Welcome to the FTI Consulting Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants will be key followed by 0. Please note this event is being recorded. At this time, I would like to turn the conference over to Molly Hawkes, Vice President of Investor Relations. Please go ahead.
Good morning, and welcome to FTI Consulting conference call to discuss the company's fourth quarter 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 relating 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 website at www.fticonsulting.com as well as other disclosures under heading of risk factors and forward looking information in our annual report, Form 10 K and in our other financial filings with the SEC. Investors are cautioned not to place undue reliance on any forward looking statements speak 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. Discussion of these and other non GAAP financial measures, as well as our reconciliations 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 website, section of our website this morning for your reference.
These include quarterly earnings presentation and an Excel and PDF of our historical financial and operating data, which have been updated to include our fourth quarter full year 2018 results. Of note, during today's prepared remarks, management will not speak directly to the quarterly earnings presentation posted Investor Relations section of our website. To ensure our disclosures are consistent, these slides provide the same details as they have historically, and as I have said, are available on the Investor Relations section of our website. With these formalities out of the way, I'm joined today by Stephen Gundy, our President and Chief Executive Officer and Ajay Sabarwal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gumy.
Thank you, Molly, and good morning, and thank you all for joining us. I'm sure many of you saw our press release this morning. This quarter, once again, we had record results, record 4th quarter revenues and record 4th quarter adjusted EPS. The record 4th quarter, together with record performances in the 1st 3 quarters of the year, resulted not surprisingly in the best year, this company has ever had. In particular, they drove double digit organic growth, which in turn led to record GAAP EPS in fact, marking 6 consecutive years of EPS growth and record adjusted EPS, marking 4 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've 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've 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 huge jobs, temporary influencers of cost or whether we happen 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 negative noise. In 2018, in contrast, In fact, to the contrary, more things seemed to break early expected. We have, as I'm going to talk about in a moment improve this company enormously, and importantly, the teams involved are continuing to do that every day. But given the event driven nature of our business, I never expect no matter what our teams are doing perfectly at a moment that even if we're doing everything right, that every business and region will be up.
And yet, that's what happened in 2018. And though we expect sustained double digit growth in adjusted EPS over time, and we have delivered it, we don't expect to be up more than 70% in adjusted EPS. A number that we saw in 2018. So our conclusion is we're doing a terrific job, but we did have some positive noise in 2018, and that noise contributed. To record financial performance.
To me, what is much more important and much more power is that when you look below the positive noise, you can see the ways that our folks are building upon a great institution and driving a much more powerful FTI. There are so many ways I don't believe I can do them even partial justice, but let me illustrate a few. Some of these you've heard before, some of these you haven't, but they're powerful things that our people every day are building. This institution. They include the many initiative driven by our Stratcom team, whether you talk about public affairs side, the comms side, the work we're doing in London, in the U.
S. And the continent in Asia Pacific or Latin America, or in terms of their work collaborating across on Cross segment initiatives. All of those initiatives have allowed a business that was once struggling to soar and to soar not just for a year, but to soar over multiple years. If you have a moment, go back and look at that business's history. And look at the trajectory over the last 4 years.
That team's focus in changing its trajectory, controlling its destiny, building a better institution are to me both impressive and inspiring. Or you can look at this myriad initiatives driven by tech team in the U. S. And abroad on the software side and the services side, on the e discovery front, the information governance front. And our team drove these past couple of years to allow a business in a tough market to fix a strategic disadvantage and return that business to growth.
Or you can look at the initiatives that our econ teams have driven to reinforce the strength we have in the U. S. Or extend that U. S. Leadership position around the world.
Or most significant in terms of this year's P and L improvement, you can look at the huge number of changes driven by the teams in Corp Fin and FLC. That have allowed these core pillars of the company to return to be key drivers powerful growth business. So it's like that global construction business we've talked about a few times, or reinvesting to return some core businesses historically back to growth. Importantly, it's in all innovation. For example, combining our historically strong investigations business with a powerful set of new offerings in cyber, to allow leadership in cyber crisis response, and it's involved geographical expansion.
