Greetings. Welcome to the ASGN Incorporated Fourth Quarter and Full Year 2021 Earnings Call. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Kimberly Esterkin, Investor Relations. Thank you. You may begin..

Thank you, operator. Good afternoon, and thank you for joining us today for ASGN's Fourth Quarter and Full Year 2021 Conference Call. With me are Ted Hanson, Chief Executive Officer; Rand Blazer, President; and Ed Pierce, 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..

Thank you, Kimberly, and thank you for joining ASGN's Fourth Quarter 2021 Earnings Call. The fourth quarter capped off an extremely productive year for ASGN with momentum building throughout Q4 and positioning us very well for 2022.

I want to express my gratitude to all of my teammates at ASGN for your exceptional performance and dedication to our company and our clients this year. Your efforts are the reason why ASGN is a market leader. Beginning with the fourth quarter, revenues totaled $1.1 billion, up 17% year-over-year and ahead of the top end of our guidance range.

Adjusted EBITDA totaled $130.3 million, an improvement of 26% year-over-year and also surpassing the high end of guidance. Outperformance of the Commercial segment led by our consulting business, along with higher productivity across the company, drove our progress in the quarter.

Our Federal Government segment experienced an improving business mix, resulting in impressive EBITDA and gross margins. More on that shortly.

Our success in the final quarter of 2021, combined with the strength of the prior 3 quarters, resulted in record full year revenues of $4 billion and adjusted EBITDA of $483.1 million, increases of 14.5% and 23% year-over-year, respectively.

Our Commercial segment accounted for $2.9 billion or 73% of consolidated revenues in 2021 while our Federal Government segment accounted for $1.1 billion or 27% of total annual revenues. Free cash flow from continuing operations totaled $246.9 million for 2021.

Over the past year, we maintained a very balanced and flexible approach to capital allocation, investing in our organic growth, making strategic acquisitions that support our long-term growth strategy and providing returns to our shareholders.

During 2021, we spent $181.3 million on the repurchase of our common stock, of which $13 million went under the new 2-year $350 million repurchase plan approved by our Board of Directors in December of last year.

While we will leverage our share buyback program this year, we continue to believe that M&A remains our best use of and highest return on invested capital, and I will provide an update on our recent acquisitions momentarily.

Ultimately, the acceleration of our revenue growth throughout Q4, momentum we are witnessing in Q1 to date and our first quarter 2022 guidance, which Ed Pierce will discuss shortly. Our all indications that our business remains on an upward trajectory.

While nearly all of our employees continue to work remotely, we are not experiencing any impacts of note from the recent surge in the pandemic. Our productivity and volume of work remains very high. Keep in mind that as a leading provider of IT services and solutions, our business has very steady and predictable trends.

These predictable trends include not just our revenue growth which remains above market, but also our continued margin and cash flow expansion. In other words, ASGN is not at the whims of fleeting technology trends. Our job is to implement technology and business solutions that are in demand by our clients.

These digitization and transformational trends are in their early innings of growth and have long trajectories ahead of them. This type of work provides us with a strong pathway for continued success across the end markets we serve.

With that said, let's turn to more detail on our segment performance for the fourth quarter, beginning with our largest segment, Commercial, which services large enterprise and Fortune 1000 companies. Our Commercial segment had a fantastic fourth quarter driven by strength in all service areas.

For the fourth quarter of 2021, the Commercial segment generated revenue of $790.5 million, up 24.1% year-over-year and up 22.7% organically. Growth in this segment reflected double-digit growth in commercial consulting, creative marketing and permanent placement services.

Apex Systems continued to report very strong growth and for the second time Creative Circles and CyberCoders surpassed their 2019 quarterly revenues. From an industry perspective, all 5 commercial industry verticals for Apex Systems experienced growth during the quarter with every vertical achieving double-digit growth on a year-over-year basis.

Apex System's commercial and industrial accounts were up double digits both year-over-year and sequentially due to the continued strength across all sectors with particularly high growth in retail, energy, utilities, airlines and airfreight accounts. Our Technology and Telecommunications or TMT vertical was up double digits year-over-year.

Within the vertical, technology and telecommunications accounts saw significant growth over Q4 2020. Government and Business Services was up double digits led by business services with high double-digit growth, while aerospace, defense and government accounts were down roughly 1% versus Q4 2020.

