Q4 2021 FTI Consulting Inc Earnings Call

February 24, 2022

Welcome to the F T I consulting fourth quarter and full year 2021 earnings conference call.

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Please note that 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.

Thank you good afternoon, welcome to the MTI consulting conference call to discuss the company's fourth quarter and full year 2021 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 $19 34 that involve risks and uncertainties forward looking 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 ESG related matters and other <unk>.

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 Investor Relations website at Www Dot STI.

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 2021.

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 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 include the reconciliations.

Lastly, there are two items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation, and an excel and PDF of our historical financial and operating data well.

You've been updated to include our fourth quarter and full year 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 Investor Relations section of our website.

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

Thanks, Molly Molly can you hear me okay.

Okay.

Well good afternoon to everyone and thank you all for joining US let me start with a couple of preliminary remarks before we get into it.

First of all thank you all for juggling your time I know that we had to at the last minute switch. This time on this and everybody on this call and for the calendar. So.

Apologize for any inconvenience and want to express.

Our appreciation for you all struggling your calendars to be here.

Second my second point was going to be I thought a positive point I was kind of maybe for the first time ever.

However begin to talk a little positively on the Covid situation.

And express my hope that.

We are finally in many places around the world and I Hope, where you are starting to see some movement towards normality.

I still hope that but I think.

The events in the Ukraine in the last little while.

Remind us that the hope to normality. Unfortunately is not just limited to COVID-19 .

So I wish many good wishes to you.

And any colleagues family friends, who are affected by that situation.

Yes.

Let me turn to what I think is a much more positive set of messages.

I would like to share three messages about our company.

Before I turn the call over to Ajay to take you through our financials.

First one if you don't mind I'd like to spend a couple minutes upfront banking.

And complementing our team for what I believe has been spectacular spectacular.

And so over the last year.

And in fact over the last while a longer period of time as well as I'm sure. Many of you by now have already seen in 2021 was another another terrific year in the face of the global pandemic, Dennis will talk about the worst restructuring market.

Really the last 15 years.

We delivered another record year.

And let me stress that word another we've now had seven years in a row of adjusted EPS growth.

Seven years in a row in the face of Covid.

Fluctuating restructuring markets turning around core strategies expanding geographies. Please.

Enter new Adjacencies lumpiness from big jobs, coming or going heightened competition in attracting talent among lots of other challenges seven years in a row of quotes.

Adjusted EPS, which is the easiest thing to measure.

But also to me far more important and the underlying drivers of those financial results.

Talent level of our organization the ambition of the energy and the commitment of our people the leadership.

Number of great assignments, we are working on the client relationships we forged.

And the enhancement of our reputation that all of those factors have driven.

We don't have a single business.

That is guaranteed automatic growth every quarter.

In fact, if you look back over the several years many of our teams and sub businesses. During this period were down multiple quarters in a row.

As they face difficult markets, we made big investments are a big jobs and.

What I believe our results have shown.

Is that over any extended period of time.

Those short term factors don't matter.

Rather over any extended period of time, when our teams do the right things.

They control our destiny.

We could.

Create our own future.

Over time, we have shown ourselves able to attract great talent to support the growth of that talent in our organization.

Down and reinforce core positions in core markets expand into new Adjacencies and as a consequence of all of that make ourselves ever better able to serve our clients to build our businesses to build our brand.

It is that commitment.

Those efforts by our leaders and our teams that have allowed us to grow.

Seven years in a row.

Over those last four years in the last four years of that.

Good markets and bad markets.

The average double digit organic topline growth.

To me that demonstrates something important.

It demonstrates that MTI is not.

He is not.

The court on the restructuring wave that some describe the size when I joined.

While there I think our teams have shown that when we do the right things.

We have multiple multiple businesses that are each.

Powerful growth engines engines that of course can get buffeted by markets or other short term factors over any extended period of time engines that could plow through markets.

Cloud through them and find their way.

Towards success.

Tracking and developing talent successful brand building assignments and success in financial results.

Over the past several years I believe we've seen examples of that in every business. This year and the resilience of CFS the comeback of MLC in some parts of econ business in.

In the last several years the extraordinary performance of our tech business. Following the strategic changes they've made five years ago or the performance of our Stratcom business over now.

Seven years.

And I think the story is similar if you think about it instead of by segment by geography.

Just think about the challenges our team as head of taking on difficult positions.

Say, Australia or Latam.

Small more is the challenge of conquering new markets in Europe .

But that's why I think our teams.

Very much deserved the sense of excitement and pride that they have when they turn those platforms positions into platforms for growth.

So let me start with my Thanks, and my congratulations to our teams.

And the second point, let me pick up on that word platform.

I'd like to underscore.

Is that to me the successes we have been having.

Or not.

And.

But rather the beginning the success. We've had has left us with powerful platforms that we can leverage going forward to extend that growth to.

To build upon it.

A successful we've had gives us the ability now to bet boldly in Germany, and France, and the Netherlands, and China, and the Middle East and in other places in a way that we could never have done a few years ago. It gives us the ability to invest behind that successful tech business and Thats successful strat comm business to drive our investigations business to grow all of those non restructuring service.

As in Corp, fin and in the face of a slow restructuring market to commit to continue to grow that business to extend that global leadership confident that it will eventually pay off in a big way and brands assignments in leadership positions in attracting great talent.

To me to my knowledge there.

This company has never had such a rich set of opportunities before it as we do today.

And that brings me to the third point to previous something odd Jay will discuss which is.

There is always near term risk in these sorts of investments.

Let me spend a minute on that.

As you know our investments.

Our typically in hiring.

If one instead buys a company the best shows up the investment shows up at <unk> capital.

If on the other hand, you hire a lot of people.

Shows up in EBITDA.

This year, our ambition is to have the highest organic growth rate.

During my tenure.

I guess has joined the company's entire history, the highest organic growth rate.

There is no way to make those sorts of bold bets without facing some <unk>.

Short term financial risk.

And if you want to underscore some of the negative is we're making those bets at a time when our most profitable business in our restructuring business.

It's facing market demand that is lower than it's been in 15 years. According to one measure in 20 years. According to another measure and we no longer have the rollover of the large restructuring jobs from the early parts of the 2020.

