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ASGN Incorporated (NYSE:ASGN)
Q3 2021 Earnings Call
Oct 27, 2021, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to ASGN Incorporated Third Quarter 2021 Earnings Call. [Operator Instructions] At this time, I'll turn the conference over to Kimberly Esterkin, Investor Relations. Kimberly, you may now begin.

Kimberly Esterkin -- Investor Relations

Thank you, operator. Good afternoon, and thank you for joining us today for ASGN's third quarter 2021 conference call. With me are Ted Hanson, President and Chief Executive Officer; Rand Blazer, President of Apex Systems; George Wilson, President of ECS; 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 the GAAP and non-GAAP measures are included in today's press release.

I will now turn the call over to Ted Hanson, President and Chief Executive Officer.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Thank you, Kimberly. And thank you for joining ASGN's third quarter 2021 earnings call. ASGN reported very strong results for the third quarter. I'd thank our entire team for their incredible effort which contributed to such strong performance. I'm pleased to report that we came in above the high-end of our revenue and adjusted EBITDA guidance ranges for Q3, which we raised from our initial guidance during our Investor and Analyst Day Conference last month, indicating a continued acceleration of our business. Importantly, all of our businesses, with the exception of CyberCoders, achieved record revenues for the quarter, with CyberCoders' revenues increasing to levels above the third quarter of 2019. Given these strong results, we will be raising our guidance estimates for Q4 2021. Ed Pierce, our CFO, will discuss our updated guidance shortly.

Revenues for the third quarter totaled approximately $1.1 billion, up 18.7% year-over-year. Excluding acquisition contributions, revenues improved 14.1% year-over-year. Adjusted EBITDA of $136.6 million improved 34.1% from the prior-year period.

ASGN has significant capital resources to support investments in our organic growth, M&A and share repurchases. In the third quarter, acquisitions contributed $47.2 million in revenue. We continue to believe that M&A generates the highest return of capital for all of our stakeholders. Our M&A pipeline remains robust, and we recently added a Senior Vice President of Corporate Development to our team to support our companywide acquisition efforts. Year to date, we also spent $118.4 million in the repurchase of shares and have $131.6 million remaining under our $250.0 million share repurchase plan.

With that said, let's turn to more detail on our segment performance for the quarter, beginning with our largest segment, Commercial, which services large enterprises and Fortune 1000 companies across multiple end market.

For the third quarter of 2021, the Commercial Segment generated revenue of $774.9 million, up 25.8% year-over-year and up 24.1% organically. Apex Systems continued to report very strong growth and for the first time Creative Circle and CyberCoders surpassed 2019 quarterly revenues. Each of these operating units also reported their fifth quarter of sequential growth.

From an industry perspective, all five commercial industry verticals for Apex Systems, our commercial IT services and solutions division, experienced growth during the quarter, with every vertical except the Financial Services industry accounts achieving double-digit growth on a year-over-year basis.

Apex System's Commercial & 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 energy, utilities, airlines and air freight.

Its Technology and Telecommunications, or TMT, vertical was up double digits year-over-year. Within the vertical, technology accounts saw significant growth over Q3 2020, while telecommunications accounts were up high single-digits year-over-year.

Government & Business Services was up double digits, with Aerospace & Defense and Government accounts up mid-single digits for the third quarter, while Business Services accounts grew double digits year-over-year. Financial Services accounts were up mid-single digits with growth in Regional Banks, Wealth Management and FinTech accounts.

Revenues in applications and project management including agile, digital, ERP and cloud continued to perform well. Apex Systems top accounts and retail and branch accounts achieved double-digit growth rates for Q3.

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

Gross margin for the Commercial Segment was 32.4%, up 150 basis points from Q3 of last year due to growth across our high-margin commercial consulting, creative marketing and permanent placement businesses.

EBITDA margins were also up due to the associated growth in gross margins, along with higher productivity in our workforce.

We also continued to expand our commercial consulting revenues during the quarter. Commercial consulting revenues totaled $187.6 million, a significant increase of 94.2% year-over-year, virtually all of which was organic growth. Our pipelines of booked revenue and future opportunities each continue to grow at high double-digit rates and are trending positively in the fourth quarter.

