EFOR 10-K & 10-Q changes, risk factors and insider trading

The IT services industry is highly competitive and fragmented with limited barriers to entry. We compete in national, regional, and local markets with professional services firms, traditional consulting agencies, and specialized boutique industry or solutions-focused businesses. The success of our business depends upon our ability to continually secure new long-term consulting projects as well as shorter-term assignment contracts from clients and organize custom fit teams to fill them withmeet our billableclients’ professionals.needs.

Most of our agreements with clients do not provide for exclusive use of our servicesservices, and many of our agreements may be terminated at will. As such, clients are free to place orders with our competitors. If clients terminate a significant number of agreements or do not use us for future IT servicessolutions support, we may be unable to generate new work to replace lost revenues. The growth of our business could be adversely affected, and our revenues and results of operations could be harmed. Specifically with regardsregard to our longer-term consulting contracts, clients may delayreduce, delay, or cancel bookings. This may cause expected revenues to be lower, to be realized in a later periodperiod, or not at all. In addition, if we are not able to comply with performance requirements laid out in the consultant contract, our revenues and client relationships may be adversely affected. It is therefore imperative to our continued growth that we maintain positive relationships with our clients.

If we are unable to attract and retain qualified billableIT, creative digital, and engineering professionals, our business could be adversely affected.

Our business is substantially dependent upon our ability to attract and retain billable professionals who possess the skills, experience, advanced degrees, certifications, licenses, and clearances which may be required to meet the specified IT requirements of our clients. We compete for such billablethese professionals with other staffingprofessional services and consulting companies, government contractors, and our clients and potential clients. There can be no assurance that qualified professionals will be available to us in adequate numbers to staff our temporary assignments or client projects. Moreover, the employment of our temporary billablecontingent professionals is terminable at will and they are often hired to become regular employees of our clients. Attracting and retaining billable professionals depends on several factors, including our ability to provide billablethese professionals with desirable assignmentsopportunities and competitive wages and benefits. The cost of attracting and retaining billable professionals may be higher than we anticipate if there is an increase in competitive wages and benefits and, as a result, if we are unable to pass these costs on to our clients, our likelihood of achieving or maintaining profitability could decline. In periods of low unemployment, there may be a shortage of, and significant competition for, the skilled professionals sought by our clients. If we are unable to attract and retain a sufficient number of billable professionals to meet client demand, we may be required to forgo revenue opportunities, which may hurt the growth of our business. In periods of high unemployment, due to a large pool of available candidates, clients are able to directly hire and recruit qualified candidates without the involvement of our services.

In prior years, we have experienced revenue and earnings growth both organically and through acquisitions. There is no assurance that we will resume this pace of growth in the future or meet our strategic objectives for growth. Our revenues declined this past year due to adverse macroeconomic conditions, includingincluding, anbut ITnot industrylimited recession.to, increasing interest rates, tariffs, efforts by the Department of Government Efficiency ("DOGE"), and a government shutdown. Our growth could be adversely affected by many other factors, including future technology industry conditions, macroeconomic events such as inflation,inflation and recession, and interest rate increases, competition, and labor market trends or regulations. If our growth rate continues to decline, or we fail to grow at the pace anticipated and we are unsuccessful in our growth initiatives and strategies, our financial results could be less than our expectations or those of investors or sell-side research analysts.

Performance under contracts, including those on which we have partnered with third parties, may be adversely affected if we or the third parties fail to deliver on commitmentscommitments, or otherwise breach obligations to our clients.

Our contracts are complex and, in some instances, may require that we partner with other parties, including software and hardware vendors, to provide the complex solutions required by our clients. Our ability to deliver the solutions and provide the services required by our clients is dependent on our and our partners’ ability to meet our clients’ delivery schedules and other expectations. Our partners may at times be impacted by global events, the changing macroeconomic environment and supply chain disruptions, as well as rapid increases in demand for their products and services, any of which may impact their ability to provide their products and services within our expected timeframestimeframes, or at anticipated prices. If we or our partners fail to deliver services on time, our ability to complete the contracts may be adversely affected.

Our success depends on our ability to keep pace with rapid technological changes in the development and implementation of our services. We rely on a variety of technologies to support important functions in our business, including the recruitment, placement and monitoring of our billable professionals, our billings, and candidate and client data analytics. If we do not sufficiently invest in new technology and(including industryartificial developments (suchintelligence as emergingmore jobfully anddescribed resume posting servicesbelow), appropriately implement new technologies, or evolve our business at sufficient speed and scale in response to such developments, or if we do not make the right strategic investments to respond to these developments, our services, results of operations, and ability to develop and maintain our business could be adversely affected.

We develop and utilize artificial intelligence, including generative artificial intelligence, machine learning, and similar tools and technologies that collect, aggregate, analyze, or generate data or other materials or content (collectively, “AI”) in connection with our business.business and our services.

