Q1 2024 FTI Consulting Inc Earnings Call
Good day and welcome to the F. T. I consulting first quarter 2024 earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
Operator: Good day, and welcome to the FTI Consulting First Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode.
Operator: Should you need assistance, please signal conference specialists by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad, and to withdraw your question, please press star then 2.
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 and to withdraw your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Mollie Hawkes head of Investor Relations. Please go ahead ma'am.
Operator: Please note this event is being recorded. I would now like to turn the conference over to Ms. Mollie Hawkes, Head of Mid-Vestor Relations. Please go ahead, ma'am.
Mollie Hawkes: Good morning. Welcome to the FTI Consulting conference call to discuss the company's first quarter 2024 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 27A of the Securities Act of 1933 and Section 21 of the Securities Exchange Act of 1934 that involve risk and uncertainty.
Mollie Hawkes: Good morning, welcome to the STI consulting conference call to discuss the company's first quarter slightly 24 earnings results as reported this morning management will begin with formal 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 27, a the Securities Act of 1933.
Mollie Hawkes: In fact in 'twenty, one and the Securities Exchange Act of 1934 and involve risks and uncertainties forward. Looking statements include statements concerning plans initiatives projections prospects policies processes and practices objective goals commitment.
Mollie Hawkes: Forward-looking statements include statements concerning plans, initiatives, projections, prospects, policies, processes, and practices, objectives, goals, commitments, strategies, future events, future revenues, future results, and performance, future capital allocations, and expenditures, expectations, plans, or intentions relating to acquisitions, share repurchases, and other matters, business trends, ESG-related matters, new or changing laws, brand regulations, scientific or technological developments, and other information 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.fticonsulting.com, as well as other disclosures under the headings of risk factors and forward-looking information in our quarterly report on Form 10-Q for the quarter ended March 31, 2024 Investors are cautioned not to place undue reliance on any forward-looking statements that speak only as of the date of this earnings call and will not be updated.
Mollie Hawkes: Strategies future events future revenues future results and performance future capital allocation and expenditure expectations plans or intentions relating to acquisitions share repurchases and other matters isn't this trend ESG related matter new or changing.
Speaker Change: Uh huh.
Mollie Hawkes: When regulation scientific or technological developments and other information or other matters that are not historical including statements regarding estimates of our future financial results and other matters.
Mollie Hawkes: 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 schools.
Mollie Hawkes: Under the heading of risk factors and forward looking information in our quarterly report on Form 10-Q for the quarter ended March 31, 2020 for our annual report on Form 10-K for the year ended December 31, 2023, and in our other filings with the SEC.
Mollie Hawkes: You are cautioned not to place undue reliance on any forward looking statements, which speak only as of today. This earnings call and will not be updated.
Mollie Hawkes: During the call, we will discuss certain non-GAAP financial measures, such as Total Segment Operating Income, Adjusted EBITDA, Total Adjusted Segment EBITDA, Adjusted Earnings per Diluted Share, Adjusted Net Income, Adjusted EBITDA Margin, and Free Cash Flow. For a discussion of these and other non-GAAP financial measures, as well as reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the press release and the accompanying financial tables that we issued this morning, which include the reconciliation.
Mollie Hawkes: 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.
Mollie Hawkes: For a discussion of these and other non-GAAP financial measures as well as reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures investors should review the press release and the accompanying financial tables that we issued this morning, which includes the reconciliation.
Mollie Hawkes: But actually there are two items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation, and an excel and PDF of our historical financial and operating data, which have been updated to include our first quarter 2024 result.
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 and an Excel and PDF of our historical, financial, and operating data, which have been updated to include our first quarter 2024 results. Of note, during today's prepared remarks, management will not speak directly to the quarterly earnings presentation posted to the investor relations section of our website.
Speaker Change: Of note during today's prepared remarks management will not speak directly to the quarterly earnings presentation posted to the Investor Relations section of our website.
Mollie Hawkes: To ensure our disclosures are consistent these slides provide similar details as they have historically and as I've said are available on the Investor Relations section of our website.
Mollie Hawkes: With these formalities out of the way I'm joined today by Steven Gunby, Our President and Chief Executive Officer, and Ajay Sabra Bell, our Chief Financial Officer.
Mollie Hawkes: At this time I will turn the call over to our President and Chief Executive Officer, Steve Gunby.
Steven H. Gunby: Thank you Mollie and welcome everyone. Thank you all for joining us this morning.
Speaker Change: I'm sure. Many of you saw in our press release. This morning, we again delivered terrific results this quarter.
Steven H. Gunby: We delivered results, which exceeded our expectations and I suspect many of yours as well, but I would like to do is to make two points before I turn the call over to Andre.
Mollie Hawkes: To ensure our disclosures are consistent, these slides provide similar details as they have historically and, as I have 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 Ajay Sabherwal, 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.
Andre: We will as usual go through the details of the quarter.
Andre: The first just to talk about something we've always believed is important to talk about.
Andre: After bad quarters, but also have the good ones.
Andre: Which is that individual quarters.
Andre: They do tend to reflect the core strengths we work every day.
Andre: Are often influenced by transients elements as well.
Andre: And hence we always urge caution nothing any given quarter.
Andre: Multiplying it by four and thinking Wow, that's a great representation of where the company is.
Andre: That's the first point the second point.
Andre: It was on a different subject, but one that in important ways ties to the first.
Andre: Any case, something very important going on.
Andre: Which is the rich set of investment opportunities that we are seeing right now across our segments and across the world.
Andre: Let me start with the first why it is that quarterly results can deviate from what we would see what's the true durable underlying economic power of the business.
Steven H. Gunby: Welcome, everyone. Thank you all for joining us this morning. As I'm sure many of you saw in our press release this morning, we again delivered terrific results this quarter. In fact, we delivered results that exceeded our expectations, and I suspect many of yours as well. What I would like to do is to make two points before I turn the call over to Ajay, who will, as usual, go through the details of the quarter.
Andre: One reason is that certain P&L P&L elements, and sometimes have somewhat of a random deal.
Andre: Do you happen to have negative FX in the quarter.
Andre: Or higher bad debt than is typical or happen to have lower success and sometimes it's the opposite.
Andre: With those factors in a given quarter cut more positively than we would typically expect.
Andre: Okay.
Andre: So to operate this.
Andre: This quarter was sort of factors would typically discuss didn't all positive for example, as Ajay will talk about you had some major revenue deferrals in E com.
Andre: But as I just Ajay will also talk about the factors on average this quarter cut more positively for example, our tax rates happen to be significantly lower than we expected in this quarter, we have lower FX re measurement losses, as well as higher success fees compared to the prior year quarter.
Steven H. Gunby: The first is to talk about something we've always believed is important to talk about, after bad quarters but also after good ones, which is that individual quarters, while they do tend to reflect the core strengths we work every day to create, are often influenced by transient elements as well. And hence, we always all urge caution about taking any given quarter and multiplying it by four and thinking, "wow, that's a great representation of where the company is." That's the first point.
Andre: So the C. Randomness of those factors is one reason.
Andre: I believe we should never overweight a quarter.
Andre: The second reason I would like to discuss is more subtle.
Andre: But it's also one that has turned up some powerful in some quarters.
Andre: Which is the degree to which the business ebbs and flows.
Andre: Coincide.
Andre: As I think everyone knows all of our businesses can have substantial real underlying swings from quarter to quarter.
Andre: He has to have a multitude of columns, sometimes they reflect overall forces like COVID-19 or geopolitical tensions.
Andre: Other times, it's market specific conditions that drive our business such as whether the restructuring market deal markets are booming.
Andre: And other times it can be factors that are more idiosyncratic to us for example, whether business happens to be pumped up to that is that quarter's largest job, whereas the big jobs in any one segment that happened to start though in that quarter.
Steven H. Gunby: The second point is on a different subject, but one that in an important way ties to the course, and there's, in any case, something very important going on, which is the rich set of investment opportunities that we are seeing right now across our segments and across the world. Let me start with the first point, why it is that quarterly results can deviate from what we would see as the true, durable, underlying economic power of the business. One reason is that certain P&L elements can sometimes have somewhat of a random feel.
Andre: We have across our business not disparate businesses across MTI.
Andre: So both business influencing factors rarely caught all of the same way across all of our businesses at the same time.
Andre: Well, typically one region or business or the big set of jobs roll off another spacing. Some jobs that are just beginning.
Andre: But occasionally there's more alignment to those doctors.
Andre: More coincidence, either positively or negatively.
Speaker Change: That is typical.
Andre: Many of you have been following us for a while for those things.
Andre: Remember the first half of 2017.
Andre: I would say that was a period, where we had a whole lot of negative coinciding going on.
Andre: We happened to swing and Miss won some big jobs were conflicted out of some other some of the investments we have made have not yet gone out and we've cycled in the first half but happen to be speculated strong.
Steven H. Gunby: Sometimes you happen to have negative FX in a quarter, or higher bad debt than is typical, or happen to have lower success rates, and sometimes it's the opposite. Those factors in a given quarter cut more positively than you would typically expect them to do. This quarter, the sort of factors we typically discuss didn't all cut positively.
Andre: So we had a couple of very poor quarterly results.
Andre: At that time however.
Andre: We were quite confident that the coincidence of bad factors.
Andre: Not reflect the true underlying strength of our business.
Andre: We reaffirmed guidance for the year and as you know that confidence was subsequently borne out.
Andre: The results for the second half of 2017 and beyond.
