πŸ“’ New Earnings In! πŸ”

ASGN (2025 - Q2)

Release Date: Jul 23, 2025

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Stock Data provided by Financial Modeling Prep

Surprises

Revenue Beat

$1.02 billion

Revenues of $1.02 billion were above the high-end of our guidance range.

Adjusted EBITDA Margin In-Line

10.6%

Adjusted EBITDA margin of 10.6% was at the top end of our expectations for the quarter.

Commercial Consulting Revenue Growth

15.7%

Revenues from our commercial consulting, the largest of our high-margin revenue streams, totaled $325.7 million, an increase of 15.7% year-over-year.

Federal Government Revenue Growth

+1.1%

1.1%

Revenues from our Federal Government segment were $312.5 million, an increase of 1.1% year-over-year.

Assignment Revenue Decline

-13.9%

13.9%

Assignment revenues totaled $382.4 million, a decline of 13.9% year-over-year reflecting continued softness in portions of our Commercial segment.

Gross Margin Decline

28.7%

Gross margin for the second quarter of 2025 was 28.7%, a decrease of 40 basis points from the second quarter of last year.

Revenue Beat

$1.02 billion

Revenues of $1.02 billion were above the high-end of our guidance range, while adjusted EBITDA margin of 10.6% was at the top end of our expectations for the quarter.

Commercial Consulting Revenue Growth

15.7%

15.7%

Revenues from our commercial consulting, the largest of our high-margin revenue streams, totaled $325.7 million, an increase of 15.7% year-over-year, and included the contribution from TopBloc.

Federal Government Revenue Increase

1.1%

1.1%

Revenues from our Federal Government segment were $312.5 million, an increase of 1.1% year-over-year, including approximately $10 million of higher-than-expected license revenues.

Free Cash Flow Conversion Rate

107%

107%

Free cash flow was $115.8 million for the second quarter, a conversion rate of approximately 107% of adjusted EBITDA.

TopBloc Performance Ahead of Expectations

Tracking just ahead of $150 million revenue and high teens EBITDA margin

TopBloc was going to contribute over the course of the year, $150 million in revenues for the full year... they're tracking just ahead of those numbers on revenue, just ahead of those numbers on bookings and kind of in the range on EBITDA.

Impact Quotes

ASGN's distinctive model, which delivers a broad spectrum of skill sets just-in-time on a contingent basis, continues to set us apart and will enable us to serve as an excellent partner to enterprises and public agencies seeking to achieve their IT modernization goals.

ASGN's distinctive model, which delivers a broad spectrum of skill sets just-in-time on a contingent basis, continues to set us apart and will enable us to serve as an excellent partner to enterprises and public agencies seeking to achieve their IT modernization goals.

AI enables our consultants to work faster, smarter, and with more insight, driving a higher ROI for our clients.

AI enables our consultants to work faster, smarter, and with more insight, driving a higher ROI for our clients.

Our strategic alliances with partners like AWS and Elastic, enable us to deliver cutting-edge technology solutions tailored to our clients' unique business needs.

Our strategic alliances with partners like AWS and Elastic, enable us to deliver cutting-edge technology solutions tailored to our clients' unique business needs.

By leveraging our deep expertise in application development and managed services, we've been able to create relevant AI applications for our consultants' everyday work and ultimately share this IP with our Fortune 1000 and defense and intelligence customer base.

By building out these accelerators, we create repeatable, lower cost solutions that can be easily deployed for our clients' custom environments.

Our strong free cash flow provides a strategic advantage that enables ASGN to fund growth initiatives, opportunistically repurchase shares, and invest in strategic M&A, all while maintaining a healthy balance sheet.

Free cash flow was $115.8 million for the second quarter, a conversion rate of approximately 107% of adjusted EBITDA.

The recently passed One Big Beautiful Bill represents one of the largest single-year increases in U.S. defense spending in modern history.

The AI Innovation Center offers development environments, a centralized repeatable IP repository, documented best practices, thought leadership, and new technology evaluation.

We're seeing some positive signs in our commercial consulting business, specifically in certain areas like cloud, data and AI.

We're seeing some positive signs in our commercial consulting business, specifically in certain areas like cloud, data and AI.

We're not seeing anything that would indicate that there's a massive impact of AI on that business. I think it's largely the macros and cyclicality at this moment.

We're not seeing anything that would indicate that there's a massive impact of AI on the Creative Circle business. I think it's largely the macros and cyclicality at this moment.

Notable Topics Discussed

  • ASGN launched the AI Innovation Center to enhance innovation, optimize resources, and promote AI-driven growth, featuring development environments, a repository of IP, best practices, and technology evaluation.
  • The center develops solution accelerators, such as financial agents, code discovery tools, network security assistants, and AWS Agentic AI tools, to solve specific business problems and deploy cost-effective solutions.
  • AI University provides upskilling resources for sales and technical teams, fostering continuous innovation and relevance in AI advancements.
  • Management emphasizes that AI investments are integrated into the company's broader strategy to build proprietary IP and support long-term growth, with a focus on account and deal-specific IP development.
  • Commercial consulting bookings increased, with a focus on data, AI, and digital engineering, including larger, complex deals and technology partnerships like Workday.
  • Federal segment saw new contract awards of $72 million, with backlog over $2.9 billion, supported by government initiatives and increased defense spending, especially in AI, cybersecurity, and cloud migration.
  • The company is leveraging its broad skill set and industry-specific assets to support clients' IT modernization and AI adoption, positioning for long-term growth despite macroeconomic uncertainties.
  • Despite macroeconomic headwinds, clients continue to invest in AI and modernization to stay competitive.
  • Government budget increases, especially in defense, are expected to positively influence future federal contract awards.
  • The impact of DOGE (a specific contract or project) on margins and revenues was in line with expectations, with a forecast of minimal ongoing impact in the near term.
  • The company is transitioning from traditional staffing to higher-end, high-value IT consulting, emphasizing proprietary IP development.
  • Investments are focused on creating repeatable AI accelerators and solutions that can be scaled across clients, reducing costs and increasing margins.
  • Partnerships with AWS, Workday, and others are central to building client-specific IP and accelerating deployment of AI solutions.
  • Internal use of AI is also improving operational efficiencies, including in recruiting, bid proposals, and cybersecurity.
  • Strategic alliances with AWS and Elastic enable scalable cloud migrations, compliance, and AI search capabilities for federal clients.
  • Partnerships with Workday facilitate enterprise platform implementations, HR centralization, and process streamlining.
  • Collaboration with alliance partners is critical for delivering cutting-edge solutions and expanding market reach.
  • AI is used internally to enhance productivity in recruiting, proposal development, and cybersecurity.
  • The company is embedding AI into enterprise systems like ServiceNow to automate processes and improve user experience.
  • Management highlights that AI investments are not degrading margins; instead, they are contributing to margin expansion and operational improvements.
  • Focus on developing client-specific AI solutions and accelerators that can be scaled across multiple clients.
  • Examples include code discovery tools, cybersecurity AI, and agentic AI tools available in AWS marketplace.
  • The company aims to monetize these accelerators externally and incorporate them into client environments, reinforcing its IP-driven growth model.
  • Baseline federal revenue run rate estimated around $290-$295 million, with a positive outlook due to increased defense budgets and government initiatives.
  • The impact of high-margin license revenues is diminishing, with a shift toward direct labor and lower-margin work.
  • Long-term federal margins are expected to be in the 20-21% range, with some variability due to pass-through revenues and contract mix.
  • Strong growth in energy, utilities, and materials sectors driven by investments in cloud, data, and AI.
  • Partnerships with data platform providers like Databricks support industry-specific solutions such as asset utilization and predictive maintenance.
  • The company sees ongoing opportunities in sectors traditionally considered slow-moving, now becoming more dynamic due to technological investments.
  • ASGN plans to host an Investor Day in Q4 to discuss near- and long-term growth strategies.
  • Management intends to share detailed plans on how the company aims to unlock future value through AI, modernization, and strategic initiatives.