Import Finnet involves on one hand, successful extensions into adjacencies in business transformation and transaction services moves that both leverage our core restructuring but also extend their offerings into new areas such as the Office of the CFO or merger integration or performance improvement. But it's not just the adjacencies. At the same time, it included investing behind our core businesses: the lateral hires and acquisition, promotions, that allowed our creditor rights and company Laurels in those businesses we built on those positions. And we continue to extend our leading restructuring position to new geographies, I think 5 years ago, many people in EMEA didn't know who we were. Today, we're a credible number 1 or 2 player in many places across EMEA.
And that's just a quick review of the types of progress that our teams are driving and have driven business by business over the last several years. To build a fundamentally stronger and thereby drive growth and opportunity on a sustained basis. Let me take a minute to share a slightly different lens on that same progress, a softer lens, which is to look at the progress in terms of people and culture. I believe we've been accomplishing what we've been accomplishing for a lot of softer reasons as well, in part because we've turned into firm that knows how to make record numbers of well considered promotions and then how to support those promotions, those people. And become successful leaders in our firm, in turn, develop other people.
In part, because the phone is ringing off the hook, from folks wanting to join us in a way that I think is unprecedented in our history, allowing us to be extremely selective in who we take into the firm and yet still have record numbers of senior hires. It is also in my mind because today, I believe we have an executive committee that knows its job is to build a brighter future the leaders in each of our segments and regions understand in professional services you need to lead in part by encouraging others to lead. To take advantage of the tremendous professionals we have, the ambitious driven professionals and support their business building behavior. Those are softer developments. It's hard to put financial values against each of them, but to me, those are critical bases and have been critical bases for the sustained progress.
To close off on the review of the year, 2018 results probably reflected some good fortune. Even Bryce Harper, whether he's a nat or a Philly will not hit home runs every time. I'm sure we will have quarters that are impacted by negative noise at some point in the future. But I hope you take away the far more important message that below any volatility driven by noise, we have a set of teams that have built and are building on a sustained basis an extraordinary firm, a powerful firm, a stronger firm, an important one that knows how to evolve, to grow to take advantage of market opportunities to make itself better. It is that progress that makes me so bullish on the years ahead.
Before I turn the call over to Ajay, let me give some perspective on the 2019 guidance. First, I'm sure you know this at the midpoint of our adjusted EPS guidance is below what we delivered in 2018. So let me say a few words on that. The midpoint of our 2019 guidance is up compared to the 2017 actual adjusted EPS So if we hit the midpoint of our adjusted EPS guidance, we won't have had sustained double digit growth, we will have had sustained extraordinary growth. Even at the low end of the adjusted EPS guidance range for 2019, we will have more than doubled adjusted EPS of 5 years prior.
This guidance range far exceeds what I believe most folks 9 or 12 months ago were expecting for 2019 and in many cases for 2020. So I hope we have some perspective. Our guidance is, quote, down only in comparison in a year where adjusted EPS was up more than 70%. 2nd, our guidance is also informed by the fact that we're making significant investments in people. We have had a record number of senior hires join us in the 2017 sorry, the second half of twenty eighteen with some actually coming in at the beginning of 2019.
We're excited about those hires. We see those folks helping us drive growth in 2020 beyond. But we do not expect senior hires in general or this specific group of senior hires to be accretive in our 1st year. And of course, we are also building our junior headcount, both because we got behind in junior headcount recruiting in the first half of twenty eighteen and to support the new senior hires and promotions. Those investments will weigh on 2019 results.
Senior talent usually cost you EBITDA in the 1st 12 to 18 months. But please don't misunderstand what we're saying. We've made those investments quite consciously and very bullishly, we're very bullish about those hires. Just as we see 2018 as the results of the many in important investments we made in several prior years, we see these investments helping us drive the bright picture that we have in our mind for the next several years. So let me close by reinforcing that bullish note.
The last 5 years to me have proved that this farm, this group of people can be an incredibly powerful growth engine. They show that we can grow a business that supports our terrific people's goals, their ambitions, and at the same time, drives work, results that delight our clients and deliver returns for our shareholders. The last 5 years have been terrific, and yet in my view, the next 5 years look even brighter than the last. I very much look forward to working with each of you to see that potential unfold.
