Q1 2021 FTI Consulting Inc Earnings Call

April 29, 2021

[music].

Good morning.

Welcome to the F. B I consulting first quarter 2021 Holdings conference call.

All participants lines will be in the listen only mode.

Should you need assistance, please signal up on certain specialist.

Young people.

By channel.

On the beach doesn't it.

It will be an opportunity to work with them.

You asked a question you may Pascal and Watson for feedback.

From your question Keith.

Didn't you.

No, but the steuben is being reported.

I would like to simple profitable.

On the call Vice President of Investor Relations. Please go ahead.

Yeah.

Good morning, welcome to the STI consulting conference call to discuss the company's first quarter 'twenty 'twenty. One 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 1934 that involve risks and uncertainties forward looking statements include.

Statements concerning plans objectives goals strategies future events future revenues future results and performance expectations.

<unk>, our intentions relating to financial performance acquisitions share repurchases business trends and other information or other matters that are non 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 F T I consulting dotcom.

As well as other disclosures under the heading of risk factors and forward looking information in our annual report on form 10-K for the year ended December 31st 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 date on 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 measure 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 reconciliation.

Lastly, there are two items that are 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 first quarter 2021 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 provide the same details as they have historically and as I've said are available on the investors 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 Al. Thank Sabra ball, our Chief Financial Officer at this time I will turn the call over to President and Chief Executive Officer, Steve Gunby.

Right.

Okay.

Thank you Paul.

Checking things.

Oh from you.

Good morning to everyone and thank you all for joining US let me start with a couple of words on COVID-19, even though I'm sure all of you like I <unk>.

So sick.

On the topic and the issue I.

I hope everyone on this call continues to be well.

All of US on this call are increasingly able to get back from <unk>.

So those of us from the U S.

We can sense at least at the beginning.

The change in mood.

At least for me, it's wonderful to see the rollout of vaccines.

No I don't know anybody who doesn't get incredibly excited when we see our fab friends or family members getting vaccinated.

That's true for many of you as well and from many people.

And some other parts of the world, particularly the U K.

I think on the other hand, most of US know the story is not as true every place around the world when I talk to colleagues on the Continental Europe.

Story feels somewhat a line, but also somewhat different because a lot of frustration about performance of the rollout on the vaccine.

It feels very different very different last week, when I talk with colleagues from Latin America from colleagues in India.

If we look at the statistics I think we see that global cases globally total cases, right now are actually at the highest the highest levels we have ever seen the world has ever seen.

Of course, the rollout on the vaccine low half.

Turning around the world, it's happening very different paces, depending on where you set.

The good news I think is that we can all at this point see a light.

See that light at the end of the tunnel and I'm. So excited about on that light deals close.

I just wanted to also share say Mylan my colleagues' hard from thoughts are also with all of those.

Thanks.

Within our firm and within Yours Alright.

Still feels further away.

And I know that sentiment I'm sure. It was from many of you on this call.

Yeah.

Let me turn to a price are subject, which is our quarter our results I'm sure as many of you saw on our press release this quarter.

It was a great quarter.

They had some positive surprises in it.

One can't count on recurring which I will talk about but even normalize for those it was a terrific quarter.

I know very many people.

10 years ago, or even a few years ago.

I would've thought that in a period of restructuring as an industry is down substantially and our restructuring business is well off the peak.

We saw last year that we would produce a halfway decent quarter, let alone on a quarter like this.

For the quarter was spectacular.

Let me, however, say something that we've discussed many times quarters are fickle.

Markets can fluctuate up and down big jobs can come and go cases from settlements continuously investments to drive future growth, although critical for the future can negatively weighted past quarters in the short term the quarters to me as excited as you can see about a quarter.

Or in fact never good measures of performance for this company good quarters or bad quarters.

Indeed, what is much more powerful than this quarter or any quarterly results is the strength of the longer term trajectory that we have been on.

And then I believe we are on as well as the reasons for that great trajectory compared to 10 years ago.

Forget the quarter.

Collectively we have managed to build a business that is much more powerful much more global much more diverse than it ever has been and that's true for the company as a whole, but even within each segment. Today for example, our core business.

More powerful and restructuring than it ever has been is also much broader much more powerful.

Much breadth index.

Experience and capabilities to serve our clients on a broader range of challenges and opportunities than ever.

Yes, it's powerful and restructuring, but also in transactions and office of the CFO and so many other services.

And you can say the same for all of our business segments.

The way, we've gotten here at the basis for that.

It's terrific teams reinvesting in our core reinvesting behind our good businesses, but also looking where our clients have needs and broadening our business most of our offerings and our geographical footprint those actions and our collective commitment to bet.

Great positions and great people.

Let me have changed the fundamental trajectory and resilience.

For this company.

I mean, we have shown over the past several years, but if we do the right thing.

We do the right thing if we commit to our to position our business from the right way.

Support great people for long term sustainable growth.

We can still have bad quarters.

For any extended period of time, we control our destiny.

We control our destiny.

On a way that allows us to serve evermore, our clients' most important needs across a wider range of circumstances, not just in things like restructuring, but an antitrust the major M&A and cyber security, it's facts and public affairs and global Cross border E destinations and you can go on and that to me that growth and capabilities of our people that ability to extend it.

Our farm innovate.

It's far more exciting and a much more durable basis.

Statements and success than any any given quarter's results.

Well I'm not going to talk anymore about the quarter Ajay well.

Let me close by taking a moment.

So thank and congratulate.

My colleagues for their efforts for their conviction behind their businesses and.

And recognize that the results of their conviction of their efforts.

With those results so I have been for our clients our shareholders.

Our communities and each other.

I want to particularly thank our colleagues.

For the energy and persist mirror that they have shown on this past year.

And our company and I'm sure. Many of you on this calls companies isn't so hard to deliver.

During COVID-19 and our from good deliver.

It's been so frustrating to see that the white there at the end of the tunnel, but see how slow its been approaching it in some places the emotional fortitude.

Our people have shown during this period to keep our company moving to keep connected with each other.

And supported to each other dedicated to our clients.

It's been wonderful to see you as the CEO.

But actually equally as much as it's just a human being.

So I'm going to say in addition to congratulations.

I want to express my Pride.

And my colleagues and say thank you to each of you across the globe.

With that I'll turn it over to Ajay to take you through the quarter in more detail.

Yeah.

Thank you Steve on.

Good morning, everybody.

In my prepared remarks, I will take you through our company wide and segment results and discuss guidance for the full year.

I'm delighted to report year over year double digit revenue growth this quarter.

On our last earnings call in February we sent that strong M&A activity would favorably impact our economic consulting technology and strategic communications segments as well on our transactions business within our corporate financing restructuring segment.

Conversely, we had also expected weakness in demand for our restructuring services.

Both trends are good and were deeper than we anticipated.

And in forensic and litigation consulting or restaurant see the segment, which was most impacted by COVID-19 in 2020.

We expected continued gradual improvement instead in the quarter results rebounded faster than we anticipated as we were able to resume work on many matters where trials for reschedule the resumed particularly in North America.

Obviously, we are very pleased with these results.

First quarter of 2021 revenues of $686 $3 million were up $81 $7 million or 13, 5%.

GAAP EPS of $1 84, compared to $1 49 in the prior year quarter GAAP EPS included $2 3 million of non cash interest expense related to our convertible notes, which decreased EPS by five percentage.

Adjusted EPS of $1, 89, which excludes the noncash interest expense compared to $1 63 in the prior year's quarter.

Net income of $64 5 million compared to $56 $7 million in the prior year quarter.

This increase was due to higher operating profits and our economic consulting.

<unk> and technology segments, which was partially offset by lower operating profit and corporate finance and restructuring.

SG&A of $126 $5 million was 18, 4% of revenues and compares to SG&A on a $127 million or 21% of revenues in the first quarter of 2020.

SG&A was flat year over year from primarily because lower travel and entertainment expenses offset higher costs related to the increase in non billable head count.

Double digit revenue growth and flat SG&A expenses more than offset higher billable head count related costs, resulting in first quarter 2021, adjusted EBITDA of $99 5 million, an increase of 19, 5% compared to 83.