Key Insights:

  • ASGN reported second quarter 2025 revenues of $1.02 billion, above the high-end of guidance, with adjusted EBITDA margin at 10.6%, at the top end of expectations.
  • Cash and cash equivalents were $138.9 million; $320 million available on revolver; net leverage ratio was 2.46x.
  • Commercial consulting bookings totaled $417.5 million with a book-to-bill ratio of 1.2x on a trailing 12-month basis.
  • Federal Government segment revenues increased 1.1%, including $10 million of higher-than-expected license revenues.
  • Federal new contract awards were $72 million with a book-to-bill of 1.1x, and federal backlog was over $2.9 billion, a coverage ratio of 2.4x trailing 12-month revenues.
  • Free cash flow was $115.8 million, converting approximately 107% of adjusted EBITDA; $9.5 million was used to repurchase 200,000 shares.
  • Gross margin was 28.7%, down 40 basis points year-over-year; Commercial segment gross margin improved by 30 basis points to 33%, Federal segment gross margin declined 140 basis points to 19.2%.
  • Gross margin was 28.7%, down 40 basis points year-over-year; Commercial segment gross margin increased 30 basis points to 33%, Federal segment gross margin declined 140 basis points to 19.2%.
  • IT consulting revenues grew to approximately 63% of total revenues, up from 57% year-over-year.
  • Net income was $29.3 million; adjusted EBITDA was $108.5 million with a margin of 10.6%.
  • Net leverage ratio was 2.46x at quarter end with $138.9 million in cash and $320 million available on revolver.
  • Second quarter revenues decreased 1.4% year-over-year; Commercial segment revenues declined 2.4%, with assignment revenues down 13.9%, while commercial consulting revenues increased 15.7%.
  • SG&A expenses increased to $216.8 million, including $8.3 million in acquisition, integration, and strategic planning expenses.
  • SG&A expenses were $216.8 million, including $8.3 million in acquisition, integration, and strategic planning expenses.
  • ASGN plans to host an Investor Day in Q4 to discuss near- and long-term strategy and growth opportunities.
  • Estimates exclude acquisition, integration, or strategic planning expenses.
  • Guidance assumes 63.5 billable days in Q3, same as prior year and 0.25 more than Q2 2025.
  • Guidance assumes 63.5 billable days in Q3, same as prior year and 0.25 more than Q2; estimates exclude acquisition, integration, or strategic planning expenses.
  • Management expects a return to a more normal federal contract award cycle in Q3 after a muted Q2 due to procurement delays and DOGE impact.
  • Management expects a return to a more normal federal contract award cycle in Q3, supported by increased defense spending from the One Big Beautiful Bill.
  • Management is cautiously optimistic about commercial consulting growth, especially in cloud, data, AI, and digital engineering, while watching for improvement in banking and other large industries.
  • Management is cautiously optimistic about commercial consulting growth, especially in cloud, data, and AI, but is watching larger industries like banking for a turnaround.
  • The recently passed One Big Beautiful Bill is expected to increase U.S. defense spending significantly, benefiting ASGN's core competencies in AI, automation, cloud migration, and cybersecurity.
  • Third quarter 2025 guidance estimates revenues between $992 million and $1.012 billion, net income between $35.8 million and $39.4 million, adjusted EBITDA between $108.5 million and $113.5 million, and adjusted EBITDA margin between 10.9% and 11.2%.
  • Agentic AI customer service tool published on AWS marketplace; ongoing development of AI advisory, literacy, and agentic architectures.
  • AI accelerators published include financial services agents, rapid code discovery tools, network security assistants, and AWS Agentic AI tool.
  • AI accelerators published include financial services agents, rapid code discovery tools, network security assistants, and AWS Agentic AI tools.
  • AI Innovation Center launched to unify AI expertise across commercial and federal businesses, offering solution accelerators, IP repository, and AI University for upskilling.
  • AI services range from advisory and literacy to building agentic AI architectures, including a recently published AI customer service tool on AWS marketplace.
  • ASGN launched the AI Innovation Center to unify AI expertise, develop solution accelerators, and provide AI University for upskilling sales and technical teams.
  • Federal business focuses on AI, cybersecurity, and digital modernization aligned with government efficiency and defense spending priorities.
  • Federal business impacted by slower contract award velocity and DOGE procurement delays, but backlog remains strong at $2.9 billion.
  • IT consulting now represents 63% of revenues, driven by growth in cloud, data, AI, and digital engineering.
  • IT consulting now represents 63% of revenues, driven by growth in cloud, data, AI, and digital engineering solutions.
  • Nearshore delivery center in Mexico supports cost-efficient application development and data modernization for consumer & industrial clients.
  • Notable projects include cloud advisory for financial services, AI-enhanced cybersecurity for DHS's CISA, and Workday implementations by TopBloc for global insurance and construction clients.
  • ServiceNow GenAI capabilities deployed for a global video game company to automate HR case management and improve user experience.
  • Strategic partnerships with AWS, Elastic, and Workday are enabling advanced cloud migrations, cybersecurity enhancements, and enterprise platform implementations.
  • Strategic partnerships with AWS, Elastic, and Workday are enabling delivery of advanced cloud migrations, cybersecurity solutions, and enterprise platform implementations.
  • TopBloc acquisition is performing above expectations, contributing significantly to commercial consulting bookings and revenues.
  • TopBloc acquisition is performing above expectations, contributing to commercial consulting growth and bookings.
  • TopBloc delivered complex Workday implementations including human capital management and payroll modules, and custom applications for unionized environments.
  • CEO Ted Hanson emphasized solid Q2 results despite macroeconomic uncertainty and highlighted strong demand for AI and cloud solutions.
  • CFO Marie Perry discussed margin dynamics, including the impact of license revenues and DOGE on federal gross margins, and the strong free cash flow generation.
  • CFO Marie Perry discussed margin dynamics, including the impact of lower-margin license revenues and DOGE on federal gross margin.
  • Management acknowledged the cyclical nature of the assignment business and noted no significant AI impact on that segment yet.
  • Management expressed cautious optimism about commercial and federal markets, expecting improved federal contract awards and continued commercial consulting strength.
  • Management expressed cautious optimism about commercial consulting growth and federal contract awards improving in Q3.
  • Management reiterated commitment to upskilling employees through AI University and leveraging AI to maintain competitive edge.
  • President Shiv Iyer detailed vertical performance, with consumer & industrial leading growth, healthcare flat, and mixed results in financial services and TMT.
  • Shiv and Ted emphasized the evolving AI strategy focused on client-specific IP development and scalable AI solutions in partnership with AWS and Workday.
  • Shiv highlighted the importance of strategic alliances and the growing demand for cybersecurity and AI services in both commercial and federal sectors.
  • Shiv highlighted the importance of strategic alliances and the growing demand for cybersecurity, cloud, enterprise platforms, and AI services.
