Q4 2022 FTI Consulting Inc Earnings Call

Good day and welcome to the MTR consulting fourth quarter and full year 2022 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 today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your Touchtone phone and Swift.

Your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Mollie Hawkes head of Investor Relations. Please go ahead ma'am.

Morning, welcome to the STI consulting conference call to discuss the company's fourth quarter and full year 2022 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 of the Securities Act of 933 and section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties forward looking statements include statements concerning plans.

Yes.

Goals strategies future events future revenues future results and performance.

Presentation plans or intentions relating to financial performance acquisitions share repurchases business trends ESG related matters and other information or other matters that are not historical including statements regarding estimates of our future financial results and other matters.

For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward looking statements investors should review the safe Harbor statement in the earnings press release issued this morning, a copy of which is available on our website at www Dot STI consulting dot com as well as other disclosure.

Under the heading of risk factors and forward looking information in our annual report on Form 10-K for the year ended December 31, 2022, and in our other filings with the SEC <unk>.

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. The most directly comparable GAAP measures investors should review the press release and the accompanying financial tables that we issued this morning, which includes a reconciliation.

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, which have been updated to include our fourth quarter and full year 2022 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 today by Steven Gunby, Our President and Chief Executive Officer, and other Sabra Walsh, our Chief Financial Officer at this time I will turn the call over to our President and Chief Executive Officer, Steve Gunby. Thank you Mollie and welcome everyone and thank each of you for joining us this morning.

Sure. Most of you have seen this morning's press release and if you have noted is that 20 to 2022 was a year in which we once again reported <unk>.

Revenue.

Our record adjusted EPS, EBITDA and record adjusted EPS.

So terrific 2022.

With your permission however, I would like to not talk too much about 2022, and rather leave it to Andre to go through the year in detail.

And instead allow me to focus on something that I find even more important than the 2022 results.

Which is the multi year trajectory. This company has been on.

And which I believe is positioned to stay on.

The critical point to me is that the 2022 was a good year.

Not a one off good year.

If you look at the last five years, we have averaged averaged double digit revenue growth.

Organically.

We have also done a couple of terrific tuck in acquisitions during that period, but even apart from those acquisitions, we've averaged double digit revenue growth.

And in terms of adjusted EPS growth, we have had adjusted EPS growth not for a year or two.

But now for eight consecutive years.

I think some of you have heard me talk a lot about the stair step nature of this business that we never grow in straight lines never in our individual businesses, certainly not sub businesses or individual geographies, but actually also for the company as a whole and some years in that eight and a lot of revenue or EPS growth. Some years had just a little bit.

But when you have had eight consecutive years of a mixture of a lot and a little.

It adds up it adds up to considerably more than a little.

In our case it adds up to more than quadrupling.

Quadrupling of adjusted EPS during that period.

To me far more important than any given year's results. It's the multiyear performance and I focus on and our teams focus on.

To me that multi year performance is a reflection of what our teams have turned this company into.

An institution that is winning in both of the marketplaces a matter.

The first is the one we always think about the marketplace of clients of winning and delivering great work.

But we're also winning in the second one which is a marketplace of talent.

Tracking great talent supporting that talent seeing it develop.

Into people, who are committed and able to deliver that great work.

By winning in both of those marketplaces, and having people who are focused on winning in both of those marketplaces. We have in my opinion turned this company into one that has.

The ability and a proven ability to thrive yes in good times.

But also through bad times.

I've made some of those observations before in a couple of folks said it would be great. If I could talk to some of the questions that naturally follow those observations, which is dive down a little bit deeper what is actually allowing that sort of sustained multi year success and second why MAA or are we confident that this sort of successes durable and extendable going forward.

So let me take a crack at both of those questions.

Starting with the question of what is allowed success I think all of US know that businesses are incredibly complicated behind any success. You can fight 1 million factors or details I can't address all of those.

Let me highlight two things that I think are incredibly fundamental perhaps the most fundamental things that have allowed us to prosper in this way over the multiyear period.

The first is that I believe over the last years, we have built a management team and now increasingly in entire organization.

That is committed irrespective of market headwinds and through this <unk> zags that happened in this industry committed to all of that to continually and confidently bet.

Where we have a right to win and invest and support the talent to our passionate about those positions.

It sounds like an extraordinarily basic concept and in some ways. It is but when I observed real life the sustained commitment to those values not just in good times, but also in bad times.

It turns out to be perhaps less common than one might think and making that sustained commitment turns out to be powerful.

Let me give a couple of examples to our company.

Corp Fin in 2022, which Jay will talk about our restructuring practice grew revenues, 14% year over year sounds pretty good and based on those results when consumer must have been good year for the restructuring markets.

Interestingly enough the answer turns out to be no. It was not a great year for the market as a whole.

In 2022, according to that while North America had the lowest number of bankruptcy filings over $50 million in 2014.

The decline of 13% compared to 2021 and less than half of what we saw in 2020.

Yes, we grew 14%.

Zooming out our restructuring practice.

Revenues have grown 67% since 2017.

Even though 2022 by all measures I know was the worst year for restructuring in 2017.

So it wasn't the market what our teams do let me talk to three of the moves.

Had confidence in the core parts of our business, but didn't sit on them. They double down on them. For example, our creditor rights business in the U S. We were already the number one player. Our teams did not standstill. We hired people. We promoted people we added people in new verticals like health care and airlines, even though we were already number one.

Secondly, we looked at areas, where we're historically underrepresented, where we under represented where we had talent for example, our company side business. We had great talent, we were underrepresented compared to where we thought we should be we invested behind that talent grew it dramatically and the market began to notice.

Last couple of years, you may have noticed that we've won several of the biggest company side jobs in North and South America.

And third our teams leverage dislocations at competitors as well as the attractiveness of our increasingly strong global network to attract great people from the outside.

At rates that exceed anything we've ever done in the past and in more widespread geographies for example, Germany, France, Australia, and the middle East and others.

Those three moves plus a few others caused us from going to go from being a very strong player in a couple of markets.

Becoming the number one or two restructuring farm in more markets than anyone else in the world.

Which in turn positions us to become the go to firm for the biggest global job.

Which in turn is incredibly attractive for the best talent in the marketplace.

Corp Fin is not some fuzzy theory of Oh, well may be sustained belden betting behind talent, where we have a right to win can work.

It's tangible actions that reflect those theories tangible actions that translate into actual powerful results.

The story I, just told us focused on the restructuring part of the business Interestingly enough is because the increases over the last five years have been on the restructuring side, we've grown outgrown our corp fin non restructuring businesses the business transformation and transaction side, even faster. During this period, we have in those businesses bets behind dynamic leaders who had confidence.

In sub.

Sub practices and teams driving those sub practices, whether it's transaction services or our office of the CFO services, our other businesses.

And those efforts.

Collectively have caused that collection of business to more than triple over the last five years.

That's a snapshot of Corp, fin, which we typically start with because it's our biggest business, but to me. There are analogous stories across every one of our business. The specifics are always different because the industry has a different competitive situation is different.

But the stories all reflect our commitment to that same set of core principles.

The second example tech.

For those of you know the tech business no. Our teams based in industry with a lot of challenges a tremendous amount of competition and incredible amount of margin compression.

In the face of those challenges our teams have delivered over 80% revenue growth since 2017 and.

And by the way if you look at the data processing done given the price reductions that turns into something absurd in terms of the amount of data process.

Either way you measure it that growth.

I believe represents by far the strongest organic growth in this industry.

Actually before I continue on track, let me make a side note that applies to Corp fin and tech, but also all of our businesses. These successes are fabulous, but none of our businesses. Neither none of the businesses in tech or Corp, spin or them as a whole was up every quarter.

There were zigzags in the Corp Fin story and the restructuring story in the <unk> story in the transaction story than there were huge.

And our Tech story, you can even see that last year. For example tech I think this past year, our EBITDA had a 37% decline from the first quarter of 'twenty two for the second quarter of 2002.

Because the business suddenly became terrible.

But because of a combination of the fact that big jobs can benefit or negatively impact any quarter and the.

The fact that our commitment to making the right investments in people independent of whether that big job happen to be there or quarter and further exacerbate the slow quarter.

Five years ago, our leadership and teams knew we were strong with a right to win we had feedback from our clients that on the most complicated cases, we were far better.

And so the team that.

Hey, Ben first making sure that on those complicated jobs, we delivered for our core clients, but then confidently they begin to engage and increasingly systematic calling programs with clients, who hadn't worked on with us who hadn't experienced that difference to encourage them to give the trial. So they can feel and test for themselves.

In some cases, it took more than a year, sometimes closer to two years before we got the trial.

Im incredibly pleased to say as people have tried us our share is growing and that gets reflected in the numbers I just talked about.

And the teams in tech or doing other things to ensure their capabilities continue to be leading edge like focusing on emerging data like teams slack, Google workplace chat apps and others they invested behind core adjacencies.

The point is the market did not give.

Our tech teams that 80% revenue growth.

Our teams.

Did the things.

Now we're required to create that growth.

I believe you get to similar conclusions if you look at our other businesses or if you look at it by geography, you talked to our teams in Australia on how we see growth out of that market over the last years.

And how we've been able to great great talent that behind them and use that to attract more great talent.

At this point in our company's history I believe we have leadership teams across every one of our businesses that is committed to that journey <unk> committed to betting on talent on our winning positions that we believe in regardless of the zig zags.

