Q2 2020 FTI Consulting Inc Earnings Call
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I would now like to turn the conference over to Mollie Hawkes Vice President Investor Relations. Please go ahead.
Good morning, welcome to the S.T.I. consulting conference call to discuss the company's second quarter of 2020 earnings results as reported this morning.
Management will begin with formal remarks, after which they will take your question.
Before we begin I would like to remind everyone that this conference call may include forward looking statements, but then the meaning of section 27 eight at the Securities Act 1933, and section 21 of the Securities Exchange Act 1934 that involve risks and uncertainties.
Forward looking statements include statements concerning plans objectives goals strategies feature that future revenues beat your results in performance expectations plans or intentions relating to financial performance acquisitions share repurchases business trends and other information or.
Other matters that are not historical including statements regarding estimates of our future financial results and other matters.
For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward looking statements investors should review the safe Harbor statement in the earnings press release issued this morning.
Copy of which is available on our website at www Dot S. T I consulting dot com as well as other disclosers under the heading of risk factors and forward looking information in our annual report on form 10-K for the year ended December 31st 2019, and updated in our quarterly report for the second quarter.
And at June Thirtyth, 2020, as well as <unk> other filings with the FCC.
Investors are cautioned not to place undue reliance on any forward looking statements, which speak only as the date of this earnings call and will not be updated.
During the call we will discuss certain non-GAAP financial measures such as total segment operating income adjusted EBITDA total adjusted segment EBITDA adjusted earnings per diluted share adjusted net income adjusted EBITDA margin and free cash flow.
For a discussion of these and other non-GAAP financial measures as well as are reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures investors should review the press release and the accompanying financial tables that we issued this morning, which include these reconciliations.
Lastly, there are two items that have been posted to the Investor Relations section of our website. This morning for your reference.
These include a quarterly earnings presentation, and an excel in PDF first Oracle financial and operating data, which have been updated to include our second quarter 2020 result.
Oh no during today's prepared remarks management will not speak directly to the quarterly earnings presentation posted to the Investor Relations section of our website <unk>.
To ensure disclosures are consistent besides provide the same details as they have historically and as I've said are available on the Investor Relations section of our website.
But these formalities out the way I'm joined today by Steven Gunby, Our President and Chief Executive Officer, and I'll, just overall, our Chief Financial Officer at this time I will turn the call over to our President and Chief Executive Officer, Steve Gunby.
In Mali for once I got from you'd off before he turned it over to make for back to Mali and thank you everyone for joining us.
Obviously hope all continues to be well with each of you and all of your loved ones in these complicated fives.
Hi, Jay and a moment will take you through the details on the quarter, what I like to do upfront.
Its first underscore just how pleased I am and we are with our second quarter results.
Thank our teams for incredible effort that drove those results extraordinary efforts over the past few months to support our clients and each other.
I'm home.
The major efforts over the last few years have put us in a position such that even in these difficult times.
He or she is highly relevant resources for clients.
Back to start with that and then what's your position also share a couple of perspectives on the future boasts the inherent near term I'm starting to see these days for a number of our businesses.
Also the enormous confidence that we have the medium and long term prospects for all of our business.
So let me start with the results.
One way to look at them.
Mystic way to look at them.
No that art adjusted EPS of $1.32 is down significantly from a year ago.
Another way to look at it however, as you know first we happened to be cycling at all time record quarter for adjusted EPS. So the comparisons difficult wants.
Second and more importantly, if you step back and think about it.
Coated.
Faces some parts of our business is being at record low levels of utilization due to travel restrictions port closures and other challenges are right I think open and in the face of a substantial amount of extra capacity that was added free coated.
We still managed to deliver the best adjusted DPF ever in the history of this company and the highest revenue quarter ever.
So I'm extraordinarily positive about <unk> results and I hope you are too.
As we discussed during the last quarters earnings calls, we expected that's to be a slow quarter and parts of our business.
We're in fact extraordinarily slow obviously, a number of parties that CBD truth Hearts every segment.
And yet overall.
We haven't been able to deliver incredibly solid results.
Let me just tried to describe a little bit of how that happens.
In park it happened because the markets not only take away they give.
No discretionary spend on consulting services is of course down considerably.
Thank you know deal flow was reduced in courts closures met litigation was postponed.
Koby crisis, and resulting economic turmoil created need as well need for restructuring for crisis communication for crisis litigation support. So some of what we're seeing is simply a major shift in clients needs and spent.
First is simply a reduction.
So some of these results.
Market driven.
To me what is much more powerful.
And much more relevant to our long term efforts to build this enterprise for our people and for you our shareholders.
Just to talk about the part of the results that are not due to market forces.
