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Navigant Consulting Inc  (NYSE:NCI)
Q4 2018 Earnings Conference Call
Feb. 26, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to Navigant's Q4 and Full Year 2018 Earnings Call. At this time, I would like to inform all participants, your lines will be in listen-only until the question-and-answer portion of the call. This call is being recorded. If you have any objections, you may disconnect at this time.

I would like to introduce Kyle Bland, Director of Investor Relations. Mr. Bland, you may begin.

Kyle Bland -- Director of Investor Relations

Good morning and thank you for joining us to discuss Navigant's fourth quarter and full year 2018 earnings results. We have posted our earnings press release, as well as the presentation materials that we'll reference throughout our call this morning on the Investor Relations section of our website. With me on the call this morning are Julie Howard, our Chairman and Chief Executive Officer; Stephen Lieberman, our Chief Financial Officer; and Lee Spirer, our Chief Growth and Transformation Officer.

Before I turn the call over to Julie, I would like to highlight the disclosure at the end of our press release and in our presentation materials for information about any forward-looking statements that may be made or discussed on this call. Please review this information, alongside the Risk Factors included in our Annual Report for items which could affect the Company's financial results and cause our actual results to differ materially from those contained in or implied by any forward-looking statements.

With that, I will turn the call over to Julie.

Julie Howard -- Chairman and Chief Executive Officer

Thank you, Kyle. Good morning and thank you all for joining our call. 2018 was a year of great transformation and progress for Navigant. Before jumping into our financial results, I thought it will be good to just take a moment to reflect on some of our key accomplishments in this past year that have really helped set the stage for us to realize stronger revenue and earnings growth potential going forward.

First, we delivered solid top line growth with contributions from all three of our businesses, which helped us achieve our full year 2018 guidance targets for continuing operations. Notwithstanding the significant distractions to both our corporate and business teams from the carve out of approximately one-third of our business this past year, our people demonstrated their tenacity to remain focused on their objectives and continue to deliver great value for our clients.

Secondly and significantly, through the divestiture of our lower growth event-driven DFLT and TAS businesses, we transformed our organization by becoming a more streamlined, specialized management consulting and managed services firm with a concentrated focus on industries that are undergoing significant market, regulatory and technological change. This was a moment of step in our evolution as a firm and I think it has positioned us for more aggressive growth opportunity going forward.

Third, we sought out innovative new ways to serve our clients and partner with our end clients, including the launch of our new HSS joint venture with Baptist Health South Florida, which purpose was to expand our managed services portfolio and importantly deliver more consistent revenue streams for the business going forward.

Fourth, we also expanded our digital and analytics capabilities across the organization, including beginning to leverage machine learning into live engagements and further expanding our robotic process automation capabilities and investing in our centralized analytics team.

And finally, we strengthened our balance sheet to position ourselves to take advantage of emerging growth investments and enhanced our capital return to shareholders in the amount of $117 million through an accelerated share repurchase program and the initiation of our first-ever quarterly dividend.

With 2018 in the review mirror, I am feeling very good about our actions. We look forward to 2019 and beyond with great conviction in our strategy, excitement for the opportunities before us and confidence in our ability to execute and drive shareholder value.

And with that, I'm going to turn the call over to Stephen to walk you through our Q4 and full year 2018 performance and discuss our 2019 and longer term financial outlook. Stephen?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Thank you, Julie; and good morning. Turning to Slide 4, you will see that we produced very strong top line growth in the quarter with Q4 2018 RBR up 11% year-over-year to $174.6 million. RBR in the quarter benefited from continuation of our HSS joint venture with Baptist Health, our new FSAC managed services engagement and a continued robust demand environment for our Energy expertise. These contributions more than offset lower-than-expected performance in certain areas within Healthcare consulting.

From a profitability perspective, adjusted EBITDA was down $2.4 million compared to the fourth quarter of 2017 to $12.8 million, a 7.3% adjusted EBITDA margin. The quarter was impacted by lower utilization in our FSAC segment, muted performance in Healthcare consulting and while G&A, excluding bad debt, improved 140 basis points as a percentage of RBR to finish at 19.1%, we did have a higher nominal G&A cost in the current year period driven by HSS supports and higher bad debt. These items more than offset stronger-than-expected profitability from the HSS joint venture and continued strong performance in our Energy segment.

