Everforth Inc (EFOR)

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements are based upon current expectations, as well as management's beliefs and assumptions, and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words "believes," "anticipates," "plans," "expects," "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences include those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 10-K"). In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q and we assume no obligation to update any forward-looking statements or the reasons why our actual results may differ.

OVERVIEW

Everforth is a technology and digital engineering company that provides IT solutions to clients across the commercial and government sectors through its two segments: Commercial Segment and Federal Government Segment (see Note 1. General in Part I, Item 1 in this Quarterly Report on Form 10-Q).

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

Revenues

Consolidated revenues for the quarter were $1.0 billion, down 1.3 percent year-over-year. The table below shows our revenues by segment for the three months ended June 30, 2026 and 2025 (in millions).

Commercial Segment revenues were approximately 70 percent of total revenues and were down 0.9 percent year-over-year. From an industry perspective, the decrease was attributable to reduced revenue from clients across Business Services, Financial Services, Consumer and Industrial, and Healthcare, partially offset by year-over-year revenue growth in TMT. Federal Government Segment revenues were approximately 30 percent of total revenues and were down 2.3 percent year-over-year. The decrease was mainly attributable to reduced revenue from Defense and Intelligence and Federal Civilian agencies, partially offset by increases in revenues from National Security agencies and other customers.

Gross Profit and Gross Margin

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

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

Consolidated gross profit declined 3.0 percent year-over-year. Gross margin for the second quarter of 2026 was 28.3 percent, a compression of 40 basis points compared with the second quarter of 2025. Gross margin for the Commercial Segment was down 90 basis points year-over-year, primarily driven by business mix related to a smaller contribution from some of our higher-margin solutions including permanent placement 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 40 basis points year-over-year, driven by focused efforts to improve profitability across the contract portfolio.

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Selling, General, and Administrative Expenses

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 $226.2 million, compared with $216.8 million in the second quarter of 2025. SG&A expenses in the second quarter of 2026 included $9.8 million in acquisition, integration, and strategic planning expenses, compared with $8.3 million in the second quarter of 2025.

Amortization of Intangible Assets

Amortization of intangible assets was $17.3 million, compared with $16.9 million in the second 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

Interest expense, net, which consists primarily of cash-based interest expense, amortization and adjustments to deferred loan costs, and interest income, was $20.4 million, up from $18.2 million in the second quarter of 2025. The increase was due to higher outstanding borrowings. The weighted-average outstanding borrowings and cash-based interest rates in the second quarter of 2026 and 2025 were $1.49 billion and 5.3 percent, and $1.28 billion and 5.6 percent, respectively.

Provision for Income Taxes

The provision for income taxes was $6.5 million, down from $12.1 million in the second quarter of 2025 due to lower income before income taxes. The effective tax rate was 31.4 percent, up from 29.2 percent in the second quarter of 2025. The increase in the effective tax rate reflects higher foreign income taxes, the non-renewal of the Work Opportunity Tax Credit ("WOTC"), and lower income before income taxes.

Net Income

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

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2026 COMPARED WITH THE SIX MONTHS ENDED JUNE 30, 2025

Revenues

Revenues for the first six months of the year were $2.0 billion, down 0.7 percent year-over-year. The table below shows our revenues by segment for the six months ended June 30, 2026 and 2025 (in millions).

Commercial Segment revenues were approximately 70 percent of total revenues and were down 0.2 percent year-over-year. From an industry perspective, the decrease was mainly attributable to revenue decline from clients across Business Services and Financial Services, partially offset by year-over-year growth across TMT, Healthcare, and Consumer and Industrial. Federal Government Segment revenues were approximately 30 percent of total revenues and were down 1.7 percent year-over-year. The decrease was mainly attributable to revenue declines from Defense and Intelligence and Federal Civilian agencies, partially offset by increases in revenues from National Security agencies and other customers.

