FTI Consulting (FCN) Q1 2025 Earnings Call April 24, 2025 09:00 AM ET Company Participants Mollie Hawkes - Head of Marketing, Communications & Investor RelationsSteven Gunby - President and CEOAjay Sabherwal - CFOTobey Sommer - Managing Director Conference Call Participants James Yaro - AnalystAndrew Nicholas - Equity Research Analyst Operator Good morning, everyone, and welcome to the FTI Consulting First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. A ...

Core Insights - FTI Consulting reported quarterly earnings of $2.29 per share, exceeding the Zacks Consensus Estimate of $1.79 per share, and showing a slight increase from $2.23 per share a year ago, resulting in an earnings surprise of 27.93% [1] - The company posted revenues of $898.28 million for the quarter ended March 2025, which fell short of the Zacks Consensus Estimate by 0.27% and decreased from $928.55 million year-over-year [2] - FTI Consulting has surpassed consensus EPS estimates two times over the last four quarters, while it has only topped revenue estimates once during the same period [2] Earnings Outlook - The immediate price movement of FTI Consulting's stock will largely depend on management's commentary during the earnings call and the sustainability of earnings expectations [3][4] - The current consensus EPS estimate for the upcoming quarter is $1.89, with projected revenues of $916.33 million, and for the current fiscal year, the EPS estimate is $7.85 on revenues of $3.69 billion [7] Industry Context - The Consulting Services industry, to which FTI Consulting belongs, is currently ranked in the top 9% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% of industries [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] Stock Performance - FTI Consulting shares have declined approximately 11.8% since the beginning of the year, while the S&P 500 has decreased by 8.6% [3] - The estimate revisions trend for FTI Consulting is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, indicating expectations of underperformance in the near future [6]

Core Viewpoint - FTI Consulting reported a decline in revenues and net income for the first quarter of 2025, primarily due to lower performance in the Economic Consulting and Corporate Finance & Restructuring segments, although some segments showed growth. The company also announced an increase in its share repurchase authorization. Financial Performance - First quarter 2025 revenues were $898.3 million, a decrease of $30.3 million or 3.3% from $928.6 million in the prior year quarter [2] - Net income for the first quarter was $61.8 million, down from $80.0 million in the prior year quarter, impacted by a special charge of $25.3 million related to severance and employee-related costs [2][3] - Adjusted EBITDA was $115.2 million, representing 12.8% of revenues, compared to $111.1 million or 12.0% of revenues in the prior year quarter [2] Earnings Per Share - Earnings per diluted share (EPS) for the first quarter 2025 was $1.74, down from $2.23 in the prior year quarter, with a special charge reducing EPS by $0.55 [3] - Adjusted EPS for the first quarter was $2.29, slightly up from $2.23 in the prior year quarter [3] Segment Performance - Corporate Finance & Restructuring segment revenues decreased by $22.4 million or 6.1% to $343.6 million, primarily due to lower demand for transformation and strategy services [9] - Forensic and Litigation Consulting segment revenues increased by $14.5 million or 8.3% to $190.6 million, driven by higher realized bill rates for risk and investigations services [12] - Economic Consulting segment revenues decreased by $24.7 million or 12.1% to $179.9 million, mainly due to lower demand for M&A-related services [13] - Technology segment revenues decreased by $3.6 million or 3.5% to $97.2 million, attributed to lower demand for M&A-related services [14] - Strategic Communications segment revenues increased by $5.8 million or 7.2% to $87.0 million, supported by higher demand for corporate reputation services [15] Cash Position and Capital Allocation - Net cash used in operating activities was $465.2 million for the quarter, compared to $274.8 million in the prior year quarter, primarily due to increased forgivable loan issuances and higher variable compensation [5] - The company repurchased 1,126,995 shares at an average price of $165.15, totaling $186.1 million, with approximately $264.3 million remaining for future repurchases [6][8] - Cash and cash equivalents decreased to $151.1 million from $244.0 million a year ago, with total debt net of cash at $8.9 million [7] Special Charges - The company incurred a special charge of $25.3 million in the first quarter, part of a broader restructuring effort that included a total of $33.5 million in special charges over two quarters, reflecting a reduction of approximately 5% of its workforce [16]