There are always zags and this is Ernie journey you see it this year for example, and a lot of the AG and parts of EMEA LLC.

And when you have a zag you always have to test yourself to say is that there really a blip or is it a reflection of something that we are doing wrong or something more fundamental.

You have to do that examination, but once we verify that the zag is due to the short term factors. Our teams continue to bet confidently and so in EMEA and <unk> done that aggressively over the course of this year notwithstanding some zags.

The second closely related point has to come at the same question not from the client side or the business side, but.

But from the people side.

Because of any of the success that I, just talked about and professional services camps happen without great people you can't do what we just said our teams are doing without focusing not just on the clients.

But also on winning the war for talent.

We have to focus everyday to make sure our great people feel supported and developing themselves in developing their businesses.

And make sure the external world is increasingly understanding how attractive our firm is.

They have that ambition as a place to grow their careers.

The second key to our multi year success has been real success on those dimensions over the last five years.

Head count by over 65% the number of applications. We received each year across this company has more than doubled we've nearly doubled the number of lateral higher SMB and MD hires we promoted 224 people to SMB and 537 people to MD and increase of over 50% from what those numbers were five years prior.

I think perhaps most fundamentally we now have a collective aspiration to be the firm that the best people want to be part of a firm where people can have confidence.

They are ambitious.

They can meet those ambitions here.

Over the last five years I am pleased to say some of that ambition and commitment has been seen by some external recognition groups. We've been named by one group of best farm to work for another a top firm for graduates in women another.

Among them America's most Jeff just companies.

I like those external awards.

Actually think more powerfully powerful.

That.

Sense of our commitment to people is getting spread by word of mouth.

People, who come to us are not saying to their friends Wow MTI has a perfect organization. We of course are not.

But they are saying in their own words Wow, it's a terrific organization.

I actually feel incredibly well supported.

And I'm not sure you can do better than that sort of validation.

As I said upfront in order to drive multiyear success, it's not two things you have to do a million things right I used to do work in retail and a retail store. In addition to all the things you have to do that to make sure. The boxes don't fall in the hands of your customers make sure. The backroom isn't getting quanta computer is arent getting unplugged.

But sometimes there is an essence, hawaii retailer wins or loses versus its competitors.

To me the essence is those twin drivers.

The two drivers that I mentioned first.

Ongoing challenging of ourselves to find out where we have really great client propositions, where we have great people and being willing to bet behind them independent of current market conditions.

And second making that known to great people.

Is it my experience great people want to be at institutions like that where they are building brands, where they are attracting and developing people who are equally committed to building great businesses.

Each of those pieces are separate.

But there's a virtuous loop between them.

What does that all add up to it's still of course doesn't add up to a straight line for any one of our businesses or even for the company as a whole in any given year.

We have had and we will have the zig zags and in some ways I think that's why we're having success because if everything went up in a straight line then it would be easy for everybody to coffee.

The discipline around the commitment of the management team to do it during the zags is the harder point.

But I believe we have today, both the management team and our entire organization that is committed to those twin drivers.

That is to me.

Powerful foundation for growth.

And a durable one.

And on a personal level, it's a fun and exciting one when that makes this company enjoy to lead.

With that let me turn this over to Ajay for the more <unk>.

Brian granular basics so 2022.

Andre Thank you Steve Good morning, everybody in my prepared remarks, I will take you through our company wide and segment results.

And guidance for 2023.

I will begin with highlights from 2022.

Our revenues of $3.03 billion increased nine 1% or $252 7 million.

Excluding the net excluding the estimated negative impact of FX revenues increased 12, 2%.

GAAP EPS of $6 58 <expletive>.

<unk> decreased 7%.

From $6 65 and 2021.

Adjusted EPS of $6 77.

Increased <unk> from $6 76 in 2021.

The difference between our GAAP and adjusted EPS for the year reflects an $8 3 million.

Fourth quarter special charge related to severance and other employee related costs, which reduced GAAP EPS by <unk> 19.

Net income of $235 $5 million compared to $235 million in 2021.

Adjusted EBITDA of $357 $6 million was up $3 $5 million from $354 million in 2021.

Last February we talked about our ambition to grow head count boldly in 2022.

Reflecting those intentions, our head count increased by 855 or 12, 6% in 2022, which compares to an increase of 459 or seven 3% in 2021.

Hiring promotions and compensation increases resulted in a $155 million increase in direct cost in 2022.

Revenue growth more than offset the increase in such direct costs with gross profit increasing $102 $2 million year over year and gross profit margin expanding from 31% to 31, 8%.

When we provided 2022 guidance. We also said we expected a sharp increase in SG&A.

For the full year 2022, approximately half of the year over year increase in SG&A was related to higher travel and entertainment marketing and business development and employee related training costs as we opened up from pandemic restrictions in many places.

An experienced pent up demand for meetings.

SG&A expenses increased $103 $2 million year over year, moving from 19, 4% of revenues in 2021 to 21, 2% of revenues in 2022.

This increase in SG&A expenses offset the increase in gross profit.

The resulting in our net income and adjusted EBITDA being up only slightly year over year.

Overall, we are pleased with these results now.

Now I will turn to fourth quarter results.

We ended the year strong with a fourth quarter that exceeded our expectations driven in part by higher than expected revenue boosted by a pickup in restructuring.

For the quarter revenues of $774 $4 million increased 14, 5% with revenues up across our corporate finance and restructuring forensic and litigation consulting or <unk> technology and strategic communications segments.

Excluding the negative impact of FX revenues increased 18, 4%.

GAAP EPS of $1 33 included the $8 3 million special charge, which reduced EPS by <unk> 19.

Compared to $1 seven in the prior year quarter, which included $2 4 million of noncash interest expense related to our 2023 convertible notes, which reduced EPS by <unk> <unk>.

Adjusted EPS of $1, 52, which excluded the special charge compared to adjusted EPS of $1 13 in the prior year quarter, which excluded the noncash interest expense.

Net income of $47 5 million compared to $38 $2 million in the fourth quarter of 2021.

Adjusted EBITDA of $92 million, which excluded the special charge compared to $62 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 $292 $8 million increased.

26, 5%.

Our 29, 5% excluding FX the.

The increase was primarily due to higher demand for restructuring and business transformation services.

Business transformation and transactions represented 54% of segment revenues in Q4 'twenty to <unk>.

<unk>, 262% in Q4 'twenty one.

Restructuring represented 46% of segment revenues in Q4, 22 compared to 38% in Q4 'twenty one.

Adjusted segment EBITDA of $52 4 million or 17, 9% of segment revenues compared to $22 $2 million or nine 6% of segment revenues in the prior year quarter.

This increase was primarily due to higher revenues, which was partially offset by an increase in compensation, including the impact of a 14, 3% increase in billable headcount and higher SG&A expenses.

Sequentially revenues increased 10, 3% largely due to 18, 7% increase in restructuring revenues.

And higher success fees.

Among industries, where we have been helping clients with restructuring matters include airlines.

Specialized and consumer finance.

Including crypto currency related matters.

And telecommunications.

<unk> seen fourth quarter revenues of $164 million increased 16, 2% or 18, 8% excluding FX.

The increase was primarily due to higher demand for investigations data and analytics and health solution services.

Adjusted segment EBITDA of $13 8 million or eight 6% of segment revenues compared to eight 5 million or six 2% of segment revenues in the prior year quarter.

This increase was primarily due to higher revenues, which was partially offset by higher compensation, including the impact of a five 9% increase in billable headcount and higher SG&A expenses.

Economic consulting revenues of $172 million.

Decreased 0.2%.

Excluding the estimated negative impact from FX revenues increased four 9% compared to the prior year quarter.

Increase in revenues was primarily due to higher realization for M&A related antitrust and international arbitration services.

Which was partially offset by lower demand for financial economic services compared to the prior year quarter.

Adjusted segment EBITDA of $27 3 million or 15, 9% of segment revenues compared to $30 million or 17, 4% per segment revenues in the prior year quarter.

This decrease was primarily due to higher SG&A expenses.

Sequentially economic consulting revenues decreased 11% as our record Q3 2022 revenues were boosted by the recognition of previously deferred revenue.

In technology revenues of $76 $8 million increased 18, 9% or 22, 2%, excluding FX compared to Q4 of 2021.

The increase in revenues was primarily due to higher demand for investigations and M&A related second request services.

Adjusted segment EBITDA of $11 $8 million or 15, 3% per segment revenues compared to $7 8 million or 12, 1% per segment revenues in the prior year quarter.

This increase was primarily due to higher revenues, which was partially offset by an increase in compensation, including the impact of an 18, 8% increase in billable headcount and higher SG&A expenses.

Sequentially technology revenues decreased nine 6% largely due to lower demand for M&A related second request services.

Lastly, in strategic communications revenues of $72 $4 million increased three 7% or 10, 4%, excluding FX compared to Q4 of 2021.

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

Adjusted segment EBITDA of $10 $5 million or 14, 5% per segment revenues compared to $14 $9 million or 21, 4% of segment revenues in the prior year quarter.

This decrease was primarily due to higher compensation, including the impact of a 19, 2% increase in billable head count and an increase in SG&A expenses.

I will now discuss certain cash flow and balance sheet items.

Net cash provided by operating activities of $188 8 million compared to $355 $5 million for the year ended December 31 2021.

The decrease in net cash provided by operating activities was primarily due to higher compensation operating expenses and income taxes paid which was partially offset by an increase in cash collected.