Although we conduct diligence on third-party AI developers, we will not be able to control the manner in which third-party AI technologies are developed or maintained. Legal and regulatory frameworks related to the use of AI are rapidly evolving worldwide,worldwide includingand duethere is divergence among such AI laws and regulations. The continued enactment or expansion of laws and regulations related to the perceived or actual risksuse of bias,AI unfairin discrimination,our transparency,operations could result in increased compliance costs related to our use of AI. Violations of these laws may lead to reputational damage, financial penalties and informationincreased security.regulatory scrutiny and oversight. Furthermore, because AI technology itself is highly complex and rapidly developing, it is not possible to predict all of the legal, operational, or technological risks that may arise relating to the use of AI.

Our daily business operations depend on our information technology systems and third-party systems (collectively, "IT Systems") for a wide variety of functions, including, among other things, identifying consulting and staffing resources, matching personnel with client assignments, and managing our accounting and financial reporting functions. In conducting our business, we and certain of our third-party providers routinely collect, retain, and process data about customers, employees, business partners, and others, including personally identifiable information (PII) on these systems about our employees and billing professionals and their dependents, as well as sensitive and/or proprietary information belonging to our business such as trade secrets (collectively, “Confidential Information”). Any informationIT technology systemsSystems are at risk of being compromised, including through malicious activity or human or technological error. AlthoughWhile we devoteinvest significant resources toin maintainmaintaining and regularly upgradeenhancing our information security technologies, and we have implemented security controls to help protect the security and privacy of our business information on-premiseboth on‑premises and in the cloud, our and third-party information technology systems’the confidentiality, integrity, and availability areof our IT Systems remain subject to cybersecurity risks. These risks arise from diversea range of threat actors, suchincluding asstate‑sponsored state-sponsored organizations,groups, opportunistic hackershackers, and hacktivists, as well as throughfrom diversemultiple attack vectors,vectors. suchSuch asthreats potentialmay include security breachesincidents throughinvolving third-partythird‑party service providers, employee negligence, fraud or misappropriation, business email compromisecompromise, and other cybersecurity threats,events, including denial ‑of ‑service attacks, viruses, ransomware, social engineering/phishing, or phishing schemes, and other malicious softwaresoftware. programs,Additional andrisks as amay result offrom malicious code embedded in open-sourceopen‑source software, or from misconfigurations, bugsbugs, or other vulnerabilities in commercial software that is integrated into our or our service providers’ IT systems, products or services.Systems. Successful cyberattacks can result in third parties gaining unauthorized access to our informationIT technology systemsSystems for purposes of misappropriating assets or confidentialConfidential information,Information, corrupting data, or causing operational disruption. We are continuously exposed to unauthorized attempts to compromise the confidentiality, integrity, and availability of our IT systemsSystems and Confidential Information through cyber attacks,cyberattacks, insider threats and other information security threats, including physical break-ins and malicious insiders, and we and certain of our third-party providers have, from time to time, experienced security incidents. Moreover, we have acquired and continue to acquire companies with cybersecurity vulnerabilities and/or unsophisticated security measures, which exposes us to significant cybersecurity, operational, and financial risks. Remote and hybrid working arrangements at our company (and at many third-party providers) also increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks. Additionally, any integration of artificial intelligence in our or any service providers’ operations, products or services has and is expected to continue to pose new or unknown cybersecurity risks and challenges. Because our products and services are integrated with our customers’ systems and processes, any circumvention or failure of our cybersecurity defenses or measures could compromise the confidentiality, integrity, and availability of our customers’ own IT systems or Confidential Information as well.

Any security incident that results in the compromise of the confidentiality, integrity, and availability of our IT systemsSystems and Confidential Information we collect and retain, or that otherwise disrupts or negatively impacts our operations, could harm our reputation, lead to customer or employee attrition, and expose us to regulatory enforcement action or litigation (including class actions). Because the techniques used in cyber attacks change frequently and threat actors are becoming increasingly sophisticated in using techniques and tools—including artificial intelligence—that circumvent security controls, evade detection and remove forensic evidence, despite maintaining robust detection and remediation efforts, we may face difficulties in detecting, investigating, remediating or recovering from future attacks or incidents, or to avoid a material adverse impact to our IT systems,Systems, Confidential Information or business. In addition, our informationIT technology systemsSystems are vulnerable to fire, storm, flood, power loss, computer and network failures, problems with transitioning to upgraded or replacement systems or platforms, flaws in third-party software or services, terrorist attacks, and similar events. All of these risks are also applicable wherever we rely on outside vendors to provide services. We cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all. For information on our cybersecurity risk management, strategy, and governance, see Item 1C. Cybersecurity.

