FTI Consulting Reports Fourth Quarter and Full Year 2016 Financial Results

Introduces 2017 Guidance

WASHINGTON, Feb. 28, 2017 (GLOBE NEWSWIRE) -- FTI Consulting, Inc. (NYSE:FCN) today released its financial results for the fourth quarter and full year ended December 31, 2016.

Full Year 2016 Results

• Revenues of $1.81 billion increased 1.8% compared to the prior year. Excluding the estimated negative impact of foreign currency translation, revenues increased 3.6% compared to the prior year.
• Fully diluted EPS of $2.05 were up 29.7% compared to the prior year.
• Adjusted EPS of $2.24 were up 21.7% compared to the prior year.
• Net income of $85.5 million was up 29.5% compared to the prior year.
• Adjusted EBITDA was $203.0 million, or 11.2% of revenues, compared to $205.8 million, or 11.6% of revenues, in the prior year.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting, said, “2016 was a superb year for FTI Consulting. We delivered record revenues in Economic Consulting and Corporate Finance & Restructuring, and had another year of strong performance in Strategic Communications. And our EMEA region is benefitting from our multi-year commitment to grow our global platform, delivering record revenues and continuing to grow headcount substantially.”

For the full year 2016, revenues increased 1.8% to $1.81 billion compared to $1.78 billion in the prior year. Excluding the estimated negative impact of foreign currency translation (“FX”), revenues increased 3.6% compared to the prior year. The increase in revenues was driven by broad-based higher demand across the Economic Consulting segment and higher demand for restructuring services in the Corporate Finance & Restructuring segment. This strength was partially offset by reduced demand in the Technology and Forensic and Litigation Consulting segments. Net income increased 29.5% to $85.5 million compared to $66.1 million in the prior year. Adjusted EBITDA was $203.0 million, or 11.2% of revenues, compared to $205.8 million, or 11.6% of revenues, in the prior year. Adjusted EBITDA growth in the Economic Consulting, Corporate Finance & Restructuring and Strategic Communications segments was more than offset by Adjusted EBITDA declines in the Technology and Forensic and Litigation Consulting segments and higher corporate costs. The decline in Adjusted EBITDA and Adjusted EBITDA Margin was also impacted by higher costs primarily from higher compensation related to an increase in aggregate headcount, which was not sufficiently offset by higher revenues.

Full year 2016 fully diluted earnings per share (“EPS”) were $2.05 compared to $1.58 in the prior year. Full year 2015 EPS included a $19.6 million debt extinguishment charge, which reduced EPS by $0.28. Full year 2016 EPS included:

• A $10.4 million special charge related to headcount reductions, which reduced EPS by $0.17;
• A $3.8 million charge related to the write-down of capitalized software, which reduced EPS by $0.06;
• $17.9 million in interest expense savings due to reduced borrowings and lower average interest rates, which increased EPS by $0.27; and
• A $3.7 million reduction in income tax expense related to the reversal of a tax reserve, which increased EPS by $0.09.

Full year 2016 Adjusted EPS were $2.24 compared to $1.84 in the prior year. Adjusted EPS in 2016 excludes the $10.4 million special charge related to headcount reductions and a $1.4 million fair value adjustment for an acquisition contingent consideration liability.

Cash Position and Capital Allocation

Cash and cash equivalents were $216.2 million at December 31, 2016, compared to $149.8 million at December 31, 2015. In 2016, the Company spent $21.5 million to repurchase 537,400 shares of its common stock at an average price of $39.97. As of December 31, 2016, approximately $81.4 million remained available under the Company’s $100.0 million share repurchase authorization.

The Company reduced the balance drawn on its credit facility by $130.0 million during 2016. Total debt of $370.0 million at December 31, 2016 compares to total debt of $500.0 million at December 31, 2015. Total debt, net of cash, was $153.8 million at December 31, 2016, down from $350.2 million at December 31, 2015.