Rather do in recent times for the incredible efforts by our team to work effectively from home together with over the last several years the efforts of our people to strengthen our position to extend into new adjacent season, geography and to anticipate and deliver on our clients' needs.
I'd like to try to illustrate that duality first bancorp and where you obviously see credible second quarter results, but also in two or other business or the economy will see its stride constant tech as well.
Let me start with that.
I think I suspect anyway.
In restructuring today is busy.
And of course, most of you remember that hope and 10 years ago, and I missed supermarket Bloom had record results flip obviously easy to simply say Wow. The markets are off and so as a few ice corp fin business as well.
Meet framing this point that way Miss is critical powerful points.
Instead suggest so obviously we are affected by markets we are not.
Works on a wave.
Overtime, we determine our destiny and part of what we're saying as the markets, but part of what we're seeing is the result of actions that our teams have taken over time not simply the markets.
A couple of ways to see that one way is to recall that Corp. Fin. Our Corp fin business was growing slightly even before this market fall back during 2018 or 29 seen when the restructuring market was harboring around all time lows. We delivered record revenue was up 17% in 28% respectively that was the wave we were.
Right and that was OS lifting off it was the result of our teams investments and incredible efforts that drove those results.
Equally as powerful is to not just look at how similar we already Corp.'s then to where we were 10 years ago, but to look at how we've changed since that's how we've enhanced our positions 10 years ago. During the last resist recession, we already had a powerful strong corp.'s then business.
But we were primarily U.S. business at that point in time.
We were in London, what we were probably number four in London, we didn't have a German Dennis business. We didn't have an Asian Australian does get a smaller business in Latin America.
Even in the U.S., we were primarily known as the best creditor rights business. We did in fact do company side work, what we were known primarily for middle market company side capabilities and tended not to win the Big company side cases there.
Asked for today.
In North America, we are still there number one creditor rights business.
But this year, we've already won three of the biggest company side jobs in North and South America.
You look outside of North America, we're no longer number four in London. We're now number one we have tower on the cost that we didn't have 10 years ago with the addition of Anderson, Germany and the addition of other terrific professionals elsewhere in Europe, we have the leading position in Hong Kong has strengthened practice and Australia and now leading practice in Latin America with people on the ground in place.
Like Mexico and Brazil.
And that's all before we talk about what Weve built before then that goes well beyond restructuring practices and see a flow in transactions and carve outs in performance improvement it merger integration et cetera.
There are waves in our business.
Well, what our teams have done is to take a fundamentally strong U.S. business and rather than sit on it.
They've made it fundamentally stronger.
Turning off until a powerful.
Global.
Multi dimensional player.
Our success today reflects not just the markets, but the changes that our teams have driven.
That is true for Corp.'s, then, but it's also true for our other segments as well I won't be as long winded on the other segments, but let me touch on them.
In stress hospitals for those of you who have been long term shell shareholders. You you may remember that 10 years ago, when the recession headset business in large part melted down not because we weren't good.
A week because we were focused on one part important part, but a small part of our clients coordinates.
Today some parts of this business are also extraordinarily slow.
Critically other parts or soaring with the result that if you exclude the negative impact from FX and have to wrapper news and look at Stratcom normalized for those are Stratcom revenues are actually up for the first half the 2020.
I don't know of any other competitor in that industry people say that.
Similarly, if you look at the top 10 years ago, we already had a fabulous E com business.
It was primarily a fabulous no fabulous North American business today, we still have a fabulous business in the U.S., but now we have a fabulous business in multiple locations around the world.
As a result, the timeline litigation investigations and M&A transactions are down and some have been delayed and travel is restricted you can't get your clients.
We have a business that even with some slow parts is overall even more in demand.
And even in epilepsy, whereas you can see from our results. We have had a drastic declining revenues at a number of places due to some large jobs rolling off and the effect of the travel restrictions on the delays and litigation investigations even there.
The breadth of the conversations we're having across multiple dimensions with clients remains robust.
Reflecting the investments our teams a major increase the depth and the reach of our offerings.
Construction for cyber to investigations to data analytics in multiple places around the world.
Yes, what you're seeing on the negative and the positive side is somewhat a function of markets markets fluctuate up and down those affect us.
The me what is much more powerful add more durable is a non market driven pieces. The way our teams have invested to control our destiny I growing core capabilities that allow us to serve the most important client needs in a wide range of circumstances.
And that's to me is more powerful and the more exciting part of the results you're seeing from this company.
Let's see if I can tie those observations about the quarter in our history to what we see going forward.
First of all looks obvious point, but one I have to underscore is something I'm sure you. All believe as well is that there is tremendous uncertainty on the world I don't think anybody on this call or anywhere else knows exactly where cold it is going on a global basis.
