FTI Consulting Reports Record First Quarter 2018 Financial Results

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| Source: FTI Consulting, Inc.
  • First Quarter 2018 Revenues of $497.8 million, Up 11.5% Compared to Prior Year Quarter
  • First Quarter Fully Diluted and Adjusted EPS of $1.04 Compared to $0.34 in Prior Year Quarter

WASHINGTON, April 26, 2018 (GLOBE NEWSWIRE) --  FTI Consulting, Inc. (NYSE:FCN) today released its financial results for the quarter ended March 31, 2018.

First quarter 2018 revenues of $497.8 million increased $51.4 million, or 11.5%, compared to revenues of $446.3 million in the prior year quarter. Excluding the estimated positive impact from foreign currency translation (“FX”), revenues increased by $39.4 million, or 8.8%, compared to the prior year quarter. The increase in revenues was primarily driven by higher demand within the Corporate Finance & Restructuring and Forensic and Litigation Consulting segments. Net income of $38.9 million compared to $14.0 million in the prior year quarter. The increase was largely due to higher revenues and a lower effective income tax rate. Adjusted EBITDA was $72.3 million, or 14.5% of revenues, compared to $38.3 million, or 8.6% of revenues, in the prior year quarter. The increase in Adjusted EBITDA was primarily due to higher revenues and improved utilization. First quarter 2018 fully diluted earnings per share (“EPS”) and Adjusted EPS of $1.04 compared to $0.34 in the prior year quarter.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting, said, “Our record first quarter results, together with our strong second half of 2017, reflect the enormous efforts our leaders and professionals have made in listening to our clients and investing heavily to deliver on core client needs. Though quarters will always have some volatility, the overall improvement of our positions over these past several years is gratifying and powerful.”

Cash Position and Capital Allocation

Net cash used in operating activities was $69.2 million for the quarter ended March 31, 2018 compared to $93.1 million for the quarter ended March 31, 2017. The year-over-year reduction in the use of operating cash resulted from improved cash collections.

During the quarter, the Company used approximately $14.2 million to repurchase 337,075 shares of its common stock at an average price per share of $42.17. As of March 31, 2018, approximately $99.1 million remained available for stock repurchases under the Company’s $300.0 million share repurchase authorization.

Total debt was $445.0 million at March 31, 2018 compared to total debt of $400.0 million at December 31, 2017 and $407.0 million at March 31, 2017. Cash and cash equivalents were $152.0 million at March 31, 2018 compared to $190.0 million at December 31, 2017 and $121.0 million at March 31, 2017. Total debt, net of cash, was $293.0 million at March 31, 2018, up from $210.0 million at December 31, 2017 and $286.0 million at March 31, 2017.

First Quarter 2018 Segment Results

Corporate Finance & Restructuring
Revenues in the Corporate Finance & Restructuring segment increased $37.0 million, or 35.0%, to $142.9 million in the quarter compared to $105.9 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $34.3 million, or 32.4%, compared to the prior year quarter. The increase in revenues was due to higher demand for restructuring, business transformation and transaction services. Adjusted Segment EBITDA was $34.8 million, or 24.4% of segment revenues, compared to $10.3 million, or 9.7% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues with improved utilization.

Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment increased $16.6 million, or 14.9%, to $128.0 million in the quarter compared to $111.4 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $14.9 million, or 13.3%, compared to the prior year quarter. The increase in revenues was primarily driven by increased demand for construction solutions, investigations and health solutions services. Adjusted Segment EBITDA was $25.8 million, or 20.1% of segment revenues, compared to $13.5 million, or 12.1% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues with improved utilization.

Economic Consulting
Revenues in the Economic Consulting segment decreased $6.1 million, or 4.4%, to $133.1 million in the quarter compared to $139.2 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues decreased $9.9 million, or 7.1%, compared to the prior year quarter. The decrease in revenues was primarily due to lower demand for antitrust services in North America. Adjusted Segment EBITDA was $19.1 million, or 14.4% of segment revenues, compared to $20.1 million, or 14.4% of segment revenues, in the prior year quarter. The decrease in Adjusted Segment EBITDA was primarily due to lower revenues, which was partially offset by lower variable compensation costs.