And we're facing compensation pressure due to wage inflation type talent market and at the same time, we're expecting rising SG&A expenses due to a rebound in travel expenses post COVID-19 as well as investments in infrastructure to support the growth.

So one can get worried about that.

Number of bets, we're making one could wonder in the face of that could we cut back on our bets.

Of course, we could.

But let me underscore something else.

I don't believe that's how one makes a company like this or it's not.

How we built this company over the last seven years, it's not how we've achieved the growth we have.

My experiences when you have great people.

And great that's to make.

You commit to those people you commit to those opportunities and you make those bets and you lived with any potential short term dislocations in the P&L.

Because if you do.

Even if there are short term dislocations in the P&L in a couple of quarters or a year in the medium term.

The company source it delivers four to clients that delivers for the people, whose energy and sweat makes that success happen.

Ultimately, thereby of deliveries for the shareholder.

As you have seen.

Now over the last seven years.

So we are making those bets this year.

There is some risk in the near term P&L, but I will say those bets those opportunities.

And left me never more excited about where we can take this company over the next while.

Okay.

I still look forward to sharing that journey.

With each of you.

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

Thank you Steve.

Good afternoon, everybody in my prepared remarks, I will take you through our company wide and segment results.

And guidance for 2022.

I will begin with some highlights from our full year 2021 performance revenues of $2 $78 billion increased $314 9 million from $2 $4 6 billion in 2020 GAAP.

GAAP EPS of $6 65.

Increased 98 from $5 67 in 2020.

Adjusted EPS of $6.76 increased 77% from $5 99, and 2020 and adjusted EBITDA of $354 million was up $21 $7 million from $332 $3 million in 2020.

Our record performance. This year is primarily because of 12, 8% revenue growth once again, demonstrating how beneficial it is to have the breadth of our service offerings.

In 2021 demand continued to decline for restructuring often our highest margin service offering as access to capital remains abundant and many pandemic related moratoriums and insolvency proceedings were extended.

Conversely, the continued high level of liquidity in the market spurred a record levels of M&A activity, which drove strong demand for our economic consulting and technology segments as well as our transactions practice within our corporate finance and restructuring segment.

Our forensic and litigation consulting or <unk> segment, which was heavily impacted by pandemic related travel restrictions and court closures in 2020, so activity levels rebound across almost all practice areas in 2021.

So <unk> has not yet reached pre COVID-19 levels of business activity across the entire segment.

Lastly, our strategic communications segment recovered well from Covid related impacts in 2020 and delivered a record year.

We also continued to invest in people our total head count increased seven 3% year over year on top of the 13, 5% increase in total headcount in 2020.

Revenue growth more than offset the increase in direct costs, primarily from head count growth and higher variable compensation and an increase in SG&A expenses.

Now I will turn to fourth quarter results for the quarter revenue of $676 $2 million.

Increased $49 7 million or seven 9% with revenues increasing across all business segments compared to the fourth quarter of 2020.

GAAP EPS of $1 7 million compared to $1 57 in the prior year quarter adjusted.

Adjusted EPS of $1, 13, which excludes <unk> <unk> of noncash interest expense related to our 2023 convertible notes compared to adjusted EPS of $1 61 in the prior year quarter.

Of note the fourth quarter of 2020 included a significant tax benefit resulting from the use of foreign tax credits in the U S and a deferred tax benefit arising from an intellectual property license agreement between our U S and UK subsidiaries.

<unk> boosted both fourth quarter of 2020, GAAP and adjusted EPS by 32 cents.

Net income of $38 $2 million compared to $55 6 million in the fourth quarter of 2020.

Adjusted EBITDA of $62 million compared to $82 $3 million in the prior year quarter.

Now turning to our performance at the segment level for the fourth quarter.

In corporate finance and restructuring revenues of $231 5 million increased five 3% compared to Q4 of 2020. The increase was due to higher demand for business transformation and transaction services as well as an increase in pass through revenues and <unk>.

Excess fees, which was partially offset by lower demand for restructuring services compared to the prior year quarter.

Business transformation and transactions represented 62%, while restructuring represented 38% of segment revenues this quarter.

This compares to business transformation and transactions, representing 44% and restructuring representing 56% of segment revenues in the prior year quarter.

As business transformation and transactions grew 50%, while restructuring revenues declined 27%.

Adjusted segment EBITDA of $22 2 million or nine 6% of segment revenues compared to $35 4 million or 16, 1% per segment revenues in the prior year quarter. This decrease was primarily due to higher compensation, which was largely related.

Two an increase in variable compensation and higher SG&A expenses.

<unk> revenues of $138 million increased eight 5% compared to the prior year quarter.

Increase was primarily due to higher demand for health solutions and investigation services.

Adjusted segment EBITDA of $8 5 million or six 2% of segment revenues compared to $7 $6 million or 6% of segment revenues in the prior year quarter.

This increase was due to higher revenues, which was partially offset by an increase in SG&A expenses and compensation.

Economic consulting revenues of $172 $3 million increased seven 4% compared to Q4 of 2020. The increase in revenues was primarily due to higher demand for non M&A related antitrust and financial economic services.

Which was partially offset by lower demand for M&A related antitrust services compared to the prior year quarter.

Non M&A related antitrust services represented 33% and M&A related antitrust services represented 20% of total segment revenues for the fourth quarter.

Adjusted segment EBITDA of $30 million or 17, 4% of segment revenues compared to $31 3 million or 19, 5% of segment revenues in the prior year quarter.

This decrease was primarily due to higher compensation.

In technology revenues of $64 6 million increased 10, 2% compared to Q4 of 2020.

The increase in revenues was primarily due to higher demand for investigations and litigation services in <unk>.

Adjusted segment EBITDA of $7 million to $8 million or 12, 1% of segment revenues compared to $10 2 million or 17, 3% of segment revenues in the prior year quarter.

This decrease was primarily due to higher compensation, which includes an increase in variable compensation and the impact of a 14, 7% increase in billable headcount as well as higher SG&A expenses.

Lastly, in strategic communications revenues of $69 $9 million increased 15, 5% compared to Q4 of 2020.

The increase in revenues was primarily due to higher demand for corporate reputation and public affairs services.