Financial Performance - Revenues for Q1 2025 decreased by $30.3 million, or 3.3%, to $898.3 million compared to Q1 2024[76] - Net income for Q1 2025 decreased by $18.1 million, or 22.7%, to $61.8 million compared to Q1 2024[80] - Adjusted EBITDA for Q1 2025 increased by $4.1 million, or 3.7%, to $115.2 million, with an Adjusted EBITDA Margin of 12.8%[81] - Total revenues for the three months ended March 31, 2025, were $898,282,000, a decrease of 3.2% from $928,553,000 in the same period of 2024[86] - Net income for the three months ended March 31, 2025, was $61,824,000, down 22.7% from $79,965,000 in the prior year[86] - Adjusted EBITDA for the three months ended March 31, 2025, increased to $115,164,000, compared to $111,073,000 in 2024, reflecting a growth of 3.5%[87] Cash Flow and Expenses - Free Cash Flow was an outflow of $483.0 million in Q1 2025, compared to an outflow of $279.5 million in Q1 2024[84] - Net cash used in operating activities increased by $190.4 million, or 69.3%, to $465.2 million in Q1 2025[83] - The company reported a net cash used in operating activities of $465,210,000 for the three months ended March 31, 2025, compared to $274,818,000 in 2024[89] - Unallocated corporate expenses decreased by $19.8 million, or 50.0%, to $19.8 million for the three months ended March 31, 2025, primarily due to a legal settlement gain[91] - Net cash used in investing activities was $17.8 million, a decrease of $38.4 million compared to net cash provided by investing activities of $20.6 million in the prior year[131] - Net cash used in financing activities increased by $230.9 million to $32.3 million, primarily due to $182.6 million in common stock repurchases[132] Segment Performance - The decrease in revenues was primarily due to lower performance in the Economic Consulting and Corporate Finance segments[77] - Revenues for the Corporate Finance segment decreased by $22.4 million, or 6.1%, to $343.6 million, primarily due to lower demand and realized bill rates for transformation & strategy and restructuring services[102] - Gross profit for the Corporate Finance segment decreased by $15.7 million, or 12.3%, with a gross profit margin decline of 2.3 percentage points to 32.6%[103] - Revenues for the Forensic and Litigation Consulting segment increased by $14.5 million, or 8.3%, to $190.6 million, driven by higher realized bill rates and increased demand for data & analytics services[106] - Gross profit for the Forensic and Litigation Consulting segment increased by $9.0 million, or 14.1%, with a gross profit margin of 38.1%[107] - Revenues for the Economic Consulting segment decreased by $24.7 million, or 12.1%, to $179.9 million, primarily due to lower demand for M&A-related services[110] - Gross profit for the Economic Consulting segment decreased by $3.7 million, or 8.2%, with a gross profit margin increase of 1.0 percentage points to 23.0%[111] - Revenues for the Technology segment decreased by $3.6 million, or 3.5%, to $97.2 million, primarily due to lower demand for M&A-related services[114] - Gross profit for the Technology segment decreased by $3.7 million, or 10.2%, with a gross profit margin decline of 2.5 percentage points to 33.9%[115] Employee Metrics - The total number of employees increased to 8,105 in Q1 2025 from 8,055 in Q1 2024[76] - The company experienced a net reduction in headcount of 269, or 3.2%, from December 31, 2024, to March 31, 2025[85] - The total number of billable professionals increased to 6,395, up from 6,366, reflecting a 0.5% increase year-over-year[1] - The number of billable professionals decreased by 4.5% to 937 compared to 981 in the prior year[118] Financial Obligations and Risks - Future contractual obligations include long-term obligations of $160.0 million related to outstanding borrowings under the Credit Facility as of March 31, 2025[141] - Current obligations under operating leases amount to $33.8 million, with non-current obligations totaling $201.2 million[141] - The company was contingently liable under bank guarantees totaling $13.1 million as of March 31, 2025, up from $10.9 million as of December 31, 2024[143] - Available amounts under guarantee facilities were $33.7 million as of March 31, 2025, compared to $31.8 million as of December 31, 2024[143] - Key risks include changes in demand for services, ability to recruit qualified professionals, and competition for clients and key personnel[146] - The company has no material changes in market risk exposure during the period covered by the report[148] - Future events could cause actual payments to differ from projected amounts due to various assumptions including interest rates[142] Forward-Looking Statements - The company emphasizes that forward-looking statements involve uncertainties and risks that could cause actual results to differ materially[144] - The company does not intend to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances[147] - The company has guaranteed facilities totaling $46.8 million as of March 31, 2025[143] - The company anticipates additional capital expenditures of between $50 million and $60 million for the remainder of 2025, including costs related to new office space[138] - During the three months ended March 31, 2025, the company made $182.6 million in payments for common stock repurchases, with $264.3 million remaining available under the Repurchase Program[140]

