FTI CONSULTING, INC Q4 FY2024 earnings call

Management Statement and Operational Highlights

• 2024 had a strong first half with 12% revenue growth and 48% EPS growth, but the second half disappointed. Despite this, it was the tenth year of record revenues and adjusted EPS growth.
• 2025 faces multiple headwinds: slow growth trajectory, senior departures in Compass Lexicon's US competition practice, a low tax rate in 2024 creating tough year-on-year comps, and continued investment in talent leading to near-term financial pressures.
• Market forces affected M&A-related businesses and some economies. The US competition part of Compass Lexicon has seen senior departures with potential junior departures impacting revenue and profitability.
• Disciplined headcount actions to align capacity with demand, expecting $70 million in cost savings in 2025, but continuing to invest in talent where opportunities exist.

Segment Performance

• Corporate Finance and Restructuring: Q4 2024 revenues were $335.7 million, a 8.2% decrease compared to Q4 2023. Adjusted segment EBITDA was $44.7 million, representing 13.3% of segment revenues.
• FLC (Forensic and Litigation Consulting): Q4 2024 revenues were $175.9 million, a 6.3% increase compared to Q4 2023. Adjusted segment EBITDA was $18 million, representing 10.2% of segment revenues.
• Economic Consulting: Q4 2024 revenues were $200.1 million, flat compared to Q4 2023. Adjusted segment EBITDA was $15.8 million, representing 7.7% of segment revenues.
• Technology: Q4 2024 revenues were $90.6 million, a 10.2% decrease compared to Q4 2023. Adjusted segment EBITDA was $6.6 million, representing 7.2% of segment revenues.
• Strategic Communications: Q4 2024 revenues were $86.6 million, flat compared to Q4 2023. Adjusted segment EBITDA was $13.8 million, representing 15.9% of segment revenues.

Guidance

• Revenue is estimated to range between $3.66 billion and $3.81 billion.
• GAAP EPS is estimated to range between $7.44 and $8.24.
• Adjusted EPS is estimated to range between $7.80 and $8.60.
• Midpoint of revenue and adjusted EPS guidance reflects 1% revenue growth and 2.6% adjusted EPS growth year-over-year. Guidance is shaped by expected growth in many businesses, but impacted by Compass Lexicon headwinds, headcount actions, and tax comparables.

Risks

• Senior Departures: Sustained senior departures in Compass Lexicon's US competition practice, with potential junior departures, creating headwinds for revenue and profitability.
• Tax Comparables: Favorable tax rate in 2024 creating tough year-on-year comparisons.
• Talent Investment: Continued investment in talent leading to near-term financial pressures.

Question and Answer

• Q: About the $35M reference and impact on 2026 A: Uncertainty around the magnitude, early stages, and potential impact on 2026 if people finish projects then leave.
• Q: Impact on competition practice industries and network effect A: No specific industry focus, personal connections, economists join for great team and training.
• Q: Revenue guidance and headcount growth A: Expect headcount growth net of reductions, aggressively hiring talented individuals.
• Q: Demand backdrop and product/geography A: Mixed market forces, some idiosyncratic, but growth expected except for Compass impact.
• Q: FLC business demand and Econ Consulting departures A: FLC has pickup due to strong teams; Econ departures didn't affect Q4 results.