As part of our growth strategy, we have made numerous acquisitions, and we intend to continue to pursue select acquisitions in the future, including the acquisition of TopBloc,Quinnox LLC,Inc., which we announced on FebruaryJanuary 4,20, 2025,2026, subject to regulatory approval. We compete with other companies for acquisition opportunities and there can be no assurance that we will be able to successfully identify suitable acquisition candidates or be able to complete future acquisitions on favorable terms, if at all. In making acquisitions, we may pay substantial amounts of cash, incur debt, or issue securities to finance our acquisitions, which would adversely affect our liquidity or capital resources or result in dilution to our stockholders. There also can be no assurance that we will realize the benefits expected from any transaction or receive a favorable return on investment from our acquisitions.

Our outstandinglong-term debt at December 31, 20242025, includedis comprised of (i) a Senior Secured Credit Facility, inclusive of term loan of $493.8 million under our senior secured credit facility due 2030,A and $550.0B, millionas ofwell 4.625% unsecured senior notes due 2028. We haveas a $500.0 million senior secured revolving credit facilityfacility, dueand 2028,(ii) whichUnsecured isSenior fullyNotes, availablesee asNote 9. Long-Term Debt in Item 8. Financial Statements and Supplementary Data. The components of Decemberour 31,Senior 2024.Secured OurCredit termFacility loan has ahave variable interest rate,rates, making us vulnerable to increases in interest rates. Additionally, we use a portion of our cash provided by operations for interest payments on our debt rather than for our operations.

Demand for the IT services and solutions that we provide is significantly affected by global market and economic conditions, including recessions, inflation, interest rates, tax rates, tariffs, and economic uncertainty. Our business is particularly susceptible to economic conditions in the United States where our clients or operations are concentrated. As economic activity slows, many clients or potential clients reduce their use of and reliance upon billable professionals, which reduces the demand for the Company’s services and could significantly decrease the Company’s revenues and profits. During periods of reduced economic activity, we may also be subject to increased competition for market share and pricing pressure. As a result, any significant economic downturn in the United States or other countries in which we operate could have a material adverse effect on our business, financial condition, and results of operations.

Our business relies heavily on the health and safety of our employees, billable professionals, and customers. The impact of a health crisis such as a pandemic on our business, operations, and future financial performance could include, but is not limited to, adverse impacts to our operating income, operating margin, net income, earnings per shareshare, and operating cash flows, as expenses may not decrease at the same rate as revenues decline. In addition, our quarterly and annual revenue growth rates and expenses as a percentage of our revenues may differ significantly from our historical rates, and our future operating results may fall below expectations.

Our environmental, social and governance (ESG)sustainability commitments and disclosures may expose us to reputational risks and legal liability.

We, as with other companies, face scrutiny related to our environmental, social and governance (“ESG”)sustainability practices and disclosures required or made by certain customers, employees, investors, shareholder advocacy groups, federal, state, local and localforeign governments, and other stakeholders. With this increased focus, public reporting of ESG practices has become commonplace. Requirements to report on our ESGsustainability practices may therefore result in increased costs, enhanced compliance or disclosure obligations, or other adverse impacts on our business, financial condition, or results of operations. At the request of our clients, we have reported on various disclosure frameworks and standards, and the interpretation or application of those frameworks and standards may change from time to time or may not meet the expectations of our clients, investors or other stakeholders.

Furthermore, our processes and controls for reporting ESGsustainability matters across our operations and supply chain are evolving along with multiple disparate standards for identifying, measuring, and reporting ESGsustainability metrics, including ESG-related disclosures that may be required by various regulators.regulators regarding our greenhouse gas emissions. Such standards may change over time, which could result in significant revisions to our currentemissions goals,reduction reported progress in achieving such goals,targets or ability to achieve such goalstargets in the future.

Contract backlog, which was $3.1approximately $3 billion at December 31, 2024,2025, is a useful measure of potential future revenues for our Federal Government Segment. Contract backlog consists of contracts for which funding has been formally awarded (funded backlog of $0.5 billion at December 31, 20242025) and unfunded backlog, which represents the estimated future revenues to be earned from negotiated contract awards for which funding has not been awarded, and from unexercised contract options (unfunded backlog of $2.6$2.5 billion at December 31, 20242025). The U.S. government’s ability to not exercise contract options, to reduce orders, or to modify, curtail or terminate our contracts, makes the calculation of our Federal Government Segment contract backlog subject to numerous uncertainties.uncertainty. Due to the uncertain nature of our contracts with the U.S. government, we may never realize revenue from some of the contracts that are included in our contract backlog.