Notably operating expenses. This year included more items that were prepaid such as travel and entertainment expenses with the resulting negative impact on cash flow.

Total debt net of cash was a negative debt position of negative $175 $5 million at December 31, 2022, which compares to a negative debt position of $10 8 million at September 32022.

The sequential decrease in total debt net of cash was due to strong cash collections in the fourth quarter, which is historically, our strongest quarter for cash collections and was partially offset by share repurchases.

Cash and cash equivalents of $491 7 million at December 31, 2000, <unk> compared to $494 $5 million at December 31, 2021.

On December one 2022, our board of directors authorized an additional amount of $400 million.

Through our stock repurchase program.

During the quarter, we repurchased $425000 <unk> shares at an average price per share of $153 nine.

For a total cost of $65 $1 million.

As of December 31, 2020, do approximately $478 5 million remained available under our stock repurchase authorization.

Turning to our 2023 guidance, we are as usual providing guidance for revenues EPS and adjusted EPS.

After a year of double digit revenue growth, but only a slight increase in adjusted EPS, we are guiding to renewed EPS growth in 2023.

We estimate that revenues for 2023 will be between 333 billion and $3 $47 billion.

We expect our EPS to range between $6 and eight <unk>.

And $7 70.

We currently do not expect our adjusted EPS to differ from EPS.

Our 2023 guidance range incorporates several assumptions, including first.

Our revenue guidance reflects our expectation for growth in all business segments with the additional capacity that we added in 2022.

Second we assume head count growth in 2023 at similar levels as in 2022 with the caution that short term profits could be significantly adversely affected if market disruptions afford us the opportunity to bring in a substantial.

The number of lateral hires.

Third we expected we expect restructuring activity to remain elevated through 2023.

Though there can be no certainty of the strength and length of this restructuring cycle.

Firstly, we expect M&A activity to be slower in 2023.

Fourth we expect improved performance in <unk>.

And to begin to realize the benefits of the investments we have made in EMEA across all segments.

Fifth we expect SG&A in 2023 do neither revert to the lower levels. We saw during the pandemic nor to grow at the rate we saw post pandemic in 2022.

Finally tax planning strategies executed over the last few years reduced our effective tax rate, though we continue to look for additional opportunities. We currently expect a considerably higher tax rate for 2023 compared to 2022.

For 2023, we expect our tax rate to range between 24% and 26% in part because in many countries, where we operate tax rates are going up.

I must point out that our assumptions define the midpoint and we provide a range of guidance around such midpoint, which I characterize as our current best judgment often refined actual results our beyond such range because ours is largely.

Fixed cost business in the short term and small variations in revenue may have an outsized impact on income.

Yeah.

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

First as Steve said, we are increasingly seen as a place where the best people in professional services one to build their businesses.

We will continue to find opportunities to invest and grow because the best professionals are attracted by the complex work, we do that ranges from the regulation of social media to being at the forefront of crypto currency matters all over the world.

Second our management team is focused on both growth and utilization.

Third while we cannot predict what will happen in the world in 2023, we do know and have shown over the past several years that our collection of businesses is both resilient and can grow regardless of business cycles.

And finally, our balance sheet remains strong and continues to provide us the ability to boost shareholder value through organic growth share buybacks and acquisitions when we see the right one.

With that 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 Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

And the first question will come from Tobey Tobey Summer with <unk> Securities. Please go ahead.

Thank you.

A question about guidance.

The simplest terms for your revenue guidance for 2023, what are the basic building blocks in terms of utilization head count in bill rates.

So Tobey you know, we don't give that level of detail.

But essentially we expect.

We've told you. The you know the number of heads by segment at the end of the year. We've told you.

We have similar ambitions.

Utilization is.

As a as a derivative of how how we hire and what matters, we bring in et cetera, we're always looking for higher utilization.

And we're always also looking to compensate people. So that ours is the place they want to join and to have rates in the marketplace that are.

Our compensatory to the talent that we bring to the field that's as much as I'll give you.

Okay.

Im curious.

Curious if you would.

Comment on SG&A expense growth.

As we exited last year on prior calls I think we had indicated or you had indicated that.

While SG&A investments are of course is likely to continue that the gist.

Disproportionate drag on the bottom line was going to.

Dissipate overtime is that still an expectation here in 2023.

Absolutely.

Okay, and then one more financial questions and then ill go to something a little bit more strategic.

Are your expectations for free cash flow conversion from EBITDA.

Are there any initiatives to improve that.

After last year.

Thank you for that question Tobey so.

No.

It's all good.

A little bit more granular, it's roughly 65%.

Free cash flow to EBITDA, and that's defined as and we have obviously taxes.

We have a certain amount of capex.

Small amount of cash interest expense I mean, those are the and there is of course working capital. Those are the main variables. If you go back in Florida for several years, that's the kind of conversion. Obviously 2022 was nowhere there, but then 2021 and 2000 22020, we're far.

Higher than the 65%.

And that's what the pandemic from a cash flow perspective was very good because.

People completely stopped traveling and all of that and all of not just travel, but meetings et cetera, all of that prepaid expenditure just stopped. Meanwhile, you got all the normal collections, which in our case, we're not impacted adversely at all the flip side. They took place in 2022, when there was a <unk>.

Massive revving up of such SG&A.

But once you have built that up.

Even if you keep it at the same level you don't see the adverse cash impact so average out those three years and Youll get this percentage I mentioned, which is what we should expect going forward.

Okay. Thank you.

And then maybe this is for Steve I was wondering if you could.

Describes the portfolio.

Businesses that the company operates in sort of grouping the most pro cyclical and the most counter cyclical and describing.

Demand.

And those two sort of ends of the spectrum.

It's difficult to interpret what are mixed economic signals and anticipate with accuracy, how thats playing out in your portfolio. Thanks.

That's a great question I'm not sure we debate this internally im not sure we have any great exact numbers, but let me let me and then you can chime in here too <unk>. If you say something you disagree with I mean, these are judgment things, but I think there's three parts of our business not just two there is there is pro cyclical parts. There are cyclical part there's countercyclical parts and there is a cyclical parts.

And and so you just have to think about all three.

The pro cyclical stuff tends to tie to M&A right and we do M&A, we do M&A in our strat comm business, it's not half of our business, but we do it sometimes ipos are pro cyclical too but.

But when you do M&A related work in our Corp fin business as well and so thats pro cyclical some of our E com business on merger merger clearance.

Is is pro cyclical countercyclical, obviously, our restructuring business is countercyclical and sometimes some parts of the non restructuring business is countercyclical because the impetus to cut costs private equity impetus to cut cost for healthy companies grows during their during troubled times. So we have some substantial.

Countercyclical I think the thing that people Miss is we also have a whole lot of our businesses that are not particularly driven by the cycle I mean, if the governments are investigating tech companies.

As far as I know they don't.

Turning to throttle on or off based on the global economy.

And so a lot of our investigations work is affected by things that are independent of.

<unk>.

Of the of the cycle and so I think we have all three.

Actually.

I think we're sufficiently balance that I paid zero attention.

Zero attention of course monitor the news all the time, but I don't act based on those.

Those determinations, because I believe as a company.

If we arent prospering it has more to do with us.

Put it another way over any multiyear period no matter what the general economic is if we do the right things I believe we can grow now I'll withdraw that is prudent.

Nuclear awards around the world that's a different issue.

<unk>.

But in terms of the general economy of the World I think what we have to focus on is doing the right things for our business and I think we've proven over the last years, if we do we grow and so that's where we keep our focus.

As much as we can.

Does that makes sense.

It does yes.

And.

Last question for me and I'll get back in the queue.

We've seen some layoff announcements among some of the big four firms and even some.

White shoe.

Strategic strategy consulting businesses at least reported.

It does could you describe how this climate maybe in the context of the restructuring business picking up other.

Competitors, both close in distance changing their behaviors what does this do to the context of that.

<unk>, adding talent.

It's a great question. So let me respond to wave look first of all I don't.

If we were on the verge of going bankrupt of course, we would consider layoffs, but that is not our instinct here. We have we have performance conversations, particularly with the senior people to make sure that they are aligning their.

<unk> business with the market's going ahead and all of that but.

I'm not sure that it ever makes sense to optimize a quarter by laying off junior people you just hired and we try to hold off as much as we can.

And I think we have I mean, obviously, our economics are great and so I guess.

I kind of personally we didn't do that during COVID-19 and I'm not sure why we would do it at an individual business happens to have a slow quarter, which is different than if a business has no future, but we don't have any of those.

To the contrary, though I do think it creates opportunity because and we found this in different places around the world.

We picked up for example in Australia, some incredible talent to.

Who were frustrated by the actions of the companies that they came from during Covid, where they thought they were being short term ism. They werent addressing those people, but they were addressing those people's people and that frustrates people and so then they said well maybe FTE as a place that is more committed to the same values as me and we picked up a fabulous talent, which has changed our marketplace.

So that's why I believe.

Curt counted when its available.

Your point is.

I think you pointed to something really important.

Difficult times, often cause others to feel like they have to do things that are not good and that frees up talent and if it is we're going to jump on it.

At least respond to your question Tobey.

Yes, you did thank you very much thank you.

The next question will come from James <unk> with Goldman Sachs. Please go ahead.

Good morning, Stephen R J and thanks for taking my questions.

Maybe if we could just start with some of the drivers in corporate finance restructuring this quarter, maybe you could speak to where you're seeing stronger restructuring results in the fourth quarter.