Unfortunately, even in the United States.
I don't think anyone can definitively say, what the impact of cold it will be over the longer term or even in the medium term on things like bankruptcy M&A litigation trends are the economy more generally for what the specific impact looks in different places in Latin America, U.S., India Asia UK.
I believe we have to recognize is clearly just a lot of uncertainty in the world, particularly as short term and so therefore, you can run a lot of scenarios in terms of how business is going to perform.
Ross you could run an incredibly negative scenario.
You can say Wow, what would happen if bankruptcy slowed down dramatically in the businesses that are slow stayed slow.
I would be pretty negative scenario.
We don't believe that's the most likely scenario.
As our Jay will talk about our current belief is the strong businesses are likely to stay strong.
And our businesses that I've been a week. So far this year are likely to see a recovery a gradual recovery better recovery.
And that's how we came to the judgment for the rest of your that reaffirms our guidance.
Well, we have to underscore the concept of uncertainty here in east Cobot days in truth, Nobody knows the depth and duration of the impact we may see and although we have enormous confidence into all of our businesses over any medium term you could have a scenario where government actions caused a temporary pause on bankruptcies in some places around the world.
And of course, you can always have the random idiosyncratic factors like you would lose some big jobs, a set of wanting them.
So please recognize although we are reaffirming guidance. We also are and need to underscore just telling certain the world is now.
Let me therefore, instead talk to what I believe is more important.
Which is where based on the efforts. Our team has made and are making we can drive this business in the medium and longer term.
Because over the medium and longer term I believe.
Markets matter, but more at the poor we control our destiny.
As we just talked about my experience and I believe our results have shown that if you do the right things over medium term curious, even though quarters can fluctuate and market conditions fluctuate through the fluctuations you build the business. So we focus a lot on making sure we're thinking hard about what the right things are.
So let me describe a few of them we talk about.
First of all.
No not most critically but importantly.
Focusing on knowing the difference between the bad business or that good business that tends to be hurt by some temporary factors Zogenix factor, we can't fix that up we can't take us good business like our ethanol see business, our FC business and overreact to temporary exhaustion of factors.
Yes, it's about being willing to support those good businesses going slow times and indeed, the best in them, even that slow quarters in fact in general in some slow quarters.
It's especially important you'd be willing to invest in talent because it's oftentimes the case that precisely in slow quarters. It's the most great talent is available.
Think about our history here as we've talked about a few times.
For the most important outside hires we've done have been joining slow times in our business.
We got terrific cyber capabilities during a period, where I'll see was slow.
We acquired CDG, which augmented our company side capabilities in the U.S. at a time on Corp. Fin was slow and as you may have noticed we just closed the deal with Delta partners, which isn't the non restructuring part in Seattle.
Period, when the non restructuring part of CF did not domain.
We made each those investments because we can find great talent, how can we talk would collaborate terrifically with the rest through our farm that those point in time talent, we had confidence in and it has proven at least so far in the first few patients that if you get great talent whenever it is available over in medium term it pays for itself even if.
Good point in time that business is slow.
Our core belief therefore is notwithstanding fluctuations that earnings.
We hold they need to be focused on attracting.
Developing betting behind terrific talent, whether it is recruited.
For its home grown.
My experience is that if one does that if we continue to do that we will continue.
To do the essence of building a professional services far.
Build great businesses extend those businesses into new adjacent sees extend our core positions to new places roller brand attract grow and retain and develop great people and I was there won't be more relevant for your clients and take market share.
Thereby you build a farm that makes your people proud to be there.
Attracts other great people.
And through that ultimately, but also powerfully.
Delivers for you.
Our shareholders.
That is the path we have been on these past few years.
And I believe in the face of co, but it is eating more potent pass the commit to stay on going forward.
So with that let me turn this over dogs eight to take you through the quarter.
More detail.
Okay.
Thank you Steve good morning, everybody.
In my prepared remarks. This morning, I will provide an overview of our company wide and segment results.
And discuss guidance for the full year.
Beginning with the second quarter results as Steve said.
Reported record quarterly revenues and our results were better than we anticipated at the time off her last earnings call.
Considering the impact of the covert 19 pandemic on us our clients and I've employees.
We I was very grateful for these results.
Revenues of $607.9 million were up $1.7 million, <unk>, 0.3% compared to revenues of $606.1 million than the prior year quarter.
As expected I revenue growth year over year was driven by record quarterly performance in our corporate finance and restructuring segment because of the surge in demand for our restructuring services.
Got bps, if the dollar 27 and to do 20 compared to earnings per share for Dollarssixty nine due to 19.