Steven H. Gunby: For example, as Ajay will talk about, we had some major revenue deferrals in the economy. But as Ajay will also talk about, the factors, on average, cut more positively this quarter. For example, our tax rate happened to be significantly lower than we expected, and in this quarter, we had lower FX remeasurement losses as well as higher success fees compared to the prior year quarter. So the seeming randomness of those factors is one reason. I believe we should never weigh a quarter.
Speaker Change: It's still painful when you're sitting there in the beginning of 2017 with 42 back two quarters that have been terrible.
Speaker Change: Negative coincide.
Speaker Change: On the other hand in 2019, some quarters like camera.
Speaker Change: With us coming to close as we've ever come to everything going right every business and every region at the same time.
Speaker Change: When <unk> talked about this quarter it doesn't quite feel like 2019.
Speaker Change: But it does feel closer to Campbell up than typical.
Speaker Change: We have had just so many things go right. So far this year.
Speaker Change: Yeah.
Speaker Change: I'll give a few examples in Corp fin as you know when restructuring is up is often a partial offset in some of the other businesses.
Steven H. Gunby: The second reason I'd like to discuss is more subtle, but it's also one that has turned out to be powerful in some ways, which is the degree to which the business flows coincides. Coincidence. As I think everyone knows, all of our businesses can have substantial, real, underlying swings from quarter to quarter. Those swings can have a multitude of causes.
Speaker Change: This quarter all three of the major businesses in Corp, fin restructuring business transformation and strategy and transactions.
Speaker Change: Grew at double digit rates year over year.
Speaker Change: In Econ, we have won some of the biggest jobs we have ever won.
Speaker Change: And we're seeing strength not only in non M&A and M&A related antitrust, but also the financial economics and international arbitration and not just in big regions, but in smaller geographies like us for us like Asia Pacific and Latam.
Speaker Change: I'm sure you saw <unk> had terrific results this quarter.
Speaker Change: Year over year coming from and it came from powerful contributions across investigations and disputes construction solutions health solutions, essentially almost all of our practice lines.
Steven H. Gunby: Sometimes they reflect overall forces, like COVID, or geopolitical tensions. Other kinds of market-specific conditions that drive our business, such as whether the restructuring market or deal markets are booming. And yet other times, it can be factors that are more idiosyncratic for us, for example, whether business happens to be conflicted out of that quarter's largest job, or if the big jobs in any one segment happen to start or end that quarter. We have, across our business, enough disparate businesses across FTI.
Speaker Change: We'll be in the right direction.
Speaker Change: Check check is in the business that is facing industry backdrop with some significant challenges.
Speaker Change: Yet in the face of that we continued to gain share when.
Speaker Change: And in large M&A second request engagements and we're also seeing the results.
Speaker Change: Forward looking investments in areas like emerging data.
Speaker Change: In Strat Comm, we also delivered double digit revenue growth and that's from a segment perspective, if you look at it from a geographical perspective.
Speaker Change: This quarter, we saw growth in all four regions with North America, and EMEA, both growing revenues at double digit rates year over year.
Speaker Change: The strength of this quarter clearly reflects the multi year progress we've made and the focus we've had on building strong the business is better durable.
Speaker Change: More powerful.
Speaker Change: Able to sustain growth year over year after year.
Speaker Change: But I think both RJ and I bought that in terms of the ebbs and flows of the underlying businesses.
Steven H. Gunby: Those business influencing factors rarely cut all the same way across all of our businesses at the same time. Where, typically, if one region or business has a big set of jobs disappear, another is facing some jobs that are just beginning. Occasionally, there is more alignment to those factors, more coincidence, either positively or negatively, and that's typical. Many of you have been following us for a while. For those of you who have, you might remember the first half of 2017.
Speaker Change: It does feel a little closer to <unk> than we would typically see in the quarter.
Speaker Change: Yeah.
Speaker Change: The consequence of these observations as Ajay will talk about is that notwithstanding the strong quarter, we are not revising guidance youre not assuming Camelot last forever.
Ajay: So let me use that to bridge to something I feel is a far more fundamental point.
Speaker Change: It's nice to be in Tampa to report these sorts of results in the quarter.
Speaker Change: But our success over these last years.
Speaker Change: Has not required us to be in Tampa.
Speaker Change: In fact, our success has had little to do with the short term factors I was just talking about it is never involved plus trying to make sure every business only finances exhibits business and avoids the zags every quarter.
Steven H. Gunby: I would say that was a period where we had a whole lot of negative coinciding going on. We happened to swing and miss on some big jobs. We were conflicted out of some others. Some of the investments we had made had not yet sunk in. And we were cycling the first half, which happened to be particularly strong.
Speaker Change: To the contrary our success. These last five to 10 years has in fact actually been characterized by choppy lines in every business restructuring has gone up hugely in some quarters.
Speaker Change: <unk> gone down substantially and others transactions of that variability as is antitrust clearance, we got testifying business. Good near zero during Covid, we had so many ebbs and flows across the businesses our success has not.
Speaker Change: Then because we tried to get rid of that variability.
Speaker Change: Instead, what we have focused on is making sure that variability oscillates.
Steven H. Gunby: And so we had a couple of very poor quarterly results. At that time, however, we were quite confident that the coincidence of bad factors did not reflect the true underlying strength of our business. We reaffirmed guidance for the year, and as you know, that confidence was subsequently borne out by the results in the second half of 2017 and beyond. Nevertheless, it was still painful.
Speaker Change: Around powerful upward sloping lines of every one of our businesses.
Speaker Change: It is the change in the trajectory of those underlying lines business by business region by region.
Speaker Change: Not the elimination of observation.
Speaker Change: That has made the difference.
Speaker Change: One of the most critical enablers of that change has been that we now have a leadership team at the exco level.
Speaker Change: Also far more broadly throughout the company.
Speaker Change: That is focused not on quarters, but on the fundamentals over time Trump all short term factors.
Speaker Change: Making a difference for core clients.
Steven H. Gunby: We were sitting there in the beginning of 2017 reporting two facts, two quarters that were pretty terrible. That's a negative coincidence. On the other hand, in 2019, some quarters felt like Camelot, with us coming the closest we'd ever come to everything going right across every business in every region at the same time. When Ajay and I talk about this quarter, it doesn't quite feel like 2019. But it does feel closer to Camelot than usual.
Speaker Change: Developing those core clients into deep relationships.
Speaker Change: Practice and promoting people you are proud to be associated with those businesses.
Speaker Change: Investing behind those people.
Speaker Change: An important be willing to do so.
Speaker Change: Even if those investments come at a time that happens not to be convenient for your P&L.
Speaker Change: And that connection let me move on to the second point I wanted to make which is that right. Now I believe we are staring at the richest set of investment opportunities that I have ever seen at this company.
Speaker Change: The combination of a great set of people we've attracted over time some of the promotions. We've made the success, we're having the investments we've shown ourselves willing to make around the world EBIT when others were cutting back or are cutting back.
Speaker Change: Get noticed by talent.
Speaker Change: And have been noticed by a lot of terrific talent around the world.
Speaker Change: So we have a great number of people, calling us in a range of places around the world.
Steven H. Gunby: We have had just so many things go right so far this year. I'll give you a few examples. And corporate spend, as you know, when restructuring is up, is often a partial offset in some of the other businesses. This quarter, all three of the major businesses in Corcoran, restructuring, business transformation, and strategy and transactions. Clear double-digit rates year-over-year, and Econ, we have won some of the biggest jobs we have ever won.
Speaker Change: And it happens to come at a great time for us when we have leaders now in many places around the World and then cross all of our segments.
Speaker Change: And we feel confident to that.
Speaker Change: So we have an enormous set of conversations going on 110 two points out to me never know exactly how many of those opportunities will come to fruition.
Speaker Change: But assuming a good number of them do and then we add junior professionals behind those bets on senior talent it could hurt our P&L in the second half of the year or maybe into 2025.
Speaker Change: Yeah.
Speaker Change: As I hope you know and remember it is the equivalent analogous investigations the investments that we've made.
Speaker Change: Past.
Speaker Change: That hasn't been the essence of the core vitality of this company that has allowed us to achieve these multiple multiple years of growth.
Speaker Change: My sense is that the history of these last five to 10 years shows that if we have these opportunities.
Speaker Change: And invest boldly if we execute at the level of quality and conviction that we have in the past.
Steven H. Gunby: And we're seeing strength not only in non-M&A and M&A-related antitrust but also in financial economics and international arbitration, and not just in big regions but in smaller geographies like us, for example, like Asia Pacific and LATAM. I'm sure you saw FLC had terrific results this quarter, year over year, coming from, and it came from powerful contributions across investigations, disputes, construction solutions, health solutions, essentially almost all of our practice lines, pulled in the right direction. Tech
Speaker Change: We might yes, we might have some quarters.
Speaker Change: But we will be building on and accelerating this powerful journey.
Speaker Change: And that would reinforce my conviction.
Speaker Change: Which is that this company as much success as we've had recently.
Speaker Change: But we are much closer to the beginning of the Fabulous journey we're on.
Speaker Change: And we ought to be yet.
Speaker Change: With that let me turn this over to you, particularly.
Speaker Change: Thank you.
Speaker Change: Good morning, everybody in my prepared remarks, I will take you through our company wide and segment results for the quarter.
Speaker Change: As Steve mentioned today, we reported yet another quarter of record revenues with all of our segments growing year over year.
Speaker Change: 15, 1% revenue growth outpaced a 13, 1% increase in direct costs and a nine 6% increases in SG&A expenses compared to the prior year quarter.
Steven H. Gunby: Tech is in a business that is facing industry backdrops with some significant challenges. Yet in the face of that, we continue to gain share, winning large M&A second requests for such engagements. And we're also seeing the results of forward-looking investments in areas like emerging data and Stratcom. We also deliver double-digit revenue growth. And that's from a segment perspective. If you look at it from a geographical perspective,
Speaker Change: As a result earnings per share grew by 66, 4% to $2 23.