Adjusted segment EBITDA of $14 9 million or 21, 4% of segment revenues compared to $11 7 million or 19, 4% per segment revenues in the prior year quarter.

This increase was due to higher revenues, which was partially offset by an increase in compensation and SG&A expenses.

I will now discuss certain cash flow and balance sheet items net cash provided by operating activities of $355 5 million compared to $327 $1 million in the prior year.

Free cash flow of $286 9 million in 2021 compared to $292 2 million in 2020, primarily due to an increase in net cash used for purchases of property and equipment, which includes capital expenditures related to our new.

New office in New York City.

There were no share repurchases in Q4 of 2021.

For the full year 2021, we repurchased 422000 shares at an average price of $109 37.

For a total cost of $46 $1 million.

Cash and cash equivalents at the end of the year was $494 million $494 $5 million.

Total debt net of cash of negative $178 2 million on December 31, 2021 decreased $199 $5 million compared to December 31 of 2020.

Turning to our 2022 guidance.

We are as usual providing guidance for revenues and EPS.

We estimate that revenues for 2022 will be between $2 92 billion and 3.0 for $5 billion.

We expect our EPS to range between $6 40.

$7 in 2000.

Off note due to our adoption of a new accounting standard change that went into effect on January one 2022, we will not record noncash interest expense related to our 2023 convertible notes.

As such assuming no other future special charges that are adjustments. We currently expect EPS and adjusted EPS to be the same in 2022.

Additionally, pursuant to the first supplemental indenture for our 2023 convertible notes that was effective on January one 2022. The company is now required to settle the principal amount of our 2023 convertible notes that is due upon conversion in <unk>.

Cash only versus at our option in cash or stock or a combination.

We retain the option of settling the premium if any due upon conversion of our 2023 convertible notes in cash or stock or a combination.

Importantly, none of these changes affect the calculation of adjusted EPS in the prior period.

Turning to our guidance.

Our 2022 guidance range incorporates several assumptions.

First <unk>.

As we have the wherewithal intent and opportunity to invest for growth. Our plans include aggressive hiring globally.

Though there is no certainty that we will be successful in such filings.

Vessel head count additions typically result in reduced profitability in the short term.

Coupled with the investment in head count there is also increasing pressure on wages and not all of this expense may be recoverable in price increases.

Second, though we believe we are the leader in restructuring globally, and we intend to maintain that position. We currently expect restructuring activity to improve only moderately over the course of 2022.

Additionally, many of the large restructuring engagements we supported in 2020 in 2021 has now concluded.

Moody's trailing 12 months global default rate for speculative grade corporate issuers was one 7% as of the end of 2021.

Down from six 9% in December of 2020, Moody's is currently forecasting that this rate will fall to our bottom of one 5% in Q2 of 2022 and will gradually rise to two 4% by the end of 2022.

Some analysts don't expect a rebound in restructuring activity until 2023.

Third global M&A activity, which drives demand in our economic consulting and technology segments as well as a REIT transactions business in corporate finance and restructuring was at record levels in 2021.

So we currently expect that this elevated level of activity will continue.

Regulatory scrutiny fiscal policy and other events globally may dampen such demand.

Pulp demand in our <unk> segment improved significantly in 2021 compared to pandemic related loans and performance in 2020.

However over the course of 2021 demand for these services weakened.

Our current expectation is for a rebound in such demand in 2022.

Certain aspects of SG&A, such as travel and entertainment have remained depressed due to the pandemic.

Our expectation is that in 2022, SG&A main revert back closer to the purpose than levels, we saw in 2019.

Six we expect a higher effective tax rate in 2022.

We currently expect our full year 2022 tax rate to range between 22, and 25%, which compares to 21, 1% in 2021.

Overall based on our expectations for a gradual improvement in demand for restructuring and <unk> services. Our guidance assumes that the second half of 2022 will be stronger than the first half.

I must point out that our assumptions define a midpoint and a range of guidance around such midpoint, which I characterize as our current best judgment.

Often we find actual results our beyond such range because ours is largely a fixed cost business in the short term.

And small variations in revenue may have an outsized impact on income.

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

First we believe STI is unique in having such a diverse mix of services and that helps us thrive regardless of business cycle.

Second our investment to build expertise in areas like information governance privacy and cyber security public affairs and in industry verticals like energy power and renewables in financial services and in geographies, including Continental Europe , the Middle East and Australia.

Are paying off and we intend to double down on these and other investments.

Non U S revenues have more than doubled in the last five years, while U S revenues have grown by a third over that timeframe.

Third our leadership remains focused on growth with strong staff utilization and realization.

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

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

Let's open the call up for your questions.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.

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

To withdraw your question. Please press Star then two.

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

Our first question will come from Andrew Nicholas with William Blair. Please go ahead.

Hi, good afternoon. Thank you for taking my questions.

First question I had was just on FMC.

Obviously, a little bit of a challenging quarter on the utilization front for that business.

Think azure you mentioned expecting a rebound in 2022. So I was hoping you could spend a little bit more time about what's been driving that.

Weakness over the past quarter or two whether or not in the fourth quarter number was at all surprising to you and then maybe thoughts on how the segment is setting up for for next year.

Not sure whether court system throughput is is a component to what you've seen in 2021 or it gets back to pre COVID-19 levels or not but maybe you touch on that as well. Thank you.

Sure. Thanks, Andrew I'll take that so no question about the utilization in aggregate in SLC is lower than we would like to see.

There's no question about that and we expect.

Better utilization improved performance as we go but that masks a bunch of stuff. It masks. The fact that we are making continuing to make massive investments in places like Europe . For example, you can we can reasonably expect that investment to turnaround and generate profits from day one so so.

So there is.

So it's a combination we do expect better utilization, but there is also the fact that that one must note of making those significant investments in a whole bunch of new geographies. So thats one aspect there.

The second point I'll make is that we don't have we do have large jobs, but we don't have the same volume of large jobs that we had in sort of the first first second quarter of last year. So since then that volume of large drops is diminished. We don't we don't have evidence that others are getting those large drugs either.

So perhaps it's a it's a lag in when the regulatory scrutiny, which drives our business will manifest itself in sort of work for us. So.