And when and whether you expect this to accelerate further and then in addition, maybe you could just speak to the discrete outlooks for business transformation versus transactions in this somewhat.

Let's call it uncertain economic backdrop.

There is a lot of questions in there if I forget any just tell me.

Just repeat it so in terms of the we mentioned the industries that we don't we don't.

We don't talk about specific matters that could also be ongoing that well. After the fact, so we talked about the specific industries like specialized finance, including cryptocurrency.

You mentioned airlines, we mentioned telecommunications. So I think I think we mentioned the areas I won't go further than that.

There is a lot of publications that sometimes mentioned the names sometimes it's in the press, but we are not in the habit of.

Our most treasured thing as client confidentiality. So we don't go back there and start corroborating or otherwise as a practice. So that's one.

Two do we expect this to pick up in in our guidance.

Guidance and the midpoint of the range.

As I said, we expect it to remain restructuring to remain elevated at these levels.

That means I am not projecting it to get.

Even more nor I'm projecting it to come down that's at the midpoint. There is a range in there because theres a lot of folks who field.

Interest rates are going to fall by the second half of the year and there are others that feel it will they will remain elevated for longer.

There's a midpoint and there is a range around that midpoint, so and I will also tell you that some of these matters that can become large matters are not necessarily driven only by interest rates.

They could be fraud, there could be investigations they could be for.

For example for the longest time and retail we saw the impact of <unk>.

More transactions being done on the net versus brick and mortar set of premises. So it's more than the economic cycle that can drive restructuring.

That's on the restructuring side.

Transactions and transformation are.

We are minnows in that area I think getting stronger, but we're small relative to the rest of world. So for us it's more in market share versus.

Cyclical at this point.

Most spot I will say there can be ups and downs for example in Q4 I must point out and I think I said that in my.

In my words in the Transco, you can see that in transcript II. We had we had terrific success fees in the fourth quarter order of magnitude about $14 million. It ranges from $3 million at the low end per quarter to 15 at the high end. This was towards the high end and the significant portion of those that offer.

That game than our transactions business, where at the outcome of an events typically youll get a success fee that is lumpy that can move around from one quarter to the next one must understand and appreciate.

Did I answer your question.

That's very clear thank you.

If we.

Think about the weak backdrop.

That at least.

We're expecting for large cap M&A globally in the near term to what extent do you expect a slowdown in large M&A to affect each of your businesses or some of your businesses.

So.

Look at some of our M&A work is at large cap levels and some of it is is tends to be more middle market in those markets. As you know have not always move together.

<unk>, the leading I believe the leading I'm pretty sure we're the leading antitrust clearance.

M in both the U S in Europe , and and that is large cap stuff because its round big companies merging and second request from the government and so forth.

So theres always a chance that that.

Is negatively affected.

We should recognize our that business is not just that business. It also has private antitrust, which is usually multi year its regulatory its financial economics and so forth.

So I think that business has shown itself the ability to grow.

Over a multiyear period independent of the cycle, but it gets affected by the cycles and I suspect the M&A downs.

A downturn in large scale M&A will affect one portion of our business same thing for the strat comm they tend to be more involved in the large scale M&A comms because tiny deals don't involve as much comms.

But.

And then actually also our tech businesses also involved in the second request market because when the government asked for your second request. They asked for immense amounts of data in a very short period of time and I believe we're the leading provider of second request through our tech business also they do other things beyond that they do investigations that do a whole lot of things so.

Thank all of those businesses could be affected by a downturn in large scale M&A.

I've been impressed by the resilience of our transaction business in Corp fin.

Bert it's unaffected by the downturn, but I don't believe it's affected as much by the anecdotes I hear from the Big four and I think that's partly because we do a lot with private equity in middle market and middle market and and also because I think they've done a good job of gaining share, but I think we would expect that business also to be negatively affected by a generally down deal Mark.

<unk>.

So I don't think there is.

There's probably some effects through <unk> elsewhere.

I guess to come back to the more general point.

We will have businesses that could negatively affected by different parts of the business cycle. We will have sub businesses that will get negative and sometimes sharply negative effects that we saw that it is not a business cycle issue, but we saw during COVID-19 testifies to some of them utilization with zero because the courts were closed.

Our company as a whole is far more resilient than that maybe not in a quarter, but over any extended period of time and so what we do is if we believe that business has temporarily affected we will reinvest in those quarters.

Worse in the P&L in those quarters, because there's talent available and then if we that right.

It tends to make those exact line around an upward sloping, but but certainly there will be some zags. This year I would expect that I talk to your point James Yes, that's extremely helpful color.

Just a couple more here.

I, just think about forensic and litigation consulting utilization remained somewhat lower than what you've seen in historic fourth quarters, and you've obviously spoken to this in the past, but what do you think could catalyze an improvement in utilization and then if it doesn't improve is there some sort of point, where you would consider other approaches to improving the business.

Of course of course at some point you approve it but there are two ways to get this debt the utilization and yet utilization last year was not in line with our long term expectations.

ELC.

But there are two reasons for it one that will continue and one which I hope doesn't contain one of them is investments when you're investing in new geographies you get smbs. They don't take a while to get traction that is just part of our job and so.

Obviously, if you pull that out of the numbers.

<unk> historical business is utilization are higher but the other the other one is is what we have to do is make sure the bes ultimately turn out and.

We had some best in North America.

<unk> started to pay off in the fourth quarter and that Werent showing up.

In some of the earlier quarters, which is good we have a lot of bets in Europe that we're expecting to do better. This year. So we monitor this pretty closely but that doesn't mean, you always get it right at least in terms of timing, we haven't had them any bets and totally terrible compared to what we expected, but sometimes things take longer and I would say last year was a year in which some.

Some parts of efficacy were taking longer than we expected.

The utilization we had in 2022 is not our expectation of the long term unless somehow.

100, <unk> come on the market that we want to hire in which case you can have a short term blip does that response team.

Absolutely that's very helpful and then for my last one.

You've talked about some of the pressure on margins in.

In 2022.

If you're just thinking about your business level EBITDA margins.

We're just operating margins.

Perhaps both where are you seeing more pressure across the various segments and where are you seeing less.

I think it's very different by segment.

I think the one place where we've seen a lot of it in the last.

18 months or 24 months as in Tech, there's just a lot of price competition.

And.

We're gaining share and we're willing to match the markets prices on that.

So you can see over the last couple of years, our EBITDA margin, even though we are succeeding.

Well as anybody I think better than I believe better than anybody in the market you can see our EBITDA margin has compressed even while we've been growing incredibly fast.

I think there's always a mix issue within Corp fin.

Our restructuring business when it's hot is always a big boost to margin.

So.

I don't think we have long term.

Structural concerns about our margin.

And in any of the businesses I can think about but theyre zigzags in I would say.

Teck, maybe DNA the tech industry, maybe hedge.

Heading for a little bit of a shakeout and so there may be a few years, where the margins are a little lower other than that I think I don't expected long term decline in margin, but I also but I'm also willing to hit the margin.

By hiring at time becomes right and that's probably the bigger effect is there.

That helped James Yeah.

Absolutely that makes a lot of sense. Thank you both for taking my questions and welcome Steve.

The next question will come from Andrew Nichols with William Blair. Please go ahead.

Hi, good morning, Thanks for taking my questions. A lot has already been asked but I just wanted to ask a few follow ups to some of the earlier questions maybe starting with SLC.

You talked about the plans to continue growing head count across the entire firm at similar levels in 'twenty three to what you did in 'twenty two.

Is that are we are we should we assume that that is also applicable to FL C are you or are you going to wait for the improved performance, which I think you said you expect in guidance to materialize before.

Leaning into that further in 'twenty three.

So Andrew the key is finding the right talent.

If the talent is available we have the wherewithal and we have the ambition.

It's more of that than than an absolute number of hires.

Understood and in terms of the restructuring environment I know I know you talked about it.

Variety of different ways already but just maybe asking it a different way is there.

Any major change to how you're viewing the ramp of restructuring today versus what you communicated on the last call I know in guidance Youre assuming some.

Early elevated levels, but just kind of curious.

How things have unfolded over the past couple of months gives you a different opinion I know last quarter, you also talked about differences.

From a geographic perspective, so just any additional color there and how your view has evolved over over the last couple of months would be really helpful. Thank you.

Your observation is correct.

When we were when we spoke the last time.

Relative to when we spoke the last time restructuring has picked up more.

Then.

I saw our anticipated at that time. So your observation is correct.

It is primarily a U S phenomenon, but we're also seeing pickup and set another geographies.

So so still smaller but there are there is pick up in other geographies as well.

Guidance is.

With it remaining at these levels with a range of outcomes around it.

You can look at some external statistics.

2022 as a whole.

Not a boom year for restructuring effectiveness I think one of the worst year since 2014, but if you look by the fourth quarter that had changed and we have good statistics in the U S. But you can also see that in some of our overseas market and.

And I think when RJ is saying continuation youre seeing are a continuation of.

What we saw as you said since the last quarter's report as opposed to the year 2022, so that in English means it's not doesn't mean that the slope continues it means it's at this level and remains at this point.

Does that help Andrew.

Yes, Yes, and then maybe one last one for me I think earlier this year the FTC proposed a rule a noncompete agreements.

Just wondering if that would potentially impact.

Your business or your ability to either hire away from or protect.

Your talent.