$2 million in the prior year quarter.

Our first quarter 2021 effective tax rate of 23, 9% compared to our tax rate of 22, 5% in the first quarter of 2020 for the balance of 2021, we continue to expect our effective tax rate to be between 23 and 26%.

Weighted average shares outstanding our ratio for Q1 of $35 1 million shares declined $3 1 million shares compared to $38 2 million shares in the first quarter of 2020.

For the quarter, our convertible notes had a potential dilutive impact on EPS of approximately 450000 shares embraced so as our share price on average of $118 and 44%. This past quarter was above the $101 and 38 conversion threshold.

Yeah.

Billable head count at the end of the quarter increased by 562 professionals or 12, 3%. This increase is largely due to 34, 9% billable head count growth and corporate financing restructuring.

Which includes both organic hiring as well as the addition of 151 billable professionals from the acquisition of Delta partners in the third quarter of 2020.

Sequentially billable head count increased by 75 professionals are one 5%.

Now turning to our performance at the segment level and corporate financing restructuring revenues of $226 $2 million increased $18 $5 million on eight 9% compared to the prior year quarter.

Acquisition related revenues contributed $16 million in the quarter.

Excluding acquisition related revenues were essentially flat, primarily because an increase in transaction related revenues globally was offset by lower demand for restructuring services, particularly in North America.

Adjusted segment EBITDA of $37 $4 million or 16, 6% of segment revenues compared to $48 9 million or 23, 6% of segment revenues in the prior year quarter.

Year over year decrease in adjusted segment EBITDA was due to flat revenues with a 34, 9% increase in billable headcount and related compensation expenses and a 10 percentage point decline in utilization.

Turning to forensic and litigation consulting revenues of $158 million increased two 2% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for health solutions and investigation services, which will spark.

<unk> offset by a $4 $1 million decline in pass through revenues and lower realized pricing for our data and analytics services.

Adjusted segment EBITDA of $29 4 million or 19, 5% of segment revenues compared to $21 2 million or 14, 4% of segment revenues in the priority on quarter.

The increase in adjusted segment EBITDA was primarily due to higher revenues with higher utilization, coupled with a decline in SG&A expenses and direct costs, primarily related to the lower pass through revenues.

Sequentially excellent sales revenues increased $23 6 million or 18, 6% and adjusted segment EBITDA improved $21 $8 million, reflecting increased demand across all of our core offerings, including previously backlog.

The book and a nine percentage point increase in utilization.

Our economic consulting segment reported record revenues.

Revenues of $169 $3 million were up 28, 1% compared to the prior year quarter. The increase in revenues was due to higher demand for our non M&A related antitrust and M&A related antitrust services as well as higher realized.

<unk> and demand from international Arbitration services.

Adjusted segment EBITDA of $26 $6 million or $15 seven percentage of segment revenues compared to $12 7 million or nine 6% of segment revenues in the prior year quarter.

The increase in adjusted segment EBITDA was due to higher revenues, which was partially offset by higher compensation related to an increase in variable compensation and a nine 9% increase in billable headcount.

In technology, we also had a record quarter.

Our revenues increased 55, 3% to $79 5 million compared.

Compared to the priority of corridor the Inc.

Increase in revenues was due to a surge in demand for M&A related second request services.

Adjusted segment EBITDA of $21 $6 million or 27, 2% of segment revenues compared to $14 5 million or 24, 7% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was due to higher revenue.

Use which was partially offset by an increase in compensation.

Sequentially technology revenues increased $28 million or 35, 5% and adjusted segment EBITDA improved $11 $4 million.

Primarily due to a large second request engagement.

Strategic communications revenues increased three 7% to $65 million compared to the prior year quarter.

During the quarter, we experienced increased demand for our public affairs services, which was offset by a $2 million decline in pass through revenues.

Segment EBITDA of $10 4 million or 17, two percentage of segment revenues compared to $8 8 million, a 15 percentage of segment trend on using the priority in quarter three.

<unk> adjusted segment EBITDA was primarily due to lower SG&A expenses.

Let me now discuss a few cash flow few key cash flow and balance sheet items.

As is typical we paid the bulk of our bonuses in the first quarter.

Net cash used in operating activities of $166 $6 million.

Do $123 $6 million from the prior year quarter debt.

Year over year increase in net cash used in operating activities was largely due to an increase in salaries related to headcount growth and higher annual bonus payments, which was partially offset by an increase in cash collected.

During the quarter, we spent $46 $1 million to repurchase 421725 shares at an average price per share of a 100 on the $9.37.

As of the end of the quarter approximately $167 1 million remained available for stock repurchases under our current stock repurchase authorization.

Total debt net of cash of $252 8 million at March 31, 2021, compared to $143 2 million at March 31, 'twenty, 2020, one $3 million at December 31st 2020.

On a sequential increase was primarily due to $170 million of net borrowings under our bank revolving credit facility to fund cash used in operating activities primarily for annual bonus payments.

Turning to guidance first let me remind you of the guidance for 2021 we provided in February.

Revenues of between $2, $5 75 billion and $2 $7 billion.

P S of between $5 60.

And $6 30.

And adjusted EPS of between $5 on a defense and $6 50.

I believe at this juncture it is important that I share with you why we believe.

Exceptional strength, we have demonstrated in Q1 may not necessarily repeat in subsequent quarters. This year.

First we all heard the most sparked a fixed cost business as depot and real estate represents some upfront largest expenditures. These costs are not variable in the short term so small shifts in revenues have a much larger impact.

Certainly are negatively on EPS.

Second we are at our core a large job from and when matters and they may not immediately be replaced.

This quarter for example, our results were boosted by several exceptionally large engagements that were driven by record levels of M&A activity that may not be sustained through the year.

In technology for example, we had one engagement, which concluded during the quarter that represented over 20% of total quarterly segment revenues.

In economic consulting as well we have several large engagements that are expected to conclude during the year.

Even our restructuring revenue this quarter was boosted by revenue from large matters that began last year and have either now ended on will likely end this year.

Meanwhile, credit markets remain in an accommodative mode, and hence the number of stressed and distressed issues remain low.

Moody's now expects the trailing 12 months speculative grade global default rate to fall to three 2% by the end of the year down from six 8% forecast that they provided in December and Fitch, which measures defaults by dollar volume now expects that high yield default.

Trade for the U S of 2% by year end these.

These forecasts point to lower demand for restructuring services for at least the balance of this year.

Third this quarter, we were delighted by results and that helps our business most negatively impacted by COVID-19 in 2020.

That being said with the continued uncertainty of the pandemic and southern geographies experiencing third and fourth waves of infections. We remain cautious as we may be impacted in certain locations by COVID-19 related court closures and travel restrictions, which can impact our ability to sell.

All of our clients.

Paul.

Our non billable travel and entertainment expenses are typically around one 5% on revenue.

At the moment this expense is largely non existent.

As travel and entertainment is severely curtailed in most geographies.

Lastly, our fourth quarter is typically our weakest quarter with the holiday season and compensation true ups at the end of the year.

In 2020 on fourth quarter results were exceptional and Bob.

Because of the implementation of a cross border tax strategy, the more rational expectation would be for us seasonally weaker Q4, as many of our practitioners take well earned vacations.

Now with all those risks considered clearly the great performance in Q1 gives us a very good head start for achieving our guidance.

Once we have another quarter under our belt at the end of the second quarter, we will revisit guidance as is typical to see if any changes are warranted.

Before I close I want to reiterate a few key themes that underscores the attractiveness of our business first we have demonstrated that we have a tremendous collection of businesses that make us a very resilient company, we are uniquely positioned to support our clients as they navigate their most.

Complex business challenges, regardless of business cycles.

More than ever I am convinced that the key to our success is the strength of our people and their relationships both of which are exceptionally strong.

Third our leadership team is focused on driving growth with strong staff utilization and finally on our balance sheet is enviable and we have demonstrated the ability to boost shareholder value for share buybacks debt reduction organic growth and acquisitions.

<unk>, let's open the call up for your questions.

Thank you very much.

We will now begin the question and answer session.