Our businessFederal Government Segment depends upon continued U.S. government expenditures on cybersecurity, cloud and enterprise IT, AI/ML, digital transformation, and other programs that we support. During 2024,2025, revenues from contracts directly with U.S. federal government agencies were 2426 percent of consolidated revenues. All of our government contracts can be terminated by the U.S. government either for its convenience or if we default by failing to perform under the contract. The U.S. government conducts periodic reviews of U.S. defense strategies and priorities, which may shift Department of Defense budgetary priorities, reduce overall spending, or delay contract or task order awards for defense-related programs from which we would otherwise expect to derive a significant portion of our future revenues. Any of these changes could impair our ability to obtain new contracts or contract renewals. Any new contracting requirements or procurement methods could be costly or administratively difficult for us to implement. Our revenues, cash flows, and operating results could be adversely affected by spending caps or changes in budgetary priorities, as well as by delays in the government budget process, program starts, the award of contracts or task orders under contracts, or by a government shutdown. Considerable uncertainty exists regarding how future budget and program decisions will unfold, including the spending priorities of the U.S. governmentgovernment. andFrom thetime-to-time, uncertainty related to the administration's efforts to improve efficiency. Because the U.S. Congress did not complete a budget before the end of the 2024 fiscal year,certain government operationsagencies aremay currently beingbe funded through short-term continuing resolutions. These continuing resolutions authorize agencies of the U.S. government to continue to operate, but do not authorize new spending initiatives. When the U.S. government operates under a continuing resolution, contract awards may be delayed, canceled, or funded at lower levels which could adversely impact our operations, cash flows, and financial results. Failure to complete a budget for fiscal year 2025 or to provide for another continuing resolution by applicable deadlines may result in a federal government shutdown, which could cause us to incur labor or other costs without reimbursement under customer contracts or the delay or cancellation of key programs, and could adversely impact our operations, cash flows, and financial results.

Our Federal Government Segment generates revenues under various types of contracts: firm-fixed-price, cost reimbursable, and time and materials.time-and-materials. Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. Under firm-fixed-price contracts, we perform specific tasks and services for a fixed price. Compared with cost reimbursable, firm-fixed-price contracts generally offer higher margin opportunities, but involve greater financial risk because we bear the impact of cost overruns. Failure to accurately estimate costs, resources, and technology needed to perform our contracts or to effectively manage and control our costs during the performance of work could result in reduced profits or in losses. Under cost reimbursable contracts, we are reimbursed for allowable costs plus a profit margin or fee. These contracts generally have lower profitability and less financial risk. Under time-and-materials contracts, we are reimbursed for labor at negotiated hourly billing rates and for certain expenses. We assume financial risk on time-and-materials contracts because we assume the risk of performing those contracts at negotiated hourly rates.

We rely on teaming relationships with other prime contractors and subcontractors in order to submit bids for large procurements or other opportunities where we believe the combination of services, products, and solutions provided by us and our teammates will help us to win and perform theunder contract.contracts. Our future revenues and growth prospects could be adversely affected if other contractors eliminate or reduce their contract relationships with us, or if the U.S. government terminates or reduces these other contractors’ programs, does not award them new contracts, or refuses to pay under a contract. We may have disputes with our subcontractors arising from, among other things, the quality and timeliness of work performed by the subcontractor, customer concerns about the subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, our hiring of a subcontractor’s personnel, or the subcontractor’s failure to comply with applicable law. If any of our subcontractors fail to satisfactorily perform the agreed-upon services or have regulatory compliance or other problems, our ability to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized. When we are in the role of a subcontractor, we often lack control over fulfillment of a contract, and poor performance on the contract could impact our customer relationship, even when we perform as required. Moreover, our revenues and operating results could be adversely affected if any prime contractor chose to offer directly to the customer services of the type that we provide, or if they team with other companies to provide those services.

Audits of our contracts by U.S. government agencies for contracts with federal government clients could result in unfavorable audit results that could subject us to a variety of penalties and sanctions and could harm our reputation and relationships with our customers and adversely impact results of operations.

Federal government agencies, including the Defense Contract Audit Agency and the Defense Contract Management Agency,agencies routinely audit and investigate governmentcontractors’, contractswhether andcommercial governmentor contractors’federal, administrative processes and systems. These agencies review our performance on contracts, pricing practices, cost structure, and compliance with applicable laws, regulations, and standards. Any costs found to be improperly allocated to a specific contract will not be reimbursed, while such costs already reimbursed must be refunded. If a government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with federal government agencies in the future.

We employ people internally and in the workplaces of other businesses. Our ability to control or influence the workplace environment of our clients is limited. Further, many of the individuals that we place with our clients have access to client information systems and confidential information. As the employer of record of our billable professionals, we incur a risk of liability due to the actions of our billable professionals at client sites or with client information and systems, and to our billable professionals for various workplace events, including claims of physical injury, discrimination, harassment, or failure to protect confidential personal information. Other inherent risks include possible claims of errors and omissions, claims related to acquisitions and their earn-outs,acquisitions, intentional misconduct, release, misuse or misappropriation of client intellectual property, criminal activity, torts, or other claims. We have been and could, in the future, be subject to large collective, class, or Private Attorneys General Act ("PAGA") actions alleging violation of wage and hour laws. These types of actions typically involve substantial claims and significant defense costs. We also have been subject to legal actions alleging vicarious liability, job posting violations, negligent hiring, discrimination, sexual harassment, retroactive entitlement to employee benefits or pay, retaliation, and related legal theories. We may be subject to liability in such cases even if the contribution to the alleged injury was minimal. Moreover, in most instances, we are required to indemnify clients against some or all of these risks if they are caused by us or our employees, and we could be required to pay substantial sums to fulfill our indemnification obligations.