You've given any thought to that dynamic at this point, yes, we have given some thought to that look I think my understanding is that this is in the early stages of both rulemaking with a lot of comments still to come and so.

I think there's a long way to go on that.

So maybe we can revisit that as that gets closer.

We obviously monitor that.

Makes sense. Thank you very much.

Well. Thank you everyone. I think we went over I'm sorry to go over but I appreciate the good questions and.

Thanks to everyone on this call for your continued attention and support for our company, we look forward to taking it forward.

<unk>.

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

Yeah.

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Sure.

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Yes.

Good day and welcome to the MTR consulting fourth quarter and full year 2022 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 followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then one.

Touchtone phone and swept all your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Mollie Hawkes head of Investor Relations. Please go ahead ma'am.

Good morning, welcome to the STI consulting conference call to discuss the company's fourth quarter and full year 2022 earnings results as reported this morning.

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

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Jackson.

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Guarding estimates of our future financial results and other matters.

For a discussion.

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Factors and forward looking information in our annual report on Form 10-K for the year ended December 31, 2022, 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 includes the reconciliation.

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, which have been updated to include our fourth quarter and full year 2022 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 today by Steven Gunby, Our President and Chief Executive Officer, and other sovereign wealth, our Chief Financial Officer at this time I will turn the call over to our President and Chief Executive Officer, Steve Gunby. Thank you Mollie and welcome everyone and thank each of you for joining us this morning.

I'm sure. Most of you have seen this morning's press release and if you have noted that that 20 to 2022 was a year in which we once again reported <unk>.

Record revenue.

Our record adjusted EPS, EBITDA and record adjusted EPS.

So terrific 2022.

With your permission however, I would like to not talk too much about 2022, and rather leave it to RJ to go through the year in detail.

And instead allow me to focus on something that I find even more important than the 2022 results.

Which is the multi year trajectory. This company has been on.

And which I believe is positioned to stay on.

The critical point to me is that the 2022 was a good year, it's not a one off good year.

If you look at the last five years, we have averaged averaged double digit revenue growth.

Organically.

We have also done a couple of terrific tuck in acquisitions during that period, but even apart from those acquisitions, we've averaged double digit revenue growth.

And in terms of adjusted EPS growth, we have had adjusted EPS growth not for a year or two.

But now for eight consecutive years.

I think some of you have heard me talk a lot about the stair step nature of this business that we never grow in straight lines never in our individual businesses, certainly not sub businesses or individual geographies, but actually also for the company as a whole and some years and that ate at a lot of revenue or EPS growth. Some years had just a little bit.

But when you have had eight consecutive years of a mixture of a lot and a little.

It adds up and adds up to considerably more than a little in fact in our case it adds up to more than a quadrupling.

Quadrupling of adjusted EPS during that period.

To me far more important than any given year as results. It's the multiyear performance and I focus on and our teams focus on.

To me that multiyear performance is a reflection of what our teams have turned this company into.

An institution that is winning in both of the marketplaces of the matter.

The first is the one we always think about the marketplace of clients of winning and delivering great work.

But we're also winning in the second one which is the marketplace of talent.

Tracking great talent supporting that talent seeing it develop.

Into people, who are committed and able to deliver that great work.

By winning in both of those marketplaces, and having people who are focused on winning in both of those marketplaces. We have in my opinion turned this company into one that has.

The ability and a proven ability to thrive, yes in good times, but.

But also through bad times.

I've made some of those observations before in a couple of folks said it would be great. If I could talk to some of the questions that naturally follow those observations, which is dive down a little bit deeper what is actually allowing that sort of sustained multi year success and second why MAA or and are we confident that this sort of successes durable and extended well going forward.

So let me take a crack at both of those questions.

Starting with the question of what is allowed success I think all of US know that businesses are incredibly complicated behind any success. You can fight 1 million factors or details I can't address all of those.

Let me highlight two things that I think are incredibly fundamental perhaps the most fundamental things that have allowed us to prosper in this way over the multiyear period.

The first is that I believe over the last years, we have built a management team and now increasingly in entire organization.

That is committed irrespective of market headwinds and through this <unk> zags that happened in this industry committed to all of that to continually and confidently bet.

Where we have a right to win and invest and support the talent to our passionate about those positions.

Sounds like an extraordinarily basic concept and in some ways. It is but when I observed real life the sustained commitment to those values not just in good times, but also in bad times.

Turns out to be perhaps less common than one might think and making that sustained commitment turns out to be powerful.

We give a couple of examples to our company.

Corp Fin in 2022, which Jay will talk about our restructuring practice grew revenues, 14% year over year sounds pretty good and based on those results when consumer must have been good year for the restructuring markets.

Interestingly enough the answer turns out to be no. It was not a great year for the market as a whole.

In 2022, according to that why our North America had the lowest number of bankruptcy filings over $50 million in 2014.

The decline of 13% compared to 2021 and less than half of what we saw in 2020.

Yet we grew 14%.

Zooming out our restructuring practice.

Revenues have grown 67% since 2017.

Even though 2022 by all measures I know was the worst year for restructuring in 2017.

So it wasn't the market what our teams do let me talk to three of the moves they had confidence in the core parts of our business, but didn't sit on them. They double down on them. For example, our creditor rights business in the U S. We were already the number one player. Our teams did not standstill, we hired people we promoted people we added people in new.

Verticals like healthcare and airlines, even though we were already number one.

Secondly, we looked at areas, where we're historically underrepresented, where we under represented where we had talent for example, our company side business. We had great talent, we are underrepresented compared to where we thought we should be we invested behind that talent grew it dramatically and the market began to notice.

The last couple of years you may have noticed that we've won several of the biggest company side jobs in North and South America.

And third our teams leverage dislocations at competitors as well as the attractiveness of our increasingly strong global network to attract great people from the outside.

At rates that exceed anything we've ever done in the past and in more widespread geographies for example, Germany, France, Australia, and the middle East and others.

Okay.

Those three moves plus a few others caused us from going to go from being a very strong player in a couple of markets.

To becoming the number one or two restructuring farm in more markets than anyone else in the world.

Which in turn positions us to become the go to firm for the biggest global job, which in turn is incredibly attractive for the best talent in the marketplace.

Corp Fin is not some fuzzy theory of Oh, well may be sustained belden betting behind talent, where we have a right to win can work.

It's tangible actions that reflect those theories tangible actions that translate into actual powerful results.

The story I, just told US focused on the restructuring part of the business interestingly enough as big as the increases over the last five years have been on the restructuring side, we've grown our corp fin non restructuring businesses business transformation and transaction side, even faster. During this period, we have in those businesses bets behind dynamic leaders who had caught.

In.

Sub practices and teams driving those sub practices, whether it's transaction services or our office of the CFO services, our other businesses.

And those efforts collectively.

Collectively have caused that collection of business to more than triple over the last five years.

That's a snapshot of Corp, fin, which we typically start with because it's our biggest business, but to me. There are analogous stories across every one of our business. The specifics are always different because the industry has a different competitive situation is different.

But the stories all reflect our commitment to that same set of core principles.

The second example tech.

For those of you know the tech business no. Our teams faced an industry with a lot of challenges a tremendous amount of competition and incredible amount of margin compression.

In the face of those challenges our teams have delivered over 80% revenue growth since 2017.

And by the way if you look at the amount of data processing done given the price reductions that turns into something absurd in terms of the amount of data process.

Either way you measure it that growth.

I believe represents by far the strongest organic growth in this industry.

Actually before I continue on Tech, let me make a side note that applies to Corp fin and tech, but also all of our businesses. These successes are fabulous, but none of our businesses. Neither none of the businesses in tech or Corp, fin or them as a whole was up every quarter.

There were zig zags and the Corp Fin story and the restructuring story <unk> story in the transaction story than there were huge.

And our Tech story, you can even see that last year. For example tech I think this past year, our EBITDA had a 37% decline from the first quarter of 'twenty two for the second quarter of 2002.

Because the business suddenly became terrible.

But because of a combination of the fact that big jobs can benefit our negatively impact any quarter and the.

The fact that our commitment to making the right investments in people independent of whether that big job happens to be there or quarter can further exacerbate a slow quarter.

Five years ago, our leadership and teams knew we were strong with a right to win we had feedback from our clients than on the most complicated cases, we were far better.

And so the team that.

Hey, Bert first making sure that on those complicated jobs, we delivered for our clients, but then confidently they began to engage in increasingly systematic calling programs with clients, who hadn't worked on with us who hadn't experienced that difference to encourage them to give a trial. So they can feel and test for themselves.

In some cases, it took more than a year, sometimes closer to two years before we got the trial.

Im incredibly pleased to say as people who have tried us our share is growing in.

And that gets reflected in the numbers I just talked about.

And the teams in tech or doing other things to ensure their capabilities continue to be leading edge like focusing on emerging data like teams slack, Google workplace chat apps and others they invested behind core adjacencies.

The point is the market did not give.

Our tech teams that 80% revenue growth.

Our teams.

Did the things.

Now we're required to create that growth.

I believe you get to similar conclusions if you look at our other businesses or if you look at it by geography, we talk to our teams in Australia on how we see growth out of that market over the last years.

And how we've been able to great get great talent that behind them and use that to attract more great talent.

At this point in our company's history I believe we have leadership teams across every one of our businesses that is committed to that journey <unk> committed to betting on talent on our winning positions that we believe in regardless of the zig zags.

There are always zags and this is Ernie journey you see it this year for example, and a lot of bags and parts of EMEA LLC.