Consulting offerings in our Commercial Segment remain an important source of the value we provide our clients, and so we continue to identify acquisition opportunities that expand our capabilities in areas in high demand such as cloud, data analytics and AI, agile development, digital transformation and enterprise application implementations.

In the consulting space, we are seeing an increasing amount of work in digital innovation and modern enterprise solutions that enable us to implement many of the elements of our clients' individual digital roadmaps. Work in Agile and Dev Ops, in particular, is a large component of the support we provide as our clients tie together applications in their cloud environment and strengthen their customer support with real-time data updates.

For example, our ability to build dashboards and software interfaces to propel the customer experience and internal management of business operations have been key drivers of our revenues of late.

Now, let's turn to our 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 $298.9 million for the third quarter, up 3.6% year-over-year. EBITDA margin also improved during the quarter to total 11.4%, up 230 basis points from the third quarter of 2020.

The Federal Government Segment's new business pipeline remained strong, with $430.2 million in new business awarded during the third quarter and a book to bill ratio of 1.44 to 1. Contract backlog totaled $3.1 billion at the end of the third quarter or a healthy coverage ratio of 2.6 times the segment's trailing 12-month revenues.

In Q3, examples of some of the contracts awarded to our Federal Government Segment included: a legacy data consolidation solution contract with the Naval Information Warfare Center to support its work for the Defense Health Agency, including achieving new efficiencies and cost savings; three task orders to support the National Oceanic and Atmospheric Administration with the development of decision support tools such as economic impact models; a five-year prime contract with the U.S. Centcom to provide personnel, supervision and services necessary to support critical missions and operations; and a five-year multiple award prime contract with the General Services Administration to aid the development of manned and unmanned systems for the Department of Defense.

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

Edward L. Pierce -- Executive Vice President and Chief Financial Officer

Thanks, Ted. Good afternoon, everyone. As Ted mentioned, our financial performance for the third quarter exceeded our updated guidance estimates that we announced during our Investor and Analysts' Day conference last month. This performance was driven by year-over-year double digit organic revenue growth, the contribution from the businesses acquired after Q3 of last year and expansion in gross and Adjusted EBITDA margins in both business segments.

For the quarter, revenues were $1.074 billion, up 18.7% over Q3 of last year and up 10.1% sequentially. The revenue contribution from acquisitions made after Q3 of last year was $42.0 million, or 4.6 percentage points of the year-over-year growth rate for the quarter. Net Income and Adjusted EBITDA were both up year-over-year and sequentially and grew at a higher rate than revenues.

Our Adjusted EBITDA margin of 12.7% was 140 basis points higher than Q3 of last year, reflecting, among other things, improvement in the business mix and expansion in the gross margins of our two business segments.

Revenues from our Commercial Segment were $774.9 million, up 25.8% year-over-year. For the fifth straight quarter, all commercial divisions were up both year-over-year and sequentially. Acquisitions made after Q3 of last year contributed $10.4 million in revenues for the quarter, or 1.7 percentage points of the year-over-year growth rate.

Revenues from our Federal Government Segment were $298.9 million, up 3.6% year-over-year and inline with our guidance estimates. This growth was driven by a number of factors, including the effects of new contract awards and the revenue contributions from businesses acquired after Q3 2020 of $31.6 million.

As you may recall from prior calls, revenues in Q3 of last year benefited from a high level of spending under two in our cost reimbursable contracts. Normalizing for the revenue surge in Q3 of last year and excluding the contribution from acquisitions. Revenue growth in the quarter was low single digits year-over-year. Gross margin of 28.7% exceeded the high-end of our updated guidance estimates and was up 260 basis points year-over-year. Both business segments reported year-over-year expansion in gross margin. Gross margin for the commercial segment was 32.4% up 150 basis points year-over-year. The expense was a result of the double-digit growth of our high-margin commercial consulting, creative marketing and permanent placement services.

Gross margin for the Federal government segment was up 340 basis points mainly as a result of changes in business mix, which included a lower level of revenues from certain cost reimbursable contracts. The contribution from high-margin businesses acquired after Q3 of last year. And higher profitability onto firm fixed price contracts initial contract term ended during the quarter. SG&A expenses were $192.7 million and were above our updated guidance estimates because of acquisition related expenses, which we do not include in our guidance estimates. The year-over-year increase in SG&A expenses was commensurate with the growth in the business. The higher mix of high margin commercial revenues, which carry a higher SG&A expense component of the Federal Government services, higher headcount investments to support future growth in the business, and higher incentive compensation that healthcare expenses, which were both down in 2020 from historical levels.