Core Viewpoint - FTI Consulting (FCN) is expected to report a quarterly earnings per share (EPS) of $1.79, reflecting a year-over-year decline of 19.7%, with revenues projected at $900.7 million, down 3% from the previous year [1] Earnings Estimates - The consensus EPS estimate has been adjusted downward by 1.6% over the past 30 days, indicating a reassessment by analysts [1][2] - Changes in earnings estimates are crucial for predicting investor reactions and have shown a strong correlation with short-term stock performance [2] Revenue Projections - Revenue estimates for various segments include: - Technology: $98.64 million, a decrease of 2.1% year-over-year [4] - Strategic Communications: $86.30 million, an increase of 6.3% year-over-year [4] - Corporate Finance & Restructuring: $352.91 million, a decrease of 3.6% year-over-year [4] - Economic Consulting: $182.74 million, a decrease of 10.7% year-over-year [5] - Forensic and Litigation Consulting: $180.63 million, an increase of 2.6% year-over-year [5] Stock Performance - FTI Consulting shares have increased by 3% over the past month, contrasting with a decline of 5.6% in the Zacks S&P 500 composite [6] - The company holds a Zacks Rank of 4 (Sell), indicating expectations of underperformance relative to the overall market in the near future [6]

Core Insights - Compass Lexecon has appointed Dr. Faten Sabry as a Senior Managing Director, enhancing its expertise in valuation and litigation support [1][5] Company Overview - Compass Lexecon is a leading global economic consulting firm that provides critical insights to law firms, corporate clients, and government entities in various legal and regulatory matters [6] - The firm has a global team of over 700 professionals specializing in areas such as antitrust, bankruptcy, derivatives, international arbitration, and financial analysis [5] Expertise and Experience - Dr. Sabry has extensive experience in the valuation of fixed income securities, derivatives, illiquid assets, and litigation settlements [2] - She has provided expert testimony in various courts, including U.S. state and federal courts, the UK High Court, and Canadian courts, covering issues from class certification to econometric modeling [3] - Dr. Sabry's research has been published in several reputable journals, focusing on topics such as LIBOR, cryptocurrencies, subprime lending, and the economics of securitization [4] Recent Developments - Dr. Sabry's appointment follows the addition of 20 experts and economists to Compass Lexecon in the past six months, indicating the firm's growth and commitment to expanding its capabilities [5]

Core Viewpoint - FTI Consulting, Inc. (NYSE: FCN) is set to report its Q1 '25 financial results on April 24 before market opens, with expectations focused on performance indicators and investment strategies for long-term investors [1] Group 1: Company Overview - FTI Consulting is a company that operates in the consulting sector, providing various services that may impact its financial performance [1] Group 2: Investment Strategy - The investment approach discussed emphasizes a long-term horizon, typically between 5 to 10 years, with a preference for a diversified portfolio that includes growth, value, and dividend-paying stocks, although there is a stronger inclination towards value stocks [1]

Core Insights - Compass Lexecon has announced the affiliation of Professor Julian Wright, enhancing its academic credentials and expertise in various economic fields [1][2][6] Company Overview - Compass Lexecon is a global economic consulting firm with over 700 employees, focusing on antitrust, competition, healthcare, securities, financial markets, and valuation practices [2][6] - FTI Consulting, the parent company of Compass Lexecon, operates in 34 countries with more than 8,300 employees and generated $3.69 billion in revenues during fiscal year 2024 [7] Professor Julian Wright's Expertise - Professor Wright specializes in the economics of digital platforms, competition policy, and strategy, with interests in marketplaces, app stores, booking platforms, search platforms, and payment platforms [3] - His recent research includes strategy and competition policy issues related to data and artificial intelligence [3] - He has served as an expert witness and consultant for regulatory authorities and commercial entities, particularly in digital marketplaces and payment schemes [5] Academic Contributions - Professor Wright has been a Co-Editor of the International Journal of Industrial Organization since 2019 and has published in leading academic journals such as the American Economic Review and the Quarterly Journal of Economics [4]

Core Viewpoint - FTI Consulting, Inc. will release its financial results for Q1 2025 on April 24, 2025, before the New York market opens, followed by a conference call to discuss these results [1]. Company Overview - FTI Consulting is a leading global expert firm specializing in crisis and transformation, employing over 8,300 individuals across 34 countries and territories as of December 31, 2024 [3]. - The company reported revenues of $3.70 billion for the fiscal year 2024 [3]. Conference Call Details - The conference call discussing the financial results will take place on April 24, 2025, at 9:00 a.m. Eastern Time and will be hosted by senior management [1]. - The call will be available for live streaming on the company's investor relations website, with a replay accessible for 90 days [2].

Twenty Academic Affiliates Have Joined Compass Lexecon in the Past Six Months Affiliates Bring Prior Experience at Government Agencies Including the FTC, FCC and SEC Deep Expertise in a Wide Range of Areas, Including Merger Policy, Healthcare, AI, Finance, Venture Capital, Technology, Network Industries and Telecommunications WASHINGTON, April 02, 2025 (GLOBE NEWSWIRE) -- FTI Consulting, Inc. (NYSE:FCN) today announced that in the past six months 20 academic affiliates have joined its Compass Lexecon subsid ...