Q1 2025 FTI Consulting Inc Earnings Call
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Speaker Change: Good morning, everyone, and welcome to the FTI Consulting First Quarter 2025 Earnings Conference call.
Speaker Change: All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question you may press star and then wander on your telephone keypad. To withdraw your questions you may press star and two. Please note that this event is being recorded.
Speaker Change: At this time, I'd like to turn the comments call over to Molly Hawkes, head of investor relations. Please go ahead.
Speaker Change: Good morning. Welcome to the FTI Consulting Conference call to discuss the company's first quarter 2025 earnings results as reported this morning. Management will begin with formal remarks, after which they will take your question.
Speaker Change: Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Private Security's Litigation Reform Act.
Speaker Change: including the company's outlook and expectations for the full year 2025 based on management's current beliefs and expectations.
Speaker Change: These forward-looking statements include risks and uncertainties, assumptions, and estimates and other factors that could cause actual results to differ materially from such statements.
Speaker Change: 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 audience press release issued this morning, a copy of which is available on our website at www.fticonsulting.com
Speaker Change: as well as other disclosures under the headings of risk factors and forward-looking information in our annual report on Form 10K for the year ended December 31st, 2024, or our quarterly reports on Form 10Q and in our other filings with the SEC.
Speaker Change: Investors are cautioned not to place under reliance on any board looking statements, which speak only as the date of this earnings call and will not be updated.
Speaker Change: FTI Consulting assumes no obligation to update these boards of new statements whether as a result of new information, future events, or otherwise, except as required by applicable law.
Speaker Change: Are included in the press release and accompanying financial tables that we issued this morning.
Speaker Change: 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 upgraded to include our first quarter of 2025 results.
Speaker Change: 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.
Speaker Change: At this time I will turn the call over to our President and Chief Executive Officer Steve Gunby Thank you Mollie. Welcome everyone. Thank you all for joining us today. As I hope you saw this morning, we reported a strong first quarter.
Speaker Change: The first quarter did benefit as Ajay will detail some one-time items.
Speaker Change: But even adjusting for anything, one might think of as anomalous, it was a solid quarter.
Speaker Change: So, as we all know, there are lots of puts and takes in the world right now. There are lots of uncertainty. The start of this year is overall quite consistent with what our expectations were in February , when we gave you guidance for the year. [inaudible]
Speaker Change: Ajay Will, as usual, go through the details of this quarter in this typical structured fashion.
Ajay Sabherwal: Given the complexity of the world today with all the various theories of where the markets and client needs might go, I thought it might be worthwhile for me to go a little deeper than I normally go on the individual businesses.
and Sheriff's and Qualitative Observations
Ajay Sabherwal: Both on the performances of each of those businesses so far this year but also on some of the different theories of what their outlooks could be.
Ajay Sabherwal: So I'll be a little longer than usual. I hope you'll forgive me that. I want to start with and I'll see this, this, this, this, quarter of a day.
Ajay Sabherwal: I hope you saw just how fabulous the quarter FLC had. I think the EBITDA's quarter was roughly comparable to what we probably averaged for half a year for that business over the last few years.
Ajay Sabherwal: The driver of those results is that the teams there have been winning and delivering on some incredibly major roles. I would love on this call to talk about a lot of the specifics. Unfortunately many of those times are confidential because they are the nature of the work.
Ajay Sabherwal: The role of the teams are playing on 40th of the critical, the powerful.
and Foster Brand of it.
Ajay Sabherwal: At least among the people who know the work with them
Ajay Sabherwal: As I've talked about a number of times, we've always had terrific people in FLC [inaudible]
Ajay Sabherwal: The issue we've sometimes faced in that business is that it's insufficient amount of the world to how great our people were.
Ajay Sabherwal: I actually think the world at large still doesn't know that fully.
with over the last while.
Ajay Sabherwal: With a new set of energy across the various leadership levels, as well as a somewhat higher level of aggressiveness by many of our SMEs.
We now have a face more of the world.
Ajay Sabherwal: Understanding the quality of our people and the quality of what we can do, and that is true across a range of the business, whether it's the power of the deep technical expertise we have in some sub areas like cyber, anti-consumer thought, expert controls and sanctions, or others.
for the court data analytics.
and granted to take the ex-branded accounting capabilities.
They're often underpins much of the work.
Ajay Sabherwal: for the strength of some of the other businesses, the speech businesses.
Ajay Sabherwal: by Construction, and Project and Assets Business, or a Just Feet's Business, more general.
Our Experience
Ajay Sabherwal: If that is increasing parts of the world, start to really understand the depth of that expertise as well as the commitment and level of the people in those groups, you increasingly get those important, large jobs. Jobs that are often critical to the future of our clients.
Ajay Sabherwal: There's of course some serendipity of that and there's also some serendipity to one of those projects in, and therefore...
will do the args.
Ajay Sabherwal: For my senses through the zig-zag over the past few years, we have continued to increase that visibility, and you can see in the corner of this results, this corner, just how powerful that can be.
Ajay Sabherwal: Let me turn it from the corner to a more forward setting thoughts, forward setting, side of thoughts.
Ajay Sabherwal: The power of our team, the increased visibility, that doesn't go away.
But of course, individual major assignments can end.
Ajay Sabherwal: It's important for this business, as we talked about last quarter, this is a business that can be affected by policies in Washington.
Ajay Sabherwal: Particularly when you think about our strengths and things like anti-consumer fraud or FMI money laundering or FCPA areas where regulatory posture is potentially changing.
Ajay Sabherwal: So regulatory shifts could have a considerable effect on this business as the year goes on.
Ajay Sabherwal: We are therefore cautious about not assuming the current strength will get replicated through the end of the year.
Ajay Sabherwal: But important, given the capability, given the strength of our go-to-market strategies.
Ajay Sabherwal: It is not just this quarter that I am excited about. I am fundamentally excited about where the team is taking the medium and long term trajectory of this business.
Ajay Sabherwal: So I took a little extra time on FLC because I really think the team deserved it. I'll try to be a little grief for some of the other.