And when you have a zag you always have to test yourself to say is that there really a blip or is it a reflection of something that we are doing wrong or something more fundamental.

You have to do that examination, but once we verify that the zag is due to the short term factors. Our teams continue to bet confidently and so in EMEA and <unk> done that aggressively over the course of this year notwithstanding some zacks.

The second closely related point has to come at the same question not from the client side or the business side.

But from the people side.

Because of any of the success that I just talked about in the professional services camps happen without great people you can't do what we just said our teams are doing without focusing not just in the clients.

But also on winning the war for talent.

We have to focus everyday to make sure our great people feel supported and developing themselves in developing their businesses.

And make sure the external world is increasingly understanding how attractive our firm is.

They have that ambition as a place to grow their careers.

The second key to our multi year success has been real success on those dimensions over the last five years.

Head count by over 65% the number of applications. We received each year across this company has more than doubled we've nearly doubled the number of lateral higher SMB and MD hires we promoted 224 people to SMB and 537 people to MD and increase of over 50% from what those numbers were five years prior.

I think perhaps most fundamentally we now have a collective aspiration to be the firm that the best people want to be part of a firm where people can have confidence.

They are ambitious.

They can meet those ambitions here.

Over the last five years I am pleased to say some of that ambition and our commitment has been seen by some external recognitions groups with the named by one group are best for them to work for another a top firm for graduates in women another word.

Among them America's most just companies.

I like those external awards.

I actually think more powerfully powerful.

That.

Sense of our commitment to people is getting spread by word of mouth.

People, who come to us are not saying to their friends Wow MTI has a perfect organization. We of course are not.

But they are saying in their own words Wow.

As a terrific organization.

I actually feel incredibly well supported.

And I'm not sure you can do better than that sort of validation.

As I said upfront in order to drive multiyear success, it's not two things you have to do a million things right I used to do work in retail and a retail store. In addition to all the things you have to do that to make sure. The boxes don't fall in the heads of your customers make sure the backroom isn't getting clogged the computer is arent getting unplugged.

But sometimes there is an essence for why a retailer wins or loses versus its competitors.

The essence is those twin drivers.

The two drivers that I mentioned first.

Ongoing challenging of ourselves to find out where we have really great client propositions, where we have great people and being willing to bet behind them independent of current market conditions.

And second making that known to great people.

Is it my experience great people want to be at institutions like that where they are building brands, where they are attracting and developing people who are equally committed to building great businesses.

Each of those pieces are separate.

But there's a virtuous loop between them.

What does that all add up to it's still of course doesn't add up to a straight line for any one of our businesses or even for the company as a whole in any given year.

We have had and we will have zig zags and in some ways I think that's why we're having success because if everything went up in a straight line then it would be easy for everybody to coffee.

The discipline around it the commitment of the management team to do it during the zags as the harder point, but I believe we have today, both the management team and our entire organization that is committed to those twin drivers.

That is to me a powerful foundation for growth.

And a durable one.

And on a personal level, it's a fun and exciting one when that makes this company enjoy to lead.

With that let me turn this over to Ajay for the more.

Brian granular basics so 2022.

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

And the guidance for 2023.

I will begin with highlights from 2022.

Revenues of $3.03 billion increased nine 1% or $252 7 million.

Excluding the net excluding the estimated negative impact of FX revenues increased 12, 2%.

GAAP EPS of $6 58.

Decreased 7%.

From $6 65, and 2021 adjusted EPS of $6 77.

Increased 1% from $6 76 in 2021.

The difference between our GAAP and adjusted EPS for the year reflects an $8 3 million.

Fourth quarter special charge related to severance and other employee related costs, which reduced GAAP EPS by <unk> 19.

Net income of $235 $5 million compared to $235 million in 2021.

Adjusted EBITDA of $357 $6 million was up $3 $5 million from $354 million in 2021.

Last February we talked about our ambition to grow head count boldly in 2022.

Reflecting those intentions, our head count increased by 855 or 12, 6% in 2022, which compares to an increase of 459 or seven 3% in 2021.

Writing promotions and compensation increases resulted in a $155 million increase in direct cost in 2022.

Revenue growth more than offset the increase in such direct costs with gross profit increasing $102 $2 million year over year and gross profit margin expanding from 31% to 31, 8%.

When we provided 2022 guidance. We also said we expected.

The increase in SG&A.

For the full year 2022, approximately half of the year over year increase in SG&A was related to higher travel and entertainment marketing and business development and employee related training costs as we opened up from pandemic restrictions in many places.

An experienced pent up demand for meetings.

SG&A expenses increased $103 $2 million year over year.

Moving from 19, 4% of revenues in 2021 to 21, 2% of revenues in 2022.

This increase in SG&A expenses offset the increase in gross profit.

The resulting in our net income and adjusted EBITDA being up only slightly year over year.

Overall, we are pleased with these results.

Now I will turn to fourth quarter results.

We ended the year strong with a fourth quarter that exceeded our expectations driven in part by higher than expected revenue boosted by a pickup in restructuring.

For the quarter revenues of $774 $4 million increased 14, 5% with revenues up across our corporate finance and restructuring forensic and litigation consulting or <unk> technology and strategic communications segments.

Excluding the negative impact of FX revenues increased 18, 4%.

GAAP EPS of $1 33 included the $8 3 million special charge, which reduced EPS by <unk> 19.

Compared to $1 seven in the prior year quarter, which included $2 4 million of noncash interest expense related to our 2023 convertible notes, which reduced EPS by <unk> <unk>.

Adjusted EPS of $1, 52, which excluded the special charge compared to adjusted EPS of $1 13 in the prior year quarter, which excluded the noncash interest expense.

Net income of $47 5 million compared to $38 2 million in the fourth quarter of 2021.

Adjusted EBITDA of $92 million, which excluded the special charge compared to $62 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 $292 $8 million increased.

26, 5%.

Our 29, 5% excluding FX they.

The increase was primarily due to higher demand for restructuring and business transformation services.

Business transformation and transactions represented 54% of segment revenues in Q4 'twenty to <unk>.

<unk>, 262% in Q4 'twenty one.

Restructuring represented 46% of segment revenues in Q4, 22 compared to 38% in Q4 'twenty one.

Adjusted segment EBITDA of $52 4 million or 17, 9% of segment revenues compared to $22 $2 million or nine 6% of segment revenues in the prior year quarter.

This increase was primarily due to higher revenues, which was partially offset by an increase in compensation, including the impact of a 14, 3% increase in billable headcount and higher SG&A expenses.

Sequentially revenues increased 10, 3% largely due to 18, 7% increase in restructuring revenues.

And higher success fees.

Among industries, where we have been helping clients with restructuring matters include airlines.

Specialized and consumer finance.

Including crypto currency related matters.

In telecommunications.

<unk> fourth quarter revenues of $164 million increased 16, 2% or 18, 8% excluding FX.

The increase was primarily due to higher demand for investigations data and analytics and health solution services.

Adjusted segment EBITDA of $13 $8 million or eight 6% of segment revenues compared to eight 5 million or six 2% of segment revenues in the prior year quarter.

This increase was primarily due to higher revenues, which was partially offset by higher compensation, including the impact of a five 9% increase in billable headcount and higher SG&A expenses.

Economic consulting revenues of $172 million.

Decreased 0.2%.

Excluding the estimated negative impact from FX revenues increased four 9% compared to the prior year quarter.

Increase in revenues was primarily due to higher realization for M&A related antitrust and international arbitration services.

Which was partially offset by lower demand for financial economic services compared to the prior year quarter.

Adjusted segment EBITDA of $27 3 million or 15, 9% of segment revenues compared to $30 million or 17, 4% per segment revenues in the prior year quarter.

This decrease was primarily due to higher SG&A expenses.

Sequentially economic consulting revenues decreased 11% as our record Q3 2022 revenues were boosted by the recognition of previously deferred revenue.

In technology revenues of $76 $8 million increased 18, 9% or 22, 2%, excluding FX compared to Q4 of 2021.

The increase in revenues was primarily due to higher demand for investigations and M&A related second request services.

Adjusted segment EBITDA of $11 8 million or 15, 3% per segment revenues compared to $7 8 million or 12, 1% of segment revenues in the prior year quarter.

This increase was primarily due to higher revenues, which was partially offset by an increase in compensation, including the impact of an 18, 8% increase in billable headcount and higher SG&A expenses.

Sequentially technology revenues decreased nine 6% largely due to lower demand for M&A related second request services.

Lastly, in strategic communications revenues of $72 $4 million increased three 7% or 10, 4%, excluding FX compared to Q4 of 2021.

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

Adjusted segment EBITDA of $10 $5 million or 14, 5% per segment revenues compared to $14 $9 million or 21, 4% per segment revenues in the prior year quarter.

This decrease was primarily due to higher compensation, including the impact of a 19, 2% increase in billable headcount and an increase in SG&A expenses.

I will now discuss certain cash flow and balance sheet items.

Net cash provided by operating activities of $188 8 million compared to $355 $5 million for the year ended December 31 2021.

The decrease in net cash provided by operating activities was primarily due to higher compensation operating expenses and income taxes paid which was partially offset by an increase in cash collected.

Notably operating expenses. This year included more items that were prepaid such as travel and entertainment expenses with the resulting negative impact on cash flow.

Total debt net of cash was a negative debt position of negative $175 $5 million at December 31, 2022, which compares to a negative debt position of $10 8 million at September 32022.

