ASGN Incorporated

Ladies and gentlemen, thank you for standing by and welcome to the ASGN fourth quarter earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during today's call, please press star, then zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to Jason Terry, Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and thank you for joining us today. With me today are Peter Damaris, Chief Executive Officer, Ted Hanson, President, 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 presentation contains forward-looking statements. Although we believe these statements are reasonable, they are subject to risks and uncertainties and 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 the 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. Please 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 Peter Damaris.

Peter? Thank you, Jason. During our call today, I will comment on the markets we serve and our financial highlights. Ed, Rand, and George will then discuss the performance of our operating segments in greater detail before turning the call over to Ed for a detailed review of our fourth quarter results and our estimates for the first quarter of 2019. Now onto the fourth quarter results. Revenues for the quarter were $929.7 million, up 36.9% year-over-year on a reported basis or 11.8% on a pro forma basis. Our growth rate for the fourth quarter was not only higher than the third quarter, it was the fastest quarterly year-over-year growth rate for any quarter in 2018. Our strong performance is indicative of the overall strength of the US economy and labor markets and the health of the federal market. Our IT business continues to see high demand from its customers driven in part by greater adoption of staff augmentation as a viable alternative to outsourcing, offshoring, and consulting. We believe that we are well positioned to continue to service our customers' IT needs as technology rapidly evolves and is adopted. Our size and service offerings allowed us to grow faster than the published IT services industry growth rates, and we believe that we are well positioned to generate solid above-market revenue growth in the future. During the quarter, we saw strong double-digit revenue growth at Apex Systems, strong performance from Creative Circle, and continued year-over-year growth at Oxford Core and our Oxford segment. Our federal IT services and solutions business, ECS, grew revenues at roughly twice the projected annual growth rate of its peer group for 2018. ECS has grown above its peer groups organic growth rate in each of the last three quarters following the acquisition by ASGN. Investor demand was strong across our federal, local, mid-market, and large national accounts. Adjusted EBITDA was up 31.5% year-over-year to $109 million, and cash generation continues to be at or above our expectations. Our adjusted EBITDA margin was slightly below the midpoint of our guidance due to $7.1 million in software sales under one of ECS's government contracts, which carries a lower gross margin, and higher than expected flow of revenues from certain of Apex's larger customers, which also carry a lower gross margin. Free cash flow was $57.3 million, and our leverage ratio was 2.69 times trailing 12-month adjusted EBITDA at the end of the quarter. For the full year, we paid down $286 million in debt, including $276 million since the closing of the ECS acquisition. Despite normal quarterly seasonality and the payment of the cash for the DHA acquisition and the annual cash bonuses in the first quarter, the company anticipates that its leverage ratio at the end of the first quarter will be 2.65 times down from 2.69 times at the end of the fourth quarter. As we look ahead to the remainder of 2019, we anticipate our leverage ratio will be below two times by the end of the year, assuming no further acquisitions. With respect to recent production at our Apex and Oxford segments, our weekly assignment revenues, which exclude conversion, billable expenses, and direct placement revenues, averaged $48.8 million for the last two weeks of the quarter, up 11.2% over the same period in 2017. Our federal IT services and solutions business continues to see new long-term contract awards, robust spending against existing contracts, and the forward positive benefits of increased funding and visibility of defense, intelligence, and federal civil agency budgets, particularly in the areas of artificial intelligence and machine learning. During the quarter, ECS secured $196.6 million in new awards. George will speak in more detail regarding these recent awards. On January 28th, we announced the acquisition of DHA for our ECS segment. DHA is a provider of mobility, cybersecurity, cloud, and IT services to the Federal Bureau of Investigation and other federal customers. DHA's services are delivered primarily through prime, full, and open contracts. Its performance reputation and delivering technical support will strengthen ECS's rapidly growing presence across cybersecurity and other operational domains in the national security intelligence community. I would like to now turn the call over to Ted Hanson, who will review the operations of this segment.