Welcome to the FTI Consulting Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. At this time, I would like to turn the conference over to Mollie Hawkes, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to the FTI Consulting conference call to discuss the company's fourth quarter and full year 2018 earnings results as reported this morning. Management will begin with formal remarks after which we'll take your questions. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. Forward-looking statements concerning plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions related to financial performance, acquisitions, share repurchases business trends and other information or other matters that are not historical, including statements regarding estimates of our future financial results and other matters. For discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the Safe Harbor statement in the earnings press release issued this morning, a copy of which is available on our Web site at www.fticonsulting.com as well as other disclosures under the heading of Risk Factors and Forward-Looking Information in our annual report Form 10-K and in our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speaks only as of the date of this earnings call and will not be updated. During the call, we will discuss certain non-GAAP financial measures, such as total segment operating income, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per diluted share, adjusted net income, adjusted EBITDA margin and free cash flow. For discussion of these and other non-GAAP financial measures, as well as our reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the press release and the accompanying financial tables that we issued this morning, which include the reconciliations. Lastly, there are two items that have been posted to Investor Relations section of our Web site this morning for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical financial and operating data, which have been updated to include our fourth quarter and full year 2018 results. Of note, during today's prepared remarks, management will not speak directly to the quarterly earnings presentation posted to the Investor Relations section of our Web site. To ensure disclosures are consistent, these slides provide the same details as they have historically and, as I said, are available on our Investor Relations section of our Web site. With these formalities out of the way, I am joined today by Steven Gunby, our President and Chief Executive Officer; and Ajay Sabherwal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gunby.

Thank you, Mollie, and good morning and thank you for joining us. I'm sure many of you saw our press release this morning. This quarter, we once again we had record results; record fourth quarter revenues and record fourth quarter adjusted EPS. The record fourth quarter together with record performances in the first three quarters of the year resulted not surprisingly in the best year this company has ever had. In 2018, our teams delivered record revenues in particular they drove double-digit organic growth, which in turn let to record GAAP EPS in fact marking sixth consecutive years of EPS growth and record adjusted EPS marking fourth consecutive years of adjusted EPS growth. And important, we also exited 2018 with arguably the best balance sheet this company has ever had; terrific results. Let me take a moment to caveat the results just a tiny bit. As we discussed in the past, our results in any quarter, in fact, any year are driven not only by the underlying fundamental improvements we make in the business, but also in part by something we called noise short-term factors that don't necessarily say much about the underlying business. Factors like the timing of success fees, the ending or starting of huge jobs temporary influencers of cost or whether we happened to have a particularly high or low batting average in winning big jobs. Noise as we've discussed is not important over any extended period of time, but it can significantly affect quarterly and annual results. You may recall our discussion in the beginning of 2017 when we shared our view that the underlying fundamentals of this company at that time were significantly better than the indicated by the reported results that some of the underlying good fundamentals were being obscured by a bunch of…

Thank you, Steve. Good morning everybody. In my prepared remarks I will take you through our results for 2018 and our financial guidance for 2019, but first let me begin with some highlights. As Steve just discussed, we had a great year. In fact, a record year where every one of our business segments grew both revenues and EBITDA and at healthy levels. Revenues for 2018 of $2.03 billion increased $220.1 million or 12.2%, 2018 GAAP EPS $3.93 compared to $2.75 in 2017. Full year 2018 adjusted EPS were $4 up 72.4% compared to $2.32 in the prior year. Full year 2018 adjusted EBITDA of $265.7 million grew 38.4% compared to $192 million in 2017. Adjusted EBITDA margin of 13.1% improved 250 basis points from 10.6% in 2017. Before I take you through the fourth quarter, let me share with you my perspectives on the year. The excellent performance in 2018 resulted from organic growth with strong utilization. Our corporate finance, FLC and strategic communications segments grew revenues by double-digit percentages with corporate finance up 17.1%, Strat Comm up 16% and FLC up 12.5% year-over-year. After delivering record revenues in the first three quarters of 2018, we have anticipated a slowdown in the fourth quarter. We did see sequential slowdowns in economic consulting and technology as large engagements that led to strong third quarter results were completed. However, contrary to our expectations, we saw sequential revenue growth in corporate finance, FLC and strategic communications. This resulted in the fourth quarter being our third consecutive quarter with revenues over $500 million. In fact, the fourth quarter of 2018 revenues were the highest fourth quarter revenues ever for the company. Despite the year-over-year increase in revenues for the quarter, adjusted EBITDA declined compared to the prior year quarter primarily because of increased…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Marc Riddick of Sidoti. Please go ahead.