Technology
Revenues in the Technology segment decreased $5.2 million, or 11.2%, to $40.9 million in the quarter compared to $46.1 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues decreased $6.0 million, or 12.9%, compared to the prior year quarter. The decrease in revenues was primarily due to lower demand for managed review services, largely related to a decline in demand for merger and acquisition-related “second request” services. Adjusted Segment EBITDA was $5.7 million, or 14.0% of segment revenues, compared to $7.8 million, or 16.9% of segment revenues, in the prior year quarter. The decrease in Adjusted Segment EBITDA was primarily due to lower revenues.

Strategic Communications
Revenues in the Strategic Communications segment increased $9.1 million, or 20.7%, to $52.8 million in the quarter compared to $43.7 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $6.2 million, or 14.1%, compared to the prior year quarter. The increase in revenues was primarily due to an increase in both project- and retainer-based revenues. Adjusted Segment EBITDA was $9.9 million, or 18.7% of segment revenues, compared to $4.3 million, or 9.7% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues.   

First Quarter 2018 Conference Call
FTI Consulting will host a conference call for analysts and investors to discuss first quarter 2018 financial results at 9:00 a.m. Eastern Time on April 26, 2018. 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 4,600 employees located in 28 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 2017. More information can be found at www.fticonsulting.com.

Use of Non-GAAP Measures
In the accompanying analysis of financial information, we sometimes use information derived from consolidated and segment financial information that may not be presented in our financial statements or prepared in accordance with generally accepted accounting principles (GAAP). Certain of these measures are considered non-GAAP financial measuresunder the Securities and Exchange Commission (SEC) rules. Specifically, we have referred to the following non-GAAP measures:

  • Total Segment Operating Income
  • Adjusted EBITDA
  • Total Adjusted Segment EBITDA
  • Adjusted EBITDA Margin
  • Adjusted Net Income
  • Adjusted Earnings per Diluted Share
  • Free Cash Flow

We have included the definitions of Segment Operating Income 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 as a segment’s share of Consolidated Operating Income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s share of Consolidated Operating Income 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 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 define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenues. 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 (EPS), respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of debt and the adjustment related to the adoption of the 2017 U.S. Tax Cuts and Jobs Act (2017 Tax Act). 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, losses on early extinguishment of debt and the adjustment related to the adoption of the 2017 Tax Act, when considered together with our GAAP financial results, provides management and investors with an additional understanding of our business operating results, including underlying trends.

We define Free Cash Flow as net cash provided by operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with an additional understanding of the Company’s ability to generate cash for ongoing business operations and other capital deployment.

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 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 statementswithin 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 flows 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, fluctuations in the price per share of our common stock, adverse financial, real estate, or 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, new laws and regulations, or changes thereto, including the 2017 Tax Act, and other risks described under the heading “Item 1A, Risk Factors” in the Company’s annual report on Form 10-K for the year ended December 31, 2017, filed with the SEC, including the risks set forth under “Risks Related to Our Reportable Segments” and “Risks Related to Our Operations,” and in the Company’s other filings with the SEC. 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