To ask a question you may price.

And then one on your telephone keypad.

If you are using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble on stuff.

Yes.

We'll take our first question from the line of Marc Riddick from.

Sidoti <unk> company. Please go ahead.

Hey, good morning, everyone. Good morning, Mark how are you.

Very good yourself.

Thank you.

So I wanted to just go over a couple of things debt.

To get a sense of maybe some of the things that might be taking place during the quarter as far as dealing with those those demand shifts that you're seeing.

Yes.

Were there any changes in the head count as far as shifting from one to another to accommodate rising demand in one place and Paul on the menu and the mother and then I have a couple of follow ups after that.

Look.

The answer is yes.

I know can be structurally shifted any bodies between segments that would be this quarter.

But look.

What we have for example in Corp fin is.

Well I think what carland appropriately says you know a third of our people work on one side. The third of our people work on another side and about a third of that people can go back and forth and I don't know if thats exactly right, but last year.

Restructuring volume hit.

Able to take some of the.

Financially very literate people on the non restructuring side and put them on cases with the restructuring team.

This quarter, whereas restructuring things weaken in certain transactions went up we were able to flow people back the other way.

We're not homogenous business, we don't low people from dot com to E com.

But we do flow people with the right capabilities across within segments and actually between <unk> and CF.

And also increasingly I think what we're doing a better job is now falling people across the world I mean, we've been doing for the last year, a lot of tuning between Australia, and the UK and the U S which of course.

Given that raw on zoom anyway is increasingly possible to do so does that give you a short answer mark yeah, yes. It does.

It really touches on some where I was going with the next part of the question was the geographic mix and given the differences that we're seeing in <unk>.

Demand and potential demand around where COVID-19 is allowing us to do on and not allowing us to do what are the other things I was curious about should we.

Was there anything that we should be thinking about as to the cadence of success fees during the quarter and I. Appreciate all the detail around some of the large engagements that you're having and the like.

How that figures into the guidance conversation I was wondering as to where Successories where maybe.

Abuse of the expectations or last year.

<unk>.

Success fees was actually at the lower end of what we typically expect you know usually its.

At the lows around three and on the high around 15 a quarter.

This quarter was just north of <unk>.

Okay.

Okay, great. Thank you very much.

Thank you Mark.

Thank you.

To ask a question. Please press Star then one.

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

Hi, good morning.

Andrew how are you your family your interest.

Hi, everyone.

Everyone, everyone is good and we're getting into the summer weather so.

Think I fall into the camp of being optimistic that you opened with but.

Yeah. Thanks for asking in terms of my questions. The first one I just I was just hoping you could add a little bit more color to your prepared remarks around F. L. C. Obviously, well above your expectations well above mine as well just wondering kind of if you could spend some more time on on the primary drivers there.

And the overall demand environment and pipeline.

Particularly relative to the fourth quarter, where you were already seeing some improvement.

All of that would be helpful.

So as I've said.

Andrew We're obviously delighted.

Right that are now very low.

Yeah.

Mali and Guinea preparing very good reports that they put on our website, where you got the long term trends on.

And you know that gives you a good visual then you look at that our utilization in the quarter was higher than Q1 last year.

So we are in Q1 last year.

Other than towards middle of March or towards the end of March rather than in Asia, but then that Nick was not much of from factor.

So.

$29 million of EBITDA utilization above where we were last year. This is we expected a gradual improvement we've already government. That's the message we're giving this as there's maybe one or two geographies wanted to sub practices on.

Not saying do you we can never do any better we of course, we will continue to try and do better but we are already getting that backlog were getting its snapping back. We also had some big wins in cases in certain areas such as facts.

So this this this this is a tremendous level of tremendous threshold that we have that for now.

Yes, maybe I can just add one word to that I'd say look I think.

We always had confidence in this business some of the businesses. This business. Another part on parts of our Econ business were incredibly slow last year.

Confidence that they were going to come back and some of what you've been seeing this quarter is just that realization I think adjusted faster and snapped back as RJ said.

And that was because of some working down some backlog in courts, but also the stack boom triggered some massive cases this quarter.

What surprised us.

And a good way, but underlying the snapback is the strengthening of our return to.

It's a great business returning to its roots.

But beyond that.

This quarter in terms of on.

The force of that happened this quarter, but I also just want to underscore that.

When we were at 30 something percent utilization last year for this business that wasn't normal it wasn't normal and I'm proud.

I'm proud of our team for sticking with it and working their way out of it.

Does that help me Andrew Yeah, no that is helpful. Thank you and then I'm going to ask a follow up on it might be a difficult question to answer I think its been asked.

A variety of different ways in the past, but now we've seen record M&A levels here to start the year certainly seems from my perspective. The momentum has continued here into the start of the second quarter. So just a multipart question on M&A I guess first did.

To the extent Q1 result, outperformed your own expectations, which which it sounds like they did is there any way to.

Quantify how much of that outperformance.

It's tied to better than expected M&A or transaction volumes and then second if you could speak to how you're envisioning that.

Is that part of your business are those parts of your businesses performing through the end of the year I know you didn't do anything with guidance, but.

I'm trying to trying to figure out what's what's baked in net.

Current numbers thanks.

Andrew Q1.

It was the highest I think my take on the quarterly if not first quarterly MMA by dollar volume in history.

For the World.

Some of them on 116 trillion.

Not only was it the highest but also in our sweet spot, which as you know the big M&A that most of that there was a much higher percentage of big M&A versus small amendment, because we play in the antitrust or merger and you know the bigger M&A answer to that we also play in cross border. It was much more of that so.

Just like we had an epic tailwind in restructuring in second quarter of last year. This is an epic tale with minimum Nate.

We can't predict how long it will last may it could last longer but we're just saying we don't know whether to last through this year and we are cautioning that this this was this was an epic tailwind.

Did we benefit from it absolutely and for example in corporate financing to go segment by segment and corporate financing restructuring transaction.

Transaction related businesses, typically 15% 20% of revenue.

The percentage would be a great outcomes moving 15%.

We are approaching 25, 30% of the off the wall of the revenues in that segment.

In in.

Technology.

We play in the second request.

Area and second review area, and we had one case, which was M&A driven case, which contributed just over 20% of the quarter's revenues of which several other cases too. So clearly that sort of thing is not not danone. One case typically doesn't make up 20% up on that case has ended.

In.

So those are those are those two it is economic consulting clearly clearly we are the number one.

Firm in the world on antitrust cases without a doubt.

So so there are some very large cases, both M&A and non M&A on that trust that we're working with that we expect we'll end this year now, but they've been six other cases that will replace those icon pillar.

Understood. Thank you very much for your time.

Thank you Andrew.

Thank you.

The next question comes from Dolby Shlomo from <unk> Securities. Please go ahead.

Thank you if I could ask another question about sort of strong capital markets any elements of that that you think may not be.

Debt durable in particular.

Curious about what your.

How big a driver specs have been given some emerging regulatory scrutiny and just kind of wondering to the extent those maybe borrowing future years IPO activity. Thanks.

Are they.

I don't know if theyre borrowing future. Your IPO I think people are writing about that I mean, obviously.

Or I mean, I think everybody on the call most slipped back bar, but what the specs anyway to say by private companies.

And.

And those that's the way essentially for those private companies to become public so.

The notion that this is this is it.

<unk> IPO.

I think it's a reasonable interest in.

And there's all that that's the case.

On.

And so.

Which business is get affected by IPO.

On our Stratcom business, certainly is affected by <unk> and a number of other businesses I think the broader question is that the dispatch activity cause.

Like an activity for us and for sure. It did I mean, one of the big issues in snacks or when is it on the spot buys we have a range of services that can help.

No problem.

So all the way from formation, all the way through but one of the most critical issues is on a Frac company buys a private company often that private company is not ready to be public.

They often don't have the SEC.

Having followed SEC protocol, they don't have many times the finance functions they need that the COVID-19.

On the capabilities and all of a sudden they're a public company all of a sudden they're going to become a public company. So there is a surge in demand for people, who can help a company on prime after they go public they may figure out they missed the SEC guidelines often before the transaction happens to get them to the SEC ready and clearly that caused a spike of activity that affected.