Fourth quarter 2018 adjusted EPS of $0.10 was up $0.01 compared to the prior-year period, aided by higher net interest income and lower share count in the current-year period. This includes the impact of 2.5 million shares repurchased in the fourth quarter at a total cost of $57.1 million and at an average price of $0.2283 per share. GAAP EPS attributable to Navigant, including discontinued operations finished at $0.14 per share, down significantly year-over-year due to the tax gain recognized in the prior year period related to the recent tax reform.

With this Q4 performance, we finished the year in line with our 2018 guidance targets for continuing operations, which was not an easy feat given the distractions of the divestiture in the year. 2018 RBR of $673 million, adjusted EBITDA of $57 million and adjusted EPS of $0.47, all reflected outcomes above the midpoint of our guidance range. I would note that our full year 2018 adjusted EPS includes $0.05 of total adjustments taken during 2018 to reflect our fourth quarter settlement of a prior year audit with IRS.

Turning to our segment level performance on Page 5. Our Healthcare segment RBR was up 13% to $106 million for the fourth quarter of 2018 compared to the respective period in 2017 driven by the start-up of our HSS joint venture. As Julie mentioned, the HSS team continues to exceed expectations and we couldn't be more pleased with our progress to-date. On the consulting side, while client need remains strong for strategic transformation and performance improvement work, we were impacted by slower project conversion than anticipated in the quarter. As we begin 2019, we are pleased with the start-to-date as we have converted a number of initiatives in January and February and have some good momentum overall in this segment. On the margin side, top line softness, as well as a mix change, driven by the contribution of HSS drove lower margins year-over-year. For full year 2018, Healthcare RBR finished up 2018, up 1% as the start-up of the HSS JV offset declines in our Healthcare consulting.

Turning to our Energy segment. Results for the fourth quarter were consistent with what we have seen through 2018 as strong client demand drove robust RBR growth and subsequent margin expansion. RBR increased 13% year-over-year to $35 million for the quarter and segment operating profit margins expanded 200 basis points. This strong finish wraps up an exceptional year performance for the Energy segment. The segment leadership team led by Jan Vrins has done a great job leveraging their thought leadership position in the industry to win larger and more strategic engagements and this progress has really shown throughout the last several quarters.

RBR in our Financial Services Advisory and Compliance segment was up 7% year-over-year as a contribution of new managed services engagements which we announced last quarter offset softness across our FSAC consulting team. We expect this softness, which was driven by higher than normal year end pause at some of our larger Financial Services clients, as well as start-up delays and lower conversion of projects than we had anticipated for the quarter, will also impact performance here in the first quarter. Despite Q4's results, 2018 was a year of great growth for our FSAC team with RBR up 14% year-over-year. The team remains nimble and responsive to the evolving Financial Services landscape and is making numerous investments in talent and technology resources to continually shift our portfolio to help them meet the needs of our clients. This will continue to be a focus in 2019 and we will discuss more about this in a bit.

From a business mix perspective, with the growing contribution from HSS joint venture, as well as the new FSAC managed services engagement, our TD&P which is our Technology, Data & Processes businesses represented approximately 29% of RBR in the quarter, up 9 percentage points from the prior-year period. Segment operating profit margin continues to progress nicely for these businesses and improved 180 basis points for full year 2018 versus full year 2017.

Turning to Slide 6, and looking at our liquidity position. Our fourth quarter cash decreased about $70 million at close of the quarter at $207 million of cash on the balance sheet. This decrease was driven by over $59 million of cash returned to shareholders through our share repurchase program in our quarterly dividend, as well as a large tax payment related to our SaleCo divestiture which we noted last quarter. Days sales outstanding or DSO finished the year at 70 days, which is a 3 day improvement from year-end 2017, reflecting several improvements to our billing and collection processes throughout 2018 and greater practitioner familiarity with our new processes and systems. All in all, as we enter 2019, we have a clean balance sheet with significant liquidity to fund investments and pursue growth.

Looking ahead at this year on Slide number 8, we expect 2019 will be a strong performance year for Navigant with double-digit top line growth and significant improvements on profitability and cash flow. Our guidance outlook for the year includes RBR growth of 11.5% at the midpoint, to be between $735 million and $765 million driven by significant growth in our managed services business and mid-single digit growth across our consulting businesses. This RBR growth will help drive adjusted EBITDA between $70 million and $80 million, representing a 150 basis points of margin improvement at the midpoint.