That could be a factor there too and I don't want to minimize COVID-19 , though I don't want to make an excuse for COVID-19 in certain geographies like like Asia. There is a COVID-19 effect in certain segments like health and are certain chubb practices like health solutions hospitals have deferred the operational work. So it's a combination of factors bottomed.

Your line is we expect to do better we have the we have the talent the capabilities the investment in various geographies that we ought to do better.

I think maybe I can add a minute to that if I could.

Maybe go out a little further out in time frame.

And Andrew.

Talk to some longer timeframe, which I think you're also familiar with.

We've had a great business for a long period of time, but I think.

It's easy to forget is at one point this business for a long time. This business was equally as sizable contribution to the to the growth and profitability of this company as Corp fin.

And we've obviously got in Corp fin on this incredible growth trajectory, if you look hard.

Over 10 year period actually <unk> was flat in terms of EBITDA I think if you look at $15 $16 17.

We werent much higher than EBITDA in 15, 16, and 17, which actually masked the fact that some underlying businesses, where we invest and we're growing vibrantly like our construction solutions business and our data analytics business, but that in turn means we had other businesses that are stagnating, which was not acceptable.

So what we are doing and we are in the process of doing is investing to put this back a concerted effort to put this thing back on a long term major growth trajectory and if you think about it we had quite a bit of success with some of the first investments in 18 19.

We've got a little bit thrown off in 2020 one.

But we really have.

Mobile will continue.

Multiyear path in this way and right now we've been really successful in getting a bunch of very senior people in new geographies and adjacent spaces and so while we're committing to this year is to put behind those people and to realize the long term future I think <unk> right. We hope that will come along with higher utilization. This year you can ask.

Sure.

But we're not planning to run this business at low utilization forever. If this is part of a multi year trajectory to get this busy.

Business, which has some great people on it back to the position it should be and the company does that help Andrew.

Yes.

Very helpful. Thank you.

I guess for my follow up.

It's probably going to be another multi part question, but I wanted to ask about kind of wage pressures broadly.

And the ability to pass on kind of rate increases via higher billing rates I think I asked a similar question last quarter as well, but kind of doing some back of the envelope math on.

On your top line growth expectations, and EPS guidance. It seems to me given the higher tax rate that that there are there is some margin pressure year over year.

Correct me, if I'm wrong, but was that kind of in mind.

How much of that is wage pressures.

How much of that is is a teeny or pass through costs just trying to understand.

What I think is all things considered a pretty constructive margin guidance, just trying to understand where we are wages and hiring talent in the expensive nature of the current environment fits into the overall puzzle. Thank you.

Yes, let me give you a quick answer and then object and maybe give a little more detailed look I think you've hit the right issues and the truth is you don't know how much youre going to be able to capture back in price my experiences in an inflationary environment we have.

Talent costing you more and.

Real estate costs and TNT going up.

Happens to everybody and it eventually gets reflecting in bill rates.

But you never know whether youre going to get at that first year or not and you can set your list bill rate up but it's always also around realization and so.

Anybody who tells you they exactly know how much they're going to recapture this year as well I guess is smarter than me I guess is the point.

But I think you've hit the right the right sort of factors all of those things are going on and we've tried to estimate how that shakes out in the P&L RJ I don't know if we give more details on that will be brought to you.

Steve.

Mercifully, we don't that's why we gave guidance in the range Andrew.

Listen I mean, it's when.

When we are we give revenue and EPS guidance right and we've given you the tax rate, which is slightly higher. So you can use in the midpoint of the earnings guidance.

And you can take a mid point on the revenue guidance, essentially we're saying revenue growth, resulting in flat EPS. That's what you would surmise from those mid points and that must mean margin contraction somewhere along the way.

<unk>.

When you have that statistic. So and then you have a range around it and that margin contraction is for the two.

Among the three main reasons, which is head count growth not sufficiently offset with productivity growth in the same period.

Wages, not sufficiently offset with price increases on our realization there from and increases in SG&A, especially DNA. It's those three factors and where you end up in those three factors is that spectrum, one more point I would make.

We have a very very very successful company look at those cash balances look at.

The earnings growth over a period of time and one of the reasons, we don't give margin guidance and precision or we don't give exactly what head count we aim to higher is because we intend to be opportunistic if the right.

The most difficult part is hiring and growth is the hiring the right people in the right geographies and if we find those opportunities to do so which is not.

Not obvious then even if at this margin impacting we ought to do so given the capacity that we have for further growth. So we don't want be.

Handcuffed with every piece spot in our P&L.

Makes sense, thanks, a lot.

Thank you Andrew and thank you for your flexibility on the scheduled today again I apologize for asking for it but I appreciate it.

Our next question will come from Tobey Sommer with Truest Securities. Please go ahead.

Thank you and good afternoon.

Hi, Tobey.

Wanted to ask about.

What are the lines of business.

Is that you are seeing.

Seating and investing in today that you would consider.

Early stage and analogous to the ones that we know about now and talked about now as growth drivers that were in that position in your first few years at the firm.

Well, that's a good question and I'm trying to think about whether I'm actually going to answer it though because we don't like to tip off our competitive.

Our view of where we see the opportunities.

Right right.

Gave us that in year, one, but if there's something you got your two or three you might.

Let me, let me take it a different direction rather than business areas. Let me do this in terms of geography.

We had a business in Germany, we had a business in France, we didn't have a business in the Netherlands, We had a business in the middle East We had a business in Latin America, we had a business in Australia.

We didn't have many businesses that we could get behind for a long time, we had a very good German stratcom business.

But nothing else in Germany, we had mix.

Going sideways for a long time in France, who weren't in the Netherlands, Australia, you heard us talk about for a long time as a turnaround Latin America, we have to do a clean up in the middle East where kind of.

Nick's talent for a long time.

We have done over the last while is put in place teams in every part of that market and positions that are worth betting on in a way that is just radically different.

But they're small they're small they fit your definition of early stage.

Best.

Love the team we have in tech in Germany or in SLC in Germany construction in Germany.

The Corp fin business, we now have in Germany is a terrific platform for growth with the new hires we just had in France are great. The middle East is the strongest it's ever been Australia business has now turned around and we have real growth aspirations.