Fourth Quarter 2016 Results

Fourth quarter 2016 revenues of $441.9 million compared to revenues of $442.2 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased 2.6% compared to the prior year quarter. Excluding FX, the increase in revenues was primarily driven by higher demand for mergers and acquisition (“M&A”) related antitrust services in the Economic Consulting segment, which was partially offset by lower demand in the dispute advisory and health solutions practices within the Forensic and Litigation Consulting segment. Net income of $7.1 million decreased 31.4% compared to $10.3 million in the prior year quarter. Adjusted EBITDA was $30.3 million, or 6.9% of revenues, compared to $35.2 million, or 8.0% of revenues in the prior year quarter. The decline in Adjusted EBITDA was due to higher compensation related to increased headcount in the Corporate Finance & Restructuring segment and lower demand in the Forensic and Litigation Consulting segment.

Fourth quarter 2016 EPS were $0.17 compared to $0.25 in the prior year quarter. Fourth quarter 2016 EPS included a special charge of $3.6 million related to headcount reductions and a $3.8 million write-down of capitalized software. These charges were partially offset by a $3.7 million reduction in income tax expense. Fourth quarter 2016 Adjusted EPS of $0.24 were the same as the prior year quarter. Adjusted EPS excludes the impact of the $3.6 million special charge related to headcount reductions.

Fourth Quarter 2016 Segment Results

Corporate Finance & Restructuring
Revenues in the Corporate Finance & Restructuring segment increased $1.8 million, or 1.6%, to $113.4 million in the quarter compared to $111.6 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased $4.4 million, or 3.9%, compared to the prior year quarter. The increase in revenues were primarily due to higher realized pricing for restructuring services and higher success fees, which was partially offset by lower demand. Adjusted Segment EBITDA was $16.3 million, or 14.4% of segment revenues, compared to $18.9 million, or 17.0% of segment revenues, in the prior year quarter. The decline in Adjusted Segment EBITDA was due to higher compensation costs, which were partially offset by lower bad debt expense and increased revenues.

Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment decreased $11.2 million, or 9.6%, to $105.5 million in the quarter compared to $116.7 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues decreased $9.8 million, or 8.4%, compared to the prior year quarter. The decrease in revenues was primarily due to lower demand in the segment’s dispute advisory and health solutions practices. Adjusted Segment EBITDA was $6.3 million, or 6.0% of segment revenues, compared to $8.8 million, or 7.5% of segment revenues, in the prior year quarter. The decline in Adjusted Segment EBITDA was due to lower revenues, which were partially offset by lower compensation costs resulting from headcount reductions in the health solutions practice.

Economic Consulting
Revenues in the Economic Consulting segment increased $10.7 million, or 9.0%, to $129.3 million in the quarter compared to $118.6 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased $15.0 million, or 12.6%, compared to the prior year quarter. The increase in revenues was driven primarily by higher demand for M&A-related antitrust services. Adjusted Segment EBITDA was $19.0 million, or 14.7% of segment revenues, compared to $18.8 million, or 15.9% of segment revenues, in the prior year quarter. Adjusted Segment EBITDA was up only slightly from the prior year quarter as the increase in revenues was partially offset by higher compensation costs, primarily related to an increase in professionals and shifts in business mix.

Technology
Revenues in the Technology segment decreased $3.1 million, or 6.6%, to $43.5 million in the quarter compared to $46.6 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues decreased $2.3 million, or 4.8%, compared to the prior year quarter. The decrease in revenues was primarily due to lower demand and lower realized pricing for M&A-related “second request” and litigation services. Adjusted Segment EBITDA was $5.6 million, or 12.8% of segment revenues, compared to $6.0 million, or 12.8% of segment revenues, in the prior year quarter. The decline in Adjusted Segment EBITDA was due to lower revenues, which were partially offset by lower compensation costs resulting from headcount reductions taken in 2016.