Ajay Sabherwal: The Segments, but I want to go through both all those sorts of general topics with everybody. So, let me turn to Court Ben. Here are results of roughly in line with where we expected them to be at this point in the year, with of course lots of puts and takes at the sub-business level.
Ajay Sabherwal: The corporate business, as I think you all know, can be shortly affected by macroeconomic
Ajay Sabherwal: For example, whether the restructuring market or the M&A market are up or down.
Ajay Sabherwal: We of course are not totally driven by those in market moves.
Ajay Sabherwal: We've shown, I believe, over the last several years our ability to gain share through the cycles.
Ajay Sabherwal: We're not totally affected, but we're obviously not totally driven, but we're obviously affected.
Ajay Sabherwal: The restructuring market is booming, this business is going to put them. And if the M&A market is booming, her transaction business is going to plan it.
Right now, as I believe you know,
Either of these markets.
Thank you.
Ajay Sabherwal: So in this quarter, we were relying on our competitive strengths to power those businesses.
Ajay Sabherwal: Even though there weren't that many big restructuring jobs out there, we won a number of the few that were out there and we saw pockets of strength in markets such as Germany.
Ajay Sabherwal: And we were actually surprised that our transition to business with the storms it was this quarter were given the pause on the deal, Texas Markets.
Ajay Sabherwal: I think a lot of that had to do with the commercial aggressiveness of our team's opinion.
Ajay Sabherwal: Importance of this quarter, we also made and are making good progress in addressing a couple of the businesses that were dragged on results in 2024.
Ajay Sabherwal: In part, through targeted headcount actions, we took this quarter, which Ajay will speak to, but at least as much, through some refocused commercial activity by the terrific talent in those some businesses.
That's some comments on the quarter. Let me look forward.
Ajay Sabherwal: Looking forward, on this business and the macroeconomic factors, I think as we all hear every day, there's huge amounts of uncertainty on those macroeconomic factors.
Ajay Sabherwal: Lots of discussion of whether MA is coming back or not, but there's an increase in the chance of recession.
I don't think anybody knows what is going to happen.
Ajay Sabherwal: Right now, from our perspective, no signs are so definitive that we are changing our expectations for the reader.
Ajay Sabherwal: But stepping away from these short-term factors that can be material for the business, these short-term factors, of course, in no way change the tremendous trajectory that this business has been on or our tremendous conviction of the strength of this business in a medium term.
Ajay Sabherwal: Let me turn to Tech, which is another business that can be particularly affected by macro economic factors.
Ajay Sabherwal: In this business, as well as our e-con business, we have record M&A Second Request revenues in 2024. That's related to SAMHSA Trust.
Ajay Sabherwal: So our sense is that this business faces some real headwinds.
At least in that portion of the business.
Ajay Sabherwal: I was talking to Sophie the other day in just the last couple of months, I think the team had something like six potential, second request cancelled.
Ajay Sabherwal: Either because the deals were pulled, or because the regulatory authorities decided not to challenge
Ajay Sabherwal: So understandably that team is worried about the potential near-term deadlines.
Ajay Sabherwal: Coming back from that, however, that tech team has by any measure I can see had the fastest organic growth rate in the industry for a number of years.
So, if you think about it, if we face headwinds...
Ajay Sabherwal: So said when they're likely to be even stronger for some of our competitors, many of whom have serious debt loads.
Ajay Sabherwal: In my experience, typically that would mean, over medium-term, we will pick up talent. We will gain even more share.
Ajay Sabherwal: So given that competitive strength, not just in M&A, but also in investigations and litigation businesses, as well as our continued investments in key areas like crypto, digital assets and AI. And he remained very bullish on this business of median and term trajectory.
But, to be clear, we also can't game say.
To Headland, the team is facing this year in 2025
Ajay Sabherwal: Anycon Consulting, the set of departures we've seen in Compass Lexicon below the senior level has ended up being roughly consistent with what we guess would happen when we talked with you in February . All right.
Ajay Sabherwal: It is of course an important hit, but put in perspective the total departures.
Ajay Sabherwal: For example, it's 10% of our head count, Nikon, and roughly put that business back to the head count level, it was two years ago.
And the court had still leaves us.
Ajay Sabherwal: as the leading economic consulting firm globally. And I think the leading economic consulting
Ajay Sabherwal: And of course, from the overall company perspective, it represents less than 2% of the company's total cost.
Ajay Sabherwal: As we talked about last time, however, the financial impact on the bottom line is more sizable and simply the head counter impact.
Ajay Sabherwal: A key reason is that when circumstances like this occur, even if you do a terrific job that the teams are doing and keep most of other people, you end up in many instances adjusting compensation levels, and ask clearly how to keep them.
Ajay Sabherwal: So that's something I believe we talked about last time. There's been an additional development since last time, which I believe in the long-term is a fabulous thing, but is adding to the near-term financial pressure.
Ajay Sabherwal: which is that this business has, since we last talked, focused on enormous amount of tension from the clinician talent. I think we've spent more tension on that in our competition side than ever in the business
An important, with an enormous success in that endeavor.
Ajay Sabherwal: across Antitrust. We have some additions to our financial economics business and across
Just Health Care, Finance, TNT, Digital Assets, AI
Ajay Sabherwal: If you look at their website and I encourage you to do so and see their resumes, you'll see these are people with tremendous academic credentials.
Ajay Sabherwal: But in addition, in many cases, they have served previously senior roles in government, including the FTC, the FCC, and the SEC.
Ajay Sabherwal: And I was speculating with one person, I think in learning this group, there might even be a couple of people who could be potential teachers on these Nobel Prize winners.
Ajay Sabherwal: So, I hope you got my tone of voice that we're excited about these additions.
Ajay Sabherwal: A step back from other editions, what they do is they enhance what has always been the case.
Ajay Sabherwal: Like powerful confidence, nice strong confidence in the medium-term prospects of this business.
This is a great presence.
with Terrific Defiance.
Ajay Sabherwal: So, we have enormous confidence in where this business will be in the end term.