A failure of any of our employees internally, or billable professionals in clients' workplaces, to observe our policies and guidelines intended to reduce these risks could result in negative publicity, injunctive relief, investigations and/or charges, payment of monetary damages or fines, or other material adverse impacts on our business. Claims raised by clients stemming from the improper actions of our billable professionals, even if without merit, could cause us to incur significant expense associated with the costs or damages related to such claims. Further, such claims by clients could damage our business reputation and result in the discontinuation of client relationships. Any associated negative publicity could adversely affect our ability to attract and retain clients and qualified billable professionals in the future.

The IT services and solutions industry is regulated in the United States and other countries in which we operate. We are subject to federal, state, and local laws and regulations governing the employer/employee relationship, such as those related to payment of federal, state, and local payroll and unemployment taxes for our corporate employees and billable professional employees, tax withholding, social security or retirement benefits, licensing, wage and hour requirements, paid sick leave, paid family leave and other leaves, employee benefits, pay equity, non-discrimination, sexual harassment, and workers’ compensation; and we must further comply with immigration laws and a wide variety of notice and administrative requirements, such as record keeping, written contracts, notification, and reporting. We are also subject to U.S. laws and regulations relating to government contracts with federal agencies. In certain other countries, we may not be considered the legal employer of our temporary personnel, however we are still responsible for collecting taxes and social security deductions and transmitting these amounts to the taxing authorities.

In addition, we receive, store, use and otherwise process information that relates to individuals and/or constitutes “personal information” or similar terms under applicable data privacy laws, including from and about our employees and business contacts. We also depend on a number of third-party vendors in relation to the operation of our business, a number of which process personal information on our behalf. We and our vendors are subject to data privacy, protection, and security laws, rules, regulations, industry standards and other requirements, including the European Union General Data Protection ActRegulation ("EU GDPR"), the U.K. General Data Protection Regulation and the U.K.’sU.K. Data Protection Act 2018 (which implementscollectively, the GDPR into "U.K. lawGDPR"). These laws impose stringent data protection requirements on personal information and provide for significant penalties for noncompliance. These laws impact our U.S. operations as well as our European operations as they apply not only to third-party transactions, but also to transfers of personal information among the Company and its subsidiaries. Certain U.S. states such as California have also enacted new or modified data privacy laws imposing requirements including security measures for personal information. TheAlthough we have implemented and are implementing policies and procedures designed to comply with these laws and regulations, the application and interpretation of data privacy laws are constantly evolving and are subject to change, creating a complex compliance environment. In some cases, these requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other. Further, there has been a substantial increase in legislative activity and regulatory focus on data privacy and security in the United States and elsewhere, including in relation to cybersecurity incidents. Any non-compliancefailure or perceived non-compliancefailure by us or our vendors to comply with theapplicable laws, rules, regulations and other requirements related to consumer protection, information security, data protection and privacy laws applicable to our business could result in legal claims or proceedings (including class actions), governmental enforcement actions and investigations, fines, and other penalties that could potentially have an adverse effect on our operations and reputation.reputation including a loss of confidence in us or damage to our brands. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. If any of these events were to occur, our operations and financial condition could be materially adversely affected.

Future changes in the laws or governmental regulations affecting our business may result in the prohibition or restriction of certain types of consulting or employment services that we are permitted to offer, or the imposition of new or additional compliance requirements that could increase our costs and reduce our revenues and earnings. Due to the substantial number of state and local jurisdictions in which we operate, there also is a risk that we may be unable to adequately monitor actual or proposed changes in, or the interpretation of, the laws or governmental regulations of such states and localities. Any delay in our compliance with changes in such laws or governmental regulations could result in potential fines, penalties, or other sanctions for non-compliance. In addition, although we may elect to bill some or all of any additional costs to our customers, there can be no assurances that we will be able to increase the fees charged to our customers in a timely manner and in a sufficient amount to fully cover any increased costs as a result of future changes in laws or government regulations.

We conduct business outside the United States primarily in Canada and Europe, and we have delivery centers in Mexico and India. Our international operations, which represented approximately twofive percent of our consolidated revenuescosts of services in 2024,2025, expose us to, among other things, operational, regulatory, and political risks in the countries in which we operate.

ASGN provides information technology ("IT") services and solutions across the commercial and government sectors. ASGN operates through two segments, Commercial and Federal Government. The Commercial Segment, which is the largest segment, provides consulting, creative digital marketing, and permanent placement services primarily to Fortune 1000 and large mid-market companies. The Federal Government Segment provides advanced IT solutions in data and AI, cybersecurity, and enterprise transformation to some of the Departmentworld's ofleading Defense,agencies in the intelligence community,public and keyprivate federal civilian agencies, namely the Department of Homeland Security.sectors. Virtually all of the Company's revenues are generated in the United States.