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Gross Profit and Gross Margin

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

Consolidated gross profit declined 3.1 percent year-over-year. Gross margin for the first six months of 2026 was 27.9 percent, a compression of 70 basis points from the first six months of 2025. Gross margin for the Commercial Segment was down 120 basis points year-over-year, primarily driven by business mix related to a smaller contribution from some of our higher-margin solutions including permanent placement 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 30 basis points year-over-year, driven by focused efforts to improve profitability across the contract portfolio.

Selling, General, and Administrative Expenses

SG&A expenses were $450.6 million, compared with $431.3 million in the first six months of 2025. SG&A expenses in the first six months of 2026 included $22.6 million in acquisition, integration, and strategic planning expenses, compared with $11.6 million in the first six months of 2025.

Amortization of Intangible Assets

Amortization of intangible assets was $31.8 million, compared with $31.2 million in the first six months of 2025. The increase relates to the effects of the Quinnox acquisition, partially offset by older intangibles that have reached the end of their useful lives.

Interest Expense, Net

Interest expense, net was $37.5 million, up from $33.6 million in the first six months of 2025. The weighted-average outstanding borrowings and cash-based interest rates in the first six months of 2026 and 2025 were $1.38 billion and 5.3 percent, and $1.20 billion and 5.6 percent, respectively.

Provision for Income Taxes

The provision for income taxes was $11.6 million, down from $22.4 million in the first six months of 2025 due to lower income before income taxes. The effective tax rate was 37.1 percent, up from 30.9 percent in the first six months of 2025. The increase in the effective tax rate reflects higher foreign income taxes, the non-renewal of the WOTC, and lower income before income taxes.

Net Income

Net income was $19.7 million, down from $50.2 million in the first six months of 2025.

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Commercial Segment - IT Consulting Metrics

The book‑to‑bill ratio represents the ratio of consulting bookings to related revenues for a specified period. Commercial IT consulting accounts for approximately 50 percent of the segment’s revenues and has increased as a proportion of the segment’s revenues over time. Bookings represent the value of new contracts entered into during the period, including adjustments for changes in contract scope and contract terminations. Measuring bookings involves the use of estimates and judgments and there are no independent standards or requirements governing

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the other sections of this 2025 10-K, including the Special Note on Forward-Looking Statements and Part I, Item 1A. Risk Factors.

OVERVIEW

ASGN provides IT 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 world's leading agencies in the public and private sectors. Virtually all of the Company's revenues are generated in the United States.

Critical Accounting Policies and Estimates

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States ("GAAP"), which require us to make certain assumptions and related estimates affecting the amounts reported in the consolidated financial statements. Actual results could differ from those estimates.

Critical accounting policies are those we believe are both most important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often because we must make estimates about matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. We believe the accounting policies and estimates most critical in understanding the judgments involved in preparing our financial statements are goodwill and acquired intangible assets.

Recognition of Goodwill and Acquired Intangible Assets — Determining the fair value of goodwill and intangible assets requires management's judgment, the use of significant estimates and assumptions and, in some cases, the utilization of independent valuation experts. The most critical assumptions utilized in this determination are the future cash flow estimates associated with the acquired businesses, as well as discount rates and royalty rates applied to those cash flow estimates.

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.

When evaluating goodwill and trademarks for impairment, the Company may first perform a qualitative assessment to determine whether it is more likely than not that there has been an impairment. A qualitative assessment takes into consideration (i) macroeconomic, industry and market conditions; (ii) cost factors; (iii) overall financial performance compared with prior projections, including changes in assumptions since the last quantitative assessment; (iv) future performance and projections; (v) the excess of fair value over carrying value as of the most recent quantitative assessment performed; and (vi) other relevant entity-specific events. The decision to perform a qualitative assessment in a given year is influenced by a number of factors including the significance of the excess of the estimated fair value over carrying amount at the last quantitative assessment date and the amount of time between quantitative fair value assessments. If the Company decides not to perform a qualitative assessment, or if it determines that it is more likely than not that the carrying amount of goodwill or trademarks exceeds their fair value, a quantitative assessment is performed to determine the estimated fair value of the reporting unit or trademark.