As I will discuss in more detail, margins of 2019 are impacted by mix changes as we ramp our managed services offerings and also higher levels of organic investment in our people, tools and technology to support our growth aspirations throughout the business. We expect adjusted EPS to roughly double in 2019 between $0.85 and $1 per share, supported by strong operating improvement and aided by continuation of our remaining share buyback program.

And we anticipate adjusted free cash flow, which assumes approximately $20 million of CapEx for the year of between $43 million and $53 million. From a timing perspective, I'd like to note that as in past years, our profitability in the first quarter will be markedly lower than the rest of the year, likely in this mid-single single digit adjusted EBITDA margin range as we ramp certain projects and experience higher benefit costs at the start of the year. All in all, 2019 is anticipated to realize very strong revenue growth, supported by a much higher than normal level of organic investment as we look to build out our technology capabilities and invest in our people and processes to advance our capabilities and build for the future.

Diving into the segments on Slide number 9. We expect all three segments to produce strong top line growth for 2019. For our Healthcare segment, we anticipate RBR growth in the mid-teens for 2019 underpinned by full year contributions from our HSS joint venture, which we expect will ramp to approximately $60 million in 2019, accounting for approximately $35 million of year-over-year growth.

On the consulting side, we expect a very solid recovery in demand after lows of 2017 and 2018. We remain very bullish on the Healthcare consulting market over the medium and long-term and anticipate we'll begin to ramp up in this space in 2019. We see good opportunities across several practice areas including value transformation and revenue cycle consulting, supported by strong MD hiring in 2018. We expect Life Sciences will continue to produce strong RBR after several years of impressive growth.

In our managed services business, we have some good opportunities in the pipeline and remain focused on the execution of our margin improvement plan. The quality of our delivery and execution continues to improve and gain recognition by our clients in industry publications, as evidenced by a third straight Best in KLAS Award for revenue cycle outsourcing, which we received earlier this month.

Changing focus to our Energy segment. We expect continuation of strong demand and performance in this segment for 2019 with RBR growth in the high-single to low-double digit range. Clients continue to turn to Navigant to help them address the dynamic changes that are impacting their business including energy efficiency and sustainability programs, grid modernization initiatives and complex program management engagements. As I mentioned earlier, 2018 was a banner year for this segment and we expect that momentum to continue into 2019 and beyond.

For our FSAC segment, 2019 will be both a year of growth, and for this segment in particular a year of investment in transformation. As the competitive environment increases and the needs of our Financial Services clients continue to evolve, so to must our offerings and capabilities to remain a highly valued and differentiated partner for our clients. We need to continue to invest in our people and develop technology enabled offerings to address client directives to operate faster and more efficiently and with higher quality.

For 2019, in particular, we expect to double down on our previous investments and add capabilities and tools in other nascent but growing areas to maintain our leading competitive position. This includes furthering our machine learning and robotic process automation capabilities and expanding and upgrading our data consulting and management capabilities. We will be onboarding senior talent, testing proof of concepts and running pilots with a number of clients to develop new tools for this business.

From a financial perspective, while we expect to achieve high ROI for these investments over time, many of them are margin dilutive in the near-term. This translates into a year of our high-single digit RBR growth will be largely reinvested into the business to drive longer term value for our clients and shareholders.

Looking beyond 2019 in Slide number 10. We expect to take significant strides toward growth and profitability in 2019. We still have room for improvement to achieve our long-term organic targets, particularly with our EBITDA margins. Fortunately, we have a clear path forward.

There are five levers in front of us where we expect improvement over time that will drive us to higher and more sustainable organic margins, including: First, a return to more consistent and normalized growth in Healthcare consulting, which will drive higher utilization and more dollars to the bottom line.

Second, continued ramp up of the HSS joint venture to realize our ability to achieve run rate target of $75 million to $100 million of RBR with mid-teen adjusted EBITDA margins. As discussed, we assume to make progress toward these goals in 2019, but still have additional room going forward.

Third, with increased level of investment in our guidance for 2019, we expect return on those investments as they ramp and reach their full potential.

Fourth, continued progress in our TD&P margins as we continue to revisit lower margin contracts, gain scale and improve operational effectiveness. While we assume margin improvement in our 2019 guidance, we still have more room for improvement in 2020 and beyond.

And finally, we expect to continue to gain G&A leverage as we realize significant top-line growth and wrap-down our level of support for the Ankura TSA as the year progresses. For 2019, we anticipate G&A excluding bad debt as a percentage of RBR will be around 18%, which includes continued support of the Ankura TSA through August of 2019. With this, we think there will be another 100 basis points of opportunity in the short-to-medium term to continue to gain G&A leverage.