Financial Services accounts were up high single digits with the largest growth across insurance, fintech and wealth management accounts. Healthcare continued with double-digit growth driven by provider and payer accounts.

Revenues derived from our work in applications and project management, including agile, digital, ERP and cloud continued to perform well. Apex Systems top accounts and retail and branch accounts all achieved double-digit growth rates for Q4.

From an industry perspective for the quarter, top account revenue at Apex Systems was up in all 5 industry verticals we target while Creative Circle also posted positive growth across their top accounts. Permanent placements at CyberCoders exceeded our expectations.

Gross margin for the Commercial segment was 32.5%, up 130 basis points from Q4 of last year due to growth across our high-margin commercial consulting, creative digital marketing and permanent placement businesses. EBITDA margins were flat compared to Q4 2020.

Higher gross margin and higher productivity in our workforce was offset by higher variable incentive compensation due to the outperformance of our expectations for the quarter as well as investments in new headcount to support demand opportunities across our account portfolio.

We also continue to expand our commercial consulting revenues during the quarter. Commercial consulting revenues totaled $191.7 million in Q4 2021, a significant increase of 75.2% year-over-year and up 67.2% organically.

As you may recall at our Investor and Analyst Day conference this past September, we projected to reach $595 million in commercial consulting revenues for 2021. I'm pleased to report with our strong close to the year, commercial consulting revenues totaled $641.2 million.

Growth in consulting revenues was primarily driven by existing accounts, and our pipeline of future opportunities continues to grow at high double-digit rates and is trending positively in the first quarter. ASGN's consulting offerings remain an important source of value we provide our clients.

So we continue to build out solution strengths and identify acquisition opportunities that expand our consulting capabilities and service to our clients. To illustrate our solution capabilities and growth, our recent acquisition of Avaap Infor business unit gave us added capability in healthcare and manufacturing ERP solutions.

With this added strength, we won a major opportunity in Q4 to support a prestigious hospital's ERP process and move to the cloud. While this account was a long-standing account for Apex Systems, the added ERP solution strength gave us the opportunity to expand our relationship by bringing this solution to one of our existing clients.

This is a great example of how we are building and acquiring new solutions and taking that strength to the market. Now let's turn to the Federal Government segment, which provides mission-critical solutions to the Department of Defense, intelligence agencies and other civilian agencies.

Revenues for the Federal Government segment totaled $263.3 million for the fourth quarter, consistent with the prior year period on a very tough comparison. Flat year-over-year revenue was a result of a discontinuation of a low-margin contract, offset by revenue generated from our IndraSoft and ERPi acquisitions.

Importantly, even with this difficult revenue comparison, we saw an improving business mix that resulted in an adjusted EBITDA margin of 11.3% for the quarter, up 230 basis points year-over-year. Gross margin also improved and was up an impressive 560 basis points year-over-year.

The Federal Government segment's new business pipeline remained strong with $131.1 million in new business awarded during the quarter and a book-to-bill of 1.1 to 1 on a trailing 12-month basis. Contract backlog totaled $3 billion at the end of the fourth quarter, a healthy coverage ratio of 2.6x the segment's 12-month revenues.

In Q4, examples of some of the contracts awarded to our Federal Government segment included 3 contracts that were plus-ups for important mission-critical work, including an award to support activities in the development, fielding and sustainment of AI solutions for the DoD Combatant Command mission; a second award that focuses on licenses, training and experience in AI-related analytical tool kits for the Air Force; and a third award for AI-related labeling and expertise for classified mission activities.

Also during the quarter, we won a contract to provide system engineering, technical and advisory services to the Defense Advanced Research Projects Agency's Tactical Technology office.

A contract to provide software engineering and application modernization to the Air Force and a follow-on contract to provide mobile application development and mobile device management for a premier law enforcement customer.

With that, I will now turn the call over to Ed Pierce, our CFO, to discuss the fourth quarter financial results and our first quarter 2022 guidance.

Ed?.

Thanks, Ted. Good afternoon, everyone. As Ted mentioned earlier, our financial performance for the fourth quarter and full year 2021 exceeded our guidance estimates.

This performance reflected double-digit growth of our Commercial segment, solid performance of our Federal Government segment, the contribution from acquisitions and the expansion in gross and adjusted EBITDA margins in both business segments.

