Q4 2020 FTI Consulting Inc Earnings Call

[music].

Welcome to the F T I consulting fourth quarter and full year 'twenty 'twenty earnings conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question press Star then one on your telephone keypad to withdraw your question. Please press Star then two please note. This event is being recorded.

I would now like to turn the conference over to Mollie Hawkes Vice President of Investor Relations. Please go ahead.

Good morning, welcome to the STI consulting conference call to discuss the company's fourth quarter and full year 2020 earnings results as reported this morning management will begin with formal remarks, after which they will take your questions.

Before we begin I would like to remind everyone that this conference call may include forward looking statements within the meaning of section 27, a of the Securities Act of 1933 and section 21 of the Securities Exchange Act of 1930 for that involve risks and uncertainties forward looking statements include statements concerning.

Plan.

Objectives goals strategies future events future revenues future results and 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, a copy of which is available on our website at www Dot S. T I consulting dot com as well as our other does.

Section of our web site.

To ensure disclosures are consistent these slides will provide the same details as they have historically and as I've said are available on the Investor Relations section of our web site.

With these formalities out of the way I am joined today by Steven Gunby, Our President and Chief Executive Officer, Nowadays several all our Chief Financial Officer at this time I will turn the call over to our President and Chief Executive Officer, Steve Gunby.

Always ask for your number to take off from youth Molly. Thank you for for the introduction and good morning, and thank you all for joining US I guess as many of you like me are.

Extraordinarily happy to see 2020 behind us.

I think also many of us realize that some elements of 2020 are not yet fully behind us.

The Covid cases are coming down from an extraordinary levels that we saw over the holidays of course, they're not balance 2098, Champs and there's still a lot of it or around.

We have vaccines, but they're not yet.

And each of our arms I.

And I guess, most important to disruption that 20.

COVID-19 has caused.

For businesses, our personal lives in society more broadly obviously remained.

Having said that I think we all see some light at the end of this tunnel and I for one am so so grateful to see that.

So look in addition to thanking you as I normally would do for your continued attention to accompany on.

On the once again wish you can eat for your family's good health.

Over the next while in rapid access for things like vaccines.

Today I have two messages about our company.

The first is that I am and I hope you are incredibly impressed by how our company has weathered.

This unprecedented set of challenges of 2020 and continue to do so.

Thus far in 2021.

And the second is to suggest that the resilience shown in 2020 further underscores my conviction and the tremendous hour of this company and just how bright our future is.

Coming out of Covid.

Let me talk to both of those points briefly and then I'll turn it over to our day to go through the numbers for the quarter and for the year.

In terms of the first message, let me start by thanking.

And celebrating the teams that deliver those results are people for the dedication that they showed last year that drove the success. Our teams did an incredible job keeping our people safe keeping their family safe supporting each other and their families through that challenging year, all while delivering for clients and unprecedented.

Ways and critical ways for.

From home as a result of those efforts even in the face of those challenges.

On one and delivered on some of the most important assignments and our company's history, we built a brand.

While maintaining incredible morale around the farm, we promoted terrific people, we attracted more great people to FDI and through all that.

We delivered solid financial results.

Even while parts of our business faced unprecedented challenges.

With respect for the financial results were gonna leave most of the discussion to object, but let me talk about why he used the word solid.

Some folks could look at the 599 of adjusted EBITDA, sorry, the adjusted EPS for 2020 and point out and other record year and other record year of adjusted EPS for the company.

In truth, when you're on packet and RJ will on packet a bit further I think it's more appropriately viewed as a solid performance as you know there are a bunch of things that any quarter that can play out one way or another like taxes on success fees and the fourth quarter. Those items played out positively and a much bigger way that we typically.

That when we typically see.

If you'd just for that you don't see it as a record year, but rather solid year and I think that's a better way to look at it.

Because if you look at some of the underlying factors also I think a solid year. We grew and we grew less staff than we had hoped to at the beginning of the year.

We grew less than the head count we added adjusted EBITDA, which you know we've been growing over time this year was pretty flat.

So I think a solid year is a more appropriate description of 2020.

But on the other way to look at it and I think this is an important but.

We had a solid year for it.

Example, we grew in the face.

Of Covid.

A solid year in a year when some parts of our business had unprecedented challenges some parts of our business, we're close to shut down for parts of the year.

And importantly, we drove those solid results.

Without shortchanging, our future in fact, while supporting and investing for the future of this company. We didn't with teams that we're facing slow periods. We supported day, we continue to track right people develop our people retain terrific talent, we've made both organic and inorganic investments we didn't.

<unk> head count on the face of Covid, we increased our billable headcount by 14.5%.

We seize the opportunity created by disruptions in the market to attract 36 terrific S M DS laterally and.

And we welcomed an additional 21 smbs through the acquisition of Delta partners, we didn't make those investments to bolster a profitability. This year on the short term as we talked about in the past most investments like that and professional services cost you in the short term.

We made them because we believe they light the prior investments we made build our business and we'll build our business for the next many years.

And we made those investments because we could.

Because of the investments we have made an prior periods had given us a strength.

That allowed us to have the wherewithal to invest at a time on others.

We're not so fortunate.

Those moves those investments that support for the great for T. M. A S T I in my position.

In my opinion physician is extremely well for the period coming out of Covid.

You could ask other challenges occurred of course, they're challenges ahead, I think we all know them I've never seen the world with more uncertainty with more disruption, whether it's economic uncertainty credit uncertainty for political uncertainty.

He can point to loose money out there in government interactions that are dampening restructuring activity you can look at the fact that they're nuke Bryant variants of the Corona virus that could accelerate cases, conceivably and we can all point of stress on uncertainty on the global political world.

But to me if this year prove anything about our company.

It is the incredible resilience of our business.

And our people.

Our ability to drive through a myriad of challenges over on any medium term.

A few quarters ago, we had some businesses that had record low utilization and what for the first time ever not profitable in those circumstances you always have some people question Oh should we do layoffs will these business has ever come back.

We thought those were great businesses with great people and we continue to support them and now just two to three quarters later that confidence on these business is being rewarded the efforts for the people in those businesses that they need to stay relevant to clients connected to critical issues connected to their people.

Not only resulted in those businesses come back.

But as a result of the us being bulb in critical matters in our backlogs up dramatically from where they were just a few quarters ago.

This past year confirms for me lessons I've learned over many years and professional services.

Which in times of difficulty if you avoid focusing on a quarter avoid overreacting.

But rather concentrated.

On aggressively building positions around the most important mark needs, attracting and supporting the best professionals.

You can use that period to help build an institution, that's a powerful growth engine.

Perhaps not in that quarter or the next one but for years to come an institution that great prep professionals want to be part of that they want to help grow.

In an institution that creates economic value for those committed employees and for shareholders.

That is what we have been doing these last years. It has led to some quarters some quarters with down results.

And some years with only solid result.

But it's also led to years, where we can deliver the highest employee engagement scores in the lowest turnover ever we can investing important initiatives for the future. This company like diversity inclusion and belonging in corporate citizenship and allows us to continue to attract great talent I think it's not generally known that two thirds of ours.

<unk> and this firms today either.

Either joined the firm or were promoted and this during my six years.

Degree of energy and enthusiasm and for his looking that we have today because of that investment and terrific talent and allows you to win more big impactful Cross segment jobs in more places than ever before.

Oh commit Lee those sorts of investments allow you to build a better stronger for attractive vibrant institution.

Which ultimately and also allows you to deliver a lot of shareholder value.

For example, as many of you know we've more than doubled the market cap of this company over the last few years.

I, so look forward to continuing on attorney hopefully with each of you.

In the years ahead.

But that let me turn the call over to hydrate to take you through our financial results in more detail.

A day.

Thank you Steve.

Good morning, everybody.

In my prepared remarks, I will take you through our company wide and segment results for 2020, and the fourth quarter and guidance for 2021.

I'll begin with some highlights for the year.

Revenues of $2.461 billion increased $108.6 million or four six per cent.

GAAP EPS on $5.67 compared to GAAP EPS of $5.69 and 2019.

And just did EPS of $5.99 compared to adjusted EPS of $5.80 and 2019.

As Steve mentioned or gap and adjusted EPS included is significant tax benefit that boosted from your 2020 EPS by 30 cents.

N adjusted EBITDA of $332.3 million was down from $343 $9 million and 2019.

Our performance. This year is the result of the breadth of our service offerings and the continued investments we have made for future growth.

The global pandemic boosted demand for a restructuring services, so such demand peeked in the second quarter as governments increase liquidity and placed moratoriums on insolvency proceedings.

Firstly in the second half of the year increase liquidity spurred M&A activity, creating more demand for our economic consulting and technologies segments as well as I work transactions practice within a corporate finance and restructuring segment.