Ajay Sabherwal: We need to say that our guess of the near-trumpy and L.D. will be at least as hard as we speculate about February .
a bit more.
Ajay Sabherwal: Finally, our Stratcom business. Look, I think as you know, our Stratcom business had some struggled for the last couple of years. Not fundamental struggles. Not struggles in competitive position or bottom line results, but struggles getting back to the sort of growing.
Ajay Sabherwal: that have been proud to show for a number of years.
Ajay Sabherwal: I think that this quarter suggests we're beginning to get back in track. We still have ways to go to bring that growth back up to our aspirations, but we're seeing good progress.
Ajay Sabherwal: that people are focused on supporting their clients amidst this unbelievable political and regulatory uncertainty.
Ajay Sabherwal: That strengthening of Stratcom was expected. We had confidence in the team. Overall our performance this quarter was in line with what we're hoping to see from Stratcom at this point of the year. And simply reinforces our strong confidence that the business is maybe in turn prospects are strong.
Speaker Change: I've won a lot more detail through individual segments that I often do, I think given the uncertainty in the world, both Ajay and I thought it made a sense, but of course then there's a question of when you step back from the individual segments, what did it all add up to?
Speaker Change: I think the answer, with respect to this year, is probably an answer you will come into this call because of the answer that almost every company is saying today.
Uncertainty
Speaker Change: If you look at our guidance range, you realize that within our guidance ranges, scenario where even in the face of the Compass Lexicon Disruption, we end up with a solid year.
Speaker Change: But it also encompasses a very real scenario, so that very first time in my tenure, we're down in adjusted PPS.
So there's lots of uncertainty
About the Year
Important, with that uncertainty, does not do.
Speaker Change: to shake my conviction about the powerful future this company has. Sure, we have challenges and there are headwinds in the market.
Speaker Change: And there's times when competitors have been crazily aggressive. As a consequence, we've had tremendous zigzag in individual businesses, and in geographies, and even substantial zigzag for the company as a whole in multiple quarters.
Speaker Change: So, we have also talked about the fact that it's through the different sides.
Speaker Change: We remain committed to doing the right things for this business.
Speaker Change: Monitoring the market forces and adjusting where we have to, but underlying that, focusing on what matters in professional services, attacking dedicated people, great people, supporting those people who are the drive to make a difference for their clients and make a drive to make a difference for the people who are underlying who work for them and mentor those people.
Speaker Change: If you do that, you still have big things, eggs, and portions of the business, and perhaps overall.
Speaker Change: But through those digs and dags, you attract and retain and develop many more great people than you ever lose. You build capability. You increase your relevance for the clients on their most important issues.
Speaker Change: As a consequence, those zigzags surround a powerfully upward sloping line.
Speaker Change: Our clients, our shareholders, we borrow people. We have talked about that as a philosophy. We've talked about that as a theory.
I believe.
Speaker Change: The date of the last 10 years to turn that theory into a proven
Proposition
We will maintain that commitment.
Speaker Change: Include that commitment, I believe, this company will continue to deliver a future that is extraordinarily
Bright.
Ajay Sabherwal: With that, let me turn the call over Ajay to give you two the details of the quarter.
Thank you.
Ajay Sabherwal: Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company wide and segment results for the quarter.
Ajay Sabherwal: First quarter of 2025 revenues of $898.3 million decreased, $30.3 million or 3.3% compared to the first quarter of last year.
Ajay Sabherwal: Sequentially, compared to Q4 of last year, our revenues were up slightly.
Ajay Sabherwal: Gap earnings per share of $1.74 compared to $2.23 in the prior year quarter.
Ajay Sabherwal: I adjusted EPS of $2.29 compared to $2.23 in the prior year quarter.
Ajay Sabherwal: The difference between our gap and adjusted EPS for the quarter reflects a $25.3 million dollar list-water special charge.
Ajay Sabherwal: Related to Severance and other employee-related costs which reduced GAPPS by $0.55
Ajay Sabherwal: Net income of $61.8 million, compared to $18 million in the prior year of Quapper.
Ajay Sabherwal: The decrease in net income was largely driven by lower revenues and the special charge, which was partially offset by a decrease in SGNA and direct costs.
Ajay Sabherwal: Direct costs of $608.9 million compared to $626 million in the prior year quarter.
Ajay Sabherwal: The decrease in direct costs was primarily due to lower variable compensation and contractor costs, which was partially offset by higher benefits and salaries.
Ajay Sabherwal: The decrease in SVNA was primarily due to a benefit from litigation settlements in Q1 and lower bad debt.
Ajay Sabherwal: Plus, quarter 2025 adjusted EBITDA of $115.2 million or 12.8% of revenues compared to $111.1 million or 12% of revenues in the prior year quarter.
Ajay Sabherwal: Our first quarter 2025 effective tax rate of 23.3 percent compared to 19.6 percent in the
Ajay Sabherwal: The prior year photo tax rate was exceptionally low because of large auction exercises in Q1 of last year and the resulting discrete tax adjustment.
Ajay Sabherwal: Weighted average shares outstanding or way so for Q1 of 35.5 million shares compared to 25.8 million shares in the prior year quarter.
Ajay Sabherwal: Billable headcount increased by 0.5% compared to the prior year quarter with the largest increases in corporate finance and restructuring, forensic and litigation consulting and technology.
Ajay Sabherwal: which was partially offset by headcount declines in economic consulting and strategic communications.
Non-villable headcount increased by 1.2% year over year.
Ajay Sabherwal: Sequentially, billable headcount decreased by 3.6% and non-villable headcount decreased by 1.8%. The sequential decreases in headcount were primarily due to headcount actions.
Speaker Change: taken across our business to better align with demand and the debauchers Steve mentioned in our economic consulting segment.
Thank you.
Now, Turning to our Performance at the Segment Level
Speaker Change: In corporate finance and restructuring, revenues of $343.6 million decreased 6.1%, compared to our record for quarter-twenty-four revenues.
Speaker Change: The decrease in revenues was primarily due to lower demand and realize bill rates for transformation and strategy and restructuring services.
