Q3 2023 FTI Consulting Inc Earnings Call

October 26, 2023

[music].

Welcome to the FTR consulting third quarter 2023 earnings conference call.

All participants will be in a listen only mode.

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

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

Please also note that this event is being recorded today.

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

Good morning, welcome to the F T.

Yeah I consulting.

It's got the company's third quarter earnings results as reported this morning.

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

Before we begin I would like to remind everyone that this conference call may include forward looking statements within the meaning of section 27, a Securities Act of 1933 and section 21 Securities Exchange Act of 1934 that involve risks and uncertainties for looking statements include statements concerning plans.

Justin.

<unk> strategy future events future revenues future results and performance.

Asian plans or intentions relating to financial performance acquisition share repurchases business trends, yes, G related matters and other information or other matters that are not historical including statements regarding estimates.

And 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 MTI consulting dotcom as well as other disclosures under the heading risk factors and forward looking information in our quarterly report on Form 10-Q for the quarter ended September 30th 2023, our annual report on Form 10-K.

For the year ended December 31st 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 measure as well as a reconciliation of non-GAAP financial measure to the most directly comparable GAAP measures investors should review the press release and 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, an excel and PDF of our historical financial and operating data, which have been updated to address our third quarter 2023 result in changes to certain historical information.

Of note effective July 1st 2023.

Lucky seven billable professionals in the health solutions practice within the company's rapid and litigation consulting business segment were transferred to the corporate finance and restructuring business segment eight.

83, billable professionals within the health solutions practice remains in the forensic and litigation consulting segment.

Prior period information for these two segments included in the quarterly report on Form 10-Q for this quarter ended September 30th 2023, and no financial people in this morning's press release have been recast to reflect the modified composition of these segments.

Additionally, the unaudited summary, financial information and other select financial and operating data for the corporate finance and restructuring and forensic and litigation consulting segments included in the historical financial statements posted on our website have been recast for Egypt been previously reported year ended December 31, two.

Operator: Welcome to the FTI Consulting 3rd quarter 2023 earnings conference call. All participants will be in a listen only mode. Incured you need any assistance, please signalling conference specialist by pressing the star key followed by zero.

Operator: After today's presentation there will be an opportunity to ask questions. To ask a question, you may press star one on your telephone keypad. Into withdraw a question, please press star then two.

'twenty 'twenty December 31, 2021, and December 31 2022.

And between these different 40 quarters and he says here in the first and second quarters.

Operator: Please also note that this event is being recorded today.

It's free to conform to current period presentation reflected in STI consulting quarterly report on Form 10-Q for the quarter ended September 32023.

Mollie Hawkes: I would now like to turn the conference over to Mollie Hawkes, ahead of investor relations. Please go ahead. Good morning.

Mollie Hawkes: Welcome to the FTI Consulting conference call to discuss the company's 30th order 2023 earnings results as reported this morning. Management will begin with four more remarks after which they will take your questions.

Mollie Hawkes: Before we begin, I would like to remind everyone that this conference call may include forward looking statements within the meaning of Section 27A of the Citeria's Act of 1933 and Section 21 of the Citeria's Exchange Act of 1934 that involve risk and uncertainties. For looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions related to financial performance, acquisition, share purchases, 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.

<unk> provides a similar detail that 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 Al just overwhelm our Chief Financial Officer at this time I'll turn the call over to our President and Chief Executive Officer, Steve Gunby. Thank you Mollie and welcome everyone and thank you once again for joining us this morning.

I have one main message that I would like to convey this morning.

About this quarter, which is this is a quarter, where we got our earnings.

Back on track.

And I'm focusing on the word earnings because as I hope everyone. On this call will remember our revenue.

Has been terrific we on track all year in the first half of this year, our revenues were up 13%.

Mollie Hawkes: For 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 statements in the earnings press release issued this morning. A copy of which is available on our website at www.fticonselting.com and phone other disclosures under the headings of risk factors and forward looking information in our quarterly report on form 10Q or the quarter ended September 30th, 2023, our annual report on form 10K for the year ended December 31st, 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 the date of this earnings call and will not be updated.

This quarter, we delivered 15% topline growth.

Those are numbers that I would be proud of most years, but particularly so given this year has been in an environment where.

And particularly challenging for many professional services firm.

Yeah.

I liked focusing on revenue to me that sort of revenue growth is one of the best predictors of long term success.

Theres, a validate or whether your teams are doing something right.

When you have that sort of growth that shows the power of your teams and relevance in the market the competitive position.

Perhaps most important impact they are delivering for.

And with your clients.

I believe in this case. It also reflects our team's dedication to our continued success in attracting good morning.

Mollie Hawkes: During the call we've discussed certain non-gap 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 discussion of these and other non-gap financial measures, as well as our reconciliations of non-gap financial measures to the most directly comparable gap measures, investors should review the press release and a company financial tables that we issued this morning which includes the reconciliations.

Talent that aspires to make that sort of a difference for clients.

So we have been extraordinarily gratifying this year that it's been yet another year, where we have delivered terrific revenue growth.

Okay.

What was not so great in the first half of the year was translating a terrific revenue growth into earnings growth.

In general in most companies that are in professional services overtime earnings end up roughly tracking revenue and Thats. What we of course have seen for much of the last five years, but for periods of times earnings and revenues and of course, DBA and Thats. What we saw for the first half of the year and we've discussed on prior calls some of the <unk>.

Mollie Hawkes: Last, 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, an Excel and PDF of our Historical Financial and Operating Data, which have been updated to address our third quarter, 2023 results and changes to certain historical information. Of note, a theft of July 1, 2023, 127 billable professionals in the health solutions practice within the company's forensic and litigation consulting business segment were transferred to the corporate finance and restructuring business segment.

This is a bad.

One of the causes of the lag in bottom line results two of the causes that we've discussed externally driven inflation, it's taken us a while to adjust for the impact of inflation.

And second we like many professional services firm. This year have ended up with lower attrition than we expected lower attrition that we've had prior years and lower attrition that we had budgeted.

So two of the factors for the lagging bottom line results were externally driven.

Yeah.

Mollie Hawkes: 83 billable professionals within the health solutions practice remained in the forensic and litigation consulting segment. Prior period information for these two segments included in the quarterly report on form 10Q, for the quarter ended September 30, 2023, and the financial tables in this morning's press release have been recast to reflect the modifying composition of these segments. Additionally, the un-audited summary financial information and other select financial and operating data for the corporate finance and restructuring and forensic and litigation consulting segments included in the historical financial statements posted on our website have been recast for each of the previously reported years and in December 31, 2020, December 31, 2021 and December 31, 2022.

The third factor, however was not an external factor.

He's been an active set of decisions on our part and some decisions that we have made year after year after year, which we continue to make this year, which is that we committed continued to commit to be acquired to acquire and support great talent when ever.

Alex was available even if it's in a business that happens to be running at a lower utilization that quarter and we aspire to longer term.

We've continued to do that in the first half of the year, even some businesses that were slow because we were in a fortunate position. This year like we have been in many of the prior year. So that's terrific talent was available I wanted to join us.

So that was the reason for the wax net of all of that was that the revenues were up 13% in the first half of the year.

Mollie Hawkes: And the previously reported quarters in each sense year and the first and second quarters of 2023, the conforms to the current period presentation were reflected in FTI consulting's quarterly report on form 10Q, for the quarter ended September 30, 2023.

Our cost structure was up 14% and no matter how impressive 32% growth as your cost structure is up 40% youre going to have some pressure on earnings.

That's the way math works RJ, if I remember right and that's where we were.

In this quarter, we did not make a dramatic change to how we manage the business.

Mollie Hawkes: Of no, during today's program remarks management will not speak directly to the quarterly audience presentation posted to the investor relations section of our website to ensure our exposures are consistent. These slides provide the similar detail that they have historically and as I said are available on the investor relations section of our website.

Some of the factors starting to normalize a bit we had as we discuss another great quarter in terms of revenue growth.

Like the first two quarters, our cost structure do not grow quite as fast.

We continued to make progress against inflation. We also had an uptick in attrition both voluntarily and performance related.

Steven Gunby: With these formalities as the way I'm joined today by Stephen Gumby, our president and chief executive officer and audience of our well are chief financial officer at this time I'll turn the call over to our president and chief executive officer Steve Gumby. Thank you, Molly. Welcome everyone and thank you once again for joining us this morning. I have one main message that I'd like to convey this morning and about this quarter, which is this is a quarter where we got our earnings.

And we tightened higher as.

As we normally do in places, where we had low utilization.

We continued on the path of being willing to hire exceptional talent, regardless, whether it's slower businesses, but overall, we brought huddled hiring back a little bit.

It wasn't a radical change we continue to grow head count this quarter was up 8% year on year that growth was a little bit slower than the 11% head count growth. We had in the first half of the year and therefore translate into cost structure. Unlike in the first half of the year it was up a little bit less than revenue.

Steven Gunby: Back on track. And I'm focusing on the word earnings because I hope everyone on this call will remember our revenue. Has been terrifically on track all year and the first half of this year our revenues were up 13%. This quarter we delivered 15% top line group. Those are numbers that I would be proud of most years but particularly so given this year has been an environment where. Particularly challenging for many professional services firm.

If you have 13% growth in revenue and 40% brought up in your cost structure.

As we did in the first half of the pressure on earnings when you have revenue growth that is 1% higher than the increase in your cost structure the earnings benefit and that's essentially what happened this quarter not a radical change in strategy a normalization of factors that allow the underlying power of the results to show up in earnings.

Okay.

For the most part this quarter, therefore, essentially worked out much like RJ and I and the management team expected.

Steven Gunby: I like focusing on revenues to me that sort of revenue growth is one of the best predictors of long term success. It is a validator of whether your teams are doing something right. When you have that sort of growth that shows the power of your teams they're relevance in the market they're competitive positions. A perhaps most important impact they are delivering for and with your clients. I believe in this case it also reflects our team's dedication to a continued success in attracting supporting sort of talent that aspires to make that sort of difference for clients.

I do want to point out something that Ajay will detail a little bit more which is that in fact this quarter.

Actual results actually exceeded our expectations a bit not because of any of the factors I just described.

But because in addition to the underlying core drivers of earnings. We also had some problems do random factors that can cut one way or another in the quarter and this quarter a number of those optical positively like FX and higher success fees.

The underlying.

Underlying movement you see this quarter back towards strong revenue growth translating to higher earnings growth was expecting.

Steven Gunby: So we have been extraordinarily gratified this year that it has been yet another year where we have delivered terrific revenue growth. What was not so great in the first half of the year was translating the terrific revenue growth into earnings growth. In general in most companies and in professional services over time earnings end up roughly tracking the revenues and that's what we of course have seen for much in the last five years.

Actual results this quarter.

Total were actually higher than we expected.

I hope that's helpful framing Ajay will for sure give you more details let.

Let me therefore close my remarks by step going from details trying to tie this quarter and the year.

Steven Gunby: But for periods of time earnings and revenues can of course deviate and that's what we saw for the first half of the year. And we've discussed on prior calls some of the causes of that, some of the causes of the lag and bottom line results. Two of the causes that we've discussed were externally driven inflation. It's taken us a while to adjust for the impact of inflation. And second, we like many professional services firms this year have ended up with lower attrition than we expected.

Some of the broader dialogue that we've been having for some time.

Steven Gunby: Lower attrition that we've had prior years and lower attrition than we have budgeted. So two of the factors for the lag and bottom line results were externally driven. The third factor however was not an external factor. It was an active set of decisions on our part, certain decisions that we have made year after year after year which we continue to make this year, which is that we committed continued to commit to be acquired to acquire and support great talent.

We have I think frequently talked about the fact that there are so many factors that can cause <unk> and zags and under on underlying earnings of this business over any short period of time.

And the fact that.

In fact, those exact could happen not just for a quarter, but for multiple quarters, where you were at two individual businesses.

Our view has always been that when you have is that you have to look at it carefully.

On the card you have to make sure it's not reflecting a permanent change in the market, where a permanent change in your competitive position.

Steven Gunby: When ever that talent is available, even if it's in a business that happens to be running at a lower utilization that quarter than we aspire to longer term. And we continue to do that in the first half of the year even some businesses that were slow because we were in the fortunate position this year like we have been in many of the prior years that some terrific talent was available and wanted to join us.

Because if you had one of those you have to react to it.

But we also have the firm view, where he come to believe it's neither of those it is critical to withstand the pressure.

Just on short term factors.

In those circumstances rather than overreacting.

We believe it's critical to ignore the short term Zach.

To focus on the core elements that help you build a great business and professional services the focus on getting great progressions.

Steven Gunby: So that was the reason for the lapse and that above all of that was that the revenues were up 13% in the first half of the year. Our cost structure was up 14% and no matter how impressive 13% growth is, your cost structure is up 14% you're going to have some pressure on our needs. I think that's the way math works. So I did if I remember right and that's what we were in this quarter we did not make a dramatic change to how we managed the business.

Supporting their developing supporting their ambitious investing behind them and make sure. We're all thinking through the most critical issues facing the clients.

Investing to make sure we have the best teams.

Who can grow into those lead professions and support them actually make a difference for clients.

Okay.

Our belief and I think by now our experience as the focus on those core elements and you do not.

Overreact to the Zacks.

Chance that your firm can get into the virtuous loop of professional services.

Steven Gunby: Some of the factors started to normalize a bit. We had as we discussed another great quarter in terms of revenue growth. But unlike the first two quarters our cost structure do not grow quite as fast. We continue to make progress again in inflation. We also had an uptick in attrition both voluntarily and performance related. And we tighten higher as we normally do in places where we had low utilization continued on the path of being willing to hire exceptional talent regardless of whether it has lower businesses.

You have terrific teams.

Steven Gunby: But overall we throttled hiring back a little bit. It wasn't a radical change. We continued to grow headcount this quarter was up 8% year on year. That growth was a little bit slower than the 11% headcount growth we had in the first half of the year. And therefore translated into cost structure. The unlike in the first half of the year was up a little bit less than revenue. Review. If you have 13% growth in revenue and 4% growth in your cost structure, as we did in the first half of the year, you have pressure on earnings.

Delivering great work building client relationships.

Which in turn helps you attract and keep the sort of people who get motivated by that deliver that sort of work.

And who will reinforce those relationships.

And we will build others, who can build those relationships.

And in turn even create powerful growth engine.

Our growth engine that yes may have orders as lead singer and Zacks.

One that can ultimately become an institution that delivers power fleet for your clients power fleet from the great individuals in your firm the ones who are committed to delivering for those clients who are committed to building others, who can do that.

And ultimately round the noise of the Zig Zag line.

And also deliver power fleet.

For investors.

Steven Gunby: When you have revenue growth, that is 1% higher than the increase in your cost structure, the earnings benefit. And that's essentially what happened this quarter. Autoractical change in strategy and normalization of factors that allow the underlying power of the results to show up in earnings. For the most part, this quarter, therefore essentially worked out much like Ajay and I and the management team expected. I do want to point out something that Ajay will detail a little bit more, which is that in fact this quarter, the actual results actually exceeded our expectations a bit, not because of any of the factors I just described.

This year to me.

It's simply another example of that truth. It is an example of the path we have sought to be on.

And the path that we are very much committed to.

To stay on.

With that let me turn this over to Ajay to take you through the quarter in more detail.

Thank you, Steve and good morning, everybody.

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

Beginning with our third quarter results.

We reported record revenues this quarter with all business segments growing year over year.

Steven Gunby: But because in addition to the underlying order drivers of earnings, we also had, as we sometimes do, random factors that can cut one way or another in a quarter. And this quarter, a number of those have to come positively like FX and higher success speeds. So the underlying movement, you see this quarter back towards strong revenue growth, translating to higher earnings growth, with expecting the actual results this quarter in total were actually higher than we expected. I hope that's a thoughtful framing, Ajay, we'll be sure to give you more details.