Income from continuing operations was $66.3 million, up 40% year-over-year, adjusted EBITDA was up 34.1% year-over-year on revenue growth of 18.7%. Our adjusted EBITDA margin of 12.7% was up a 140 basis points from Q3 of last year related to the expansion in gross margin. At quarter end cash and cash equivalents were $679.4 million, there were no outstanding borrowings under our $250 million revolving credit facility and our senior secured debt leverage ratio was 1.08:1.

As noted in today's release, we are updating our guidance estimates for the fourth quarter from the estimates we announced during our Investor and Analyst Day Conference last month. Relative to our earlier guidance, we are increasing our revenue estimates by $20 million and our adjusted EBITDA estimate by $5 million. Our updated estimates for the fourth quarter is set forth in our earnings release and supplemental materials.

For the fourth quarter of 2021, we estimate revenues of $1 billion 10 million to $1 billion 30 million income from continuing operations of $52.5 to $56.2 million and adjusted EBITDA of $116.5 to $121.5 million. We are estimating all divisions will be up year-over-year. At the midpoint of our financial estimates year-over-year revenue growth of the fourth quarter is approximately 13.3%.

On a sequential basis, we expect revenues will be down as a fourth quarter has 3 fewer billable days in the third quarter. However, for the commercial segment, we expect revenues from billable day will be up sequentially. For our federal government segment, we expect revenues per billable day will be down because of lower expected revenues from certain cost reimbursable. Contracts in our decision not to renew to low margin web services contracts that expired at the end of the third quarter.

Thank you for your time and I'll turn the call back over to Ted for some closing remarks. Ted?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Thanks, Ed. ASGN success continues to be driven by the incredible team effort across our company. Before we open up the call to your questions. I'd like to speak about one of our team members in particular our President of ECS George Wilson. George, as many of you know spearheaded our government business since ASGN acquired ECS in 2018. ECS now referred to as our Federal Government segment has had a long history of delivering excellent financial results. George and his leadership team have expertly navigated the federal government marketplace, to meet the most critical and complex needs of our clients, to reach $1 billion in revenues, well ahead of our initial expectations.

After much planning an internal discussion, George has decided to retire at the end of this calendar year. And while George's official role as President of ECS will come to an end at the close of this year, he will remain in consultancy role with ASGN through April, 2022. In George's place John Hannigan ECS's current Chief Operating Officer will assume the role of President. George and John help work closely together for over 2 decades. And John has been preparing for this new role as part of our planned succession process. Over the past 2 years. John has more than 20 years of experience in emerging technology and digital transformation, IT product development, managed services, business strategy and corporate development. I anticipate that this transition into this new role will be seamless.

On behalf of our Board of Directors and the entire ASGN team, I want to personally thank George for his incredible service to ECS and ASGN. I'd also like to congratulate John on his promotion. John will join us for today's Q&A session. Thank you again for your time this afternoon and for your continued support of ASGN. This concludes our prepared remarks for the third quarter. We will now open up the call to your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question will be coming from the line of Gary Bisbee with Bank of America. Please proceed with your questions.

Gary Bisbee -- Bank of America -- Analyst

Hey guys, good afternoon. I guess I wanted to ask a question about the commercial segment, gross margins, I obviously up quite strongly year-over-year and also ahead of the pre-pandemic third quarter '19. When I think back a few years ago you tend to talk a lot about stable margins is the right expectation, but clearly with the mix shift going on in the business. There seems to be a good case for margin expansion. I guess you talked about certain stand at the Investor Day. But as you think out beyond these easy comps you've had for the next few quarters and looking forward, how should we think about the pace of margin expansion on the gross margin line?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Well, Gary. Look, I'll let Rand happen here and talk about this, but there is some proof points, if you will. Underneath the strategy here that we see that are working. One is where in the commercial segment, as we've talked about a lot and they've been up into higher margin work. We're also seeing that we're on the backs of that getting expansion and pay-to-bill margins and so all these kinds of underlie the strategy of where we are. I mean obviously there can be headwinds in certain skill sets certain large accounts but I think the progress that we're making here is incrementally adding to gross margin here as we go forward. We've set the guidance for you on a forward basis that they could that they could be stable based on be in the larger firm but then to offset in that with moving into higher margin work streams here, but I kind of refer you back to the Analyst Day materials for anything on a forward basis. Randy, anything you'd add to that? Rand, you are mute?