Ajay? Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our results for 2018 and our financial guidance for 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 $2,030,000,000 increased $220,100,000 or 12.2 percent, 2018 GAAP EPS of $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 $265,700,000. Grew 38.4% compared to $192,000,000 in 2017.
Adjusted EBITDA margin of 13.1 percent improved 250 basis points from 10.6% in 2017. Before I take you 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%, Stratcom up 16% and FLC up 12.5% year over year. After delivering record revenues in the 1st 3 quarters of 2018, we had anticipated a slowdown in the 4th 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 4th quarter being our 3rd consecutive quarter with revenues over $500,000,000. In fact, the fourth quarter of 2018 revenues were the highest 4th 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 compensation and SG to reflect the record year and costs were also boosted by increased headcount in the Third And Fourth quarters.
Through the first half of twenty eighteen, our headcount was relatively flat, but in the second half, hiring ramped up As of December 31, billable headcount increased by 183 professionals, a 5.1% year over year increase. Non billable headcount decreased by 24, primarily due to the sale of Ringtail in September. 2018 SG and A expenses of $465,600,000 compared to $432,000,000 in 2017. The year over year increase in SG And A resulted from many areas and initiatives including record results that drove higher variable compensation. Investments in regional leadership and key account programs.
An increase in rent and occupancy costs and an increase in bad debt proportionate to higher revenues. Having said that, SG And A as a percentage of revenues declined 90 basis points from 23.9 percent of revenues in the prior year to 23 percent of revenues in 2018. I will remind you that in 2017, we took several headcount and real estate related cuts that resulted in special charges of $40,900,000, but did not impact adjusted EBITDA. Noteworthy, In 2018, there were no such actions or special charges. Our 2018 effective tax rate of 27.5 percent was almost unchanged compared to 27.6 percent in 2017, which excluded of the 2017 U.
S. Tax act. In 2018, despite U. S. Tax reform, which reduced U.
S. Federal tax rate from 35% to 21%, our tax rate was relatively flat year over year as we benefited from a higher mix overall, as you might expect, we are extremely pleased with these results. Now I will turn to 4th quarter results. For the quarter, revenues of $505,000,000 increased $37,300,000 or 8% compared to $6.1 includes the $9,100,000 loss on early extinguishment of debt related to the redemption of our $300,000,000 6 percent senior notes, which decreased EPS by $0.17 and a $2,100,000 of non cash interest expense related to our convertible notes, which also decreased EPS by $0.05. This compares to GAAP EPS of $1.78 in fourth quarter of 2017.
As a reminder, fourth quarter of 2017 EPS included a 2017 Tax Act benefit of $44,900,000 which increased EPS by $1.19, which was then partially offset by a $10,800,000 special charge related to headcount reductions which reduced EPS by $0.19. 4th quarter 2018 adjusted EPS of $0.83, which excludes the loss on early extinguishment of debt and non cash interest expense compared to $0.78 in the prior year quarter. Net income for the quarter was $23,700,000 compared to $66,900,000 in the fourth quarter of 2017. The decrease was largely due to the $44,900,000 discrete tax benefit in 2017 related to U S. Tax reform.
Adjusted EBITDA was $53,700,000 or 10.6 percent of revenues compared to $55,500,000 or 11.9 percent of revenues in the prior year quarter. Adjusted EBITDA declined compared to the prior year quarter, due to an increase in and corporate finance and restructuring, revenues of $144,800,000 increased 10.9% compared to Q4 of 2017. The increase in revenues was primarily due to higher demand for business transformation and transaction services. In fact, our business transformation and transaction services made up 48% of Corporate Finance's 4th quarter revenues which compares to 40 percent of revenues in 16.8 percent of revenue compared to $25,800,000 or 19.7 percent of revenues in the prior year quarter. Adjusted segment EBITDA declined as the increase in revenues was offset by higher compensation and an increase in SG and A expenses.