The sequential decrease in total debt net of cash was due to strong cash collections in the fourth quarter, which is historically, our strongest quarter for cash collections and was partially offset by share repurchases.

Cash and cash equivalents of $491 7 million at December 31, 2002, compared to $494 5 million at December 31 2021.

On December one 2022, our board of directors authorized an additional amount of $400 million.

Through our stock repurchase program.

During the quarter, we repurchased $425000 <unk> shares at an average price per share of a $153 nine.

For a total cost of $65 $1 million.

As of December 31, 2020, do approximately $478 5 million remained available under our stock repurchase authorization.

Turning to our 2023 guidance.

We are as usual providing guidance for revenues EPS and adjusted EPS.

After a year of double digit revenue growth, but only a slight increase in adjusted EPS.

We are guiding to renewed EPS growth in 2023.

We.

<unk> net revenues for 2023 will be between 333 billion and $3 $47 billion.

We expect our EPS to range between $6 and eight <unk>.

And $7 70.

We currently do not expect our adjusted EPS to differ from EPS.

Our 2023 guidance range incorporates several assumptions, including first.

Our revenue guidance reflects our expectation for growth in all business segments with the additional capacity that we added in 2022.

Second we assume our head count growth in 2023 at similar levels as in 2022 with the caution that short term profits could be significantly adversely affected if market disruptions afford us the opportunity to bring in a substantial.

The number of lateral hires.

Third we expected we expect restructuring activity to remain elevated through 2023.

Though there can be no certainty of the strength and length of this restructuring cycle.

Virtually we expect M&A activity to be slower in 2023.

Fourth we expect improved performance in <unk>.

And to begin to realize the benefits of the investments we have made in EMEA across all segments.

Fifth we expect SG&A in 2023 do neither revert to the lower levels. We saw during the pandemic norco grow at the rate we saw post pandemic in 2022.

Finally tax planning strategies executed over the last few years reduced our effective tax rate, though we continue to look for additional opportunities. We currently expect a considerably higher tax rate for 2023 compared to 2022 for 2023.

We expect our tax rate to range between 24% and 26% in part because in many countries, where we operate tax rates are going up.

I must point out that our assumptions define the midpoint and we provide a range of guidance around such midpoint, which I characterize as our current best to 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 as Steve said, we are increasingly seen as a place where the best people in professional services one to build their businesses.

We will continue to find opportunities to invest and grow because the best professionals are attracted by the complex work, we do that ranges from the regulation of social media to being at the forefront of crypto currency matters all over the world.

Second our management team is focused on both growth and utilization.

Third while we cannot predict what will happen in the world in 2023, we do know and have shown over the past several years that our collection of businesses is both resilient and can grow regardless of business cycles.

And finally, our balance sheet remains strong and continues to provide us the ability to boost shareholder value through organic growth share buybacks and acquisitions when we see the right one.

With that 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 Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

And the first question will come from Tobey Tobey Summer with <unk> Securities. Please go ahead.

Thank you.

A question about guidance in the simplest terms for your revenue guidance for 2023, what are the basic building blocks in terms of utilization head count in bill rates.

So Tobey you know, we don't give that level of detail.

Essentially we expect.

We've told you. The you know the number of heads by segment at the end of the year. We've told you.

We have similar ambitions.

We.

Utilization is.

Is it.

Relative of how how we hire.

What matters, we bring in et cetera, we're always looking for higher utilization.

And we're always also looking to compensate people. So that ours is the place they want to join and to have rates in the marketplace that are are compensatory to the talent that we bring to the field that's as much as I'll give you.

Okay.

Curious if you would.

Comment on SG&A expense growth.

As we exited last year on prior calls.

We had indicated or you had indicated that.

While SG&A investments are of course is likely to continue that the.

Disproportionate drag on the bottom line was going to.

Dissipate overtime is that still an expectation here in 2023.

Absolutely.

Okay, and then one more financial questions and then ill go to something a little bit more strategic.

Are your expectations for free cash flow conversion from EBITDA and are there any initiatives to improve that.

After last year.

Thank you for that question Tobey so.

No.

It's.

A little bit more granular, it's roughly 65%.

Free cash flow to EBITDA, and that's defined as and we have obviously taxes.

We have a certain amount of capex.

Small amount of cash interest expense I mean, those are the and there is of course working capital. Those are the main variables. If you go back in Florida for several years, that's the kind of conversion. Obviously 2022 was nowhere there, but then 2021 and 2000 22020, we're far.

Higher than the 65%.

And thats, what the pandemic from a cash flow perspective was very good because.

People completely stopped traveling and all of that and all of them not just travel, but meetings et cetera, all of that prepaid expenditure just stopped. Meanwhile, you got all the normal collections, which in our case, we're not impacted adversely adult the flip side. They took place in 2022, when there was a <unk>.

Massive revving up of such SG&A.

But once you have built that up.

Even if you keep it at the same level you don't see the adverse cash impact so average out those three years and Youll get this percentage I mentioned, which is what we should expect going forward.

Okay. Thank you.

And then maybe this is for Steve I was wondering if you could.

Describes the portfolio.

Businesses that the company operates in sort of grouping the most pro cyclical and the most counter cyclical and describing.

Demand.

Those two sort of ends of the spectrum.

It's difficult to interpret what are mixed economic signals and anticipate with accuracy, how thats playing out in your portfolio. Thanks.

That's a great question I'm not sure we debate this internally im not sure we have any great exact numbers, but let me let me and then you can chime in here too <unk>. If you say something you disagree with I mean, these are judgment things, but I think there's three parts of our business not just two there is there is pro cyclical parts. There are a cyclical part there's countercyclical parts and there is a cyclical parts.

And and so you just have to think about all three.

The pro cyclical stuff tends to tie the M&A right and we do M&A, we do M&A in our strat comm business, it's not half of our business, but we do it sometimes ipos are pro cyclical too but.

But when you do M&A related work in our Corp fin business as well and so thats pro cyclical some of our E com business on merger merger clearance.

Is is pro cyclical countercyclical, obviously, our restructuring business is countercyclical and sometimes some parts of the non restructuring business is countercyclical because the impetus to cut costs private equity impetus to cut cost for healthy companies grows during their during troubled times. So we have some substantial.

Countercyclical I think the thing that people Miss is we also have a whole lot of our businesses that are not particularly driven by the cycle I mean, if the governments are investigating tech companies.

As far as I know they don't.

Turning to throttle on or off based on the global economy.

And so a lot of our investigations work is affected by things that are independent of.

<unk>.

Of the of the cycle.

So I think we have all three.

Actually.

I think we're sufficiently balance that I paid zero attention.

Zero attention of course monitor the news all the time, but I don't act based on those.

Those determinations, because I believe as a company.

If we arent prospering it has more to do with us.

Put it another way over any multiyear period no matter what the general economic is if we do the right things I believe we can grow now I'll withdraw that is prudent.

Nuclear awards around the world, that's a different issue but.

But in terms of the general economy of the World I think what we have to focus on is doing the right things for our business and I think we've proven over the last years, if we do we grow and so that's where we keep our focus.

As much as we can.

Does that make sense.

Yes.

And.

Last question for me and I'll get back in the queue.

We've seen some layoff announcements among some of the big four firms and even some.

White shoe.

Strategic strategy consulting businesses at least reported.

It does could you describe how this climate maybe in the context of the restructuring business picking up other.

Competitors, both close in distance changing their behaviors what does this do to the context of <unk>.

STI, adding talent.

No no. It's a great question. So let me respond to wave look first of all I don't.

If we were on the verge of going bankrupt of course, we would consider layoffs, but that is not our instinct here. We have we have performance conversations, particularly with the senior people to make sure that they are aligning their.

<unk> business with the market's going ahead and all that but.

I'm not sure that it ever makes sense to optimize a quarter by laying off junior people you just hired and we try to hold off as much as we can.

And I think we have I mean, obviously, our economics are great and so I guess.

I kind of personally we didn't do that during COVID-19 and I'm not sure why we would do it at an individual business happens to have a slow quarter, which is different than if a business has no future, but we don't have any of those.

To the contrary, though I do think it creates opportunity because and we found this in different places around the world.

We picked up for example in Australia, some incredible talent to.

So were frustrated by the actions of the companies that they came from during Covid, where they thought they were being short term ism. They werent addressing those people, but they were addressing those people's people and that frustrates people and so then they said well maybe FTE as a place that is more committed to the same values as me and we picked up a fabulous talent, which has changed our marketplace.

So that's why I believe.

Curt talented when its available.

Your point is.

I think you're pointing to something really important.

Difficult times, often cause others to feel like they have to do things that are not good and that that frees up talent and if it is we're going to jump on it.

At least respond to your question Tobey.

Yes, you did thank you very much thank you.

The next question will come from James <unk> with Goldman Sachs. Please go ahead.

Good morning, Stephen R J and thanks for taking my questions.

Maybe if we could just start with some of the drivers in corporate finance restructuring this quarter, maybe you could speak to where you're seeing stronger restructuring results in the fourth quarter.

And when and whether you expect this to accelerate further and then in addition, maybe you could just speak to the discrete outlooks for business transformation versus transactions in this somewhat.

Let's call it uncertain economic backdrop.

There is a lot of questions in there if I forget any just tell me.

Just repeat it so in terms of the we mentioned the industries that we don't we don't.