Speaker Change: We are of course pleased with these results, which exceeded our expectations as we benefited this quarter from an increase in both utilization and average billable rates.
Speaker Change: However, I must point out that the year over year increase in earnings is also in part because of a number of factors that have particularly negatively impacted Q1 of last year.
Steven H. Gunby: This quarter we saw growth in all four regions, with North America and India both growing revenues at double-digit rates year-over-year. The strength of this quarter clearly reflects the multi-year progress we've made and the focus we've had on building stronger businesses that are durable, more power, able to sustain growth year over year after year.
Speaker Change: Including higher FX re measurement losses investment in our public sector practice, which resides within our corporate finance and restructuring segment, where we did not see significant revenues until the third quarter of 2003.
Speaker Change: And losses within our healthcare business transformation practice, which we have since realigned within our corporate finance and restructuring segment.
Steven H. Gunby: But I think both Ajay and I thought that in terms of the ebbs and flows of the underlying businesses, it does feel a little closer to Camelot than we would typically see. The consequence of these observations, as Ajay will talk about, is that, notwithstanding this strong quarter, we are not revising guidance. We are not assuming Camelot will last forever.
Speaker Change: Additionally, in the first quarter of 2020 for our tax rate of 19, 6% is particularly low relative to 24% in the first quarter of 'twenty three.
Speaker Change: Now turning to the details for the quarter first quarter of 2020 full revenues of $928 $6 million increased a $121 8 million or 15, 1% year over year.
Steven H. Gunby: But let me use that to bridge to something I feel is a far more fundamental question. It's nice to be in Camelot to report these sorts of results in a quarter, and our success over these last years has not required us to be in capital. In fact, our success has had little to do with the short-term factors I was just talking about. It has never involved us, trying to make sure every business only finances the zigs of its business and avoids the zags every quarter.
Speaker Change: Earnings per share of $2 23 centers increased 89 compared to $1 34 in the prior year quarter.
Speaker Change: Net income of $18 million compared to $47 $5 million in the prior year quarter.
Speaker Change: SG&A of $201 $9 million or 21, 7% of revenues compared to SG&A of $184 2 million or 22, 8% of revenues in the first quarter of 'twenty three.
Steven H. Gunby: To the contrary, our success these last five to 10 years has, in fact, actually been characterized by choppy lines in every business. Restructuring has gone up hugely in some quarters and gone down substantially in others. Transactions have had variability, as has antitrust clearance. We've had testifying businesses go to near zero during COVID. We've had so many ebbs and flows across the business, but our success has not been because we've tried to get rid of that variability.
Speaker Change: The increase in SG&A was primarily due to higher compensation and bad debt.
Speaker Change: First quarter 2024, adjusted EBITDA of $111 1 million compared.
Speaker Change: Compared to $78 4 million in the prior year quarter.
Speaker Change: Our first quarter 'twenty forward effective tax rate of 19, 6% compared to 24% in the prior year quarter.
Speaker Change: Lower tax rate was primarily due to a decrease in foreign taxes, and a higher discrete tax adjustment related to share based compensation due to the exercise of additional nonqualified stock options as compared to the prior year quarter.
Steven H. Gunby: Instead, what we have focused on is making sure that variability oscillates around powerful, upward-sloping lines in every one of our businesses. It is the change in the trajectory of those underlying lines, business by business, region by region, not the elimination of oscillation that has made the difference.
Speaker Change: For 2024.
Speaker Change: And now expect our effective tax rate to be between 22 and 24%.
Speaker Change: Weighted average shares outstanding or ratio for Q1 of $35 8 million shares compared to $35 5 million shares in the prior year quarter.
Speaker Change: Billable headcount increased by 180 professionals or two 9% year over year.
Steven H. Gunby: One of the most critical enablers of that change has been that we now have a leadership team at the Exco level, but also far more broadly throughout this company, that is focused not on quarters but on the fundamentals that, over time, trump all short-term plans, making a difference for core clients, and developing those core clients into deep relationships. Attracting and promoting people you're proud to be associated with who can build businesses, investing behind those people, and, importantly, being willing to do so. Even if those investments come at a time that happens not to be convenient for your P&L.
Speaker Change: Sequentially billable head count increased by 16 professionals are 0.3%.
Speaker Change: Though our billable head count increase is small year over year and flat sequentially. We expect the most significant additions to our employee base in 2020 forward to occur in the second half of the year. When we expect to welcome approximately 300 campus.
Speaker Change: <unk>.
Speaker Change: Non billable head count increased by 81 professionals or 5% year over year.
Speaker Change: Now turning to our performance at the segment level.
Speaker Change: In corporate finance and restructuring revenues of $366 million increased 16% revenue growth was driven by double digit topline growth across each of our restructuring business transformation and strategy and transaction businesses.
Steven H. Gunby: In that connection, let me move on to the second point I wanted to make, which is that right now, I believe we are staring at the richest set of investment opportunities that I have ever seen. The combination of the great set of people we've attracted over time, some of the promotions we've made, the success we're having, the investments we've shown ourselves willing to make around the world, even when others are cutting back or are cutting back. They get noticed by talent, and have been noticed by a lot of terrific talent around the world.
Speaker Change: In the first quarter restructuring represented 47% business transformation and strategy represented 31% and transactions represented 22% of segment revenues.
Speaker Change: This compares to a split of 45% for restructuring, 32% for business transformation and strategy and 22% for transactions in the prior year quarter.
Speaker Change: Year over year.
Speaker Change: These structuring revenues grew 20%.
Speaker Change: Business transformation and strategy revenues grew 12% and transactions revenues grew 13%.
Speaker Change: Adjusted segment EBITDA of $75 2 million or 26% per segment revenues compared to $51 8 million or 16, 4% of segment revenues in the prior year quarter.
Steven H. Gunby: And so we have a great number of people calling us from a range of places around the world. And it happens to come at a great time for us when we have leaders now in many places around the world and across all of our segments, in whom we feel confident today. We have an enormous number of conversations going on, one-ten, as Ajay points out to me. You never know exactly how many of those opportunities will come to fruition.
Speaker Change: The increase in adjusted segment EBITDA was primarily due to higher revenues, including success fees, which was partially offset by higher compensation and SG&A expenses.
Speaker Change: Sequentially corporate finance and restructuring revenues were flat.
Speaker Change: Restructuring revenues grew 5% and transaction revenues grew 2% while business transformation and strategy revenues declined 8% as we saw some large jobs and the business transformation and strategy business conclude.
Steven H. Gunby: But assuming a good number of them do, and then we add junior professionals behind those vets on senior talent, it could hurt our P&L in the second half of the year, or maybe even 2025. As I hope you know and remember, it is the equivalent analogous investigations that the investments that we've made in the past that have been the essence of the core vitality of this company that has allowed us to achieve these multiple, multiple years of growth.
Speaker Change: Industries, where we have been helping clients with restructuring where we saw sequential increases in revenues include diversified metals and mining.
Speaker Change: <unk> financial services and real estate among others.
Speaker Change: Adjusted segment EBITDA increased nine $8 million sequentially, primarily due to lower compensation and contractor costs, which was only partially offset by an increase in business development expenses related to annual client events.
Steven H. Gunby: My sense is that the history of these last 5 to 10 years shows that if we have these opportunities... and Beth Bolden... and we execute at the level of quality and conviction that we have in the past, we might, yes, we might vote in some quarter.
Speaker Change: Turning to forensic and litigation consulting or <unk> revenues of $176 1 million increased 11, 6% the.
Speaker Change: The increase in revenues was primarily due to higher demand and realized bill rates, our investigations and disputes services.
Steven H. Gunby: But we will be building on and accelerating this powerful journey. And that would reinforce my conviction, which has given this company as much success as we've had recently, that we are much closer to the beginning of the fabulous journey we're on, and we are not for the end. With that, let me turn this over to you, Ajay, to take us through. Thank you, Steven. Good morning, everybody.
Speaker Change: Adjusted segment, EBITDA was $33 7 million or 19, 1% per segment revenues.
Speaker Change: Third to $21 8 million or 13, 8% of segment revenues in the prior year quarter.
Speaker Change: The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in compensation.
Speaker Change: Sequentially <unk> revenues increased $10 6 million or six 4%, primarily due to higher demand for construction solution, Bruce and disputes services adjust.
Ajay Sabherwal: In my prepared remarks, I will take you through our company-wide and segment results for the quarter. As Steve mentioned, today we reported yet another quarter of record revenues, with all of our segments growing year over year. 15.1% revenue growth outpaced a 13.1% increase in direct costs and a 9.6% increase in SG&A expenses compared to the prior year quarter. As a result, earnings per share grew by 66.4% to $2.23.
Speaker Change: Adjusted segment EBITDA increased by $14 $5 million sequentially.
Speaker Change: Primarily due to higher revenues as well as a decrease in compensation and bad debt.
Speaker Change: In economic consulting revenues of $204 $5 million increased 26%.
Speaker Change: The increase in revenues was primarily due to higher demand and realized bill rates for non M&A related antitrust and financial economic services.
Ajay Sabherwal: We are, of course, pleased with these results, which exceeded our expectations, as we benefited this quarter from an increase in both utilization and average billable rate. However, I must point out that the year-over-year increase in earnings is also, in part, because of a number of factors that particularly negatively impacted Q1 of last year, including higher FX3 measurement losses, investment in our public sector practice, which resides within our corporate finance and restructuring segment, where we did not see significant revenues until the third quarter of 2023, and Losses Within Our Healthcare Business Transformation Practice, which we have since realigned within our Additionally, in the first quarter of 2024, our tax rate of 19.6% is particularly low, relative to 24% in the first quarter of 2023.