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; (ii) earnings before interest, taxes, 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.

To estimate the fair value of a trademark, quantitative analysis would generally include, an income approach, specifically a relief-from-royalty method. 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 the trademark.

For the 2025 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 its two reporting units, Commercial and Federal Government, and its trademarks, exceeded their respective carrying amounts.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2025 COMPARED WITH THE YEAR ENDED DECEMBER 31, 2024

In this section, we discuss the results of our operations for the year ended December 31, 2025 compared with the year ended December 31, 2024. For a discussion of the year ended December 31, 2024 compared with the year ended December 31, 2023, please refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024.

Revenues

Revenues for the year were $4.0 billion, down 2.9 percent year-over-year. The table below shows our revenues by segment (in millions).

Commercial Segment revenues (70.1 percent of total revenues) were down 2.7 percent year-over-year and are categorized into five industries: (i) Consumer and Industrial, (ii) Financial Services, (iii) Technology, Media and Telecom ("TMT"), (iv) Healthcare, and (v) Business Services. The Consumer and Industrials industry was up low-teens and Healthcare was up low single digits, while the remaining three industries declined. Federal 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: (i) Defense and Intelligence, (ii) National Security, (iii) Civilian, and (iv) other clients. Federal Civilian and Defense and Intelligence both declined year-over-year, while National Security was up.

Total IT consulting services revenues were $2.5 billion (62.3 percent of total revenues), up 5.1 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 3.3 percent year-over-year mainly related to the loss of certain contracts as a result of initiatives associated with DOGE. Assignment revenues, which totaled $1.5 billion (37.7 percent of total revenues), were down 13.8 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.

Gross Profit and Gross Margin

The table below shows gross profit and gross margin by segment (in millions).

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

Consolidated gross profit declined 2.9 percent consistent with the decline in revenues, resulting in a consistent gross margin of 28.9 percent in each year. Gross margin for the Commercial Segment was up 30 basis points, reflecting a higher mix of consulting revenues. Gross margin for the Federal Government Segment was down 70 basis points, primarily due to a higher volume of revenues from low-margin software licenses, the loss of certain higher margin contracts as a result of initiatives associated with DOGE, and higher rates of fringe benefits.

Selling, General, and Administrative Expenses

Selling, general, and administrative ("SG&A") expenses consist primarily of compensation expense for our field operations and corporate staff, rent, information systems, marketing, telecommunications, public company expenses, 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) in 2024. SG&A expenses for the year ended December 31, 2025 included $26.5 million in acquisition, integration, and strategic planning expenses, inclusive of $5.2 million in charges related to strategic workforce 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

Amortization of intangible assets was $64.8 million, up from $58.1 million in 2024. The increase relates to amortization of intangible assets associated with the acquisition of TopBloc (see Note 6. Acquisition in Item 8. Financial Statements and Supplementary Data), partially offset by lower amortization from older intangible assets that are reaching, or have reached, the end of their useful lives.

Interest Expense, Net

Interest expense, net, which consists primarily of cash-based interest expense, amortization and adjustments to deferred loan costs, and interest income, was $67.7 million, up from $64.3 million in 2024. The increase was due to higher outstanding borrowings. The weighted-average outstanding borrowings for 2025 and 2024 were $1.21 billion and 5.6 percent, and $1.05 billion and 6.0 percent, respectively.

Provision for Income Taxes

The provision for income taxes was $49.1 million, down from $64.9 million in 2024 due to lower income before income taxes. The effective tax rate of 30.2 percent was higher than the effective tax rate of 27.0 percent in 2024. The increase in the effective income tax rate was primarily due to higher non-deductible executive compe

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