Undeterred by the impact of the pandemic on Coke closures, and travel, which especially hooked on forensic in litigation consulting or F. L. C segment.

We continue to invest in growth.

And 2020 hour total billable headcount for the company <unk> 14.5 per cent.

On top of the 17.8% growth in 2019.

Lower SG&A expenses from the constrained some travelling an entertainment and lower weighted average shares outstanding her way so from share buybacks also boosted 2020 EPS [noise].

Overall, given the challenging here, we are very pleased with these results.

Now I will turn to hold quarter results rich exceeded our expectations.

For the quarter revenues of $626 $6 million increased $24.4 million on 4%.

P. P S. So for $1.57 compared to 76% from the priority on a quarter.

Noteworthy during the quarter.

<unk> and 11.2 million dollar tax benefit.

From the use of horror on tax credit in the United States.

And a deferred tax benefit.

Rising from an intellectual property license agreement between R. U S and U K subsidiaries, which boosted both yeah P. P S and adjusted EPS by 32 cents for the quarter.

Additionally, the impact of lower way so from share repurchases increased EPS by 11 cents.

Trusted EPS off $1.61, which excludes for sense of non-cash interest expense related to our 2023 convertible notes compared to adjusted EPS of 80 cents and the priority at a quarter that.

That income on $55.6 million compared to $29.1 million in there for a quarter of 2019.

Hi, Justin EBITDA of $82.3 million or 13.1 per cent of revenues compared to $58.3 million or nine seven per cent of revenues and the priority on a quarter.

The increase in EBITDA was primarily due to higher revenues and our corporate finance and restructuring economic consulting in technology segments.

Which was partially offset by a decline in SLC.

And lower SG&A expenses due to a true up on bonuses.

And lower travel and entertainment expenses.

These increases for only partially offset by higher compensation related to a 14 and a half per cent increase in billable headcount.

Mount turning to our performance at the segment levels for the quarter and corporate finance and restructuring revenues of $219.8 million increase 21.4% compared to queue for over 2019.

Acquisition related revenues contributed $19 million in the quarter X.

Excluding acquisition related revenues increase was primarily due to higher demand for restructuring services largely in North American EMEA as well as higher success fee.

This increase was partially offset by a 7.6 million the other decline and pass through revenues due to a decline in <unk> travel and entertainment expenses.

Adjusted segment, David D. A R $35 for a million dollars or 16.1 per cent of segment revenues compared to $24.8 million or 13.7 per cent of segment driven use in the prior to your quota.

This increase was due to higher revenues, which was partially offset by an increase in compensation.

Primarily related to collect the 8.6% growth in billable headcount.

And higher variable compensation on.

No the net Kyoto would get increase or for 161 billable professionals includes continued organic hiring 147 professionals from the acquisition on Delta partners and the transfer of 66 professionals from R. F O C segment into corporate finance, which are.

Card in the second quarter of 2020.

On a sequential basis, corporate finance and restructuring Avenue decreased 7.1 per cent due to the decline in restructuring activity.

This decline was partially offset by a sequential increase in revenues from our transactions related services.

Moving on to SLC revenues of $127.2 million decreased $15 for percent.

Compared to the priority a quarter. The decrease was primarily due to ignore demand for disputes and investigations services.

Just a segment EBITDA O seven $6 million or six per cent of segment revenues compared to $17.4 million on 11 six per cent of segment revenues on the prior to get a quarter.

This decrease on.

Was primarily due to lower revenues with lower staff utilization, which was partially offset by a decline and that's G and a expenses.

<unk> F. L cheese avenues increased 6.8 per cent due to higher revenues in North America for peculiarly driven by higher demand for our disputes services.

As for the last quarter, we continued to see momentum steadily building with an increase in new matters being opened the gradual reopening of course trial day, it's getting scheduled.

Though utilization, it's still below free COVID-19 levels.

Economic themselves things the record revenues all for $165 million increased for 9% compared to queue for of 2019.

Increase in revenues was primarily due to higher demand and realized bill rates for M&A related and non them and they related antitrust services.

Adjusted segment EBITDA of $31.3 million or 19.5 per cent of segment revenues.

What was that record.

And compared to $17.3 million or 11.3 per cent of segment revenues and the prior to your quota.

This increase was do you do higher revenues a reduction in our use of external affiliates.

And lower SG&A expenses.

Sequentially revenues, an economic consulting increased 3.5% as we continue to see higher demand for our non MMA related antitrust services.

And technology revenues of $58.6 million increased 13.8 per cent compared to queue for a 2019. The increase in revenues was largely due to higher demand for emanated related second request services.

<unk> litigation services.

Just a segment EBITDA of $10.2 million or 17.3 per cent of segment revenues compared to $7.8 million or 15.1 per cent of second revenues and the priority of quota. This increase was due to higher revenues, which was partially offset by an increase in compensation.

Lastly, and strategic communications with revenues of $65 million decreased 8.8 per cent compared to queue for of 2019, a decrease in revenues was primarily due to it for 8 million dollar decline and pass through revenues.

Adjusted Checkmates EBITDA of $11.7 million or $19 for per cent of segment's revenues compared to nine $9 million are hoping for 9% of segment revenues from the prior year quarter.

This increase was primarily due to a decline in SG&A expenses compared to the prior to your quota.

Sequentially revenues and strategic communications increased hoping 0.2%, primarily due to higher demand for corporate reputation and public affairs services in the in the region.

No I will discuss set in cash flow and balance sheet items net.

Net cash provided by operating activities of $327.1 million compared to $217.9 million and the prior to it.

Free cash flow of $292.2 million and 2020.

Compared to $175.8 million and 2019.

In 2020, we repurchased 3.3 million of our shares for a total cost of $353 for a million dollars in queue for alone VZ purchased 1.6 million shares at an average price for sure of $105.

For sense for the total cost of $169.2 million.

And who Wow 2020, we continue to invest in the business.

True, both organic and then organic investments, including attracting and developing senior managing directors through lateral hires and promotions and I were acquisition on Delta partners.

Despite using $353.4 million for Chevy Furniture's.

A 14 and a half per cent increase in available.

And the acquisition on Delta partners, we ended the year with it with our total debt net of cash up only $74.4 million from bad to December 31st 2019.

Turning to our 2021 guidance.

As usual, we are providing revenues GAAP EPS and adjusted EPS guidance for the year.

We estimate that revenues for 2021 will be between $2.575 billion and $2.7 billion for.

We expect our GAAP EPS, which includes estimated non cash interest expense related to our 2023 convertible notes of approximately 20 cents per share to range between $5.60 and $6.30.

We expect holier 2021, adjusted EPS rich excludes the impact of the non-cash interest expense to range between $5.80 and $6.50.

You may notice that on a guidance ranges are slightly wider than previous years.

And the low and all her guidance for adjusted EPS is up only slightly compared to a full year 2020 performance after adjusting for the benefit so for a pack strategy.

Or 2021 guidance range is shaped by several assumptions.

Globally increased liquidity and Monitorial zone insolvency has benefited even the most distressed companies.

That speculating debt default levels are at their records no.

We expect restructuring activity to be subdued in terms of new default at least.

For the first half of 2021.

However, we believe that eventually moratoriums will be lifted and there may be limits the liquidity for.

The resulting in an increase in restructuring activity.

<unk> demand surfaces or to what extent is uncertain.

Conversely, we see that curtain backdrop of strong M&A activity continuing.

Favorably impact, our economic consulting technology, and strategic communications segments, as well as I've transactions business within our corporate finance and restructuring segment.

We have I'll try investing significantly and capacity and our business transformation and transactions businesses.

Where we believe we have enormous growth potential.

The segment, which was most impacted by COVID-19, and 2020 was F O C.

Already senior recovery Howbeit slow and current expectations are that we will continue to gain momentum.

We expect a higher effective tax rate in 2021, we currently expect our holier 2021 tax rate the range between 23, and 26%, which compares to 19.7 per cent and 2020.

And we expect S. T N a to gradually increase cruise a year as the pandemic Kansas.

Before I open the call to questions.

I like Steve would like to express my gratitude to our employees for their performance in 2020, and the face of COVID-19, and do our share holders in planes for their continued simple.

And now I closed my other match today by emphasizing a few E pains for.

<unk>.

Our business is resilient because of hard diverse mix of services, which uniquely physicians us to help our clients has been navigate their most complex business challenges regardless of business cycle.

Second our business is strong not only in North America, but also globally our capacity to serve our clients in multiple jurisdictions is one O five distinct competitive advantages.

<unk>, our and media and Asia Pacific regions had directed revenues in 2020.

R Kaigler for revenues in the media since 2017 is 23.9%.

