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FTI Consulting Reports Record First Quarter 2021 Financial Results

  • First Quarter 2021 Revenues of $686.3 Million, Up 13.5% Compared to $604.6 Million in Prior Year Quarter
  • First Quarter 2021 EPS of $1.84, Up 23.5% Compared to $1.49 in Prior Year Quarter; First Quarter 2021 Adjusted EPS of $1.89, Up 23.5% Compared to $1.53 in Prior Year Quarter

WASHINGTON, April 29, 2021 (GLOBE NEWSWIRE) -- FTI Consulting, Inc. (NYSE: FCN) today released financial results for the quarter ended March 31, 2021.

First quarter 2021 revenues of $686.3 million increased $81.7 million, or 13.5%, compared to revenues of $604.6 million in the prior year quarter. Excluding the estimated positive impact from foreign currency translation ("FX"), revenues increased $67.0 million, or 11.1%, compared to the prior year quarter. Acquisition-related revenues contributed $16.0 million in the quarter. Excluding the estimated positive impact of FX and acquisition-related revenues, revenues increased $51.0 million, or 8.4%, compared to the prior year quarter, primarily due to higher demand in the Economic Consulting and Technology segments, which was partially offset by a $17.5 million decline in pass-through revenues. Net income of $64.5 million compared to $56.7 million in the prior year quarter. The increase in net income was primarily due to higher operating profits in the Economic Consulting, Forensic and Litigation Consulting, and Technology segments, which was partially offset by lower operating profits in the Corporate Finance & Restructuring segment compared to the prior year quarter.

Adjusted EBITDA of $99.5 million, or 14.5% of revenues, compared to $83.2 million, or 13.8% of revenues, in the prior year quarter. The increase in Adjusted EBITDA was due to higher revenues, which was partially offset by higher compensation, primarily related to a 12.3% increase in billable headcount and higher variable compensation compared to the prior year quarter.

First quarter 2021 diluted earnings per share ("EPS") of $1.84 compared to $1.49 in the prior year quarter. First quarter 2021 EPS included $2.3 million of non-cash interest expense related to the Company's 2.0% convertible senior notes due 2023 ("2023 Convertible Notes"), which decreased EPS by $0.05. First quarter 2020 EPS included $2.2 million of non-cash interest expense related to the Company's 2023 Convertible Notes, which decreased EPS by $0.04. First quarter 2021 Adjusted EPS of $1.89 compared to Adjusted EPS of $1.53 in the prior year quarter.

Steven H. Gunby, President and Chief Executive Officer of FTI Consulting, commented, “Though we are, of course, very pleased with our record quarterly performance, even more gratifying is the progress we have shown over multiple years. That longer-term trajectory underscores the strength of our team and the power of our strategy of focusing on attracting and developing the best professionals in the market and supporting them — in weak quarters as well as strong ones — as they support our clients and build our business.”

Cash Position and Capital Allocation
Net cash used in operating activities of $166.6 million for the quarter ended March 31, 2021 compared to $123.6 million for the quarter ended March 31, 2020. The year-over-year increase in net cash used in operating activities was largely due to an increase in salaries related to headcount growth and higher annual bonus payments, which was partially offset by an increase in cash collected resulting from higher revenues.

Cash and cash equivalents of $233.4 million at March 31, 2021 compared to $223.1 million at March 31, 2020 and $295.0 million at December 31, 2020. Total debt, net of cash, of $252.8 million at March 31, 2021 compared to $143.2 million at March 31, 2020 and $21.3 million at December 31, 2020. The sequential increase in total debt, net of cash, was primarily due to higher borrowings under the Company's senior secured bank revolving credit facility, which were primarily used for annual bonus payments.

During the quarter, the Company repurchased 421,725 shares of its common stock at an average price per share of $109.37 for a total cost of $46.1 million. As of March 31, 2021, approximately $167.1 million remained available for common stock repurchases under the Company’s stock repurchase authorization.