Randolph C. Blazer -- President

I'm sorry, yes. I wouldn't add anything to it. I think the tailwinds, you've commented on are great. I think we obviously resurgence of Creative Circle and CyberCoders within our commercial units is helping -- the consulting business is helping. By the way, our staffing gross margins have always been best in class. So I think steady is certainly what we -- the least that we would expect. All right.

Gary Bisbee -- Bank of America -- Analyst

Okay and then just a follow-up. I'd ask on the commercial consulting business I know you've said, we've had relatively easier comps, but the growth has been terrific. If we were to think about the number of acquisitions you've done in the last couple of years that added capabilities and how important those have been to the organic growth, you've been delivering versus penetrating clients more with these services or any other sort of relevant driver. How important is the M&A been and continuing to add those capabilities versus just your views of how you're penetrating the market? Thank you.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Well, it's been very important. Rand, I'll let you talk to that.

Randolph C. Blazer -- President

Yeah, I think, look, there's -- we have an excellent reputation with the clients. We've always said that our past is a staffing firm is critical. The account relationships we've built over the last decade have put us in good stead with the client and make us present in the discussion about future needs. The muscle that we've added through the acquisitions has been unbelievable, is really propelled us in areas like Cloud, Agile development, overall integration in ERP implementation. So they have all contributed. It's a combination of the things, so it's. I think they have been instrumental, Gary, to our strength in consulting and if you look at the numbers in consulting and by the way, I mean, it really has jumped up, right? Since even to '19 to '20. If you look back in all the revenue numbers. We've more than doubled. These numbers in this year, and so right time, right place. And fortunately for us, we had the right set of technical strength to step up.

Gary Bisbee -- Bank of America -- Analyst

Thank you. Terrific performance.

Operator

Our next question comes from the line of Tim Marrone with William Blair. Please proceed with your questions.

Unidentified Participant

Hey this is Sam, joining in for Tim. Thanks for taking my questions here. We've seen strong growth, both organic and total growth coming out of the ECS in the broader Federal business for several years now, I'm not asking for guidance on fiscal '22 specifically, but just more broadly speaking I'm curious, under a more normalized environment. How you think about the organic growth rate potential for this business based on the portfolios stands today?

Theodore S. Hanson -- Chief Executive Officer, President and Director

So Sam, if you go back to the 2018 at the acquisition date and still kind of holds true today and we would kind of guided due you to mid to has single digits for organic growth rates for ECS. They fortunately have gotten much higher growth rates in that here in the past very difficult comps are kind of catching up with us, but I think for your modeling purposes, I would look to mid-to-high single digits, and I think again, I'd refer you back to Ed Pierce's numbers for our 3-year targets and the Investor and Analyst Day presentation.

Analyst

Perfect. I appreciate it. Switching gears a little bit here. Our team read an article from FY the other day but shared how cybersecurity accounted for more than 20% of all IT job hosting this year. I'm curious if this is what you can see on your side of things, and in particular, cybersecurity has had a larger impact on your growth this year and the previous years. And if so, is that trend something you might expect to carry forward in the next few years here?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Yes, I'll let Randy answer the commercial side of this, and John comment on Federal.

Randolph C. Blazer -- President

I would say on the commercial side, Sam, the cybersecurity, we look at it is, it's embedded in every solution we provide. So you always have to consider the security aspects of whatever you're doing in the technology area, if you looked at our actual, what we call counted revenue toward the cybersecurity skill area works solution area, it has increased definitely. But it's not our fastest growing or largest solution area. But I go back and say again, cyber security, we view it as an important element in everything we do. So you can be working with the Cloud. You can work of the ERP. You could be working with code development, dashboard, you have got to consider cybersecurity your security and all of that. So it's embedded in everywhere, George?

Analyst

Hey, Rand, this is John.