As Steve said, we succeed by building positions around the most important market needs and attracting and simple thing the best professionals.

For our leadership themed remains focused on thrilled with strong staff utilization.

And finally, our business generates excellent free cash flow and on a balance sheet is exceptionally strong we have the capability to continue to booze shareholder value from share buybacks organic growth and acquisitions, when we see the right ones for.

That that's open to call up for your questions.

We will now begin the question answer session.

To ask a question you May press star one on your Touchtone phone, if you're using a speaker phone. Please pick up your handset before pressing the keys.

To withdraw your question Press Star then too.

This time, we will pause momentarily to assemble our roster.

And the first question comes from Toby Summer with Truest Securities. Please go ahead.

Thank you with respect to your outlook for corporate finance restructuring you started subdued.

Defaults in the first half.

Do you see that that segment is down year over year and if so how much in in do you think the moratoria will be lifted.

This year.

Uhm, so to Toby let me try and answer that so you know, we and I love it.

Won't give you a glib answer on answered it for me like visit range of outcomes. That's why does it angel guidance and certainly.

Certainly at the higher end of the range on other things being equal we expect Burlington and conversed me at the lower end alright. So does the range of five sounds great in terms of where it's headed.

Restructuring is we and we do expect monitorial should be lifted as as the pandemic diseases, but I actually don't have a crystal ball on when the pandemic for that actually you could go away and governments. Then do you know push out the ending of moratoriums, So and that's factored in some of other assumptions and.

Range of stuff what does most more important than any of this is that you know restructuring has higher bit rate is higher margins well. We have that was very very successful transactions and <unk> and you know business transformation practice, that's actually with secular growth that restructuring is more volatile. These other businesses.

Are longer ago, and there is a trade off that we experience between the two staff moving back and forth, especially at the junior level. So we factor all of this in our guidance and there's also every possibility that's our business and reached and covered for that and some aggregate actually throw in here yeah.

Okay. Thank you and.

<unk> Your garden. She you don't guide for a relief for sort of a an EBITDA operating margin imply.

Implied in your garden.

Is EIT.

EBITDA margin up your every year cause you have a few offsets below that line in terms of a lower share count on a higher tax rate. Thanks.

Again.

At at the lower end of the range it would not be what you're saying at the Hyatt and it would be and this is why is it ainge and in terms of their share buybacks as well, let me just be clear.

We don't mind cash piling up we would over time, we will not accept dilution, but there's no R. R. Bold mandate is buyback shares, but with no time constrained sort of share price. We don't have a defined to find plan in that sense of course of for her.

Almonds is weaker share price usually responds accordingly, and then we buyback Moore and Conversely on the other end so that those all of those multiple scenarios with offsets are factored into the guidance.

The posture for hiring this year on.

No. The the day are you sure read in recent years has been stream double digits, but uhm is there any reason for things that you may be slightly.

Slightly.

Slower and your religious group this year versus recent trend.

Maybe I can take that.

Toby nice nice to hear your voice by the way I Hope it you on your family are all doing fine.

Look I think we disaggregate the day.

There's two different answers that we disaggregate the the topic I mean.

Some of our businesses are are like sold out right now on the other business. So very slow and yeah. You have to forecast for that is over an extended period of time, because sometimes you have to commit to hiring months in advance right and so but we don't we don't set a target for the company as a whole what we do is we look business by business about where we are with hired a bunch of senior.

People and you need to build up leverage blow them with back for that and as well as the current economic conditions and so we think that through it's of course, the case that if a business has been slow for a year and didn't use all the resources that we hired in anticipation of higher growth. The prior year that we tend to paper the hiring there.

So that's you.

You know it's just we just we just think about it as you might expect quite quite Ah logically business, but sub business by sub business. The only change to that is we are pretty opportunistic independent of the business economics on the senior hires.

If we can get great senior hires.

No matter how data businesses, if we believe in the business will will jump on that and then we'll we'll sort the rest about but otherwise, we obviously adjust hiring and focus if it for long on staff and a place for US is short on staff does that it will be a sense totally.

It does thank you and likewise for your for I'm received last question for me could you refresh us on the approximate breakdown of revenue in the various businesses within corporate 20th restructuring I think that's something that investors struggled to perceive thank you.

And there's a reason for that the struggles because it's not static as you can imagine right in and let me give you. An example, and do you do.

Restructuring was almost 70 per cent of the revenue.

In queue for those are too you know 55%.

So it varies it's M and and staff at the junior level can do restructuring work transactions work and business transformation, what they're on matters or assignments engagements as you would like to call them whichever components of all three. So this is this is the reason why you're here.

Have that that gives you a sense for it it's we've been doing over the years. If she didn't want to take it slightly longer term view over the years business transformation in transactions are becoming a growing percentage of the total mix. This is a concerted effort on that box get vendors boom is it for.

Hold on restructuring that revenue does become a much much higher part of Adolf So right now you know the true transactions practice for example is doing exceptionally well and so you will see that percentage you know grow so I hope I've I've answered the question.

Yeah. Thank you.

Thanks for Toby.

The next question comes from Andrew Nicholas with William Blair. Please go ahead.

Hi, good morning.

Morning, Thanks for joining on.

Of course RJ in your prepared remarks, you mentioned your assumption that SG&A will gradually increase throughout the year is dependent make lessons or evolves.

I guess I'm wondering if it's almost a year now under under your belt in the new environment could you speak to other you expect any kind of permanent savings and that SG&A line, whether it be from you know lower real estate spend with a higher rely on on remote work or less T V spend and then somewhat relatedly how much.

That is simply just a reduction pass through revenue as opposed to potentially.

Potentially a bottom line benefit.

Okay, Yeah, I'll, let all day respond for the second part of that question about the past revenue maybe I can talk to the first part more broadly Andrew if I could.

But I think I think the world Nobody knows there are lots of people forecasting in the world Nobody exactly knows what the post Covid World would look like and there are extremes out there and I think we can argue against the extremes, but I have a view that we're gonna be somewhere in the middle Uhm. So look I I do remember young earlier part of my career.

Flying to Korea.

Or six minutes of a pet.

The pitch, we were doing was longer than six minutes, but my goal on that pitch was six minutes and they made me for lie to Korea flew to Korea got off the plane took a shower and drink a lotta coffee did six minutes got went back to the airport and flew back.

I'm pretty sure nobody in the history of consulting is Gonna go do that again right. The world will change people will zoom or teams and for those meeting. So the world is not going to go back to the way it was before.

But although I know there are people, who say Oh, we're gonna get rid of offices and we're not gonna have anybody get back together I don't think that's the reality, either particularly not an hour segment of the market our segment of the market is doing.

<unk> high intensity really high stakes things that involve teams working closely together on non standard product you know it's not the same thing we're doing over and over again, it's different each assignment is different and the stakes for huge and you need teams, we invest a lotta money on creating teams not only in offices.

From segment for across the World because.

You do on a big bankruptcy across the world people from work collaboratively together and so I don't believe I know some people are saying, we're gonna get rid of real estate I don't believe we're gonna get rid of real estate, we will have real estate and we will have people in offices.

And then argue L will there be a little bit less office is a little less travel and so forth I would guess there are some some movement on that and I don't think but I don't think anybody knows exactly where in the middle that's going on and I think the reality in terms of 2021 that object can verify as I you know.

We did not budget radical.

Radical changes in any SG&A strategies in 2020 or 2021 on the reality is.

You know.

The reality is like the SG&A krager, because we didn't travel and and the travel costs went down and I think the budget is for that to gradually come back, but we don't have a definitive world post Covid world.

In our minds, yet and I think we'll sorted out as we.

As as we emerge I didn't want to add to that and adjusted the the the pass through question that was part of that yeah, absolutely just just add to other Steve that day.

Mm mm billable T N E goes through revenue indirect costs doesn't go through <unk>. So that's that's for the number one.

My comments on so that's that's the Bachelor that's one on one doesn't make difference for margins on maybe the margins it doesn't make difference for EBITDA.

In terms of in terms of S. G N a non business other T N E as it for.

It would be imprudent, though bill, yes lots of folks on realizing that you can do without traveling for business. That's fine I mean look at this call that for you just having we're not on gathered together for doing it from our own.

All the investor Roadshows et cetera, though I'm sure some of them. Some of you want to see me, but you know we've been doing that remotely uhm, but it would be imprudent to model. Accordingly. So we model that you know by the middle of the year will be back to where we were before and and slowly move up to that.

Never Linden stay on that level than girl I mean, that's a modeling assumption would range is around it.

Got it no that's helpful. Thank you.

And the other question I had was just on kind of project size dynamics in the fourth quarter specifically.