Sequentially, revenues increased 6.9 percent for Corporate Finance as we continue to win and increasing share of restructuring opportunities in the U. S, even though the U. S. Restructuring market remains subdued. Moving on to FLC, revenues of $132,100,000 increased 9.3% compared to the prior year quarter.
This was largely driven by increased demand for our construction solutions and dispute services. Adjusted segment EBITDA was $21,500,000 or 16.3 percent of revenues compared to $23,600,000 or 19.5 percent of revenues in the prior year quarter. Adjusted segment EBITDA declined as the increase in revenues was offset by higher as we saw improved demand for our operations and advisory offerings within our health solutions practice and for our dispute services. Economic consulting revenues of $128,400,000 increased 6.1% compared to Q4 of 2017. The increase in revenues was primarily due to higher demand for antitrust and financial economic services.
Adjusted segment EBITDA was $12,100,000 or 9.4 percent of revenues compared to $14,300,000. Or 11.8 percent of revenues in the prior year quarter. Adjusted segment EBITDA was down due to higher compensation. Sequentially, both revenues and adjusted segment EBITDA declined as the surge in demand for M and A related antitrust services that resulted in near record revenues for the segment in third quarter declined as those engagements rolled off. In technology, revenues of $41,700,000 increased 2% compared to Q4 of 2017.
The increase in revenues was largely due to higher demand for consulting services, primarily related to our information governance, privacy, and security offering which was partially offset by a $2,800,000 decline in licensing revenues related to the ringtail divestiture. Adjusted segment EBITDA was $2,700,000 or 6.4 percent of revenues compared to $3,000,000 or 7.3 percent of revenues in the prior year quarter. Adjusted segment EBITDA was down slightly, as the increase in revenues and lower SG and A, primarily related to the decline in R&D expenses, was more than offset by higher compensation. Reflecting both increased variable compensation and the hiring of senior professionals in various countries. Sequentially, the declines on both the top and bottom line are related to the roll off of the large M and A related second request engagements that contributed to a very strong 3rd quarter for technology.
Lastly, in strategic communications, revenues of $58,000,000 increased 6.7% compared to Q4 of 2017. The increase in revenues was primarily due to increased demand for both retainer and project based services. Adjusted segment EBITDA of $11,300,000 or 19.5 percent of revenues compared to $10,500,000 or 19.4 percent of revenues in the prior year quarter. The increase in adjusted segment EBITDA was due to higher revenues which was only partially offset by increase in variable compensation and SG and A expenses. Sequentially, strategic communications delivered growth on both the top and bottom line capping off a tremendous year for them.
I will now discuss certain cash flow and balance sheet items. Net cash provided by operating activities of $230,700,000 as of December 31, 2018, compared to $147,600,000 at December 31, 2017. Free cash flow of $198,400,000 compared to The increase was primarily due to higher cash collections from increased revenues, which was partially offset by an increase in cash we spent $26,500,000 to repurchase 418,728 shares of stock. At an average price of $63.31. On February 21, 2019, the Board of Directors authorized an additional $100,000,000 for an aggregate authorization of $400,000,000 As of February 22, 2019, we had purchased 6,200,000 shares at an average price per $249,000,000, leaving us with approximately $151,000,000 available for share repurchases under the program.
Turning to our 2019 guidance as usual, we are providing revenues, GAAP EPS and adjusted EPS guidance for the year. Starting with revenues, We estimate that revenues for 2019 will be between $2,000,000,000 $2,100,000,000. We expect our GAAP EPS, which includes the noncash interest expense related to our convertible notes of approximately $0.17 per share to range between $3.33 3.83. We expect full year 2019 adjusted EPS, which excludes the impact of the noncash interest expense to range between $3.50, and $4. In 2019, we expect our effective tax rate to range between 27% 29%.
Our 2019 guidance assumes lower revenue growth compared to a record 2018. As we continue to have may moderate. After a year, where revenues grew 12.2% and adjusted EPS grew 72.4% we believe it is prudent to moderate expectations. Additionally, we have higher costs, related to our increased headcount, particularly at the senior levels, who as Steve just said, can often take 12 to 18 months to become fully accretive. At the end of January 2019, we had 513 Senior Managing Director which include our most 439 SMDs we had at the end of 2017.