Randolph C. Blazer -- President

Yeah, John here, and Sam, cybersecurity makes up about 20% of the ECS Segment business and like Rand said cybersecurity really is in and around everything that we do, it's a big part of our Dev Sec Ops model. So cybersecurity also is an area where we are highly invested and is a big part of our future growth. We are kind of leading the space and zero-trust and in cyber analytics and managed security offering. So it's a place that we're highly invested. We have great depth of capability and look for that as a continued market priority for our federal customers and so we are prepared for that and excited about where cybersecurity is going from business. Appreciate you guys.

Operator

Our next question is from the line of Tobey Sommer with Truist Securities. Please proceed with your question.

Tobey Sommer -- Truist Securities -- Analyst

Thanks. I had a question on wage inflation certainly a broad topic out there today. And so both internally and externally. In your business still does a higher rate of wage inflation over the next several years, make it easier or harder for you to hit your multi-year goals and could you explain how it might impact the attainment of those goals? Thanks.

Randolph C. Blazer -- President

Yeah. Well, good question, Tobey, I mean, look, we've always lived in wage inflation in technology skill sets in our business. We're in typical years, maybe it's a couple 3 points. And we've got a plan on that both in the current period and forecasting pricing for the future periods. Today, it's may be in the may be more in the mid-single digits. I don't think that that necessarily hinders or helps if you will. I guess you could make an argument for we're doing a good job today passing that through to higher bill rates with our customers, they understand that they want the best talent. So they're making the appropriate accommodations in order for that to happen. So maybe if bill rates are a little higher then it's a little easier to get to our targets. But I think that those are kind of just incremental crumbs kind of around the edges, I mean I think the story is here that there's wage inflation, for sure. We always experience that we have been adapted passing that to the customer. Because they have the desire to get the best talent and you can see that in the performance of our gross margin profiles. We've got some incremental expansion here.

Tobey Sommer -- Truist Securities -- Analyst

Thanks. Shifting gears to the ECS in the Federal Government segment, do -- or do you see a good pipeline of awards pending adjudication in that kind of thing even as we stare at a continuing resolution and haven't really had a lot of what, it seems like tangible progress on the multiple appropriations bills that are floating around Congress right now?

Randolph C. Blazer -- President

Right. So we've -- Tobey, we had a good quarter for bookings this quarter. Here in the third but John, you want to talk to Tobey about future bookings what's kind of just what's in the pipeline and what it how our customer is interacting with us?

Unidentified Participant

Sure. Yeah, and Tobey, we do have a very strong and healthy pipeline as we articulated earlier with you in the Investor Day. Our presentation. Last month, we have seen a delay in RFP releases over first half of the year. But we've seen that accelerate and are expecting our Q4, a lot of RFPs to release and then as you know in this space, you wait for those RFPs to be awarded and as potential protest and all that, but we do see that acceleration has finally picked up post-COVID and compounded by the presidential transition so excited about 2022 and beyond, the pipeline strong.

Tobey Sommer -- Truist Securities -- Analyst

Thank you. If I could just kind of apply. My first question. That Ted answered to the ECS business and you John, is there anything about your contract mix cost plus or T&M fixed price in which there is a sort of a distinct negative or positive implication from higher wage inflation over the next several years?

Analyst

No, I think, I think Ted answered that appropriately. We've seen that our customers understand the market. And they want to talent we bring to bear. And we've been able to find ways to increase the wages, I mean increase the bill rates as appropriate to match the labor, and as you know, a third of our business is cost reimbursable and that makes that a little bit easier and some of our most high value type of work is in that cost reimbursable space.

Tobey Sommer -- Truist Securities -- Analyst

Thank you very much.

Operator

Our next question is from the line of Jeff Silber with BMO Capital Markets. Please proceed with your questions.

Jeff Silber -- BMO Capital Markets -- Analyst

Thanks so much. I was wondering if we can focus on the assignment business within your commercial segment. And I'm just curious how bill rates are running compared to what they normally run because of all the supply constraint issues, do you think that's holding back some of the business there?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Rand?

Randolph C. Blazer -- President

Hi there, bit well -- And let me understand the question, Jeff are the bill rates holding us back and we felt

Jeff Silber -- BMO Capital Markets -- Analyst

Fill, fill F, it's fill rates.

Randolph C. Blazer -- President

Fill rates.

Jeff Silber -- BMO Capital Markets -- Analyst

Fill rates.