Specifically interested in an economic consulting segment looks like you had a really strong quarter with what I believe or a record margins in that business. So I'm wondering if that was partly due to some larger than usual.

Engagements or if the strength was pretty spread out.

We are.

I am beyond extremely proud of the achievement so far economic consulting practice you know it. It gives you want on great Pride to work in a company that is working on much some of the most significant matters in the world.

And and there are many of those but I'm not going to get into the specifics. It's not it's not appropriate to die. We just simply don't talk about specific matters their size ranges mm mm. So so so so so so that's that's the that's the headline that.

If you have an M. A name matter of any large size that you're contemplating F. T I and it's kind of gross lexicon and economic practices are the people to higher than our clients are if you're on a non M. Amanda Trust an issue in technology space. For example, we have the meeting at <unk>.

On on this in the World working it that's the Guy. So you must hire that's D. I that that is what is going on is the most important the smell in terms of the margins primarily to functional Avenue, but we used fewer external affiliates then used our own staff from just matter of expertise that then you know the results in.

Higher higher margins margins can come and go with matters, ending who would you use for engagement et cetera, I would not read too much into it I would read more into their revenue sturdy and the profile.

Great.

On them and then one last one for me.

One of your competitors in the U K, so losses restructuring business a couple of weeks back I believe.

And so I'm wondering first if there's any potential market impact to to a competitor changing ownership in your view graphs, an opportunity to take some share at talent and then related to me I'm I'm wondering how much private equity's interest in that consulting space more broadly is impacting asset prices right now and and how that affects here.

Approach to M&A in in the current environment. Thank you.

Well, maybe I'll take a crack at both of those.

So in terms of our restructuring business.

We.

As you know have grown it extraordinarily right I mean at one point 10 years ago, we were mainly a U S business now we have I think the strongest global.

Physician of any firm and we're number one which doesn't mean, where every place we wanna be but we're number one or two in more places around the world than any other for them to my knowledge and I think.

I think when I joined I think we have 700 billable professionals and see up and I think we have I think between 16 and 1700 now so it's a huge growth area and you know and this year I think week with the acquisitions on you know that it related to go with something you say 38 per cent contact from somewhere around that right. I mean, so we are committed to the.

Business I think we are the strongest life are by far we have ever been and we've always been strong in this business and we take all competitors seriously, but you know my experience is if you have leaders and leaders I don't mean, just a segment leaders or at my level I mean multiple leaders around the world.

Looking to build that business you continue to attract great people around the world and you continue to strengthen yourself and we've done that we've done this with terrific people, who have joined us in Australia and other places around the world and so I feel like we're on the strongest position and we've ever been in and we the phone has been ringing continues to him off the hook with people, who on and join US and we expect that to continue we don't see.

Any competitors lately, but.

But and we monitor that very strongly but we I feel very good about that the competitive position in that business.

The second question about private equity yeah, we've noticed that to look I think.

Private equity it's also.

The loose money, which.

Is out there is just causing the ability to raise debt.

For professional services companies and others at unprecedented levels.

And that just makes it the prices or assets at historically.

Unprecedented levels.

You know, we we look very aggressively out there on the world for acquisitions, but.

We screen them tightly with screen them first and foremost for this a group of people, who we think will want to stay with her firm and build it over an extended period of time, but secondly, then we also look at the purchase price associated with it and so.

In this environment and it makes it even harder to do acquisitions that you feel.

Real good about it so that is a that is a limiting factor on the acquisitions.

But candidly our growth has although we've had several great acquisitions, but I've been here a growth has been to grow notwithstanding acquisitions and take advantage of them when they're available and so.

The private equity drives the prices up and we can't do acquisitions for a little while we we won't but I suspect also that bar.

That at some point.

Loose money and then there may be a lot of assets to pick up in which case will take advantage of it does that talk to your question.

Yeah. That's that's great nature, Thank you very much and and talk again too.

Thank you.

The next question comes from Mark critic with Sadosky and company. Please go ahead.

Hi, good morning.

Good morning, Mark.

So I wanted to touch on a couple of quick things speaking about the I guess, maybe it is for your best for a little bit on on the office space and on the future of Horserace. Each question, but I guess, maybe more more broadly in the near to I'm, just wondering where we should think about potential capex levels for for 2021, and maybe with some some.

[noise] targeted on it or is it may be whether you need to <unk> technology standard if there's anything you should be thinking about there.

So a great question Capex is gonna be high this year, we're thinking around $70 million and that ZIP code, which is you know more than the typical 35 to 40 that for you spend because we have a major project in New York, We are consolidating our office space and building out.

A new space, there and that's more than half off that so this so this is the Catholics and we also have the change out of our ERP systems that too is taking place this expected to pay pay per view.

So that's that sounds like a request for Ya.

Do you think that that's going to be contained it 2020 on that we think that's gonna go on to 22 of those projects.

No. There's this is a once in a lifetime you know actually.

Massa stick to do ERP systems every year and I'd say I thought you want us to that's what you're asking me that you wanted to do those every year. There was so much fun all day, so I missed misunderstand too so so [laughter] and and a new Yorker average state is.

Right.

[laughter], Okay, and then switching gears to <unk>, there's certainly a good amount of getting to the end of the year would be you had come additions, particularly you know and uncalled for and I was wondering if you could talk a little bit about maybe on the games. So that's as far as the account.

And on target target areas that you might you know probably all charged I suppose giving me what your machine Martha bunch from.

I'm sorry, I didn't hear the question. If you did I did go ahead and answered it if not <unk> you were put him on the phone muffled a little bit Mark could you just repeat it. Please oh, just just actually about targeted areas for additional headcount for 21.

[laughter] Brooke.

Look I think.

You know I don't know I think basically we.

<unk>, we we the way we think about this is we basically say you know we have all of our leaders thinking about strategies for grow with <unk>.

And where we believe in those strategies for gross we support headcount additions now I think every part of our business has shown itself able to grow one of the things we have to do when I got here was picked some businesses that didn't really have a right to grow but right. Now we have businesses every one of our businesses and every one of our regions has it.

Right to grow.

You said that you know some some businesses as you might imagine.

Expected to grow more last year than they grill, because they didn't expect COVID-19 and so we have we've had we hired for gross more gross last year, then we actually achieved so even though we believe on those businesses. The longterm gross they're tapering they're hiring expectations for this year at least in the area of the sub parts of their business.

Is that where we're having a lot of items on this last year every business has some sub parts that were really busy on those still can be adding head count I think over a long period of time every one of our businesses and every one of our regions will will add head count.

But it'll it'll different quite sharply by some business. This year because of just some overhang of head count from from.

From previously more bullish forecasts for growth that predated COVID-19 does that makes sense mark.

Yes, it doesn't it the last day the last name for me I was curious about you talked earlier about the the teams in the in the.

Have any of the work that you're doing this one if you'd talk a little bit about the complexity of some of those big projects do you get a sense of.

Bit of a squishy question, but I just wanted to get your general thoughts on this on.

Are you getting a sense of the complexity of what's being worked on is similar to what you see me, but sometimes it does the layers of Covid add greater complexity in there for you know expertise being delivered.

For a better way of thinking about it.

Yeah, I think that's a good question I don't know if I know the definitive answer on that what I will say is this that.

Picking up on the general point is.

As we've strengthened our firm over the last while we get increasingly the the the largest jobs in the world and and and those jobs tend to be the most complex. You know we we have you know part of what's driven on both over the last few years is just getting an increasing share of the largest the global job the most complex job.

You know all these sorts of things and I think that's as we've added great capability we.

From more and more of the default for those sorts of jobs I don't think I cause I I don't know whether some of I don't know.

Released client names, but some of the global restructuring cases, we get these days, we would not have 110 years ago, because we didn't have the global capabilities and those are complicated jobs, but but we get them because we have a global capabilities and the ability to juggle complicated thing. It's the same thing on our tech practice, our tech practice is a very much high on global.

Business that disproportionately gets brought into the highest most complicated so the increase of complexity to the world is a good thing for us It may not be a good thing for the world [laughter], but it's a good thing for our business and whether it's COVID-19 adds to it it'll I think the a wind behind further wind behind us does that help a little bit.

Mark.

Very much so thank you very much [laughter].

Well, let me just say to all is that is that it for questions Bali.

So let me just say to all of you. Thank you so much for your continuous tension during this stressful year and let me close by once again wishing each of you good health and and.

And good wishes to you and your families. Thanks.

This concludes our question and answer session, which also concludes our conference. Thank you for attending today's presentation. You may now disconnect.

[noise].

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Welcome to the F T I consulting fourth quarter and full year 'twenty 'twenty earnings conference call.

All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question press Star then one on your telephone keypad to withdraw your question. Please press Star then two please.