Speaker Change: which was partially offset by higher realized bill rates for transaction services and an increase in success fees.
In the quarter, re-structuring represented 46% of segment revenues.
Transformation and Strategy is represented 29% of segment revenues.
Speaker Change: This compares to a split of 47% for restructuring, 31% for transformation and strategy, and 22% for transactions in the prior year quarter.
Speaker Change: Adjusted segment EBITDA of $55.9 million or 16.3% of segment revenues compared to $75.2 million or 20.6% of segment revenues in the prior year quarter.
Speaker Change: The decrease in adjusted segment EBDA was primarily due to lower revenues, which was partially offset by lower compensation.
Speaker Change: Sequentially, corporate finance and re-structuring revenues increased 2.4% as 19.5% growth in transactions.
Speaker Change: More than offset a 3.9% decline in transformation and strategy and a 1.5% decline in restructuring.
Speaker Change: Adjust the segmented with DA, increased $11.2 million sequentially, primarily due to higher revenues and lower compensation.
Speaker Change: Turning to forensic and litigation consulting or FLC, record revenues of $190.6 million increased 8.3%.
Acquisition-related revenues contributed $1.3 million in the quarter.
Speaker Change: Excluding acquisition related revenues, the increase in revenues was primarily due to higher realized bill rates for risk and investigation services and higher realized bill rates and demand for data and analytics services.
Speaker Change: We are supporting incident response, readiness and regulatory compliance in cybersecurity.
Investigations in consumer finance and anti-money laundering in financial services
Speaker Change: and we design and implement compliance programs related to export controls and
Speaker Change: Adjust the segmented with DA of $37.5 million, or 19.7% of second revenues, compared to $33.7 million or 19.1% of second revenues in the prior year quarter.
Speaker Change: The increase in adjusted segment of the DA was primarily due to higher revenues, which was partially offset by an increase in compensation and S-GNA expenses.
Speaker Change: Sequentially, FLC revenues increased 8.4%, primarily due to higher risk and investigations and construction solutions revenues.
Speaker Change: As Justice segmented with the A, increased by $19.5 million sequentially, primarily due to higher revenues and lower S.T.A. expenses.
In economic consulting, revenues of $179.9 million decreased 12.1%.
Speaker Change: The decrease in revenues was primarily due to lower demand for emanate-related antitrust, financial economics, and non-eminate-related antitrust services.
which was partially offset by higher realized bin rates.
Thank you very much.
Speaker Change: The departures in the competition practice in Compass, Lexicon, and there was nothing uncertainty for that practice.
Speaker Change: Impacted revenue adversely as did the reduction in the number of large mergers and acquisitions.
Speaker Change: Adjust the segment with the A of $14.4 million or 8% of segment revenues compared to $14.2 million or $6.9% of segment revenues in the prior year quarter.
Speaker Change: The increase in adjusted segmented with DA was primarily due to lower compensation, which includes the impact from a 6.6% decline in billable headcount and lower bad debt expense
Speaker Change: Sequentially, economic consultants revenues decreased 12.7 percent, primarily due to lower demand for emanated related antitrust services and lower realized bill rates for non-eminent
Speaker Change: Adjust the segmented with DA decreased $1.4 million sequentially, primarily due to lower revenues, which was partially offset by decline in compensation, which includes an 8.2% decline in billable headcount and lower bad debt.
Speaker Change: Technology's revenues of $97.2 million decreased, 3.5 percent. The decrease in revenues was primarily due to lower demand for M&A-related second-request services, which was partially offset by higher demand for investigation services.
Speaker Change: Adjust the Segmentee with the A of $11.6 million or $11.9% of segment revenues compared to $14.6 million or $14.5% of segment revenues in the prior year quota.
Speaker Change: The decrease in adjusted segmented with the A was primarily due to lower revenues, which was partially offset by lower bad debt.
Speaker Change: Sequentially, technologies have a news increase 7.2%, primarily due to higher M&A-related Second Request Services.
Speaker Change: Adjusted segment, EBDA increased $5 million sequentially, primarily due to higher revenues.
Speaker Change: Words noting, our technology team had several M&A-related second request matters that largely began and subsequently concluded in Q1.
Speaker Change: and we do not expect the sequentially freeze in M&A-related activity in Q1 to continue in Q2, given the broader market slowdown, Steve spoke to.
Speaker Change: Wordsmoting, the federal pre-merger notification program administered under the Harts Scott Rodino Act recorded just 89 transactions in March 2025.
Marking the lowest monthly filing total in nearly five years.
Speaker Change: To put this in perspective, this compares to a monthly average of 188 transactions in the prior 12 month period.
Strategic Communications Record Revenues of $87 million, increased 7.2%
Speaker Change: The increase in revenues was primarily due to a $3.5 million increase in pass-through revenues and higher demand for corporate reputation services.
Speaker Change: as we support clients with important cybersecurity, regulatory advocacy and crisis communications
Speaker Change: Adjust the segmented with the A of $12.9 million or 14.8% of segment revenues compared to $12.4 million or 15.3% of segment revenues in the prior year quarter.
Speaker Change: Sequentially, strategic communications revenues were up, 1.5%, primarily driven by an increase in past two revenues.
Speaker Change: Adjust the segmented with DA decreased $0.9 million, primarily due to higher pass through expenses, which were partially offset by lower direct compensation and SGNA 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: Netcash used in operating activities of $465.2 million compared to $274.8 million used 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 forgivable loan issuances.
Higher Variable Compensation and a Decrease in Cash Collections
Speaker Change: No to a tedious quarter, we funded a $162 million in forgivable loans, net of repayments to both retain professionals and attract new academic affiliates, mostly in our economic
During the quarter, we repurchased 1,126,995 shares.
Speaker Change: At an average price per share of $165.15, for a total cost of $186.1 million.
Subsequent to Quarter End
Speaker Change: And as of April 22, 2025, we have repurchased a further 602,549 shares at an average price per share of $159.33.