Both FSC and and CF on.

This quarter, we benefited from because we have really stepped up.

Sweet spot of our capability.

To your question.

You did thank you.

If I could ask a follow up question on you made some comments about court related activity. How would you characterize the rebound or said differently is there is there more normalization that remains to get back to pre COVID-19 court related business.

In addition to that if you could talk about if you're hearing from customers that that cases of settled over the course of the pandemic or is.

Is it more like a backlog so to speak is accumulated.

So there is a backlog that is getting addressed knowledge the point not all of it is in person, but the world has found its way around there are trials in Texas in person there are trials elsewhere in person, but theyre also trials taking place not in person so to the extent that your question is is everything absolutely normal.

They're not in person as acquired debt that's been I think free.

But absolutely normal that day part, but but in terms of activity. They are we are both Bolton Bolton on sea and importantly in our international arbitration business within the economic consulting.

Where we had weakness prior in both those areas the levels of activity are back those folks are busy those.

We are very busy in fact, so so those activity levels are back on the.

The way, they're doing that activity is still a combination of virtual and in person.

Thank you that's helpful.

Oh sure.

I'll ask a longer term question over five years or some long term view you can pick a different time frame. If you like what percentage of sales do you expect the company to derive from it.

I'm curious.

Even stepping out just from that geography, what are the margin implications of a mix shift favoring the international side of your business.

So on.

I think Mike can correct me if I'm wrong on the margin point, let me address that first and then talk to the broader question I don't think of expansion overseas there's fundamentally.

Worse than expansion on the U S or better than the expense on the U S. In terms of margin I don't say Oh, if we expand overseas our margins are going to crater, where our margins are kind of sore I mean any time, you're investing for growth you often cause.

And lose money the first.

New business area, Youre doing on new countries youre going into or whatever.

But our experience has been very good these last five years as we've grown EMEA.

Actually.

Improving the margins in EMEA.

What we're seeing so I don't see it as inherently dilutive in terms of growth expectations.

I think one of the things.

It's certainly incredible what we've been able to do overseas and you can look at EMEA I think we released the revenue numbers.

Don't think we release EBITDA numbers.

At least price if we're not something like three times the revenue from when I joined.

So that's.

And my aspiration is and I know our European team that is just the bloody beginning because we work we work on called ourselves in EMEA business, we were a U K debt through a London based business and we have a London based business with a subset of our capabilities. We are now increasingly in EMEA business, but not anywhere near as strong on the continent as we should.

But we have moved we are moving we've got really good teams on the continent even on.

A strong team in South Africa, both on we have a strong team in the middle East, but we are scratching the surface, but we are scratching hard and effectively I think there is enormous growth in EMEA, there's amount of flow in Asia. They have been.

From this position we've ever had in Australia, we have the best team we've ever had in Latin America, but I also want to say one of the most important things that change the trajectory of this company was the return of the U S to growth.

For a long time, the U S wasn't growing not organically and what we now have is a set of leaders who understand that we have.

Enormous opportunities to grow in U S. We grew.

Effectively the U S restructuring business, which is historically, our strongest business and and just.

Just by having leaders, who and supporting people with ambition.

That's behind our core and also invest in Adjacencies so on.

On.

I don't have I don't have preferred children I don't say Oh, my preferred child has to grow in Spain.

I think wherever we have teams with ambition on that.

On a reasonable plan.

Find them and so far that's shown our ability to grow every price I think this quarter RJ. It didn't every region growth.

It didn't have any recent growth this quarter and thats not true for every quarter, but over the period of time, we've been doing pretty well across a lot of places in the world. It was a long answer.

That's your question Tobey.

Thank you.

Within corporate finance restructuring could you describe the the growth or change in revenue in bankruptcy versus non bankruptcy work. Because you do have two pieces that are significant that kind of should be moving perhaps in opposite direction.

Okay.

Let me just the peak Dolby last year in Q2.

In Q2 last year restructuring was almost 70% of the revenue maybe.

Maybe a little bit higher.

In corporate financing restructuring.

Now, it's less than 50% and as I pointed out there are cases, continuing from prior periods. The bigger cases take some time, sometimes to resolve and the main point I'm trying to communicate is that the number of new cases is drying up not that we're losing share not at all but.

There's just fewer defaults.

That makes sense do you have an update for us on the international.

Moratorium and.

When those are poised to lapse from perhaps start contributing a little bit more.

Right, so that could be the other side of it.

Moratoriums are lifted in the UK, and Australia, and Germany. Other places on the solvency and those havent get lifted their lifted in like in Australia, and barks, they've lifted some aspects have been eased up.

So certainly that good companies are also strengthened and liquidity is available to just lifting the moratorium is not necessarily going to result.

In bankruptcy just to note.

So that's that's the update did I answer your question was there a second part to it.

That was my last question is within F. L. C. Could you describe what is driving the demand for health care solutions and thank you for your time.

In the U S. It's the U S. Those of her team has done a great job on those hospitals that word because opening up again so.

That's part of it.

Build on that though I think it actually yes. The hospitals are working on but I feel really good about it I think we increased in.

In the midst of the worst quarters in that company and to my knowledge that segment's history.

We invested in I think we increased our SMB accounts by 60 or 70%.

And so some of this of the market's coming back and some of it is the fact that our team and the courage to make a firm argument for investment in a bad quarter.

And we went ahead and debt.

And so some of that is the market I got to tell you some of that Charles on the team deserve credit for as well and I'm excited about where they are taking the business and let me actually views that the bridge back to your restructuring thing.

To underscore what I just said look.

Okay.

You can look at the external ratings and plummeting expectations for restructuring and so we could have a lot of jobs rolled off and.

Our restructuring business be just.

Really.

Falloff, a lot, particularly because of the fixed nature of our business I just wanted to underscore.

Is a great business, because it's a great business and we will continue to support it and frankly I tell the people in that business. If this creates an opportunity to get talent.

They'll get talent, because we're not in the business for a couple of quarters, we have overtime taken a great business meeting.

Better in the United States more global around the world and we're going to invest in that business I know it hasnt bad quarters that'll be bad.

But it will be.

Bulwark of debt the company's future.

Forward to and so just like we did in health solutions last year in some parts of <unk>, if we have that opportunity.

Restructuring this year, even if this week, we'll do that too.

But that I think I'd, probably more than answered your question Tobey.

You did but you prompted another one that was was that a group lift out or did you just higher sort of broadly.

From a lot of sources to get those.

Yes.

The second the team did the work to find great talent and attract them and I think it was one by one I don't think there were any.

Paris, if I remember right.

It was it was one by one people talking to great people, and saying, where we're trying to take the business and attracting them really really nice margin.

Yes.

Shall we take the next question.

<unk>.

Thank you.

The next question is from the line of critic from Sidoti <unk> Company. Please go ahead.

Hi, Good morning, again, I realized when I was on earlier that I forgot to ask about the if you could give some commentary around the acquisition pipeline and maybe what that looks like both domestically and internationally.

So.

Mark.

But he is a closet consulting so there's no shortage of acquisition opportunities.

But we are very very low.

I mean, we are not going to do.

Just purchase for the sake of purchasing an estimate since for US on we have very very exacting standards on what makes sense for us, but there's no shortage of opportunity.

Marc anything else.

Sorry that was still muted my apologies I was sort of curious as to maybe what the.

What you're seeing as far as those those valuations me what they look like.

Changed much.

Are we seeing better opportunities abroad, or or is it similar to what we've seen over the last few quarters. Thanks.

Weigh in on this I think look the.

There are a couple of different issues that.

The breath and really get I guess I've got a solicitation I think every day for some sort of potential acquisition. There is plenty of acquisitions out there.

I think there are two two things that caused us to screen them down the first and most important is.

We're not in doing acquisitions, but hope to pump up our quarterly earnings or next year's earnings we want to have somebody who is kind of.

People that are excited to work with that are going to have a whole they're going to stay here for the duration in their next generation of people are going to grow up and become really great folks. So we're looking for long term partners just.