All of those countries are actually mid year.

What's your criteria for kind of early stage.

New into Germany, when compared to where we could be in Germany. We are and we're just at the early stages and I think every one of the countries I just mentioned and then the sub practices within those countries.

Meet your definition and it's not just in those countries.

In.

In the UK, we're investing behind some of our non bankruptcy services in a way we never did in the past we're investing in financial institutions practice, which we always had so I think theres a lot of that.

Maybe that gives you a little bit of granularity does that help.

<unk>.

It did thank you.

Yeah.

I don't I don't know, whether you will I don't expect to.

Specific numbers, but I'd love to get a flavor.

For the inputs into.

Your revenue growth guidance.

And in the broadest strokes I see.

Head counts.

Utilization and <unk>.

Our realized bill rate of sort of the broadest care categories that could contribute to that or.

Since I didn't ask for specific numbers or any way you could rank order those or give us some color about how.

How you get to your revenue growth.

Now, let me talk about conceptually and then ask RJ, whether he wants to comment on the arithmetic look I think the real issue is.

Talk about all of these investments the first place we start is either.

By betting behind the new senior team that we've promoted that is coming into their own either mds or smbs that are coming into their own or we've hired and are excited about and so the real question at the end of the day is how fast.

Can they penetrate the market that we believe those are bets that we believe is people can penetrate the markets, but you never know how fast it can be and sometimes they are constraints that they're hired laterally. We honor noncompete, if they're promoted there may be incredible talent, but not have the footprint at some of the laterals have so there is a bet on how fast that goes and then.

There is a tendency to say well why don't we not higher junior people below those people until they start selling.

And that number has worked in the history of professional services firm Youre not if when you go in for a huge investigation people say you are fabulous how big is your team below ly for people.

That never sold the huge investigations in the history of the world and so once you've made the decision to bet on the senior people you bet on the junior people.

And then you make a forecast of how fast it's going to be.

And I'd say likes to call it a forecast I, sometimes call it a guess.

On how fast it is to realize my experience is.

We have not made that many mistakes.

Most of the bets we've made have worked.

We're I mean, it's an exceptional track record on that dimension in terms of predicting how fast it was.

It's sort of a little bit more mixed but Ajay do you want to be more precise than that or leave it there.

Good.

I won't be more.

Exactly precise but.

Put it in context of some numbers and some opportunity. So the two areas, where we give utilization numbers in <unk>.

And E com and.

And our utilization numbers in Corp, fin and therefore see our LOE and our lower than we had in the prior.

Prior years.

So what I'm trying to paint a picture on Tobey is that we have a lot of avenues of fats to significant revenue growth.

Simply improving that utilization statistic would get us.

Very significantly higher revenue growth as well as profitability now. We also have clearly said today that we'd like to hire lots and lots of people globally right.

Just just our desire to hire people doesn't necessarily mean people will come to us I mean, thats always we have to go out there and get them. Similarly, with the business, but we have many avenues for growth. There. So the first the utilization piece would impact your bill rate that would take that bill rate higher and the head count.

If it's not followed immediately with revenue growth would take your bill rate lower but what would get you the head count growth and this is the reason we have the range of range of revenues then they're in a range of estimations.

Around around that midpoint.

In terms of the geography that I don't know whether you noticed in the supplemental disclosure that in the last six years there'll be a revenue outside the U S has grown from 28% I think to 38%.

UK has doubled in revenue the rest of countries other than the UK other than the U S have more than doubled and and the U S has grown by a third.

So I mean as Steve mentioned, they're now platforms for growth. If you have one partner in one country that may not necessarily be an adequate platform, but when you have 50 or 800, certainly is and we have we have platforms from growth in various places we never had information governance, we never had.

Privacy and cyber security, we never had an ESG offering.

Tremendous avenues for growth.

Thank you.

Last question for me, if I could ask one more do you.

Could you give us a sense for the mix of lateral senior hires versus when youre going to be able to be generating a substantial mix of internally promoted.

Mds and SMB.

Because I think that's where you start to get into or sort of a different orbits.

We're nurturing talent.

Talent internally fueling your growth that way.

Yes, I don't know if we have the numbers here, but at the same time I think you know we've been doing record numbers of lateral hire smbs I think maybe over three years.

I don't know, maybe 150 over three years or something like that but I don't think the homegrown promotes are that's far behind we've also had record numbers of homegrown promotes I mean, it's not like.

Hum.

Uh huh.

Some firms that never has hired laterally, where 80% of the people are homegrown, but we are making real progress on the homegrown.

And Luckily at this point in time, it's our story is one that allows us to supplement I don't think we could today.

Our growth aspirations with only homegrown, but we're getting we're getting stronger and theres a commitment to it.

They were never was.

So we can get you the exact numbers I think Molly we can get to the exact numbers of.

Homegrown promotes.

But it's a pretty impressive.

Number two it's not just the laterals.

Terrific. Thank you very much.

Thank you and thanks to you also for juggling your calendar.

Again, if you have a question. Please press Star then one our next question will come from Marc Riddick with Sidoti and company. Please go ahead.

Hi, good afternoon, everyone.

Hey, Margaret.

So I was wondering if you could sort of.

Having a slightly different direction, maybe you could talk a little bit about what you're seeing there were a couple of acquisitions last year that which was certainly additive I was wonder if you could spend a little bit of time on.

Those and maybe talk a bit about the what the pipeline looks like.

Based on commentary it seems as though the.

It might be a little more attractive or complimentary on the international side, but maybe you could spend a little bit of time on that.

Well the acquisitions, we've done over the last several years I am very excited about they are we screen we look at.

For jet family, but not only jet family it looks at a whole lot of acquisitions, we don't do very many.

And that is not our primary growth vehicle our growth. We now have a management team that believes understands and believes that our day in day out responsibility is organic growth and that's what we do we will supplement that with great acquisitions, when we when we find them, but they have to be great.

<unk> and that.

That is two constraints both of which are pretty substantial constraints. One is a financial constraint and right now with the looseness of private equity with the looseness of bank money.

The aggressiveness of private equity a huge number of deals are going at prices that are not have no historical precedent.

And we've not gotten into a bidding auction I don't think on but I don't think we've ever gotten on a bidding auction while I've been here.