15, 1% revenue growth outpaced the 14, 4% increase in direct costs and SG&A expenses.

And earnings per share grew by eight 8%.

Setting a new record at $2 and 34%.

Growth in revenues resulted from higher demand and.

And higher realized bill rate.

Steven Gunby: Let me therefore close my remarks by instead of going from details, trying to tie this quarter and the year to some of the broader dialogue that we've been having for some time. We have, I think frequently talked about the fact that there are so many factors that can cause fakes and bags and underlying earnings of this business over any short period of time. And the fact that in fact those things and bags can happen not just for a quarter, but for multiple quarters or a year or two for individual businesses.

Utilization remained steady.

As we welcomed our new class of graduates.

While moderating other hiring.

Overall, we are pleased with the strong results, especially after a weaker than expected first half of the year.

Yeah.

Year to date, our performance is more modest.

<unk> 2023, adjusted EBITDA of $118 $7 million is up 20% from $99 million in <unk> 2022 year to date adjusted EBITDA of 297 4 million is only.

Steven Gunby: Our view has always been that when you have a sad, you have to look at it carefully, you have to look at it hard. You have to make sure it's not reflecting the permanent change in the market, or a permanent change in your competitive position. Because if you have one of those, you have to react to it. But we also have the firm view where you come to believe it's neither of those.

<unk> is up only 12% compared to $265 $6 million in the prior year period.

And earnings per share would have increased only three 4% primarily because of a higher tax rate. This year in FX remeasurement losses compared to the prior year period.

Steven Gunby: It is critical to withstand the pressure to act just on short-term factors. In those circumstances, rather than overreacting, we believe it's critical to ignore the short-term act, to focus on the core elements that help you build great businesses and professional services, to focus on getting great pressures, supporting their developing, supporting their own business, investing behind them, making sure we're all thinking through the most critical issues facing the clients. Investing makes sure we have the best teams who can grow into those lead professions, and it can support them to actually make a difference for clients.

Okay.

Now turning to our third quarter results in more detail.

Record revenues of $893 $3 million increased $117 4 million or 15, 1% compared to revenues of $775 9 million in the prior year quarter.

The increase in revenues was primarily due to higher demand in corporate finance and restructuring forensic and litigation consulting or <unk> strategic communications and technology segments.

Steven Gunby: Our belief, and I think by now, our experience is to focus on those core elements, and you do not, if you do not overreact to these acts. Now, the chance that your firm can get into the virtuous loop of professional service. You have terrific teams delivering great work, building client relationships, to turn helps you track and keep the sort of people who get motivated by that and deliver that sort of work, and who will reinforce those relationships, and who will build others who can build those relationships, and in turn you can create a powerful growth pension.

Net income of $83 3 million compared to $77 3 million in the prior year quarter.

The increase in net income was due to higher revenues, which was partially offset by an increase indirect compensation, which includes the impact of a seven 8% increase in billable headcount.

Higher SG&A expenses, a higher effective tax rate and a decline in FX remeasurement gains compared to the prior year quarter.

Steven Gunby: A growth pension that, yes, may have borders as these zigs and zags. One that can ultimately come in institution that delivers powerfully for your clients, powerfully for the great individuals in your firm, the ones who are committed to delivering for those clients, and who are committed to building others who can do that, and ultimately around the noise of this exact line, and also deliver powerfully for investors. This year, to me, is simply another example of that truth. It is an example of the path we have sought to be on, and the path that we are very much committed to stay on.

Earnings per share of $2, 34, and <unk> 23, compared to $2.15 in the prior year quarter.

SG&A of $186 $1 million were 28% of revenues. This compares to SG&A of $159 $2 million or 25% of revenues in the third quarter of 2002.

The year over year increase in SG&A was primarily due to higher compensation and bad debt.

Third quarter 2023, adjusted EBITDA of $118 $7 million or 13, 3% of revenues compared to $99 million or 12, 8% of revenues in the prior year quarter.

Ajay Sabherwal: Let me turn this over to Ajay to take the quarter in more detail.

Ajay Sabherwal: Ajay. Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company wide and segment results, and discuss guidance for the full year. Beginning with our third quarter results, we reported record revenues this quarter, with all business segments growing year-over-year. 15.1% revenue growth outpaced the 14.4% increase in direct costs and S.T.N.A, expenses, and earnings per share grew by 8.8%. Setting a new record at $2.34. Growth and revenues resulted from higher demand and higher realized build rates.

The year over year increase in adjusted EBITDA was primarily due to higher revenues.

Our third quarter effective tax rate of 22, 6% compares to 17% in <unk> 'twenty two.

As a reminder, we had an unusually low tax rate in the prior year quarter, because we utilize foreign tax credits against the licensing of our intellectual property on our brand to additional foreign subsidiaries.

For the full year, we expect that effective tax rate to be between 24 and 26%.

Our 2% convertible senior notes matured on August 15, 2023 and were fully settled on August 17 2023 with.

We settled the principal amount of $315 $8 million in cash.

Ajay Sabherwal: Utilization remains steady, as we welcomed our new class of graduates while moderating other hiring. Overall, we are pleased with the strong results, especially after a weaker than expected first half of the year. Year to date, our performance is more modest. While in $99 million in 3Q 2022, year-to-date adjusted EBITDA of $297.4 million is up only 12% compared to $265.6 million in the prior year period. And earnings per share have increased only 3.4%, primarily because of a higher tax rate this year, and FX remeasurement losses compared Now, turning to our third quarter results in more detail.

And $283 million of premium in shares of our common stock based on a share price of $191 89.

Resulting in $1 46 million additional shares being added to our total shares outstanding this quarter.

As a reminder, our weighted average shares outstanding of wasteful numbers in prior quarters already included then estimated impact of our 2023 convertible notes premium if converted in stock.

Fully diluted way so of $35 7 million shares in <unk> 'twenty three decreased by 262000 shares compared to $35 9 million shares in <unk> of 'twenty two.

We remain steadfast in our commitment to attract talented professionals.

<unk> head count increased by 467 professionals or seven 8%.

And non billable head count increased by 140 professionals are six 9% compared to the prior year quarter.

Sequentially billable head count increased by 247 professionals or 4%, which included 316, new joiners from University campuses, our largest class ever.

Ajay Sabherwal: Record revenues of $893.3 million increased $117.4 million or 15.1 percent compared to revenues of $775.9 million in the prior year quarter. The increase in revenues was primarily due to higher demand in corporate finance and restructuring, forensic and litigation consulting or FLC strategic communications and technology segments. Net income of $83.3 million compared to $77.3 million in the prior year quarter. The increase in net income was due to higher revenues, which was partially offset by an increase in direct compensation, which includes the impact of a 7.8 percent increase in billable headcount.

Non billable head count decreased by 11 professionals are 0.7%.

Now I will share some insights at the segment level and.

In corporate finance and restructuring <unk>.

Revenues of $347 $6 million increased 23, 2% compared to the prior year quarter. The increase in revenues was primarily due to higher realized bill rates.

And demand for restructuring and business transformation and strategy services as well as an increase in success fees.

Ajay Sabherwal: Higher SGNA expenses, a higher effective tax rate and a decline in FX remeasurement gains compared to the prior year quarter. Earnings per share of $2.34 in 3Q23 compared to $2.15 in the prior year quarter. SGNA of $186.1 million were 20.8 percent of revenues. This compares to SGNA of $159.2 million or 20.5 percent of revenues in the third quarter of 22. The year-over-year increase in SGNA was primarily due to higher compensation and bad debt.

Adjusted segment EBITDA of $68 1 million or 19, 6% of segment revenues compared to $53 5 million or 19% of segment revenues in the prior year quarter.

The year over year increase was due to higher revenues, which was partially offset by higher compensation, including the impact of a nine 8% increase in billable headcount and higher SG&A expenses.

The restructuring represented 46% of segment revenues.

Business transformation and strategy represented 33% of segment revenues and transactions represented 22% of segment revenues this quarter.

This compares to 41% for restructuring, 33% for business transformation and strategy and 26% of segment revenues for transactions in <unk> of 'twenty two.

Ajay Sabherwal: Third quarter to $99 million or 12.8 percent of revenues in the prior year quarter. The year-over-year increase in SGNA was primarily due to higher revenues. A third quarter effective tax rate of 22.6 percent compares to 17 percent in 3Q22. As a reminder, we have an unusually low tax rate in the prior year quarter because we utilize foreign tax credits against the licensing of our intellectual property or our brand to additional foreign subsidiaries.

On a sequential basis revenues increased $29 6 million or nine 3%, primarily due to higher demand for business transformation and strategy and restructuring services, which was partially offset by a decline in.

Demand.

Our transaction services.

Restructuring revenues grew 6%.

Ajay Sabherwal: For the full year, we expect our effective tax rate to be between 24 and 26 percent. Our 2 percent convertible senior notes matured on August 15, 2023 and were fully settled on August 17, 2023. We settled the principal amount of $3.15.8 million in cash and $2.80.3 million of premium in shares of our common stock based on a share price of $191.89 resulting in $1.46 million additional shares being added to our total shares outstanding this quarter.

Business transformation and strategy revenues grew 26% and transactions revenues declined.

2% compared to <unk> of 2023.

Adjusted segment, EBITDA increased $22 6 million compared to <unk> of 2023.

Industries, where we have been helping clients with the restructuring where we saw sequential increases in revenues include energy utilities healthcare retail real estate and technology among others.

Ajay Sabherwal: As a reminder, our weighted average shares outstanding are racial numbers in prior quarters already included the then estimated impact of our 2023 convertible notes premium if converted in stock. [inaudible] FTI. FTI. A Justices segmented the DA increased 22.6 million dollars compared to 2Q of 2023. Industries where we have been helping clients with restructuring where we saw sequential increases in revenues include energy, utilities, healthcare, retail, real estate and technology among others. Worth noting, on July 1, 2023, we transferred 127 billable professionals from our health solutions practice within our FLC segment who focus on business transformation in the healthcare and life sciences sector into the business transformation and strategy practice within our corporate finance and restructuring segment.

Worth noting on July one 2023, we transferred 127 billable professionals from our health solutions practice within our <unk> segment, who focus on business transformation in the healthcare and life sciences sector into the business transformation and strategy.

Ajay Sabherwal: This change is reflected in the recast historical financials document and other documents filed with the SEC, which as Mollie said, we shared on our investor relations website this morning. Turning to FLC, revenues of 166.1 million dollars increased 15.9% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for our investigations, data and analytics and construction solution services. Adjusted segmented the DA of 21.5 million dollars or 12.9% of segment revenues compared to 16.2 million dollars or 11.3% of segment revenues in the prior year quarter.

<unk> practice within our corporate finance and restructuring segment.

This change is reflected in the recast historical financial documents and other documents filed with the SEC, which as Molly said, we shared on our Investor Relations website. This morning.

Turning to FMC revenues of $166 $1 million increased 15, 9% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for our investigations data and analytics and construction. So.

Ajay Sabherwal: The increase was due to the revenues, which was partially offset by higher compensation and SGNA expenses compared to the prior year quarter. Sequentially, revenues were essentially flat and adjusted segmented the DA decreased 4.1 million dollars compared to 2Q of 23. Primarily due to a $4.5 million increase in segment SGNA expenses largely related to higher bad debt. Our economic consulting segments revenues of $193.9 million were essentially flat compared to the prior year quarter.

<unk> services.

Ajay Sabherwal: Excluding FX, economic consulting revenues decreased 3.5 million dollars or 1.8%. The decrease in revenues was due to a decline in non-MNA-related antitrust revenues which was partially offset by an increase in international arbitration and MNA-related antitrust revenues compared to the prior year quarter. As a reminder, in the third quarter of last year, our economic consulting segment recognized 21.4 million dollars of previously deferred revenues from one large client which resulted in higher realized bill rates in the prior year quarter.

Adjusted segment EBITDA of $21 5 million or 12, 9% of segment revenues compared to $16 $2 million or 11, 3% of segment revenues in the prior year quarter.

The increase was due to higher revenues, which was partially offset by higher compensation in SG&A expenses compared to the prior year quarter.

Sequentially revenues were essentially flat and adjusted segment EBITDA decreased $4 1 million compared to <unk> of 23, primarily due to a $4 5 million increase in segment, the SG&A expenses largely related to higher bad debt.

Our economic consulting segment revenues of $193 $9 million were essentially flat compared to the prior year quarter, excluding FX economic consulting revenues decreased $3 5 million or one 8%.

The decrease in revenues was due to a decline in.

And non M&A related antitrust revenues, which was partially offset by an increase in international arbitration and M&A related antitrust revenues compared to the prior year quarter.

As a reminder.

In the third quarter of last year, our economic consulting segment recognized $21 $4 million of previously deferred revenues from one large client, which resulted in higher realized bill rates in the prior year quarter.

Adjusted segment EBITDA of $27 million to $8 million or 14, 3% of segment revenues compared to $32 9 million or 17% of segment revenues in the prior year quarter.

The decrease was primarily due to higher SG&A expenses, which was partially offset by lower compensation compared to the prior year quarter.

Sequentially revenues decreased $8 million or three 9% and adjusted segment EBITDA decreased $7 million to $8 million.

As a reminder, in the second quarter of this year, our economic consulting segment recognized $7 6 million of previously deferred revenues from one large client.

If you look at economic consulting performance for the first nine months of 2023 compared with the first nine months of 2020 due the fluctuations we've seen in recent quarters as a result of deferred revenues are normalized.

Ajay Sabherwal: Adjusted segmented the DA of $27.8 million or 14.3% of segment revenues compared to $32.9 million or 17% of segment revenues in the prior year quarter. The decrease was primarily due to higher SGNA expenses, which was partially offset by lower compensation compared to the prior year quarter. Sequentially, revenues decreased $8 million or 3.9% and adjusted segment EBDA decreased $7.8 million. As a reminder, in the second quarter of this year, our economic consulting segment recognized $7.6 million of previously deferred revenues from one large client.

Year to date, the economic consulting segments revenues increased $42 1 million or 8% compared to the prior year period.

Primarily due to higher demand for international arbitration, M&A related antitrust and non M&A related antitrust services yet.

Year to date adjusted segment EBITDA increased $1 7 million or two 3% as higher revenues were partially offset by an increase in compensation, including the impact of an eight 7% increase in billable headcount and higher SG&A expenses.

In technology revenues of $98 $9 million increased 16, 4% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for investigations and litigation services, which was partially offset.

Set by lower demand for M&A related second request services.

Adjusted segment EBITDA of $14 9 million or 15% of segment revenues compared to $13 2 million or 15, 6% of segment revenues in the prior year quarter.

The increase was primarily due to higher revenues, which was partially offset by higher compensation, including the impact of a 14, 8% increase in billable headcount and higher SG&A expenses.

Sequentially revenues increased $1 $4 million or one 5%, primarily due to higher demand for litigation services adjusted segment EBITDA decreased.

$5 $2 million sequentially, primarily due to higher SG&A expenses, largely related to higher bad debt and compensation compared to <unk> of 23.

Revenues in strategic Communications segment of $86 $8 million increased 19, 9% compared to the prior year quarter. The increase in revenues was largely due to higher demand for corporate reputation and public affairs services compared to the prior year quarter.

Adjusted segment EBITDA of $13 5 million or 15, 5% of segment revenues compared to $12 9 million or 17, 9% of segment revenues in the prior year quarter.

The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in compensation, which includes the impact of a six 2% increase in billable headcount and higher SG&A expenses.

Sequentially revenues in strategic communications increased $4 2 million or five 1%, primarily due to higher demand for corporate reputation services.

Adjusted segment EBITDA increased $1 2 million.

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

Net cash provided by operating activities of $106 $7 million for the quarter compared to $128 3 million of net cash provided by operating activities for the prior year quarter.

The year over year decrease in net cash provided by operating activities was primarily due to cash collections not keeping pace with the increase in revenues and not sufficiently offsetting the increase in salaries and other employee cash compensation.