For the quarter, revenues were slightly above $1 billion, up 17% year-over-year and included $41 million from acquisitions made after Q3 of 2020. Gross profit, operating income and adjusted EBITDA were all up year-over-year and grew at higher rates and revenues. Revenues from our Commercial segment were $790.5 million, up 24.1% year-over-year.

And for the fourth straight quarter, all commercial divisions were up year-over-year. The revenue contributions from businesses acquired earlier in 2021 was approximately $8.8 million. Revenues from our Federal Government segment were $263.3 million, in line with last year and our guidance estimates.

The revenue consistency for the quarter was achieved despite a difficult prior year comp which had benefited from higher program spending on certain cost reimbursable contracts and from revenues on the web services project that was not renewed in Q3 of 2021.

Revenues for the quarter included a contribution of $32.2 million from acquisitions made after Q3 of 2020. Gross margin of 29.8% exceeded the high end of our guidance estimates and was up 310 basis points over Q4 last year. Both business segments reported year-over-year expansion in gross margin driven by improvements in business mix.

Gross margin for the Commercial segment was 32.5%, up 130 basis points year-over-year. This expansion was a result of double-digit growth of our high-margin commercial consulting and creative digital marketing services. Gross margin for the federal government segment was 21.6%, up 560 basis points as a result of changes in business mix.

This improvement resulted from one, lower level of revenues from certain cost reimbursable contracts that had revenue surges from 2020 -- in 2020 and from a low-margin web services project that was not renewed in Q3 of 2021; two, the contribution from high-margin businesses acquired in 2021; and three, higher profitability on certain firm-fixed price contracts whose initial term ended during the year.

SG&A expenses were $202.4 million, up 32.3% year-over-year.

The increase related to high year-over-year growth in the business, including double-digit growth of high-margin commercial revenue streams, which carry a higher level of expense than IT staffing and federal government services, higher headcount investments to support growth and higher incentive compensation and healthcare expenses that were both down in 2020 from historical levels.

Income from continuing operations was $65.4 million, up 35.4% year-over-year. Adjusted EBITDA was up 26% year-over-year, reflecting expansion of 90 basis points in our adjusted EBITDA margin to 12.4%. At year-end, cash and cash equivalents were $529.6 million, and there were no outstanding borrowings under our $250 million revolving credit facility.

Our senior secured debt leverage ratio was 1.02 to 1. Our financial estimates for the first quarter 2022 are set forth in our earnings release and supplemental earnings materials.

These estimates are based on current production trends, assume 63 billable days in the quarter, which is 1 more day than Q1 of 2021 and include an estimated revenue contribution of $39.6 million from acquisitions made after Q4 of 2020.

Our estimates also include or also consider the payroll tax reset, which occurs at the beginning of every year, which results in lower gross and adjusted EBITDA margins in the first quarter.

For the first quarter of 2022, we estimate revenues of $1,033 million to $1,053 million, income from continuing operations of $54.8 million to $58.4 million and adjusted EBITDA of $117.3 million to $122.3 million.

With respect to the full year 2022, we expect revenues will grow above market rates and gross margin will expand primarily as a result of double-digit growth of our high-margin commercial consulting and creative digital marketing services.

We expect our adjusted EBITDA margin for the year will be in line with last year as we continue to invest in our operating platform to support high sustainable growth of the business. Thank you for your time, and I'll turn it back over to Ted for some closing remarks.

Ted?.

Thanks, Ed. As many of you are aware, over the past several months, we've announced a number of leadership changes, each of which has been part of our long-term succession planning. I'd like to provide a brief update on these changes, beginning with the promotion of Rand Blazer to President of ASGN.

Rand is approaching his tenth anniversary with ASGN and 15 years leading Apex Systems. Since joining ASGN, Rand has been integral to our company's growth and in particular, the expansion of our Commercial Consulting business.

As President of ASGN, Rand will be well positioned to continue to provide leadership across our units and drive our growth strategies. We are also installing ready-made leaders at the helm of each of our operating units.

Sean Casey with more than 25 years in successive roles within the business has assumed Rand's former role as President of Apex Systems. While John Heneghan whom we spoke about in detail last quarter, has become President of ECS.

Both Sean and John have worked hand in hand with our executive management team since joining ASGN and are well equipped to succeed in their new positions. Along with these previously announced promotions, we continue to make investments in adding professionals to our team who will help drive our revenue growth and margin expansion.