Just like we do let me do a lateral hires where when we grow people up and that's a that's a much higher hurdle because you have to see the way youre going to work with them and you have to like them.

So you have to yes.

And.

Oh, that's not usually on the little blurb that the investment bankers give us you have to do.

Some digging to figure that out the other issue, though that you raise is pricing and I would say valuations in general have gone nuts.

Over the last while and so.

I don't think we I don't think we participated with.

I don't know if it's I don't think.

Great and then any auction, but certainly I haven't gotten any of our acquisitions through an option I mean, where we usually have done is.

We're not we're not paying the top of the market.

Okay.

While we have gotten terrific people when the fed has been so good that people can see a much better future on our platform and an excitement to help build something and that's where most of our that's where all of our acquisitions I think I've come thus far.

So do I dream of the day when valuation.

Drop and then we can then only the first screen becomes one sure but right now that both screens are operating.

Does that help.

Yep, absolutely makes perfect sense. Thank you for your time.

Thank you.

But on another question.

Listen nobody in the queue that on the last one.

So let me just say thank you all for your continued attention and support to our company from COVID-19. So all the struggles in asbestos you've been working through from COVID-19.

Much wish all of you good luck in getting access to the vaccines and from getting out to the other side of it. Thank you again.

Thank you very much.

The conference call has now concluded. Thank you for attending today's presentation you may now disconnect.

Okay.

[music].

Good morning welcome.

Welcome to the F. B I consulting first quarter 2020 Bond Holdings conference call.

All participant lines will be in the listen only mode.

Should you need assistance please signal.

On a conference specialist by COVID-19.

Spiking up.

Based on <unk>.

It won't get opportunity to our strength.

You asked a question you May press.

And what's the quality of our property taxes.

From a part of your question Keith.

Debt to.

But the standard.

That's been going on.

Okay.

On the Hawkes Vice President of Investor Relations. Please go ahead.

Good morning, welcome to the STI consulting conference call to discuss the company's first quarter 2021 earnings results as reported this morning.

Management will begin with formal remarks, after which they will take your questions.

Crude statements concerning plans 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.

Copy of which is available on our website at Www Dot F T I consulting dot com as well as other disclosures 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 date on 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 our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures investors should review the press release and the accompanying financial tables that we issued this morning, which includes the reconciliation.

Lastly, there are two items that are 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 first quarter 2021 results on.

With these formalities out of the way I'm joined today by Steven Gunby, Our President and Chief Executive Officer, and Ajay <unk>, our Chief Financial Officer.

At this time I will turn the call over to President and Chief Executive Officer, Steve Gunby.

Okay.

Thank you Paul.

Thanks, guys on off mute.

Our change.

To everyone and thank you all for joining us on it.

To start with a couple of words on COVID-19, even though I'm sure all of you like I.

So that's at the.

On the topic and the issue I.

I hope everyone on this call continues to be well.

All of US on this call are increasingly able to get back from weighted.

So those of us from the U S.

We can sense at least at the beginning.

The change in mood.

At least for me, it's wonderful to see the rollout of vaccines.

No I don't know anybody who doesn't get incredibly excited when we see our fab friends or family members getting vaccinated.

And I think that's true for many of you as well and for many people.

In some other parts of the world to particularly the U K.

I think on the other hand, most of US know the story is not as true every place around the world when I talk to colleagues on the Continental Europe.

Story feels somewhat in line, but also somewhat different because a lot of frustration about performance with the rollout on the Max.

Pete.

And it feels very different very different last week, when I talk with colleagues from Latin America from colleagues in India.

If we look at the statistics I think we see that global cases globally total cases, right now are actually at the highest the highest levels we have ever seen the world has ever seen.

Of course, the rollout of the vaccine from happening around the world is happening at very different paces, depending on where you sit.

The good news I think is that all at this point see a light.

See that light at the end of the tunnel and I'm. So excited about on that light fuels close.

I just wanted to also share my my colleagues Hearts and thoughts are also with all of those.

<unk>.

Within our firm and within Yours Alright.

Still feels further away.

And I know that sentiment I'm sure those from any of you on this call.

Yeah.

Let me turn to a greater subjects, which is our quarter our results I'm sure as many of you saw on our press release this quarter.

It was a great quarter.

It had some positive surprises in it.

One can't count on recurring which I will talk about but even normalize for those it was a terrific quarter.

I doubt very many people.

On years ago, or even a few years ago.

The thought that in a period of restructuring as an industry is down substantially and our restructuring business is well off the peak.

Fall last year, and we would produce a halfway decent quarter, let alone on a quarter like this.

For the quarter was spectacular.

Let me, however, say something that we've discussed many times quarters are fickle.

Markets can fluctuate up and down big jobs can come and go cases settlement continuously investments to drive future growth, although critical for the future can negative cash.

<unk> quarters in the short term the quarters to me as excited as you can see about a quarter.

Fact never good measures of performance for this company good quarter or bad quarters.

And then what is much more powerful than this quarter or any quarterly results due to the strength of the longer term trajectory that we have been on.

And then I believe we are on as well as the reasons for that great trajectory compared to 10 years ago.

I guess the quarter.

It's more powerful and restructuring than it ever has been is also much broader much more powerful.

Much breath.

On the experience and capabilities to serve our clients on a broader range of challenges and opportunities than ever.

Yes, it's powerful and restructuring also in transactions in office from the CFO and so many other services.

And you can say the same for all of our business segments.

The way, we've gotten here at the basis for that.

These terrific teams reinvesting in our core reinvesting behind our good businesses, but also looking where our clients have needs and broadening our business most of our offerings and our geographical footprint those actions and our collective commitment to bet.

I am great positions and great people.

EMEA has changed our fundamental trajectory and resilience.

For this company.

I mean, we have shown over the past several years debt. If we do the right thing to do.

We do the right thing if we commit to our to position our business in the right way.

Support great people for long term sustainable growth.

But we can still have bad quarters.

For any extended period of time, we control our destiny.

We control our destiny.

In a way that allows us to serve evermore, our clients' most important needs across a wider range of circumstances, not just in things like restructuring, but an antitrust the major M&A on cyber security and snacks and public affairs and global Cross border E destinations and you can go on and that to me that growth and capabilities of our people that ability to extend.

Our firm innovate.

This is far more exciting in a much more durable basis.

Our excitement and success than any any given quarter's results.

Well I'm not going to talk anymore about the quarter, Ajay well, let me close by taking a moment.

So thank and congratulate.

My colleagues for their efforts for their conviction behind their businesses.

Recognize that the results of their conviction and efforts.

What those results have been for our clients our shareholders.

Our communities and each other.

One on particularly thank our colleagues.

So the energy and <unk> that they have shown on this past year.

And our company and I'm sure. Many of you on this calls companies isn't so hard to deliver.

During COVID-19 and our firm good deliver.

It's been so frustrating to see that the white there at the end of the tunnel, but see how slow its been approaching that in some places the emotional fortitude.

Our people have shown during this period to keep our company moving to keep connected with each other.

It remains supportive to each other dedicated to our clients.

It's been wonderful to see as the CEO.

But actually equally as much as it's just a human being.

So I'm going to say in addition to congratulations.

I want to express my Pride.

And my colleagues can say, thank you to each of you across the globe.

With that I'll turn it over to Ajay to take you through the quarter in more detail.

Yes.

Thank you, Steve and good morning, everybody.

In my prepared remarks, I will take you through our company wide and segment results and discuss guidance for the full year.

I'm delighted to report year over year double digit revenue growth this quarter.

On our last earnings call in February we said that strong M&A activity would favorably impact our economic consulting technology and strategic communications segments as well on our transactions business within our corporate financing restructuring segment.

Conversely, we had also expected weak mentioned demand for our restructuring services.

Both trends are good and were deeper than we anticipated.

And in forensic and litigation consulting or <unk> see the segment, which was most impacted by COVID-19 in 2020.

Obviously, we are very pleased with these results.

First quarter of 2021 revenues of $686 $3 million were up $81 $7 million or 13, 5% GAAP EPS of $1 84, compared to $1 49 in the prior year quarter GAAP EPS included $2 $3 million on.