Recoverability of Goodwill and Trademarks — Goodwill and trademarks are evaluated for impairment annually on October 31st, or more frequently if an event occurs or circumstances change, including but not limited to, a significant decrease in expected revenues or cash flows; an adverse change in the business environment, regulatory environment or legal factors; or a substantial sustained decline in the market capitalization of our stock. Goodwill is tested at the reporting unit level, which is generally an operating segment or one level below the operating segment level, where a business operates and for which discrete financial information is available and reviewed by segment management. The Company's only identifiable indefinite-lived intangible assets are its trademarks.

To estimate the fair value of a reporting unit, quantitative analysis would generally include a combination of a discounted cash flow (“DCF”) model and a market approach. Key inputs to the DCF model would include (i) future revenues,revenues; (ii) earnings before interest, taxestaxes, depreciation and amortization; and (iii) the weighted average cost of capital discount rate. As a result of a quantitative assessment, if the carrying amount exceeds the estimated fair value, an impairment charge would be recorded to reduce the carrying amount of goodwill.

For the 20242025 impairment test of goodwill and trademarks, the Company performed a qualitative assessment and determined there were no indicators of impairment and it was more likely than not that the fair value of eachits of thetwo reporting units, Commercial and theFederal Government, and its trademarks, exceeded their respective carrying amounts.

From an industry perspective, the Company operates in six broad industry verticals. Commercial Segment revenues (70.070.1 percent of total revenues) were down 9.62.7 percent year-over-year and are categorized into five broad industry verticalsindustries: (i) Consumer and Industrial, (ii) Financial Services, (ii) Consumer and Industrials, (iii) Healthcare, (iv) Technology, Media and Telecom ("TMT"), (iv) Healthcare, and (v) Business and Government Services. The TMTConsumer and Industrials industry verticalwas hadup low-teens and Healthcare was up low single-digitsingle growth,digits, while the remaining fourthree industryindustries verticalsdeclined. declinedFederal Government Segment revenues (29.9 percent of total revenues) were down 3.3 percent year-over-year. Federal Government Segment revenues are categorized into four customer types: (30.0i) percentDefense ofand totalIntelligence, revenues(ii), theNational sixthSecurity, industry(iii) vertical,Civilian, wereand down(iv) 3.5other percentclients. Federal Civilian and Defense and Intelligence both declined year-over-year, reflectingwhile lowerNational third-partySecurity softwarewas licenses revenues compared with the prior year.up.

Total IT consulting services revenues were $2.4$2.5 billion (57.562.3 percent of total revenues), downup 0.55.1 percent year-over-year. Commercial Segment consulting revenues were $1.3 billion, up 14.4 percent year-over-year. Federal Government Segment revenues, which are all consulting revenues, were $1.2 billion, down 3.53.3 percent year-over-year mainly related to the loss of certain contracts as stateda above.result Commercialof Segmentinitiatives consultingassociated revenueswith were $1.1 billion, up 3.0 percent year-over-year.DOGE. Assignment revenues, which totaled $1.7$1.5 billion (42.537.7 percent of total revenues), were down 16.313.8 percent year-over-year, reflecting continued softness in the portions of the Commercial Segment Business that are more sensitive to changes in the macroeconomic cycles (i.e., more cyclical).cycles.

Gross profit is comprised of revenuesrevenues, less costs of services, which consist primarily of compensation for our contractbillable professionals, other direct costs, and reimbursable out-of-pocket expenses.

Selling, generalgeneral, and administrative ("SG&A") expenses consist primarily of compensation expense for our field operations and corporate staff, rent, information systems, marketing, telecommunications, public company expensesexpenses, and other general and administrative expenses. SG&A expenses were $854.0 million (21.5 percent of revenues), compared with $821.2 million (20.0 percent of revenues), compared with $844.2 million (19.0 percent of revenues) in 2023. The decrease in2024. SG&A expenses wasfor primarilythe dueyear ended December 31, 2025 included $26.5 million in acquisition, integration, and strategic planning expenses, inclusive of $5.2 million in charges related to lowerstrategic compensation-relatedworkforce expense.optimization initiatives. Additionally, in 2025, there was a $4.4 million write-off charge related to previously capitalized costs for software enhancements that will no longer be placed into service.

Amortization of intangible assets was $58.1$64.8 million, downup from $71.7$58.1 million in 2023.2024. ThisThe decreaseincrease was duerelates to (i)amortization of intangible assets associated with the acceleratedacquisition of TopBloc (see Note 6. Acquisition in Item 8. Financial Statements and Supplementary Data), partially offset by lower amortization methodfrom wherebyolder mostintangible ofassets ourthat acquiredare intangiblesreaching, or have higher amortization rates at the beginning of their useful lives, and (ii) older intangibles reachingreached, the end of their useful lives.