  • Ted described the AI Innovation Center as a key initiative to drive AI-driven business growth and operational efficiency internally and for clients.
  • Ted described the AI Innovation Center as a key initiative to drive innovation, resource optimization, and AI-driven growth.
  • Ted noted ASGN's distinctive model delivering just-in-time IT skills and deep sector expertise as a competitive advantage.
  • Ted noted ASGN's distinctive model delivering just-in-time IT skill sets as a competitive advantage in IT modernization.
  • Ted shared plans for an Investor Day in Q4 to communicate strategy and growth plans.
  • Ted shared that AI investments are accretive to margins and productivity, with ongoing efforts to embed AI in recruiting, sales, and cybersecurity.
  • AI has not yet materially impacted the Creative Circle assignment business, which remains stable and cyclical.
  • AI investments are not degrading margins; management expects them to contribute positively to margin expansion.
  • AI investments are not degrading margins; rather, they are contributing to margin expansion and operational efficiencies.
  • ASGN is leveraging AI internally to improve productivity in recruiting, sales, bid proposals, and cybersecurity.
  • Clients are increasingly seeking advisory services on AI architecture and deployment strategies.
  • Commercial consulting shows positive momentum in cloud, data, and AI, but banking and some industries remain cautious.
  • Commercial consulting shows positive momentum in cloud, data, and AI, but some industries like banking remain cautious.
  • Consumer & Industrial segment strength driven by materials, utilities, and energy subsectors with dynamic investments in cloud, data, and AI.
  • Consumer & Industrial segment strength driven by materials, utilities, industrials, and consumer discretionary sectors with dynamic investments in cloud, data, AI, and custom software.
  • Creative Circle assignment business remains stable with softness attributed to macroeconomic cyclicality rather than AI impact; consulting portion is growing.
  • DOGE impact on revenues remains less than 2% and consistent with prior expectations for Q2 and Q3.
  • DOGE impact on revenues was less than 2%, consistent with prior expectations, and expected to continue similarly in Q3.
  • Energy and utilities subsectors benefit from industry-specific AI assets developed with partners like Databricks.
  • Federal baseline revenues estimated around $290-295 million excluding pass-throughs; backlog and new budget support growth prospects.
  • Federal government contract awards expected to improve in Q3 with new defense budget funding; gross margin expected to remain in 20-21% range despite license revenue fluctuations.
  • Federal government contract awards were slow in Q2 but expected to normalize in Q3 with increased defense spending.
  • Federal gross margins are expected to remain in the 20-21% range, with some variability due to license revenues and direct labor mix.
  • Internal use of AI includes productivity tools in recruiting, sales, bid proposals, and cybersecurity threat management.
  • Management expects federal baseline revenues in mid $290 million to mid $295 million range after adjusting for pass-throughs and license revenues.
  • Management is actively building client-specific AI IP and agentic AI solutions, with a focus on scalable and monetizable offerings.
  • Management is building client-specific AI IP and partnering with AWS and Workday to scale solutions.
  • Management is seeing early signs of improvement in assignment business metrics and client conversations.
  • TopBloc is tracking ahead of expectations on revenue and bookings, with EBITDA margins in the high teens.
  • ASGN maintains a healthy balance sheet with strong free cash flow and significant share repurchase authorization remaining.
  • ASGN's AI University supports ongoing professional development and customer education on AI best practices.
  • ASGN's model of contingent IT staffing is well suited to meet the growing demand for skilled IT professionals.
  • ASGN's nearshore delivery center in Mexico is a key cost-efficient resource for application development and data modernization.
  • Federal backlog coverage ratio remains strong at 2.4x trailing 12-month revenues.
  • ISG Index indicates AI demand is overcoming macro distractions with companies investing in generative and agentic AI.
  • ISG Index indicates AI demand is overcoming macro distractions, with companies investing in generative and agentic AI.
  • Macroeconomic uncertainty continues to impact discretionary spending but demand for AI and cloud remains strong.
  • Nearshore delivery capabilities in Mexico provide cost-effective support for application development and modernization.
  • ServiceNow is positioning itself as the AI platform for digital business, with ASGN supporting GenAI deployments.
  • Strategic alliances with AWS, Elastic, and Workday are critical to delivering tailored technology solutions.
  • The company is focused on cost optimization initiatives alongside strategic investments.
  • The company is focused on evolving into higher-end, high-value IT consulting.
  • The One Big Beautiful Bill represents a historic increase in U.S. defense spending, focusing on AI, automation, cloud migration, and cybersecurity.
  • The One Big Beautiful Bill represents a significant increase in U.S. defense spending, aligning with ASGN's core competencies.
  • AI capabilities developed in the federal government are being leveraged to enhance commercial offerings.
  • AI University supports continuous professional development and customer education on AI best practices.
  • ASGN is actively developing AI accelerators and agentic AI tools to create repeatable, scalable solutions for clients.
  • ASGN is monitoring industry-specific trends closely, especially in banking, to time growth opportunities.
  • ASGN's AI Innovation Center fosters collaboration between commercial and federal teams to accelerate AI-driven solutions.
  • ASGN's model of contingent workforce delivery is positioned to meet increasing IT resource demands driven by AI adoption.
  • Investor Day planned for Q4 to communicate strategic vision and growth plans.
  • Management acknowledges the evolving nature of AI adoption and is actively investing in scalable IP and partnerships.
  • Management expects AI investments to enhance margins and drive competitive advantage without degrading financial performance.
  • Management is focused on building account- and deal-specific AI IP to differentiate offerings and scale across clients.
  • Management views AI as a key driver of future growth and operational efficiency across all business segments.
  • Published AI accelerators enable rapid deployment of AI solutions tailored to client needs, enhancing competitive positioning.
  • The AI Innovation Center fosters collaboration between commercial and federal teams to drive AI-driven business growth.
  • The company is investing in AI to improve internal operations, including recruiting, sales, bid proposals, and cybersecurity.
  • The company is leveraging its broad industry expertise to tailor IT modernization roadmaps for diverse clients.
  • The company is preparing for an Investor Day to communicate its strategic vision and growth plans.
Complete Transcript:
ASGN:2025 - Q2
Operator:
Greetings, and welcome to the ASGN Incorporated Second Quarter 2025 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Kimberly Esterkin, Vice President of Investor Relations. Thank you. You may begin. Kimberly
Kimberly Esterkin:
Good afternoon. Thank you for joining us today for ASGN's second quarter 2025 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.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.