Ajay Sabherwal: If you look at economic consulting's performance for the first nine months of 2023, compared with the first nine months of 2022, the fluctuations we have seen in recent quarters as a result of deferred revenues are normalized. Year-to-date, the economic consulting segments revenues increased $42.1 million or 8% compared to the prior year period, primarily due to higher demand for international arbitration, M&A-related antitrust and non-M&A-related antitrust services. Year-to-date, adjusted segment EBDA increased $1.7 million or 2.3% as higher revenues were partially offset by an increase in compensation, including the impact of an 8.7% increase in billable headcount and higher SGNA expenses.

Largely related to head count growth as well as higher operating expenses.

We generated free cash flow of $92 $5 million in the quarter.

Total debt net of cash and short term investments of $59 4 million at.

At September 32023, compared to a negative debt position of $10 8 million at September 32022, and $137 $2 million on June 32023.

The sequential decrease in total debt net of cash and short term investments was primarily due to the $315 million.

Repayment of our 2023 convertible notes at maturity, which was partially offset by an increase in net borrowings of $285 million under our senior secured bank revolving credit facility.

Ajay Sabherwal: In technology, revenues of $98.9 million increased 16.4% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for investigations and litigation services, which was partially offset by lower demand for M&A-related second request services. Adjusted segment EBDA of $14.9 million or 15% of segment revenues compared to $13.2 million or 15.6% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues, which was partially offset by higher compensation, including the impact of a 14.8% increase in billable headcount and higher SGNA expenses.

Turning to our guidance.

With the passage of three quarters, and a stronger than expected third quarter, we are narrowing and raising the lower end of our revenue and EPS guidance ranges.

We now expect revenues will range between 335 billion and $3 4 billion.

Which compares to our previous range of between $3 $33 billion and $3 4 billion.

We now expect EPS to range between $6 $77 in 2000.

Which compares to our previous range of between $6 50, <unk> and.

$7 20.

Ajay Sabherwal: Sequentially, revenues increased $1.4 million or 1.5%, primarily due to higher demand for litigation services. Adjusted segment EBDA decreased $5.2 million sequentially, primarily due to higher SGNA expenses largely related to higher bad debt and compensation compared to 2Q of 23. Revenues in strategic communication segment of $86.8 million increased 19.9% compared to the prior year quarter. The increase in revenues was largely due to higher demand for corporate reputation and public affairs services compared to the prior year quarter.

Our updated guidance is shaped by several key considerations.

First we are an event driven large jobs.

And our intake of and success rate in winning new business.

Pain moderate.

Second our business is in the short term a fixed cost business, where small swings in revenue can cause significant swings in earnings per share.

Third as Steve said.

Have and will continue to invest aggressively in talent when the right people become available such investments typically negatively impact EBITDA in the short term.

Ajay Sabherwal: Adjusted segment EBDA of $13.5 million or 15.5% of segment revenues compared to $12.9 million or 17.9% of segment revenues The increase in adjusted segmented with DA was primarily due to higher revenues, which was partially offset by an increase in compensation, which includes the impact of a 6.2% increase in billable headcount and higher STA expenses. Sequentially, revenues and strategic communications increased $4.2 million or 5.1%, primarily due to higher demand for corporate reputation services, adjusted segmented with DA increased $1.2 million.

Lastly, the fourth quarter is usually a weaker quarter for us because of our seasonal business slowdown as professionals main take time off during the holidays.

Before I close I want to reiterate five key themes that underscore the strength of our company.

Cursed.

Our key differentiating factor is the expertise of our people their relationships and the impact they deliver for our clients.

Second we continue to find opportunities to attract strong professionals and grow our reach globally.

Those such growth at the outset can and typically does adversely impact the EBITDA. We have demonstrated our continued commitment to seize such opportunities.

Ajay Sabherwal: Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $106.7 million for the quarter, compared to $128.3 million of net cash provided by operating activities for the prior year quarter. The year-over-year decrease in net cash provided by operating activities was primarily due to cash collections not keeping pace with the increase in revenues and not sufficiently offsetting the increase in salaries and other employee cash compensation largely related to headcount growth as well as higher operating expenses.

Third we are able to do both.

We grow at a double digit rate and optimize staff utilization and bill rates.

Paul.

Our scale and diversity of services that reduce risk.

And finally, our balance sheet remains exceptionally strong we have the ability to boost shareholder value through share buybacks organic growth and acquisitions, when we see the right ones.

With that let's open the call up for your questions.

Ajay Sabherwal: We generated free cash flow of $92.5 million in the quarter. Total debt net of cash and short term investments of $59.4 million at September 30, 2023 compared to a negative debt position of $10.8 million at September 30, 2022 and $137.2 million on June 30, 2023. The sequential decrease in total debt net of cash and short term investments was primarily due to the $315 million repayment of our 2023 convertible notes at maturity which was partially offset by an increase in net borrowings of $285 million under our senior secured bank revolving credit facility.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys into withdraw yourself from the queue. Please press Star then two.

At this time, we will take our first question, which will come from James <unk> with Goldman Sachs. Please go ahead.

Good morning, and thanks for taking my questions.

Maybe I could just start with corporate and restructuring I think restructuring was up.

$9 million quarter on quarter.

The dramatic increase in long rates over the past one or two months, maybe you could just speak to the outlook for restructuring and whether this has improved versus a few quarters ago.

I'm going to make this into a multi parter. So I apologize in advance, but maybe if you could just give us a little bit more color on the street discrete outlooks across business transformation and strategy versus transactions and then finally, you did touch on the success fees.

Ajay Sabherwal: Turning to our guidance. With the passage of three quarters and a stronger than expected third quarter, we are narrowing and raising the lower end of our revenue and EPS guidance ranges. We now expect revenues will range between $3.35 billion and $3.4 billion which compares to our previous range of between $3.33 billion and $3.4 billion. We now expect EPS to range between $6.70 and $7.20 which compares to our previous range of between $6.50 and $7.20.

In the segment, which are usually I think a fairly small portion of our fees. So any chance you could just size those.

Sure sure we can address all of those James.

First on the success fees success fees were around $12 million in the quarter.

That was up from like toward in the same quarter last year, but were lower than about the 15 odd million that we had in the second quarter of this year. So thats those specifics.

In terms of the three areas.

Certainly I mean, the math that you should do is look at the sequential growth rates in restructuring business transformation and strategy and transactions. So each quarter. We give you those numbers plot out the sequential growth rates the sequential growth rate this quarter is higher than that last quarter.

Ajay Sabherwal: Our updated guidance is shaped by several key considerations. First, we are an event-driven, large jobs firm and our intake of and success rate in winning new business main moderates. Second, our business is, in the short term, a fixed cost business, where small swings and revenue can cause significant swings in earnings per share. Third, as Steve said, we have and will continue to invest aggressively in talent when the right people become available.

At 6% I think versus about 5% or 4%. It was last quarter. So it's up slightly.

Does that does that say that we are entering into a.

A recession not necessarily.

The default rates are still in between the 3% and 4% range in a recession, you get 10% default rates on speculative grade debt. So.

This is as stronger performance from our restructuring, but I am not willing to say. This this is a harbinger for a recession coming up so that's on that one.

Ajay Sabherwal: Such investments typically negatively impact EBITDA in the short term. Lastly, the fourth quarter is usually a weaker quarter for us because of a seasonal business slowdown as professionals may take time off during the holidays. Before I close, I want to reiterate five key things that underscore the strength of our company. First, our key differentiating factor is the expertise of our people, their relationships, and the impact they deliver for our clients. Second, we continue to find opportunities to attract strong professionals and grow our reach globally.

Four and so we expect to continue to be strong and to be the leading provider of restructuring services in the world.

On the second one on business transformation and strategy for US we had an exceptionally strong quarter, but game after a quarter in second quarter, which was weak and what happens here is you can we are relatively small in the grand scheme of things for business transformation and you could have big jobs, ending and new big job.

Starting off causing one quarter strong one week and one quarter strong again, we are very confident about this area. We believe we have enormous potential to grow.

But don't read one quarter as a trend.

Finally transactions down 2% from from Q from Q2, but still relatively strong and transactions.

Ajay Sabherwal: Though such growth at the outset can, at typically does, adversely impact EBITDA, we have demonstrated our continued commitment to seize such opportunities. Third, we are able to both grow at a double digit rate and optimize staff utilization and build rates. Fourth, our scale and diversity of services reduce risk. And finally, our balance sheet remains exceptionally strong. We have the ability to boost shareholder value through share buybacks, organic growth, and acquisitions when we see the right ones. With that, let's open the call up for your questions.

There is a lot of due diligence going on but less closing of deals.

And it's when you close that you get the success fees that results in the revenues in that area. We are optimistic about the future, but those are the trends.

Does that answer your question.

Absolutely that's super clear so thank you for that.

And then just.

I think your guidance upgrade.

It was very constructive but it does imply on my math, a slight revenue decline in the fourth quarter.

Can you just speak to the drivers of this and.

Maybe what how we should sort of thing.

About the jumping off point for next year, because obviously this quarter is very strong it seems like for the fourth quarter is a little bit weaker you did talk about how there's seasonality there so just putting that altogether.

Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys and to withdraw yourself from the key, please press star then two.

Yes, so essentially James what we're saying is don't take Q3 and start multiplying take the first three quarters and extrapolate.

That's the main message, we're giving you.

James Yaro: At this time, we will take our first question, which will come from James Jara with Goldman Sachs. Please go ahead. Good morning, and thanks for taking my questions.

We're not I'm not going to give you the guidance and trend lines for next year, just yet given me till February to get there.

James Yaro: Maybe I could just start with the corporate stance and restructuring. I think restructuring was up, on my map, 9 million, quarter on quarter. So, post the dramatic increase in long rates over the past one to two months, maybe you just speak to the outlook for restructuring and whether this has improved versus a few quarters ago, and then I'm going to make this into a multi-parter, so I apologize in advance, but maybe if you could just give us a little bit more color on the discrete outlooks across business transformations and strategy versus transactions, and then, finally, you did touch on the success fees in the segment, which are usually, I think, a fairly small portion of your fees.

But that's the that's the main theme that we're indicating I'm not taking anything away from the strength of this quarter. Despite hiring 316 people from University, our utilization was strong which meant our bill rates and utilization for the.

The more senior professionals were higher than we anticipated and good strong performance. We also had very strong realization, especially in corporate finance and restructuring from work that was done in prior quarters were.

Whether it's releasing gaps are getting Louie signed we could we could realize the revenue. So a good strong quarter, but you must take the first three quarters and extrapolate and not take the third quarter, whether good or bad and multiply.

James Yaro: So, any chance you could just size those? Sure, sure. We can address all of those, James. So, first of all, the success fees, the success fees were around $12 million in the quarter that was up from, like, two odd in the same quarter last year, but they were lower than about the 15 odd million that we had in the second quarter of this year. So, that's those specifics. In terms of the three areas.

I guess the only other thing I would add Jay is to underscore your other point, which is.

Thank you have holidays, and where our professional services business in the fourth quarter that is occasionally we have weird stuff happens at the end of the year, where we close deals. So that you don't see it in the numbers, but if you look back over multiple years.

Our decembers are much weaker than a stop because our business fell off it's because equal took some well deserved vacation around the holidays that we built by the hour. So thats the other factor of it.

James Yaro: The math you should do is look at the sequential growth rates in restructuring, business transformation and strategy and transaction. Each quarter, we give you those numbers, plot out the sequential growth rates. The sequential growth rate, this quarter, is higher than that last quarter. It's 6%, I think, versus about 5% or 4%, it was last quarter. So it's up slightly. Does that say that we are entering into a recession? Not necessarily. The default rates are still in between the 3% and 4% range.

And Mike James Yes.

Absolutely that's very clear.

And then just my last question I, just wanted to turn to cash flow conversion.

Despite very robust earnings cash balances were down sequentially in <unk> and the <unk> days sales outstanding are substantially above historic <unk>, maybe you could just speak to the drivers of the lower conversion and perhaps whether there is anything structural that is different versus prior years.

There isn't anything structural that's the first part of that look.

James Yaro: In a recession, you get 10% default rates on speculative grade debt. So this is a stronger performance for restructuring, but I'm not willing to say this is a harbinger for you know, a recession coming up. So that's on that one. And so we expect to continue to be strong and to be the leading provider of restructuring services in the world. On the second one, on business transformation and strategy, of course, we had an exceptionally strong quarter, but it came after a quarter and second quarter, which was weak.

Look are we launched a new ERP system in April.

And in April our billing was depressed since then our billing has picked up substantially.

Last few months, we are billing over.

$300 million, each month, but theres still a little bit of a lag revenues have surged, which I'm delighted about in the same timeframe. So as billing and collection has picked up its lagging the revenue.

And I think in the fourth quarter, we will flip that.

James Yaro: And what happens here is you can, we are relatively small in the grand scheme of things for business transformation. And you could have big jobs ending and new big jobs starting off, causing one quarter strong, one week and one quarter strong again. We are very confident about this area. We believe we have enormous potential to grow, but don't read one quarter as a trend. Finally, transactions, down 2% from Q2, but still relatively strong.

Okay. Thank you so much.

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

Thank you.

I was curious.

The historical perspective.

A reasonable revenue range for what constitutes a large project at the company in a single quarter.

In.

Is there a high degree of variance across the segments and I don't expect specific numbers, but if you could ballpark it for us because we do know that it has to.

James Yaro: Look, in transactions, there's a lot of due diligence going on, but less closing of deals. And it's when you close that you get the success fees that results in the revenues in that area. They're optimistic about the future, but those are the trends. Does that answer your question? Absolutely, that's super clear. So thank you for that.

Big project firm.

The answer that RJ Im happy to answer it I just don't know if we give out that information or not.

To answer that.

In general terms, so let me say this they get they do vary they do vary a lot by by segment I mean, they all have big jobs smaller jobs, but.

If I think back over the years the largest drop in strat comm has been less than the largest job in E con or the largest bankruptcy we've done in corp fin or the largest investigation we've done an MLC.

James Yaro: You know, I think your guidance outgrade is very constructive, but it does imply on my math a slight revenue decline in the fourth quarter. So maybe you just speak to the drivers of this and you know, maybe what, how we should sort of think about the jumping off point for next year, because obviously this quarter is very strong. It seems like the fourth quarter is a little bit weaker. You did talk about how, you know, there's seasonality there.

<unk>.

Yeah.

I don't do we do we respond to the range of the size of the jobs.

Let's say, what we will do is we will call out at any point John is more than 10% of segment Anthony So from time to time.

James Yaro: So just, you know, putting that all together. Yeah. So essentially, James, what we are saying is, don't take Q3 and start multiplying. Take the first three quarters and extrapolate. That's the mean message we're giving you. We're not, I'm not going to give you the guidance and trend lines for next year, just yet. Give me till February to get there. But that's the, that's the main theme that we're indicating. I'm not taking anything away from the strength of this quarter.

We will have that.

Okay.

More recently, it's been around eight times larger matters, there and technology I think last year actually technology, we called out that we had one large mandate that was over 10% of segment revenue.

So.

Short over 10% of revenue is a good threshold for what constitutes a large shop.

So suggest sure I mean that would be a large job I mean, obviously, if it's at 88% of revenues, we actually think of it as a large job too you know what I'm, saying I mean, I think I think what we're saying is they can be more.

James Yaro: You know, despite hiding 3 and 16 people from university, our utilization was strong, which meant our bill rates and utilization for the, you know, the more senior professionals were higher than we anticipated. Good strong performance. We also had very strong realization, especially in corporate finance and restructuring. From work that was done in prior quarters where, you know, whether it's releasing caps or getting L.O.E, signed, we could, you know, we could realize that revenue is a good strong quarter.

Double digit revenue.

Quarter for some of these segments, if you do the math on that.