And we are finding opportunities to hire more. Which means that small shifts in revenue have a much larger impact, both positive and negative on EPS in the short term. I want to emphasize though that the strength of the last few quarters is continuing in 2019. Our guidance assumes and we expect the first half of twenty nineteen to be stronger than the second half confident about our prospects before or a huge uptake in financial fraud, there is dislocation taking place around the world that creates opportunities for FTI. This dislocation creates a need for our professionals who are the leading experts in their respective fields to help our clients overcome and resolve critical issues.
2nd, several jobs ending at the same time can cause volatility in our earnings. This is part of the reason we are prudent in our guidance but let me assure you Our practitioners are working hard Lastly, our balance sheet has and create shareholder value in numerous ways, including organic investments, acquisitions when we see the right ones and share repurchases. This is the 6th quarter in a row that we have come out ahead of our own expectations. And I hope that we can continue to With that,
session. And the first question will come from Mark Riddick of Sidoti. Please go
ahead. Hey, good morning, everyone. Good morning, Mark. How are you? Very good.
Yourself? Great. Thanks.
I was wondering if
you could 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, Mark, 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 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's huge opportunity for our firm.
And we're going to have to sort those out as as it comes through. I wish I could give you more specific read on that, but I suspect if you and I knew exactly what was going to happen Brexit, we would be the only two people in the world. And we could figure out lots of ways to make money off of 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 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 what we the philosophy we have here though is that at one point, this is a totally acquisition driven company, and that can't be. I mean, 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 it depends on when we find really good opportunities with people who we believe will join us, stay with us and help build the institution. We're not interested in temporary acquisitions that look good on the P and L and then people leave after 5 years.
And that's takes a lot of work to find those. And then, and then as you 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 5 years. Does that help, Mark?
Absolutely. I appreciate it. Thank you very much.
The next question will be from Tobey Sommer of SunTrust.
Hi, this is Joseph on the line for Tobey this morning.
I just wanted to talk
a little bit about big projects. I think you mentioned that you didn't expect as many in 2019, but are you sorry, are you seeing less big projects in the marketplace so far this year 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 use the batting average analogy consciously.
I think somebody starts hitting $450,000,000 in, in May, April and May, and you say, well, maybe they could continue it for the year. And sometimes people do. I guess, Rod Karru 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 here sit here and you have visibility always into the 1st 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 it's 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 portion 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 that's going to make clients in the future more confident in your ability to complete projects of scale as they come up? Thank you.
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, 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 5 years, there's no noise in a 5 year trajectory.
We've more than doubled the EPS in 5 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 and big jobs in every segment we're in. And the market is noticing.
So I think you've got the right point there.
The next question will be from Tim McHugh of William Blair. Please go ahead.
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 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 has done 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 these 1 variables. 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 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's 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 via references into other work. So we're excited about that business. There's 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 been a it was not a positive surprise in the sense of long term. We had enormous confidence in the long term, the speed with which it's taken hold has been a positive surprise. Does that make sense, Tim?
Yes, that helps. Then let me follow-up 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 bets being made as we go here into 2019 with that headcount growth?
So as you would imagine, the success breeds hiring, so outside of the United States a lot more, well, 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 are hiring both there and in the U. S. In terms of, segments, you know, FLC a little bit higher than the average CF right at the average and the 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 of historical results, but how are you thinking about the potential changes to audit rules in the UK and the opportunity, I guess, relative to the big 4 in the UK market over the next couple of years here?
Yes, that's a good question here. I mean, I think, we 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 tracking so much talent is some of the dislocation in the big board over there. I mean, as you know, Tim, it's pretty serious. And our parts of the big 4 are the most contentious parts of the big 4.
They're the parts, which have the most conflict or most chance of conflict, right? It's big litigation, it's big investigations, it's bankruptcy. So the big four parts that are most likely to get shaken loose by the disruptions over that are the big are the parts that we are specializing. And so it is 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.
Do you read it differently?
No, that seems consistent with what I'm hearing. I appreciate it.
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.