Theodore S. Hanson:
Thank you, Kim, and thank you for joining ASGN's second quarter 2025 earnings call. ASGN reported solid results for the second quarter. Revenues of $1.02 billion were above the high-end of our guidance range, while adjusted EBITDA margin of 10.6% was at the top end of our expectations for the quarter. Our IT consulting revenues continue to grow, reaching approximately 63% of revenues for the second quarter, up from 57% in the year-ago period. Macroeconomic uncertainty remains, impacting discretionary spending. Still clients are focused on staying competitive, driving demand for cloud and data solutions to modernize legacy systems and capitalize on AI. According to the ISG Index's second quarter 2025 call, the demand for AI is overcoming macroeconomic distractions, with companies actively investing in generative and agentic AI, deploying cost savings from other areas of their operations. We are experiencing this trend in our commercial consulting bookings, where we are seeing continued demand in data, AI, and digital engineering, including custom applications and development. Commercial consulting bookings for the quarter totaled $417.5 million, translating to a book-to-bill of 1.2x on a trailing 12-month basis. While bookings remain weighted toward renewals, we are increasingly winning larger, more complex, multi-capability deals as we advance our commercial practice areas and technology partnerships. Our technology partnership with Workday is progressing very well, and TopBloc, which continues to perform above our expectations, contributed to growth of our commercial consulting bookings for the second quarter. In our federal business, new contract awards totaled $72 million for the second quarter or a book-to-bill of 1.1x on a trailing 12- month basis. Contract awards were challenged as anticipated, reflecting a slowness in award velocity and the impact of DOGE on procurement and approval processes. New federal contract backlog was over $2.9 billion at quarter end or a coverage ratio of 2.4x the Federal segment's trailing 12-month revenues. Despite lower federal quarterly bookings, our core solution capabilities in AI, cybersecurity, and digital modernization remain well aligned with the administration's efficiency cost savings priorities. In addition, the recently passed One Big Beautiful Bill represents one of the largest single-year increases in U.S. defense spending in modern history. Much of this funding focuses on our primary competencies, including AI and automation, cloud migration, secure communications, and threat intelligence platforms. Ultimately, a constant among this ongoing transformation is the critical need for skilled IT professionals. Case in point, ISG estimates that in the next year, 60% of enterprises plan to expand their IT resources to accelerate the capture of AI benefits. ASGN's distinctive model, which delivers a broad spectrum of skill sets just-in-time on a contingent basis, continues to set us apart and will enable us to serve as an excellent partner to enterprises and public agencies seeking to achieve their IT modernization goals. We are uniquely positioned to identify the right skill sets for our clients, and, with an industry-led focus, we deeply understand the nuances of each sector's IT needs. With that, let me turn the call over to our President, Shiv Iyer, to discuss our industry and solution performance in the second quarter.
Sadasivam Iyer:
Thanks, Ted, and it's great to speak with everyone this afternoon. Beginning with our Commercial segment verticals, consumer & industrial accounts performed the strongest in the second quarter and were up mid-double digits year-over-year. Improvement in this vertical was driven by mid-teens or better growth in materials, utilities, industrials, and consumer discretionary accounts. Our healthcare vertical was relatively flat compared to the prior year as a result of double-digit growth amongst our pharmaceutical and biotech clients. Financial services, business services, and TMT accounts declined compared to the year-ago period. On a sequential basis, we achieved growth in four of our five commercial industry verticals, with consumer & industrial accounts again leading our performance. Our consumer & industrial clients have been leveraging our nearshore delivery center in Mexico as a cost efficient and capable alternative for application development and data modernization. In the financial services vertical, we saw double-digit growth amongst our wealth management and insurance clients, both of which were active with our cloud and infrastructure teams in the quarter. In our TMT vertical, we saw mid-single-digit growth in telecom, e-commerce, and software and services. For clients in this vertical, we supported enterprise platform implementations, including integrating new AI Capabilities into existing cloud platforms and developing solutions to help clients harness the power of their data, AI, and advanced analytics. In our federal business, we track our revenues across four end customers: defense and intelligence, national security, civilian, and other clients. Defense, intelligence, and national security accounts comprised approximately 72% of our total government revenues. Growth in national security accounts was largely driven by work for the Department of Homeland Security, examples of which I will share shortly. As anticipated, our civilian business for the quarter was impacted by DOGE, the impact of which was unchanged and consistent with expectations. Defense and intelligence revenues, though up sequentially by mid-single digits, were down year-on-year due to budget constraints. We remain bullish on the long-term positioning of our federal government business, particularly with the recent expansion of the defense budget. To provide greater clarity on the dynamics driving bookings across our commercial verticals and government clients, let's turn to our solutions capabilities. For the quarter, consulting engagements across the company focused on four major areas, including: cloud and data infrastructure, cybersecurity, enterprise platform advisory and implementation, and AI services. Let me provide a few examples of each, beginning with cloud. For a global financial services company, we were engaged to assess the current state of their cloud operations, evaluate a newly procured FinOps tool, and build a multi-year cloud road map. As a result of our advisory services, our client will be able to improve its cloud governance, taxonomy, capacity, and consumption across its wealth management lines of business. Importantly, this framework provides our client the confidence to accelerate their cloud migration. For a Fortune 500 life insurance and retirement company, our consultants were engaged to determine if migrating to Amazon's cloud- based system would provide cost savings, operational efficiency, and improved scalability for the company. Our team delivered a viable migration model in just 8 weeks, resulting in query execution 3x faster and generating significant cost savings for the client. By deploying this model, our client will be able to accelerate their data center exits and mainframe retirement, while simultaneously unlocking the AI capabilities provided by migrating to AWS. We also work side-by-side with AWS as a premier partner and managed services provider in the federal space. Similar to the commercial market, federal agencies are looking to modernize legacy infrastructure. In the second quarter, we partnered with AWS on behalf of national security and defense agency clients to secure scalable cloud migrations and continuous compliance in AWS GovCloud. Alongside cloud support, our cybersecurity expertise was another solution area in demand this past quarter. For DHS's