While it's difficult to predict the timing of success of all five of these areas, there is a pathway to making significant progress on these items beyond 2019. It's important to note that these organic levers can be further enhanced or accelerated through our continued pursuit of accretive M&A opportunities, for which I'll now hand over to Lee to explain this in more detail. Lee?

Lee Spirer -- Executive Vice President and Chief Growth and Transformation Officer

Thanks, Stephen. As Julie and Stephen both highlighted, we continue to execute a balanced approach to capital allocation. This includes returning capital to shareholders, for which we've completed $95 million of our target to return over $175 million through August of 2019, while also investing in pursuit of our growth strategy and expanding our market position.

As it relates to our strategy, we are pursuing opportunities organically through partnerships and via M&A. In all cases, we are tightly aligned to two strategy pillars to drive value for our clients. First, focus on our three core industries, which continues our track record of growing our industry consulting expertise, deepening and scaling our skills, and expanding into adjacencies, including managed services. Second, expanding our digital capabilities that will enable delivery of high-value solutions to our clients, including data and technology consulting, predictive analytics, technology tools such as workflow automation and RPA.

In approaching M&A in these spaces, we have always and continued to have a structured set of criteria, strategic alignment, cultural fit and financial returns. It all starts with strategic; do these investments make us more valuable as a company, are we adding new capabilities, enhancing our value to clients and raising our competitive position. Strategic is then followed closely by cultural fit; do we have a shared vision for the future of the combined service offerings and how will we work together.

Strategic and cultural alignment is really what enables our financial returns. We have a disciplined approach for evaluating financial fit, including ensuring an appropriate ROI, assessing potential for acceleration of growth and/or margin expansion, and valuing the impact of recurring revenue opportunities in balancing our business model.

So over the past year we've had an active sourcing strategy, working closely with our own practitioners and clients, researching and building markets keeps (ph) of target capabilities, attending key conferences and leveraging advisors, all with an eye to identify potential targets. And we've been very active with a proactive outreach to companies, often prior to their engaging in a process and at times we've built a stronger understanding of a potential target through beta testing in partnerships and working together at clients.

All that said about M&A, while we are applying significant effort to accelerate our position, it's always hard to predict exactly how, what or when we may be successful on opportunities given the market, the desires of target companies and our own disciplined process. But needless to say, the team is busy evaluating opportunities and we expect to be active but disciplined in the space.

I'll now turn it back over to Julie for some closing comments.

Julie Howard -- Chairman and Chief Executive Officer

Thank you, Lee and Stephen, for those remarks. And before we open up the call to Q&A, I just wanted to reinforce some of the key and important initiatives we're focused on in 2019. One of the key areas, as Lee just explained, is expanding and deepening our industry expertise and technology enablement in 2019. Teams across the organization have been focused on evaluating current and future growth opportunities within their industries and we are pursuing these opportunities through both M&A and organic investment. Our full intention is to put our capital to work in a disciplined manner as we build this organization for the future.

Beyond M&A and investment, we will continue to execute against our plan to return over $175 million to shareholders by August of 2019. We are more than halfway through our goal and remain focused on executing against this objective through share repurchases and the continuation of our quarterly dividend.

And finally, and most importantly, we remain focused on enduring as a world-class consulting and managed services firm by reinforcing our culture of innovation and development. Investing in our people empowers them to deliver value to our clients and ultimately maximize the return for our shareholders. I'm really excited about what lies ahead in 2019 and beyond and I thank all of you for your continued interest in the new Navigant.

And with that, we'll open it up for Q&A.

Questions and Answers:

Operator

Thank you. We will now begin the Q&A session. (Operator Instructions) The first question came from the line of Tobey Sommer of SunTrust. Your line is now open.

Joseph -- SunTrust Robinson Humphrey -- Analyst

Hi. This is Joseph on the line for Tobey this morning. My first question is about the agreement with Ankura related to the divestiture of the Disputes segment. Do you have any additional details on when this agreement will end? And if so, what is your plan for the employees that are currently working as a part of this agreement? Thank you.

