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01/09 23:24
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
EPS and adjusted EPS $2.60 per share, up over 40% year-over-year. The increase was influenced by onetime factors that cut positively, but even normalizing for these, it was a record quarter.
Revenue $956.2 million, increased 3.3% year-over-year. The growth was driven by strong performances in Corp Fin, FLC, and Strat Com, which offset declines in E Con and Tech.
Corp Fin Revenue $404.9 million, increased 18.6% year-over-year. Growth was due to higher demand for restructuring and transaction services and higher realized bill rates for transformation and strategy services.
FLC Revenue $194.7 million, increased 15.4% year-over-year. Growth was driven by higher realized bill rates for risk and investigations, data and analytics, and construction solutions services, as well as higher demand for risk and investigation services.
E Con Revenue $173.1 million, decreased 22% year-over-year. Decline was due to lower demand for non-M&A-related antitrust and M&A-related antitrust services, partially offset by higher realized bill rates for non-M&A-related antitrust services and higher demand for financial economic services.
Tech Revenue $94.1 million, decreased 14.8% year-over-year. Decline was due to lower demand for M&A-related second request and information governance, privacy, and security services.
Strat Com Revenue $89.4 million, increased 7.4% year-over-year. Growth was driven by higher demand for corporate reputation services, particularly in crisis, people and transformation, and cyber services.
Adjusted EBITDA $130.6 million, or 13.7% of revenue, compared to $102.9 million, or 11.1% of revenue, in the prior year quarter. The increase was due to higher revenue and lower SG&A expenses.
Net Income $82.8 million, increased 25% year-over-year. The increase was driven by higher revenue and lower SG&A expenses.
SG&A Expenses $199.5 million, decreased from $206 million in Q3 2024. The decrease was primarily due to lower compensation and a gain related to a legal settlement, partially offset by higher bad debt.
AI and Machine Learning Investments: FTI Consulting's Tech business has been an early adopter of advanced technologies, including AI and machine learning, to maintain its leadership position in high-stakes investigations, litigation, and M&A-related second requests.
Geographical Expansion: FTI Consulting has expanded its restructuring services in key geographies, including the U.S., U.K., Germany, Spain, France, and Australia, leveraging its strong relationships and expertise.
Record Financial Performance: FTI Consulting reported record results with EPS of $2.60, up 41% year-over-year, and adjusted EPS up over 40%. Corp Fin and FLC segments delivered double-digit growth, while Strat Com also showed solid revenue growth.
Headcount Management: Billable headcount decreased 3% year-over-year but increased 4% sequentially, including the largest-ever class of 331 new university joiners.
Talent Acquisition and Retention: FTI Consulting has focused on attracting and retaining top talent, with 79 senior hires year-to-date, including 28 in Compass Lexecon, despite competitive pressures.
Investment in Core and Adjacent Businesses: The company has made significant investments in core areas like restructuring and adjacencies such as financial services, cybersecurity, and AI-driven analytics to drive long-term growth.
Economic Conditions: The antitrust market has been weaker than expected this year, particularly in EMEA, with large jobs winding down and competitive pressures impacting revenue.
Talent Retention and Costs: The cost to retain professionals has been more competitive than anticipated, and attracting new professionals has had a larger cost impact than expected.
Segment-Specific Challenges: The E Con segment faced significant headwinds, including lower demand for non-M&A-related antitrust and M&A-related antitrust services, and increased forgivable loan amortization costs. The Tech segment experienced lower demand for M&A-related second request and information governance services.
Revenue Dependency: Legacy revenue in the E Con segment continues to ramp down, while revenue from new professionals is ramping up more slowly, creating a revenue gap.
Seasonal Business Slowdown: The fourth quarter is typically weaker due to a seasonal business slowdown as clients and professionals take time off during the holidays.
Geopolitical and Regulatory Risks: Increased demand for services like crisis communications and cyber communications reflects ongoing geopolitical and regulatory disruptions, which could pose challenges to operations.
Revenue Guidance: The company now estimates revenue for the full year 2025 to range between $3.685 billion and $3.735 billion, slightly adjusted from the previous range of $3.66 billion to $3.76 billion.
Earnings Per Share (EPS) Guidance: The company now estimates EPS for the full year 2025 to range between $7.62 and $8.12, and adjusted EPS to range between $8.20 and $8.70, revised upward from the previous range of $7.80 to $8.40.
Economic Consulting (E Con) Outlook: The E Con segment has faced significant headwinds, including weaker-than-expected antitrust markets and competitive pressures. While costs have stabilized, revenue growth is expected to return gradually over the next several quarters, though the timing remains uncertain.
Technology Segment Outlook: The Technology segment has experienced a decline in demand for M&A-related second request services. However, sequential revenue increased by 12.5% in Q3 2025, and the company continues to invest in AI and talent to support future growth.
Corporate Finance (Corp Fin) Outlook: Corp Fin delivered record results in Q3 2025, with double-digit growth across restructuring, transactions, and transformation services. The company expects continued strong performance driven by investments in talent and expanded service offerings.
Forensic and Litigation Consulting (FLC) Outlook: FLC has shown strong growth, with year-to-date revenue up 11% and adjusted EBITDA up 62%. The company continues to invest in data analytics, cybersecurity, and risk and investigations services, expecting these areas to drive future growth.
Strategic Communications (Strat Com) Outlook: Strat Com has delivered record revenue and adjusted EBITDA year-to-date, driven by demand for corporate reputation and crisis communication services. The company expects continued growth in high-stakes areas like public affairs and cyber communications.
Headcount and Talent Investments: The company has made significant investments in talent, with 79 senior hires announced year-to-date, compared to 33 and 39 in the same periods of 2024 and 2023, respectively. These hires span across key areas such as antitrust, transactions, financial services, and cybersecurity.
Share Repurchase Program: During the quarter, we repurchased 1.426 million shares at an average price per share of $164.18 for a total cost of $234.1 million. After quarter end, we repurchased 469,610 shares at an average price per share of $160.23. As you may have seen in our earnings press release, our Board of Directors authorized an additional $500 million for share repurchases.
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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