Strategic Communications
Revenues in the Strategic Communications segment increased $1.6 million or 3.2%, to $50.3 million in the quarter compared to $48.8 million in the prior year quarter. Excluding the estimated negative impact of FX, revenues increased $4.3 million, or 8.8%, compared to the prior year quarter. The increase in revenues was primarily due to higher project-based revenues in the Europe, Middle East and Africa (“EMEA”) region, driven by public affairs and financial communications engagements. Adjusted Segment EBITDA was $8.4 million, or 16.7% of segment revenues, compared to $7.6 million, or 15.6% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was due to the increase in revenues, which were partially offset by higher compensation costs, primarily related to an increase in professionals.

2017 Guidance
The Company estimates that revenues for 2017 will range between $1.80 billion and $1.90 billion. The Company estimates that EPS will range between $1.95 and $2.30 and that Adjusted EPS will range between $2.10 and $2.40. The variance between EPS and Adjusted EPS guidance for 2017 is related to estimated lease cancellation charges of $0.10 to $0.15 per share for the move of the Company’s Washington, D.C., office to another Washington, D.C., office location. The Company’s guidance assumes the completion of the remaining $81.4 million of its $100.0 million share repurchase authorization in 2017, which will be dependent on fluctuations in the price per share of the Company’s common stock, the timing of stock repurchases, market conditions and other future events that may be beyond the Company’s control.

Fourth Quarter and Full Year 2016 Conference Call
FTI Consulting will host a conference call for analysts and investors to discuss fourth quarter and full year 2016 financial results at 9:00 a.m. Eastern Time on February 28, 2017. The call can be accessed live and will be available for replay over the Internet for 90 days by logging onto the Company's investor relations website here.

About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. With more than 4,700 employees located in 29 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges and make the most of opportunities. The Company generated $1.81 billion in revenues during fiscal year 2016. More information can be found at www.fticonsulting.com.

Use of Non-GAAP Measures

We have included the definitions of Segment Operating Income (Loss) and Adjusted Segment EBITDA below in order to more fully define the components of certain non-GAAP financial measures presented in this earnings release. We define Segment Operating Income (Loss) as a segment’s share of Consolidated Operating Income (Loss). We define Total Segment Operating Income (Loss), which is a non-GAAP financial measure, as the total of Segment Operating Income (Loss) for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income (Loss) for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s share of Consolidated Operating Income (Loss) before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash. We define Adjusted Segment EBITDA Margin as Adjusted Segment EBITDA as a percentage of a segment’s revenues.

We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. We believe that the non-GAAP financial measures, which exclude the effects of remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges, when considered together with our GAAP financial results and GAAP measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating results with the operating results of other companies.

We define Adjusted Net Income and Adjusted Earnings per Diluted Share (“Adjusted EPS”), which are non-GAAP financial measures, as net income and earnings per diluted share, respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that this non-GAAP financial measure, which excludes the effects of the remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt, when considered together with our GAAP financial results, provides management and investors with an additional understanding of our business operating results, including underlying trends.

Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables accompanying this press release.

Safe Harbor Statement
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to acquisitions, share repurchases and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results. When used in this press release, words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes,” "forecasts" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and estimates will be achieved, and the Company's actual results may differ materially from our expectations, beliefs and estimates. Further, preliminary results are subject to normal year-end adjustments. The Company has experienced fluctuating revenues, operating income and cash flow in prior periods and expects that this will occur from time to time in the future. Other factors that could cause such differences include declines in demand for, or changes in, the mix of services and products that we offer, the mix of the geographic locations where our clients are located or where services are performed, adverse financial, real estate, fluctuations in the price per share of our common stock, other market and general economic conditions and other future events, which could impact each of our segments differently and could be outside of our control, the pace and timing of the consummation and integration of future acquisitions, the Company's ability to realize cost savings and efficiencies, competitive and general economic conditions, retention of staff and clients and other risks described under the heading "Item 1A Risk Factors" in the Company's most recent Form 10-K filed with the SEC and in the Company's other filings with the SEC, including the risks set forth under "Risks Related to Our Reportable Segments" and "Risks Related to Our Operations". We are under no duty to update any of the forward looking statements to conform such statements to actual results or events and do not intend to do so.

FINANCIAL TABLES FOLLOW