and once they get the green light from corporate, if you will, they'll release requirements. And boom, we'll see RFP flow, much different than we've seen for the past year.

So it's more transactional and more quick based. Green shoots really come from where we can see a buildup of thought and proactive working toward an end, if that helps at all, Joe, in your question.

Certainly, perm placement part of time revenue is going to be -- nobody is going to do anything until corporate gives the go ahead, right, and says we can hire internal people.

Sure. That's great color.

And then -- maybe we just drill down a little bit on Mexico delivery center. And obviously, digital transformation can't stand still because the world is not standing still, and enterprises need to move forward.

And maybe some more -- any evolution in the business model and we're seeing others in services lead with lower-cost Geos and how that is maybe helping keeping consulting moving forward on an upward trajectory.

I think -- well, look, I think that's right, Joe. I mean, our clients are looking for things to either continue that are critical or things that haven't started that are critical, a way to get them done even in the face of tight budgets.

I mean they're very aware here that haven't kind of fully released things. And so they've turned to delivery opportunities like our Mexico delivery center.

We've seen full utilization plus in that center. And even here over a short time in the last few years, I mean, our headcounts there are growing by 10x.

So I think it's a really good example. Here in the U.S., you can see clients much more willing to look broadly across the U.S.

to other lower-cost markets. They're willing to get project teams that are in lower cost areas.

They don't have to have certain developers sitting right in Jersey City at a certain exorbitant price per hour, they're just thinking differently about all that stuff. So there's movement going on around that for sure.

But I would just reinforce here that clients are taking longer here to fully adjudicate their budgets and their plans for this year and then to begin to release that. But I think it's only a matter of time.

Ted, can I add something to that? If you wouldn't mind, Joe?

Yes, sure. Absolutely, Rand.

There is AI insertion in our clients' enterprise architecture. And then there's AI insertion in our own services that we have to do to stay competitive, cost competitive for our clients.

And everything Ted said is correct. We made a big investment in Mexico.

He talked about all that we've seen since we've done that and the growth of our Mexico Development Center. But we're now implementing better techniques, AI techniques with which to code in the new languages, the modern language and the large languages.

So the fact that our Mexican center is moving out in these AI adoption of these AI techniques makes us even more competitive in Mexico. And it's interesting, our clients are asking about that.

They want to talk about that and understand that, which I think is a good -- is a good sign for us that we're on the right path, not just because we have the center, but we're keeping the center up to date with the latest technologies, which makes them more efficient for our clients.

That's helpful. And then maybe I'll just sneak one more in on capital allocation.

The free cash flow is really great here, and it's great to see the share buybacks. Just wondering it feels like -- I know -- I heard Marie say that the market wasn't that good for M&A right now is it just -- are you seeing targets not really wanting to kind of sell down here?

Or what is the dynamic there? Because it feels like it might be a nice time to do some bolt-ons.

Ted, want me to take it?

So Joe, so I think that -- you're right. I mean, we would love to be allocating capital right now to strategic acquisition opportunities.

I think it's the dearth of opportunities and the real quality opportunities in the market right now. But we're -- we have a very defined shopping list, if you will.

We know what we can fulfill and invest in organically. We know what we would like to invest in inorganically to support all the things that Rand was mentioning here earlier around what our clients are thinking about.

And that’s going to take just a better flow, which means a little bit more time. And there’s all kinds of underlying reasons, whether it’s private equity still holding on tight and not quite ready to trade assets because the valuation, where the debt markets are and a whole bunch of other things.

But we would kind of remain committed here. We’re just going to be ready.

And in the meantime, we’re going to stay focused on share repurchases, which you’ve seen us do. And our Board is supporting wholeheartedly, and we’ll kind of watch and measure this out.

This is Andre on for Mark Marcon. So my first question is just a follow-up to something Rand said earlier about some of the green shoots on the consulting side.

It sounds like your clients in general have roadmaps that they want to execute on. But based on your conversations with those clients, what needs to change in the environment for them to actually unleash some of those RFPs and execute on those roadmaps?

Rand, do you want to follow-up on that?

Yes. I mean, our thesis has been ever since we've been a public company that IT spends a function of corporate earnings.

So I think when companies feel like their earnings are secure and then they have good runway ahead, they're going to spend more on IT. Ted, I think we would say our hope is that what we saw from the consumer industrial side of our sectors and the healthcare providers as well as the TMB segment that they're feeling more secure and they're going to start spending more.