Julie Howard -- Chairman and Chief Executive Officer

Stephen, do you want to go ahead and address that?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Yeah. Thanks, Julie. So Ankura had the ability to extend our transition services agreement. The first period is ending here at the end of February. They've elected to extend a number of services through the end of August, in fact, running into early September. So this will be around for a while. It certainly takes a number of resources to go ahead and support this. But when you kind of look at our G&A, we think that there's other ways we're going to gain leverage too by just growing the business as well. But certainly we will be continuing to look at our indirect -- allocation of -- or indirect resources of attributable to the TSA, they're focusing on it and look at ways to continue to drive efficiency. Once again, I think a lot of that we'll be able to absorb just through continued leverage by growing the business.

Joseph -- SunTrust Robinson Humphrey -- Analyst

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

Operator

Thank you. Our next question came from the line of Kevin Steinke of Barrington Research. Your line is now open.

Julie Howard -- Chairman and Chief Executive Officer

Good morning, Kevin.

Kevin Steinke -- Barrington Research -- Analyst

Following-up a little bit on the last question. If you could maybe quantify in terms of the initial, I know was preliminary adjusted EBITDA outlook for 2019 of $85 million to $95 million versus the $70 million to $80 million you're guiding to. What was the impact of the extension of the Ankura agreement; and also, maybe some of the organic investments you're making in 2019? Sounds like those might be pretty meaningful in terms of dollars. So any more detail or quantification on that would be helpful. Thanks.

Julie Howard -- Chairman and Chief Executive Officer

Yeah, Kevin, I'll take that. I don't think we're going to go into significant detail. It was a combination of things. I just want to remind everybody when back in August, we talked about a preliminary view, it wasn't guidance for 2019, but rather just kind of an assessment of where we thought we might be without the benefit of our full budget review process which we did at the end of the year. So there's a couple of things that I think have changed from our holistic view; one is certainly the extension of certain services under the TSA for Ankura to support them through August of this year, that's one piece.

And the second is very importantly that as we began to build our plan, several areas were identified for organic investment, which can have a significant return over time, but also significant impact in the year it occurs in operating expense. And so we will be making investments in strategic capabilities of individuals, expertise, but also in various -- the development of various capabilities from a technology standpoint. And most of that will show up in OpEx in 2019 and in particular in our Financial Services segment.

And I think then the final piece was our updated view of Healthcare consulting, which continued to evolve over 2018 and was certainly, the recovery was slower than we anticipated. So we're taking a much more cautious approach in 2019 to the growth in Healthcare consulting, which is a very profitable business. And as a result of that total recovery, it impacts our guidance for margin.

So I'd just remind everybody that our guidance reflects double-digit growth. We have significantly improved profitability in 2019. So it's not at some of the levels we had at our preliminary view, but we think it's really put us on a pathway to achieving the longer term growth and margin targets that we've outlined.

Kevin Steinke -- Barrington Research -- Analyst

Okay, got it. That's helpful. And you're still expressing some confidence and a rebound in Healthcare consulting in 2019, despite it may be being a little slower than originally anticipated. So if you could, maybe give us more commentary on your confidence in the rebound there maybe in terms of projects that have started recently or the pipeline or any other color around that would be helpful.

Julie Howard -- Chairman and Chief Executive Officer

Yes, Kevin, I think it's all of the above. 2018 was a disappointment as it related to performance there on our expectation of how things would turn. As we said, some of that was market related, much slower conversion of pipeline, much slower identification in client opportunities. We also had some changes of ourselves in our own strategy practice and in the leadership of the strategy practice. There was a number of things that impacted our ability to kind of come out of that in 2018. We have a much more positive view for 2019 and that evidenced for us already in either the opportunities that we have closed, the establishment of strong leadership that's in place and the pipeline that we see of opportunities that we're pursuing.

I don't know if -- Lee or Stephen if you want to add anything further?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

No, I think that was a good summary.

Kevin Steinke -- Barrington Research -- Analyst

Okay. On Financial Services Advisory and Compliance, you cited, I guess, some factors related to a slowdown in that segment in the fourth quarter. And that it sounds like that's going to continue into the first quarter, but then you'd expect things to start to rebound a little bit more after that. Is that the way to characterize it and if you could maybe just touch on some of the reasons for the bit of a slowdown there in a little more color or detail I guess that would be helpful.

Julie Howard -- Chairman and Chief Executive Officer

So let me take that and others can jump in. So part of the impact of performance in the fourth quarter was on a ramp of the new managed services engagement that we talked about, which is a different margin profile, clearly a lower margin profile. Part of it was several of our larger Financial Services clients who essentially just kind of shut the door to business in the last portion of the year, in December, for many more weeks then had been in past. So I just kind of said we are done for the last two weeks and therefore we're not also working on their behalf. And that was a bit of a surprise to us.