Adjusted EPS for the quarter over $1.32, which compared to $1.73 in the prior to get caught up.
The difference between GAAP and adjusted EPS in Twoq, Wendy's reflects $2.3 million us noncash interest expense related to our convertible notes, which decreased got bps by five cents.
I can let them have notes had it but then showed diluted impact on new D.S., approximately 507000 shares and weighted average shares outstanding for the quarter.
As Ive average share price of $321 and think sense. This past quarter was above the $101.38 conversion threshold price at maturity.
Worth, noting the trigger so conversion offer convertible notes prior to maturity was not met during the quarter.
Second quarter, Twentytwenty net income of $48.2 million compared to net income $64.6 million and the prior year quarter a.
A year over year decrease was largely due to higher compensation, which was primarily related to an 18.2% increase in billable headcount and higher variable compensation, which was partially offset by a decline in SGN expenses and lower tax rate.
SGN expenses for two to 2500 $26.9 million were 20.9% of revenues. This compares to history and am $129.9 million or 21.4%, though revenues and the second quarter of 29 theme.
The decrease was primarily due to lower travel and entertainment expenses, there's something from covert 19 related travel restrictions, which was partially offset by an increase in bad debt.
Second quarter, Twentytwenty, adjusted EBITDA of $75.8 million or 12.5% of revenues compared to $97.2 million or 16% of revenues in the prior to your quota.
Our effective tax rate for the second quarter granted 3.1 per cent compared to 24.8% than the prior year quarter.
At 1.7% decline was primarily due to a favorable discrete tax adjustment related to share based compensation.
Well the balance of Twentytwenty, we expect our effective tax rate to range between 25 and 27%.
Billable headcount increased by 715 professionals or 18.2% compared to the prior year quarter.
Sequentially billable headcount was up by 65 professionals or 1.4%.
Well, it's no thing during the quarter.
66 professionals focused on performance analytics.
Imminently transferred from our forensic litigation consulting segment to our business transformation and transactions practice within our corporate finance and restructuring segment.
Now I will share some insights at the segment level.
In corporate finance and restructuring record revenues of $246 million increased 29.5%.
Compared to the prior to get a quota this terrific growth occurred despite a decline in success fees relative to the extra ordinary success fees in the prior year quarter, and lower business transformation and transaction services revenues.
Higher demand and realization flora restructuring services, which includes revenues related to our acquisition of Anderson Agee in August of 29 theme that resulted in the significant increase in segment revenues.
Well its noting during the quarter, we've engaged in some of the largest company and credit decide restructuring mandates, particularly in the retail and consumer energy automotive airline telecom and financial services sectors.
Adjusted segment, EBITDA deal $76.3 million or 31% of segment revenues compared to $50.5 million or 26.6% of segment revenues in the prior year quarter as in could easily revenues more than offset higher compensation related.
To that put the 4.7% increase and billable headcount and higher variable compensation.
On a sequential basis, corporate finance and restructuring revenues increased $38.3 million are 18.4% as drill 10 out of restructuring practice was partially offset by a decline in demand for our business transformation and transaction services.
Turning to SLC revenues of $506.4 million decreased 27.1 per cent compared to the prior year quota that decrease in revenues was primarily driven by lower demand for investigations and dispute services and bought because certain matters worse.
At least in deferred due to travel restrictions to client locations coke closures and delays.
Adjusted segment EBITDA was a loss.
$9 million, which compared to adjustments segment EBITDA of $28.2 million or 19.4% of segment revenues in the prior year quota.
The year over year decrease in adjusted segment EBITDA was due to lower revenues were lower staff utilization and higher compensation related primarily related to a 9.4% increase in billable headcount, which was only partially offset by a decline in this janet expenses.
Sequentially I felt see revenues decreased $41.2 million or 27.9% as we experienced lower demand for investigations disputes and data and analytic services.
In addition to the covert 19 related impacts that I previously mentioned has negatively impacting revenues.
A few large investigations ended during the second quarter.
Our economic consulting segments revenues of $151.5 million decreased 2.6% compared to the prior to year quota.
Despite the impacts of covert 19, we weren't able to continue work on large M&A related antitrust engagements and achieve higher realization.
This increased demand for M&A related and that trust services was more than offset.
By lower demand for financial economics, and non emanate and they did antitrust services as well as lower realization for non M&A related antitrust and international arbitration services compared to the prior to get caught up.
[noise] adjustments segment, EBITDA of $21.7 million or 14.3% of segment revenues compared to $23.3 million or 15% a segment revenues in the prior year quota.
The year over year decrease in adjusted segment EBITDA was due to lower revenues as well as higher SGN expenses, primarily related to an increase in bad debt, which was partially offset by lower variable compensation.
