ASGN Incorporated

Greetings, and welcome to the ASGN Incorporated third quarter 2019 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I would now like to turn the conference over to your host, Kimberly Esselstyn, Investor Relations. Thank you. You may begin.

Thank you, Operator. Good afternoon, and thank you for joining us today for ASGN's third quarter 2019 conference call. With me are Ted Hansen, President and Chief Executive Officer, Rand Blazer, President of APEC 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 certain 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 test release and in our SEC filing. 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.asgf.com. Please also note that on this call, we will be referencing certain non-GAAP financial measures, such as adjust the EBITDA, adjust the 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 President and Chief Executive Officer, Ted Hanson.

Thank you, Kimberly, and thank you for joining ASGN's third quarter conference call. It's been an exciting time for ASGN as we accelerate into the next phases of our five-year strategic plan. As we initially outlined at our analyst day in May of 2018, by 2022, we anticipate reaching $5 billion in top-line revenue, which includes $500 million to $700 million in acquired revenue and adjusted EBITDA margins of 12 to 12.5%. I'm pleased to report that we remain on track to reach each of these targets. Our ability to attain these targets derives from a combination of ASGN's deep industry expertise, expanded consultative and solutions capabilities, and a vast talent pool of accomplished professionals who deliver productive and effective solutions to our commercial and government clients. Our unique deployment model differentiates ASGN from other IT service providers. We are very pleased with our quarterly performance, with all numbers either in line or exceeding our Q3 guidance ranges. Ed Pierce, our CFO, will provide further details on our results later during today's call, so I will focus on a few key highlights for the quarter, including revenues and free cash flows. Consolidated revenues for the third quarter totaled just over $1 billion, an increase of 10.6% year-over-year, and at the high end of our guidance range for the quarter. This growth was mainly driven by strength in our APEX and ECS segments and represents a significant milestone for our company by reaching a billion in quarterly revenues for the very first time. APEX, our largest segment, which services clients across multiple commercial and markets, generated revenue of $644.1 million, up 9.2% year-over-year. Growth in the APEX segment was driven by strong performance in our top account portfolios. Graham Blazer will provide more color on Apex's success later on today's call. ECS, which provides IT solutions to the federal government, including the Department of Defense, intelligence agencies, and certain civilian agencies, generated revenue of $206.1 million, up 25.7% year-over-year. George Wilson will speak more on ECS shortly. Oxford, which offers on-demand consulting talent for commercial IT, healthcare, life sciences, and engineering clients reported revenues of $152.5 million for the third quarter, roughly consistent with the prior year period when adjusted for both billable days and currency fluctuations. We also continued to generate strong free cash flow for the quarter, enabling us to pay down $42 million of our long-term debt and repurchase $20 million in common stock. Even after paying down our long-term debt, buying back shares, we saw a decline in our average leverage ratio to 2.26 times our trailing 12-month adjusted EBITDA at quarter end. We anticipate a leverage ratio of approximately 2.19 by the end of 2019. As I noted last quarter, neither the repayment of our debt nor the repurchase of our shares precludes the ASDN from making strategic acquisitions. In fact, just this past week, we announced the acquisition of InterSys Consulting, a leading IT services and solutions provider, for $67 million in cash. InterSys Consulting is now part of Apex Systems, and we welcome their team to ASGN. The acquisition of InterSys Consulting is an important step in our strategic growth plan to deliver increased value to both our customers and our shareholders. InterSys Consulting anticipates generating approximately $31 million in revenues for full year 2019, followed by double-digit revenue growth in 2020. Their addition deepens and expands our capabilities in digital innovation and systems modernization. We expect to realize revenue synergies by leveraging their robust capabilities within our current APEC systems and Oxford customer bases to capture an increased portion of our existing pipeline of higher-end consulting opportunities. While Rand will further discuss InterSys Consulting's capabilities shortly, I'd like to briefly address our strategy behind this acquisition. When making acquisitions, ASTN looks to acquire companies that continue to evolve our business as a preeminent and differentiated IT services and solutions provider and attractive market. Increasing our consultative capabilities and leveraging our existing account relationships and pipelines continues to be our focus. Target acquisitions must fulfill the strategic needs, be accretive to growth rates and margin profiles, and possess in-demand consultative and solutions capabilities. InterSys Consulting checks the box on each of these attributes. Their industry expertise, combined with a deep focus on developing long-standing customer relationships, fits well within ASDN's own mission to provide high-end technology services across each of the end markets we serve. Through the acquisition of InterSys Consulting, our most recent prior acquisitions of ECS and DHA, we are scaling our consultative and solutions capabilities and expanding into key industry segments across the commercial and government sectors. We are strengthening our vision of merging industry expertise and technology solutions with unparalleled account relationships. Ultimately, our strategy to execute our long-term business plan to expand our presence in commercial and government IT services and solutions, and to acquire assets which complement our industry expertise and solution capabilities, will further position ASGN to achieve strong growth today, tomorrow, and into the future. I'll now turn the call over to Rand Blazer to speak further about the APEC segment's third quarter performance.