And Thats, a pretty big thing and so you drop.

It's something that's strong double digit revenue in a quarter and it goes to zero that is a material when we have a fixed cost structure. If you do the math I think thats can be applied and Molly's comment does that makes sense Tobey.

It does thanks.

<unk>.

Where is the STI and the maturation of the international business, which clearly doesn't.

James Yaro: But you must take the first three quarters and extrapolate and not take the third quarter, with a good or bad and, and multiply. I guess the only other thing I'd add, Ajay, is to underscore your other point, which is, you have holidays and we're professional services business in the fourth quarter. And that is, you know, occasionally we have weird stuff happen at the end of the year where we close deals so that you don't see it in numbers.

Every city you have abroad has every segment and capability of the firm a year youre increasing that over time as you build scale.

Is the the margin internationally over.

Over the next few years likely to be sort of an increasing drag neutral or or sort of expanding from.

A level, perhaps below the firm average but.

James Yaro: But if you look back over multiple years, you know, our December's are much weaker. And it's not because our business fell off. It's because people took some well-deserved vacation around the holiday that we build by the hour. So that's the other factor to have in mind, James. Yeah? Absolutely. That's very clear.

But accretive to corporate margin as that occurs.

So let me treat that as maybe a two part question, even if you'd mentioned one part question. Okay. I think in terms of our international expansion.

We are still in the early innings of this.

James Yaro: And then for just my last question, I just want to turn to cash flow conversion. You know, despite very robust earnings, cash balances were down sequentially. And the 3Q sales outstanding are substantially above historic 3Qs. Maybe you could just speak to the drivers of the lower conversion and perhaps whether there's anything structural that is different versus prior years. There isn't anything structural. That's the first part of that. Look, are we launched a new ERP system in April?

It's.

Hope somebody notices the revenue growth I think we published revenue growth for EMEA right I think it was <unk>.

697% something like that year on year.

But some of Thats FX, but it was north of 20% even without FX.

And we're nowhere near.

With presence that I aspire to bars aspires to the segment leaders aspired to country by country, but we are no longer saying, we're a European firm. When we only have we have 900 out of 1000 people in London right. We have more people in London than we did when I got here, but we have people on the continent and they are building businesses that are attracting and theyre showing our one.

James Yaro: And in April, our billing was depressed since then our billing has picked up substantially. We're last few months. We're billing over 300 million dollars each month. But there's still a little bit of a lag. Our revenues have searched, which which I'm delighted about in the same time frame. So as billing and collection is picked up, it's lagging the revenue. And I think in the fourth quarter, we will flip that. Okay.

<unk> to win in those markets. So I think we're in and I am just talking about EMEA right now, but Latin America, we've had the best team ever we've talked about the turnaround in in Asia, and Australia that we've had in recent years.

James Yaro: Thank you so much.

We are in the early innings of a multi.

Maybe multi game business out there and I feel really good about that in terms of the earnings.

Okay.

It has.

<unk> has been a significant drag, but it's not always been a significant drag I think I think.

Toby Sommer: Our next question will come from Toby Salmon with truest. Please go ahead. Thank you. I was curious. So much historical perspective.

We are we are succeeding many places the problem is that.

You can succeed some places and have an ability to get a whole bunch of talent. Other places and so you can mask that in the numbers a little bit because you are succeeding and the last point you made and you make another bet and so I think thats some of the issue and I think that phenomenon is going to we are committed to having that phenomenon and go on for some time to call its not about sitting with bad bets it's about <unk>.

Toby Sommer: What's a reasonable revenue range for what constitutes a large project at the company in a single quarter? Is there a high degree of variance across the segments? And I don't expect specific numbers, but if you could ballpark it for us because we do know that it's a big project firm. The answer to that. I'm happy to answer it. I just don't know if we give out that information or not that way.

Being good.

<unk> come to fruition, but then having the confidence if great talent becomes available to jump on that again and we did that this year.

Toby Sommer: I answered that. I am in general terms. Let me say this. They do vary. They do vary a lot by by segment. I mean, they all have big jobs, smaller jobs, but. If I think back over the years, you know, the largest job in track comm has been less than the largest job in econ or the largest bankruptcy we've done in Corpon or the largest investigation we've done in FLC. I don't do we respond to the range and the size of the jobs?

That's how we're getting.

Double digit growth I mean, that's that's phenomenal levels of growth in EMEA and I think we have the confidence to continue to bet behind it.

If we stopped growing.

The EBITDA margin would go up for sure, but thats not our intent.

And if we have got no opportunities to get people to EBITA margin would go up but with the ability to continue to grow that I think that's that's the countervailing force, but I wouldn't underestimate.

How many of the best overseas. We are excited about how well we're doing does that at least talk to your point Toby.

Toby Sommer: I mean, I would say what we will do is we will call out if any one job is more than 10% of segment revenue. So from time to time, we'll have that size of case. And more recently, it's been around the Eton larger matter fair and technology. I think last year actually in technology, we called on that we had one large mandate that was over 10% of segment revenue. So that threshold over 10% of revenue is a good threshold for what constitutes a large shop.

Sure.

I had a couple of questions on M&A.

I would like to get your.

Youre economists since for what.

Of the large activity in the oil patch is that indicative of a broader resurgence or perhaps isolated and I'd love to hear if you have any perspective on the new merger guidelines out of the FTC.

Toby Sommer: So just sure. I mean, that would be a large job. I mean, obviously, if it's an 8% of revenues, we actually think of it as a large job, too. You know what I'm saying? I mean, I think, I think, you know, what we're saying is there they can be more, you know, double digit revenue in a quarter for some of these segments. If you do the math on that, you know, and that's a pretty big thing.

Related to antitrust seem a little bit stricter, which can maybe.

Be favorable on a specific project, but also could influenced.

The animal spirits.

Drive consolidation and make some other sort of reluctant to pursue it if you have it.

Toby Sommer: And so you drop. Yeah, something that's strong double digit revenue in a quarter and it goes to zero that material when we have a fixed cost structure, if you do the math, I think that's would be applied in Molly's comment. Does that make sense, Tony? Yeah, it does.

Toby Sommer: Thanks.

Early perspective, I'd love to hear.

Look I don't have a definitive perspective on this I think you're hitting on the two points that do matter a lot of new one is how many deals get done and then a second one is how protested are those deals I mean, if you look at.

Toby Sommer: Where is FTI in the maturation of the international business? which clearly doesn't, not every city you have abroad has every segment and capability of the firm and you're increasing that over time as you build scale. And is the margin internationally, you know, over the next few years likely to be sort of an increasing drag, neutral, or sort of expanding from a level, perhaps below the firm average, but a creative to corporate margin as that occurs.

This year the deal market is down a lot our E comm business is doing pretty well why is that because.

There's been a lot of regulatory scrutiny enhanced regulatory scrutiny with an S regulatory scrutiny having.

Having leading group of economists as you could.

Presented as a demand.

Thank you pointed out the right forces.

Get people, we scrutinize every day, which is higher interest rates does that make deals down animal spirits positive negative, but also an enhanced regulatory scrutiny.

Toby Sommer: So let me treat that as maybe a two-part question even if you've meant it a one-part question. Okay, I think in terms of our international expansion, we are still in the early endings of this. I mean, it's hope somebody notices the revenue growth, I think the positive revenue growth for the right, and it was 26, 27 percent, something like that year on year, there's not some of that to have X, but it was north to 20 percent even with sound effects, you know, it's, and we're nowhere near the presence that I aspire to, large aspires to the segment leaders aspired to country by country, but we're no longer, say we're a European firm when we only have, we have 900 out of 1,000 people in London, right, we have more people in London than we did when I got here, but we have people on the continent and they're building businesses that are attracting, and they're showing our ability to win in those markets.

I don't know how that all shakes out, but certainly enhanced regulatory scrutiny has historically been.

Toby Sommer: So I think we're in, and Adam just talking about a Mia right now, but Latin America, we've had the best team ever, we've talked about the turnaround in Asia and Australia that we've had in recent years, and, you know, so we are in the early endings of a multi, maybe multi-game business out there, and I feel really good about that. In terms of the earnings, you know, it's, it had quarters been a significant drag, but it's not always been a significant drag, you know, I think, I think we are, we are succeeding many places.

More demand for our services rather than less the market how many M&A deals next year I don't know any better than you.

I'll be happy to compare notes, but I think we're both guests it.

Okay.

Absolutely last question from me are Jay you've written.

Tired the convert is the current balance sheet structure, what we should think of.

Over the medium term or do you have something in mind to alter the complexion.

No no Tobey, we have a $900 million revolver and thats, what were using and paying them.

Thank you.

Thank you Tobey.

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

Hi, Good morning, I. Appreciate you taking my questions a lot of a lot of things that I was going to ask have been covered so apologize for a little bit more granular granular questions here I guess first on CFR, the higher bill rates really good growth.

I think you mentioned some differences in terms of the staffing pyramid and who is doing work, but is there any way to kind of frame.

The impact from mix.

Between the different business lines and practices versus underlying rate increases or price increases.

Toby Sommer: The problem is that you can succeed some places and have it really to get a whole bunch of talent other places, and so you can mask that in the numbers a little bit, because you're succeeding in the last bet you made, and you make another bet. And so I think that's some of the issue, and I think that phenomenon is going to, we are committed to having that phenomenon go on for some time to come.

On a rate card.

Just trying to get a better sense for for the different levers there.

So.

I wouldn't have the outset go to either of those two places the rate card or the mix.

Toby Sommer: It's not about sitting with bad bets. It's about seeing good bets come to fruition, but then having the confidence if great talent becomes available to jump on that again, and we did that this year, and that's how we're getting, you know, not to the double digit growth. I mean, that's, that's phenomenal levels of growth in a Mia, and I think we have the confidence to continue the bet behind it. If we stop growing, the EBITDA margin would go up for sure, but that's not our intent, you know, and if we have got no opportunities to get people, the EBITDA margin would go up, but with the ability to continue to grow, you know, that I think that's, that's the counter-vailing force, but I wouldn't underestimate how many of the bets overseas we are excited about and how well they're doing, so that, at least, talked to your point, Toby?

Would go to the factors that we mentioned which is.

We hired a lot of junior people and the universities and yet our utilization. If you look at by by segment remained fairly steady, which meant that more senior people, who are more busy and they bill at a higher rate that that plus the realization on fast.

Deferred revenues went if somebody hit a cap or we started work without an early and those were the those were the larger factors there.

On our last call, Steve mentioned, something very important where he said look it's the head count growth plus inflation, our revenue should exceed both of those combined together this quarter, we achieved that.

That's our goal now over those can come through rate increases mix utilization realization two of those four were in play this quarter.

Toby Sommer: Sure. So I had a couple of questions on M&A. I'd like to get your, your, your, your economist's sense for what the large activity in the oil patch is that indicative of a broader resurgence or, or perhaps, ice, is related. And I'd love to hear if you have any perspective on the new merger guidelines on the FTC related to antitrust, to seem a little bit stricter, which can maybe be favorable on a specific project, but also could influence the animal experience that sometimes drive consolidation and make some other sort of reluctant to pursue it.

Understood. That's helpful. Thanks, Sanjay and then for my follow up on the restructuring environment.

Appreciate all the commentary to this point, including the details on the sector level kind of momentum.

But just wondering if you could speak to differences between the restructuring environment here in the United States versus abroad, I think theres been.

Dichotomy in the way that you described that historically or at least a few quarters ago wondering if theres been any kind of narrowing of the experience between those two regions or any color you could give on regional differences. Thank you.

Toby Sommer: If you have an early perspective, I'd love to hear it. Look, I don't have a definitive perspective on this. I think you're hitting on the two points that do matter a lot. I mean, one is how many deals get done, and then the second one is how contested are those deals. I mean, if you look at this year, you know, the deal market is down a lot. Our Eton business is doing pretty well.

I think there is a lot of variation around the world.

It's just different by geography I mean.

Even the earlier in the year when we said some overseas markets were slow our Australia business happen to be very busy even though the Australia market wasn't just that new team down there seem to be winning every job in Australia sure. It wasn't every job, but it was a lot of the jobs and then those jobs rolled off in Australia. So theyre not so busy right now so there's a lot of variation.

Toby Sommer: Why is that? Because there's been a lot of regulatory scrutiny and enhanced regulatory scrutiny. And when it's enhanced regulatory scrutiny, having the leading group of economists is your group is in demand. I think you're pointing out the right forces, you know, that people we scrutinize every day, you know, which is higher interest rate that I mean deals down, animal spirits, positive, negative, but also enhanced regulatory scrutiny. I don't know how that all shakes out, but certainly enhanced regulatory scrutiny is historically been a more demand for our services, rather than less. The market, how many M&A deals next year? I don't know any better than you. Don't be happy to compare notes, but I think we're both guessing. Absolutely.

Our German business was slow in the beginning of the year, a German business has gotten busier.

I would say that.

If we talk Sweepingly that was probably over sweeping but yes for sure U S was busier than on average overseas earlier in the year.

That's still the case RJ, certainly, it's lesser and lesser deviation, but with Boston variations, our Spanish business is really busy on the continent.

I think you feel more momentum overseas than we did earlier in the year, but still with Watson geographical variation RJ you have a different view on average that celebrate no sir is exactly right.

Toby Sommer: Last question from me, Ajay, you've retired the convert is the current balance sheet structure or what we should think of. Over the median term, or do you have something in mind to alter the complexion? No, no, Toby, we have a 900 million dollar revolver, and that's what we're using and being down. Thank you.

Thank you very much.

Thank you and thank you all the time today and over the over the year and over the multiple years we.

Toby Sommer: Thank you, Toby.

We.

So enjoy building this institution and I appreciate your continuous tension that support so thank you very much.

Okay.

This concludes today's conference call. Thank you very much for attending today's presentation. You may now disconnect your lines.

Andrew Nicholas: Our next question will come from Andrew Nicholas with William Blair, please go ahead. Hi, good morning. I appreciate you taking my questions. A lot of a lot of things that I was going to ask have been covered.

Andrew Nicholas: So apologies for a little bit more granular granular questions here. I guess first on CFR, the higher bill rates, really good growth. I think you mentioned some differences in terms of staffing pyramid and who's doing work. But is there any way to kind of frame the impact from mix between the different business lines and practices versus underlying rate increases or price increases on a rate card, just trying to get a better sense for the different lovers there.

Andrew Nicholas: So I wouldn't at the outset go to either of those two places, the rate card or the mix, I would go to the the factors that we mentioned, which is that we hide a lot of junior people from the universities and yet are utilization. If you look at my segment, remain fairly steady, which meant that's more senior people who are more busy and they build at a higher rate. That plus the realization on past, you know, deferred revenues where somebody hit a cap or we started work without an L.A. Those were the, those were the larger factors there.

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Andrew Nicholas: You know, on our last call, Steve mentioned something very important where he said, look, it's the head count growth plus inflation, our revenue should exceed all of those combined together. That's our goal. Now, those can come through rate increases, makes utilization, realization, two of those four were in play this quarter. Understood. That's helpful. Thanks, Ajay.

Andrew Nicholas: And then, for my follow-up on the restructuring environment, appreciate all the commentary to this point, including the details on sector level and momentum. But just wondering if you could speak to differences between the restructuring environment here in the United States versus abroad, I think there's been dichotomy in the way that you described that historically or at least a few quarters ago, wondering if there's been any kind of narrowing of the experience between those two regions or any color you could give on regional differences.

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Andrew Nicholas: Thank you. I think there's a lot of variation around the world, and it's just different by geography. I mean, even earlier in the year when we said some overseas markets were slow, our Australia business happened to be very busy, even though the Australian market wasn't, it's just that new team down there seemed to be winning every job. I'm sure it wasn't every job, but it was a lot of the jobs. And then those jobs rolled off in Australia, so they're not so busy right now.