Hey, good morning, everyone.

Good morning, Marc. How are you?

Very good. Yourself?

I'm great. Thanks.

I was wondering if you can give an update on how you feel as far as regionally especially with so much focus around Brexit. I was wondering if you could sort of give an update as to maybe what you're seeing there and what types of opportunities and/or things we should be thinking about for the region based on what you're seeing today?

Yes. Marc, look, I think -- let me answer that in two ways. We feel very bullish about our EMEA region. If you look at and I know we don't disclose many of the details, but if you look at the stuff we do disclose, we have made a major change in that region over the last few years. That business is growing; we've strengthened our competitive positions both in London, but also on the continent. And we are really bullish about where we can take it over time. Now the question you asked about Brexit, I got to tell you, I spent a lot of time talking with people about Brexit. I don't think the people in parliament in London know where Brexit is going. And I don't think anybody actually knows what the implications would be if different scenarios come out. And I don't want to pretend I'm smarter than that. I would say that we believe with Brexit or without Brexit there is huge opportunity for our firm. And we're going to have to sort those out as it comes through. I wish I could give you a more specific read on that. But, I suspect if you and I knew exactly what was going to happen with Brexit, we would be the only two people in the world then we could figure out lots of ways to make money after that. For us, we're just trying to figure out how to make a business regardless and I think we can. Does that help a little?

It does. And then, I guess maybe we can sort of shift a little bit as to maybe what type of acquisition opportunities that you might be seeing and how you're feeling about valuations on some target areas that might be attractive to you going forward?

Yes. Look, I think as we've said before, we are always looking for acquisitions. I mean, I think the philosophy we have here though is that at one point this was a totally acquisition driven company and that can't be. I mean what because you never know whether good acquisitions are going to come along. And what you have to do is commit to organic growth day in day out by betting behind your best people, by attracting people laterally and so forth. So we've committed to that. The acquisition strategy is on top of that. And that's opportunistic. It depends on when we find really good opportunities with people who we believe will join us, stay with us and help us build the institution. We're not interested in temporary acquisitions that look good on the P&L, and then, people leave after five years. And that's takes a lot of work to find those. And then, as you've pointed out valuations haven't been low in the market. So we've done one of consequence since I've been here. But we are actively in the market always looking at that. I suspect if the market slows down, if there's recessions in different places around the world, valuations will also become much more reasonable. The last thing I'll say is, we have a balance sheet that allows us to do any acquisition we want. And so we're actively monitoring it. But we're not going to do an acquisition just because cash is burning a hole in our pocket. We will use the cash wisely as we've been trying to do the last five years. Does that help Marc?

Absolutely. I appreciate it. Thank you very much.

The next question will be from Toby Sommer of SunTrust. Please go ahead.

Hi. This is Joseph on the line for Toby this morning. I just want to talk a little bit about big projects. I think you mentioned that you didn't expect as many in 2019, are you seeing less big projects in the marketplace so far this year. And what do you think the effect on productivity will be for 2019? Thank you.

Thanks, Joseph. It's a good question. This is not a market phenomenon and it's not a science. Let me be clear. This is, I mean I used the batting average analogy consciously. I think somebody starts hitting 450 in May -- April and May and you say well maybe they could continue for the year. And sometimes people do. I guess Rod Carew did for a whole year. I feel like last year there was no restructuring boom in the market. We just swung and hit on so many of the jobs and the same thing across all of our segments. I think when Ajay and I sit here and you have visibility always into the first part of the year and you can see whether you think big jobs you have today are continuing and so forth. It's very hard to have visibility into the second half of the year. And therefore, very hard to predict that you're going to have a 450 batting average in the second half of the year. So it's much more of a statistically grounded thing about our swing and hit rate than it is on any piece of market forces. Does that help Joseph?