Some of these professionals have joined us organically, some from peer firms and others arrived through acquisitions. ASGN's ability to not only identify and fund strategic acquisitions but to also integrate them quickly and efficiently as a competitive advantage.

I'm pleased to note that as of December 31, all of our previously announced acquisitions have been fully integrated. This then ultimately brings you back to where we began our discussion today - our sustainable business model. ASGN has evolved its business to be well aligned with multiyear IT and digital transformation trends.

Each of these trends are in their early innings of growth and present strong tailwinds going forward. As evident in our financial performance, our business has already benefited from these secular trends, and we are well positioned to continue on an upward trajectory.

In fact, we are tracking ahead of the model in which our 3-year targets introduced this past September were set. It is these favorable industry tailwinds that will provide us with consistent pipeline of higher-margin consulting work going forward and help to grow our historically strong free cash flow generation capabilities.

We will deploy this capital into further expanding our higher-margin consulting services to boost our growth and ultimately our profitability for the long term. ASGN is in the right end markets with the right capabilities and has the right team in place to maintain our leadership in the commercial and government spaces.

I'm confident that our unique business model, strong cash flow generation and strategic capital deployment will continue to position us for success going forward. With that said, this concludes our prepared remarks. On behalf of the Board of Directors and the entire ASGN team, we thank you for your continued support of our company.

We will now open up the call to your questions.

Operator?.

[Operator Instructions]. Our first question comes from the line of Tim Mulrooney with William Blair..

Yes. Congrats on the nice quarter, and Rand and everyone else, Rand, congrats on the promotion. Just a couple for me on margins. So I mean, your EBITDA margin guide for the fourth quarter, I mean it was looking for something close to 11.7% at the midpoint, and you came in well ahead of that.

Now you listed some of the reasons for why you saw margin expansion.

But can you talk about the primary factors that drove the outperformance relative to your internal expectations?.

Well, sure, Tim. It's definitely business mix driven, if you will, right? We got a much stronger performance in the Commercial segment than we thought.

And so the continued contribution from Creative Circle, from CyberCoders, from our consulting business primarily, which had -- the largest amount of overperformance was certainly a driver of gross margin. And then in turn, EBITDA margin.

And then I think Ed laid out in the Federal Segment, 2 things that really made the biggest difference, which was what we believe is the right decision to bid some low-margin contracts. And so that was a contributor.

And then we had better-than-expected performance from our 2 new acquisitions, IndraSoft, and the ERPi in the second half of the year, and they certainly contributed to some of that margin overperformance as well.

So faster growth in Commercial but then underneath that, it kind of gave you business by business a little flavor about where we saw things that were beyond our original expectations..

Yes. That's really helpful. And then my second question, this might be for John if he's on the call. On the government side of the business, have you continued to see more RFPs release that were delayed in 2021. This is something that I know you've talked about the last several quarters.

Have you seen more releases there on those delays? And then how would you characterize the pipeline now versus a year ago?.

Yes. So it's better than it was, Tim. I mean I would say that it's still -- that market is still not functioning perfectly you know as it -- you know pre-COVID, if you will. So we're seeing a few more opportunities being released. We're definitely responding to those.

We're still a little bit kind of held back by the slowness of having the right people in the right chairs to make decisions on behalf of the government. So in those instances, they're extending contracts, more than they're rebidding total awards, large multiyear awards. But I think every month and every quarter gets a little bit better.

And we think this year, we're going to have the chance to begin to bid on things that are larger. And so we'll have to watch that develop here in that federal marketplace..

Our next question comes from the line of Tobey Sommer with Truist Securities..

I was wondering if you could dig into that hospital customer example that you had, just to frame things sort of how much revenue would Apex in its traditional form or legacy form garner from a customer like that, I don't expect you to name them, of course, versus what that looks like when you sort of add consulting to the mix?.

Sure. I'll let Rand take that one.

Rand?.

Yes. Well, I think the -- these consulting opportunities double the opportunity, Tobey. So we had a steady amount of staffing business with this account but this is taking it to another level. So it's -- this is a pretty meaty piece of work, and it's critically important to that account.

So you can imagine that it's certainly in this case, probably more than a doubling.

Did that answer your question?.

It does. It does. And with respect to sort of an average customer in the portfolio, I don't know how special this one is in terms of size and the amplification of the opportunity from consulting.