And in Financial Services, as we had talked about last year, we've already started this kind of internal organic investment through kind of upping our pace with the hiring that we've done of various individuals who -- we did the hiring in the fourth quarter and have already onboarded here in the first quarter; and also the investment in some of their technology that will help us to really leverage our Financial clients related expertise going forward. So we feel really good about it.

We also, I think in Financial Services more than anywhere else, have felt some of the impact of the government shutdown, which has delayed some decisions as it relates to opportunities that are out there with the Department of Justice and also just the lack of having an attorney general, which means that a lot of decision-making has been postponed. It just puts some compression on or delay in opportunities in Financial Services. So it's kind of the sum total of all of those, Kevin, but as you'll see, we do predict good growth in Financial Services this year, so we're anticipating that to turnaround.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Perfect. And then, lastly from me, you cited higher support costs for the HSS joint venture is one of the drivers of G&A expense in the quarter. I mean, are those support costs higher than you expected or in line with what you expected and you just were calling that out as a factor in the quarter, but not necessarily...

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Yeah, why don't I take that. It was just a factor in the quarter. I mean, they're not higher than we expected. In fact, we're really pleased with how the HSS joint venture is going, how we're providing great value to our client, which is Baptist Health and how we're managing the cost. It's just when you're adding that big of a business, there's going to be costs linked to it and those are bucketed and some of the costs are bucketed in the G&A.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Thank you.

Operator

Thank you. Another question came from the line of Marc Riddick of Sidoti. Your line is now open.

Marc Riddick -- Sidoti -- Analyst

Hey, good morning, everyone.

Julie Howard -- Chairman and Chief Executive Officer

Good morning, Marc.

Marc Riddick -- Sidoti -- Analyst

I wanted to just follow up a little little bit on FSAC and sort of maybe think about how we should be thinking about the timing impact. I was wondering, while it may be sort of difficult to quantify even if it's just anecdotal I was sort of thinking about, do you get the sense that some of the opportunities that had been delayed are ones that can be recaptured later in the year or do you think some things are sort of just sort of gone as far as timing opportunities, I just sort of wanted to get a general ballpark thought on that.

Julie Howard -- Chairman and Chief Executive Officer

I think, things will be recaptured. I think that this is, like I said, to a large degree, some delay in decision-making as it relates to government shutdown and the AG's office. And so we're anticipating that this might be a bit more of a hockey stick over the course of the year and that those opportunities will be fulfilled as the year progresses.

Now, Lee, you want to add anything additional?

Lee Spirer -- Executive Vice President and Chief Growth and Transformation Officer

No, I think you summed it up well, Julie.

Marc Riddick -- Sidoti -- Analyst

Okay. And then if can sort of shift a little bit on to the Energy segment, which seem to be fairly solid in there. You had been mentioned on some of the more recent wins. I was wondering if you could touch on maybe what you're seeing there and what's helping you as far as winning recent larger engagements and maybe if you're going to focus a little bit on sort of not just the wins, but the size of engagements maybe what you see there and what's driving them?

Julie Howard -- Chairman and Chief Executive Officer

Stephen?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Yeah. So we're really excited about the momentum that we've continued to see in Energy over the last number of quarters. They've done a really good job taking thought leadership and converting those into engagements and engagements of larger scale and including some really interesting project management work as well. So we're foreseeing that continuation of that momentum. There is -- we've talked about it quite a bit in the past, significant change going on in that industry and grid modernization, electrification or transportation, sustainability and use of renewables, there's just so much activity going on. And I think we're just doing a much better job meeting our client needs and taking that thought leadership and turning it into real concrete sizable opportunities.

Julie Howard -- Chairman and Chief Executive Officer

Yes. And I think, Marc, I would add to that by saying that the team also, in addition to just really kind of coming into their own as it relates to being ahead of, I think we were ahead of the market with our thought leadership and we're beginning to see that merge together. But also in the past, we were proactively very focused on a particular technical issue with our clients. So oftentimes it wasn't a repeatable kind of opportunity, it wasn't a significant sustainable. And the team, the leadership team there has really transitioned the way that they interact and work with our clients and with the offerings that we have, so that we can be much more an end-to-end solution-oriented business, where you have strategy at the tip of the spear working through operations and into implementation. And that's been the goal and as a result of that, you're seeing bigger opportunities for the segment.