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Andrew Nicholas: So, you know, there's a lot of variations. Our German business was slow in the beginning of the year, our German business has gotten busier. I would say that, you know, if we were, if we talked sweepingly, that was probably over-sweeping. But yes, for sure, your rest was busier than on average overseas earlier in the year. So if that's still the case, Jay, certainly it's lesser deviation. But with lots of variations, our Spanish business is really busy on the continent.

Andrew Nicholas: I mean, it just, I think you feel more momentum overseas than we did earlier in the year, but still with lots of geographical variations. Jay, you have a different view on that or is that sound right? No, sir. Exactly. Thank you very much. Thank you.

Okay.

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Operator: And thank you all for the time today and over the year and over the multiple years. We so enjoy building this institution and appreciate your continued attention and support. So thank you very much.

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Operator: This concludes today's conference call. Thank you very much for attending today's presentation.

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Operator: You may now disconnect your lines.

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Okay.

Welcome to the STI consulting third quarter 2023 earnings conference call.

All participants will be in a listen only mode.

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

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

Please also note that this event is being recorded today.

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

Good morning, welcome to the STI consulting conference call to discuss the company's third quarter 2023 earnings results as reported this morning.

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

Before we begin I would like to remind everyone that this conference call may include forward looking statements within the meaning of section 27 a M.

<unk> Act of 1933 and section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties.

Forward looking statements include statements concerning plans.

<unk> goals strategies future events future revenues future results and performance.

Patients plans or intentions relating to financial performance.

<unk> 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.

Which is available on our website at www Dot STI consulting dotcom.

Other disclosures under the heading risk factors and forward looking information in our quarterly report on Form 10-Q for the quarter ended September 32023, 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 the date of this earnings call and will not be updated.

For a discussion of these and other non-GAAP financial measure as well as a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures investors should review the press release and accompanying financial tables that we issued this morning, which includes the reconciliation.

Of note effective July one 2023.

<unk> thousand seven billable professionals in the health solutions practice within the company granted and litigation consulting business segment were transferred to the corporate finance and restructuring business segment.

83, billable professionals within our health solutions practice remains in the forensic and litigation consulting segment.

Prior period information for these two segments included in the quarterly report on Form 10-Q for the quarter ended September 32023, and the financial tables in this morning's press release have been recast to reflect the modified composition of these segments.

Additionally, the unaudited summary, financial information and other select financial and operating data for the corporate finance and restructuring and forensic and litigation consulting segments included in the historical financial statements posted on our website and then react for Egypt previously reported year ended December 31, two.

1020, <unk> December 31, 2021, and December 31 2022.

And as previously reported in.

In each next year and the first and second quarter.

Three to conform to the current period presentation reflected in <unk> quarterly report on Form 10-Q for the quarter ended September 32023.

Operator: Tobey Sommer, James Yaro, Steven Gunby, Ajay Sabherwal James Yaro, Steven Gunby, Ajay Sabherwal, Mollie Hawkes, FTI Consulting Inc Tobey Sommer, Ajay Sabherwal, Mollie Hawkes, FTI Consulting Inc Welcome to the FTI Consulting 3rd quarter 2023 earnings conference call. All participants will be in a listen only mode. In should you need any assistance, please signalling conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.

Of note during today's prepared remarks management will not speak directly to the part of the earnings presentation posted to the Investor Relations section of our website to ensure our exposures are consistent. These slides provides a similar detail that they have historically and as I've said are available on the Investor Relations section of our website.

Operator: To ask a question, you may press star 1 on your please also note that this event is being recorded today. I would now like to turn the conference over to Mollie Hawkes ahead of investor relations. Please go ahead.

With these formalities out of the way I'm joined today by Steven Gunby, Our President and Chief Executive Officer, and others have around 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 you once again for joining us this morning.

Mollie Hawkes: Good morning. Welcome to the FTI Consulting Conference call to discuss the company's third quarter 2023 earnings results as reported this morning. Management will begin with four more 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 27A of the Citeria's Act of 1933 and Section 21 of the Citeria's Exchange Act of 1934 that involve risk and uncertainties.

I have one main message that I would like to convey this morning.

About this quarter, which is this is a quarter, where we got our earnings.

Back on track.

And I'm focusing on the word earnings because as I hope everyone. On this call will remember our revenue.

Has been terrific on track all year in the first half of this year, our revenues were up 13%.

Mollie Hawkes: Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues, future results, and performance, expectations, plans or intentions related to financial performance, acquisition, share purchases, 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 discussion of risk 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 statements in the earnings press release issued this morning.

This quarter, we delivered 15% topline growth.

Those are numbers that I would be proud of most years, but particularly so given this year has been in an environment where.

Mollie Hawkes: A copy of which is available on our website at www.fticonselting.com as well as other disclosures under the headings of risk factors and forward-looking information in our quarterly report on form 10Q for the quarter ended September 30, 2023, our annual report on form 10K 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 the date of this earnings call and will not be updated.

And particularly challenging for many professional services firm.

I would like focusing on revenues to me that sort of revenue growth is one of the best predictors of long term success.

It is a validate or whether your teams are doing something right.

When you have that sort of growth that shows the power of your teams and relevance in the market their competitive position.

Perhaps most important impact they are delivering or.

With your clients.

I believe in this case. It also reflects our team's dedication to our continued success in attracting reporting.

Mollie Hawkes: During the call we've discussed certain non-gap financial measures, such as total sentiment operating income, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per diluted share, adjusted net income, adjusted EBITDA margins and free cash flow. For discussion of these and other non-gap financial measures, as well as our reconfiliations of non-gap financial measures to the most directly comparable gap measures, investors should review the press release and accompany financial tables that we issued this morning which includes the reconfiliation.

Sort of talent that aspires to make that sort of difference for clients.

So we have been extraordinarily gratified this year that it has been yet another year, where we have delivered terrific revenue growth.

But what's not so great in the first half of the year was translating a terrific revenue growth into earnings growth.

In general in most companies and in professional services over time earnings end up roughly tracking revenues and Thats. What we of course have seen for much of the last five years.

But for periods of times earnings and revenues and of course, DBA and Thats, what we saw for the first half of the year and we've discussed on prior calls some of the causes of that some of the causes of the lag in bottom line results two of the causes that we've discussed externally driven inflation, it's taken us a while to adjust for the impact of inflation.

Mollie Hawkes: 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, an Excel and PDF of our historical financial and operating data which have been updated to address our third quarter, 2023 results and changes to certain historical information, of no effective July 1, 2023, 127 billable professionals in the health solutions practice within the company's thoracic and litigation consulting business segment were transferred to the corporate finance and restructuring business segment.

<unk>.

Second we like many professional services firm. This year have ended up with lower attrition than we expected lower attrition that we've had prior years and lower attrition than we had budgeted for.

So two of the factors for the lagging bottom line results were externally driven.

Mollie Hawkes: 83 billable professionals within the health solutions practice remained in the forensic and litigation consulting segment. Prior period information for these two segments included in the quarterly report on form 10Q, for the quarter ended September 30, 2023, and the financial tables in this morning's press release have been recast to reflect the modified composition of these segments. Additionally, the un-audited summary financial information and other select financial and operating data for the corporate finance and restructuring and forensic and litigation consulting segments included in the historical financial statements posted on our website and then we passed for each of the previously reported years and in December 31, 2020, December 31, 2021, and December 31, 2022.

The third factor, however was not an external factor.

Using an active set of decisions on our part a set of decisions that we have made year after year after year, which we continue to make this year, which is that we committed continued to commit to be acquired to acquire and support great talent when ever that talent is available even if it's in our business.

That happens to be running at a lower utilization at <unk>.

And we aspire to longer term.

And we've continued to do that in the first half of the year, even some businesses that were slow because.

We were in a fortunate position this year like we have been in many of the prior year. So that's terrific talent was available and wanted to join us.

So that was the reason for the lax net all of that was that the revenues were up 13% in the first half of the year.

Mollie Hawkes: And the previously reported quarters in each sense here and the first and second quarters of 2023, to conform to the current period presentation reflected in FTI consulting's quarterly report on form 10Q, for the quarter ended September 30, 2023. Of no, during today's proprietary remarks, management will not speak directly to the quarterly audience presentation post-writening investor relations section of our website. To ensure our exposures are consistent, these slides provide the similar detail that they have historically and, as I have said, are available on the investor relations section of our website.

Our cost structure was up 14% and no matter how impressive 32% growth as your cost structure is up 40% youre going to have some pressure on earnings.

I think thats the way math works RJ, if I remember right and Thats, where we were.

In this quarter, we did not make a dramatic change to how we manage the businesses.

Some of the factors starting to normalize a bit we had as we discuss another great quarter in terms of revenue growth.

Like the first two quarters, our cost structure did not grow quite as fast and.

We continued to make progress against inflation. We also had an uptick in attrition both voluntarily and performance related.

Mollie Hawkes: With these formalities out of the way, I'm joined today by Steven Gumby, our President and Chief Executive Officer and Audit Suburbel, our Chief Financial Officer.

We tightened tire.

As we normally do in places, where we had low utilization.

We continued on the path of being willing to hire exceptional talent, regardless of whether it's Tesla businesses, but overall, we draw tunnel hiring back a little bit.

Steven Gunby: At this time, I'll turn the call over to our President and Chief Executive Officer Steve Gumby. Thank you, Molly. Welcome, everyone, and thank you once again for joining us this morning.

Steven Gunby: I have one main message that I'd like to convey this morning about this quarter, which is this is a quarter where we got our earnings back on track. And I'm focusing on the word earnings because as I hope everyone on this call will remember, our revenue has been terrifically on track all year. In the first half of this year, our revenues were all 13%. This quarter, we delivered 15% top line growth.

And we have 13% growth in revenue and 40% brought up in your cost structure.

As we did in the first half of the year pressure our earnings when you have revenue growth that is 1% higher than the increase in your cost structure the earnings benefit and that's essentially what happened this quarter at a radical change in strategy and normalization of factors that allow the underlying power of the results to show up in earnings.

Steven Gunby: Those are numbers that I would be proud of most years, but particularly so, given this year has been an environment where it's been particularly challenging for many professional services firm. I like focusing on revenues. To me, that sort of revenue growth is one of the best predictors of long-term success. It is a validator of whether your teams are doing something right. When you have that sort of growth that shows the power of your teams that are relevant to the market, their competitive position, that perhaps most important impact they are delivering for and with your clients.

Okay.

For the most part this quarter, therefore, essentially worked out much like RJ and I and the management team expected.

I do want to point out something that <unk> will detail a little bit more which is that in fact this quarter.

Actual results actually exceeded our expectations a bit not because of any of the factors I just described.

But because in addition to the underlying core drivers of earnings we also had some.

Steven Gunby: I believe in this case, it also reflects our team's dedication to a continuing success in attracting, supporting sort of talent that aspires to make that sort of difference for five. So we have been extraordinarily gratified this year that it has been yet another year where we have delivered terrific revenue growth. What was not so great in the first half of the year was translating the terrific revenue growth into earnings growth. In general, in most companies, then in professional services, overtime earnings end up roughly tracking the revenue.

Please do random factors that can cut one way or another in the quarter and this quarter a number of those optical positively like FX and higher success fees.

So the underlying.

Underlying movement you see this quarter back towards strong revenue growth translate into higher earnings growth was expecting.

Steven Gunby: And that's what we, of course, have seen for much in the last five years. But for periods of time, earnings and revenues can, of course, deviate. And that's what we saw for the first half of the year. And we've discussed on prior calls some of the causes of that, some of the causes of the lag and bottom line results. Two of the causes that we've discussed were externally driven inflation. It's taken us a while to adjust for the impact of inflation.

Actual results this quarter.

Total were actually higher than we expected.

I hope that's a helpful framing Ajay will for sure give you more details let.

Let me therefore close my remarks by instead of going through details trying to tie this quarter and the year.

Some of the broader dialogue that we've been having for some time.

We have I think frequently talked about the fact that there are so many factors that can cause zig zags under underlying earnings of this business over any short period of time.

Steven Gunby: And second, we, like many professional services partners this year, have ended up with lower attrition than we expected. Lower attrition that we've had prior years, and lower attrition than we have budgeted for. So two of the factors for the lag and bottom line results were externally driven. The third factor, however, was non-max-termal factor. There's an active set of decisions on our part, certain decisions that we have made year after year after year, which we continue to make this year, which is that we committed, continued to commit to be acquired, to acquire and support great talent whenever that talent is available.

And the fact that.

In fact dosage zigzags can happen not just for a quarter, but for multiple quarters or a <unk> II for individual businesses.

Our view has always been that when you have is that you have to look at it you have to look at it hard you have to make sure it's not reflecting a permanent change in the market or a permanent change in your competitive position.

Because if you are one of those you have to react to that.

We have also.

The firm view, where he come to believe it's neither of those it is critical to withstand the pressure.

Just on short term factors.

Steven Gunby: Even if it's in a business that happens to be running at a lower utilization that quarter than we aspire to longer term. And we continue to do that in the first half of the year, even some businesses that were slow. Because we were in the fortunate position this year, like we have been in many of the prior years, that some terrific talent was available and wanted to join us. So that was the reason for the lags.

In those circumstances rather than overreacting.

We believe it's critical to ignore the short term Zach.

To focus on the core elements that help you build a great business and professional services the focus on getting great progressions.

Supporting their development supporting their ambitious investing behind them make sure. We're all thinking through the most critical issues facing the clients.

Steven Gunby: And that above all of that was that phone revenues were up 13% in the first half of the year. Our cost structure was up 14%, and no matter how impressive 13% growth is, your cost structure is up 14%, you're going to have some pressure on our names. I think that's the way math works out today, if I remember right. And that's where we were. In this quarter, we did not make a dramatic change to how we managed the business.

Investing to make sure we have the best teams.

Who can grow into those lead professions and support them actually make a difference for our clients.

Our belief and I think by now our experience as the focus on those core elements and you do not.

Overreact to the Zix and.

I have a chance that your firm can get into the virtuous loop of professional services.

Steven Gunby: Some of the factors started to normalize a bit. We had, as we discussed, another great quarter in terms of revenue growth. But unlike the first two quarters, our cost structure did not grow quite as fast. We continued to make progress again in inflation. We also had an uptick in attrition, both voluntarily and performance related. And we tightened higher. As we normally do in places where we had low utilization, we continued on the path of being willing to hire exceptional talent, regardless of whether it has lower businesses.

You have terrific teams deliver.

Steven Gunby: But overall, we throttled hiring back a little bit. It wasn't a radical change. We continued to grow headcount this quarter. It was up 8% year on year. That growth was a little bit slower than the 11% headcount growth we had in the first half of the year. And therefore, we're translated into cost structure that, unlike in the first half of the year, it was up a little bit less than revenue. If you have 13% growth in revenue and 14% growth in your cost structure.

Delivering great work building client relationships.

To turn helps to attract and keep the sort of people get motivated by that deliver that sort of work.

And who will reinforce those relationships.

And we will build others, who can build those relationships.

And in turn you and create powerful growth engine.

Our growth engine that yes may have orders as lead zinc and zacks.

One that can ultimately become an institution that delivers power fleet for your clients power fleet from the great individuals in your firm.

Once we are committed to delivering for those clients and we're committed to building others, who can do that.

And ultimately round the noise of the Zig Zag line.

And also deliver power fleet.

Steven Gunby: As we did in the first half of the year, you have pressure on earnings. When you have revenue growth, that is 1% higher than the increase in your cost structure. The earnings benefit. And that's essentially what happened, at this quarter. Autoratical change in strategy and normalization of factors that allow the underlying power of the results to show up in earnest. For the most part, this quarter therefore essentially worked out much like Ajay and I in the management team expected.

For investors.

This year to me.

It's simply another example of that treats it as an example of the path we have sought to be on.

And the path that we are very much committed to.

To stay on.

With that let me turn this over to Ajay to take you through the quarter in more detail project.