Speaker Change: You may have noticed that our Board of Directors has authorized an additional $400 million
Speaker Change: As of April 22nd 2025, we had approximately 568.3 million dollars remaining available for share repurchases under the program, including the additional amount approved by our both.
Turning to Guidance
Speaker Change: As a typical, we will re-evaluate guidance once we have another quarter under our belt, at the end of the second quarter, to see if any changes are warranted.
Speaker Change: Now, though an aggregate, this quarter we beat our earnings expectations.
Speaker Change: Let me share some of the considerations that impact our projections.
First.
Our S.G.NA was exceptionally low this quarter.
Primarily due to legal settlements.
Speaker Change: We expect SGNA to be approximately 15 to 20 million dollars higher in each of the next two quarters than it was in Q1.
Speaker Change: Second, as I mentioned, we funded a $162 million in forgivable loans, net of repayments this quarter. Most of which were at the end of the quarter.
Speaker Change: Amortization of these loans typically occurs over three to six years and we will begin to significantly impact Adjusted Evidda in Q2.
Speaker Change: Third, our Forensic and Litigation Consulting segment, had a record quarter.
and has strength going into the second quarter.
Speaker Change: However, regulatory scrutiny is a key driver of this business, and do they extend that scrutiny
Speaker Change: amidst the changing regulatory posture in the United States, that could have a negative impact on our business going forward.
Who? Who? Who? Who? Who?
Speaker Change: As you know, there is considerable uncertainty in the M&A market.
Speaker Change: According to Reuters, US deal volume fell 13% year over year, and only one mega deal over $10 billion was announced in Q1.
Speaker Change: Do they extend that M&A remains subdued? It may result in continued lower demand for our related services in economic consulting and technology and lower demand for our transaction services in proper finance and restructuring.
Fifth.
and conversely.
Speaker Change: Very recently, we have seen a pickup in restructuring matters in the United States.
Stemming Import from Terrace-Induced Stress
Speaker Change: However, it is still early to say, just how significant this pickup may be.
Speaker Change: 6. We expect that the headcount actions we took will result in cost savings of approximately $85 million in salary and benefits on an annualized basis.
Speaker Change: Of setting a substantial portion of these savings, we have some terrific investment opportunities.
Speaker Change: and we have already invested considerably this year, including announcing 31 SMD hires across the business. In addition to the 21 academic affiliates, we have announced in Compass Lexicon so far this year.
Speaker Change: We expect to continue investing in areas where we see exceptional opportunities to hire talent, which typically has a negative impact on Adjustedee with the A, at least through the first year after hiring.
Speaker Change: Before I close, I want to reiterate 5 key things that I believe underscore the attractiveness of our business.
1st
Speaker Change: This is a time of incredible disruption for our clients, and we are actively engaged in helping our clients in areas such as cybersecurity, export controls and sanctions, regulatory advocacy, cryptocurrency and digital assets.
Speaker Change: Second, we are the leading restructuring practice in the world, and we are better positioned than ever before to help our clients globally.
Speaker Change: Third, despite the headwinds this year, I believe that our economic consulting group as a whole remains the best in the world.
Speaker Change: And as Steve mentioned, we believe the practice has been further strengthened by the addition of new academic affiliates in Compass, Lexicon this year.
Hope.
Speaker Change: Our enviable balance sheet allowed us to opportunistically repurchase 1.7 million shares to April 22nd of this year, and we have the ability to create further shareholder value to organic headcount growth, share buybacks and acquisitions when we see the right ones.
Finally, while remaining focused on utilization.
Speaker Change: The number of talented people who want to join us is up across the board and we continue to make investments in talent in areas such as antitrust, financial economics, transformation and strategy, healthcare, financial services and investigations and in geographies across the globe.
With that, let's open the call up for your questions.
Thank you very much.
Speaker Change: Ladies and gentlemen, at this time we'll begin the question and answer session. Ask a question you may press star and then one on your telephone keypads. If you are using a speaker phone, we do ask that you please pick up your handset before pressing the keys.
To withdraw your questions, you may press star in two.
Speaker Change: What's again that is Star and then one to join the question to you.
Speaker Change: Our first question today comes from James Yaro from Goldman Sachs. Please go ahead with your question.
James Yarrow: Good morning and thanks for taking my question, Steven Ajay. Just starting here on the tariffs and the impacts on your business.
James Yarrow: Could you maybe speak a little bit on which of the businesses as part of FTI Consulting could be affected either positively or negatively by tariffs? And have you started to see any of these potential impacts thus far? I know it's early, but just an early read there.
James Yarrow: Yeah, look, I think whenever you have something a major policy change, one of the issues are there's the first order consequences, then there's a second and then a third order consequences. I don't think, first of all, I don't even think everybody should.
James Yarrow: Absolutely certain about where the tariff thing is going to end up, let alone.
James Yarrow: The first order, second order, and third order consequences. So, you know, we're in a speculation mode, speculative mode as everybody is on exactly, but, you know, you see things happening.
James Yarrow: So our just busy as all can be, you know, supply chain people who are helping try to think about things like that. You know, there's national security issues being discussed based on some of this. There's some strategy questions.
James Yarrow: Our Strap Prom people are being asked to help with communications issues and so forth. You know, the big wild card is restructuring.
Ajay Sabherwal: You know, if you're somebody who is who's totally dependent on cost of goods so coming out of China right now, you have some stress on you. And so that I think is behind a couple of the more recent things that Ajay was referring to.
So there's a lot of stuff, wasn't...
Ajay Sabherwal: The driver of most of the first quarter, I would say, but you see a lot of discussion and activity going on right now, around.
Well, a lot of different areas. Does that help teams?
James Yarrow: It's really helpful. Thanks, Steve. Maybe just another one relates to policy, and I know it's still early, but we've had a little bit more time on this one than we have had on tariffs.
Speaker Change: Perhaps you could just talk about the impact of Doge thus far on the business and perhaps with a particular focus on the forensic and litigation consulting business.
Thank you guys.
Speaker Change: You know, so far, I would say we have not seen an effect of that, you know, I think, you know,
and I'm extracting from those, specifically, those initiatives, you know.