Speaker Change: Adjusted segment EBITDA of $14 2 million.
Speaker Change: Our six 9% of segment revenues compared to $14 2 million or eight 4% of segment revenues in the prior year quarter.
Speaker Change: The increase in revenues was more than offset by higher compensation contractor costs and SG&A expenses.
Speaker Change: The increase in compensation was primarily related to higher variable compensation and the impact of a five 8% increase in billable head count.
Speaker Change: The increase in SG&A expenses was primarily related to higher bad debt.
Speaker Change: Similar to recent years in the first quarter, we experienced revenue deferrals that have resulted in and May continue to result in variations in the timing of revenue recognized on work already performed well.
Speaker Change: We believe that conditions to recognize these revenues will be met later this year and could positively impact adjusted EBITDA by approximately $6 million.
Speaker Change: Sequentially economic consulting revenues decreased $1 5 million.
Speaker Change: Adjusted segment, EBITDA decreased $24 $2 million, primarily due to higher compensation and bad debt.
Speaker Change: Technologies revenues of $107 million increased 11, 1% the increase in revenues was primarily due to higher demand for M&A related second request and information governance privacy and security services, which was partially offset.
Ajay Sabherwal: Now, turning to the details for the quarter. First quarter of 2024 revenues of $928.6 million increased by $121.8 million, or 15.1% year over year. Earnings per share of $2.23 increased 89 cents compared to $1.34 in the prior year quarter.
Speaker Change: By a decline in demand for our investigation services.
Speaker Change: Adjusted segment EBITDA of $14 $6 million or 14, 5% of segment revenues compared to $15 4 million or 17% of segment revenues in the prior year quarter.
Ajay Sabherwal: Net income of $80 million compared to $47.5 million in the prior year quarter. SG&A of $201.9 million, or 21.7% of revenues compared to SG&A of $184.2 million, or 22.8% of revenues in the first quarter of 2023. The increase in SG&A was primarily due to higher compensation and bad debt.
Speaker Change: The decrease in adjusted segment EBITDA was primarily due to an increase in compensation, which includes the impact of an 11, 2% increase in billable head count higher as needed consultant costs and an increase in SG&A expenses.
Speaker Change: Sequentially technology revenues were flat.
Speaker Change: And adjusted segment EBITDA increased $2 $2 million.
Speaker Change: Primarily due to lower SG&A expenses, which was partially offset by an increase in compensation.
Speaker Change: Strategic communications revenues of $81 $2 million increased 11, 1%. The increase in revenues was primarily due to higher demand for public affairs and corporate reputation services.
Ajay Sabherwal: This quarter 2024 adjusted EBITDA of $111.1 million compared to $78.4 million in the prior year quarter. Our first quarter 24 effective tax rate of 19.6% compared to 24% in the prior year quarter. The lower tax rate was primarily due to a decrease in foreign taxes and a higher discreet tax adjustment related to share-based compensation due to the exercise of additional non-qualified stock options as compared to the prior year quarter.
Speaker Change: Adjusted segment EBITDA of $12 4 million or 15, 3% intersegment revenues compared to $9 6 million or 13, 1% of segment revenues in the prior year quarter.
Speaker Change: The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in compensation and higher SG&A expenses.
Speaker Change: Sequentially strategic communications revenues decreased $5 4 million or six 3%.
Speaker Change: I'm really due to lower demand for corporate reputation services.
Ajay Sabherwal: For 2024, we now expect our effective tax rate to be between 22 and 24 percent. Weighted Average Shares Outstanding, or WESO, for Q1 was 35.8 million shares compared to 35.5 million shares in the prior year quarter. Billable headcount increased by 180 professionals, or 2.9% year over year. Additionally, sequentially, billable headcount increased by 16 professionals, or 0.3%. Though our billable headcount increase is small year over year and flat sequentially, we expect the most significant additions to our employee base in 2024 to occur in the second half of the year when we expect to welcome approximately 300 campus hires. Non-billable headcount increased by 81 professionals, or 5%, year over year.
Speaker Change: Adjusted segment EBITDA decreased $3 $2 million.
Speaker Change: Primarily due to lower revenues, which was partially offset by a decline in compensation and SG&A expenses.
Speaker Change: Let me now discuss a few cash flow and balance sheet items.
Speaker Change: As is typical we pay the bulk of our annual bonuses in the first quarter.
Speaker Change: Net cash used in operating activities of $274 $8 million compared to $254 2 million in the prior year quarter.
Speaker Change: The year over year increase in net cash used in operating activities was primarily due to an increase in salaries higher annual bonus payments and an increase in forgivable loan issuances, which was partially offset by higher cash collections.
Speaker Change: Total debt net of cash and short term investments of negative $39 million at March 31st 2024, compared to $122 7 million at March 31 2023.
Speaker Change: And negative $328 $7 million at December 31, 2023.
Speaker Change: The sequential increase in total debt net of cash and short term investments was primarily due to higher borrowings under the company's senior secured bank revolving credit facility, which were primarily used for annual bonus payments.
Ajay Sabherwal: Now, turning to our performance at the segment level. In corporate finance and restructuring, revenues of $366 million increased 16%. Revenue growth was driven by double-digit top-line growth across each of our restructuring, business transformation, and strategy, and transactions businesses. In the first quarter, restructuring represented 47%.
Speaker Change: Okay.
Speaker Change: Turning to guidance.
Speaker Change: Though the end of first quarter is usually too early to revisit guidance. Let me remind you of a few of the determining factors.
Speaker Change: First as I said at the beginning of the call.
Speaker Change: Tax rate was 19, 6%.
Ajay Sabherwal: Business Transformation and Strategy represented 31%, and Transactions represented 22% of segment revenue. This compares to a split of 45% for restructuring, 32% for business transformation and strategy, and 22% for transactions in the prior year quarter. Year over year, restructuring revenues grew 20%.
Speaker Change: First quarter of 2004.
Speaker Change: We expected to be between 22 and 24% for the full year.
Speaker Change: Second let me remind everyone that last year, we had a weak first half followed by an exceptionally strong second half of the year.
Speaker Change: Our restructuring business this quarter was even stronger than we expected.
Speaker Change: Whether this level of strength will persist through the year may depend on factors that are difficult to reliably predict and include availability of funding for distressed companies.
Ajay Sabherwal: Business transformation and strategy revenues grew 12% and transactions revenues grew 13%, resulting in adjusted segment EBITDA of $75.2 million or 20.6% of segment revenues compared to $51.8 million or 16.4% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, including success fees, which was partially offset by higher compensation and SG&A expenses. Sequentially, corporate finance and restructuring revenues were flat.
Speaker Change: And the duration of our matters.
Speaker Change: Further several of our other businesses can have significant ups and downs based on large new matters, starting or ending.
Speaker Change: As evidenced even than this past quarter and business transformation and strategy.
Speaker Change: Certain jobs ended.
Speaker Change: Third as Steve mentioned, we have both the appetite and the wherewithal to make investments.
Speaker Change: Having said that we cannot say with certainty when such investments will be made and therefore, how much impact they will have in this calendar year.
Speaker Change: Lastly, the fourth quarter is typically a weaker quarter for us because of the seasonal business slowdown and vacations at the end of the year.
Speaker Change: As Steve said it is rare that we see the underlying ebbs and flows in our business coincide to the extent that they have so far this year.
Ajay Sabherwal: Restructuring revenues grew 5% and transaction revenues grew 2%, while business transformation and strategy revenues declined 8% as we saw some large jobs in the business transformation and strategy business conclude. Industries where we have been helping clients with restructuring, where we saw sequential increases in revenues, include diversified metals and mining, chemicals, financial services, and real estate, among others. Adjusted segment EBITDA increased $9.8 million sequentially primarily due to lower compensation and contractor costs, which was only partially offset by an increase in business development expenses related to annual client events.
Speaker Change: Our current guidance is in that range that encompasses both positive and negative scenarios and combinations for our various businesses.
Speaker Change: At this time our guidance remains unchanged.
Speaker Change: Before I close I want to reiterate four key themes that I believe underscores the attractiveness of our business.
Speaker Change: First our results illustrate the growing need for our services as we assist our clients as they navigate through their most complex challenges and opportunities regardless of business cycle.
Speaker Change: Second our leading practitioners and their continued ability to not only win business, but also attract top talent is our core strength.
Speaker Change: Third we continue to even look to expand our portfolio of services.
Ajay Sabherwal: Turning to Forensic and Litigation Consulting, or FLC, revenues of $176.1 million increased 11.6%. The increase in revenues was primarily due to higher demand and realized bill rates for investigations and dispute services; adjusted segment EBITDA of $33.7 million, or 19.1% of segment revenues compared to $21.8 million, or 13.8% 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.
Speaker Change: Jason fees related to our core competencies examples of such expansion range from construction solutions with cyber security and AI in SLC strategy consulting and digital transformation in corporate finance.
Speaker Change: Non M&A related antitrust in economic consulting blockchain digital assets emerging data and AI based capabilities and technology and public affairs consulting and strategic communications.
Speaker Change: Finally, our enviable balance sheet allows us the flexibility to continue to boost shareholder value through organic head count growth share buybacks and acquisitions, when we see the right ones.
Speaker Change: With that let's open the call up for your questions.
Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone telephone.
Ajay Sabherwal: sequentially, FLC revenues increased $10.6 million, or 6.4%, primarily due to higher demand for construction solutions and dispute services. Adjusted segment EBITDA increased by $14.5 million sequentially, primarily due to higher revenues, as well as a decrease in compensation and bad debt. In economic consulting, revenues of $204.5 million increased 20.6%.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two and at this time, we will pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Andrew Nicholas with William Blair. Please go ahead.