Non cash interest expense related to our convertible notes, which decreased EPS by five percentage.

Adjusted EPS of $1, 89, which excludes the noncash interest expense compared to $1 63 in the prior year quarter.

Net income of $64 5 million compared to $56 7 million in the prior year quarter.

This increase was due to higher operating profits and our economic consulting.

<unk> and technology segments, which was partially offset by lower operating profit and corporate finance and restructuring.

SG&A of $126 $5 million was 18, 4% of revenues and compares to SG&A on a $127 million or 21% of revenues in the first quarter of 2020.

SG&A was flat year over year from primarily because lower travel and entertainment expenses offset higher costs related to the increase in non billable head count.

Double digit revenue growth and flat SG&A expenses more than offset higher billable head count related costs, resulting in first quarter 2021, adjusted EBITDA of $99 5 million.

An increase of 19, 5% compared to $83 2 million in the prior year quarter.

Weighted average shares outstanding our ratio for Q1 of $35 1 million shares declined $3 1 million shares compared to 38 2 million shares in the first quarter of 2020.

For the quarter, our convertible notes had a potential dilutive impact on EPS of approximately 450000 shares embraced so as our share price on average of $118.44. This past quarter was above the $101 and 38 conversion threshold.

Billable head count at the end of the quarter increased by 562 professionals or 12, 3%. This increase is largely due to 34, 9% billable head count growth and corporate financing restructuring.

Which includes both organic hiring as well as the addition of 151 billable professionals from the acquisition of Delta partners in the third quarter of 2020.

Sequentially billable head count increased by 75 professionals are one 5%.

Now turning to our performance at the segment level and corporate financing restructuring revenues of $226 $2 million increased $18 5 million or eight 9% compared to the prior year quarter.

Acquisition related revenues contributed $16 million in the quarter.

Adjusted segment EBITDA of $37 4 million or 16, 6% of segment revenues compared to $48 9 million or 23, 6% of segment revenues in the prior year quarter.

The year over year decrease in adjusted segment EBITDA was due to flat revenues with a four 9% increase in billable headcount and related compensation expenses and a 10 percentage point decline in utilization.

Turning to forensic and litigation consulting.

Revenues of $158 million increased two 2% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for health solutions and investigation services, which was partially offset by a $4 $1 million decline in <unk>.

Pass through revenues and lower realized pricing for our data and analytics services.

Adjusted segment EBITDA of $29 4 million or 19, 5% of segment revenues compared to $21 2 million or 14, 4% of segment revenues in the priority on quarter.

<unk> work and a nine percentage point increase in utilization.

Our economic consulting segment reported record revenues.

<unk> and demand from international Arbitration services.

Adjusted segment EBITDA of $26 $6 million or $15 seven percentage of segment revenues compared to $12 7 million or nine 6% of segment revenues in the prior year quarter.

In technology, we also had a record quarter.

Our revenues increased 55, 3% to $79 5 million compared.

Compared to the priority of corridor to Inc.

Increase in revenues was due to a surge in demand for M&A related second request services.

Adjusted segment EBITDA of $21 6 million or 27, 2% of segment revenues compared to $14 5 million or 24, 7% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was due to higher revenue.

<unk>, which was partially offset by an increase in compensation.

Sequentially technology revenues increased $28 million or 35, 5% and adjusted segment EBITDA improved $11 $4 million.

Primarily due to a large second request engagement.

Strategic communications revenues increased three 7% to $65 million compared to the prior year quarter.

During the quarter, we experienced increased demand for our public affairs services, which was offset by a $2 million decline in pass through revenues.

Segment, EBITDA of $10 4 million or 17, 2% of segment revenues compared to $8 8 million a 15 percentage of segment revenues on the priority in quarter increase.

The increase in adjusted segment EBITDA was primarily due to lower SG&A expenses.

Let me now discuss a few cash flow few key cash flow and balance sheet items.

As is typical we paid the bulk of our bonuses in the first quarter.

Net cash used in operating activities of $166 6 million compared to $123 $6 million from the prior year quarter.

A year over year increase in net cash used in operating activities was largely due to an increase in salaries related to headcount growth and higher annual bonus payments, which was partially offset by an increase in cash collected.

During the quarter, we spent $46 $1 million to repurchase 421725 shares at an average price per share of a 100 on the $9.37.

As of the end of the quarter approximately $167 1 million remained available for stock repurchases under our current stock repurchase authorization.

Total debt net of cash of $252 8 million at March 31, 2021, compared to $143 2 million at March 31, 2020, and $21 $3 million at December 31, 2020.

On a sequential increase was primarily due to $170 million of net borrowings under our bank revolving credit facility to fund cash used in operating activities primarily for annual bonus payments.

Turning to guidance first let me remind you of the guidance for 2021 we provided in February.

Revenues of between $2, $5 75 billion and $2 $7 billion.

<unk> of between $5 60.

$6 on 30 <unk>.

And adjusted EPS of between $5, a day and $6 50.

I believe at this juncture. It is important that I share with you why we believe the exceptional strength. We have demonstrated in Q1 may not necessarily repeat in subsequent quarters. This year.

First we offered the most spot and fixed cost business as depot and real estate represents some of our largest expenditures.

These costs are not variable in the short term so small shifts in revenues have a much larger impact positively or negatively on EPS.

Second we are at our core a large job from and when matters and they may not immediately be replaced.

This quarter for example, our results were boosted by several exceptionally large engagements that were driven by record levels of M&A activity that may not be sustained through the year.

In technology for example, we had one engagement, which concluded during the quarter that represented over 20% of total quarterly segment revenues.

In economic consulting as well we have several large engagements that are expected to conclude during the year.

Even our restructuring revenue this quarter was boosted by revenue from large matters that began last year and have either now ended are will likely end this year.

Meanwhile, credit markets remain in an accommodative mode, and hence the number of stressed and distressed issues remain low.

Moody's now expects the trailing 12 months speculative grade global default rate to fall to three 2% by the end of the year down from six 8% forecast that they provided in December.

<unk>, which measures defaults by dollar volume now expects that high yield default rates for the U S of 2% by year end. These.

These forecasts point to lower demand for restructuring services.

At least the balance of this year.

Third this quarter, we were delighted by results in epilepsy or business, most negatively impacted by COVID-19 in 2020.

That being said with the continued uncertainty of the pandemic and certain geographies and experiencing third and fourth waves of infections. We remain cautious as we may be impacted in certain locations by COVID-19 related closures and travel restrictions, which can impact our ability to sell.

All of our clients.

Paul on.

Our non billable travel and entertainment expenses are typically around one 5% on revenue.

At the moment this expense is largely non existent.

As travel and entertainment is severely curtailed in most geographies.

Lastly, our fourth quarter is typically our weakest quarter with the holiday season and compensation true ups at the end of the year.

In 2020 on fourth quarter results were exceptional and Bob.

Because of the implementation of a cross border tax strategy, the more rational expectation would be for us seasonally weaker Q4, as many of our practitioners take well earned vacations.

Now with all those risks considered clearly the great performance in Q1 gives us a very good head start for achieving our guidance.

Once we have another quarter under our belt at the end of the second quarter, we will revisit guidance as is typical to see if any changes are warranted.

Complex business challenges, regardless of business cycle.

More than ever I am convinced that the key to our success is the strength of our people and their relationships both of which are exceptionally strong.

Third our leadership team is focused on driving growth with strong staff utilization and finally on our balance sheet is enviable and we have demonstrated the ability to boost shareholder value through share buybacks debt reduction organic growth and acquisitions.

Matt lets open the call up for your questions.

Thank you very much.

We will now begin the question and answer session.

To ask a question you may price then.

One on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys.

To withdraw your question. Please press Star then two.

At this time, we will pause momentarily to assemble on wholesale.

We'll take our first question from the line of Marc Riddick from.

Sidoti <unk> company. Please go ahead.

Okay.

Hey, good morning, everyone.

Mark how are you.

Very good yourself.

Fine Thank you.

So I wanted to just go over a couple of things debt.

Uh huh.

Get a sense of maybe some of the things that might be taking place during the quarter as far as dealing with those those demand shifts that you're seeing.