FTI CONSULTING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

  March 31, December 31,
  2018 2017
  (unaudited)  
Assets    
Current assets    
Cash and cash equivalents $152,044  $189,961 
Accounts receivable:    
   Billed receivables 417,085  390,996 
   Unbilled receivables 367,516  312,569 
   Allowances for doubtful accounts and unbilled services (201,013) (180,687)
      Accounts receivable, net 583,588  522,878 
Current portion of notes receivable 29,371  25,691 
Prepaid expenses and other current assets 50,775  55,649 
   Total current assets 815,778  794,179 
Property and equipment, net 75,586  75,075 
Goodwill 1,208,011  1,204,803 
Other intangible assets, net 42,390  44,150 
Notes receivable, net 91,215  98,105 
Other assets 43,472  40,929 
         Total assets $2,276,452  $2,257,241 
Liabilities and Stockholders' Equity    
Current liabilities    
Accounts payable, accrued expenses and other $105,966  $94,873 
Accrued compensation 191,055  268,513 
Billings in excess of services provided 46,446  46,942 
    Total current liabilities 343,467  410,328 
Long-term debt, net 441,473  396,284 
Deferred income taxes 129,274  124,471 
Other liabilities 124,804  134,187 
    Total liabilities 1,039,018  1,065,270 
Stockholders' equity    
Preferred stock, $0.01 par value; shares authorized — 5,000; none
outstanding
    
Common stock, $0.01 par value; shares authorized — 75,000; shares
issued and outstanding — 37,720 (2018) and 37,729 (2017)
 377  377 
Additional paid-in capital 261,765  266,035 
Retained earnings 1,085,061  1,045,774 
Accumulated other comprehensive loss (109,769) (120,215)
    Total stockholders' equity 1,237,434  1,191,971 
         Total liabilities and stockholders' equity $2,276,452  $2,257,241 



FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)

 Three Months Ended
March 31,
 
 2018 2017
 (unaudited)
Revenues$497,774  $446,344 
Operating expenses   
Direct cost of revenues321,117  309,072 
Selling, general and administrative expenses112,128  107,690 
Amortization of other intangible assets2,270  2,493 
 435,515  419,255 
Operating income62,259  27,089 
Other income (expense)   
Interest income and other(1,800) 605 
Interest expense(6,244) (5,801)
 (8,044) (5,196)
Income before income tax provision54,215  21,893 
Income tax provision15,270  7,877 
Net income$38,945  $14,016 
Earnings per common share ― basic$1.06  $0.35 
Weighted average common shares outstanding ― basic36,700  40,527 
Earnings per common share ― diluted$1.04  $0.34 
Weighted average common shares outstanding ― diluted37,612  41,245 
Other comprehensive income, net of tax   
Foreign currency translation adjustments, net of tax expense of $0$10,446  $7,370 
Total other comprehensive income, net of tax10,446  7,370 
Comprehensive income$49,391  $21,386 



FTI CONSULTING, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)

  Three Months Ended
March 31, 2018
  2018 2017
  (Unaudited)
     
Net income $38,945  $14,016 
Add back:    
Remeasurement of acquisition-related contingent consideration   166 
Tax impact of remeasurement of acquisition-related contingent consideration   (65)
Adjusted net income $38,945  $14,117 
EPS and Adjusted EPS — diluted $1.04  $0.34 
Weighted average number of common shares outstanding ― diluted 37,612  41,245 


Three Months Ended March 31, 2018
(unaudited)
 Corporate
Finance &
Restructuring
 Forensic and
Litigation
Consulting
 Economic Consulting Technology Strategic Communications Unallocated Corporate Total
Net income             $38,945 
Interest income and other             1,800 
Interest expense             6,244 
Income tax provision             15,270 
Operating income $33,211  $24,330  $17,648  $2,593  $8,365  $(23,888) $62,259 
Depreciation and amortization 802  1,028  1,364  3,077  593  901  7,765 
Amortization of other intangible assets 791  399  124  62  894    2,270 
Adjusted EBITDA $34,804  $25,757  $19,136  $5,732  $9,852  $(22,987) $72,294 
               
Three Months Ended March 31, 2017
(unaudited)
 Corporate
Finance & Restructuring
 Forensic and
Litigation Consulting
 Economic Consulting Technology Strategic Communications Unallocated Corporate Total
Net income             $14,016 
Interest income and other             (605)
Interest expense             5,801 
Income tax provision             7,877 
Operating income $8,749  $11,924  $18,502  $4,440  $2,527  $(19,053) $27,089 
Depreciation and amortization 781  1,173  1,454  3,206  602  1,355  8,571 
Amortization of other intangible assets 795  424  154  158  962    2,493 
Remeasurement of acquisition-related contingent consideration         166    166 
Adjusted EBITDA $10,325  $13,521  $20,110  $7,804  $4,257  $(17,698) $38,319 