First Quarter 2021 Segment Results

Corporate Finance & Restructuring
Revenues in the Corporate Finance & Restructuring segment increased $18.5 million, or 8.9%, to $226.2 million in the quarter, compared to $207.7 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $14.4 million, or 6.9%, compared to the prior year quarter. Acquisition-related revenues contributed $16.0 million in the quarter. Excluding the estimated positive impact from FX and acquisition-related revenues, revenues decreased $1.6 million, or 0.8%, primarily due to a $9.3 million decline in pass-through revenues and lower demand for restructuring services in North America, which was partially offset by higher demand and realized rates for transactions services compared to the prior year quarter. Adjusted Segment EBITDA of $37.4 million, or 16.6% of segment revenues, compared to $48.9 million, or 23.6% of segment revenues, in the prior year quarter. The decrease in Adjusted Segment EBITDA was due to higher compensation, which was primarily related to a 34.9% increase in billable headcount compared to the prior year quarter.

Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment increased $3.2 million, or 2.2%, to $150.8 million in the quarter, compared to $147.6 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $0.4 million, or 0.3%, primarily due to higher demand for health solutions and investigations services, which was largely offset by a $4.2 million decline in pass-through revenues and lower realized rates for data & analytics services compared to the prior year quarter. Adjusted Segment EBITDA of $29.4 million, or 19.5% of segment revenues, compared to $21.2 million, or 14.4% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues with higher utilization and a decline in selling, general and administrative ("SG&A") expenses compared to the prior year quarter.

Economic Consulting
Revenues in the Economic Consulting segment increased $37.1 million, or 28.1%, to $169.3 million in the quarter, compared to $132.1 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $33.5 million, or 25.3%, primarily due to higher demand for non-merger and acquisition ("M&A")-related antitrust and M&A-related antitrust services, as well as higher realized rates and demand for international arbitration services compared to the prior year quarter. Adjusted Segment EBITDA of $26.6 million, or 15.7% of segment revenues, compared to $12.7 million, or 9.6% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was due to higher revenues, which was partially offset by higher compensation, related to an increase in variable compensation and a 9.9% increase in billable headcount compared to the prior year quarter.

Technology
Revenues in the Technology segment increased $20.7 million, or 35.3%, to $79.5 million in the quarter, compared to $58.7 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $19.0 million, or 32.4%, primarily due to higher demand for M&A-related “second request” services compared to the prior year quarter. Adjusted Segment EBITDA of $21.6 million, or 27.2% of segment revenues, compared to $14.5 million, or 24.7% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was due to higher revenues, which was partially offset by an increase in compensation compared to the prior year quarter.

Strategic Communications
Revenues in the Strategic Communications segment increased $2.1 million, or 3.7%, to $60.5 million in the quarter, compared to $58.4 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues decreased $0.3 million, or 0.5%, primarily due to a $2.2 million decline in pass-through revenues, which was largely offset by higher demand for public affairs services compared to the prior year quarter. Adjusted Segment EBITDA of $10.4 million, or 17.2% of segment revenues, compared to $8.8 million, or 15.0% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to lower SG&A expenses compared to the prior year quarter.

First Quarter 2021 Conference Call
FTI Consulting will host a conference call for analysts and investors to discuss first quarter 2021 financial results at 9:00 a.m. Eastern Time on Thursday, April 29, 2021. 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 6,400 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 $2.46 billion in revenues during fiscal year 2020. More information can be found at www.fticonsulting.com.

Non-GAAP Financial 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 in the United States ("GAAP"). Certain of these financial measures are considered not in conformity with GAAP ("non-GAAP financial measures") under the United States Securities and Exchange Commission ("SEC") rules. Specifically, we have referred to the following non-GAAP financial 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, which are GAAP financial measures, below in order to more fully define the components of certain non-GAAP financial measures presented in this press 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, gain or loss on sale of a business and losses on early extinguishment of debt. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial 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 non-GAAP financial measures, considered along with corresponding GAAP financial measures, provide management and investors with additional information for comparison of our operating results with the operating results of other companies. We define Adjusted EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues.

We define Adjusted Net Income and Adjusted Earnings per Diluted Share ("Adjusted EPS"), which are non-GAAP financial measures, as net income and EPS, respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of debt, non-cash interest expense on convertible notes and the gain or loss on sale of a business. 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 these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with an additional understanding of our business operating results, including underlying trends.