Randolph C. Blazer -- President

Sorry about that. No, I'm sorry, our fill rates are. No, I don't think that's holding us back. Our fill ratios have gone up this past year quite significantly more importantly, the quality, the acquisitions or the requirements were getting or what we call higher quality Rex. What we find a lot of our bigger clients in the Fortunate 500 clients is, they're working with a fewer number of vendors and they expect us to step-up and to deliver. Our clients are very concerned about building their own work forces. And so, this is not a time to -- if you will. They're anxious to work with the best and get the best results. And so, fill ratios have moved up very nicely as part of our success this year.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay, that's great to hear. And then, just a question about the near-term guidance. I know at your Investor and Analyst Day last month, you positively pre-announced and yet you beat those expectations a few weeks later. Did I hear you say that that changes have actually accelerated since that point in time?

Edward L. Pierce -- Executive Vice President and Chief Financial Officer

Well, Jeff, I don't know if they've accelerated more than the pace that they were on, but it accelerated through the end of the quarter. So I would just -- I would just say the pace continues. This is probably the best way to put it.

Jeff Silber -- BMO Capital Markets -- Analyst

And was there any meaningful -- I'm sorry, just any meaningful business that would -- the different in terms of that acceleration?

Edward L. Pierce -- Executive Vice President and Chief Financial Officer

No. Just, just steady acceleration across the board.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay, great. That's great to hear. All right. Thanks so much.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Yeah.

Operator

Our next question is coming from the line of Surinder Thind with Jefferies. Please proceed with your questions.

Benjamin Fowler -- Jefferies -- Analyst

This is Benjamin Fowler down in for Surinder. Thanks for taking my question and congratulation on the quarter. In terms of just a few housekeeping items, given M&A has become a bigger part of your strategy.

We just want to have a better understanding on how much inorganic revenue is embedded in the 4Q guide? Thanks.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Ed Pierce, you want to take that?

Edward L. Pierce -- Executive Vice President and Chief Financial Officer

Yeah. And as it relates to the contribution from acquisitions, this past quarter it was $42 million that would be acquisitions that we made after Q3 of last year. And we're estimating it's going to be roughly $42 million in Q4.

So in our earnings release and in our supplemental, you can see us set out separately what the organic growth rate is, not only for the consolidated enterprise, but also by segment.

So it's in the information that we presented.

Benjamin Fowler -- Jefferies -- Analyst

Got it. Thank you. And then, just switching gears a little bit. In terms of client demand trends, in terms of how many positions are being filled in remote capacity now versus pre-pandemic. Is there any sort of meaningful changes versus the height of the pandemic when almost all the jobs were remote?

Theodore S. Hanson -- Chief Executive Officer, President and Director

You've seen an incremental return to on-site work. I wouldn't say it's been a half or more than half by any means. But certain clients in certain industries, where it's more important to be on-site. You've seen some return to work there, but more than half of our resources to continue to work on a remote basis.

Benjamin Fowler -- Jefferies -- Analyst

Got it. Thank you.

Operator

Next question comes from the line of Kevin McVeigh with Credit Suisse. Please proceed with your questions.

Kevin McVeigh -- Credit Suisse -- Analyst

Great. Thanks again. Nice quarter. Hey, you talked about Ted M&A and how it should turned to capital and it sounds like you hired relatively senior person. Any thoughts around that and is that purely addition or obviously maybe CyberCoders areas like that starting to scale, do you still look to refine a little bit or would it primarily be targeted M&A?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Yeah, it's really targeted M&A, Kevin. The addition of some -- bringing more muscle to the table if you will to help us prosecute M&A here is important in my view over the next three years, given the amount of capital that we have the opportunity to deploy their and number of targets and the size of targets that are out there in that opportunity set.

So I think that this is -- while we are historically very capable of executing M&A, you know, this is a time to invest there. And I would say the pipeline to it right now, where we're in a mode of building pipeline and the pipeline is becoming more robust. And there are target rich opportunities out here in both the commercial and the federal segments. And we have to continued applied through that to find the right technical capabilities with the right, the main expertise, so that fits with what our current view is that we want to add into the business.

Kevin McVeigh -- Credit Suisse -- Analyst

And just, not only obviously you can do it inorganically. But as you think about sourcing candidates in the current environment Ted, how do you think about today versus, was it tougher today versus

Theodore S. Hanson -- Chief Executive Officer, President and Director

Did we lose Kevin?