Speaker Change: As we talk about, if the thrust of this administration is to cut back regulatory enforcement on a number of key areas, that can have a pretty big effect on us. We have been one of the leaders in.
Speaker Change: and anti-consumer fraud issues. We have a big practice in FCPA. We have a big practice. And I'm mind-wondering to the extent those policies get rolled out either because of conscious decisions or because of headcount reductions, then that can have a substantial impact on us.
We can't find a huge effect on our business.
Ajay Sabherwal: You disagree, Ajay, or is that pretty much your reaction? Does that help things?
Speaker Change: Excellent, thank you. And then just one last one for me. I just wanted to make sure that I understand your comments on guidance.
Speaker Change: So, is the guidance for this year that you gave at the 4th quarter, 2020, 24 earnings call still applicable? Or are you saying that it has been suspended and you'll give us an update at the 2nd quarter earnings call?
Ajay Sabherwal: It is still applicable, James, and we will give you an update of the second programming
Excellent. Thank you so much.
Speaker Change: Our next question comes from Tobey Sommer from Bruce. Please go ahead with your question.
Toby Sommer: Thank you. I'd like to start on the economic segment. Now that the more time has passed, can you size the revenue, annualized revenue headwind from the departures?
Toby Sommer: and maybe give us a framework for what you think the long-term margin profile of the business looks like because there clearly are some moving parts that are difficult to assess from the outside.
Speaker Change: Let me talk conceptually about the margin and then I'll let Ajay decide whether how much he tells we give on the revenue side on the stuff. Look, the business is going to...
Speaker Change: Have a major impact on the EBITDA? There's no question about it. I speculated certain numbers last time, I think.
Speaker Change: If anything, the effect is going to be higher, not because...
Speaker Change: You know, the number of departures is radically different than we were speculating against him last time, and maybe a little bit because...
Speaker Change: Some of the retention programs that we put in place, or the people we kept, there can be different people asking, going after your people, and we may spend a little bit more than I think we expected on that, but actually also because of a good thing which was we've attracted a lot of new affiliates.
Speaker Change: And, you know, that is a great thing for the medium term but almost always in this company.
Speaker Change: New strong people cost you money in the first year, you know, either, you know, there, there are either some of the folks who are attracting are, you know, new in their career and they're up and coming and we're helping it to track them with the view that the hockey stick is pretty substantial over the next few years.
Speaker Change: Well, even with the people who are established testifiers, bringing theoretically big books of business, sometimes the book of business doesn't transfer immediately for a variety of reason. And so, you know, you spend, you spend a fair amount of money, these particular loans that Ajay referred to, and then that...
Speaker Change: And you know, you spend the beginning now and some of the revenue comes later and so this is that's why we're underscoring this. I mean, you know, we're not underscoring this because we think.
You know
Thank you.
The people were attracting just reinforces that.
Speaker Change: But the financial hint to the bottom line is substantial. I think last time I speculated it could be 35 million versus last year. I think the number is likely to be higher than that. I don't think we have so much detail that we can get more specific than that.
Okay, so that's on the...
Speaker Change: Bottom line impact. I don't know how much heat that we give on the revenue.
Ajay Sabherwal: So, Tobey, you already see the impact in revenue this quarter, so you already see that. In terms of the cost side on in the short term, the next few quarters have been very explicit on the incremental, at least for a given loan given through this quarter, and I said they're mostly at the end of the quarter, we've said the amortization happens over three to six years, you can average it and calculate the quarterly impact.
Ajay Sabherwal: has a range of outcomes that Steve mentions already incorporated in that range.
was attached to the partying place.
Ajay Sabherwal: So, sorry, let's be clear about that. Most of the departing people departed towards the end of the corner.
Ajay Sabherwal: So, no, it didn't. I mean, now we also had market slowdowns and other factors in that first quarter but no, the revenue impact of the party employees really starts to show up for in the second third quarter.
Ajay Sabherwal: But the first quarter also had some other headlines in it. So it's hard to know. And put it, there is obviously a disrupted practice. So to that extent, yes. As I said explicitly in my remarks, it's a combination of factors, the markets. [inaudible]
Speaker Change: Departures, which has Steve said happened to us then, but also the destruction in the practice.
Thank you and clearly the new wires come over time.
Speaker Change: Thank you. Could you talk about trends in your healthcare business within FLC? What did you experience there in the quarter and what's the outlook for the year?
Speaker Change: in FLC and it's been a good, it's been a good, they both had good businesses this quarter. I don't know what else you want to say about that. Yes and particularly so tobey because last year there were some weeks so the year over year comparisons show up more which is what we talked about.
Speaker Change: Can't predict what the changes will be and what the effects will be going forward, but could you?
Speaker Change: Size for us the parts of the business, or maybe proportion of business that is regulator led investigations and the like.
Speaker Change: That's a difficult one to answer. At the end of the day, regulators are, every investigation has some regulatory.
Speaker Change: You know, this regulation is, is it the federal or is it the state regulation? Which one would take precedence? Of course, we're only talking United States. There's also regulators in Europe and other geographies.
Speaker Change: So, that one is really an impossible one for me to answer. All I can tell you is that our practitioners, whilst we have struck a cautious stone for obvious reasons, our practitioners in the business remain very positive.
Speaker Change: Okay, last one for me, Ajay, could you give us some color on the head count actions, maybe color on the distribution, segments, geographies, split between back office versus few generators that kind of thing? Thank you.
Thank you. Thank you.
Speaker Change: It's all laid out in the 10Q in terms of the breakdown by segment and I don't remember all those numbers of stuff on my head, but what I will tell you is about 400 plus folks.
Speaker Change: Between Q4 and Q1, it is spread across all levels. In fact, remarkably proportional to the mix we have on the billable side, it's remarkably even the same proportions as we have seen years worse in juniors.
Speaker Change: Perhaps a little bit more weighted on the senior side and smaller on the non-villable side.
Speaker Change: And it's across the globe. You know, as you know, we are most of our people in the United States in India. It's a little bit more in India than in the United States, but otherwise it's across the globe.