Thank you, Steve and good morning, everybody in my prepared.

Steven Gunby: I do want to point out something that Ajay will detail a little bit more, which is that in fact this quarter the actual results actually exceeded our expectations a bit, not because of any of the factors I just described. But because in addition to the underlying quarter drivers of earnings, we also had, as we sometimes do random factors that can cut one way or another in a quarter, and this quarter a number of those have to come positive with like FX and higher success speeds.

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

Beginning with our third quarter results.

We reported record revenues this quarter with all business segments growing year over year.

15, 1% revenue growth outpaced the 14, 4% increase in direct costs and SG&A expenses.

Steven Gunby: So the underlying movement you see this quarter back towards strong revenue growth translating to higher earnings growth with expecting the actual results this quarter in total were actually higher than we expected. I hope that's a helpful framing, Ajay, we'll be sure to give you more details.

And earnings per share grew by eight 8%.

Setting a new record at $2 and 34%.

Growth in revenues resulted from higher demand and higher realized bill rates.

Steven Gunby: Let me therefore close my remarks by instead of going from details trying to tie this quarter and the year to some of the broader dialogue that we've been having for some time. We have, I think frequently talked about the fact that there are so many factors that can cause fakes and bags and under underlying earnings of this business over any short period of time. And the fact that in fact those things and bags can happen not just for a quarter, but for multiple quarters or a few or two for individual businesses.

Utilization remains steady.

As we welcomed our new class of graduates.

While moderating other hiring.

Overall, we are pleased with the strong results, especially after a weaker than expected first half of the year.

Year to date, our performance is more modest while <unk> 2023, adjusted EBITDA of $118 $7 million is up 20% from $99 million in <unk> 2022.

Steven Gunby: Our review has always been that when you have a sad you have to look at it carefully, you have to look at it hard. You have to make sure it's not reflecting the permanent change in the market or a permanent change in your competitive position. Because if you have one of those, you have to react to it. We've also have the firm view where you come to believe it's neither of those.

Year to date adjusted EBITDA of 297 4 million is only is up only 12% compared to $265 $6 million in the prior year period.

And earnings per share have increased only three 4% primarily because of a higher tax rate this year and FX remeasurement losses compared to the prior year period.

Steven Gunby: It is critical to withstand the pressure to act just on short-term factors. In those circumstances, rather than overreacting, we believe it's critical to ignore the short-term act, to focus on the core elements that help you build great business and professional services, to focus on getting great pressures, supporting their developing, supporting their all thinking through the most critical issues facing clients. In fact, to make sure we have the best teams who can grow into those lead professions and it can support them actually make a difference for clients.

Steven Gunby: For belief, and I think by now our experience is to focus on those core elements and you do not, if you do not overreact to the bags, you have a chance that your firm can get into the virtuous loop of professional services. You have terrific teams, delivering great work, building client relationships, to turn helps you track and keep the sort of people who get motivated by that and deliver that sort of work.

Okay.

Now turning to our third quarter results in more detail.

Record revenues of $893 $3 million increased $117 4 million or 15, 1%.

<unk> revenues of $775 $9 million in the prior year quarter.

The increase in revenues was primarily due to higher demand in corporate finance and restructuring forensic and litigation consulting or <unk> strategic communications and technology segments.

Net income of $83 $3 million compared to $77 3 million in the prior year quarter.

The increase in net income was due to higher revenues, which was partially offset by an increase indirect compensation, which includes the impact of a seven 8% increase in billable head count.

Steven Gunby: And then we'll reinforce those relationships, and will build others who can build those relationships. In turn, you can create a powerful growth engine. A growth engine that, yes, may have borders as these digs and zags. One that can ultimately come an institution that delivers powerfully for your clients, powerfully for the great individuals in your firm, the ones who are committed to delivering for those clients and who are committed to building others who can do that.

Higher SG&A expenses, a higher effective tax rate and a decline in FX remeasurement gains compared to the prior year quarter.

Earnings per share of $2 34, and <unk> 23, compared to $2 15 in the prior year quarter.

SG&A of $186 $1 million were 28% of revenues. This compares to SG&A of $159 $2 million or 25% of revenues in the third quarter of 2002.

Steven Gunby: And ultimately, around the noise of this exact line, and also deliver powerfully for investors. This year, to me, is simply another example of that truth. It is an example of the path we have sought to be on, and the path that we are very much committed to stay on.

The year over year increase in SG&A was primarily due to higher compensation and bad debt.

Third quarter 2023, adjusted EBITDA of $118 7 million or 13, 3% of revenues compared to $99 million or 12, 8% of revenues in the prior year quarter.

Ajay Sabherwal: But that, let me turn us over to Ajay to take you to the quarter in Multicel. Ajay. Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company wide and segment results and discuss guidance for the full year.

The year over year increase in adjusted EBITDA was primarily due to higher revenues.

Our third quarter effective tax rate of 22, 6% compares to 17% in <unk> 'twenty two.

Ajay Sabherwal: Beginning with our third quarter results, we reported record revenues this quarter with all business segments growing year over year. 15.1% revenue growth outpaced the 14.4% increase in direct cost and S.T.N.A, expenses, and earnings per share grew by 8.8%. Setting a new record at $2.34. Growth and revenues resulted from higher demand and higher realized bill rates. Utilization remained steady as we welcomed our new class of graduates while moderating other hiring. Overall, we are pleased with these strong results, especially after a weaker than expected first half of the year.

As a reminder, we had an unusually low tax rate in the prior year quarter, because we utilize foreign tax credits against the licensing of our intellectual property or our brand to additional foreign subsidiaries.

For the full year, we expect that effective tax rate to be between 24 and 26%.

Our 2% convertible senior notes matured on August 15, 2023 and were fully settled on August 17 2023 with.

We settled the principal amount of $315 $8 million in cash.

And $283 million of premium in shares of our common stock based on a share price of $191 89.

Resulting in $1 46 million additional shares being added to our total shares outstanding this quarter.

As a reminder, our weighted average shares outstanding of wasteful numbers in prior quarters already included then estimated impact of our 2023 convertible notes premium if converted in stock.

Ajay Sabherwal: Year to date, our performance is more modest. While 3Q2023 adjusted EBITDA of $118.7 million is up 20% from $99 million in 3Q2022 year-to-date adjusted EBITDA of $297.4 million is up only 12% compared to $265.6 million in the prior year period. And earnings per share have increased only 3.4%, primarily because of a higher tax rate this year and FX remeasurement losses compared to the prior year period. Now turning to our third quarter results in more detail.

Fully diluted way so of $35 7 million shares in <unk> 'twenty three decreased by 262000 shares compared to $35 9 million shares in <unk> of 'twenty two.

We remain steadfast in our commitment to attract talented professionals billable head count increased by 467 professionals or seven 8%.

And non billable head count increased by 100 fold professionals are six 9% compared to the prior year quarter.

Sequentially billable head count increased by 247 professionals are 4%, which included 316, new joiners from University campuses, our largest class ever.

Ajay Sabherwal: Record revenues of $893.3 million increased $117.4 million or 15.1% compared to revenues of $775.9 million in the prior year quarter. The increase in revenues was primarily due to higher demand in corporate finance and restructuring, forensic and litigation consulting or FLC, strategic communications and technology segments. Net income of 83.3 million dollars compared to 77.3 million dollars in the prior year quarter. The increase in net income was due to higher revenues which was partially offset by an increase in direct compensation which includes the impact of a 7.8 percent increase in billable headcount.

Non billable head count decreased by 11 professionals are 0.7%.

Now I will share some insights at the segment level and.

In corporate finance and restructuring revenues of $347 $6 million increased 23, 2% compared to the prior year quarter. The increase in revenues was primarily due to higher realized bill rates.

And demand for restructuring and business transformation and strategy services as well as an increase in success fees.

Ajay Sabherwal: Higher SGNA expenses, a higher effective tax rate and a decline in FX remeasurement gains compared to the prior year quarter, earnings per share of $2.34 in 3Q23 compared to $2.15 in the prior year quarter. SGNA of $186.1 million were 20.8 percent of revenues. This compares to SGNA of $159.2 million dollars or 20.5 percent of revenues in the third quarter of 22. The year-over-year increase in SGNA was primarily due to higher compensation and bad debt.

Adjusted segment EBITDA of $68 1 million or 19, 6% of segment revenues compared to $53 $5 million or 19% of segment revenues in the prior year quarter.

The year over year increase was due to higher revenues, which was partially offset by higher compensation, including the impact of a nine 8% increase in billable headcount and higher SG&A expenses.

The restructuring represented 46% of segment revenues.

Business transformation and strategy represented 33% of segment revenues and transactions represented 22% of segment revenues this quarter.

Ajay Sabherwal: Third quarter-2023 adjusted with DA of $118.7 million or 13.3 percent of revenues compared to $99 million or 12.8 percent of revenues in the prior year quarter. The year-over-year increase in adjusted with DA was primarily due to higher revenues. A third quarter effective tax rate of 22.6 percent compares to 17 percent in 3Q22. As a reminder, we had an unusually low tax rate in the prior year quarter because we utilized foreign tax credits against the licensing of our intellectual property or our brand to additional foreign subsidiaries.

This compares to 41% for restructuring, 33% for business transformation and strategy and 26% of segment revenues for transactions in <unk> of 'twenty two.

On a sequential basis revenues increased $29 6 million or nine 3%.

Primarily due to higher demand for business transformation and strategy and restructuring services, which was partially offset by a decline in demand.

For transaction services.

Ajay Sabherwal: For the full year, we expect our effective tax rate to be between 24 and 26 percent. Our 2 percent convertible senior notes matured on August 15, 2023 and were fully settled on August 17, 2023. We settled the principal amount of $3.15.8 million in cash and $2.80.3 million of premium in shares of our common stock based on a share price of $191.89 resulting in 1.46 million additional shares being added to our total shares outstanding this quarter.

Restructuring revenues grew 6%.

Business transformation and strategy revenues grew 26% and transactions revenues declined 2% compared to <unk> of 2023.

Adjusted segment, EBITDA increased $22 6 million compared to <unk> of 2023.

Industries, where we have been helping clients with restructuring where we saw sequential increases in revenues include energy utilities health care retail real estate and technology among others.

Ajay Sabherwal: As a reminder, our weighted average shares outstanding are way so numbers in prior quarters already included the then estimated impact of our 2023 convertible notes premium if converted in stock. Fully diluted way so of 35.7 million shares in 3Q23 decreased by 262,000 shares compared to 35.9 million shares in 3Q of 22. We remain steadfast in our commitment to attract talented professionals. Billable headcount increased by 467 professionals or 7.8% and non-billable headcount increased by 104 professionals or 6.9% compared to the prior year quota. Sequentially, billable headcount increased by 247 professionals or 4%, which included 316 new joiners from university campuses are largest-class ever. Non-billable headcount decreased by 11 professionals or 0.7%.

The practice within our corporate finance and restructuring segment.

This change is reflected in the recast historical financial documents and other documents filed with the SEC, which as Molly said, we shared on our Investor Relations website. This morning.

Turning to SLC revenues of $166 $1 million increased 15, 9% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for our investigations data and analytics and construction solutions.

Services.

Adjusted segment EBITDA of $21 5 million or 12, 9% of segment revenues compared to $16 $2 million or 11, 3% of segment revenues in the prior year quarter.

The increase was due to higher revenues, which was partially offset by higher compensation in SG&A expenses compared to the prior year quarter.

Ajay Sabherwal: Now, I'll share some insights at the segment level. In corporate finance and restructuring, revenues of $347.6 million increased 23.2% compared to the prior year quota. The increase in revenues was primarily due to higher realized bill rates and demand for restructuring and business transformation and strategy services as well as an increase in success fees. Adjusted segment EBDA of $68.1 million or 19.6% of segment revenues compared to $53.5 million or 19% of segment revenues in the prior year quota.

Sequentially revenues were essentially flat and adjusted segment EBITDA decreased $4 1 million compared to <unk> of 23.

Primarily due to a $4 5 million increase in segment, the SG&A expenses largely related to higher bad debt.

Our economic consulting segment revenues of 193 $9 million were.

Generally flat compared to the prior year quarter, excluding FX economic consulting revenues decreased $3 $5 million or one 8%.

The decrease in revenues was due to a decline in.

Ajay Sabherwal: The year-over-year increase was due to higher revenues, which was partially offset by higher compensation, including the impact of a 9.8% increase in billable headcount and higher SGNA expenses. Restructuring represented 46% of segment revenues. Business transformation and strategy represented 33% of segment revenues, and transactions represented 22% of segment revenues this quarter. This compares to 41% for restructuring, 33% for business transformation and strategy, and 26% of segment revenues for transactions in 3Q of 22.

And non M&A related antitrust revenues, which was partially offset by an increase in international arbitration and M&A related antitrust revenues compared to the prior year quarter.

As a reminder.

In the third quarter of last year, our economic consulting segment recognized $21 4 million of previously deferred revenues from one large client, which resulted in higher realized bill rates in the prior year quarter.

Adjusted segment EBITDA of $27 million to $8 million or 14, 3% of segment revenues compared to $32 9 million or 17% of segment revenues in the prior year quarter.

The decrease was primarily due to higher SG&A expenses, which was partially offset by lower compensation compared to the prior year quarter.

Ajay Sabherwal: On a sequential basis, revenues increased 29.6 million or 9.3% primarily due to higher demand for business transformation and strategy and restructuring services, which was partially offset by a decline in demand for transaction services. Restructuring revenues grew 6% business transformation and strategy revenues grew 26% and transactions revenues declined 2% compared to 2Q of 2023. Industry is where we have been helping clients with restructuring, where we saw sequential increases in revenues include energy, utilities, healthcare, retail, real estate and technology among others.

Sequentially revenues decreased $8 million or three 9% and adjusted segment EBITDA decreased $7 million to $8 million.

As a reminder, in the second quarter of this year, our economic consulting segment recognized a $7 6 million of previously deferred revenues from one large client.

If you look at economic consulting performance for the first nine months of 2023 compared with the first nine months of 2022, the fluctuations we've seen in recent quarters as a result of deferred revenues are normalized.

Year to date, the economic consulting segments revenues increased $42 1 million or 8% compared to the prior year period.

Primarily due to higher demand for international arbitration, M&A related antitrust and non M&A related antitrust services.

Ajay Sabherwal: Worth noting, on July 1st, 2023, we transferred 127 billable professionals from our health solutions practice within our FLC segment who focus on business transformation in the healthcare and life sciences sector into the business transformation and strategy practice within our corporate finance and restructuring segment. This change is reflected in the recast historical financials document and other documents filed with the SEC, which as Molly said, we shared on our investor relations website this morning.

Year to date adjusted segment, EBITDA increased $1 $7 million or two 3% as higher revenues were partially offset by an increase in compensation, including the impact of an eight 7% increase in billable headcount and higher SG&A expenses.

Ajay Sabherwal: Turning to FLC, revenues of $166.1 million increased 15.9% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for our investigations, data and analytics and construction solution services. Adjusted segmented with the A of $21.5 million or $12.9% of segment revenues compared to $16.2 million or $11.3% of segment revenues in the prior year quarter. The increase was due to higher revenues, which was partially offset by higher compensation and S.G.N.A, expenses compared to the prior year quarter.

Set by lower demand for M&A related second request services.

Adjusted segment EBITDA of $14 $9 million or 15% of segment revenues compared to $13 2 million or 15, 6% of segment revenues in the prior year quarter.

The increase was primarily due to higher revenues, which was partially offset by higher compensation, including the impact of a 14, 8% increase in billable headcount and higher SG&A expenses.

Sequentially revenues increased $1 $4 million or one 5%, primarily due to higher demand for litigation services adjusted segment EBITDA decreased.