Interest expense, net, which consists primarily of cash-based interest expense, amortization and adjustments to deferred loan costs, and interest income, was $64.3$67.7 million, downup from $66.4$64.3 million in 2023.2024. The decreaseincrease was primarilydue the result ofto higher interestoutstanding income and lower debt amendment fees (related to refinancing the senior secured credit facility in both periods), partially offset by higher interest expense on the senior secured credit facility.borrowings. The weighted-average outstanding borrowings for 20242025 and 20232024 were $1.21 billion and 5.6 percent, and $1.05 billion and the cash-based interest expense rate was 6.0 percent and 5.9 percent (excluding interest income and costs related to debt amendments),percent, respectively.

The provision for income taxes was $64.9$49.1 million, down from $78.4$64.9 million in 20232024 due to lower income before income taxes. The effective tax rate of 27.030.2 percent was slightly higher than the effective tax rate of 26.327.0 percent in 2023.2024. The increase in the effective income tax rate was primarily due to higher non-deductible executive compensation related to the termination of the Company’s deferred compensation plan (see Note 12. Stock-Based Compensation and Other Employee Benefit Plans in Item 8. Financial Statements and Supplementary Data), and tax shortfalls related to stock-based compensation arrangements.

Commercial consulting bookings are the value of new contracts entered into during a specified period, including adjustments for the effects of changes in contract scope and contract terminations ("Bookings"). The underlying contracts are terminable by the client on short notice with little or no termination penalties. Measuring Bookings involves the use of estimates and judgments and there are no independent standards or requirements governing the calculation of bookings. Information regarding Bookings is not comparable to, nor should it be substituted for, an analysis of reported revenues. The book-to-bill ratio for our commercial consulting revenues is the ratio of Bookings to commercial consulting revenues for a specified period. The average duration of commercial consulting projects is approximately one year.

Our working capital, which is current assets less current liabilities, at December 31, 20242025 was $550.6$491.9 million, and our cash and cash equivalents were $205.2$161.2 million. Our cash flows from operating activities have been our primary source of liquidity and have been sufficient to meet our working capital and capital expenditure needs. At December 31, 2024,2025, we had fullapproximately availability$455.0 million available under the $500.0 million revolving credit facility. We believe that our cash and cash equivalents on hand, expected operating cash flows, and availability under our revolving credit facility will be sufficient to fulfill our obligations, working capital requirements, capital expenditures, and capitalanticipated expendituresacquisitions (see Note 17. Subsequent Events in Item 8. Financial Statements and Supplementary Data) for the next 12 months.months and beyond.

For details on the Company’s senior secured credit facility, comprised of a revolving credit facilityfacility, andterm loan A, term loan B, and unsecured senior notes, see Note 8.9. Long-Term Debt in Item 8. Financial Statements and Supplementary Data.

Commitments and Contingencies — The following table sets forth, on an aggregate basis, the amounts of specified contractual cash obligations required to be paid in the future periods shown (in millions):

(3) Purchase obligations areinclude non-cancelable job board service agreements, outsourcing services, software maintenance and license agreements and software subscriptions,subscriptions. maintenance,In andthe licensefourth agreements.quarter of 2025, the Company entered into a multi-year contract for outsourcing services.

For additional information about these contractual cash obligations, see Notes 4.5. Leases, 8.9. Long-Term DebtDebt, and 9.10. Commitments and Contingencies in Item 8. Financial Statements and Supplementary Data.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCHJUNE 31,30, 2026 COMPARED WITH THE THREE MONTHS ENDED MARCHJUNE 31,30, 2025

Consolidated revenues for the quarter were $968.3$1.0 million,billion, thedown same1.3 aspercent the year ago period.year-over-year. The table below shows our revenues by segment for the three months ended MarchJune 31,30, 2026 and 2025 (in millions).

Commercial Segment revenues were approximately 70 percent of total revenues and were updown 0.50.9 percent year-over-year. From an industry perspective, the increasedecrease was mainly attributable to reduced revenue growth from clients across Healthcare,Business Services, Financial Services, Consumer and Industrial, and TMT. The revenue growth from those industries wasHealthcare, partially offset by year-over-year declinesrevenue acrossgrowth Businessin Services and Financial Services.TMT. Federal Government Segment revenues were approximately 30 percent of total revenues and were down 1.12.3 percent year-over-year. The decrease was mainly attributable to reduced revenue declines from Defense and Intelligence and Federal Civilian agencies, aspartially aoffset resultby of initiatives associated with the Department of Government Efficiency (“DOGE”), which began at the end of the first quarter of 2025. The year-over-year effects of DOGE initiatives will lapseincreases in the second quarter of 2026. Revenuesrevenues from National Security agencies and Otherother customers increased year-over-year.customers.