Thank you.
Moderator: Our next question comes from Andrew Nicholas from William Blair, please go ahead with your question.
Hi, good morning. Thank you for taking my question.
I wanted to ask first on the restructuring business.
Moderator: Sounds like you've seen a little bit of incremental stress in the past couple of weeks.
Moderator: The question I want to ask is just around kind of the bifurcation in that market between.
Moderator: Liability Management and your traditional, like chapter 11 bankruptcy activity, is there any?
Moderator: shift from what you can tell in preference for one route or the other right now and maybe understanding that it's difficult to predict the future if you think.
Moderator: You know, the next couple months or quarters in this specific environment might skew one way versus the other relative to what you've seen the past couple of years.
For more information, visit www.fema.gov
of the...
Bankruptcies were a repeat.
Thank you. Bankruptcies.
So, liability management doesn't always work [inaudible]
Moderator: In fact, that creates a market in the future for restructuring. What we hope our clients do well, but typically taking on more debt if you have already have high leverage with Unsecured
Moderator: You know, other unsecured positions doesn't necessarily get you out of trouble and we can see evidence of that already.
Moderator: Where the fourth line is running through working capital with these status.
Thank you.
Moderator: Slew of services from cost-studying to changing supply channels to transactions and in the ultimate analysis restructuring to the equation.
Ajay Sabherwal: That's helpful. Thank you. And then kind of going back to economic consulting, Ajay, you cited some statistics on the HR kind of deal counts.
Speaker Change: is, and I apologize if you outlined this already, but just to clarify, is that primarily regulatory driven slowdown or are there other kind of macro dynamics that are already show up in that figure, just trying to get a sense for...
Ajay Sabherwal: No overall backdrop, excluding some of the accomplishes of the Kentland.
No, no, no, it's the biggest backdrop is uncertainty.
Ajay Sabherwal: It's people freeze when they don't know and it's the tariffs more than their regulatory people freeze when they don't know which which way things are going to come down and and and that's you know that shows up in lemonade. At least that's our supposition.
Speaker Change: Great, and then maybe one last question. You know, obviously dealing with some of the departures in Compass Lexicon, there's specific headwinds within that segment, but I'm curious, are there any kind of ripple effects that you expect?
Speaker Change: from some of the loss revenue there to other parts of your business. I know in the past you've talked about.
Speaker Change: You know, having some success driving additional cross-cell between EC and technology or CFR and Stratcom. I'm just kind of curious outside of what's isolated to that segment if there's anything that you'd say there. Thank you.
to do things first.
Speaker Change: Those range of outcomes raised that one can reasonably foresee related to either economic consulting, compost, tax costs specifically or second or third order are in our guidance. So that's number one.
Speaker Change: Number two, this could be unique. I know there is no such expectations of this big straw or whatever, there could be some where I wouldn't, I wouldn't create too much into it.
helpful. Thanks again.
Speaker Change: We know other questions. I just want to say thank you for your continued attention look as we all know the world is filled with uncertainty and as we talked about individual businesses of ours can be affected by those uncertainty negatively or positively.
Speaker Change: You know, I just come back to a general point. You know, that's there's a unique constellation of uncertainties today, but the notion that our business
Speaker Change: as submerged and soared through periods of uncertainty in the past as a thing I would come back to. In fact, our company exists to help companies.
Speaker Change: In the face of the deepest uncertainty, doesn't mean you can't have a pause for a while or a big effect on one business or another and you can always have cost issues as you're stabilizing the business that has some departures and stuff like that.
Speaker Change: Nothing about the current uncertainty changes my fundamental conviction of this company as
Speaker Change: is closer to the beginning of its journey than the end. So, before to be in on that journey with all of you. Thank you very much.
Speaker Change: And ladies and gentlemen with that will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Tobey Sommer, Andrew Nicholas, James Yaro, Steven Gunby
Speaker Change: Dr. J. Holt, Dr. J. Holt, Steven Gunby, Ajay Sabherwal
[music]
Speaker Change: tobey Sommer, Mollie Hawkes, FTI Consulting Inc.
Thank you for watching!
Speaker Change: Good morning everyone and welcome to the FTI Consulting First Quarter 2025 Earnings Conference call.
Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please send a new conference specialist by pressing the star key, followed by zero.
Speaker Change: After Today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then wander on your telephone keypad. To withdraw your questions, you may press star and two.
Please note that this event is being recorded.
Speaker Change: At this time, I'd like to turn the comments call over to Molly Hawkes, head of investor relations. Please go ahead.
Speaker Change: Good morning. Welcome to the FTI Consulting Conference call to discuss the company's first quarter 2025 earnings results as reported this morning. Management will begin with formal remarks after which they will take your question.
Speaker Change: Before we begin, I would like to remind everyone that this conference call may include forward looking statements within the meaning of the Private Security's Litigation Reform Act.
Speaker Change: including the company's outlook and expectations for the full year 2025 based on management's current beliefs and expectations.
Speaker Change: These forward-looking statements include risks and uncertainties, assumptions, and estimates and other factors that could cause actual results to differ materially from such statements.
Speaker Change: For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by four-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.
Speaker Change: as well as other disclosures under the headings of risk factors and forward-looking information in our annual report on Form 10K for the year-ended December 31st, 2024, or our quarterly reports on Form 10Q and in our other filings with the SEC.
Speaker Change: Investors are cautioned not to place under reliance on any board looking statements, which speak only as the date of this earnings call and will not be updated.
Speaker Change: FTI Consulting assumes no obligation to update these four-looking statements whether as a result of new information, future events, or otherwise, except as required by applicable law.
Speaker Change: During the call we will discuss certain non-GAAP financial measures, a discussion of any non-GAAP financial measures addressed on this call, and reconciliation to the most directly comparable of GAAP measures .
Speaker Change: are included in the press release and accompanying financial tables that we issued this morning.
Speaker Change: 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 upgraded to include our first quarter 2025 results.
Speaker Change: 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.