Ajay Sabherwal: Sequentially, revenues were essentially flat and adjusted segmented with the A decreased $4.1 million compared to 2Q of 23. Primarily due to a $4.5 million increase in segment S.G.N.A, expenses largely related to higher bad debt. Our economic consulting segments revenues of $193.9 million were essentially flat compared to the prior year quarter. Excluding FX, economic consulting revenues decreased $3.5 million or 1.8%. The decrease in revenues was due to a decline in non-MNA-related antitrust revenues which was partially offset by an increase in international arbitration and revenue related antitrust revenues compared to the prior year quarter.

$5 $2 million sequentially, primarily due to higher SG&A expenses, largely related to higher bad debt and compensation compared to <unk> of 23.

Adjusted segment EBITDA of $13 5 million or 15, 5% of segment revenues compared to $12 9 million or 17, 9% of segment revenues in the prior year quarter.

Ajay Sabherwal: As a reminder, in the third quarter of last year, our economic consulting segment recognized $21.4 million of previously deferred revenues from one large client which resulted in higher realized bill rates in the prior year quarter. Adjusted segmented with the A of $27.8 million or 14.3% of segment revenues compared to $32.9 million or 17% of segment revenues in the prior year quarter. The decrease was primarily due to higher S.G.N.A, expenses which was partially offset by lower compensation compared to the prior year quarter.

Sequentially revenues in strategic communications increased $4 2 million or five 1%, primarily due to higher demand for corporate reputation services.

Adjusted segment, EBITDA increased $1 $2 million.

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

Net cash provided by operating activities of $106 7 million for the quarter compared to $128 $3 million of net cash provided by operating activities for the prior year quarter.

Ajay Sabherwal: Sequentially, revenues decreased $8 million, or 3.9%, and adjusted segment E with DA decreased $7.8 million. As a reminder, in the second quarter of this year, our economic consulting segment recognized $7.6 million of previously deferred revenues from one large client. If you look at economic consulting's performance for the first nine months of 2023, compared with the first nine months of 2022, the fluctuations we have seen in recent quarters as a result of deferred revenues are normalized.

Largely related to head count growth as well as higher operating expenses.

We generated free cash flow of $92 $5 million in the quarter.

Ajay Sabherwal: Year-to-date, the economic consulting segments revenues increased $42.1 million or 8% compared to the prior year period. Primarily due to higher demand for international arbitration, M&A-related antitrust, and non-M&A-related antitrust services. Year-to-date, adjusted segment E with DA increased $1.7 million or 2.3% as higher revenues were partially offset by an increase in compensation, including the impact of an 8.7% increase in billable headcount and higher SG&A expenses. In technology, revenues of $98.9 million increased 16.4% compared to the prior year quarter.

Total debt net of cash and short term investments of $59 4 million.

At September 32023, compared to a negative debt position of $10 8 million at September 32022, and $137 $2 million on June 32023.

The sequential decrease in total debt net of cash and short term investments was primarily due to the 315 million repayment of our 2023 convertible notes at maturity, which was partially offset by an increase in net borrowings of 285 million.

Under our senior secured bank revolving credit facility.

Ajay Sabherwal: The increase in revenues was primarily due to higher demand for investigations and litigation services which was partially offset by lower demand for M&A-related second request services. Adjusted segment E with DA of $14.9 million or 15% of segment revenues compared to $13.2 million or 15.6% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues which was partially offset by higher compensation, including the impact of a 14.8% increase in billable headcount and higher SG&A expenses.

Turning to our guidance.

With the passage of three quarters, and a stronger than expected third quarter, we are narrowing and raising the lower end of our revenue and EPS guidance ranges we.

We now expect revenues will range between 335 billion and $3 $4 billion.

Which compares to our previous range of between $3 $33 billion and $3 4 billion.

We now expect EPS to range between $6 $77 20.

Which compares to our previous range of between $6 50, <unk> and.

$7 20.

Ajay Sabherwal: Sequentially, revenues increased $1.4 million or 1.5% primarily due to higher demand for litigation services. Adjusted segment E with DA decreased $5.2 million sequentially, primarily due to higher SG&A expenses largely related to higher bad debt and compensation compared to 2Q of 23. Revenues in strategic communication segment of $86.8 million increased 19.9% compared to prior year quarter. The increase in revenues was largely due to higher demand for corporate reputation and public affairs services compared to the prior year quarter.

Our updated guidance is shaped by several key considerations.

First we are an event driven large jobs.

And our intake of and success rate in winning new business.

<unk> moderate.

Second our business is in the short term a fixed cost business, where small swings in revenue can cause significant swings in earnings per share.

Third as Steve said.

Have and will continue to invest aggressively in talent when the right people become available such investments typically negatively impact EBITDA in the short term.

Ajay Sabherwal: Adjusted segment E with DA of $13.5 million or 15.5% of segment revenues compared to $12.9 million or 17.9% of segment revenues in the prior year quarter. The increase in adjusted segmenting with DA was primarily due to higher revenues, which was partially offset by an increase in compensation, which includes the impact of a 6.2% increase in billable headcount and higher SGNA expenses. Sequentially, revenues and strategic communications increased $4.2 million or 5.1%, primarily due to higher demand for corporate reputation services, adjusted segmenting with DA increased $1.2 million.

Lastly, the fourth quarter is usually a weaker quarter for us because of our seasonal business slowdown as professionals main take time off during the holidays.

Before I close I want to reiterate five key themes that underscore the strength of our company.

First.

Our key differentiating factor is the expertise of our people.

Their relationships and the impact they deliver for our clients.

Second we continue to find opportunities to attract strong professionals and grow our reach globally.

Though such growth at the outset can and typically does adversely impact the EBITDA. We have demonstrated our continued commitment to seize such opportunities.

Ajay Sabherwal: Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $106.7 million for the quarter compared to $128.3 million of net cash provided by operating activities for the prior year quarter. The year-over-year decrease in net cash provided by operating activities was primarily due to cash collections not keeping pace with the increase in revenues and not sufficiently offsetting the increase in salaries and other employee cash compensation largely related to headcount growth as well as higher operating expenses.

Third we are able to both grow at a double digit rate.

And optimize staff utilization and bill rates.

Forward.

Our scale and diversity of services that reduce risk.

And finally, our balance sheet remains exceptionally strong we have the ability to boost shareholder value through share buybacks organic growth and acquisitions, when we see the right ones.

With that let's open the call up for your questions.

Ajay Sabherwal: We generated free cash flow of $92.5 million in the quarter. Total debt net of cash and short-term investments of $59.4 million at September 30, 2023 compared to a negative debt position of $10.8 million at September 30, 2022 and $137.2 million on June 30, 2023. The sequential decrease in total debt net of cash and short-term investments was primarily due to the $315 million repayment of our 2023 convertible notes at maturity which was partially offset by an increase in net borrowings of $285 million under our senior secured bank revolving credit facility.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

If youre using a speakerphone please pick up your handset before pressing the keys into withdraw yourself from the queue. Please press Star then two.

At this time, we will take our first question, which will come from James <unk> with Goldman Sachs. Please go ahead.

Good morning, and thanks for taking my questions.

Maybe I could just start with the corporate and restructuring I think restructuring was up.

$9 million quarter on quarter.

The dramatic increase in long rates over the past one or two months, maybe you could just speak to the outlook for restructuring and whether this has improved versus a few quarters ago.

And I'm going to make this into a multi parter. So I apologize in advance, but maybe if you could just give us a little bit more color on the street discrete outlooks across business transformation and strategy versus transactions and then finally, you did touch on the success fees.

Ajay Sabherwal: Turning to our guidance. With the passage of three quarters and a stronger than expected third quarter, we are narrowing and raising the lower end of our revenue and EPS guidance ranges. We now expect revenues will range between $3.35 billion and $3.4 billion, which compares to our previous range of between $3.33 billion and $3.4 billion. We now expect EPS to range between $6.70 and $7.20 which compares to our previous range of between $6.50 and $7.20.

In the segment, which are usually I think a fairly small portion of your fees. So any chance you could just sizes.

Sure sure we can address all of those James.

First on the success fees success fees were around $12 million in the quarter.

Was up from like toward in the same quarter last year, but were lower than about the 15 odd million that we had in the second quarter of this year. So that's that those specifics.

In terms of the three areas.

Yes.

Ajay Sabherwal: Our updated guidance is shaped by several key considerations. First, we are an event-driven, large jobs firm and our intake off and success rate in Second, our business is, in the short term, a fixed cost business, where small swings and revenue can cause significant swings in earnings per share. Third, as Steve said, we have and will continue to invest aggressively in talent when the right people become available. Such investments typically negatively impact the Vida in the short term. Lastly, the fourth quarter is usually a weaker quarter for us because of a seasonal business slowdown as professionals may take time off during the holidays.

<unk> I think versus about 5% or 4% that was last quarter. So it's up slightly.

Does that does that say that we are entering into a.

A recession not necessarily.

The default rates are still in between the 3% and 4% range in a recession, you get 10% default rates on speculative grade debt. So.

This is as stronger performance from our restructuring, but I am not willing to say. This this is a harbinger for a recession coming up so that's on that one.

Four and so we expect to continue to be strong and to be the leading provider of restructuring services in the world on.

On the on the second one on business transformation and strategy for US we had an exceptionally strong quarter, but game after a quarter in second quarter, which was weak and what happens here is you can we are relatively small in the grand scheme of things for business transformation and you could have big jobs, ending and new big draw.

Ajay Sabherwal: Before I close, I want to reiterate five key things that underscore the strength of our company. First, our key differentiating factor is the expertise of our people, their relationships, and the impact they deliver for our clients. Second, we continue to find opportunities to attract strong professionals and grow our reach globally. Though such growth at the outset can, at typically does, adversely impact Vida, we have demonstrated our continued commitment to seize such opportunities.

Ajay Sabherwal: Third, we are able to both grow at a double digit rate and optimize staff utilization and bill rates. Fourth, our scale and diversity of services reduce risk. And finally, our balance sheet remains exceptionally strong. We have the ability to boost shareholder value through share buybacks, organic growth, and acquisitions when we see the right ones.

Starting off causing one quarter strong one weekend one quarter strong again, we are very confident about this area. We believe we have enormous potential to grow but don't read one quarter as a trend.

Finally transactions down 2% from from Q from Q2, but still relatively strong look and transactions.

There's a lot of due diligence going on but less closing of deals.

And it's when you close that you get the success fees that resulted in the revenues in that area. We are optimistic about the future, but those are the trends.

Does that answer your question.

Absolutely that's super clear so thank you for that.

And then just.

I think your guidance upgrade.

It was very constructive but it does imply on my math, a slight revenue decline in the fourth quarter.

Maybe you can speak to the drivers of this and maybe what how we should turn.

About the jumping off point for next year, because obviously this quarter is very strong it seems like the fourth quarter is a little bit weaker you did talk about there is seasonality there so just putting that altogether.

Operator: 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 the more on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing the keys. And to withdraw yourself from the key, please press star than two.

Yes, so essentially James what we are saying is don't take Q3 and start multiplying take the first three quarters and extrapolate.

That's the main message, we're giving you.

James Yaro: At this time, we will take our first question, which will come from James Yara with Goldman Sachs. Please go ahead. Good morning, and thanks for taking my questions.

We're not going to give you the guidance and trend lines for next year, just yet given me till February to get there.

James Yaro: Maybe I could just start with the corporate stance and restructuring. I think restructuring was up, on my map, 9 million, quarter on quarter. So post the dramatic increase in long rates over the past one to two months, maybe you could just speak to the outlook for restructuring and whether this has improved versus a few quarters ago, and then I'm going to make this into a multi-parter. So I apologize in advance, but maybe if you could just give us a little bit more color on the discrete outlooks across business transformations and strategy versus transactions.

But thats the Thats the main theme that we're indicating I'm not taking anything away from the strength of this quarter. Despite hiring 316 people from University, our utilization was strong which meant our bill rates and utilization for the.

The more senior professionals were higher than we anticipated.

Strong performance, we also had very strong realization, especially in corporate finance and restructuring from work that was done in prior quarters, where whether it's re leasing gaps are getting Louie signed we could we could realize the revenue. So a good strong quarter, but you must take the first three quarters and extrapolate and <unk>.

James Yaro: And then finally, you did touch on the success fees in the segment, which are usually, I think, a fairly small portion of your fees. So any chance you could just size those. Sure, we can address all of those, James. So first of all, the success fees were around $12 million in the quarter. That was up from two odd in the same quarter last year, but they were lower than about the 15 odd million that we had in the second quarter of this year.

Not take the third quarter, whether good or bad and multiply.

I guess the only other thing I would add Jay is to underscore your other point, which is.

And you have holidays, and where our professional services business in the fourth quarter and that is occasionally we have weird stuff happens at the end of the year, where we close deals. So that you don't see it in the numbers, but if you look back over multiple years.

James Yaro: So that's those specifics. In terms of the three areas. Certainly, I mean, the math that you should do is look at the sequential growth rates in restructuring, business transformation and strategy and transactions. So each quarter, we give you those numbers, plot out the sequential growth rates. The sequential growth rate this quarter is higher than that last quarter. It's 6%, I think, versus about 5%, or 4%, it was last quarter. So it's up slightly.

Our decembers are much weaker and it's not because our business fell off it's because equal took some well deserved vacation around the holiday that we built by the hour. So thats the other factor of it.

James Yes.

Absolutely that's very clear.

And then just my last question I, just wanted to turn to the cash flow conversion.

James Yaro: Does that say that we are entering into a recession? Not necessarily. The default rates are still in between the 3% and 4% range. In a recession, you get 10% default rates on speculative grade debt. So this is a stronger performance for restructuring, but I'm not willing to say this is a harbinger for a recession coming up. So that's on that one. For, and so we expect to continue to be strong and to be the leading provider of restructuring services in the world on the second one on business transformation and strategy course, we had an exceptionally strong quarter, but it came after a quarter and second quarter, which was weak.

There isn't anything structural that's the.

First part of that look.

We launched a new ERP system in April.

And in April our billing was depressed since then our billing has picked up substantially.

Last few months, we are billing over.

$300 million, each month, but theres still a little bit of a lag revenues have surged, which I'm delighted about in the in the same timeframe. So as billing and collection has picked up its lagging the revenue.

And I think in the fourth quarter, we will we'll flip back.

James Yaro: And what happens here is you can we are relatively small in the grand scheme of things for business transformation and you could have big jobs ending and new big jobs starting off causing one quarter strong, one week and one quarter strong again. We are very confident about this area. We believe we have enormous potential to grow, but don't read one quarter as a trend. Finally, transactions, down 2% from Q2, but still relatively strong.

Okay. Thank you so much.

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

Thank you.

I was curious from a.

A historical perspective.

A reasonable revenue range for what constitutes a large project at the company in a single quarter.

<unk>.

Is there a high degree of variance across the segments and I don't expect specific numbers, but if you could ballpark it for us because we do know that it's a.

James Yaro: Look, in transactions, there's a lot of due diligence going on, but less closing of deals, and it's when you close that you get the success fees that results in the revenues in that area. They're optimistic about the future, but those are the trends. Does that answer your question? Absolutely, that's super clear, so thank you for that.

Big project firm.

Let me answer that RJ Im happy to answer it I just don't know if we give out that information or not.

To answer that.

In general terms. So let me say this they do vary they do vary a lot by by segment I mean, they all have big jobs smaller jobs, but.

James Yaro: And then just, you know, I think your guidance outgrade was very constructive, but it does imply on my math a slight revenue decline in the fourth quarter. So maybe you just speak to the drivers of this and maybe how we should think about the jumping off point for next year, because obviously this quarter is very strong. It seems like the fourth quarter is a little bit weaker. You did talk about how there's seasonality there, so just putting that all together.

Sure.

I don't do we respond to the range of the size of the jobs.

I'd say, what we will do is we will call out of any job is more than 10% of segment revenue. So from time to time, we'll have that type of case.