Operator

Yes sir. We've lost Kevin's line. I'm moving onto our next question is from the line of --

Theodore S. Hanson -- Chief Executive Officer, President and Director

Operator, hang on one second. Kevin was asking about difficulty to sourced candidates today versus past I believe, right Kevin?

Kevin McVeigh -- Credit Suisse -- Analyst

Yeah. Sorry about that Ted -- my phone.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Yeah, no problem. Well, I guess you expect me Kevin to say it's more difficult today. But I'm not going to say that. It's always been difficult. We have a large database of candidates that we envisioned to us. We have an alumni network that's very strong. We have obviously churn and the Canada is coming off jobs and going on jobs that sort of thing.

But I think it's the automation of all of that that we have that makes it -- makes it a little easier to get to the right candidate and to respond to the clients. If you look at our fill ratios and our growth and everything else, there is nothing that points to we are having more difficulty.

I think sometimes, we've said in the past, when you want a certain person with Java skills in New Jersey and you only want to pay $50 an hour for him, that's a difficult fill. Okay. So there are something -- things like that that jump into it.

But today with remote work with using labor across the country or even near shore, we found that we have more avenues now to address the needs. So it's no more or no less difficult than it was before.

Edward L. Pierce -- Executive Vice President and Chief Financial Officer

And Kevin just emphasize that last point with clients more open now to bring on remote workers, they've opened thereafter here quite, quite a bit across the country and nobody is better positioned here than we are is one of the largest providers of IT resources to identify that across the country, found the right skill set, find a more precise match on experiences and industry expertise and bring that to there.

So while there is a balance here demand and supply, there is also kind of a new view here around remote work and then obviously we're the best position here to bring that to there for our clients.

Kevin McVeigh -- Credit Suisse -- Analyst

It makes sense. And then, Ted, just one quick one if I could one follow-up. Has there been any on the government side, any kind of sub-contract awards like with the JEDI contract or is that still too early for that?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Rand will take that one?

Randolph C. Blazer -- President

We had several sub contract awards, not so much JEDI but DRC is the one where we've seen that as well as a few others, and that's a part of our business that remains healthy. I hope that answers your question, Kevin?

Kevin McVeigh -- Credit Suisse -- Analyst

Yeah. That helps. Thank you.

Operator

Your next question comes from the line of Mark Marcon with Robert W Baird. Please proceed with your questions.

Mark Marcon -- Baird -- Analyst

Good afternoon, everybody and congratulations on a terrific quarter. I'm wondering, can you -- this is a question for Rand or Ted. Can you talk a little bit about the consulting business on the commercial side and your ability to continue to transition some of the Apex Systems clients over to consulting assignments?

I'm just wondering what percentage of your top enterprise clients are typically using you for consulting services? And how has the nature of those consulting assignments changed or evolved over the last few quarters, as you think about just the size of them the number of consultants On Assignment the length of the projects, et cetera?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Rand?

Randolph C. Blazer -- President

Yeah, that's a good question, Mark. I'm please to answer it. First of all, we do about a third of our enterprise clients are also consulting clients if you will.

So with that has propelled our growth with, but also shows we have a lot of room to go. If you look at the three major groupings of solutions we have and offerings we have to the client Workforce mobilization, modern enterprise and digital transformation, all three are growing off solutions in all three areas have grown over this past year quarter-to-quarter, digital transformation solution and sales have been highest, OK. They've grown the most. Workforce mobilization actually declined a bit and now it's starting to come back and that's around companies who are recognizing the need to build a workforce strategy. They're concerned about the shortage of labor and they are starting to think differently about how they build their workforces for now and for the future with some staying power around that. So we're benefiting from that. And then in modern enterprise, a lot of that is ERP work. For example, our new acquisition they've -- that gives us a strong position there with the package we think is up and coming and doing very well in the marketplace in the healthcare and manufacturing sector called in for. So I mean I think there are things that we're doing that are helping us propel growth. The digital transformation definitely has been the biggest grower.

Mark Marcon -- Baird -- Analyst

That's great. And Randy I -- and Ted. I appreciate that you all have lots of consulting experience if you think about just the types of assignments that you're winning relative to the other bidders that are out there. Can you just talk about like who you're going head-to-head against and like some of the wins that you're kind of the most proud of that exemplify on the progress that the overall consulting practice is making?