Sequentially economic consulting revenues increased $19.4 million or 14.6% due to increased realization and demand for our M&A related antitrust services.
In technology revenues of $47.1 million decreased 15.4% compared to the prior to get quota.
The decrease in revenues was primarily due to lower demand for litigation and global Cross border investigation sentences in Boston rising from covert 19 related delays of investigations and travel restrictions as well as lower revenues related to the completion of our transition services associate.
If it but the September 28, being Greendale divestiture.
Adjusted segment EBITDA of $6.4 million for 13.7% of segment revenues compared to $12.9 million or 23.1% of segment revenues in the prior year quarter.
The decrease in adjusted segment EBITDA was due to lower revenues and higher compensation, primarily related to a 19.5% entity and billable headcount.
On a sequential basis technology revenues decreased $11.6 million or 19.8% because of decreased demand for global cross border investigations and M&A related services.
Revenues in the strategic communications segment of $56.9 million decreased 3.8% compared to the prior to get a quota excluding the impact of FX. The decrease in revenues was primarily due to a 1.9 million dollar decline and pass through revenues which include below.
I will travel and entertainment expenses client event costs and media buys.
The decrease in revenues was partially offset by higher demand for public affairs and financial communication services.
Adjusted segment EBITDA of $10 million or 17.6% of segment revenues compared to $10.5 million or 17.7% or segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was due to higher compensation primarily related to at 13.2% increasing.
Billable headcount, which was partially offset by a decline in history in a expenses.
Sequentially strategic communications revenues decreased one and a half million dollars up 2.6%, primarily due to a decline in pass through revenues, which was largely offset by higher demand for services provided to clients managing through urgent communication projects related to restructuring and financial issues.
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Let me now discuss he cash flow and balance sheet items.
Regenerated net cash from operating activities of $153 million and free cash flow of $147.3 million in the quarter.
Total debt net of cash decreased 100, <unk> point $1 million year over year from $147.1 million at June 30, 29, deem to $47 million at June 30 Twentytwenty.
During the quarter repurchased 470000, they took them and 53 shares at an average price per share of $108.41 for total cost all $51 million and the last 12 months ended June Thirtyth Twentytwenty.
We have repurchased 1.27 million shares at an average price per shed $107.78 for a total cost of $137.1 million.
On July 28, Twentytwenty hover Bodo detectors authorized an additional $100 million for share repurchases as of July 28, 22. Indeed, we have report we have purchased 8.2 million shares pursuant to the repurchase program at an average price per share.
Oh, 54 daughters, and 90 cents for an aggregate cost of approximately $450.4 million.
We have approximately $249.5 million the remaining available for share repurchases under the program.
Turning to our guidance incident from prior quarterly calls we've shared with you that a small change in revenue for us.
And have an outsized impact on EPS.
Because of the relatively fixed cost nature of her business and associated margins.
This cuts both ways I suppose abundantly evident this quarter in a positive way for a corporate finance segment and a negative way quota that well see segment.
Our decision to reaffirm guidance for the year.
Even in this very uncertain time is based not only on not results today, but also on several assumptions about the balance of the year.
First.
We expect elevate the demand for our restructuring services at least for the balance of this year.
Driven by strong demand and several verticals, including oil and gas exploration production and drilling Automotives Department stores financials, Telecommunication services healthcare Airlines restaurants, and entertainment and entertainment venues.
Second our guidance assumes an improvement.
So very gradual and utilization for many of our practices across several segments, but in particular quarter I felt see segment.
We are starting to see virtual depositions and arbitrations being rescheduled and some paused onsite clientworks stopping to resume.
I caution, though that this situation is fluid as the majority of our clients premises are still not open read our restricting traveled slaughtered employees, even where airlines are operating a red cross border travel is allowed.
Business development is hampered by not being in person and backups in core proceedings me Bush certain book into next together.
Third we believe this pandemic will continue to result in a new genre of disputes investigations and conflicts that are experts are well positioned to assist with ansible.
Our expertise is needed as distressed transactions crisis communications litigations related to material adverse effect clauses disputes related to business interruption and investigations arising from improprieties girl.
For.
The business travel all but stopped it isn't associated drop in billable and non billable travel and entertainment expenditures.
[laughter] our guidance is what a finite period. The next two quarters and we typically have lower utilization in the fourth quarter as many of our professionals me.
Take time off for the holidays in the fourth quarter. This year in particular this impact maybe even more pronounced than usual.
Before I close I want to reiterate if you keep teams that underscored the strength and potential of our business.
That relative strength and stability off our collective grouping of businesses.
Trying to this quarter.