Please note this event is being recorded.

I would now like to turn the conference over to Mollie Hawkes Vice President of Investor Relations. Please go ahead.

Good morning, welcome to the MTI consulting conference call to discuss the company's fourth quarter and full year 2020 earnings results as reported this morning management will begin with formal remarks, after which they will take your questions.

Before we begin I would like to remind everyone that this conference call may include forward looking statements within the meaning of section 27, a of the Securities Act of 1933 and section 21 of the Securities Exchange Act of 1930 for that involve risks and uncertainties for.

We're looking statements include statements concerning plans objectives.

Objective goals strategies future events future revenues future results and 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, a copy of which is available on our website at www Dot Spi consulting dot com as well as our other does.

Closures under the heading of risk factors and forward looking information in our annual report on form 10-K for the year ended December 31, 2020 and in our other filings with the SEC investors are cautioned not to place undue reliance on any forward looking statements, which speak only as of the day 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 a reconciliation 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 includes the 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 and PDF of our historical financial and operating data, which have been updated to include our fourth quarter and full year 2020 results.

Of note during today's prepared remarks management will not speak directly to the quarterly earnings presentation posted to the Investor Relations section of our website.

To ensure our disclosures are consistent these slides will provide the same details as they have historically and as I've said are available on the Investor Relations section of our website.

With these formalities out of the way I'm joined today by Steven Gunby, Our President and Chief Executive Officer, and other sovereign wall, Our Chief Financial Officer at this time I will turn the call over to our President and Chief Executive Officer, Steve Gunby.

Okay.

I always have to remember to take off from your Molly. Thank you for for the introduction and good morning, and thank you all for joining us.

As many of you like me are.

Extraordinarily happy to see 2020 behind us.

I think also many of them realize that some elements for 2020 are not yet fully behind us.

The Covid cases are coming down on me.

Extraordinary levels that we saw over the holidays.

Of course, they're not balance to zero right.

And Theres still a lot of it around.

We have vaccines, but theyre not yet.

Each of our arm.

And I guess most important the disruption that COVID-19 has caused.

Businesses are personal lives on society more broadly obviously remain.

Having said that I think we all see some light at the end of this tunnel and I for one I'm, so grateful to see that.

In addition to thanking you for what they normally would do for your continued attention to our company.

Once again wish you and your families good health.

Over the next while and rapid access for things like vaccines.

Yeah.

Today I have two messages about our company.

Yeah.

The first is that I am and I hope you are incredibly impressed by how our company has weathered.

This unprecedented set of challenges for 2020 and continue to do so.

Thus far in 2021.

And the second is to suggest that the resilience shown in 2020 further underscores my conviction and the tremendous power of this company and just how great our future is.

Coming out of Covid.

Let me talk to both of those points briefly and then I'll turn it over to Jay to go through the numbers for the quarter and for the year.

In terms of the post method, let me start by thanking.

And celebrating.

The teams that delivered those results our people for their dedication that they showed last year that drove the success. Our teams did an incredible job.

Keeping our people safe keeping their families safe supporting each other on their families through that challenging year, all while delivering for clients and unprecedented ways in critical ways for.

From home as a result of those efforts even in the face of those challenges.

One and delivered on some of the most important assignments in our company's history, we built our brand.

While maintaining incredible morale around the firm we promoted terrific people, we attracted more great people, the FBI and through all that.

We delivered solid financial results.

Even while parts of our business faced unprecedented challenges.

With respect for the financial results I'm going to leave most of the discussion to all day, but let me talk about why you used the word solid.

Some folks can look at the $5 99 of adjusted EBITDA, sorry, the adjusted EPS for 2020 and point out another record year on.

Another record year of adjusted EPS for the company.

In truth, when you're on packet and Ajay will unpack it a bit further I think its more appropriately viewed as a solid performance. As you know there are a bunch of things that any quarter that can play out one way or nothing like taxes or success fees in the fourth quarter. Those items played out positively in a much bigger way than we typically.

That's when we typically see.

If you adjust for that you don't see it as a record year, but rather solid year and I think that's a better way to look at it.

Because if you look at some of the underlying factors. It's also I think a solid year we grew.

Less bad than we had hoped to at the beginning of the year.

We grew less than the head count we added adjusted EBITDA, which you know we've been growing overtime. This year was pretty flat.

So I think a solid year is a more appropriate description of 2020.

But another way to look at it and I think this is an important but we.

We had a solid year for example, we grew in the face.

Of Covid.

A solid year in a year when some parts of our business had unprecedented challenges some parts of our business, we're close to shut down for parts of the year.

And importantly, we drove those solid results.

Without short changing our future in fact, while supporting and investing for the future of this company. We didn't with teams that were facing slow periods. We supported them. We continue to attract great people develop our people retain terrific talent, we made both organic and inorganic investments we didn't.

Head count in the face of Covid, we increased our billable head count.

A 14, 5%.

We see as the opportunity created by disruptions in the market to attract 36 terrific Smbs laterally and.

And we welcomed an additional 21 F&B is through the acquisition of Delta partners, we didn't make those investments to bolster our profitability. This year on the short term as we've talked about in the past most investments like that in professional services cost you in the short term.

We may use them because we believe they liked the prior investments we made building our business and we'll build our business for the next many years.

And we made those investments because we could.

Because of the investments we have made in prior periods had given us a strength.

That allowed us to have the wherewithal for invest at a time when others.

Were not so fortunate.

Those moves.

These investments that support for the great 14 without Ti in my position.

In my opinion position us extremely well for the period coming out of Covid.

You could ask other challenges occurred of course, there are challenges ahead, I think we all know them I've never seen a world with more uncertainty with more disruption, whether it's economic uncertainty credit uncertainty for political uncertainty.

We can point to loose money out there and government interactions that are dampening restructuring activity. You can look at the fact that there are new Bryant variance for the Corona virus that could accelerate cases conceivably.

We can all point to stress and uncertainty on the global political world.

Yes.

But for me if this year proves anything about our company.

It is the incredible resilience of our business.

And our people.

Our ability to thrive through a myriad of challenges over any medium term.

Few quarters ago, we had some businesses that had record low utilization and what for the first time ever not profitable in those circumstances, you always have some people question or should we be layoffs will these businesses ever come back.

We thought that was a great businesses with great people and we continue to support them and now that's two to three quarters later that confidence in these business is being rewarded the efforts for the people on those businesses that they need to stay relevant to clients connected the critical issues connected to their people.

Not only resulted in those businesses coming back.

As a result of us being involved in critical matters in our backlogs up dramatically from where they were just a few quarters ago.

This past year confirms for me lessons I've learned over many years on professional services.

Which in times of difficulty if you avoid focusing on the quarter avoid overreacting.

But rather concentrated.

On aggressively building positions around the most important market needs, attracting and supporting the best professionals.

You can use that period to help build an institution that is a powerful growth engine.

That's not in that quarter or the next one but for years to come and institution that great prep professionals want to be part of that they want to help grow and.

On an institution that creates economic value for those committed employees and for shareholders.

That is what we have been doing these last years. It has led to some quarters some quarters with that result.

And some years with only solid results.

But it has also led to years, where we can deliver the highest employee engagement scores and our lowest turnover ever we can invest in important initiatives for the future of this company like diversity inclusion and belonging in corporate citizenship and allows us to continue to attract great talent.

It is not generally known that two thirds of our smbs in this firm today.

The other joined the firm or were promoted.

During my six years.

Degree of energy and enthusiasm and forward looking that we have today because of that investment and terrific talent and it allows you to win more big impactful Cross segment jobs in more places than ever before.

Ultimately those sorts of investments allow you to build a better stronger for attractive vibrant institution.

Which ultimately then also allows you to deliver a lot of shareholder value.

For example, as many of you know we've more than doubled the market cap of this company over the last few years.

So look forward to continuing that journey.

With each of you.

In the years ahead.

With that let me turn the call over to Ajay to take you through our financial results in more detail.

Okay.

Thank you Steve.

Good morning, everybody.

In my prepared remarks, I will take you through our company wide and segment results for 2020 and the fourth quarter.

On guidance for 2021.

I'll begin with some highlights for the year.

Revenues of $2 $461 billion increased $108 $6 million or for 6%.

GAAP EPS of $5 67.

Compared to GAAP EPS of $5 69 in 2019.

Adjusted EPS of $5 99, compared to adjusted EPS of $5 a day.

In 2019.

As Steve mentioned on a GAAP and adjusted EPS included a significant tax benefit that boosted full year 2020, EPS by 30.

And adjusted EBITDA of $332 3 million was down from $343 $9 million in 2019.