We don't talk about specific matters that could also be ongoing that well. After the fact, so we talked about the specific industries like specialized finance, including cryptocurrency. We mentioned airlines, we mentioned telecommunications. So I think I think we mentioned the areas I won't go further than that.

There is a lot of publications that sometimes mentioned the names sometimes it's in the press, but we are not in the habit of.

Our most treasured thing as client confidentiality. So we don't go back there and start corroborating or otherwise as a practice. So that's one.

Two do we expect this to pick up in <unk>.

Our guidance and the midpoint of the range as I said, we expect it to remain restructuring to remain elevated at these levels.

That means I am not projecting it to get.

Even more nor am projecting it to come down that's at the midpoint. There is a range in there because theres a lot of folks who field.

Interest rates are going to fall by the second half of the year and there are others that feel it will they will remain elevated for longer.

There's a midpoint and there is a range around that midpoint, so and I will also tell you that some of these matters that can become large matters are not necessarily driven only by interest rates.

They could be fraud, they could be investigations they could be for.

For example for the longest time and retail we saw the impact of <unk>.

More transactions being done on the net versus brick and mortar set of premises. So it's more than the economic cycle that can drive restructuring.

That's on the restructuring side.

Transactions and transformation are.

We are minnows in that area.

<unk> getting stronger, but we are we are.

Relative to the rest of world So for us it's more in market share versus.

Cyclical at this point for the most spot I will say there can be ups and downs for example in Q4 I must point out and I think I said that in my.

In my words in the <unk> you can see that in transcript, we had we had terrific success fees.

In the fourth quarter order of magnitude about $14 million it ranges from $3 million.

And per quarter to 15 at the high end this was towards the high end and the significant portion of those that came in our transactions business, where at the outcome of an events typically youll get a success fee that is lumpy that can move around from one quarter to the next one must understand and appreciate.

Did I answer your question.

That's very clear thank you.

If we.

Think about the weak backdrop.

That at least we're expecting for large cap M&A globally in the near term to what extent do you expect a slowdown in large cap M&A to affect each of your businesses or some of your businesses.

So.

Look at some of our M&A work is at large cap levels and some of it is is tends to be more middle market in those markets. As you know have not always move together.

<unk>, the leading I believe the leading I'm pretty sure we're the leading antitrust clearance.

M in both the U S in Europe , and and that is large cap stuff because its round big companies merging and second request from the government and so forth.

So theres always a chance that that.

Is negatively affected.

We should recognize our that business is not just that business. It also has private antitrust, which is usually multi year its regulatory its financial economics and so forth.

So I think that business has shown itself ability to grow.

Over a multiyear period independent of the cycle, but it gets affected by the cycles and I suspect the M&A downs.

Downturn in large scale M&A will affect one portion of that business same thing for strat comm. They tend to be more involved in a large scale M&A comps because tiny deals don't involve as much comms.

But.

And then actually also our tech business is also involved in the second request market because when the government asked for your second request. They asked for immense amounts of data in a very short period of time and I believe we're the leading provider of second request through our tech business also they do other things beyond that they do investigations that do a whole lot of things so.

Thank all of those businesses could be affected by a downturn in large scale M&A.

I've been impressed by the resilience of our transactions business in Corp fin.

That it's unaffected by the downturn, but I don't believe it's affected as much by the anecdotes I hear from the Big four and I think that's partly because we do a lot with private equity in middle market and middle market and and also because I think they've done a good job of gaining share, but I think we would expect that business also to be negatively affected by a generally down deal Mark.

<unk>.

So I don't think there is.

There's probably some effects through through elsewhere.

I guess to come back to the more general point.

We will have businesses that could negatively affected by different parts of the business cycle. We will have sub businesses that will get negative and sometimes sharply negative effects that we saw that it's not a business cycle issue, but we saw during COVID-19 testifies some of them utilization with zero because the courts were closed.

Our company as a whole is far more resilient than that maybe not in the quarter, but over any extended period of time and so what we do is if we believe that business has temporarily affected we will reinvest in those quarters.

Worse in the P&L in those quarters, because there's talent available and then that rate.

It tends to make this exact line around an upward sloping, but but certainly there will be some zags. This year I would expect that I talk to your point James Yes, that's extremely helpful color.

Just a couple more here wondering if you just think about forensic and litigation consulting utilization remained somewhat lower than what you've seen in historic fourth quarters, and you've obviously spoken to this in the past, but what do you think could catalyze an improvement in utilization and then if it doesn't improve is there some sort of point, where you would consider other approaches.

Two improving the business.

Of course of course at some point you approve it but there are two ways to get this that the utilization and yet utilization last year was not in line with our long term expectations for epilepsy.

But there are two reasons for it one that will continue and one which I hope doesn't continue one of them is investments when you're investing in new geographies you get smbs. They don't take a while to get traction that is just part of our job and so.

Obviously, if you pull that out of the numbers. The historical business is utilization are higher but the other the other one is is what we have to do is make sure the bets ultimately turn out and.

We had some best in North America.

Started to pay off in the fourth quarter and that Werent showing up.

In some of the earlier quarters, which is good we have a lot of bets in Europe that we're expecting to do better. This year. So we monitor this pretty closely but that doesn't mean, we're always get it right at least in terms of timing, we haven't had them any bets and totally terrible compared to what we expected, but sometimes things take longer and I would say last year was a year in which some.

Some parts of LLC were taking longer than we expected.

The utilization we had in 2022 is not our expectation of the long term unless somehow.

100, S&P has come on the market that we want to hire in which case you can have a short term lift does that respond yes.

Yeah, absolutely that's very helpful and then for my last one.

You've talked about some of the pressure on margins in.

In 2022.

If you're just thinking about your business level EBITDA margins.

We're just operating margins.

Perhaps both where are you seeing more pressure across the various segments and where are you seeing less.

I think it's very different by segment.

I think the one place where we've seen a lot of it in the last.

18 months or 24 months as in Tech, it's just a lot of price competition.

And.

We're gaining share and we're willing to match the markets prices on that.

So you can see over the last couple of years, our EBITDA margin, even though we are succeeding.

Well as anybody I think better than I believe better than anybody in the market you can see our EBITDA margin has compressed even while we've been growing incredibly fast.

I think there's always a mix issue within Corp fin.

Our restructuring business when it's hot is always a big boost to margin.

So.

I don't think we have long term.

Structural concerns about our margin.

And in any of the businesses I can think about but there are zigzags in I would say.

Teck may be in a tech industry, maybe hedge.

Heading for a little bit of a shakeout and so there may be a few years, where the margins are a little lower other than that I think I don't expected long term decline in the margin, but I also but I'm also willing to hit the margin.

By hiring at the time becomes right and that's probably the bigger effect is there.

That helped James Yeah, absolutely that makes a lot of sense. Thank you both for taking my questions and welcome.

The next question will come from Andrew Nichols with William Blair. Please go ahead.

Hi, good morning, Thanks for taking my questions. A lot has already been asked but I just want to ask a few follow ups to some of the earlier questions maybe starting with SLC.

You talked about the plans.

Plans to continue growing head count across the entire firm at similar levels in 'twenty three to what you did in 'twenty. Two is that are we are we should we assume that that is also applicable to MLC are you or are you going to wait for the improved performance, which I think you said you expect in guidance.

To materialize before.

Leaning into that.

Further in 'twenty three.

So the key is finding the right talent.

If the talent is available we have the wherewithal and we have the ambition.

It's more of that than than an absolute number of hires.

Understood.

In terms of the restructuring environment I know I know you talked about it.

Variety of different ways already but just maybe asking it a different way is there.

Any major change to how you're viewing the ramp of restructuring today versus what you communicated on the last call I know in guidance Youre assuming.

Early elevated levels, but just kind of curious.

Yes.

How things have unfolded over the past couple of months gives you a different opinion I know last quarter, you also talked about differences.

From a geographic perspective, so just any additional color there on how your view has evolved over over the last couple of months would be really helpful. Thank you.

Your observation is correct.

When we were when we spoke the last time.

<unk>.

Relative to when we spoke the last time restructuring has picked up more than I saw our anticipated at that time. So your observation is correct.

It is primarily a U S phenomenon, but theyre also seeing pickup and set another geographies.

So so still smaller but there are there is pick up in other geographies as well.

The guidance is.

With it remaining at these levels with a range of outcomes around it.

You can look at some external statistics.

2022 as a whole.

It was not a boom year for restructuring and factory list I think.

One of the worst year since 2014, but if you look by the fourth quarter that had changed and we have good statistics in the U S. But you can also see that in some of our overseas markets and.

And I think when RJ is saying continuation youre, saying of the continuation of that.

What we saw as you said since the last quarter's report as opposed to the year 2022. So so that in English means that it's not doesn't mean that the slope continues it means it's at this level and remains of this.

Does that help Andrew.

Yes, Yes, and then maybe one last one for me.

Earlier this year the FTC proposed a rule a noncompete agreements just.

Just wondering if if that would potentially impact.

Your business or your ability to either hire away from or protect.

Your talent or if you've given any thought to that dynamic at this point, yes, we have given some thought to that look I think my understanding is that this is in the early stages of both rulemaking with a lot of comments still to come and so.

I think there's a long way to go on that.

So maybe we can revisit that as that gets closer.

We obviously monitor that.

Makes sense. Thank you very much.

Well. Thank you everyone. I think we went over I'm sorry to go over but I appreciate the good questions and.

Thanks to everyone on this call for your continued attention and support for our company, we look forward to taking it forward.

Yes.

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