The table below shows gross profit and gross margin by segment for the three months ended MarchJune 31,30, 2026 and 2025 (in millions).

Consolidated gross profit declined 3.23.0 percent year-over-year. Gross margin for the firstsecond quarter of 2026 was 27.528.3 percent, a contractioncompression of 9040 basis points compared with the firstsecond quarter of 2025. Gross margin for the Commercial Segment was down 14090 basis points year-over-yearyear-over-year, primarily driven by business mix related to a smaller contribution from some of our higher-margin solutions withinincluding thepermanent Commercialplacement Segment,revenues, as well as changes in foreign currency exchange rates primarily related to our delivery center in Mexico. Gross margin for the Federal Government Segment was up 1040 basis points,points year-over-year.year-over-year, driven by focused efforts to improve profitability across the contract portfolio.

Selling, general, and administrative ("SG&A") expenses consist primarily of compensation expense for our field operations and corporate staff, information systems, rent, public company expenses, and other general and administrative expenses. SG&A expenses were $224.4$226.2 million, compared with $214.5$216.8 million in the firstsecond quarter of 2025. SG&A expenses in the firstsecond quarter of 2026 included $12.8$9.8 million in acquisition, integration, and strategic planning expenses, compared with $3.3$8.3 million in the firstsecond quarter of 2025.

Amortization of intangible assets was $14.5$17.3 million, compared with $14.3$16.9 million in the firstsecond quarter of 2025. The increase relates to the effects of the Quinnox acquisition, partially offset by older intangibles reaching the end of their useful lives.

Interest expense, net, which consists primarily of cash-based interest expense, amortization and adjustments to deferred loan costs, and interest income, was $17.1$20.4 million, up from $15.4$18.2 million in the firstsecond quarter of 2025. The increase was due to higher outstanding borrowings. The weighted-average outstanding borrowings and cash-based interest rates in the firstsecond quarter of 2026 and 2025 were $1.49 billion and 5.3 percent, and $1.28 billion and 5.2 percent, and $1.13 billion and 5.55.6 percent, respectively.

The provision for income taxes was $5.1$6.5 million, down from $10.3$12.1 million in the firstsecond quarter of 2025 due to lower income before income taxes. The effective tax rate was 48.131.4 percent, up from 33.029.2 percent in the firstsecond quarter of 2025. The increase in the effective tax rate relatesreflects tohigher taxforeign shortfallsincome ontaxes, stock-basedthe compensation.non-renewal of the Work Opportunity Tax Credit ("WOTC"), and lower income before income taxes.

Net income was $5.5$14.2 million, down from $20.9$29.3 million in the firstsecond quarter of 2025.

Our working capital, which is current assets less current liabilities, at MarchJune 31,30, 2026, was $508.4$523.2 million, and our cash and cash equivalents were $143.6$152.9 million. Our cash flows from operating activities have been our primary source of liquidity and have been sufficient to meet our working capital and capital expenditure needs. At MarchJune 31,30, 2026, we had approximately $160.0$180.0 million available under the $500.0 million revolving credit facility. We believe that our cash and cash equivalents on hand, expected operating cash flows, and availability under our revolving credit facility will be sufficient to fulfill our obligations, working capital requirements, and capital expenditures for the next 12 months and beyond.

Net cash provided by operating activities was $18.5$70.7 million for the first threesix months of 2026, compared with $16.8$141.7 million in the same period of 2025. Net cash provided by operating activities before changes in operating assets and liabilities was $50.2$112.4 million, compared with $66.4$137.5 million in the same period of 2025. Changes in operating assets and liabilities resulted in net cash usage of $31.7$41.7 million for the first threesix months of 2026, compared with $49.6net cash provided of $4.2 million in the same period of 2025. This year-over-year change primarily related to timing of payments. Both comparative periods had an increase in accounts receivable days sales outstanding, contributing to the seasonally low cash provided by operating activitiesoutstanding in the first threesix months of the year.2026.

Net cash used in investing activities for the first threesix months of 2026 was $293.0$298.9 million, comprised of $283.6 million used to acquire Quinnox and $9.4$15.3 million used for capital expenditures. Net cash used in investing activities for the first threesix months of 2025 was $316.3$325.4 million, comprised of $306.1 million used to acquire TopBloc and $10.2$19.3 million used for capital expenditures.

Net cash provided by financing activities was $257.6$220.3 million for the first threesix months of 2026 and included net borrowings under the senior secured credit facility totaling $293.1$269.2 million, offset by $39.0$50.5 million used to repurchase the Company's common stock. Net cash provided by financing activities in the first threesix months of the prior year was $201.2$116.3 million and included net borrowings under the senior secured credit facility totaling $248.7$177.5 million, offset by $50.4$59.9 million used to repurchase the Company's common stock.

There were no material changes to our critical accounting policies and estimates during the firstsecond quarter of 2026 compared with those disclosed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2025 10-K.