Not certainly any of the deals we've done.

So there is a price constrained, but more important than that there is a fit constraint I think some of our.

History was.

Doing acquisitions, which look good at the first time and we never integrated them. They didn't they didn't click with the culture of the company and then after five years, even if there was good financials people went off and if you actually look at it when you look at it over five years. There has never been in an acquisition I don't think in the history of professional services that if everybody disappears after five years the <unk>.

Cash on cash is a good return and so we really screen aggressively for.

People, who we think will grow on our platform better than they are in their current platform will be excited to be here.

And so we're really pleased when we find those but those are hard to find I think both the deal we did in the Netherlands and the construction deal we did this past year.

We're really excited about both of those as we were on the German acquisition and the Delta acquisition before and in the CDG acquisition before it but those are hard to find when we find if we can find 30 of them I do them.

Uh huh.

We don't have a constraint on cash are saying, we only can do three but it's hard to find them at the more we find that more will do but our day job day in day out is not the acquisitions.

It's to build out organically.

Makes sense Mark did I notice that you did actually that's perfectly fair.

One thing I was really curious about I think you made a little you touched on this a little bit about sort of curious about maybe what youre seeing is too.

Pick up on your end of things as far as pickup both Sony and visiting clients are you beginning to see folks can we get out there and travel a little bit more not just from an expense side, but just from an engagement.

Prospectus.

Absolutely look I think I've personally done this I spent three weeks in.

In Europe in January I spent.

I went over there in September last year.

When they were when they were low in the summer I started traveling around the U S and we might and since people not.

Our people too and people humans are starved for.

Contact and zoom is good and teams is good but I mean.

There is something about the quality of a face to face engagement that really matters.

I think.

There is an unlocking of that now it's happening interestingly enough in my observation quite differently differentially around the world I mean.

Theres just parts of the world that are essentially emotionally declared COVID-19 is over.

I think the UK felt more like that in New York.

I think it has to do with the history of Covid and how cautious that has made people feel but you can feel that desire desire to.

To put it behind us and go back not to the same as before I think this thing is a huge amount of <unk>.

Travel that will never happen because zoom is actually very effective.

Huge amount of <unk>.

Work remotely that will happen, but put a supplement that with the essence of.

A person to person connection and I feel that internally, but I also as I visited clients.

We're not alone for the clients as I say the people you'll clients for humans to does that does that resonate with you I assume it's too near firm to Mark.

It certainly is all sort of thinking about the.

<unk>.

What we've seen on the leisure side of things from some from folks who are in the travel business I was getting at just wanted to get sort of a sensitive we are beginning to see a little bit of <unk>.

<unk>.

From that on your end.

I guess the last thing for me is that so it really it seems as though that part is part of your guidance Youre expecting more travel up more face to face going forward within the firm and that sounds like it's part of the investment that Youre doing.

The last part I would sort of add to it.

From the <unk>.

Hiring timeframe perspective things like that is it fair to when you were a couple of months into the year now so it's fair to assume that that process has already begun.

Yeah sure look I think a lot of the senior most hiring has already happened I mean, the bets, we're making a lot of I mean look I think actually we've had incredible run on senior hiring even this year, but a lot of the bets that we are thinking about here had to do with a great set of senior hires we were doing during the course of last year, the last year or two.

Which were in place and so that we are now hiring less tenured people below them in various geographies around the world.

And so there's a lot underway second issue of course, as we always have pre committed.

For the entry level hires right because entry level hires come from schools the timing of that means.

You make those decisions quite a bit ahead of time so.

Yes, a lot of a lot of hires not all the hires are pre committed but a lot of hires are not just intellectually and our minds, but were.

Either we have in place or are <unk>.

Right now interviewing people for.

Does that answer your question Marc Yes, yes, it sounds very encouraging thank you.

Okay.

This concludes our question and answer session, which also concludes our conference for today. Thank you for thank you all for.

Attending.

You may now disconnect your lines at this time.

[music].

Welcome to the F T I consulting fourth quarter and full year 2021 earnings conference call.

All participants will be in a listen only mode.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to.

To withdraw your question. Please press Star then two.

Please note that this event is being recorded.

Now I'd like to turn the conference over to Mollie Hawkes, Vice President of Investor Relations. Please go ahead.

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.

Information or other matters that are not historical including statements regarding estimates of our future financial results and other matters.

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 2021.

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 of this earnings call and will not be updated.

Which have been updated to include our fourth quarter and full year 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 Investor Relations section of our website.

With these formalities out of the way I am joined 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, Steven Gunby.

Thanks, Molly Molly can you hear me okay.

Well good.

Well good afternoon to everyone and thank you all for joining US let me start with a couple of preliminary remarks before we get into it.

First of all thank you all for juggling your time I know that we had to at the last minute switch the timeless and everybody on this call into the calendar. So.

Apologize for any inconvenience and want to express our appreciation for all juggling your calendars to be here.

Second my second point, what would kind of be I thought a positive point I was kind of maybe for the first time ever.

However begin to talk a little positively on the Covid situation.

I'm going to express my hope that.

We are finally in many places around the world and I Hope, where you are starting to see some movement towards.

Valerie.

I still hope that but I think.

The events in the Ukraine in the last little while.

Remind us that the whole thing about unfortunately is not just limited to COVID-19 .

So I wish many good wishes to you.

And then he colleague's family friends, who are affected by the situation.

Yeah.

Let me turn to what I think is a much more positive set of messages.

I'd like to share three messages about our company.

Before I turn the call over to Ajay to take you through our financials.

First one if you don't mind I'd like to spend a couple minutes upfront banking.

And complementing our team for what I believe has been spectacular spectacular.

And so over the last year.

Really the last 15 years.

We delivered.

Their record year.

And let me stress that word another we've now had seven years in a row of adjusted EPS growth.

Seven years in a row in the face of Covid plus.

Fluctuating restructuring markets turning around core strategies expanding geography. Please.

Entering new Adjacencies, lumpiness from big jobs, coming or going heightened competition in attracting talent.

Lots of other challenges seven years in a row of growth in adjusted EPS, which is the easiest thing to measure.

But also to me far more important and the underlying drivers of those financial results.