Andrew Owen Nicholas: Hi, good morning, and thanks for taking my questions.
Andrew Owen Nicholas: Let us start on on the restructuring environment.
Andrew Owen Nicholas: RJ I think you said it was even stronger than you expected in the quarter. Obviously first quarter I think is higher than fourth quarter levels. Just curious if you could kind of unpack the strength how much of it is is the environment and kind of the market.
Ajay Sabherwal: The increase in revenues was primarily due to higher demand and realized bill rates for non-M&A related antitrust and financial economic services. Adjusted Segmented FDA revenue of $14.2 million, or 6.9% of segment revenues compared to $14.2 million, or 8.4% of segment revenues in the prior year quarter. The increase in revenues was more than offset by higher compensation, contractor costs, and SG&A expenses. The increase in compensation was primarily related to higher variable compensation and the impact of a 5.8% increase in billable headcount. The increase in SG&A expenses was primarily related to higher bad debts.
Andrew Owen Nicholas: Staying higher than you had expected versus the company, winning a higher share of mandates. It does seem like from some.
Andrew Owen Nicholas: Some of the things that we were able to track down intra quarter or is it that you guys are doing quite well in terms of winning large deals. So any kind of color between what is and is not under your control and that restructuring business would be helpful.
Jamie: Jamie have more detail.
Jamie: The answer is look there have been some quarters, where we've been up in the market has been down which clearly gives you an indication that there is share gain.
Jamie: Think this market is robust for people in addition to US it's not just us.
Ajay Sabherwal: Similar to recent years, in the first quarter, we experienced revenue deferrals that have resulted in, and may continue to result in, variations in the timing of revenue recognized on work already performed. However, we believe that conditions to recognize these revenues will be met later this year and could positively impact adjusted EBITDA by approximately $6 million. sequentially, Economic Consulting's revenues decreased $1.5 million, and Adjusted Segment EBITDA decreased $24.2 million, primarily due to higher compensation and bad debt.
Jamie: That are doing well, but I think I don't know how to.
Jamie: Disaggregate the two.
Speaker Change: Youre, absolutely right us and others are doing better than we expected.
Jamie: Infrastructure.
Jamie: So I'd like to say, it's all share gains sometimes it has been I can't claim that this quarter here, Andrew is my sense, but but we're feeling pretty good about.
Jamie: Our competitive position out there does that at least to respond to your question yes.
Speaker Change: Yes, absolutely no no it's not.
Speaker Change: An easy question to answer so I appreciate that.
Speaker Change: In terms of economic consulting you mentioned the revenue deferrals.
Speaker Change: And that potentially pressuring.
Speaker Change: First quarter margins just to clarify there.
Speaker Change: Is the work.
Ajay Sabherwal: Technology's revenues of $100.7 million increased 11.1%. The increase in revenues was primarily due to higher demand for M&A-related second requests and information governance, privacy, and security services, which was partially offset by a decline in demand for investigative services. Adjusted Segment EDA of $14.6 million, or 14.5% of segment revenues compared to $15.4 million, or 17% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to an increase in compensation, which includes the impact of an 11.2% increase in billable headcount, higher as-needed consultant costs, and an increase in SG&A expenses.
Speaker Change: That you did or I guess, the expenses tied to that work that you expect to come through maybe in the second half of the year did that all happened in the first quarter I guess I'm asking if I can if I can do that math to specifically allocate.
Speaker Change: That $6 million of EBITDA headwind.
Speaker Change: As as a onetime item to the first quarter economic consulting margins because that is a.
Speaker Change: Quite a bit lower margin levels than maybe what you've done historically.
Speaker Change: You can Andrew and that's exactly right. That's why we provided that number.
Andrew Owen Nicholas: So to.
Andrew Owen Nicholas: We should be clear the work that was work last year as well as work this quarter. This quarter the impact would be the $6 million that we mentioned and there is work continuing into the second quarter.
Speaker Change: Alright, Great and then maybe just one one last one for me I appreciate all the insight.
Speaker Change: So far as I think.
Speaker Change: If it wasn't yesterday.
Speaker Change: There was some news on noncompete legislation.
Speaker Change: I know that there has been already some pretty significant pushback from corporations on the new legislation, but if you could speak to either your thoughts on the legislation the likelihood of it ultimately coming to pass and the impact on the business that'd be really helpful. Thank you.
Ajay Sabherwal: Sequentially, technology revenues were flat, and Adjusted Segmented EVA increased $2.2 million primarily due to lower SG&A expenses, which was partially offset by an increase in compensation. Strategic communications revenues of $81.2 million increased 11.1%. The increase in revenues was primarily due to higher demand for public affairs and corporate reputation services. Adjusted segment EBITDA of $12.4 million, or 15.3% of segment revenues, compared to $9.6 million, or 13.1% 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 and higher SG&A expenses.
Speaker Change: Yes.
Speaker Change: Thanks for the question look we're obviously looking at that we knew that that.
Speaker Change: The FTC was looking at that and we've been monitoring it and we are monitoring I think you've got it right. There are a lot of.
Speaker Change: As my General Counsel, who is a very big baseball fan. So there are a lot of innings left in this game before it's over.
Speaker Change: Let me maybe talk to the more general point is out there or different aspects of that legislation I mean, some of it apparently is targeting up people who are non competes for people who are in $30000. A year. I mean, we don't do that we have non competes for our senior people who are an important leadership roles in order to protect big investments, we're making in those people.
Speaker Change: That is important to us.
Speaker Change: We invest confidential information about us and our clients, we invest put them in positions of trust with our people and so forth. So in that sense that part of it is very important to US now even then.
Ajay Sabherwal: sequentially, strategic communications revenues decreased $5.4 million, or 6.3%, primarily due to lower demand for corporate reputation services. Adjusted segment EBITDA decreased $3.2 million primarily due to lower revenues, which was partially offset by a decline in compensation and SG&A expenses. Let me now discuss a few cash flow and balance sheet items. As is typical, we pay the bulk of our annual bonuses in the first quarter. Net cash used in operating activities of $274.8 million compared to $254.2 million in the prior year's quarter.
Speaker Change: When senior people believe we're usually able to as long as they are willing to honor their restrictions able to to make this work.
Speaker Change: So.
Speaker Change: Yes.
Speaker Change: But those those restrictions the does not abusing.
Speaker Change: And relationships and so forth is an important element. It is not clear whether those are actually going to ultimately be challenged by this legislation. So we're monitoring it the other thing I would say is.
Speaker Change: There are some competitors out there who are routine about abusing.
Speaker Change: These sorts of provisions we arent when we hire people from competitors, we honor them. So if this thing were actually to go through and it's most broad form.
Speaker Change: I suspect we ended up.
Speaker Change: We don't think Thats, the right thing, but we will end up being benefited because people, we hire who we protect.
Speaker Change: They're confidential.
Ajay Sabherwal: The year-over-year increase in net cash used in operating activities was primarily due to an increase in salaries, higher annual bonus payments, and an increase in forgivable loan issuances, which was partially offset by higher cash collections. Total debt, net of cash and short-term investments, of negative $39 million at March 31, 2024, compared to $122.7 million at March 31, 2023 and negative $328.7 million at December 31, 2023. The sequential increase in total debt, net of cash, and short-term investments was primarily due to higher borrowings under the company's senior secured bank revolving credit facility, which were primarily used for annual bonus payments.
Speaker Change: Responsible was after the prior firm.
Speaker Change: We wouldn't be required to come onboard. So there's a lot of puts and takes we're monitoring actively and I think there are a lot of innings left does that at least talk to the question.
Speaker Change: Definitely thanks Keith.
Speaker Change: The next question will come from Tobey Sommer with true Securities. Please go ahead.
Tobey O'Brien Sommer: Thank you.
Tobey O'Brien Sommer: I was hoping you could give us some color on the.
Tobey O'Brien Sommer: Investments in the kind of calls you're getting from interested potential lateral hires.
Tobey O'Brien Sommer: Across the segments geographies and.
Tobey O'Brien Sommer: And Ed I don't know if those investments also include external acquisition opportunities. So any color you can provide would be helpful.
Tobey O'Brien Sommer: Okay.
Ed: Yes look.
Ed: I'm not going to comment on acquisitions that were thinking about or not but I would say just to be clear.
Tobey O'Brien Sommer: Almost all of the investments we've made historically have been.
Ed: And the one off hires of individuals.
Ed: We haven't made a dramatic change in strategy, which I think is going on here is.
Ed: A combination of things.
Tobey O'Brien Sommer: As you might know there's a lot of disruption.
Ajay Sabherwal: Turning to guidance. Though the end of the first quarter is usually too early to revisit guidance, let me remind you of a few of the determining factors. [inaudible] As I said at the beginning of the call, our tax rate was 19.6% in the first quarter of 2024, but we expect it to be between 22 and 24% for the full year.
Tobey O'Brien Sommer: Various marketplaces around the world in a number of our competitors and that's coming at a time when our.
Tobey O'Brien Sommer: Our reputation has grown enormously one point.
Tobey O'Brien Sommer: Professionals in many markets overseas would ever have called us if they were ticked off.
Tobey O'Brien Sommer: That has dramatically changed.
Tobey O'Brien Sommer: And even in the U S, where we always had a long relationship the number of people who are extinct.
Tobey O'Brien Sommer: Evidently would go to STI has just soared and so disruption in marketplaces in some ways is very good for us and so it's it's a it's across the world and it's across our segments.