Cybersecurity and Infrastructure Security Agency or CISA, we were awarded incremental work to deliver essential technical and digital engineering services vital to protecting critical infrastructure and enhancing national cybersecurity. We also partnered with Elastic, a leading platform for search-powered solutions, to add AI search capability into CISA's continuous diagnostics and mitigation dashboard, thereby enhancing cross-domain visibility of the agency and reducing national security vulnerabilities. Collaboration with our alliance partners is critical to our success. Our strategic alliances with partners like AWS and Elastic, enable us to deliver cutting-edge technology solutions tailored to our clients' unique business needs. The value of our technology partnerships is particularly evident in enterprise platform implementations, which represented a third area of focus. As an example, TopBloc, a leading, high-growth tech-enabled Workday consultancy, recently partnered with a global provider of insurance solutions to leverage the full Workday suite across 11 countries. For this client, TopBloc provided end-to-end implementation of the Workday human capital management and payroll modules, full-service change management, managed testing services, and post-go-live support. A new win for the quarter, this initiative was designed to centralize our client's HR operations, streamline its internal processes, and enhance the company's ability to attract and retain top talent. TopBloc was also engaged during the quarter to develop a custom-built Workday application for a national mechanical contractor. This application enables the company's foremen and site managers to enter time on behalf of their crews in real-time, aligning with the unique needs of the construction environment, and showcasing TopBloc's ability to support complex, unionized work environments across multiple implementation phases. Our ServiceNow implementations are also on the rise, particularly as the company makes a push to become the AI platform for digital business. In the quarter, we assisted a prominent global video game and entertainment company with deploying ServiceNow's GenAI capabilities within the HR service delivery environment. This consulting project focused on increasing automation and improving user experience by implementing GenAI to automatically classify HR cases, auto-generate resolution summaries and enhance case documentation and audit readiness. In addition to platform-driven implementations, we are helping drive to a smarter future for our clients by providing a comprehensive suite of AI services, ranging from advisory and literacy to developing and building agentic architectures, powered by our assets and accelerators. In the advisory space, one of the world's largest professional services firms engaged our team of consultants, architects, and cross-capability solution leaders to rethink the process and technical design of some of their key knowledge management workflows. These workflows are currently conducted manually and involve the complex task of updating governing policies in thousands of downstream documents and systems. The advisory phase of the engagement was successful, and we are now moving into delivery, a collaboration between our U.S. consulting team and our Mexico delivery center. We are also leveraging our AI capabilities to improve data management and accelerate model deployment within the federal space. During the quarter, our government team used advanced analytics and machine learning to support the U.S. Navy in processing vast amounts of maritime data. By training and deploying AI models on their behalf, we are helping the Navy enhance its situational awareness, safety, and operational efficiency. Beyond AI advisory, we are growing our agentic AI practice by architecting and building agents to support a myriad of client use cases. Just last week, we published an agentic AI customer service tool on the new AI Agents and Tools storefront in the AWS marketplace. This agent is one of the many AI accelerators being built by our teams. Ted will discuss more about our AI accelerators and investments shortly, but first, I'll turn the call over to our CFO, Marie, to discuss ASGN's second quarter segment performance and third quarter guidance.
Marie L. Perry:
Thanks, Shiv. For the second quarter, revenues totaled $1.02 billion, a decrease of 1.4% year-over-year, but above our guidance expectations. Revenues from our Commercial segment were $708.1 million, a decrease of 2.4% compared to the prior year. Assignment revenues totaled $382.4 million, a decline of 13.9% year-over-year reflecting continued softness in portions of our Commercial segment that are more sensitive to changes in macroeconomic cycles. Revenues from our commercial consulting, the largest of our high-margin revenue streams, totaled $325.7 million, an increase of 15.7% year-over-year, and included the contribution from TopBloc. Revenues from our Federal Government segment were $312.5 million, an increase of 1.1% year-over-year, including approximately $10 million of higher-than-expected license revenues. As Shiv noted, the impact from DOGE in the second quarter was in line with our expectations. Turning to margins. Gross margin for the second quarter of 2025 was 28.7%, a decrease of 40 basis points from the second quarter of last year. Gross margin from our Commercial segment was 33%, up 30 basis points year-over-year, reflecting a higher mix of consulting revenues as well as margin expansion in these revenues. Gross margin from our Federal Government segment was 19.2%, a decline of 140 basis points year-over-year, due to higher volume of low-margin software licenses. Gross margin was also impacted by loss of higher margin work under DOGE. Excluding the impact of client-driven license revenues that were outside of our guidance estimates, consolidated company gross margin was within our guidance range for the quarter. SG&A expenses for the quarter was $216.8 million, compared to $205.6 million in the second quarter of 2024. SG&A expenses included $8.3 million in acquisition, integration, and strategic planning expenses, inclusive of cost optimization initiatives. These items were not included in our previously announced guidance estimates. For the second quarter, net income was $29.3 million, adjusted EBITDA was $108.5 million, and adjusted EBITDA margin was 10.6%. Also at quarter end, cash and cash equivalents was $138.9 million, and we had $320 million available on our $500 million senior secured revolver. Our net leverage ratio was 2.46x at the end of the quarter. Our strong free cash flow provides a strategic advantage that enables ASGN to fund growth initiatives, opportunistically repurchase shares, and invest in strategic M&A, all while maintaining a healthy balance sheet. Free cash flow was $115.8 million for the second quarter, a conversion rate of approximately 107% of adjusted EBITDA. We deployed $9.5 million of our free cash flow to repurchase approximately 200,000 shares, at an average share price of $58.69. At quarter end, we had approximately $470 million remaining under our $750 million share repurchase authorization. Turning to guidance. Our financial estimates for the third quarter of 2025 are set forth in our earnings release and supplemental materials. These estimates are based on current market conditions and assume no further deterioration in the markets we serve. Guidance also assumes 63.5 billable days in the third quarter, which is the same number of billable days as the year-ago period and 0.25 more days than in the second quarter. Estimates do not include any acquisition, integration or strategic planning expenses. With that as background for Q3 2025, we are estimating revenues of $992 million to $1.012 billion, net income of $35.8 million to $39.4 million, adjusted EBITDA of $108.5 million to $113.5 million, and adjusted EBITDA margin of 10.9% to 11.2%. Thank you, I'll now turn the call back over to Ted.