The talent level of our organization and the ambition of the energy the commitment of our people the leadership the.

Number of great assignments, we are working on the client relationships we forged.

And the enhancement of our reputation that all of those factors have driven.

We don't have a single business.

That is guaranteed automatic growth every quarter.

In fact, if you look back over the several years many of our teams and sub businesses. During this period were down multiple quarters in a row.

As they face difficult markets are made big investments are a big jobs and.

What I believe our results have shown.

Is that over any extended period of time.

Those short term factors don't matter.

Other over any extended period of time, when our teams do the right things.

They control our destiny.

We.

Create our own future.

Over time, we have shown ourselves able to attract great talent to support the growth of that talent in our organization.

<unk> down and reinforce core positions in core markets to expand into new Adjacencies and as a consequence of all that make ourselves ever better able to serve our clients to build our businesses.

To build our brand.

Is that commitment.

Those efforts by our leaders and our teams that have allowed us to grow.

Seven years in a row.

And over those last four years in the last four years of that.

In the face of good markets and bad markets.

The average double digit organic top line growth.

To me that demonstrates something important.

It demonstrates that MTI is not.

It is not.

The court on the restructuring wave that some describe the size when I joined.

While there I think our teams have shown that when we do the right things.

We have multiple multiple businesses that are each.

Powerful growth engines engines that of course can get buffeted by markets or other short term factors over any extended period of time engines that could plow through markets.

Cloud through them and find their way towards.

Towards success.

Tracking and developing talent successful brand building assignments and success in financial results.

Over the past several years I believe we've seen examples of that in every business. This year and the resilience of CFS the comeback with SLC in some parts of E com business in.

In the last several years the extraordinary performance of our tech business. Following the strategic changes they've made five years ago or the performance of our Stratcom business over now.

Seven years.

And I think the story is similar if you think about it instead of by segment by geography.

Just think about the challenges our team's head of taking on difficult positions.

Say, Australia or a laptop.

They were not small more is the challenge of conquering new markets in Europe .

But that's why I think our teams.

Very much deserved the sense of excitement and pride that they have when they turn those platforms positions into platforms for growth.

So let me start with my Thanks, and my congratulations to our teams.

The second point, let me pick up on that word platform.

What I'd like to underscore.

Is that to me the successes we have been having.

Or not.

And.

So rather than at the beginning the success. We've had has left us with powerful platforms that we can leverage going forward to extend that growth.

To build upon.

The success, we've had gives us stability now that boldly in Germany, and France, and the Netherlands, and China, and the Middle East and in other places in a way that we could never have done a few years ago. It gives us the ability to invest behind that successful tech business and that successful strat comm business to drive our investigations business to grow all those non restructuring surge.

This is in Corp fin and in the face of a slow restructuring market to commit to continue to grow that business to extend that global leadership confident that it will eventually pay off in a big way and brands assignments in leadership positions in attracting great talent.

To me to be.

By knowledge. This company has never had such a rich set of opportunities before it as we do today.

And that brings me to the third point to previous something odd Jay will discuss which is.

Theres always near term risk in these sorts of investments.

Let me spend a minute on that.

As you know our investments.

Our typically in hiring.

If one instead buys a company the best shows up the investment shows up at <unk> capital.

If on the other hand, you hire a lot of people.

Shows up in EBITDA.

This year, our ambition is to have the highest organic growth rate.

During my tenure.

Guess has joined the company's entire history, the highest organic growth rate.

There is no way to make those sorts of bold bets without facing some.

Short term financial risk.

Okay.

And if you want to underscore some of the negative is we're making those bets at a time when our most profitable business in our restructuring business.

This facing market demand that is lower than it's been in 15 years. According to one measure in 20 years. According to another measure and we no longer have the rollover of the large restructuring jobs from the early parts of the 2020.

And we are facing compensation pressure due to wage inflation type talent market and at the same time, we're expecting rising SG&A expenses due to a rebound in travel expenses post COVID-19 as well as investments in infrastructure to support the growth.

Okay.

So one can get worried about.

The number of bets, we're making one could wonder in the face of that could we cut back on our bets.

Of course, we could.

But let me underscore something else.

I don't believe that's how one makes a company like this or it's not.

How we built this company over the last seven years, it's not how we've achieved the growth we have.

My experience is when you have great people.

Great that's to make.

You commit to those people.

You commit to those opportunities and you make those bets and you lived with any potential short term dislocations in the P&L.

Because if you do.

Even if there are short term dislocations in the P&L in a couple of quarters or a year in the medium term.

The company source it delivers four to clients that delivers for the people, whose energy and sweat makes that success happened.

Ultimately, thereby it delivers for the shareholder.

As you have seen.

Now over the last seven years.

So we are making those bets this year and there is some risk in the near term P&L, but I will say those bets those opportunities.

I have left me never more excited about where we can take this company over the next while.

I still look forward to sharing that journey.

With each of you.

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

Thank you Steve.

Good afternoon, everybody in my prepared remarks, I will take you through our company wide and segment results and guidance for 2022.

I will begin with some highlights from our full year 2021 performance revenues of $2 78 billion increased $314 9 million from $2 $4 6 billion.

20 <unk>.

GAAP EPS of $6 65.

Increased 98 cents from $5 67 in 2020.

Adjusted EPS of $6 76.

Increased 77% from $5 99, and 2020 and adjusted EBITDA of $354 million was up $21 $7 million from $332 $3 million in 2020.

Our record performance. This year is primarily because of 12, 8% revenue growth once again, demonstrating how beneficial it is to have the breadth of our service offerings.

So <unk> has not yet reached pre COVID-19 levels of business activity across the entire segment.

Lastly, our strategic communications segment recovered well from Covid related impacts in 2020 and delivered a record year.

We also continue to invest in people our total head count increased seven 3% year over year on top of the 13, 5% increase in total head count in 2020.

Revenue growth more than offset the increase in direct costs, primarily from head count growth and higher variable compensation and an increase in SG&A expenses.

Now I will turn to fourth quarter results for the quarter revenue of $676 $2 million.

Increased $49 $7 million or seven 9% with revenues increasing across all business segments compared to the fourth quarter of 2020.

GAAP EPS of $1 7 million compared to $1 57 in the prior year quarter adjusted.