Ajay Sabherwal: Second, let me remind everyone that last year we had a weak first half followed by an exceptionally strong second half of the year. Our restructuring business this quarter was even stronger than we expected. Whether this level of strength will persist through the year may depend on factors that are difficult to reliably predict and include the availability of funding for distressed companies and the duration of our matters. Further, several of our other businesses can have significant ups and downs based on large new matters starting or ending, as evidenced even in this past quarter in Business Transformation and Strategy, where certain jobs ended.
Tobey O'Brien Sommer: What's going on now.
Tobey O'Brien Sommer: As RJ with caution there is a lot of conversations and then some of those translate into things and then there's sometimes long delays like we probably hired more people to know right now because.
Tobey O'Brien Sommer: If.
Tobey O'Brien Sommer: Order there are people allow people to honor their commitments to.
Tobey O'Brien Sommer: So there are existing employees, we allow them to honor their commitments. If we don't announce them until they are finished with that so but it's.
Tobey O'Brien Sommer: It's pretty broad and and it was very broad in its global and so Thats why I said I think this is the largest extensive conversations we've ever had was that.
Speaker Change: Talk to your point Toby.
Toby: It very much does thank you and the air related question.
Speaker Change: What is the.
Ajay Sabherwal: Third, as Steve mentioned, we have both the appetite and the wherewithal to make investments. Having said that, we cannot say with certainty when such investments will be made and, therefore, how much impact they will have this calendar year. Lastly, the fourth quarter is typically a weaker quarter for us because of a seasonal business slowdown and vacations at the end of the year.
Toby: Your expectation for SG&A percentage and investments to support those.
Toby: Prospective new revenue generators are there.
Toby: Consequential new economies, you may need to enter them de novo or significant flesh, you would need to add to the bone and muscle in existing geographies such that G&A percentage is likely to tick higher as a result of these investments.
Ajay Sabherwal: As Steve said, it is rare that we see the underlying ebbs and flows in our business coincide to the extent that they have so far this year. Our current guidance is in a range that encompasses both positive and negative scenarios and combinations for our various businesses. At this time, our guidance remains unchanged.
Speaker Change: Yes look.
Toby: It's not that we're now colonizing Mars and so we have to put.
Toby: Infrastructure on bars.
Toby: I think notwithstanding somebody's requests were not coming into the MLR anytime soon either.
Toby: Look I think I think the right way I think about it is.
Ajay Sabherwal: Before I close, I want to reiterate four key themes that I believe underscore the attractiveness of our business. First, our results illustrate the growing need for our services as we assist our clients as they navigate through their most complex challenges and opportunities, regardless of the business cycle. Second, our leading practitioners and their continued ability to not only win business but also attract top talent is our core strength. Third, we continually look to expand our portfolio of services to areas related to our core competencies. Examples of such expansion range from construction solutions to cyber security and AI in FLC, strategy consulting, and digital transformation in corporate finance.
Toby: Yes.
Toby: When you enter new geographies, you always have significant infrastructure or you enter totally new lines of business.
Toby: And as you saw that happen to US right. When we made major investments in Europe, we had two and frankly, we underinvested in for a while and we're now doing a catch up on some of those countries. Because we just have much deeper commitments some of those countries and we did it doesn't work did not have the infrastructure in place that's not what's going on mostly.
Toby: Here, mostly what's going on is in markets, which we have established presence. There just people are calling us off the hook.
Toby: I would caution though is I think there is a 90 to take in.
Toby: In retail when I used to do retail consulting had said if I add more stores my SG&A goes down.
Toby: And there is a naive Italian professional services that are add more hedged or we're just going to amortize. The same costs licenses SG&A is pretty proportional most times to the number of hedge app. It doesn't you don't get a lot of economies of scale and retail if you double the volume per store is that a lot of economies of scale and the same thing if we drive our revenue per professional.
Ajay Sabherwal: Non-M&A Related Antitrust and Economic Consulting, Blockchain, Digital Assets, Emerging Data, and AI-Based Capabilities in Technology, and Public Affairs Consulting in Strategic Communication. Finally, our enviable balance sheet allows us the flexibility to continue to boost shareholder value through organic headcount growth, share buybacks, and acquisitions when we see the right one. With that, let's open the call up for your questions. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone telephone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Toby: But if we add a lot of professionals, it's not like Oh.
Toby: You had to hire you had to hire people to recruit them you have to give them laptops you have to have real estate for them and sometimes its lumpy increases but on average it tends to be proportionate. So I guess I haven't looked at your question exactly but my guess is this is not a dramatic.
Toby: Driver, one way or another on on the SG&A percentage, the only exception being sometimes what you do is you bring these people in and they don't get revenues for a while because they are.
Toby: Non competes which we honor and so.
Toby: It causes a little dip in your revenue per professional that that makes the percentage a little higher but thats a temporary factor does that give you at least some thoughts to think about it.
Speaker Change: Definitely does Steve I appreciate that I had two other questions.
Operator: To withdraw your question, please press star then 2, and at this time, we'll pause momentarily to assemble our roster. For the first question, we'll come from Andrew Nicholas with William Blear. Please go ahead. Hi, good morning.
Speaker Change: One in.
Speaker Change: They both relate to economic consulting.
Speaker Change: In non M&A related antitrust.
Speaker Change: Do you hear people tell you that those that that trend in the projects that you may be involved in are certainly out in the market.
Andrew Owen Nicholas: And thanks for taking my questions. I want to start with the restructuring environment. Ajay, I think you said it was even stronger than you expected in the quarter. Obviously, the first quarter is higher than fourth quarter levels. Just curious, if you could kind of unpack the strength, how much of it is the environment and kind of the market staying higher than you had expected versus the company winning a higher share of mandates?
Speaker Change: Long leg in our sort of likely to be of a longer duration than a chip.
Speaker Change: Typical M&A related antitrust engagement.
Speaker Change: More defined timeline.
Speaker Change: And then <unk>.
Speaker Change: Secondly, what is sort of the long term margin outlook. There in the segment I know you have very talented people.
Speaker Change: Generate.
Speaker Change: In some cases a lot of business. So how do you feel about that relative to historic normative margins.
Speaker Change: Toby I'll take a crack and both of them. The first one answer is simply yes.
Andrew Owen Nicholas: It did seem like from some of the things that we were able to track down and record are that you guys are doing quite well in terms of winning large deals. So any kind of color between, you know, what is and is not under your control in that restructuring business would be, Ajay may have more detailed answers, but there have been some quarters where we've been up when the market has been down, which clearly gives you an indication that there is share gain. I think this market is robust for people in addition to us. It's not just us that are doing well. But I don't know how to disaggregate the two.
Speaker Change: The non M&A antitrust.
Speaker Change: <unk> does not have the same defined.
Speaker Change: Duration that an M&A hands, because M&A is very set non M&A could also it also extends to various jurisdictions you might doing non M&A antitrust and in the U S with different countries have their own.
Speaker Change: So priority so.
Speaker Change: There are longer legs to those sorts of assignments.
Speaker Change: So that's one second.
Speaker Change: We typically have not given margin guidance and we're not going to start doing auction guidance debate. So, but if you look at last year, our economic consulting segment had about 15% margin.
Speaker Change: And we have the same in 2020, so around 15% for that for that segment then.
Steven H. Gunby: You're absolutely right. Us and others are doing better than we expect. So I'd like to say it's all shared gain. Sometimes it has been.
Speaker Change: Very clearly telegraphed in my in the last quarter's earnings call that we do expect.
Speaker Change: The erosion in margin for a variety of reasons and so don't take the first quarter.
Steven H. Gunby: I can't claim that this quarter year, Andrew, is my sense, but we're feeling pretty good about it. Our competitive position out there. Does that at least respond to your question? Yeah absolutely, no it's not an easy question to answer, so I appreciate that. In terms of economic consulting, you mentioned the revenue deferrals and that potentially pressuring first quarter margin sum. Just to clarify, is the work that you did, or I guess the expenses tied to that work that you expect to come through maybe in the second half of the year. Did that all happen in the first quarter?
Speaker Change: So that still stands now don't take the first quarter margin and say well that's what it is because there is there is significant deferrals that have taken place in the first quarter. There are other items as well like bad debt et cetera that you don't expect to beat and so thats as much as we would see on margins at this point.
Speaker Change: Thank you if I could sneak one last one Jay in your prepared remarks, you referenced a lot of new businesses that have been launched in adjacent markets over time.
Speaker Change: I don't expect you to tell me whatever year nascent new investments our way through.
Speaker Change: Have them percolate be consequential, then we can talk about them, but could you comment about whether you have.
Speaker Change: Sort of multiple irons in the fire to develop new things that we may talk about live on these calls in two or three years.
Speaker Change: Look absolutely let me say this if I can I mean look one of the things that we've done over the last while is we have quarterly strategy meetings and you say like I.
Andrew Owen Nicholas: I guess I'm asking if I can do the math to specifically allocate that $6 million of EBITDA headwind as a one-time item to the first quarter economic consulting margins because that is quite a bit lower than maybe what you've done historically. You can, Andrew, and that's exactly right.
Speaker Change: <unk> quarterly strategy meetings with every segment and with the key leaders around the world and you say well how much can the strategy changed in the quarter you don't expect the entire strategy change in the quarter, but what youre doing is youre evaluating bets and Youre valuing AE is do we think actually our core <unk> core businesses have more legs than we've historically done and so we want to up the <unk>.
Ajay Sabherwal: That's why we provided that number. So, just to be clear, there was work last year as well. There's work this quarter. This quarter, in fact, would be the $6 million that we mentioned, and there is work continuing into the second quarter. All right, great. And then maybe just one last one for me.