Despite that global pandemic.
We reported record revenues and that reaffirmed guidance.
We continue to attract talent because our colleagues are working on beef highest profile engagements and their fields across the globe.
We believe our investments in talent with higher utilization will drive profitability.
As Steve mentioned over the years, we have both had deepened our core capabilities for example, in EMEA and Asia and Australia in corporate finance.
And expanded into adjacent sees such as non emanate related anti trust business transformation Cyber security and public affairs. We continue to believe that these areas will come out strong as we emerge on the other side of the spend dynamic.
Our business generates tremendous fee cash flow as evidenced by the <unk> hundred point 1 million dollar reduction in net debt over the last 12 months, despite a city purchasing hundred and $37.1 million worth of our shares over the same thing.
Same.
And making a well timed acquisition I felt leading restructuring business in Germany.
On top of this our balance sheet strength gives us the flexibility to continue to create shareholder value in numerous ways, what's noting following the close of the second quarter on July 1st Twentytwenty, We closed the acquisition or does that blockers. We believe this acquisition.
Along with that are already very strong position that technology media and telecom vertical makes us one of the pre eminent DMT focus consulting practices in the world.
And today, we announced a 200 million dollar increase to our share repurchase authorization.
With that let's open the call up for your questions.
We will now be getting the question and answer session.
To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the kids.
To withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Andrew Nicolas with William Blair. Please go ahead.
Hi, good morning, Thanks for taking my questions.
First I just wanted to touch on CFR and the bankruptcy environment I realize market and economic conditions are evolving pretty rapidly, but I'm just hoping to get your take on the runway for this level of demand and CFR. How do you see the bankruptcy market kind of evolving over the rest of this year and into next and then.
Related Lee if you could speak to the length of the typical and gauge meant in the current environment.
Actually recognizing that each case is unique that'd be helpful.
Let me take a crack at it RJ then chime in if you like to add anything look I think it's the world is it very complicated in fluid place. This fight cancer as you know I think our sense is our guys sense and it's in Corp fin is that.
This is likely to be a long cycle, but with some potential uncertainties along the way right. I mean, you just don't know how would government actions get taken some places around the world governments are suspended bankruptcy is for a period of time, you don't think that will happen forever.
And that sort of things can happen at any point in time and they can have a material impact on your business, but I think if you think about the more fundamental macro factors. There's just been a loose loose money for an extended period of time, which means that.
Lot of companies that that would have been restructure in the past our somehow.
Surviving to live another another day and that eventually cures itself. So I think our guys are feeling quite.
A bullish about the need for Reed Smith thing out restructuring services for an extended period of time, but that makes that doesn't necessarily mean.
Each quarter it looks like this quarter certainly not he used to be a lot of idiosyncratic factors that can affect it. So on the old medium term I think were.
Bullish on that business quarter to quarter. It's it's it's almost anybody's guess exactly how that plays out.
I just want to add anything on the likes of I don't know every describe license or the somebody assignments are different in length. I don't know how you to answer that but maybe you can help yeah no no no I'll try so and are to be precise and we used the words is incredibly carefully in my script.
We expect to strengthen corporate finance to continue at least for the balance of this year.
Talk about guidance for next year and said in February next year.
But at least for the balance of this year a number one number two you know the theirs or if there. If you want me to has had an average it's about six months for an assignment.
Got it but that's helpful.
And then the next question I had is you know looking at some of them. The mandate that you one throughout the quarter, we saw a handful of examples where.
You were also tasked with with helping in another area kind of alongside a restructuring when have you seen an uptick in your ability to cross sell services in the current environment, specifically I know that's been a trend over the past several years more broadly, but just just curious on the cross sell opportunity in that environment and.
Progress there.
[noise] I don't know if this is the environment I think you're right.
Andrew that what's happened is oh, pharmas gotten to know each other a lot better over the last few years and our leadership team has gotten to know each other a lot better and.
And where it's made sense for teams to collaborate we're just dealing at a lot more that's been a general trend over the last.
Few years, whether this environment creates new opportunities I mean look.
What does happen in this environment, a challenging economic conditions as I've been educated tends to.
Reveal.
Fraud for example in big frauds tend to be associated with a with big bankruptcies and so that those sorts of macro forces tend to tee up big.
Joint efforts between our R.L.C. business, and our and our bankruptcy business.
I think what I've been seeing more as the general increase of collaboration across our farm rather than anything I can point to for coated do you see something different Ajay or would you agree with that they own no questions are completely agree with you a the culture of the company is engendering. This the one thing that I might add is out of strategic communications practice.
Especially this quarter.
Benefited significantly from allying itself, but I'll cover the restructuring practice.