We define Free Cash Flow, which is a non-GAAP financial measure, as net cash used in 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 Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows. Reconciliations of these 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, unaudited quarterly 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; the impact of the COVID-19 pandemic and related events that are beyond our control, which could affect our segments, practices and the geographic regions in which we conduct business differently and adversely; and other future events, which could impact each of our segments, practices and the geographic regions in which we conduct business 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; 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, 2020, filed with the SEC, 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.

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

FINANCIAL TABLES FOLLOW

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

 March 31, December 31,
 2021 2020
 (Unaudited)  
Assets   
Current assets   
Cash and cash equivalents$233,421  $294,953 
Accounts receivable, net798,516  711,357 
Current portion of notes receivable35,540  35,253 
Prepaid expenses and other current assets83,672  88,144 
Total current assets1,151,149  1,129,707 
Property and equipment, net100,686  101,642 
Operating lease assets148,322  156,645 
Goodwill1,233,292  1,234,879 
Intangible assets, net38,172  41,550 
Notes receivable, net59,049  61,121 
Other assets47,530  51,819 
Total assets$2,778,200  $2,777,363 
Liabilities and Stockholders' Equity   
Current liabilities   
Accounts payable, accrued expenses and other$167,818  $170,066 
Accrued compensation285,528  455,933 
Billings in excess of services provided42,432  44,172 
Total current liabilities495,778  670,171 
Long-term debt, net458,840  286,131 
Noncurrent operating lease liabilities153,376  161,677 
Deferred income taxes157,861  158,342 
Other liabilities95,995  100,861 
Total liabilities1,361,850  1,377,182 
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 — 34,228 (2021) and 34,481 (2020)
342  345 
Additional paid-in capital   
Retained earnings1,527,685  1,506,271 
Accumulated other comprehensive loss(111,677) (106,435)
Total stockholders' equity1,416,350  1,400,181 
Total liabilities and stockholders' equity$2,778,200  $2,777,363 



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

 Three Months Ended March, 31
 2021 2020
    
 (Unaudited)
Revenues$686,277  $604,593 
Operating expenses   
Direct cost of revenues468,424  402,247 
Selling, general and administrative expenses126,546  126,959 
Amortization of intangible assets2,801  2,331 
 597,771  531,537 
Operating income88,506  73,056 
Other income (expense)   
Interest income and other1,034  5,017 
Interest expense(4,797) (4,861)
 (3,763) 156 
Income before income tax provision84,743  73,212 
Income tax provision20,247  16,465 
Net income$64,496  $56,747 
Earnings per common share ― basic$1.93  $1.56 
Weighted average common shares outstanding ― basic33,483  36,415 
Earnings per common share ― diluted$1.84  $1.49 
Weighted average common shares outstanding ― diluted35,063  38,190 
Other comprehensive loss, net of tax   
Foreign currency translation adjustments, net of tax expense of $0$(5,242) $(31,102)
Total other comprehensive loss, net of tax(5,242) (31,102)
Comprehensive income$59,254  $25,645 



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

 Three Months Ended March 31,
 2021 2020
    
 (Unaudited)
Net income$64,496  $56,747 
Add back:   
Non-cash interest expense on convertible notes2,348  2,225 
Tax impact of non-cash interest expense on convertible notes(611) (579)
Adjusted Net Income$66,233  $58,393 
Earnings per common share — diluted$1.84  $1.49 
Add back:   
Non-cash interest expense on convertible notes0.07  0.06 
Tax impact of non-cash interest expense on convertible notes(0.02) (0.02)
Adjusted earnings per common share — diluted$1.89  $1.53 
Weighted average number of common shares outstanding ― diluted35,063  38,190 



FTI CONSULTING, INC.
RECONCILIATION OF NET INCOME AND OPERATING INCOME TO ADJUSTED EBITDA
(in thousands)


Three Months Ended March 31, 2021
(Unaudited)
 Corporate
Finance
& Restructuring
 Forensic and
Litigation
Consulting
 Economic
Consulting
 Technology  Strategic
Communications
 Unallocated
Corporate
 Total
Net income             $64,496 
Interest income and other             (1,034)
Interest expense             4,797 
Income tax provision             20,247 
Operating income  $34,299  $28,006  $25,232  $18,559  $9,120  $(26,710)  $88,506 
Depreciation and amortization 1,253  1,252  1,347  3,039  539  731   8,161 
Amortization of intangible assets 1,887  174      739  1   2,801 
Adjusted EBITDA $37,439  $29,432  $26,579  $21,598  $10,398  $(25,978)  $99,468 
               