Speaker Change: Hiring or.
Speaker Change: But also continually evaluating what other adjacencies, which gill and monitoring what's going on in the world.
Speaker Change: Three years ago, we werent thinking about in a serious way across the company about AI, we were in our tech business. Our Tech business was doing machine learning before it was a common.
Andrew Owen Nicholas: Appreciate all the insight so far, as I think if it wasn't yesterday, there was some news on non-compete legislation. I know that there's already been some pretty significant pushback from corporations on the new legislation. But if you could speak to either your thoughts on the legislation, the likelihood of it ultimately coming to pass, and the impact on the business, that'd be really helpful.
Speaker Change: Phrased in the Wall Street Journal, but we Werent looking at it more systematically with of course have been looking at it more systematically and come up with new ideas and all that but it's also around changes in geography changes competitor changes and our capabilities changes and the people who come to us.
Speaker Change: We didn't enter the strategy business, because we've made a conscious decision to enter the strategies implemented strategy business was a great group of people wanted to join US at the same thing with public sector work because a great group of people. So these conversations are ongoing and <unk> essence of.
Steven H. Gunby: Yeah, look, thanks for the question. Look, we're obviously looking at that. We knew that the FTC was looking at that, and we've been monitoring it, and we are monitoring it. I think you've got it right. There are a lot of, as my general counsel, who's a very big baseball fan, says there are a lot of innings left in this game before it's over.
Speaker Change: What I write to our people which is great.
Speaker Change: The biggest mistake in professional services is thinking you can sit still.
Speaker Change: Ever peoples SaaS still they thought they were sitting still and the world changed and they were really move it backwards and what we are committed to is to continue to challenge ourselves to say where should we be moving and that's an ongoing process and if something new doesn't come out with two or three years then.
Steven H. Gunby: But let me maybe talk to the more general point. You know, there are different aspects of that legislation. I mean, some of it apparently is targeting people who have non-competes for people who make $30,000 a year. I mean, we don't do that.
Speaker Change: It wasn't doing his job and I'm looking at myself is that at least talk to your question.
Speaker Change: Sure. Thanks.
Speaker Change: The next question will come from James Euro with Goldman Sachs. Please go ahead.
James Edwin Yaro: Good morning, Thanks for taking my questions.
James Edwin Yaro: Maybe just starting off on the confidence and restructuring segment, we've seen more challenging M&A trends in this quarter for many investment banks, how do you expect the higher rates for longer environment to impact growth.
Steven H. Gunby: We have non-competes for our senior people who are in important leadership roles in order to protect the big investments we're making in those people, and that is important to us. You know, we invest confidential information about us and our clients. We invest, put them in positions of trust with our people, and so forth. So in that sense, that part of it is very important to us. When senior people leave, we're usually able to, as long as they're willing to honor their restrictions, able to make this work.
James Edwin Yaro: Our business transformation and strategy and transactions businesses going forward.
James Edwin Yaro: So.
Speaker Change: Look at the.
Speaker Change: Business transformation and transformation and strategy.
Speaker Change: They're not as sort of rate sensitive. This is this is this is a big job big job business and if you look at the last 12 quarters, you will notice that we could have a run of three strong quarters, and then a really weak quarter sequentially and then simply a matter of major matters, ending and new <unk>.
Speaker Change: Theres not starting this is this is one of those quarters, where in business transformation and strategy in Q4 system matters ended and you see that sequential decline, so I'm not willing to say that because.
Steven H. Gunby: So, you know, But those restrictions, the not abusing in relationships and so forth, are an important element. It's not clear whether those are actually going to be challenged by this legislation, so we're monitoring it. The other thing I would say is there are some competitors out there who are routine about abusing these sorts of provisions. We aren't.
Speaker Change: Interest rates are elevated so that's on that.
Speaker Change: M&A M&A is actually picking up so even though rates are rates are elevated what we hear is more M&A picking up not just within CFR just to be clear there.
Speaker Change: In our transaction business. The the bulk of the revenue isn't I banking banking is a very tiny fraction of the bulk of the business is.
Steven H. Gunby: When we hire people from competitors, we honor them. So if this thing were actually to go through in its most broad form... We don't think that's the right thing, but we would end up being benefited by the people we hire who we protect. We have a lot of takes, and we are monitoring actively, and I think there are a lot of innings left.
Speaker Change: Due diligence merger integration carve out work.
Speaker Change: And it's typically in the small to mid size types of transactions.
Speaker Change: So it's not.
Speaker Change: That business is actually not that sensitive to the larger trends the large M&A effects, our economic consulting and certainly our technology business with the second request stadia.
Steven H. Gunby: Does that at least talk to the question? Yes. Definitely.
Speaker Change: Okay, that's very clear thanks, maybe.
Speaker Change: Maybe just turning back to <unk> consulting.
Operator: Thank you. The next question will come from Tobey Sommer with Truist Securities. Please go ahead.
Speaker Change: Which obviously was substantially better than at.
Speaker Change: At least I had been forecasting revenue only down 1% quarter on quarter. Previously you have talked about you can consulting being back half weighted for this year and you noted on this call that deferred revenue could support revenue further out in 2024. So should we think of this as being a good starting point in revenue can grow from here and Theyre still beat.
Tobey O'Brien Sommer: Thank you. I was hoping you could give us some color on the investments and the kind of calls you're getting from interested potential lateral hires across the segments and geography. And I don't know if those investments also include... External Acquisition Opportunities. So any color you can provide would be helpful.
Speaker Change: <unk> the same second half weighted component.
Steven H. Gunby: Yeah, look, I'm not going to comment on acquisitions that we're thinking about or not, but I would say just to be clear, you know, most of, almost all of the investments we've made historically have been in the, and the one-off hires of individuals, you know. And so, we haven't made a dramatic change in strategy. What I think is going on here is a combination of things.
Speaker Change: Consulting.
Speaker Change: I actually don't recollect, saying econ consulting would be second half weighted but.
Speaker Change: Can go back and look at that.
Speaker Change: <unk> EBITDA to be at to anticipate deferrals, I mean that could have been the EBITDA that you're talking about because I don't think we would have said I. There's nothing that I never thought that said that revenue would be so that maybe.
Speaker Change: Maybe that deferral.
Speaker Change: So on the revenue side.
Speaker Change: Absolutely delighted and positively surprised at the at the revenue number on economic consulting.
Steven H. Gunby: Uh, as you might know, there's a lot of disruption in the various marketplaces around the world by a number of our competitors, and that's coming at a time when, you know, our reputation has grown enormously. I mean, at one point, leading professionals in many markets overseas would never have called us if they were ticked off. And that has dramatically changed. And even in the U.S., where we always had a long relationship, the number of people who think, well, if I were ever going to leave, I would go to FTI has just soared.
Speaker Change: And non M&A antitrust is the area, which is which has thrown the M&A antitrust is robust, but as relatively flat.
Speaker Change: <unk> is what has grown in another areas like.
Speaker Change: Recreation and financial Economics.
Speaker Change: We're very pleased and made long continue.
Speaker Change: Okay got it yet.
Speaker Change: I guess I misunderstood that I thought you were talking about last quarter about how there could be more.
Speaker Change: Pick up in the second half of the year, but.
Speaker Change: Makes sense, maybe just.
Speaker Change: <unk> zinc and litigation consulting utilization, which did improved notably in the quarter.
Speaker Change: Is this related to some of the actions you took last year or because of the.
Speaker Change: The large quarter on quarter revenue step up or perhaps both in your aspirations for utilization in that business going forward.
Steven H. Gunby: And so, you know, disruption in marketplaces is, in some ways, very good for us. And so it's across the world, and it's across our segment. Now, as Ajay would caution, you know, there's a lot of conversation, and some of those translate into things, and then there's sometimes long delays. Like, we've probably hired more people than you know right now because... You know, in order to allow people to honor their commitments to their existing employees, we allow them to honor their commitments, and we don't announce them until they're finished with that.
Speaker Change: Yes look there is some.
Speaker Change: One time things in there and the EBITDA increase there, but the underlying realities of that business are due to two things. One is we have been on and we've had a lot of work going on on a multiyear basis to strengthen that business and that started selling some some some progress overtime and thats continued and.
Speaker Change: That's what you see in and revenue lines and those are really good. The other thing is yes, we tapered back hiring in the second half of the year.
Speaker Change: A number of segments because our attrition levels were so low in the first half of the year plus we had started the year higher than we expected in a number of places and so forth and so.
Steven H. Gunby: It's pretty broad, and it's very broad, and it's global. And so that's why I said, I think this is the largest extent of the conversations we've ever had. Does that make your point, Toby? It very much does. Thank you.
Speaker Change: And then the revenue in the second half of last year was stronger than we thought so we've gotten in some places caught short I think the headcount increase year on year on that is not us.
Speaker Change: Is dramatically less of our revenue, which of course is not sustainable so, but but look when you have high revenue growth and no head count growth or almost no head count growth.
Tobey O'Brien Sommer: And a related question, what is your expectation for SG&A percentage and investment to support those, you know, prospective new revenue generators. Are there consequential new economies you may need to enter in de novo or significant flesh you would need to add to the bones and muscle in existing geographies such as, https://www.youtube.com or the link in the description below?
Speaker Change: It all drops to the bottom line I think what we believe in all of our businesses that.
Speaker Change: The levels of head count growth, we've had year on year are not sustainable you can't travel you can't drive it sort of revenue growth, we aspire to so we're going to have to tweak that up but it <unk> and elsewhere.
Speaker Change: I think I think we are seeing.
Speaker Change: With some different zags.
Speaker Change: The progress of what our leadership team has done to strengthen our business there.