Theodore S. Hanson:
Thanks Marie. As discussed at the outset of today's call, despite ongoing macroeconomic uncertainties, our clients are continuing to invest in AI recognizing that maintaining a competitive edge requires staying at the forefront of technological advancements. With that in mind, I'd like to take this opportunity to further highlight ASGN's ongoing AI investments, and how, like our clients, we are strategically positioning our business amid rapid technological change. AI enables our consultants to work faster, smarter, and with more insight, driving a higher ROI for our clients. By leveraging our deep expertise in application development and managed services, we've been able to create relevant AI applications for our consultants' everyday work and ultimately share this IP with our Fortune 1000 and defense and intelligence customer base. As part of our commitment to unify our company-wide AI expertise, we launched the ASGN AI Innovation Center, a collaborative initiative between our commercial and federal businesses, designed to enhance innovation, optimize resource utilization, and promote AI-driven business growth for our clients. The innovation center offers development environments, a centralized repeatable IP repository, documented best practices, thought leadership, and new technology evaluation. At the core of our innovation center are the solution accelerators, proofs of concept developed to quickly solve specific business problems with the help of AI. By building out these accelerators, we create repeatable, lower cost solutions that can be easily deployed for our clients' custom environments. Several accelerators have already been published and many more are in the pipeline for launch this year. Some examples of those already in use include financial services agents, rapid code discovery tools, network security assistants, and the AWS Agentic AI tool previously highlighted. Our AI University is also a crucial component of the ASGN Innovation Center. Our AI University provides resources for upskilling our sales and technical teams, while serving as a launching pad for developing white papers, best practices and trainings for our customers. We've found that by incorporating AI understanding and education into ongoing professional development, we can drive continuous innovation, while ensuring that our professionals remain relevant in a rapidly evolving market. Through the establishment of our AI Innovation Center and our many centers of excellence, we are enhancing our solutions capabilities and positioning ourselves as a leading authority in all facets of commercial and federal IT modernization. Our diverse customer base has equipped us with a deep understanding of the distinct data and IT needs across a wide range of sectors, enabling us to effectively support each client's long-term IT road map. Speaking of long-term road maps, I am excited to share today that ASGN will be hosting an Investor Day in the fourth quarter. During this event, we will speak about our company's near- and long-term strategy to unlock the next wave of growth and value creation. We look forward to sharing more details in the coming weeks. That concludes our prepared remarks. I'd like to extend my gratitude to all of our employees for your unwavering commitment this past quarter. Your efforts have been invaluable to fostering our client relationships as we continue to evolve our business into higher- end, high-value IT consulting. With that, we'd now like to open up the call to questions.
Operator:
[Operator Instructions] Our first question comes from the line of Tobey Sommer with Truist Securities.
Tobey O'Brien Sommer:
Wanted to start out and ask how TopBloc is performing relative to your expectations and maybe numerically what was the contribution to results?
Theodore S. Hanson:
Yes. So Tobey, thanks for the call and the question. If you remember, we at the acquisition date said that TopBloc was going to contribute over the course of the year, $150 million in revenues for the full year. Mind you, it closed on the 1st of March. And then EBITDA margins in the high teens. And to this point, I'd say they're tracking just ahead of those numbers on revenue, just ahead of those numbers on bookings and kind of in the range on EBITDA.
Tobey O'Brien Sommer:
Okay. Perfect. You talked a lot about AI in your prepared remarks in terms of opportunities and described a lot of initiatives and actions that you're helping with customers. Could you talk about the more cyclical part of your assignment business, specifically sort of the Creative Circle piece? And what, if any, impact are you seeing from AI on that business? Or would you describe the top line softness as purely cyclical at this stage?
Theodore S. Hanson:
Yes, I'll let Shiv answer that. I'd say pretty stable, right? Shiv, and the cyclicality of it, it is one of the more cyclical pieces of the portfolio.
Sadasivam Iyer:
Yes. I think that's spot on Ted. We're not seeing anything that would indicate that there's a massive impact of AI on that business. I think it's largely the macros and cyclicality at this moment.
Theodore S. Hanson:
And I think, Tobey, going on to like -- and into the beginning of the third quarter, I'd say that, that business has been stable kind of quarter-to-quarter.
Sadasivam Iyer:
It has been stable quarter-to-quarter. We expect that, and we also expect some parts of the consulting piece of that business to continue to progress, which we're seeing some uptick on.
Theodore S. Hanson:
Yes. If you think about the opportunity in that business, even though the discretionary piece of this is earning the results of the traditional staffing part, the opportunity in customer experience is definitely a growth area. We're seeing that to Shiv's point inside the business. And our consulting work in there is growing. It's not the biggest part of the business. I'd call it, maybe 25%, but it's growing, and we think there's big opportunity there as we go forward. So we'll continue to emphasize that. And at some point here, the discretionary spending is going to return, and we think both of those things will contribute to Creative Circle.
Tobey O'Brien Sommer:
And then within the government consulting area in the ECS business, a couple of topics on that. One, what is the long-term margin profile? Is it any different because of the high-margin, those contracts perhaps no longer being ongoing. And do you think you grow from here? We've heard some other dedicated companies that focus on this area of the market exclusively, talk about perhaps an opportunity for calendar third quarter kind of a bigger than usual contract award period because of slow awards year-to-date in the federal fiscal year?
Theodore S. Hanson:
Yes. I'll take the second part, and I'll let Marie talk about the gross margins. But I do think that there is a lot percolating here for the third quarter. So we're only a few weeks in, we'll have to watch that play out, but it does feel like we're back to kind of a normal cycle there. It has been muted in the second quarter, as you mentioned, just because of the -- I think just the wait-and-see approach of the government contracting officials and the agency heads. But I think the positive note is here, we've got a new bill out. There's going to be a significant amount of new money in the budget, especially in the defense area, which is where we are embedded. And so I think all those portend good for us. So I look for a good third quarter, but I really look for a good bookings outcome here as we get a little further down the road because the government is going to put that money to work. They're going to have to get it on the street and compete it with us and our peer group to be able to get these things done because as you know very well, Tobey, the government doesn't have all these assets inside of their operation to accomplish these things that need to be accomplished in data and AI and technology modernization, cybersecurity and other areas where we play, and then Marie on the gross margin.