Three Months Ended March 31, 2020
(Unaudited)
 Corporate Finance
& Restructuring
 Forensic and
Litigation
Consulting
 Economic
Consulting
 Technology Strategic
Communications
 Unallocated
Corporate
 Total
Net income             $56,747  
Interest income and other             (5,017)
Interest expense             4,861  
Income tax provision             16,465  
Operating income $46,664   $19,506   $11,396   $11,589   $7,492   $(23,591)  $73,056  
Depreciation and amortization 979   1,416   1,270   2,895   586   677    7,823  
Amortization of intangible assets 1,303   286   44   —   698   —    2,331  
Adjusted EBITDA $48,946   $21,208   $12,710   $14,484   $8,776   $(22,914)  $83,210  
               



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, 2021 (Unaudited)           
Corporate Finance & Restructuring$226,203  $37,439   16.6% 59 % $462  1,684 
Forensic and Litigation Consulting150,821  29,432   19.5% 60 % $357  1,367 
Economic Consulting169,273  26,579   15.7% 75 % $494  890 
Technology (1)79,459  21,598   27.2% N/M N/M 423 
Strategic Communications (1)60,521  10,398   17.2% N/M N/M 778 
 $686,277  $125,446   18.3%     5,142 
Unallocated Corporate  (25,978)         
Adjusted EBITDA   $99,468   14.5%      
            
Three Months Ended March 31, 2020 (Unaudited)           
Corporate Finance & Restructuring$207,749  $48,946   23.6% 69% $456  1,248 
Forensic and Litigation Consulting147,597  21,208   14.4% 58% $342  1,393 
Economic Consulting132,138  12,710   9.6% 68% $466  810 
Technology (1)58,723  14,484   24.7% N/M N/M 374 
Strategic Communications (1)58,386  8,776   15.0% N/M N/M 755 
 $604,593  $106,124   17.6%     4,580 
Unallocated Corporate  (22,914)         
Adjusted EBITDA   $83,210   13.8%      


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,
 2021 2020
    
 (Unaudited)
Operating activities   
Net income$64,496  $56,747 
Adjustments to reconcile net income to net cash used in operating activities:   
Depreciation and amortization8,161  7,823 
Amortization and impairment of intangible assets2,801  2,331 
Acquisition-related contingent consideration1,289  506 
Provision for expected credit losses4,832  3,872 
Share-based compensation7,242  7,454 
Amortization of debt discount and issuance costs and other2,815  2,978 
Deferred income taxes3,612  545 
Changes in operating assets and liabilities, net of effects from acquisitions:   
Accounts receivable, billed and unbilled(93,396) (60,963)
Notes receivable1,899  7,051 
Prepaid expenses and other assets1,900  9,442 
Accounts payable, accrued expenses and other(7,803) 11,136 
Income taxes9,355  (667)
Accrued compensation(172,042) (176,070)
Billings in excess of services provided(1,745) 4,253 
Net cash used in operating activities(166,584) (123,562)
Investing activities   
Purchases of property and equipment and other(7,976) (8,228)
Net cash used in investing activities(7,976) (8,228)
Financing activities   
Borrowings under revolving line of credit197,500  55,000 
Repayments under revolving line of credit(27,500) (5,000)
Purchase and retirement of common stock(46,133) (49,135)
Share-based compensation tax withholdings and other(6,798) (5,583)
Payments for business acquisition liabilities(3,374)  
Deposits and other2,721  3,870 
Net cash provided by (used in) financing activities116,416  (848)
Effect of exchange rate changes on cash and cash equivalents(3,388) (13,672)
Net decrease in cash and cash equivalents(61,532) (146,310)
Cash and cash equivalents, beginning of period294,953  369,373 
Cash and cash equivalents, end of period$233,421  $223,063 



FTI CONSULTING, INC.
RECONCILIATION OF NET CASH USED IN OPERATING ACTIVITIES TO FREE CASH FLOW
(in thousands)

 Three Months Ended March 31,
 2021 2020
    
Net cash used in operating activities$(166,584) $(123,562)
Purchases of property and equipment(8,001) (8,236)
Free Cash Flow$(174,585) $(131,798)


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