Adjusted EPS of $1, 13, which excludes six cents of noncash interest expense related to our 2023 convertible notes compared to adjusted EPS of $1 61 in the prior year quarter.

Boosted both fourth quarter of 2020, GAAP and adjusted EPS by 32 cents.

Net income of $38 $2 million compared to $55 $6 million in the fourth quarter of 2020.

Adjusted EBIT EBITDA of $62 million compared to $82 3 million in the prior year quarter.

Now turning to our performance at the segment level for the fourth quarter.

In corporate finance and restructuring revenues of $231 $5 million increased five 3% compared to Q4 of 2020. The increase was due to higher demand for business transformation and transaction services as well as an increase in pass through revenues and <unk>.

Excess fees, which was partially offset by lower demand for restructuring services compared to the prior year quarter.

Business transformation and transactions represented 62%, while restructuring represented 38% of segment revenues this quarter.

This compares to business transformation and transactions, representing 44% and restructuring representing 56% of segment revenues in the prior year quarter.

As business transformation and transactions grew 50%, while restructuring revenues declined 27%.

Adjusted segment EBITDA of $22 $2 million or nine 6% of segment revenues compared to $35 4 million or 16, 1% per segment revenues in the prior year quarter. This decrease was primarily due to higher compensation, which was largely related.

Get it to an increase in variable compensation and higher SG&A expenses.

<unk> revenues of $138 million increased eight 5% compared to the prior year quarter. The increase was primarily due to higher demand for health solutions and investigation services.

Adjusted segment EBITDA of $8 5 million or six 2% of segment revenues compared to $7 $6 million or 6% of segment revenues in the prior year quarter.

This increase was due to higher revenues, which was partially offset by an increase in SG&A expenses and compensation.

Which was partially offset by lower demand for M&A related antitrust services compared to the prior year quarter.

Non M&A related antitrust services represented 33% and M&A related antitrust services represented 20% of total segment revenues for the fourth quarter.

Adjusted segment EBITDA of $30 million or 17, 4% of segment revenues compared to $31 $3 million or 19, 5% of segment revenues in the prior year quarter.

This decrease was primarily due to higher compensation.

In technology revenues of $64 6 million increased 10, 2% compared to Q4 of 2020.

The increase in revenues was primarily due to higher demand for investigations and litigation services and <unk>.

Adjusted segment EBITDA of $7 $8 million or 12, 1% of segment revenues compared to $10 2 million or 17, 3% of segment revenues in the prior year quarter.

This decrease was primarily due to higher compensation, which includes an increase in variable compensation and the impact of a 14, 7% increase in billable headcount as well as higher SG&A expenses.

Lastly, in strategic communications revenues of $69 $9 million increased 15, 5% compared to Q4 of 2020.

The increase in revenues was primarily due to higher demand for corporate reputation and public affairs services.

Adjusted segment EBITDA of $14 $9 million or 21, 4% of segment revenues compared to $11 7 million or 19, 4% of segment revenues in the prior year quarter.

This increase was due to higher revenues, which was partially offset by an increase in compensation and SG&A expenses.

I will now discuss certain cash flow and balance sheet items net cash provided by operating activities of $355 5 million compared to $327 $1 million in the prior year.

Free cash flow of $286 $9 million in 2021 compared to $292 $2 million in 2020, primarily due to an increase in net cash used for purchases of property and equipment, which includes capital expenditures related to our new.

<unk> office in New York City.

There were no share repurchases in Q4 of 2021.

For the full year 2021, we repurchased 422000 shares at an average price of $109 37.

For a total cost of $46 1 million.

Cash and cash equivalents at the end of the year was $494 million $494 $5 million.

Total debt net of cash of negative $178 2 million on December 31, 2021 decreased $199 $5 million compared to December 31 of 2020.

Turning to our 2022 guidance.

We are as usual providing guidance for revenues and EPS.

We estimate that revenues for 2022 will be between $2 92 billion and $3.045 billion.

We expect our EPS to range between $6 40.

$7 in 2000.

Off note due to our adoption of a new accounting standard change that went into effect on January one 2022, we will not record noncash interest expense related to our 2023 convertible notes.

As such assuming no other future special charges that are adjustments. We currently expect EPS and adjusted EPS to be the same in 2022.

Cash only versus at our option in cash or stock or a combination.

We retain the option of settling the premium if any due upon conversion of our 2023 convertible notes in cash or stock or a combination.

Importantly, none of these changes affect the calculation of adjusted EPS in the prior periods.

Turning to our guidance.

Our 2022 guidance range incorporates several assumptions.

First <unk>.

As we have the wherewithal intent and opportunity to invest for growth. Our plans include aggressive hiring globally.

Though there is no certainty that we will be successful in such filings.

Vessel head count additions typically result in reduced profitability in the short term.

Coupled with the investment in head count there is also increasing pressure on wages and not all of this expense may be recoverable in price increases.

Second, though we believe we are the leader in restructuring globally, and we intend to maintain that position. We currently expect the restructuring activity to improve only moderately over the course of 2022.

Additionally, many of the large restructuring engagements we supported in 2020 in 2021 has now concluded.

Moody's trailing 12 months global default rate for speculative grade corporate issuers was one 7% as of the end of 2021.

Down from six 9% in December of 2020, Moody's is currently forecasting that this rate will fall to our bottom of one 5% in Q2 of 2022 and will gradually rise to two 4% by the end of 2022.

Some analysts don't expect a rebound in restructuring activity until 2023.

So we currently expect that this elevated level of activity will continue.

Regulatory scrutiny fiscal policy and other events globally may dampen such demand.

Pulp demand in our <unk> segment improved significantly in 2021 compared to pandemic related Lowe's and performance in 2020.

However over the course of 2021 demand for these services weakened.

Our current expectation is for a rebound in such demand in 2022.

Chris certain aspects of SG&A, such as travel and entertainment have remained depressed due to the pandemic.

Our expectation is that in 2022, SG&A may revert back closer to the purpose than levels, we saw in 2019.

Six we expect a higher effective tax rate in 2022, we currently expect our full year 2022 tax rate to range between 22, and 25%, which compares to 21, 1% in 2021.