Were there any changes in the head count as far as shifting from one to another to accommodate rising demand in one place from falling demand on the mother and then I have a couple of follow ups after that.

Yes.

The answer is yes.

I don't think we structurally shifted any bodies between segments did we this quarter.

But look.

What we have for example in Corp fin is well.

I think what carland appropriately said a third of our people work on one side the third of our people work on another site and about a third of that people can go back and forth and I don't know if thats exactly right, but last year.

The restructuring volume hit we were able to take some of the debt.

Financially very literate people on the non restructuring side and put them on cases with the restructuring team.

On this quarter, whereas restructuring things weaken in certain transactions went up we were able to flow people back the other way.

We can't we're not homogenous business, we don't low people from dot com to E com.

But we do flow people with the right capabilities across within segments and actually between <unk> and CF.

And also increasingly I think what we're doing a better job is now falling people across the world I mean, we've been doing for the last year, a lot of teaming between Australia, and the UK and the U S which of course.

Given that we're all on zoom anyway.

As increasingly.

Possible to do so does that give you.

The answer Mark Yeah, yes, it does.

It really touches on some where I was going with the next part of the question was the geographic mix and given the differences that we're seeing in <unk>.

Demand and potential demand around where COVID-19 is allowing us to do on and not allowing us to go what are the other things I was curious about.

How that figures into the guidance conversation I was wondering as to where Successories where maybe.

Abuse of your expectations or last year.

<unk>.

Success fees was actually at the lower end of what we typically expect usually it's.

At the lows around three in the high around 15 at quarter.

This quarter was just north of <unk>.

Okay.

Okay, great. Thank you very much.

Thank you Mark.

Thank you.

To ask a question. Please press Star then one.

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

Hi, good morning.

Andrew how are you your family your interest.

Hi, everyone.

Everyone, everyone is good and we're getting into summer weather so.

Think I fall into the camp of being optimistic that you opened with but.

And the overall demand environment and pipeline.

Particularly relative to the fourth quarter, where you were already seeing some improvement.

All of that would be helpful.

So as I've said.

Were obviously delighted.

There are now very low.

Okay.

Molly and her team preparing very good reports that they put on their website, where you've got the long term trends on.

And that gives you a good visuals and you look at that on utilization in the quarter was higher than Q1 last year.

So we are in Q1 last year.

Other than towards middle of March on towards the end of March other than in Asia, but then that Nick was not much of a factor.

So.

$29 million of EBITDA utilization above where we were last year. This is we expected a gradual improvement we've already got net that's the message we're giving this as there's maybe one or two geographies wanted to sub practices on.

Not saying do you can never do any better we of course, we will continue to try and do better but we are already getting that backlog were getting its snapping back. We also had some big wins in cases in certain areas such as specs.

<unk>.

This is a tremendous level of tremendous threshold that we have out from now.

Yes, maybe I can just add one word to that I'd say look I think.

We always had confidence in this business and some of the business as this business another part from <unk>.

Parts of our E comm business, we're incredibly slow last year, we had confidence that they were going to come back.

And some of what you've been seeing this quarter is just that realization I think adjusted faster and snapped back as RJ said.

And that was because of some working down some backlog in courts, but also the backroom triggered some massive cases this quarter.

What surprised us.

On a good way, but underlying the snapback is the strengthening of our return to.

It's a great business returning to its roots.

We went beyond that.

But this quarter in terms of.

Some of the force of that happened this quarter, but I also just want to underscore that.

When we were at 30 something percent utilization last year for this business that wasn't normal it wasn't normal and I'm proud.

Out of our team for sticking with it.

Working their way out of it.

Yeah.

Does that help me Andrew Yeah, no that is helpful. Thank you and then I'm going to ask a follow up on it might be a difficult question to answer I think its been asked.

To the extent Q1 result, outperformed your own expectations, which which it sounds like they did is there any way to.

Quantify how much of that outperformance.

It's tied to better than expected M&A or transaction volumes and then second.

If you could speak to how you're envisioning that.

That part of your business are those parts of your businesses performing through the end of the year I know you didn't do anything with guidance, but.

Trying to trying to figure out what what's baked in net.

Current numbers thanks.

Andrew Q1.

It was the highest I think pointing on the quarterly if not first quarterly MMA by dollar volume in history.

For the World.

Moving on 116 trillion.

Not only was it the highest but also in our sweet spot, which is the big M&A that most of that there was a much higher percentage of big M&A versus small amendment, because we play in the antitrust or merger and the bigger M&A answer to that.

We also play in cross border it was much more of that so.

Just like we had an epic tailwind in restructuring in second quarter of last year. This is an epic tale with no M&A.

We can't predict how long it will last it may it could last longer but we're just saying we don't know whether to last through this year and we are cautioning that this this was this was an epic tailwind.

Did we benefit from it absolutely.

For example in corporate financing go segment by segment and corporate financing restructuring.

Transaction related business is typically 15%, 20% of revenue I mean, 20% would be a great outcome from the 15% hurdle.

We are approaching 25, 30% of the off the wall of the revenues in that segment.

In.

Technology.

We play in the second request.

Area and second review area, and we had one case, which was M&A driven case, which contributed just over 20% of the quarter's revenues of which several other cases too. So clearly that sort of thing is not not the norm. One case typically doesn't make up 20% up on that case has ended.

In.

So those are those are those two it is economic consulting clearly clearly we are the number one.

Firm in the world on antitrust cases without a doubt.

So so there are some very large cases, both M&A and non M&A on debt Trust that we are working with that we expect we'll end this year now, but they've been six other cases that will replace those icon pillar.

Understood. Thank you very much for your time.

Thank you Andrew.

Thank you.

The next question comes from Dolby Shlomo from <unk> Securities. Please go ahead.

Thank you if I could ask another question about sort of strong capital markets any elements of that that you think may not be.

Debt durable in particular.

Curious about what your.

How big a driver specs have been given some emerging regulatory scrutiny and just kind of wondering to the extent those maybe borrowing future years IPO activity. Thanks.

Okay.

I don't know if theyre borrowing future. Your IPO I think people are writing about that I mean, obviously.

Or I mean, I think everybody on the call knows slipped back bar, but what the specs.

By private companies.

And.

And those that's the way essentially for those private companies to become public. So I noticed the notion that this is this is an effective IPO.

I think it's a reasonable inference.

And there is on.

Thats the case.

On.

And so which debt.

Each business has got affected by IPO.

On our Strat comm business certainly is affected by our dealers and number of other businesses I think the broader question is the spec activity cause.

Like an activity for us and for sure. It did I mean, one of the big issues in Spain.

Fax or when.

On the spot buys we have a range of services that can help.

No problem.

But all the way from formation, all the way through but one of the most critical issues is on a snack company buys a private company often that private company is not ready to be public.

We're often don't have the SEC.

Having followed SEC protocol, they don't have many times the finance functions they need that.

On the capabilities and all of a sudden they're a public company all of a sudden they're going to become a public company. So there is a surge in demand for people, who can help a company on price after they go public and they figure out they missed the SEC guidelines often before this transaction happens to get them to be SEC ready and clearly that caused the spike of activity that affected.

Both MLC and Mcf.

This quarter, we benefited from because we are really.

Sweet spot of our capability.

To your question.

You did thank you.

If I could ask a follow up question on <unk> you made some comments about court related activity.

Or would you characterize the rebound or said differently is there is there more normalization that debt remains to get back to pre COVID-19 court related business.

In addition to that if you could talk about if you're hearing from customers that that cases of settled over the course of the pandemic or.

Is it more like a backlog so to speak is accumulated.

So there is a backlog that is getting addressed now is the point not all of it is in person, but the world has found its way around there are trials in Texas in person there are trials elsewhere in person, but theyre also trials taking place not in person so to the extent that your question is is everything absolutely normal.

They're not in person as acquired debt that's been I think.

Absolutely.

Absolutely normal that day part, but but in terms of activity. They are we are both Bolton Bolton on C and importantly in our international arbitration business within the economic consulting where we had weakness prior in both those areas the levels of activity are back those folks on.