Our performance. This year is the result of the breadth of our service offerings and the continued investments we have made for future growth.

The global pandemic boosted demand for our restructuring services those such demand peaked in the second quarter as governments increased liquidity and placed moratorium on insolvency proceedings.

Firstly in the second half of the year increase in liquidity spurred M&A activity, creating more demand for our economic consulting and technology segments as well as our transactions practice within our corporate finance and restructuring segment.

Undeterred by the impact of the pandemic on court closures, and travel, which especially hurt our forensic and litigation consulting on FMC segment.

We continue to invest in growth.

In 2020, our total billable head count for the company.

You 14, 5%.

On top of the 17, 8% growth in 2019.

Lower SG&A expenses from the constraints from travel and entertainment and lower weighted average shares outstanding on our way so from share buybacks also boosted 2020 EPS.

Overall.

Given the challenging year.

We are very pleased with these results.

Now I will turn to fourth quarter results, which exceeded our expectation.

For the quarter revenues of $626 6 million increased $24 $4 million or 4%.

GAAP EPS of $1 57, compared to 76% from the prior year quarter.

Noteworthy during the quarter.

We recorded an $11 2 million sacks.

Tax benefits from.

From the use of foreign tax credit in the United States.

On a deferred tax benefit.

Rising from an intellectual property license agreement.

Our U S and UK subsidiaries, which boosted both GAAP EPS and adjusted EPS by 32 cents for the quarter.

Additionally, the impact of lower waste so from share repurchases increased EPS by <unk> 11.

Adjusted EPS of $1 61, which excludes for sense of noncash interest expense related to our 2023 convertible notes compared to adjusted EPS of <unk> in the prior year quarter net.

Net income of $55 $6 million compared to $29 $1 million in the fourth quarter of 2019.

Adjusted EBITDA of $82 $3 million or 13, 1% of revenues compared to $58 $3 million or nine 7% of revenues in the prior year quarter.

Net increase in EBITDA was primarily due to higher revenues in our corporate financing restructuring economic consulting and technology segments.

Which was partially offset by a decline in epilepsy.

And lower SG&A expenses due to a true up on bonuses.

And lower travel and entertainment expenses.

These increases were only partially offset by higher compensation related to a 14, 5% increase in billable headcount.

Now turning to our performance at the segment level for the quarter in corporate finance and restructuring revenues of $219 $8 million increased 21, 4% compared to Q4 of 2019.

Acquisition related revenues contributed $19 million in the quarter.

Excluding acquisition related revenues the increase was primarily due to higher demand for restructuring services, largely in North America, and EMEA as well as higher success fees.

This increase was partially offset by a $7 $6 million decline in pass through revenues due to a decline in billable travel and entertainment expenses.

Adjusted segment EBITDA of $35 4 million or 16, 1% per segment revenues compared to $24 $8 million or $13 seven per cent of segment revenues in the prior year quarter.

This increase was due to higher revenues, which was partially offset by an increase in compensation.

Primarily related to the eight 6% growth in billable head count.

And higher variable compensation.

Off note the net.

Yet over year increase of 461 billable professionals includes continued organic hiring.

Wondered 47 professionals from the acquisition of Delta partners and the transfer of 66 professionals from our <unk> segment into corporate finance, which occurred in the second quarter of 2020.

On a sequential basis corporate financing restructuring revenues decreased seven 1% due to the decline in restructuring activity.

This decline was partially offset by a sequential increase in revenues from our transactions related services.

Moving on to our subsea revenues of $127 $2 million decreased 15, 4%.

Compared to the prior year quarter. The decrease was primarily due to lower demand for disputes and investigation services.

And segment EBITDA of $7 6 million or 6% of segment revenues compared to $17 $4 million on 11, 6% per segment revenues in the prior year quarter.

This decrease.

It was primarily due to lower revenues with lower staff utilization, which was partially offset by a decline in SG&A expenses.

Sequentially <unk> revenues increased six 8% due to higher revenues in North America, particularly driven by higher demand for our disputes services.

As with last quarter, we continued to see momentum steadily building with an increase in new matters being opened the gradual reopening of course and trial day, it's getting scheduled.

So utilization is still below pre COVID-19 levels.

Economic consulting the record revenues of $165 million increased four 9% compared to Q4 of 2019. The increase in revenues was primarily due to higher demand and realized bill rates for M&A related.

And non M&A related antitrust services.

Adjusted segment EBITDA of $31 3 million or 19, 5% of segment revenues.

It was a record.

And compared to $17 3 million or 11, 3% of segment revenues in the prior year quarter.

This increase was due to higher revenues.

Reduction in our use of external affiliates.

And lower SG&A expenses.

Sequentially revenues in economic consulting increased three 5% as we continued to see higher demand for our non M&A related antitrust services.

In technology revenues of $58 $6 million increased 13, eight per cent compared to Q4 of 2019. The increase in revenues was largely due to higher demand for M&A related second request services.

And litigation services.

Adjusted segment EBITDA of $10 2 million or 17, 3% for segment revenues compared to $7 $8 million or $15. One percentage of segment revenues in the prior year quarter.

This increase was due to higher revenues, which was partially offset by an increase in compensation.

Lastly, in strategic communications revenues of $60 $5 million decreased eight 8% compared to Q4 of 2019, a decrease in revenues was primarily due to a $4 $8 million decline in pass through revenues.

Adjusted segment EBITDA of $11 $7 million or $19 four per cent of segment revenues compared to $9 $9 million or hoping for 9% per segment revenues from the prior year quarter.

This increase was primarily due to a decline in SG&A expenses compared to the variety of quarter.

Sequentially revenues in strategic communications increased hoping 2%, primarily due to higher demand for corporate reputation and public affairs services in the EMEA region.

No.

Discuss certain cash flow and balance sheet items.

Net cash provided by operating activities of $327 1 million compared to $217 $9 million on the prior year.

Free cash flow of $292 $2 million in 2020.

Compared to $175 8 million in 2019.

In 2020, we repurchased three 3 million of our shares for a total cost of $353 $4 million in Q4 alone we repurchased one 6 million shares at an average price per share of $105.

84 cents.

For a total cost of $169 $2 million.

And throughout 2020, we continue to invest in the business.

Through both organic and inorganic investments, including attracting and developing senior managing directors through lateral hires and promotions and our acquisition of Delta partners.

Despite using $353 million for share repurchases.

Holding them a half percentage things available cash.

And the acquisition of Delta partners.

We ended the year with it with our total debt net of cash up only $74 $4 million compared to December 31 2019.

Turning to our 2021 guidance.

As usual, we are providing revenues GAAP EPS and adjusted EPS guidance for the year.

We estimate that revenues for 2021 will be between 257 $5 billion and $2 $7 billion we.

We expect our GAAP EPS, which includes estimated non cash interest expense related to our 2023 convertible notes of approximately <unk> 20 per share to range between $5 60.

$6 13.

We expect full year 2021, adjusted EPS, which excludes the impact of the noncash interest expense to range between $5 an AP.

And $6 50.

You may notice that on our guidance ranges are slightly wider than previous years.

And the low end of our guidance for adjusted EPS is up only slightly compared to our full year 2020 performance after adjusting for the benefits of our tax strategy.

Our 2021 guidance range is shaped by several assumptions.

Globally, Inc.

Greece liquidity and moratoriums and insolvency has benefited even the most distressed companies such that speculative debt default levels are at a record low.

We expect restructuring activity to be subdued in terms of new defaults at least.

The first half of 2021.

However, we believe that eventually moratoriums will be lifted.

And there may be limits to liquidity for us.

<unk> and an increase in restructuring activity.

But when such demand surfaces part.

What extent.

Yes.

Certain.

Conversely, we see the current backdrop of strong M&A activity continuing.

To favorably impact, our economic consulting technology, and strategic communications segments, as well as our transactions business within our corporate finance and restructuring segment.

We have also invested significantly in capacity and our business transformation and transactions businesses.

Where we believe we have enormous growth potential.

The segment, which was most impacted by COVID-19 in 2020 was epilepsy.

We're already seeing a recovery, albeit slow.

Current expectations are that we will continue to gain momentum.

We expect a higher effective tax rate in 2021, we currently expect our full year 2021 tax rate to range between 23, and 26%, which compares to 19, 7% in 2020.

And we expect SG&A to gradually increase through the year as the pandemic eases.

Before I open the call to questions I like Steven would like to express my gratitude to our employees for their performance in 2020 in the face of COVID-19, and to our shareholders and clients for their continued support.

And now I'll close my remarks today by emphasizing a few key themes.

Worse.

Our business is resilient.

Also hard diverse mix of services, which uniquely positions us to help our clients as they navigate their most complex business challenges regardless of business cycles.