Is that a fair benchmark or -- on an average customer basis in terms of the opportunity?.

I think the opportunity is there, Tobey, let me say, first of all, that this is what we vision. This is exactly what we vision, being able to fulfill the staffing requirements and then do the important -- even more value-added driven work for them, which can add to the revenue stream, okay? And in this case, maybe it's doubling.

I wouldn't expect in every case. I think we've reported in the past, we penetrated only a portion of our account base with consulting work. Over time, that work started as, I think, more than nibbles, Tobey, but now it's 7-figure engagements that go a year and sometimes even multiyear.

So I think you're going to see the consulting work grow in an account as we go, plus we have to increase the number of accounts we do that work for.

Does that give you some sense?.

It does..

Okay..

On the CyberCoders business, could you talk about the -- a little bit more granularity and flesh on the bones of the growth in revenues and maybe speak to how you're handling the hiring to take advantage of this market?.

So Tobey, we don't release the growth rates of the individual units. But certainly, CyberCoders contribution is up. They're well over 2019 levels. They're consistently growing sequentially. And that's just a factor of the labor market, the permit placement offering.

But as you know, it's not a large part of what we're doing here, but it's certainly contributing not as much on the top line, but to the margin profile at the gross margin level. So we are certainly investing in it organically so that they can take advantage of the market opportunity as our clients ask us for that service.

But also, we're very focused on investing in the other parts of the business where we have a larger end market opportunity, consulting services in the federal space and other places..

Ted, is it worth -- Tobey, it is worth mentioning too, the CyberCoders approach to the market is more of an electronic approach. So they're scouring digital fields to see where the opportunities are and then jumping in to fill them.

So they give us, if you will, an adjunct to our -- the rest of our business in that they are an electronic component to identifying opportunities and responding to them. And in this day and age, right now, the electronic means or digital means they're critically important to clients because they're looking for people..

Makes perfect sense. I wanted to ask a broad question about capital deployment as my last one.

Ted, are you seeing opportunities for larger acquisitions than you've done recently, which has primarily been small tuck-ins because that share repurchase that you authorized, some clients were wondering whether that was indicative of a smaller opportunity set in front of you..

No, I don't think so, Tobey. Look, the authorization is bigger because we're a bigger company than 2 years ago when we put our last authorization out there. So I don't think it's a reflection on what we believe the opportunity is in M&A. We are definitely seeing all flavors of acquisition opportunities.

We're seeing things in the strategic tuck-in category that are sub-$100 million. We're active to lead looking at things that are larger than that, that would also be strategic tuck-ins, but they would be at more scale, call it $100 million and above. And so we feel good about the pipeline.

There's definitely been a -- coming into the end of the year and in January, a little bit of a lull in new businesses coming to market from an M&A standpoint.

But I think that, that was just a small moment in time as deals were rushed to get done at 12/31 because what we're seeing here in January and now building into February and later in the first quarter is a pretty good flow of opportunities. So we're pleased with that part of it, and we just have to keep working on one by one..

Great. So it sounds like that's a kind of seasonal phenomenon. I appreciate the color..

Our next question comes from the line of Jeff Silber with BMO Capital Markets..

I just wanted to go back to the federal government segment. Actually I had a 2-part question. You mentioned the lower growth rate, not only because of tough comps because of the -- also the decision to discontinue a low-margin contract. Are there any more contracts like this to come? And then also, gross margins were extraordinarily high.

I know that's one of the reasons.

Is that the new basis we should be using going forward for this segment? I know there's some seasonality but just excluding that?.

So I'll answer the first part of that and let Ed take the second. So Jeff, thanks for the question. We don't see anything else. This was -- I mean, obviously, you can -- we're very focused on quality of revenues and the conversion of those revenues down to the EBITDA line. So this was not a difficult decision to make.

Every now and then, you take on an opportunity to get to higher value, additional work in the future. In this particular case that didn't happen. And so I think the team here made the right decision of ECS not to bid that. And you can see its reflection as we go down the bottom line.

Ed, on gross margins going forward?.

Yes. I mean, look, I think Q4 was a high watermark, Jeff. As you probably read in our earnings release, they benefited also from some adjustments related to firm fixed price contracts that ran their initial terms in the year. And so there was a pickup in gross profit related to that in Q4.