Busy those.

A very busy in fact, so so those activity levels are back.

The way they are doing that activity is still a combination of virtual and in person.

Thank you that's helpful.

<unk>.

Alright.

I want to ask a longer term question over five years or some long term view you can pick a different time frame. If you like what percentage of sales do you expect the company to derive from EMEA and I'm curious.

Even stepping out just from that geography, what are the margin implications of a mix shift favoring the international side of your business.

So on.

I think Mike.

Correct me, if I'm wrong on the margin point, let me address that first and then talk to the broader question.

Don't think of expansion overseas as fundamentally.

Worse than expansion on the U S or better than the expense on the U S. In terms of margin I don't say Oh, if we expand overseas our margins are going to crater, where our margins are kind of somewhere I mean anytime you're investing for growth.

Boston.

Moving money first.

New business area, Youre doing on new countries youre going into or whatever.

Our experience has been very good these last five years as we've grown EMEA.

Actually.

Improving the margins in EMEA.

That's what we're seeing so I don't see it as inherently dilutive in terms of growth expectations.

I think one of the things.

Certainly.

Incredible what we've been able to do overseas and you can look at on the I think we released the revenue numbers I don't think they release EBITDA numbers.

Are we surprised if we're not something like three times the revenue from when I joined.

So that's.

That's incredible and my aspiration is on I know our European team is it that is just the bloody beginning because we were we were called ourselves in EMEA business. We were a U K debt, we were a London based business and we have a London based business with a subset of our capabilities. We are now increasingly in EMEA business, but not anywhere near as strong on the continent.

As we should be but we have moved we are moving we've got really good teams on the continent, even at a <unk>.

Strong team in South Africa, I mean bolt on.

We have a strong team in the middle East, but we are scratching the surface, but we are scratching hard and effectively I think there is enormous growth in EMEA. There was a modest growth in Asia, we have the strongest position we've ever had in Australia. We have the best team we've ever had in Latin America, but I also wanted to say one of the most important things that change the trajectory of this company was the return of the U.

Less to growth from <unk>.

A long time, the U S wasn't growing not organically and what we now have is a set of leaders who understand that we have enormous opportunities to grow the U S. We grew.

Secondly, the U S restructuring business, which was historically, a strong business and and.

Just by having leaders, who and supporting people with ambition.

That's behind our core and also invest in Adjacencies so on.

On.

I don't have I don't have preferred children I don't say Oh, my preferred child has to grow in Spain.

I think wherever we have teams with ambition on that.

Reasonable plan on a week.

Find them and so far that's shown our ability to grow every price I think this quarter RJ. It didn't every region growth.

There's every reason to grow this quarter and that's not true for every quarter, but over the period of time, we've been doing pretty well across a lot of places in the world that was a long answer.

Rest of your question Tobey.

Thank you.

On.

Within corporate finance restructuring could you describe the the growth of our change in revenue in bankruptcy versus non bankruptcy work. Because you do have two pieces that are significant that kind of should be moving perhaps in opposite direction.

Okay.

And let me just the peak Dolby last year in Q2.

In Q2 last year restructuring was almost 70% of the revenue.

Maybe a little bit higher.

In corporate financing restructuring.

Now, it's less than 50% and as I pointed out there are cases, continuing from prior periods. The bigger cases take some time, sometimes to have resolved and the main point that I'm trying to communicate is that the number of new cases is drying up not that we're losing share not at all but.

There's just fewer defaults.

That makes sense do you have an update for us on the international.

Moratorium and.

When those are poised to lapse and perhaps start contributing a little bit more.

Right, so that could be the other side of it.

So certainly that could but companies are also strengthened and liquidity is available to just lifting the moratorium is not necessarily going to result.

In bankruptcy just to note.

So that's the update did I answer the question was there a second part to it.

So that was my last question is within <unk> could you describe what is driving the demand for health care solutions and thank you for your time.

In the U S. It's the U S. Those of her team has done a great job on those hospitals that work because opening up again.

<unk>.

That's part of it.

Can I build on that though I think look on it.

Actually yes, the hospitals are working on what I feel really good about it I think we increased.

In the midst of the worst quarters in that company and to my knowledge that segment's history.

We invested in I think we increased our SMB accounts by 60 or 70%.

And so some of this is the market's coming back and some of this is the fact that.

Our team and the courage to make a firm argument for investments in a bad quarter.

And we went ahead and debt.

And so some of that is the market I got to tell you some of that Charles on the team deserve credit for as well and I'm excited about whether they've taken the business and let me actually views that the bridge back to your restructuring thing.

To underscore what I just said look.

Okay.

You can look at the external ratings and plummeting expectations for restructuring and so we could have a lot of jobs roll off on <unk>.

Our restructuring business B J.

Really.

Falloff, a lot, particularly because of the fixed nature of our business I just wanted to underscore.

Is a great business, because it's a great business and we will continue to support it and frankly I tell the people in that business. If this creates an opportunity to get talent.

You'll get talent, because we're not in the business for a couple of quarters, we have overtime taken a great business meeting.

Better in the United States more global around the world and we're going to invest in that business I know it hasnt bad quarters that'll be bad.

But it will be.

A bulwark of the company's future going forward too and so.

Just like we did in health solutions last year in some parts of that but if we have that opportunity.

<unk>.

Restructuring this year, even if this week, we'll do that too.

But that I think I, probably more than answered your question Tobey.

You did but you prompted another one was that a group lift out or did you just higher sort of broadly.

From a lot of sources to get those.

On this.

Second the team did the work to find great talent and attract them and I think it was one by one I don't think there were any.

Spares, if I remember right.

It was it was one by one people talking to great people, and saying, where we're trying to take the business and attracting them really really nice margin.

Shall we take the next question please.

Thank you.

The next question is from the line of critics from Sidoti <unk> Company. Please go ahead.

So.

Mark and free.

But he is a classic consulting so there's no shortage of acquisition opportunities.

But we are very very well.

We are not going to do.

Purchase for the sake of purchasing an estimate since for US on we have very very exacting standards on what makes sense for us, but there is no shortage of opportunity.

Marc anything else.

Sorry that was still muted my apologies.

Curious as to maybe what the.

What you're seeing as far as those those valuations maybe what they look like on <unk>.

Changed much.

Are we seeing better opportunities abroad, or or is it similar to what we've seen over the last few quarters.

Look I'll weigh in on that I think look the.

There are a couple of different issues that they're supposed to.

Brad I don't know yet I guess I got a solicitation I think every day for some sort of potential acquisition theres plenty of acquisitions out there.

I think there are two two things that caused us to screen them down the first and most important is.

We're not in doing acquisitions, but pump up our quarterly earnings or next year's earnings we want to have somebody who is kind of.

We think people are going to be excited to work with that are going to add a whole theyre going to stay here for the duration in their next generation of people are going to grow up and become great. Great folks. So we're looking for long term partners.

Just like we do when we do a lateral hires where when we grow people up and that's a that's a much higher hurdle because you have to see the way youre going to work with them and you have to like.

So you have to.

And.

That's not usually in their little blurb that the investment bankers go back to how we have to do some digging to figure that out.

Other issue, though that we raised is pricing and I would say valuations in general have gone nuts.

Over the last while and so.

I don't think we how can we participate in it I don't know if.

I don't know who participated on any auction, but certainly haven't gotten any of our acquisitions through an option I mean, where we usually have done as well.

We're not we're not paying the top of the market.

While we have gotten terrific people when the fit has been so good that people can see a much better future on our platform and an excitement to help build something and Thats, where most of our that's where all of our acquisitions I think I've come thus far.

Do I dream of the day when valuation.

The drop and then we can then only the first screen becomes one sure but right now they're both screens are operating.

Does that help.

Yes, absolutely it makes perfect sense. Thank you for your time.

Thank you.

Any other questions.

Listen nobody in the coupon on that was the last one.

Let me just say thank you all for your continued attention and support to our company from COVID-19. So all the struggles in asbestos you've been working through from COVID-19.

I very much wish all of you good luck in getting access to the vaccines and from getting out to the other side of it.

You again.

Thank you very much.

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