FTI CONSULTING, INC.
OPERATING RESULTS BY BUSINESS SEGMENT

  

Segment
Revenues
 Adjusted
EBITDA
 Adjusted
EBITDA

Margin
 Utilization  Average
Billable
Rate
 Revenue-
Generating
Headcount
  (in thousands)       (at period end)
Three Months Ended March 31, 2018
(unaudited)
           
Corporate Finance & Restructuring$142,922  $34,804  24.4% 71% $444  910 
Forensic and Litigation Consulting128,039  25,757  20.1% 67% $326  1,072 
Economic Consulting133,109  19,136  14.4% 71% $543  689 
Technology (1)40,914  5,732  14.0% N/M   N/M  288 
Strategic Communications (1)52,790  9,852  18.7% N/M   N/M  630 
 $497,774  $95,281  19.1%     3,589 
Unallocated Corporate  (22,987)        
Adjusted EBITDA  $72,294  14.5%      
            
Three Months Ended March 31, 2017
(unaudited)
           
Corporate Finance & Restructuring$105,901  $10,325  9.7% 59% $377  900 
Forensic and Litigation Consulting111,406  13,521  12.1% 60% $330  1,110 
Economic Consulting139,221  20,110  14.4% 72% $554  660 
Technology (1)46,087  7,804  16.9% N/M   N/M  296 
Strategic Communications (1)43,729  4,257  9.7% N/M   N/M  657 
 $446,344  $56,017  12.6%     3.623 
Unallocated Corporate  (17,698)        
Adjusted EBITDA  $38,319  8.6%      
            
            
N/M Not meaningful           
(1) The majority of the Technology and Strategic Communications segments' revenues are not generated based on billable hours. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.



FTI CONSULTING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 Three Months Ended
March 31,
 
 2018 2017
 (unaudited)
Operating activities   
Net income$38,945  $14,016 
Adjustments to reconcile net income to net cash used in operating activities:   
Depreciation and amortization7,765  8,571 
Amortization and impairment of other intangible assets2,270  2,493 
Acquisition-related contingent consideration396  395 
Provision for doubtful accounts5,676  3,551 
Non-cash share-based compensation4,676  7,281 
Non-cash interest expense and other591  508 
Changes in operating assets and liabilities, net of effects from acquisitions:   
     Accounts receivable, billed and unbilled(61,677) (52,489)
     Notes receivable2,622  7,153 
     Prepaid expenses and other assets(378) 553 
     Accounts payable, accrued expenses and other9,348  287 
     Income taxes13,480  3,650 
     Accrued compensation(92,501) (92,561)
     Billings in excess of services provided(413) 3,505 
                          Net cash used in operating activities(69,200) (93,087)
Investing activities   
Purchases of property and equipment(7,680) (5,831)
Other27  127 
                          Net cash used in investing activities(7,653) (5,704)
Financing activities   
Borrowings under revolving line of credit, net45,000  37,000 
Deposits1,431  3,069 
Purchase and retirement of common stock(14,220) (36,918)
Net issuance of common stock under equity compensation plans4,215  (812)
Payments for acquisition-related contingent consideration(2,502)  
                           Net cash provided by financing activities33,924  2,339 
Effect of exchange rate changes on cash and cash equivalents5,012  1,253 
Net decrease in cash and cash equivalents(37,917) (95,199)
Cash and cash equivalents, beginning of period189,961  216,158 
Cash and cash equivalents, end of period$152,044  $120,959 


FTI Consulting, Inc.

555 12th Street NW
Washington, DC 20004
+1.202.312.9100

Investor & Media Contact:
Mollie Hawkes
+1.617.747.1791
mollie.hawkes@fticonsulting.com