Second our business is strong not only in North America, but also globally our capacity to serve our clients in multiple jurisdictions is one of our distinct competitive advantages.

Both our EMEA and Asia Pacific regions had record revenues in 2020.

Our CAGR for revenues in EMEA since 2017 is 23, 9%.

As Steve said, we succeed by building positions around the most important market needs and attracting and supporting the best professionals.

Third our leadership team remains focused on growth.

With strong staff utilization.

And finally, our business generates excellent free cash flow and our balance sheet is exceptionally strong.

We have the capability to continue to boost shareholder value through share buybacks organic growth and acquisitions, when we see the right points.

Let's open the call up for your questions.

Okay.

We will now begin the question answer session.

To ask a question you May press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys.

To withdraw your question Press Star then two.

At this time, we will pause momentarily to assemble our roster.

And the first question comes from Tobey Sommer with <unk> Securities. Please go ahead.

Thank you with respect to your outlook for corporate financing restructuring you started subdued.

On defaults in the first half do you assume.

That segment is.

<unk> year over year, and if so how much in it.

And do you think the moratoria will be lifted.

This year.

So Tobey, let me try and answer that so.

And I love it.

I won't give you a glib answer I'll answer that for me like there's a range of outcomes.

That's why there's a range of guide.

<unk>.

And.

Certainly at the higher end of the range on other things being equal we expect we're open and Conversely at the lower end. So there's a range of outcomes there.

In terms of.

Where it's headed.

The restructuring is weak and we do expect monitory interest will be lifted as has the pandemic eases.

I actually don't have a crystal ball on when the pandemic will absolutely go away and governments tend to push out the ending of moratoriums, So and that's factored in some of other assumptions in the range of stuff what does most more important than any of this is net restructuring has higher bill rates has higher.

Well, we haven't been very very successful transactions.

Business transformation practice, that's actually with secular growth.

Restructuring is more volatile these other businesses are longer.

And there is a trade off that we experience between the two would start moving back and forth, especially at the junior level. So we factor all of this in our guidance and the results for every possibility, that's our business and reach and copper can add on some aggregate actually drove year over year.

Great. Thank you.

<unk>.

Your guidance you didn't guide for relief for sort of a non EBITDA or operating margin implied in your guidance.

Is <unk>.

EBITDA margin up year over year, because you have a few offsets below that line in terms of a lower share count and a higher tax rate.

Again.

At the at the lower end of the range would not be what you are saying at the higher end it would be.

And this is why there is a range and in terms of the share buybacks as well, let me just be clear.

We don't mind cash piling up.

We will overtime, we will not accept dilution, but there's no R. R Board mandate is buyback shares.

At no time constraints or the share price, we don't have a defined defined plan in that sense of course, if performance is weaker share price usually responds accordingly, and then we buyback more and Conversely on the other end so those all of those multiple scenarios with offsets are.

Factored into the guidance.

Well the posture for.

Hiring this year.

I know that the long term rate in recent years has been strong double digits, but.

Is there any reason for things that you may be.

Slightly slower.

Slower than your billable headcount growth this year versus recent trend.

Maybe I can take that.

Toby nice for a nice to hear your voice by the way I Hope that you and your family are all doing fine.

Look I think we disaggregate the there's two different assays that we disaggregate the topic I mean.

Some of our businesses are like sold out right now on other business are very slow and you got to forecast where that is.

Over an extended period of time, because sometimes you have to commit to hiring months in advance right and so but we don't we don't set a target for the company as a whole what we do is we look business by business about where we are we've hired a bunch of senior people and you need to build up leverage below them and we factor that in as well as the current economic conditions.

And so we think that through of course, the case that if a business has been slow for a year and didn't use all the resources that we've hired in anticipation of higher growth for prior year that we tend to taper the hiring there.

So that's.

It's just we're just we just think about it as you might expect quite quite logically.

Logically business, but sub business by sub business. The only change to that is we are pretty opportunistic independent.

Independent of the business economics on the senior hires.

If we can get great senior hires.

No matter, how bad businesses, if we believe in the business will jump on that and then we'll sort for the rest about but otherwise, we obviously adjust hiring.

And focus.

If for a long on staff in place versus short on staff does that give you a sense Tobey.

It does thank you and likewise for your family Steve last question for me could you refresh us on the approximate breakdown.

Revenue in the various businesses within corporate finance restructuring I think that's something that investors struggled to perceive thank you.

And there's a reason for that the struggle because its not static as you can imagine right in and let me give you. An example in Q2.

Restructuring was almost 70% of for revenue.

In Q4, those are 255 per cent.

So it varies.

And in staff for the junior level cash.

And do restructuring work transactions work and business transformation book, there are matters, our assignments engagements as you would like to call them, which has components of all three.

So this is this is the reason why you have that gives you a sense for it. It's a we've been doing over the years. If you want to take a slightly longer term view over the years business transformation and transactions are becoming a growing percentage of the total mix. This is a concerted effort on that box.

Yes vendors.

<unk> is a quote on restructuring that revenue does become at much much higher part of our dog. So right now you know the transactions practice for example.

It's doing exceptionally well and so you will see that percentage grow.

No.

So I hope I've answered the question.

Thank you.

Thanks Tobey.

The next question comes from Andrew Nicholas with William Blair. Please go ahead.

Hi, good morning.

Thanks for joining us on.

Of course, Jay in your prepared remarks, you mentioned your assumption that SG&A will gradually increase throughout the year as the pandemic lessens or evolves.

I guess I'm wondering with almost a year now under under your belt in the new environment could you speak to whether you expect any kind of permanent savings in that SG&A line, whether it be from lower real estate spend with a higher reliance on remote work or less <unk> spend and then.

Somewhat relatedly how much of that is simply just a reduction in pass through revenue as opposed to potentially on bottom line benefit.

Yes, let me I'll, let RJ respond for the second part of that question about the pass through revenue and maybe I can talk to the first part more broadly Andrew if I could.

Look I think I think the world Nobody knows there's lots of people forecasting in the world Nobody exactly knows what the post Covid World would look like and there are extremes out there and I think we can argue against the extremes, but I have a view that we're going to be somewhere in the middle.

So look I do remember young earlier part of my career.

Flying to Korea.

For <unk>.

Six minutes of a pet.

The pitch, we were doing with longer than six minutes, but my role in that pitch was six minutes and they made me fly to Korea Korea got off the plane took a shower to think a lot of coffee did six minutes got went back to the airport and flew back.

I'm pretty sure nobody in the history of consulting is going to go through that again right. The world will change people with zoom or teams against those meetings. So the world is not going to go back to the way it was before.

But although I know there are people, who say Oh, we're gonna get rid of offices and we're not going to have anybody get back together I don't think that's the reality either particularly not in our segment of the market or segment of the market is doing.

Very high in <unk>.

Tensity really high Stakes things.

All teams working closely together on non standard product, it's not the same thing you're doing over and over again, it's different each assignment is different and the stakes are huge and you need teams, we invest a lot of money on creating teams not only in offices and segments, but across the world because.

You do on a big bankruptcy across the world people have to work collaboratively together and so I don't believe I know some people are saying, we're getting rid of real estate I don't believe were going to get rid of real estate, we will have real estate and we will have people in offices.

And then our dwell will there be a little bit less offices or little less travel and so forth I would guess there are some some movement on that and I don't think but I don't think anybody knows exactly where in the middle that's gone on.

And I think the reality in terms of 2021 that RJ can verify is.

We did not budget.

Radical changes in any SG&A strategies in 2020 or 2021 on the reality is.

No.

The reality is that the SG&A cratered, because we didn't travel.

On the travel costs went down and I think the budget is for that to gradually come back, but we don't have a definitive world post Covid world.

In our minds, yet and I think well sorted out as we.

As as we emerge I didn't want to add to that or adjusted the pass through question that was part of that day.

Absolutely yes.

Just to add to what Steve said.

Billable T&D goes through revenue and direct costs doesn't go through SG&A. So that's that's sort of number one.

My comments on so that's that's a pass through that's one on one that doesn't make difference for margins.

Maybe the margins it doesn't make difference for EBITDA.

In terms of in terms of SG&A non bid on those <unk> as it were.

It would be imprudent, though bill.

Lots of focus on realizing that even without traveling for business. That's fine I mean look on this call that we were just having where not all gathered together we're doing it from our homes.

All other Investor Road shows et cetera.

I'm sure some of them some of you want to see me, but we've been doing that.

Remotely.

But it would be imprudent to model accordingly, So we model that you know by the middle of the year, we'll be back to where we were before and and slowly move up to that level and then stay at that level and girl I mean, that's a modeling assumption with ranges around it.

Got it no that's helpful. Thank you.