So on an ongoing basis, again, this is probably higher than what they're going to perform, okay? And anyway, I think it's probably about 1 to 2 points higher if you look at it over the course of the full year..

Yes. I appreciate that. My follow-up question is about the recruiting environment. But I want to focus on your internal recruiters. I know we've talked a lot of companies in the space, both private and publicly held about the higher-than-normal turnover in those positions, given everything that's going on.

I'm just wondering if you can comment on what you're seeing..

Rand, do you want to take that one?.

Well, Jeff, it's a good question and comment. Those firms are trying to pluck our recruiters because they're so damn good. So we are having some turnover in our recruiters, particularly though, in the first year or so of them being with us because of our compensation system.

We're a high incentive comp business, and you can make some great money, but you've got to build that book of business, if you will, over a period of 12 to 18 months. So we are experiencing some turnover probably like it's going across the industry.

But this has been going on for a couple of years now with us, where instead of in the 20% turnover range, we're higher than that.

Having said that, the productivity of our force has just been astronomical this past year and all the combination of things we do, including automation, more automation of the recruiting process, making it easier for our recruiters to handle more workload, leveraging the more senior recruiters with junior, the handoff between the account managers.

I mean there's a whole host of things we can do to improve the requisition flow, where the requirements to us can make it easier for our recruiters and make it more profitable because they're going to hit on them, okay, by virtue of the quality of the requisition, all right? So we are facing turnover.

It hasn't hurt us in terms of overall performance but it's not something you want to see forever. We've also made some adjustments in compensation for those first year recruiters to help them out a little bit. So we're very mindful. We're very much watching. I wish the others would tapping into our team, but I'm not sure that's going to happen..

Our next question comes from the line of Surinder Thind with Jefferies..

I'd like to start with a question about the success of the Commercial Consulting business. Obviously, the healthcare example that you guys provided.

Can you talk a little bit more about how the consulting service fits into the overall picture of IT services consulting in general? Like who are you taking market share from at this point? And in the case of the healthcare example, did you displace an existing consulting firm? Or how should we think about that dynamic?.

So Surinder, I'll start at high level and I'll let Rand add in a comment here.

But Surinder, 1 way to think about this, obviously, is there's -- and we've talked about this a secular change going on in terms of how the CIO looks at getting things done, if you will, right? And so while there's market share moving around, and we feel like we're positioned in the right place to be the biggest winner there, the client is directing where -- the what firms they go to in order to get this done, right? And so we have a unique capability, both in consulting and to be able to bring resources to the table.

So the client is pulling us up into the work if you will there. And it doesn't mean that the client still doesn't work with some of the big consulting firms because they do, right, Rand. But there's -- this is a client-directed activity, if you will. And by way of how we're positioned, we're winning there..

Yes. Got it. So if I was to interpret -- go ahead. Sorry..

No, no. You go ahead. Go ahead..

So I was going to ask, so related to that, is effectively the client chopping up what would have been previously a large project and that goes to big IT consulting firm X. Is that effectively what's happening? So there's a portion that you can, I guess, tackle or address.

I'm just trying to fully understand the picture because part of the -- what I'm trying to get with this is the -- your guys' Commercial Consulting business also uses temporary staffing professionals. And so they bring a different potentially maybe not skill set.

But what I would call a different level of IP to the table potentially, right? Because if you hire a consulting firm X, they bring IP with them, right? That's part of the firm and the culture whereas you guys kind of seem to be putting together teams. I'm just trying to understand that dynamic..

Well, let me go, Ted. First of all, I would say our consulting unit does provide methodology, IP, experience and leadership on these engagements. So we're bringing just like a consulting business more than just bodies.

We're also happy to build the body, the team with people with the relevant experience and the relevant technology experience to that and generally and oftentimes at a better price point than the consultants who are using somebody on their bench.

Okay? So there's a combination of factors at work that give the -- as Ted said, the CIO, a quality of work, a risk profile with that work, a price point with that work and are comfortable in this that they feel they can get it accomplished. And we're obviously doing well on communicating that and hitting the stride.

And we're getting follow-on work with most of our clients in consulting, as you could expect, like any good consulting business would do. Okay? So don't think of us as just providing the team.

We are assembling a team, but the team includes if there's IP, certainly technology know-how, specific expertise in those technologies, methodologies, artifacts, in many cases that we've used in different engagements that can apply there. All right. And let me make a comment too by -- you made a comment on the evolution of consulting for us.