Marc Riddick -- Sidoti -- Analyst

Okay. And then I guess the last thing for me, is there a way to sort of think ballpark-wise as to headcount growth expectations for 2019? Thanks.

Julie Howard -- Chairman and Chief Executive Officer

Probably similar to growth expectations and the -- will come through a combination of continuing to invest in our consulting professionals. We talked a great deal about margins being somewhat a little pressured this year because of our organic investments. And part of that will be in the recruitment of additional expertise in certain areas. And part of that is to the development of additional technologies. So it will probably be near our growth for the Company.

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Yeah, I'll just -- it's Stephen. I'll make one additional comment. I think we're also continuing to be smart about where are we adding these resources. For example, within our -- and we can speak more to it, in our centralized data analytics team, a lot of that growth that we're seeing which our team members that we're adding and there're more centralized resources, those tend to be largely in India, not exclusively. And so, when -- it's sometimes also hard to equate necessarily all these costs with the number of people that you're seeing in our headcount that we may be adding to the business.

Lee Spirer -- Executive Vice President and Chief Growth and Transformation Officer

I think, maybe to add a few thing, on the consulting side, we're expecting utilization to improve in some of the businesses during the course of the year. So if you're trying to match headcount growth to revenue growth rate, we're going to hope to catch up a bit on the consulting side, but at the same time be making those investments that we need to be able to deliver on the changing face of the type of solutions we're delivering with more data and technology expertise. But generally speaking, in line with our revenue growth is reasonable with the caveat that we are expecting to pick up utilization.

Marc Riddick -- Sidoti -- Analyst

Okay. Great. Thank you very much.

Julie Howard -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Next question came from the line of Tim McHugh of William Blair. Your line is now open, Tim.

Trevor Romeo -- William Blair -- Analyst

Hi. Good morning. This is actually Trevor Romeo on for Tim. Thanks for taking the call.

Julie Howard -- Chairman and Chief Executive Officer

Good morning, Trevor.

Trevor Romeo -- William Blair -- Analyst

Good morning. So first the revenue guidance for 2019 is actually above your long-term organic growth targets. Would you say that is primarily a result of just the large ramp up in HSS from 2018 to 2019 or is there anything else in 2019 that you expect to drive above target growth?

Julie Howard -- Chairman and Chief Executive Officer

Stephen?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

So why don't I -- I mentioned that, yeah. So I think it's coming from different areas. I mean, I would say, managed services, but it's not purely managed services within HSS, it's our full managed services suite of services in Healthcare as well as FSAC which are certainly contributing to the business; but we're also talking about some solid growth from our consulting side as well. So when you add those all together, you end up with robust growth expectations for 2019.

Trevor Romeo -- William Blair -- Analyst

Okay. Great. Thanks. And then how big is the headwind from the wind-down of the large monitorship contract in the FSAC segment that you mentioned? And is that on managed service or consulting engagement?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

So that is on the consulting side, that side of the business. So that has been a component of what we've seen and certainly something that is a bit of a headwind, but one that we're continuing to work to refill, and we talked a little bit about some softness as we're going into Q1. But as we look into 2019, we continue to expect later in the year, to continue to see a nice ramp up in RBR growth for that segment.

Lee Spirer -- Executive Vice President and Chief Growth and Transformation Officer

I might add though, as we wind-off the monitorship which has been a long-term consulting large engagement, which drives very high utilization, the mix change as we grow in the remainder of the year with a stronger managed services component is part of what's also impacting the expected profitability.

Trevor Romeo -- William Blair -- Analyst

Right, that makes sense. Just a follow-up, is there any numbers or ballpark you could provide around how large that engagement is?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

No. I mean, I'm not going to give you the full amount of the engagement. But I will say that the decline that we're seeing is a meaningful headwind that the segment is facing and that we are actively working to replace and rebuild, and that's our expectation over the course of the year.

Julie Howard -- Chairman and Chief Executive Officer

Let me maybe just add to that. The monitorship was a very important engagement for our team, it's peak in revenue was though not in 2018. So this has been, we've known that this would be coming to a point of completion and so there's already been a ramp down in revenues. And there's plenty of other financial claim related monitorships out there and we'll be in pursuit of that plus other opportunities. But it's a headwind that's built into our guidance.

Trevor Romeo -- William Blair -- Analyst

Okay. That makes sense. And then just two quick sort of housekeeping type questions. So one, forgive me if I missed this, but what are you projecting for the tax rate in 2019? And then, two, what was the impairment charge in the quarter related to?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Yeah. So let me cover that. So I would be using for modeling purposes for 2019 between 28% and 30% for an effective tax rate. And the impairment charge was related to some -- basically some software that we're no longer and some business activities that we're no longer utilizing within our FSAC segment, but very minor.