<unk>.

Another question I had was just on kind of a project size dynamics in the fourth quarter.

Specifically interested in the economic consulting segment. It looks like you had a really strong quarter with what I believe are a record margins in that business. So I'm wondering if that was partly due to some larger than usual.

Engagements or if the strength was pretty spread out.

We are.

I am beyond extremely proud of the achievements so far economic consulting practice. It gives me great pride to work in a company that is working on some of the most significant matters in the world.

And there are many of those but I'm not going to get into the specifics, but it's not appropriate to do we just simply don't talk about specific matters their size ranges.

I'm so sorry.

So that's that's the that's the headline.

If you have an M&A matters of any large size that youre contemplating STI and its campus lexicon economic practices are the people to hire and our clients are if you are on the non M&A Anti Trust Inc.

Issue in technology space for example.

We have the leading economists in the world working that's the Guy. So you must highlight that that is what is going on is the most important piece now in terms of the margins primarily its a function on the revenue, but we used fewer external affiliates than we used our own staff from just matter of expertise that then.

Results from higher higher margins margins can come and go with matters, ending who would you use for engagements et cetera, I would not read too much into it I would read more into the revenue story in the profile.

Great.

Helpful. And then and then one last one for me.

One of your competitors in the U K, so rocket restructuring business a couple of weeks back I believe.

And so I'm wondering first if there's any potential market impact to a competitor changing ownership in your view congrats on opportunity to take some share on talent and then relatedly on I'm wondering how much.

Equity's interest in the consulting space more broadly is impacting asset prices right now and how that affects your approach to M&A in the current environment. Thank you.

Well, maybe I'll take a crack at both of those.

So in terms of our.

Our restructuring business.

Okay.

We.

As you know have grown extraordinarily right I mean at one point 10 years ago were mainly a U S business now we have I think the strongest global position.

Position of any firm.

And we're number one or for which doesn't mean, where every place we want to be but we're number one or two in more places around the world than any other firm to my knowledge and I think.

I think when I joined I think we had 700 billable professionals.

CF and I think we have I think between 16 to 1700, so it's a huge growth area and.

And this year I think we with the acquisitions on the organic growth. If you grew it didn't you say, 38% projects on somewhere around that right. I mean, so we are committed to this business I think we are the strongest by far.

Bar, we have ever been and we've always been strong in this business and we take all competitors seriously but.

My experience is if you have leaders and leaders I don't mean, just the segment leaders or at my level I E. Multiple leaders around the world looking to build that business you continue to attract great people around the world and you continue to strengthen yourself on we've done that we've done this with terrific people, who have joined us in Australia and other places around the.

A world and so I feel like we're on the strongest position we've ever been in and we the phone has been ringing continued to ring off the hook with people who want to join US and we expect that to continue we don't take any competitors lately.

And we monitor that very strongly but we I.

I feel very good about that the competitive positioning in that business for.

The second question is about private equity yeah, we've noticed that to look I think.

Its private equity it's also.

The loose money, which.

Is out there is just causing the ability to raise.

Debt.

For professional services companies and others at unprecedented levels.

And that just makes it the prices for assets at historically.

I think unprecedented levels.

We look very aggressively out there on the world for acquisitions.

<unk>.

We screen them tightly with screen them first and foremost for is this a group of people, who we think will want to stay with our firm and build it over an extended period of time, but secondly, then we also look at the purchase price associated with it and so.

This environment it makes it even harder to do acquisitions that you feel.

Real good about it.

So that is a that is a limiting factor on the acquisitions.

But candidly our growth hasn't although it had several great acquisitions that I've been here our growth has been to grow notwithstanding acquisitions and take advantage of them. When they are available and so if the private equity it drives the price is up and we can't do acquisitions for a little while we wont, but I suspect also that bar.

Is that at some point.

Loose money, yet and there may be a lot of assets to pick up in which case, we'll take advantage of it does that talk to your question.

That's a great answer thank you very much and talk again soon.

Thank you.

The next question comes from Marc Riddick with Sidoti and company. Please go ahead.

Hey, good morning.

Good morning, Mark.

So I wanted to touch on a couple of quick things just thinking about the and I guess, maybe just to piggyback a little bit on the office space on the future of losses Sues question, but I guess, maybe more more broadly in the near term I'm, just wondering where we should think about potential capex levels for for 2021, and maybe with some simple.

Targeted areas, maybe whether you need to do.

Jason mode technology spend or if there's anything we should be thinking about there.

So.

Great question Capex is going to be high this year, we're thinking around $17 million.

And that ZIP code, which as you know more than the typical 35 to <unk> debt to spend because we have a major project in New York, We are consolidating our office space and building out.

And new space there.

And that's <unk>.

More than half of.

All of that so this is so good.

Since the Capex on we also have the.

The change out of our ERP systems.

Two is taking place this expected to debt. This year. So that's the answer to your question.

Steven that's going to be contained to 2020 on though we think that's going to go into 'twenty towards those projects.

No. This is the one simple lifestyle.

Excellent.

I guess, they could do ERP systems every year and I'd say on.

I thought you wanted to that's what you're asking me, but if you wanted to do those every year. There was so much fun day misunderstood.

I misunderstand your sales.

And in New York Vantage standard.

On lifetime.

Okay.

And then switching gears to <unk>.

It's certainly a good amount of getting to the end of the year.

You head count additions.

Particularly.

You know.

And in corporate and I was wondering if you could talk a little bit about maybe on the JV. So that's as far as head count.

On target targets.

Targeted areas that you might.

Josh I suppose given what you're missing in the marketplace for them.

I'm sorry, I didn't hear the question if you did or did they go ahead and answer it if it's not on market.

The mother's day.

The follow on muffled, a little bit Mark could you just repeat it please.

Just actually about targeted areas for additional head count for 'twenty one.

Look I I look I think.

Okay.

I don't know I think.

We the way we think about this is we basically say.

We have all of our leaders thinking about strategies for growth.

And where we believe in those strategies for growth, we support head count additions now I think every part of our business has shown itself able to grow one of the things we have to do when I got here was picked some businesses that didn't really have a right to grow but right. Now we have businesses every one of our businesses and every one of our regions has the right.

To grow having said that.

Some businesses as you might imagine.

Expect it to grow more last year than they grew because they didn't expect COVID-19 and so we have.

We've had we hired for growth more growth last year, then we actually achieved so even though we believe in those businesses for long term growth are tapering.

They're hiring expectations for this year at least in the areas of sub parts of their business that where we are.

<unk> had a lot of item on this last year every business has some sub parts that we're really busy on those still can be adding head count.

I think over a long period of time every one of our businesses in every one of our regions, we'll add head count.

But it'll it'll differ quite sharply by sub business. This year because of just some overhang of head count from from.

From previously more bullish forecast for growth that predated COVID-19 does that make sense mark.

Yes. It does and then the last thing the last thing for me I was curious about you talked earlier about the teams and the <unk>.

On the activity of the work that you're doing I was wondering if you'd talk a little bit about keeps collection of some of those big projects.

Do you get a sense that this might be a bit of a squishy question, but I just wanted to get your general thoughts on this.

Are you getting the sense of the complexity of what's being worked on is similar to what you've seen it depend on sort of does the layers of Covid grew.

Greater complexity and therefore.

Expertise.

Being delivered.

A better way of thinking about it.

Yeah. Good question I don't know if I know the definitive answer on that what I will tell you is this debt.

Picking up on the general point is.

Look as we've strengthened our firm over the last while we get increasingly.

The largest jobs in the world and and those jobs tend to be the most complex. We have part of what's driven our growth over the last few years is just getting the increasing share of the largest global job. The most complex jobs. All these sorts of things and I think that's as we've added great capability we.

<unk> become more and more of the default for those sorts of jobs I don't think.

Because like I don't know, whether some of them I don't know that we will.

<unk> client names, but some of the global restructuring cases, we get these days, we would not have 110 years ago, because we didn't have the global capabilities and those are complicated jobs, but but we get them because we are a global capabilities and the ability to juggle complicated thing. It's the same thing in our tech practice, our tech practice is a very much high on global bid.

Debt.

Disproportionately gets brought into the highest most complicated so the increase the complexity that the world is a good thing for us it may not be a good thing for the world, but it's a good thing for our business.

And whether if COVID-19 adds to I think the.

Our wind behind our further wind behind us does that help a little bit mark.

So very much thank you very much.

Well, let me just say to all of us that is that it for questions volume.

So let me just say to all of you. Thank you. So much for your continued attention. During this stressful year and let me close by once again wishing each of you good health and and.

And good wishes to you and your families.

This concludes our question and answer session, which also concludes our conference. Thank you for attending today's presentation. You may now disconnect.