I mean we've been at this for 8 to 10 years. At the beginning, we did a lot of what we call workforce management kinds of consulting, where we help them build the right teams and manage the productivity of those teams and take on accountability for end results. Okay? That was fine.

But now we've gotten into the digital transformation and the modern enterprise, like in this case, with the healthcare business, where we're actually providing a team.

When somebody implements new ERP, you've got to maintain your existing ERP while you're translating to a new set of software, a new application and then a new cloud environment with new security, with new linkages to your other ERP pieces. And that all has to be augmented.

And I think CIOs in some cases, in this case, certainly recognized our insight in their technology environment, our knowledge of their technology, how we could take -- put teams together with the right credentials and experiences and methodologies to help do a lot of that workload.

And it will go on for quite some time because these things are not done in months. They are done over a long period of time.

So we happen to have all the expertise both in the existing environment, the new environment around the cloud, around cybersecurity and around the linkages to other systems that were required and the knowledge of the user community and how they have to be equipped to use the new technology. So it was hard for somebody else to bring all that to them.

We were there, and that's -- and been there in the past, maybe in some cases in Infor -- in this case, it was in the Infor software suite, but we were able to show that we could demonstrate and fill these gaps.

Does that give you a sense?.

Yes. I think that's actually really quite helpful. And then it's a slightly different question just in terms of where we are creative circle, permanent placement in the prepared comments, you guys talked about double-digit growth, strong performance.

Are both of those subsegments above pre-pandemic levels in terms of revenues at this point? Or where are we in that cycle? It seems like everything else is obviously very -- significantly above pre-pandemic levels..

Yeah. I suppose now 2 -- I think now 2 quarters running there above 2019 levels, Surinder..

Our next question comes from the line of Andre Childress with Baird..

This is Andre Childress, on for Mark Marcon. So my first question is just about wage inflation. Obviously, it's prevalent everywhere.

How did you see that trend in Q4? How is your ability to pass that along to your clients? And if markets stayed as tight and wage inflation remains as prevalent on a go-forward basis, how do you think that could impact your go-forward revenue and staffing margins, particularly on the Apex side of things?.

Yes. So Andre, yes, wage inflation is there. Yes, we've been able to manage it and pass that through into bill rates to our customers. I don't expect it's going anywhere. But we've not just seen this today, but over our history, we've always been in balance of supply and demand with IT -- highly skilled IT people.

So we've always been dealing with some amount of inflation and then in turn, kind of dealing with our clients as it relates to that. It just happens to be a little bit more acute right now. But if you look at our growth, it's more volume of work. And so with a little bit of increase in bill rate.

And so I expect that going forward to the last part of your question, we'll still be able to deal with our clients and have a discussion.

And include this, any other increases that we see in the bill rate because the technology work and the digital strategies that we're helping them execute are some of the most important things going on in their organizations. And so the talent to get this done is very important to them.

And that's why we've been able to have an open dialogue and make this work along the way. Rand, I don't know if you'd have anything else to add to that..

No, I think that's great..

And obviously, another fantastic performance by Commercial Consulting. You noted that most of the new business was coming from existing clients.

I just want to make sure that is that existing clients -- existing consulting clients or existing staffing clients that you're now cross-selling? And also how many staffing clients now are also consulting clients..

Ted, can I take this?.

Rand.....

Yes, I want to make a point. A client is a client. I don't care if it's an existing client. I don't care if it's staffing or consulting, it's an existing client. And obviously, a lot of our clients were existing staffing clients. And yes, we are penetrating that base to bring new value solutions to them.

And our growth is coming both from expansion of work with our existing client base, both the ones doing staffing or consulting as well as new clients. And oftentimes, consulting can be a new entree into a client where staffing may not be the entree, okay? So it's multidimensional here in terms of. And we see clients' clients.

And if we can provide value to them through any of our solutions, staffing or consulting, we're happy to do that. And we're always after new clients..

Ladies and gentlemen, we have reached to the end of the question-and-answer session. I will now turn the call over to Ted Hanson, Chief Executive Officer, for closing remarks..

Well, thank you again for listening to today's call. We hope everyone is staying healthy and look forward to speaking with you in April at the close of the first quarter. Be well..

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation, and have a wonderful day..