We saw that sequentially. That's a small data point.

It's not conclusive. But I think it all goes back to corporate earnings and the security they feel about that.

Ted, do you want to add to that?

No, that's correct.

Makes a lot of sense. And then I guess switching over to margins.

You guys did a fantastic job at preserving your margins, even considering the mix shift. And you guys talked about your natural or automatic stabilizers, but how should we think about margins for 2024?

Should we expect them to be relatively steady as the stabilizers continue to kick in? Or is there anything to call out for the full year?

Marie?

Yes. So kind of implied in our guidance for Q1, our cash SG&A margin is about 18%.

And so as we think about the full year of 2024, that's probably a pretty good run rate, if you will, from a margin perspective.

You're doing the first quarter have the payroll tax reset, right? That's going to influence it a little higher.

But look, I mean, our SG&A margins here have been fairly consistent outside of the first quarter. So look to this year, I think they were kind of right at adjusted for below-the-line stuff, just over 17%, and you should expect about the same thing, Andre.

This is John on for Seth. Maybe if we could just talk a little bit more about TMT.

It sounds like the cyber efforts have been bearing fruit. And maybe if you could just give us some more information about kind of the cross-pollination between kind of the federal side and the commercial side with cyber and maybe what clients are looking for as we enter the new year?

Rand, do you want to talk about that?

Well, I'll start. I think the man on the street would say the federal government is probably stronger cybersecurity and protection of our systems and our data then more in the commercial segment.

If you look at the past years, there have been breaches of commercial -- big commercial companies. So I guess I'm laying the groundwork here for the federal government has great calls and great track record on cybersecurity.

Our ECS team has had great calls and great track record in cybersecurity for some very important agencies in the federal government. That's transferable to the Commercial sector.

And I think when we take our technologies over in our center over to them, it's resonating with them because of that backdrop that I just mentioned. So I would say it's simple is that, okay?

Great. And then maybe a quick follow-up on Creative Circle.

Could you just comment on any trends seen in the digital marketing space and potentially any kind of viewing outlook in terms of '24 given the election year, anything we should be cognizant of?

Rand?

It's funny. I just got off call the CMO of a company, a Fortune 1000 company a couple of hours ago.

And it was interesting to talk to him. I think, first of all, CMOs are also being held tight in their spend as a function of corporate earnings and also depending on what their market position is.

But I think that talks to the marketplace that our Creative Circle plays in. It is clear that some of the bread-and-butter kinds of things like creating or being creative is still a part of our great service.

Translating that through AI, AI allows you to mass produce it or to personalize it. And I think there are technologies there that we're well aware of that we're talking to our clients about imposing.

There's also the whole question of which channels do I use to get my message out there and to make it personal. And do I have to give it to multiple mediums for that one client.

So -- there's a lot of opportunity out there. I think they're all trying to work their way through it and understand it and figure out the best path.

I think you can see that in some of the reporting from technology companies. In some cases, the ad dollars are up.

In some cases, they’re not. The whole streaming world is changing and how they’re charging for whether you want streaming with advertisement or without advertisement.

So there is a lot going on in the marketing world that has to be digested and recalculated, if you will. And I think we’re going to see a plethora of opportunity once we get past on companies feel that they’re on a good solid footing and they can move forward.

As I said before, in consumer and utilities and in certain media companies, they’re starting to get there.

Just a big picture question here in terms of the delivery model as you continue to build up the commercial consulting part of the business. Can you maybe talk about how you're thinking about headcount growth versus the use of temporary resources in terms of delivering those projects.

And the reason I ask that is just from a competitive positioning perspective in the sense that you talked earlier about investing in kind of building out your talent pool, but if a large percentage of your delivery is not owned by you guys. How do you guys manage that?

Well, look, Surinder, first of all, we've got -- today, 600-plus feet on the street with relationships directly into these Fortune 1000 enterprises. And it's that group that have had these client relationships from the traditional IT staffing business all the way through all of the customers' IT business, including consulting.

So that doesn't change. And -- we don't need to build that up, if you will.

We just need to address client opportunities. And so if it takes a little more, we can obviously scale into that and always have.

On the Consulting side, we put project teams together. And again, you note our delivery model is a little different.

