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01/09 23:25
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a decline in revenue and EPS YoY, despite an optimistic share repurchase plan. The Q&A highlights potential risks from tariffs and regulatory changes, with management providing vague responses about revenue impacts. While adjusted EPS improved slightly, the overall financial performance and uncertain external environment suggest a negative sentiment. The share repurchase announcement is a positive factor, but the declining financial metrics and unclear guidance lead to a prediction of a negative stock price movement.
Revenue $898.3 million, decreased by $30.3 million, or 3.3% year-over-year due to lower demand and realized bill rates.
GAAP Earnings Per Share (EPS) $1.74, compared to $2.23 in the prior year quarter, reflecting a special charge of $25.3 million.
Adjusted EPS $2.29, compared to $2.23 in the prior year quarter.
Net Income $61.8 million, compared to $80 million in the prior year quarter, driven by lower revenues and a special charge.
Direct Costs $608.9 million, compared to $626 million in the prior year quarter, primarily due to lower variable compensation and contractor costs.
SG&A $184.3 million, or 20.5% of revenues, compared to $201.9 million, or 21.7% of revenues in the prior year quarter, due to litigation settlements and lower bad debt.
Adjusted EBITDA $115.2 million, or 12.8% of revenues, compared to $111.1 million, or 12% of revenues in the prior year quarter.
Effective Tax Rate 23.3%, compared to 19.6% in the prior year quarter, due to large option exercises in the prior year.
Billable Headcount Increased by 0.5% year-over-year, with the largest increases in Corporate Finance & Restructuring, Forensic and Litigation Consulting, and Technology.
Cash Flow from Operating Activities Net cash used was $465.2 million, compared to $274.8 million in the prior year quarter, primarily due to increased forgivable loan issuances and higher variable compensation.
Share Repurchases 1,126,995 shares repurchased at an average price of $165.15, totaling $186.1 million.
Forgivable Loans Issued $162 million in forgivable loans net of repayments, primarily to retain professionals and attract new academic affiliates.
Market Expansion: The Corporate Finance & Restructuring segment is seeing a pickup in restructuring matters in the U.S., stemming from tariff-induced stress. The Forensic and Litigation Consulting segment had a record quarter, indicating strong demand in areas such as cybersecurity, export controls, and sanctions. The Economic Consulting segment is focusing on replenishing talent and has successfully attracted new academic affiliates, enhancing its capabilities.
Operational Efficiency: The company took targeted headcount actions to address drags on results in 2024, which are expected to result in cost savings of approximately $85 million in salary and benefits on an annualized basis. SG&A expenses decreased due to lower bad debt and litigation settlements, but are expected to rise by $15 million to $20 million in the next two quarters.
Strategic Shift: The company is investing in talent across various sectors, including antitrust, financial economics, and digital assets, despite the near-term financial pressures. FTI Consulting is focusing on enhancing its visibility and reputation in the market, particularly in the Forensic and Litigation Consulting segment.
Regulatory Issues: The business is affected by potential regulatory shifts, particularly in areas like anti-consumer fraud and anti-money laundering, which could impact performance.
Macroeconomic Factors: The Corporate Finance & Restructuring segment is influenced by macroeconomic conditions, including the restructuring and M&A markets, which are currently uncertain.
M&A Market Challenges: There is considerable uncertainty in the M&A market, with a reported 13% year-over-year decline in U.S. deal volume, which may lead to lower demand for related services.
Headcount and Talent Management: Departures in the Economic Consulting segment have led to financial pressure, necessitating adjustments in compensation and impacting overall performance.
Investment in Talent: While there are cost savings from headcount actions, investments in new talent may negatively impact adjusted EBITDA in the short term.
Market Competition: Increased competition and potential headwinds in the tech sector, particularly related to M&A-related services, could affect growth.
Economic Consulting Departures: Departures in the Economic Consulting segment have resulted in a significant impact on revenue and profitability, despite efforts to replenish talent.
Uncertainty in Future Performance: Overall, there is a high level of uncertainty regarding future performance, with potential scenarios including a decline in adjusted EPS.
Forensic and Litigation Consulting (FLC) Performance: FLC had a strong quarter with EBITDA comparable to half-year averages, driven by major roles and increased visibility of the team's expertise.
Corporate Finance & Restructuring Outlook: The restructuring market is booming, but uncertainty remains regarding M&A markets. The company is not changing its expectations for the year despite macroeconomic uncertainties.
Technology Business Outlook: The tech business faces headwinds due to regulatory changes affecting M&A-related services, but the company remains optimistic about medium-term growth.
Economic Consulting Talent Acquisition: The company is focused on replenishing talent in Economic Consulting, attracting high-caliber academic affiliates and professionals.
Strategic Communications Recovery: The Strategic Communications business is showing signs of recovery, with expectations of returning to growth.
2025 Revenue Guidance: The company expects a solid year despite uncertainties, with a range that includes a scenario of down adjusted EPS for the first time.
SG&A Expectations: SG&A is expected to increase by $15 million to $20 million in the next two quarters compared to Q1.
Forgivable Loans Impact: $162 million in forgivable loans will impact adjusted EBITDA significantly in Q2.
Cost Savings from Headcount Actions: Headcount actions are expected to yield approximately $85 million in annualized salary and benefits savings.
Investment in Talent: The company continues to invest in talent, which may negatively impact adjusted EBITDA in the short term.
Share Repurchase Program: During the quarter, FTI Consulting repurchased 1,126,995 shares at an average price per share of $165.15 for a total cost of $186.1 million. Subsequent to quarter end, as of April 22, 2025, an additional 602,549 shares were repurchased at an average price of $159.33. The Board of Directors has authorized an additional $400 million for share repurchases, with approximately $568.3 million remaining available under the program.
Despite strong EPS growth and record high EPS, revenue growth is modest, and guidance has been lowered. The decline in Economic Consulting and Tech segments, along with cautious management comments, dampen enthusiasm. The share repurchase plan is positive, but uncertainties in guidance and market conditions balance the sentiment to neutral.
The earnings call revealed mixed financial performance, with strong growth in some segments but significant declines in others, notably Technology and Economic Consulting. The Q&A highlighted uncertainties like regulatory changes and weak guidance, particularly in Economic Consulting. Despite positive restructuring growth and talent acquisition, the overall sentiment is dampened by revenue misses, higher forgivable loan costs, and unclear management responses. The lack of a positive catalyst or new partnerships further supports a negative sentiment, predicting a stock price decline of -2% to -8%.
The earnings call reveals a decline in revenue and EPS YoY, despite an optimistic share repurchase plan. The Q&A highlights potential risks from tariffs and regulatory changes, with management providing vague responses about revenue impacts. While adjusted EPS improved slightly, the overall financial performance and uncertain external environment suggest a negative sentiment. The share repurchase announcement is a positive factor, but the declining financial metrics and unclear guidance lead to a prediction of a negative stock price movement.
The earnings call presented mixed signals: strong revenue guidance and raised EPS guidance are positive, but weaker-than-expected revenue growth, declining EPS, and higher SG&A expenses weigh negatively. The Q&A section revealed management's reluctance to provide specific guidance, adding uncertainty. Although there are investments in AI and talent, and a strong cash flow, the market challenges and increased effective tax rate create concerns. With no market cap data, a neutral prediction is prudent given the mixed financial performance and management's cautious outlook.
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