Marie L. Perry:
Tobey. Yes, so you were really referencing kind of gross margin and what the long-term view is. And so when we think about the federal business, and you alluded this to as well, that the DOGE revenue that we're losing is higher margin. The reality is some of that is kind of toggling back and forth and so we'll see how that works out. But the leadership at our federal government is also looking at increasing direct labor. So there's opportunities kind of down the road as we look at the gross margin for federal to increase our direct labor. And then as we've talked about just some diminishing impact on the license revenue or the balance of the license revenue that's embedded in our federal continues to get smaller and smaller.
Theodore S. Hanson:
[ We've seen that ] we've kind of played in a 20% to 21% range, and you have some of these pass-throughs coming in and out, and so that moves up and down, but I still think that's a range that we expect to be in Tobey.
Operator:
Our next question comes from the line of Jeff Silber with BMO Capital Markets.
Jeffrey Marc Silber:
Sorry, just one more on federal government and then I can move on. You said that the DOGE impact was in line with your expectations. Can you remind us what those expectations were and what do you think the impact will be on the current quarter?
Marie L. Perry:
Absolutely. We -- and last quarter, we actually said that the DOGE impact would be less than 2% of total revenues. As noted, unchanged, in line with our expectations for Q2, and we expect that same in Q3.
Jeffrey Marc Silber:
Okay Great. If we can [Audio Gap] commercial and maybe we can segment it between your assignment and your consulting revenues. I'm just wondering what the tone is -- it sounds like on the consulting side, there's a lot going on but I don't know if you're seeing the same kind of maybe potential enthusiasm on the assignment basis. Any color would be great.
Theodore S. Hanson:
Yes. Well, I'll let Shiv comment, but you're -- I think coming out of Q2, obviously, we had a very good bookings quarter and it was stronger at the end of the quarter than it was at the beginning. And I think here, the first 3 weeks, we're seeing a little increment positive on four metrics in the assignment business. So -- and then Shiv just tone of conversation with clients.
Sadasivam Iyer:
No. Absolutely, Jeff. I think the -- as you can see from our bookings numbers, there's -- we're seeing some positive signs in our commercial consulting business, specifically in certain areas like cloud, data and AI and then -- and it's obviously a tale of different industries. You can see from our results that some of our industries are doing much better than the others. The reason we aren't out there declaring that there's something majorly [ under fair is ] we're still watching some of our larger industries like banking and looking for the turn in those industries, which is still sort of a wait and watch for us. But overall, the sentiment, at least, is we're seeing enough good things to give us cautious optimism.
Theodore S. Hanson:
And if you think about the places where we have real strength, Jeff, like data and AI, application, development, modernization, cybersecurity, enterprise systems around ServiceNow and Workday. I mean those are all kind of developing areas of strength here as things begin to emerge, and that's the core of our capabilities, if you will. So I think we're positioned pretty well here for things to begin to release, and I think Shiv hit the nail on the head, while we're seeing some positive signs in the [ foreign ] metrics, we do need a big industry like banking specifically to begin to turn positive instead of just flattish.
Operator:
Our next question comes from the line of Surinder Thind with Jefferies.
Surinder Singh Thind:
Can you maybe talk a little bit about the AI investments that you're making? And more specifically from the perspective of just kind of building IP. One of the narratives more broadly as we see across IT services is that in this next wave of growth, I guess the idea is that firms will need to build more IP than they have in the past. Can you comment on that or your thoughts and views and how that fits into your business model, in which you use more temporary workers to provide some of the consulting services on the commercial side.
Theodore S. Hanson:
Right. Well, I think you're on the right track, Shiv.
Sadasivam Iyer:
Absolutely. Surinder, that's very much part of the strategy for us and the evolution for us. We think about -- let me talk about the fact that we're doing -- making investments in AI, as Ted would say, which is very focused on account and deal-specific IP development. That doesn't mean we're not investing in just broader platforms. We are -- we've got things like code discovery and open-source tools around code discovery, which is our own IP. We've got open-source tools around applying AI to cybersecurity, which we're deploying for clients as well. So we're doing all of that. But more and more, what we're doing is we're working with partners like AWS, like Workday to start to build IP, specific to client requirements, which in many cases, tends to be ours, but we can rapidly then scale them across multitudes of clients. So that's very much part of our strategy. That's one big pillar of how we're doing that. The second big pillar is, we call it our own best [ qual ] kind of idea, where we're starting to apply agents within our own business again with partners with the intent to sort of go with them to monetize them externally. So you hit the nail on the head, it's a big part of our strategy. We're not out here declaring that we've taken the hill on this stuff, but we are actively building on all those vectors that you talked about.
Theodore S. Hanson:
And remember, our AI capabilities within the federal government, which was our first exposure here, are leading capabilities for many years here. So bringing together our commercial and our federal expertise in our AI innovation lab, training our people and using that [ halo ] to lift us forward on the commercial side is really what's afoot here. And I think Shiv is right. While we haven't taken the hill yet, you do see that the technology cycle here is emerging. There has been and remains an enormous amount of money spent on the compute part of this with the chips, now we're moving to -- obviously, we're in the middle of data center and power, which we need to power all this stuff. You can already see the investments by big tech into software enterprise to try to bring Agentic AI into their products. So then they can bring that into the customer market. Our piece of that is laying down all those AI capabilities into our customers' technology environment, which nobody knows better than us since we've been there for so long years here kind of helping them along their road map. So I would say that's developing. It's not fully emerged, but I think this is playing out as we've been speaking about it over the past quarters and a couple of years. Anything Shiv, you want to add?
Sadasivam Iyer:
No, I was just going to say one more thing, which is as a result of what Ted alluded, right, there is a lot of our clients -- a lot of our clients are grappling with what's the best architectural approach to go about doing this. Should we build our own, should we integrate what is existing and we're also seeing a pretty big uptick in advisory work around those kinds of questions, which then allows us to parlay it right down to how do you not just think about the architecture, but how do you then build it and deploy it and integrate it into your environments.