I mean, we have about 80% to 85% of our team members on these projects come from our contingent workforce, our IT staffing capabilities. And then we've got a very smart solution oriented with industry expertise team on the top, which are helping architect the solutions to meet the industry need of the customer.

And that's working just great. And so it will continue to build, but I think our model is going to be here that we're definitely on project teams going to bring our contingent labor to bear on it because they are a more perfect fit.

They're in the right place at the right price point with a more perfect skill set, the right industry experience, and so we can craft that in every team as we go here. So that's been a winning proposition for our customer and the all-in cost of that is really competitive.

And you can see that we win work not only because of our price point, but also the expertise we bring to bear. So we're going to stay the course there.

Excellent. And then in terms of just, I guess, following up on the price point question here.

How much of a difference is there between what you're able to bill for your consulting services versus the staffing services? I assume is it material at this point?

How should we think about the difference? And then maybe just some commentary on kind of the bill rate trends, I guess, at this point in terms of how that maybe trended over '23?

And what's your outlook for '24 is?

Well, for sure, the bill rate is better and it's evidenced by the fact we can get a better margin, right? So we tell you that our margin in consulting is 300 or 400 basis points better than what we get in IT staffing.

And it is because we're taking on some responsibility here for a certain amount of light or deliverables or milestones. And so from that, we're able to get a better bill rate.

I mean, there's no question about that. And what was the second part of your question, Surinder, I'm sorry.

In terms of the outlook for '24 pricing and the conversations that you're having with clients, I mean, are clients asking for better rates? Or are you able to kind of hold rate steady?

Or is -- or as you talk about in wanting to do more AI projects, that you can maybe use that to your advantage to maybe get a little bit better rate because those are harder skill sets to find?

Well, look, I think anytime it's a harder skill set to find we can get a better rate, and it doesn't matter whether it's in and -- it's really in the solution orientation, right? If it's a higher-end solution orientation, we can get a better rate.

So all that stands past. Our margins, our markups, if you will, have been pretty steady here and our bill rates are slightly rising, and I think that is part and parcel with the mix of more consultative work that we're doing.

And yes, more work we do in AI here, that will only support and improve those.

Got it. So I apologize if I didn't ask the question.

I wasn't referring to the mix. I was actually referring to the actual apples-to-apples comparison of what you could charge for a certain level of engineer in '23 versus what you think you may be able to charge them in '24?

We're not seeing a trend that is down. I mean I expect that -- typically, we'll get a slight increase in our bill rates year-to-year.

I would expect it in '24 versus '23. We don't see anything underlying that would tell us any different right now.

Ted, can I add -- Can I add something, Surinder. Keep in mind, as our consulting business grows and grows, it's cost per job, not cost per hour, and staffing, its cost per hour.

And there are built in escalators to bill rates and there are exceptions to the bill rates depending on skill types, the status of availability of skills, important projects. But a lot of what you're asking applies more to staffing where bill rates for an individual hour are highly discussed and it's consulting that grows with us.

It's discussing what the cost of the job is and what are the benefits associated with that.

But I just -- I guess maybe to help me clarify, I just want to make sure I don't miss in turn that comment. Is that implying that you're doing a lot more fixed price projects in?

Because generally, most consulting firms do not want to do fixed price projects. They want to bill by the hour.

So you have engineers...

No. Does not imply that, but the cost -- the conversations with the clients start around what’s the total cost of doing -- taking on this job.

When we -- you can build it by looking at timing material type work. You can build it by time and material, but the ultimate conversation and decision around a competitive choice is around the cost and the -- any risks associated with delivering that work and where the benefit of that work.

This is Emily Marzo on for Heather Balsky. I was wondering if you could talk to us about what you're seeing in permanent staffing.

And what was the percentage of sales you saw for staffing this quarter?

Marie, do you want...

Yes, absolutely. So yes, for the fourth quarter, we actually -- perm as a percent of total revenue was 2.4%.

And I think what you're seeing there, Heather, again, it's very steady. I mean I'd say it's not historic low percent of the mix, and there's really no change, if you will, from the third to the fourth or our expectation here for the first quarter is in similar ranges.

Great. Well, I appreciate everyone’s attention here today for the release of our fourth quarter and Q&A that followed, and we look forward to being with you very soon to discuss our first quarter 2024 results.