Good Yeah does that answer your question, Andrew or at least give you yeah no that tough helpful. And then just last one if I could squeeze it in an F.L.C. I think you mentioned on several occasions that both travel restrictions and the court systems being closed had an impact I'm just curious because because I want to understand.
And as we move through the rest of the year, how how this could all play out is is the travel restrictions a bigger impact or the court systems or is there any way for us to kind of rank those just because I would imagine that as thing hopefully improve on the travel front over the course throughout the year I just want to.
You know have a sense of what that could mean for this business.
The again, Andrew I'm, Hazarding, I guess, yeah that travel fields like the bigger attracted right about now because on the Coke we are getting virtual depositions the although on the core what we're seeing that is logjams you know there's only so many judges. So so things are getting pushed.
Into next year, but that's I mean, that's fine I mean as long as the business isn't lost I mean, that's okay. If it gets pushed into its the traveled restrictions that are hurting because they also have to some extent and business development.
Makes sense, thanks, a lot.
Thank you Andrew.
Again, if you have a question. Please press Star then one.
Next question comes from Tobey Sommer with Suntrust. Please go ahead.
Thank you.
I wanted to get your perspective on.
The hiring environment Im here up how you're thinking about.
So he utilizing the [laughter] the throttle that you control with respect to that.
And if you could.
Also comment on the opportunity to hire people, particularly in ammonia in the UK given some of the scrutiny and perhaps disruption in the <unk> traditional consulting and auditing competitors there.
Yes, Thanks, Toby hope, you're doing well and help your family so well thanks for the question.
Look I think you touched on the Yin and Yang of of the hiring conversation I mean, you know your instinct of course is not the higher.
Lots of people into a slow business until the business starts to perform so that's why that is tanks on the other side. The instinct is.
He jump on talent whenever it's available and you know and great talent isn't just automatically on the market what causes great talent to be on the market is disruption either.
Corruption in markets or disruption and competitors and during these times you have a fair amount of disruption in different parts around the world as you say some of it because of regulatory scrutiny of some of our competitors in certain places around the world, sometimes essentially because of financial pressures created by coated.
And so look we actively talk about that.
You don't hire <unk> you don't eat you you don't.
Over higher or a junior levels into businesses that are are slow, but you know you also don't read that gone offers you've made nine months ago to people coming from college, because you're in the business for a long term. It eventually those people will be needed and you have to honor your commitments and so the onto your commitments. You you you focus on developing people try to.
Again, I'm busy so they can develop and so forth you try not to over higher into business that slow, but you really mostly what we focus on his first making sure that any business that slow it's a good business and that we believe in it for the long term and if we do that we tend to follow a conservative business as usual scenario.
Ill because of you know you're hiring sometimes nine months in advance and then we're also out there very much looking to take advantage of dislocations and our competitors and that's one of the reasons I keep underscoring that because if we have a chance even in a slow business to pick up a terrific amount of talent.
We'll do it even if it hurts earnings for our quarter, because that's how you build the business over a medium term.
So those are the yet and Yang of what we think about I don't know that can comment specifically on specific competitors that have given market on <unk> on it on a call like this but does that give you a sense.
It does with respect to the the opportunity in the UK rather than talk about specific competitor.
Would you say, it's improving staying the same or or worse.
It's been look is as you know Europe has been a very fertile ground for us to be attracting senior talent now for several years and and I would say nothing in the environment. There has made it less hurdle.
Contrary all the scrutiny that you're talking about is just keeps reinforcing.
The number resumes from very attractive folks that we are getting in and in particularly in the UK, but also on the continent, because that does that help.
It does.
With respect to though the balance sheet and the convert could you give us a little bit.
Oh color of how you're thinking about that whether you've.
Kinda like coming in in equity linked instrument or maybe a eventually look to replace that would with an alternative source of financing.
[music].
In a wise men, one said hindsight is trending printing and so clearly are clearly you know we at this juncture, we're very bullish on our our stock ready bullish on our company's prospects a beyond where we were at.
Then we should that come but.
But it's a low interest bearing instrument than we've been buying back stock very aggressively to offset the potential dilution.
Or we do not need to raise additional debt at this juncture under any circumstance that back in person.
And then could delve into the <unk> in the economy segment.
The exposures.
And your M&A related work.
Between she'd be antitrust related work between M&A related in non M&A related investors on the outside often struggle to understand the relative importance of those two components of the segment.
<unk>.
So bolt.
Both are a very key drivers of for us. So we would typically in a M&A antitrust shop, but that we are now in a preeminent position Toby on non them, an anti trust as well I mean this this quarter if you step back and think about it the M&A is down.