Yes. That's helpful. And do you think that I guess having won a bunch of big projects recently, do you think that's going to make client in the future more confident in your ability to complete projects of scale as they come up. Thank you.

I do. I think look I think what happens here it's perfect. You're exactly right. This is what we're doing. That is the underlying phenomenon that has me positive. You just don't know what a quarter is going to be. But what we're doing is, we're attracting better people, we're promoting people, we're winning more big jobs that enhances our brand reputation which is the sustainable trajectory that we are writing. And that's what I'm excited about. I don't think any of us can know what a given quarter can be, this business is so volatile. But that's why I'm so excited, when you look over five years there's no noise in a five year trajectory. We've more than doubled the EPS in five years and we've more than built this institution and that's because we're attracting people, we're developing them. We're more competitive in big jobs in every segment we're in and the market is noticing. So I think you've got the right point there.

Thank you. I'll jump back in the queue.

Thank you.

The next question will be from Tim McHugh of William Blair. Please go ahead.

Good morning, Tim.

Good morning. I just want to ask for more color maybe on the business transformation side. I know you've talked about building that long-term but seems like, you're kind of saying it took a big step forward in kind of Q4 in terms of contribution, was there -- that just big jobs. Is there something more tangible I guess changing or happening in that outcome?

I think the team there's an incredible job of both supporting the people we had historically in that business. As you know we changed leadership there and Carlin has done an incredible job of supporting the people there, the existing people, but also attracting talent from outside. And the thing you don't know when you have a bunch of new people and a small practice and you have some big jobs you have this zero one variable, the big jobs go away and your utilization can drop. And how soon is it going to be to get the next big job. So that business has done better than my expectation based on lots of time in history in hitting the ground running and just building itself. It's just -- it's been a constant delightful surprise. And Carlin gets all obsessed if we have a month where it feels low utilization but the truth is that business is on fire and it's doing a great job of both delivering on its current work, but then extending that the references into other work. So we're excited about the business. There's a huge amount of upside to it. I'm sure that business at least as much as any of them will have swings quarter-to-quarter just because the law of large numbers doesn't yet apply to it. But it's done extremely well and it's not a positive surprise in the sense of long-term. We had enormous confidence in the long-term. The speed with which its taken hold has been a positive surprise. Does that make sense Tim?

Yes. That helps. Let me follow-up the Senior Managing Director headcount growth you talked about. I know you probably hired a little bit in every part of the business, but where are the disproportional facts being made as we go here into 2019 with that headcount growth?

Thanks Tim for the question. Ajay here. So as you would imagine success breeds hiring so. Outside of the United States a lot more, I think 51% of them are outside of the United States, tremendous, tremendous growth. Earlier question on EMEA; EMEA grew year-over-year 24%. So I mean we're doing extremely well and we're hiring both there and in the U.S. In terms of segments FLC a little bit higher than the average CF right at the average and others slightly below. I mean that's -- in technology too we were able to attract some really good talent in various countries around the world.

Okay. And then, maybe related to that you talked about EMEA, I know it's probably not a driver historical results but how are you thinking about the potential changes to audit rules and the U.K. and the opportunity I guess relative to the big four in the U.K. market over the next couple of years?

Hey, that's a good question here. I mean I think we like to believe that part of the reason we're attracting so much talent is because I think we're now seen as a really winning firm in Europe. But I have to admit that some of the reason we're attracting so much talent is some of the dislocation in the big board over there. I mean it's as you know, Tim it's pretty serious. And our parts of the big four are the most contentious parts of the big four. The parts which have the most conflict, the most chance of conflict, right, its big litigation, its big investigations, its bankruptcy. So the big four parts that are most likely to get shaken loose by the disruptions over that are the parts that we are specializing. And so it is a very fertile ground for us right now. And who knows how this sorts out over the next couple of years. But based on what I read in the paper, it's likely to continue to be that for some time to come. You read it differently?

I know that seems consistent with what I'm hearing. So, I appreciate it. Thank you.

Thank you, Tim.

And ladies and gentlemen, that will conclude our question-and-answer session and will also conclude our conference call for today. We thank you for attending today's presentation. And at this time, you may disconnect your lines.