Trevor Romeo -- William Blair -- Analyst

Okay. Great. Thank you very much.

Julie Howard -- Chairman and Chief Executive Officer

Thank you, Trevor.

Operator

Thank you. Another question came from the line of Kevin Steinke of Barrington Research. Your line is now open, Kevin.

Kevin Steinke -- Barrington Research -- Analyst

Hi. Just a couple of follow-ups. You talked about your desire to evaluate and pursue more acquisitions. In the particular areas that you're evaluating and pursuing acquisitions, just can you give us a sense as to how competitive the landscape is for those types of opportunities? In light of your desire to remain disciplined, how the environment might affect your ability to complete deals?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Sure, Kevin. I'll start. It is a competitive environment, alright, it's a busy market, it has been growing and I think we're increasingly seeing a number of companies assessing whether this is the right time given potential change ahead in the macro economy as well, and it's very competitive both from strategics and from private equity investors.

With that said, we are maintaining our discipline. The deals that we are assessing have to make sense for us from a business standpoint and strategic standpoint; and we talk about strategy, cultural fit and financial. And I think that in some ways that's contributing to the fact that we haven't closed any deals since we've done the divestiture. And we have been quite active and there continues to be a robust pipeline, but we're maintaining our discipline around strategy, culture and financial fit whether it's in industry focus capability or it's more in a horizontal data and technology capability, but it's a frothy market.

Julie Howard -- Chairman and Chief Executive Officer

And I'd probably add to that, Kevin, by saying we've got today areas right that we want to invest in within our industry capabilities, which is kind of always to continue to support our development and then also with horizontal capabilities. And as a firm, we've never ban the company out there that's the highest bidder and we've never felt like we needed to be, but we're certainly seeing kind of that environment, if you will. And so it's one of the reasons that: A, we've talked a lot about our partnerships and we've been working on more closely identifying partnerships with particularly in the technology area with other firms that have capabilities or people that we have clients where we can work together to pursue an opportunity. And then that's also why you're seeing more organic investment this year from an OpEx standpoint in some of our businesses, because in certain areas, we're going to do it on our own one-by-one. So it is a combination, but as we said, it's a competitive environment out there.

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

I might also add, look, we continue to be active, as Julie mentioned, partnerships, we've been active on group hiring and small practices. We are continuing to try and push the envelope forward on bringing the type of capabilities that we need in whether it's organic partnership or potential acquisition or group practice hires. I think importantly though, we do believe and we get the feedback in the market that from a strategic and cultural standpoint that Navigant is a very strong platform on which potential targets feel like they can improve their business and we continue to have a lot of interest. At the end of the day, it is going to be a competitive marketplace and we've maintained our discipline and we're going to continue to do that going forward.

Kevin Steinke -- Barrington Research -- Analyst

Okay. That's helpful. And then one last housekeeping question here. Do you have a target that's built into your 2019 guidance in terms of share count?

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

So we obviously have numbers built-in. But what I would probably continue to say is that we're making good progress toward the $175 million target that we established for return of capital to shareholders, and that began in August. And if you take a kind of a one-year view on that and so that is built into that we would go ahead and exit few on that for our share count.

Kevin Steinke -- Barrington Research -- Analyst

Okay. Got it. Thanks.

Julie Howard -- Chairman and Chief Executive Officer

Thank you, Kevin.

Operator

Thank you. (Operator Instructions)

Julie Howard -- Chairman and Chief Executive Officer

Okay. This is Julie. If there's no further questions, we appreciate everybody's ability to secure these calls. I know this is a busy time of the year and we appreciate your interest and look forward to delivering on our first quarter. Thank you.

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Thank you all.

Operator

Thank you. That concludes today's call. Thank you all for joining. You may now disconnect.

Duration: 50 minutes

Call participants:

Kyle Bland -- Director of Investor Relations

Julie Howard -- Chairman and Chief Executive Officer

Stephen R. Lieberman -- Executive Vice President and Chief Financial Officer

Lee Spirer -- Executive Vice President and Chief Growth and Transformation Officer

Joseph -- SunTrust Robinson Humphrey -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

Marc Riddick -- Sidoti -- Analyst

Trevor Romeo -- William Blair -- Analyst

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