James Yaro: Yeah, so essentially, James, what we are saying is, don't take Q3 and start multiplying. Take the first three quarters and extrapolate. That's the main message we're giving you. We're not, I'm not going to give you the guidance and trend lines for next year, just yet give me till February to get there. But that's the main theme that we're indicating. I'm not taking anything away from the strength of this quarter. You know, despite hiring 3 and 16 people from university, our utilization was strong, which meant our build rates and utilization for the more senior professionals were higher than we anticipated and good strong performance.

So that threshold over 10% of revenue was a good threshold for what constitutes a large shop.

So yes, sure I mean that would be a large job I mean, obviously, if it's at 88% of revenues, we actually think of it as a large job too you know what I'm, saying I mean, I think I think.

What we're saying is they can be more.

Double digit revenue in a quarter for some of these segments. If you do the math on that.

And that's a pretty big payments, so you drop.

Something that's strong double digit revenue in a quarter and it goes to zero that is a material when we have a fixed cost structure. If you do the math I think thats would be implied and Molly's comment does that make sense Tobey.

James Yaro: We also had very strong realization, especially in corporate finance and restructuring. From work that was done in prior quarters, whether it's releasing caps or getting L.O.E, signed, we could realize that revenue is a good strong quarter, but you must take the first three quarters and extrapolate and not take the third quarter, whether good or bad I guess the only other thing I'd add, Ajay, is to underscore your other point, which is, you have holidays and we're professional services business in the fourth quarter.

It does thanks.

<unk>.

Where is the STI and the maturation of the international business, which clearly doesn't not.

Not every city you have abroad has every segment and capability of the firm and here you are increasing that over time as you build scale.

Is the the margin internationally.

The next few years likely to be sort of an increasing drag neutral or or sort of expanding from.

James Yaro: And that is, you know, occasionally we have weird stuff happen at the end of the year where we close feels so that you don't see it in numbers. But if you look back over multiple years, you know, our defenders are much weaker and it's not because our business fell off. It's because people took some well deserved vacation around the holiday that we build by the hour. So that's the other factor to have in mind, James. Yeah. Absolutely. That's very clear.

A level, perhaps below the firm average, but but accretive to corporate margin as that occurs.

So let me treat that as maybe a two part question, even if you'd mentioned one part question. Okay. I think in terms of our international expansion.

We are still in the early innings of this.

It's.

Hope somebody notices the revenue growth I think we published revenue growth for EMEA right I think it was 2697% something like that year on year.

Its not something Thats FX, but it was north of 20% even without FX.

And we're nowhere near.

The presence that I aspire to bars aspires to the segment leaders aspired to country by country, but we are no longer saying, we're a European firm. When we only have we have 900 out of 1000 people in London right. We have more people in London than we did when I got here, but we have people on the continent and they are building businesses that are attracting and theyre showing our one.

James Yaro: And in April, our billing was depressed since then our billing has picked up substantially. We're last few months. We're billing over 300 million dollars each month, but there's still a little bit of a lag. Our revenues have surged, which which I'm delighted about in the same time frame. So as billing and collection is picked up, it's lagging the revenue. And I think in the fourth quarter, we will flip that. Okay.

James Yaro: Thank you so much.

We are in the early innings of a multi.

Maybe multi game business out there and I feel really good about that in terms of the earnings.

Eight.

It has.

<unk> been a significant drag but it has not always been a significant drag I think I think.

Toby Sommer: Our next question will come from Toby Somer. What's the truth? Please go ahead. Thank you. I was curious. Some of historical perspectives. What's a reasonable revenue range for what constitutes a large project at the company in a single quarter? Is there a high degree of variance across the segments? And I don't expect specific numbers, but if you could ballpark it for us because we do know that it's a, you know, it's a big project firm.

We are we are succeeding many places the problem is that.

You can succeed some places and haven't really to get a whole bunch of talent. Other places and so you can mask that in the numbers a little bit because you are succeeding and the last point you made and you make another bet and so I think that some of the issue and I think that phenomenon is going to we are committed to having that phenomenon and go on for some time to call its not about sitting with bad bets it's about <unk>.

Being good bets come to fruition, but then having the confidence if great talent becomes available to jump on that again and we did that this year and that's how we're getting.

Toby Sommer: We answer that. I'm happy to answer it. I just don't know if we give out that information or not that way. So that is in general terms. Let me say this. They do vary. They do vary a lot by segment. I mean, they all have big jobs, smaller jobs, but if I think back over the years, you know, the largest job in. Tractcom has been less than the largest job in econ or the largest bankruptcy we've done in Corpben or the largest investigation we've done in FLC.

Double digit growth I mean, that's that's phenomenal levels of growth in EMEA and I think we have the confidence to continue to bet behind it.

If we stopped growing.

The EBITDA margin would go up for sure, but thats not our intent.

Toby Sommer: I don't do we respond to the range in the size of the jobs. I mean, I would say what we will do is we will call out if any one job is more than 10% of segment revenue. So from time to time, we'll have that size of case. And more recently, it's been around e-con, larger matter there and technology. I think last year, actually, technology. We called out that we had one large mandate that was over 10% of segment revenue.

How many of the best overseas. We are excited about how well theyre doing does that at least talk to your point Toby.

Sure.

I had a couple of questions on M&A.

I would like to get your.

Youre economists since for what.

Of the large activity in the oil patch is that indicative of a broader resurgence or perhaps isolated and I'd love to hear if you have any perspective on the new merger guidelines out of the FTC.

Toby Sommer: So that's a good threshold. Over 10% of revenue is a good threshold for what counts to a large job. So just sure. I mean, that would be a large job. I mean, obviously, but that 80% of revenues we actually think of as a large job, too. You know what I'm saying? I mean, I think I think, you know, what we're saying is there can be more, you know, double digit revenue in a quarter for some of these segments.

Related to antitrust seem a little bit stricter, which can maybe.

Be favorable on a specific project, but also could influenced.

The animal spirits.

Toby Sommer: If you do the map on that, you know, and that's a pretty big thing. And so you drop, you have something that's strong double digit revenue in a quarter and it goes to zero that is a material when we have a fixed cost structure. If you do the map, I think that would be implied in Molly's comment. Does that make sense, Toby? Yeah, it does. Thanks.

Drive consolidation and make some other sort of reluctant to pursue it if you have it.

Early perspective, I'd love to hear.

But I don't have a definitive perspective on this I think you're hitting on the two points that do matter a lot of new one is how many deals get done and then a second one is how contested are those deals I mean, if you look at.

Toby Sommer: Where is FTI in the maturation of the international business? which clearly doesn't not every city you have abroad has every segment and capability of the firm and you're you're increasing that over time as you build scale. And is the the margin internationally, you know, over the next few years likely to be sort of an increasing drag, neutral or sort of expanding from a level, perhaps below the firm average, but, but a creative to corporate margin as that occurs.

This year the deal market is down a lot our E comm business is doing pretty well why is that because.

There's been a lot of regulatory scrutiny enhanced regulatory scrutiny and where does the enhanced regulatory scrutiny having.

Having a leading group of economists as.

Presented as a demand.

I think youre pointing out the right forces.

Get people, we scrutinize every day, which is higher interest rates does that make deals down animal spirits positive negative, but also enhanced regulatory scrutiny.

Toby Sommer: So, so let me treat that as maybe a two part question, even if you meant it a one part question. Okay, I think in terms of our international expansion. We are still in the early endings of this. I mean, if it's hope somebody notices the revenue growth, I think we published revenue growth for you me up, right? I think it was 26, 27% something like that year on year. There's not some of that's fx, but it was north to 20% even without fx, you know, it's and we're nowhere near.

I don't know how that all shakes out, but certainly enhanced regulatory scrutiny has historically been.

A more demand for our services rather than less the market. How many M&A deals next year I don't know any better than you they'll be happy to compare notes, but I think we're both gasser.

A little.

Absolutely last question from me Jay you've retired the convert is the current balance sheet structure, what we should think of.

Over the medium term or do you have something in mind to alter the complexion.

Toby Sommer: The presence that I aspired to large aspires to the segment leaders aspired to country by country, but we're no longer say we're a European firm when when we only have we have 900 out of a thousand people in London, right? We have more people in London than we did when I got here, but we have people on the continent and they're building businesses that are attracting and they're showing our ability to win in those markets.

No no Tobey, we have a $900 million revolver and thats, what were using and paying down.

Thank you.

Thank you Tobey.

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

Toby Sommer: So, I think we're in and I'm just talking about a Mia right now, but Latin America, we've had the best team ever. We've talked about the turnaround in in Asia and Australia that we've had in recent years, and you know, so we are in the early endings of a multi, maybe multi game business out there. And I feel really good about that in terms of the earnings, you know, it's it has orders been a significant drag, but it's not always been a significant drag, you know, I think I think we are we are succeeding many places.

Toby Sommer: The problem is that you can succeed some places and have a ability to get a whole bunch of talent other places and so you can mask that in the numbers a little bit because you're succeeding in the last that you made and you make another bet. And so I think that's some of the issue and I think that phenomenon is going to we are committed to having that phenomenon go on for some time to come.

I think you mentioned some differences in terms of the staffing pyramid and who is doing work, but is there any way to kind of frame.

The impact from mix.

Between the different business lines and practices versus underlying rate increases or price increases.

On a rate card.

Just trying to get a better sense for for the different levers there.

So.

I wouldn't.

At the outset go to either of those two places the rate card or the mix I would go to the factors that we mentioned which is.

Toby Sommer: It's not about sitting with bad bets. It's about seeing good bets come to fruition, but then having the confidence, if great talent becomes available to jump on that again, and we did that this year, and that's how we're getting, you know, not just a double digit growth. I mean that's that's phenomenal levels of growth in a Mia and I think we have the confidence to continue the bet behind it. If we stop growing the even out margin would go up for sure, but that's not our intent, you know, if and if we and if we have got no opportunities to get people the even out margin would go up, but with the ability to continue to grow, you know, that I think that's that's the countervailing force, but but I wouldn't underestimate how many of the bets overseas we are excited about and how well they're doing. So that at least talk to your point told me.

We hired a lot of junior people when the universities and yet our utilization. If you look at by my segment remained fairly steady, which meant that more senior people, who are more busy and they bill at a higher rate that that plus the realization on vast deferred revenues where somebody hits.

GAAP or we started work without an early <unk> those were the those were the larger factors there.

Toby Sommer: Sure, so I had a couple of questions on M&A, I'd like to get your what your your economist sense for what the large activity in the oil patch is that indicative of a broader resurgence or perhaps I, and I'd love to hear if you have any perspective on the new merger guidelines on the FTC related to Antitrust, to seem a little bit stricter which can maybe be favorable on a specific project but also could influence the animal experience that sometimes drive consolidation and make some other sort of reluctant to pursue it. If you have an early perspective, I'd love to hear it.

Thats our goal now.

Those can come through rate increases mix utilization realization two of those four were in play this quarter.

Understood. That's helpful. Thanks, Sanjay and then for my follow up on the restructuring environment.

I appreciate all the commentary to this point, including the details on.

The sector level kind of momentum.

But just wondering if you could speak to differences between the restructuring environment here in the United States versus abroad, I think theres been.

Toby Sommer: Look, I don't have a definitive perspective on this. I think you're hitting on the two points that do matter a lot. I mean, one is how many deals get done and then the second one is how contested are those deals. I mean, if you look at this year, you know, the deal market is down a lot. Our e-time business is doing pretty well. Why is that? Because there's been a lot of regulatory scrutiny, the enhanced regulatory scrutiny and whether the enhanced regulatory scrutiny, having a leading group of economists is your group is in demand.

I think there is a lot of variation around the world.

It's just different by geography I mean.

Toby Sommer: I think you're pointing out the right forces, you know, that people we scrutinize every day, you know, which is higher interest rate that I mean deals down animal spirits, positive negative, but also enhanced regulatory scrutiny. I don't know how that all shakes out, but certainly enhanced regulatory scrutiny is historically meant more demand for our services rather than less. The market, how many M&A deals next year? I don't know any better than you. Don't be happy to prepare notes, but I think we're both guessing. Absolutely.

Our German business was slow in the beginning of the year, a German business has gotten busier.

I would say that.

If we talk Sweepingly that was probably over sweeping but yes for sure. It was busier than on average overseas earlier in the year.

That's still the case RJ, certainly, it's lesser and lesser deviation, but with lots of variations our Spanish business is really busy on the continent.

I think you feel more momentum overseas than we did earlier in the year, but still with Watson geographical variation RJ you have a different view on that or is that kind of brightcove Sir is exactly right.

Toby Sommer: Last question from me, Ajay, you've retired the convert. Is the current balance sheet structure, what we should think of over the medium term, or do you have something in mind to alter the complexion? No, no, Toby, we have a $900 million revolver, and that's what we're using and paying down. Thank you. Thank you, Toby.

Okay.

Thank you very much.

Well. Thank you and thank you all are at the time today and over the over the year and over the multiple years we.

We.

So enjoy building this institution and appreciate your continued attention and support so thank you very much.

Okay.

This concludes today's conference call. Thank you very much for attending today's presentation. You may now disconnect your lines.

Andrew Nicholas: Our next question will come from Andrew Nicholas with William Blair. Please go ahead. Hi, good morning. I appreciate you taking my questions. A lot of things that I was going to ask have been covered, so apologies for a little bit more granular questions here. I guess first on CFR, the higher bill rates, really good growth. I think you mentioned some differences in terms of the staffing pyramid and who's doing work, but is there any way to kind of frame the impact from mix between the different business lines and practices, versus underlying rate increases or price increases on a rate card, just trying to get a better sense for the different lovers there.

Andrew Nicholas: So I wouldn't at the outset go to either of those two places, the rate card or the mix. I would go to the factors that we mentioned, which is that we hide a lot of junior people from the universities, and yet our utilization, if you look at my segment, remained fairly steady, which meant that more senior people were more busy and they bill at a higher rate. That plus the realization on past, you know, where deferred revenues, where somebody hit a cap or we started work without an L.A. Those were the larger factors there.

Andrew Nicholas: You know, on our last call, Steve mentioned something very important, where he said, look, it's the head count growth plus inflation. Our revenue should exceed all of those combined together. This quarter, we achieved that. That's our goal. Now, those can come through rate increases, makes utilization, realization, two of those four were in play this quarter. Understood. That's helpful. Thanks, Ajay.

Andrew Nicholas: And then for my follow-up on the restructuring environment, appreciate all the commentary to this point, including the details on the sector level and momentum. But just wondering if you could speak to differences between the restructuring environment here in the United States versus abroad, I think there's been a dichotomy in the way that you described that historically, or at least a few quarters ago, wondering if there's been any kind of narrowing of the experience between those two regions, or any color you could give on regional differences.

Andrew Nicholas: Thank you. I think there's a lot of variation around the world, and it's just different by geography. I mean, even earlier in the year when we said some overseas markets were slow, our Australian business happened to be very busy, even though the Australian market wasn't, it's just that new team down there seemed to be winning every job. I'm sure it wasn't every job, but it was a lot of the jobs. And then those jobs rolled off in Australia, so they're not so busy right now.

Andrew Nicholas: So there's a lot of variations. Our German business was slow in the beginning of the year. German business has gotten busy. I would say that if we talked sweepingly, that was probably over sweeping, but yes, for sure, UOS was busier than on average overseas earlier in the year. So if that's still the case, Ajay, certainly it's lesser deviation, but with lots of variations, our Spanish business is really busy on the continent.

Andrew Nicholas: I mean, it just, I think you feel more momentum overseas than we did earlier in the year, but still with lots of geographical variation. Ajay, you have a different view on that or is that sound right? No, sir. Exactly. Thank you very much.

Operator: So thank you. And thank you all for the time today and over the year and over the multiple years. We so enjoy building this institution and appreciate your continued attention and support. So thank you very much.

Operator: This concludes today's conference call. Thank you very much for attending today's presentation. You may now disconnect your

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