Randolph C. Blazer -- President

Ted will go ahead.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Yeah, go ahead Mark.

Mark Marcon -- Baird -- Analyst

Yeah.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Mark, I would say first of all the good news is now as we've been at this for a number of years is we're starting to get multi-year contracts and awards as well as 7-figure or higher awards per year. So we've migrated up to bigger jobs and longer-term jobs, and jobs go over a period of years. Who are we competing with it varies. There are a couple of staffing firms that offer consultative solutions, but not really. I wouldn't say they are principal competition in this work. I'd say it's generally a boutique consulting business and-or some of the big players and the accounting firms, some of the bigger players. We, won, I'm not going to mention the account or who would beat, but they actually we won an architecture job for building a Cloud architecture for a client and it was a Fortune 500 client who wanted to rethink their Cloud environment and the way they were distributing that Cloud and embedding security and we had a better answer. And they, and a quicker answer because we could pull the workforce together and get on it more quickly. So there are different reasons why we win. The good news is because of our account relationships through the staffing business over the last 2 decades, we are in the dialog and as long as we're in the dialog that gives us a chance to muscle up and present and remember because we build teams that are industry-specific, we do use contingent labor along with our own tools and artifacts and technical expertise to lead these engagements. So we found of what I call a unique way of putting together the right team of people to address the need and moving them forward and I think that wins today, particularly when some of the consulting firms are having a hard time getting talent.

Mark Marcon -- Baird -- Analyst

That's great. And if you look out like a few years like 2, 3, 4 years, what do you think of the remaining 2/3 of the enterprise Apex clients that you have like what percentage do you think those could start migrating toward using you for consulting services?

Randolph C. Blazer -- President

Ted, sorry go ahead. I don't want to be too bold.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Go ahead.

Randolph C. Blazer -- President

If we have, if we have 300 of the Fortune 500, I expect all 300 we can do an array of services for them. I'm sure we'll miss a few, but I'm also sure there, some of the other 200 where we do not provide staffing services that we can provide consulting services. So I think we see a big wide open market and by the way we've pointed ourselves toward the Fortune 1,000 now. I mean, we have a strong in our footprint and the sales team that can step up to that, so we have a lot of markets still go after.

Mark Marcon -- Baird -- Analyst

That's great and then one last one, just with Randy Phillips joining, can you just talk a little bit more about the size of the acquisitions that you might end up looking at or just the cadence of the acquisitions. It's obviously a robust environment and a big pipeline, but just wondering how we should think about it relative to recent history?

Theodore S. Hanson -- Chief Executive Officer, President and Director

Yeah, well, look, I think Randy brings years and decades long expertise in M&A both in the commercial marketplace and the government marketplace. And while we are able to build pipeline on our own, Randy just enhanced is that if you will. And then accelerates our ability to prosecute that while we're all on the day job as well which is serving our clients. So I mean you should just think about Randy as an experienced piece of incremental muscle to help us prosecute pipeline build pipeline and they get to final outcomes here. So we're excited to have him onboard and think this is the right time to make an investment in this part of the business.

Mark Marcon -- Baird -- Analyst

Perfect, thank you.

Operator

Thank you. At this time we have reached the end of the question and answer session. And I will now turn the call over to Ted Hanson for closing remarks.

Theodore S. Hanson -- Chief Executive Officer, President and Director

Great. Well, I want to thank everyone for being on the call today and we look forward to discussing our fourth quarter results with you in the first part of 2022. Thank you, and be well.

Operator

[Operator Closing Remarks]

Duration: 49 minutes

Call participants:

Kimberly Esterkin -- Investor Relations

Theodore S. Hanson -- Chief Executive Officer, President and Director

Edward L. Pierce -- Executive Vice President and Chief Financial Officer

Randolph C. Blazer -- President

Gary Bisbee -- Bank of America -- Analyst

Unidentified Participant

Analyst

Tobey Sommer -- Truist Securities -- Analyst

Jeff Silber -- BMO Capital Markets -- Analyst

Benjamin Fowler -- Jefferies -- Analyst

Kevin McVeigh -- Credit Suisse -- Analyst

Mark Marcon -- Baird -- Analyst

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