Large M&A is down and get that economic consulting practice you you may have no. This did quite well and and that is part of that he's in the earnings have exceeded where our internal expectations were at the beginning with the quarter and we've got both M&A related work and non I'm amazed related book large cases.
I'm amazed side, continuing we're also seeing a lot of mergers being contemplated that could never have been contemplated before that vertical or horizontal integration that requires antitrust scrutiny and it floater very relevant for hiding out from under non M&A side. You you just have to open but.
Newspaper to every morning to see major major technology and other firms facing antitrust scrutiny. So it's this it's this scenario were both sides are doing quite well.
Did I answer your question, though.
You did in.
Follow up and then I'll get back into queue.
Give us a sense for how.
Far in advance of M&A transaction.
No being reported on it out in the public domain.
The company is.
Hey, Dan to work.
The utilized by customers.
As they think about in playing for potential M&A.
Oh, so I joke about this every morning I look at all the cases, where pitching and the complex data base around the world. Its first thing I do in the morning and back it feels like I'm reading the financial times, the Wall Street Journal in the South China morning post three weeks before publicly.
Yes.
It you know certainly on major cases, a we get hired in advance of the cases side, whether it's three weeks or two months I can't say for sure, but it's in that said code.
Thank you very much.
The next question comes from Marc Riddick, what Siddhanti and company. Please go ahead.
Hi, good morning, gentlemen.
Morning, Mark how are you.
Very good very good. Thank you for all the detail that you provided on the call. It one of the things that didn't want to touched on is regarding the court closures and I'd say, that's why it's been a little bit more time on maybe some of the ER actions that you're seeing and ways that they are.
Oh impact you, whether you know certain jurisdictions are doing a maybe a little better than others as far as virtual testimony and things of that nature and they can sort of how you are you how you react to those things and also if you could maybe touch on if there are certain if so.
Jurisdictions are just doing maybe further ahead of a than others. Thanks.
So mercifully the bankruptcy courts in North America, then close down Delaware coach than Southern district didn't close down and a in anyway, so with virtual depositions and what have you said that that was terrific. So that's one book and at the other book and.
You know you have in Australia in Germany in various places moratoriums on the on direct a liability on cohorts are on filings. In fact, so you do you have a whole spectrum and the next we'll see in particular, it of course or why and Anna Nick.
Comic cons, something that was you know clear logjams and the coach systems and you know freezing for a while now now virtual depositions have kicked in now the greater issue is there's a log jam.
Okay. That's helpful. Thank you very much.
Thank you Mark.
Next we have a follow up calls are a follow up question from Tobey Sommer Suntrust.
Thank you for taking the follow up with respect to that the court system and the the law jamere slow down and kind of throughput public.
[laughter], how do you think about in terms of.
Demand deferral versus potentially in some cases demand destruction.
Thanks.
You know I think says it's the right question and answer is we don't know because most of what happens Toby as you might imagine is initially all starts as demand deferral fight to court date gets postponed.
They couldn't have a court in may and somebody looks at the calendar when it back and they office there already booked we're already booked in the second half of the year. So they targeted for June of next year and they put the date on June of next year, because that's the first open dates the issue is so it shows up as a deferral right. The problem is.
As between now in June of next year, if people settled or the world changes such that.
The case goes away in some way and so we don't have any real data on that I mean, I think our current judgment is.
It's gonna be it makes a lot of its going to actually show off next year because many of these cases have been floating around for years and they haven't settled till now, but some of it will undoubtedly go away.
By the by the advent of the deferral and we have no empirical data to give you any percentages on that as of now but does that I see that ties to your intuition that says some of its going to go away right.
Correct and then.
Last question is.
With respect to government investigations and driver of your business.
Did you give us some color on what you're seeing there is like government certainly back stopped a lot of bankruptcy stuff and then kind of stymied the natural course of the market.
And maybe comment about how the the government investigations have been historically as a driver under.
Administrations from different parties as we look towards the presidential election in November Thank you.
So.
You know, we sat back and said in my remarks, Steve also said that spills create a new genre disputes investigations et cetera.
Part of it may be government, given government is becoming such a large participant that known or part of it could be in the government data yet so it doesn't necessarily have to have a precedent.
I can't say for sure it will but they judgment would say it probably will when you're making such large investments in such a wide swath of the economy all around the world there will be issues and to some percentages and our from as you know with our companies.
One of our corporate finance practice, and I've felt seat practice I cannot imagine if I'm better positioned than us to help in that regards.
I'm not actually clear on what prior.
Mystical dispensations did and private sessions and disregard so I don't know of answer for that question.
Okay, well take it up a 90 day. Thank you.
This concludes the question and answer session. The conference has now concluded.
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