FTI CONSULTING, INC Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Revenue Performance: Q3 2024 revenue growth was 3.7%, which was below expectations. Factors included market forces (e.g., challenges in Asia businesses) and internal factors like delays in assignments in certain segments.
• Investments in Talent: Announced ~25 SMD hires in the last six months, welcomed over 320 professionals from campuses (largest class ever). Focus on attracting talent across all levels for growth.
• Segment Details: Ajay Sabherwal detailed segment results, noting revenue and adjusted EBITDA trends for each segment, including Corporate Finance & Restructuring, FLC, Economic Consulting, Technology, and Strategic Communications.

Segment Performance

• Corporate Finance & Restructuring: Revenues were $341.5 million, down 1.7% year-over-year. Adjusted segment operating income was $57.9 million, representing 17% of segment revenues. Sequentially, revenues decreased $6.5 million or 1.9%.
• Forensic & Litigation Consulting (FLC): Revenues were $168.8 million, up 1.6% year-over-year. Adjusted segment operating income was $20 million, representing 11.8% of segment revenues. Sequentially, revenues were flat.
• Economic Consulting: Revenues were $222 million, up 14.5% year-over-year. Adjusted segment operating income was $35.2 million, representing 15.9% of segment revenues. Sequentially, revenues decreased $8.8 million or 3.8%.
• Technology: Revenues were $110.4 million, up 11.7% year-over-year. Adjusted segment operating income was $16.5 million, representing 14.9% of segment revenues. Sequentially, revenues decreased $5.5 million or 4.7%.
• Strategic Communications: Revenues were $83.3 million, down 4.1% year-over-year. Adjusted segment operating income was $12.1 million, representing 14.6% of segment revenues. Sequentially, revenues decreased $1.6 million or 1.9%.

Guidance

• Revised revenue guidance: $3.7 billion to $3.75 billion (previously $3.7 billion to $3.79 billion).
• Revised EPS guidance: $7.90 to $8.35 (previously $8.10 to $8.60).
• Key considerations: Slower revenue momentum in Q4, weakening in business transformation and strategy practices, seasonal Q4 slowdown, and impact of ongoing investments.

Risks

• Market Forces: Challenges in various regions and businesses due to market conditions. For example, weakness in Asia businesses and slowdowns in certain sub-segments.
• Geopolitical and Economic Uncertainties: Impact of geopolitical events and economic conditions on consulting demand, affecting revenue and earnings trajectories.

Question and Answer

Q: Andrew Nicholas asked about restructuring, M&A environment, and AI investments.

A: Ajay Sabherwal noted restructuring remains strong, M&A environment is robust with availability of credit spurring transactions, and FTI is investing in AI capabilities to stay forefront.

Q: Unidentified Analyst asked about election effects, cash use, and margin expansion.

A: Steve Gunby declined to predict election effects, emphasized careful use of cash for shareholder value, and discussed margin expansion through revenue growth and strategic hiring.

Q: James Yaro asked about industry backdrop, hiring, and normalized hiring growth.

A: Steve Gunby and Ajay Sabherwal discussed industry slowdown reasons, hiring principles (focus on top talent regardless of cycle), and long-term aspiration for mid-to-high single-digit organic growth.