Surinder Singh Thind:
Got it. And that's actually -- I appreciate the detail there. And then when we think about the Government segment, can we talk a little bit about what is the appropriate baseline or run rate revenues? We saw the tick-up in the cost plus segment this quarter. How much of it is truly just incremental or specific to the quarter? It seems like there's obviously a lot of volatility there in that segment. And what is the right starting point or right baseline of revenues?
Theodore S. Hanson:
Yes. Well, I think if you take what we said in the release about the pass-throughs, which were about $10 million to $12 million here during the quarter, and back that out of the number, it kind of brings you down into the $300 million range. We also had a surge of some good, what I'll call good direct labor billable work, so of a few million, which contributed to the quarter. So I mean, I think your baseline is in the mid $290 million to mid $295 million, something like that is a good baseline to think about going forward. And obviously, we've got a 1.1 book-to-bill. I mean that is going to portend here that as we go into future quarters, we've got some growth in the backlog. And then back to the first question from Tobey, what's going on in that marketplace. Well, we now have a bill. We're going to have more money flowing into the defense department. There's money flowing into the areas that we practice. So I don't want to -- again, I will use Shiv's words, say that we've taken the hill, but we've got things developing here, and it may take a couple few quarters for them to play themselves out, but we're on a path here that I think that we're going to be in a good spot here based on what the government's initiatives are and where we've got the business positioned.
Operator:
Our next question comes from the line of Jason Haas with Wells Fargo.
Jason Daniel Haas:
I was curious if you could speak a little bit more about what drove the strength in the Consumer and Industrial segment since that saw a nice acceleration in the quarter.
Theodore S. Hanson:
Yes, Shiv?
Sadasivam Iyer:
Yes. I mean I can give you some color on what drove the strength. Look, we've -- as we pointed out and when we talked about our earnings, there were certain subsectors like materials and utilities which were a significant part of what drove our strength in that from a sectoral perspective. From a solutions perspective, I think what we're seeing is continued dynamic investments and demand from our clients in spaces like cloud, data and AI, custom software development. And that's where we're seeing the biggest uptick. So we had several areas where we were able to either add new logos or continue to expand our work in those domains.
Theodore S. Hanson:
And I'll add like in the energy and utilities piece, subsectors of that category. Obviously, they have checks to write here to bring themselves forward and meet the needs of the power generation, both for the people and for the data centers. And so there's kind of opportunity there that traditionally may be a little stoic as an industry, but it's a lot more dynamic now over the last year or 2.
Sadasivam Iyer:
And also in certain industries like energy, our partnership strategy is paying out pretty significant dividends where we've built some assets for very industry-specific questions on asset utilization, predictive maintenance, et cetera, with partners like Databricks. And that's allowing us to scale across the industry. So it's different parts of the strategy playing out, but it's essentially continued strength in our solution areas.
Jason Daniel Haas:
That's great to hear. That's great color. And then as a follow-up, I was curious if you could talk about -- you gave some good examples of how AI is helping you generate revenue and helping your clients leverage and use these AI tools. But I was curious about if you could talk about your internal use of AI, and if you've been able to find some efficiencies within your own business from using some of those tools.
Theodore S. Hanson:
Yes. Well, look, I think that we're -- I mean, Shiv put it right, we want to be an AI-led organization, both for ourselves and the productivity and opportunity that gives us -- and to showcase that in front of clients. In all of our enterprise software tools, whether it's our front-office systems or our back-office systems or our digital layer with ServiceNow, there's a Agentic AI opportunities in all of those enterprise systems that we're going to -- are beginning to bring to bear and are going to bring to bear further in our own operations. If you think about our function as an IT staffing company and the recruiting and sales that go along with that, we've implemented AI techniques in there to make us much more productive. That's been an ongoing effort here for years. We're developing tools that help us on the bid proposal and win process to bring use cases up very efficiently for our team and to lay those down into presentations in a way that we used to use a lot of pushing of the keyboard to do. So I think those are just some of the opportunities here. I probably should also not let it go without saying cybersecurity has been a big one. Our work that we've done in cybersecurity, beginning in the federal government, now in the commercial marketplace, the number of threats are so voluminous that you just can't process at all without AI capabilities. And some of those are being brought by the security software firms and some of that's being generated by us. So I think these are all examples across our organization, where we're diving in head first into all of these AI opportunities that make us better, more productive, more growthy and a great [ qual ] for our customer.
Operator:
Our next question comes from the line of Alex Sinatra with Baird.
Alexander J Sinatra:
I've just got a quick one just because a lot of things were covered already, but I was just wondering, given this discussion around AI and this big initiative that you're undergoing with all these investments, I was wondering kind of what maybe the cost of that is on your end, especially for things like that code discovery, the cybersecurity like the agents, just what that will end up costing. Any color on that would be great.
Theodore S. Hanson:
Yes. Look, I don't think you're seeing it. I guess maybe I'll put it this way. We're not quantifying all these costs, but you're not seeing it degrade our margin profiles. If anything, you're seeing -- we're thinking about like your clients, which is where can we make an investment here and get an acceleration to a return. And so in that way, we're able to meet the business case objective, whatever the case might be. And we're continuing to see our margins here kind of be creeping up because of that. So I mean I won't quantify the number for you, but I'll just say it's not degrading, it's adding to our margin profile, and we will continue to as those things get more mature.
Operator:
Thank you. And we have reached the end of the question-and-answer session. I would like to turn the floor back to Ted Hanson for closing remarks.
Theodore S. Hanson:
Great. Well, I want to thank everyone for being here this afternoon, and we look forward to speaking with you in October on our third quarter earnings release conference call. Thank you and be well.
Operator:
Thank you. And this does conclude today's conference. You may disconnect your lines at this time. We thank you for your participation.

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