Steven H. Gunby: Yeah, look. It's not that we're now colonizing Mars, and so we have to put, you know, infrastructure on Mars. And I think, notwithstanding somebody's request, we're not going into Myanmar anytime soon either.
Speaker Change: Thanks for taking my questions.
Speaker Change: I think that may be all the questions. Thank you all for your attention and continued support for our company.
Speaker Change: We're excited about where we are and we look forward to continuing the conversation with all of you. Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Steven H. Gunby: So, look, I think the right way to think about it is... When you enter new geographies, you always have significant infrastructure, or you enter totally new lines of business. And as you saw, that happened to us, right?
Speaker Change: Yes.
Steven H. Gunby: When we made major investments in Europe, we had to, and frankly, we under-invested for a while, and we're now doing a catch-up on some of those countries because we just have much deeper commitments to some of those countries than we did, and it doesn't work to not have the infrastructure in place. That's not what's mostly going on here. Mostly, what's going on is in markets where we have an established presence. They're just people outcalling us off the hook.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Okay.
Steven H. Gunby: What I would caution, though, is I think there's a naivete in... I used to do retail consulting that said if I added more stores, my SG&A went down. And there's a naivete in professional services that if I add more heads, well, we're just going to amortize the same cost. But my sense is SG&A is pretty proportional most times. Tobey Sommer, Andrew Nicholas, James Yaro, Steven Gunby, Ajay Sabherwal, Mollie Hawkes. You had to hire people to recruit them.
Speaker Change: Okay.
Speaker Change: [music].
Steven H. Gunby: You have to give them laptops. You have to have real estate for them. And then sometimes there are lumpy increases, but on average, it tends to be proportional. So I guess I haven't looked at your question exactly, but my guess is this is not a dramatic driver one way or another on the SG&A percentage. The only exception being sometimes what you do is you bring these people in, and they don't get revenue for a while because they have non-competes, which we honor. And so it causes a little dip in your revenue per profession. That then makes the percentage a little higher, but that's a temporary factor. Do those give you at least some thoughts to think about?
Tobey O'Brien Sommer: It definitely does, Steve. I appreciate that. I had two other questions. One in, they both relate to economic consulting in non-M&A related antitrust. Do your people tell you that this trend in the projects that you may be involved in or certainly out in the market have long legs and are likely to be of a longer duration than a typical M&A-related antitrust engagement that has a more defined timeline? And then, secondly, what is the long-term margin outcome in this segment? I know you have very talented people who generate, in some cases, a lot. So how do you feel about that, relative to the historic normative market? I'll take a crack at both of them.
Speaker Change: [music].
Ajay Sabherwal: The first answer is simply yes. The non-M&A antitrust does not have the same defined duration that an M&A has because M&A is very set. Non-M&A could also, it also extends to various jurisdictions. You might do a non-M&A antitrust in the US, and then different countries have their own antitrust authorities.
Ajay Sabherwal: So there are longer legs to those sorts of assignments. So that's one example. Second, you know, we typically have not given, you know, margin guidance, and we're not going to start giving action guidance today. So, but if you look at last year, our economic consulting segment had about 15% margin, and we expect the same in 2022. So around 15% for that, for that segment. And I, I very clearly telegraphed in my last quarter's earnings call that we do expect, [inaudible] Thank you. If I could speak in on last one.
Tobey O'Brien Sommer: Ajay, in your prepared remarks, you referenced a lot of new businesses that have been launched in adjacent markets over time. I don't expect you to tell me whatever your nascent new investments are, have them percolate and be consequential, and then we can talk about them, but could you comment about whether you have. Multiple irons in the fire to develop new things that we may talk about live on these calls in two or three. Look, absolutely. Let me say this, if I can.
Steven H. Gunby: I mean, look, one of the things that we've done over the last while is, you know, we have quarterly strategy meetings. And you say, like, I have quarterly strategy meetings with every segment and with the key leaders around the world. And you say, well, how much can a strategy change in a quarter? You don't expect the entire strategy to change in a quarter. But what you're doing is you're evaluating bets, and you're evaluating, A, is, you know, do we think actually our core team and core businesses have more legs than we've historically done?
Steven H. Gunby: And so we want to up the hiring or, but also continually evaluate what other adjacencies we should go up and monitor what's going on in the world. You know, three years ago, we weren't thinking about, in a serious way, across the company, AI. We were in our tech business. Our tech business was doing machine learning before it was a common phrase in the Wall Street Journal.
Steven H. Gunby: But we weren't looking at it more systematically. We, of course, have been looking at it more systematically, and you have come up with new ideas on that. But it's also around changes in geography, changes in competitors, changes in our capabilities, changes in the people who come to us. You know, we didn't enter the strategy business because we made a conscious decision to enter the strategy business. We entered the strategy business because a great group of people wanted to join us.
Steven H. Gunby: And the same thing with public sector work because of a great group of people. So these conversations are ongoing, and they are, to me, an essence of what I write to our people, which is the biggest mistake in professional services is thinking you can sit still. Whenever people sat still, they thought they were sitting still, and the world changed, and they were really moving backwards.
Steven H. Gunby: And what we are committed to is continually challenging ourselves to say, where should we be moving? And that's an ongoing process. And if something new doesn't come up in two or three years, then somebody wasn't doing his job. I'm looking at myself. Does that at least talk to your question? Sure does, thanks.
Operator: The next question will come from James Yaro with Goldman Sachs; please go ahead. Good morning and thanks for taking my question. Maybe just starting on the corporate finance and restructuring segment, we've seen more challenging M&A trends in this quarter for many investment banks. How do you expect the higher rates for longer environment to impact growth of your business transformation and strategy and transactions?
Speaker Change: [music].
James Edwin Yaro: So, um... Look, business transformation and transformation and strategy, they're not as rate sensitive. This is a big job, big job business. And if you look at the last 12 quarters, you'll notice we could have a run of three strong quarters and then a really weak quarter sequentially, and then simply a matter of major matters ending and new matters not starting.
Ajay Sabherwal: This is one of those quarters where business transformation and strategy and Q4 certain matters ended, and you see that sequential decline. So I'm not willing to say that's because interest rates are elevated. So that's on that one. M&A is actually picking up. So even though rates are elevated, what we hear is more M&A picking up.
Ajay Sabherwal: Now, just within CFR, just to be clear there, you know, in our transactions business, the bulk of the revenue isn't i-banking. i-banking is a very tiny fraction. The bulk of the business is due diligence, merger integration, and carve-out work.
Ajay Sabherwal: And it's typically in the, you know, small to mid-sized types of transactions. So it's not that business is actually not that sensitive to the larger trends. The larger M&A effects are economic consulting and certainly our technology business with the second request area.
James Edwin Yaro: Okay, that's very clear, thanks. Maybe just turning back to Econ Consulting, which obviously..., http://www.youtube.com. At least I had been forecasting and was only revenue only down. Please see the complete disclaimer at https://sites.google.com or at https://sites.google.com/policies. I actually don't recollect saying Econ Consulting would be second-half rated, but we can go back and look at that. It was EBITDA. Did we anticipate deferrals?
Ajay Sabherwal: I mean, that could have been EBITDA, what you're talking about, because I don't think we would have said it. There's nothing that I ever thought that said that revenue would be second-half. But maybe that's what you said, the deferral. So on the revenue side...
James Edwin Yaro: Please join me in welcoming Mr. Ajay Sabherwal, Andrew Nicholas, James Yaro, and Steven Gunby. I guess I misunderstood that. I thought you were talking about last week. That makes sense. Maybe just the Forensic and Litigation Consulting. Please see the complete disclaimer at https://sites.google.com or in the description of this video. There are some one-time things in the EBITDA increase there, but the underlying realities of that business are due to two things. One is that we have been on, and we've had a lot of work going on, on a multi-year basis to strengthen that business, and that has shown some progress over time, and that's continued. And that's what you see in revenue lines, and those are really good.
Speaker Change: [music].
Ajay Sabherwal: The other thing is, yes, we've tapered back hiring in the second half of the year in a number of segments because our attrition levels were so low in the first half of the year, plus we had started the year higher than we expected in a number of places and so forth. And so... And then the revenue in the second half of last year was stronger than we thought. So we've gotten caught short in some places.
Steven H. Gunby: I think the headcount increase year on year is not as... [inaudible] With some zigs and zags, the progress of what our leadership team has done to strengthen our businesses. I think that may be all the questions. Thank you all for your attention and continued support for our company. We're excited about where we are and we look forward to continuing the conversation with all of you.
Operator: Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. BF-WATCH TV 2021, Copyright 2020 Mooji Media Ltd. All Rights Reserved.
Copyright 2016 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. I am not a Buddhist. I am not a Hindu. I am not a Muslim. I am not a Christian either. I am not a Muslim. I am not a Christian either. I am not a Muslim. I am not a Christian either. I am not a Muslim. I am not a Christian either. I am not a Muslim.
I am not a Christian. I am not a Muslim. I am not a Christian. I am not a Muslim. I am not a Christian. I am not a Muslim. I am not a Christian. I am not a Muslim. I am not a Christian. I am not a believer. I am not a Muslim. I am not a Christian either. I am not a Muslim. I am not a Christian either. I am not a Christian.
I am not a Muslim. I am not a Christian. I am not a Muslim. I am not a Christian, www.fti.com.au, Copyright © 2020 Mooji Media Ltd. All Rights Reserved. No part of this recording may be reproduced without Mooji Media Ltd.'s express consent. [inaudible] Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music Music, ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Copyright © 2020, New Thinking Allowed Foundation, Andrew Nicholas, Steven Gunby, Ajay Sabherwal, Mollie Hawkes, FTI Consulting Inc