Speaker Change: At this time, I will turn the call over to our President and Chief Executive Officer Steve Gunby. Thank you Mollie. Welcome everyone. Thank you all for joining us today. As I hope you saw this morning, we reported a strong first quarter.
Speaker Change: The first quarter did benefit as Ajay will detail some one-time items.
Speaker Change: But even adjusting for anything, one might think of it as anomalous, it was a solid quarter.
Speaker Change: So as we all know, there are lots of put-and-takes in the world right now. There are lots of uncertainty. The start of this year is overall quite consistent with what our expectations were in February , when we gave you guidance for the year. It's been a long time since we've been through this year. It's been a long time since we've been through this year.
Ajay Sabherwal: Ajay Will, as usual, go through the details of this quarter in this typical structured fashion.
Ajay Sabherwal: Given the complexity of the world today, with all the various theories of where the markets and client needs might go, I thought we thought it might be worthwhile for me to go a little deeper than I normally go on the individual businesses.
and Sheriff's and Qualitative Observations.
Ajay Sabherwal: Both on the performances of each of those businesses so far this year but also on some of the different theories of what their outlooks could be.
Speaker Change: I'll be a little longer than usual. I hope you'll forgive me that. I want to start with an FLC this quarter of a day.
Ajay Sabherwal: I hope you saw just how fabulous the quarter FLC had. I think the EBITDA's quarter was roughly comparable to what we probably averaged for half a year for that business over the last few years.
Ajay Sabherwal: The driver of those results is that the teams there have been winning and delivering on some incredibly major roles. I would love on this call to talk about a lot of its specifics. Unfortunately, many of those assignments are confidential because they're the nature of the work.
Ajay Sabherwal: The role of the teams are playing on 40th of the critical, the powerful.
and Foster Brandt of it.
Ajay Sabherwal: We are talking to people who know the rights of their own [inaudible]
Ajay Sabherwal: As I've talked about a number of times, we've always had terrific people in FLC.
Ajay Sabherwal: The issue we've sometimes faced in that business is that an insufficient amount of the world you are going to see the world.
Ajay Sabherwal: I actually think the little at large still doesn't know that's fully.
with over the last while.
Ajay Sabherwal: With a new set of energy across the various leadership levels, as well as a somewhat higher level of aggressiveness by many of our SMDs.
We now have a 50 more of the world.
Ajay Sabherwal: Understanding the quality of our people and the quality of what we can do, and that is true across a range of the business, whether it's the power of the deep technical expertise we have in some sub areas like cyber, anti-consumer thought, expert controls and sanctions or others.
for the court data analytics.
and granted keep this at grants of accounting capabilities.
They're often underpinned much of the work.
Ajay Sabherwal: For the strength of some of the other businesses, the speed's businesses.
Ajay Sabherwal: by Construction, and Project and Assets Business, or the Speeds Business, more generally.
Our Experience
Ajay Sabherwal: Is that as increasing parts of the world start to really understand the depth of that expertise as well as the commitment and level of the people in those groups, you increasingly get those important large jobs, jobs that are often critical to the future of our clients.
Ajay Sabherwal: There's of course some serendipity of that and there's also some serendipity to one of those projects in. And therefore...
and David Zajac. Thank you.
Ajay Sabherwal: For my Census through the Zidium Dags over the past few years, we have continued to increase that visibility. And you can see in the corner of this results, this corner, just how powerful that can be.
Ajay Sabherwal: I'm going to turn from the quarter to a more forward setting thought, forward setting, side of thoughts.
Ajay Sabherwal: The power of our team, the increased visibility, that doesn't go away.
But, of course, individual major assignments can end.
Ajay Sabherwal: And, important for this business, as we talked about last quarter, this is a business that can be affected by policies in Washington.
Ajay Sabherwal: So regulatory shifts could have a considerable effect on this business as the year goes on.
Ajay Sabherwal: We are therefore cautious about not assuming the current strength will get replicated through the end of the year.
Ajay Sabherwal: But important, given the capability, given the strength of our go-to-market strategies.
Ajay Sabherwal: It is not just this quarter that I am excited about. I am fundamentally excited about where the team is taking a medium and long-term trajectory of this business.
Ajay Sabherwal: I took a little extra time on FLC because I really just think the team deserved it. I would try to be a little grief for some of the other.
Ajay Sabherwal: The Segments. But I want to go through both all those sorts of general topics with everybody. So let me turn to Court Ben.
Ajay Sabherwal: Here are results of roughly in line with where we expected them to be at this point in a year, with, of course, lots of puts and takes at the sub-business level.
Ajay Sabherwal: The corporate business, as I think you all know, can be sharply affected by macroeconomic
Ajay Sabherwal: For example, whether the restructuring market or the M&A markets are up or down.
Ajay Sabherwal: We, of course, are not totally driven by those in market moves.
Ajay Sabherwal: We've shown I believe over the last several years our ability to gain share through the cycles.
Ajay Sabherwal: We're not totally affected but we're obviously not totally driven but we're obviously affected.
Ajay Sabherwal: The restructuring market is booming, this business is going to put in. And if the M&A market is booming, her transaction business is going to plan it.
Right now, as I believe you know,
Either of these markets.
Thank you.
Speaker Change: So in this quarter, we were relying on our competitive strengths to power those businesses.
Speaker Change: Even though there weren't that many big, restructuring jobs out there, we wanted a number of the few that were out there, and we saw pockets of strength in markets such as Germany.
Speaker Change: And we were actually surprised that our Transiction of Business was as strong as it was this quarter, given the pause and the deal at Markets.
Speaker Change: I think a lot of that had to do with the commercial aggressiveness of our team sitting.
Speaker Change: Important this quarter, we also made, and we are making good progress on addressing a couple of the businesses that were dragged on results in 2024.
Speaker Change: In part two targeted headcount actions, we took this quarter, which Ajay will speak to, but at least as much, with some refocused commercial activity by the terrific talent in those
That's some comments on the corner. Let me look forward.
Speaker Change: Looking forward on this witness in the macroeconomic factors, I think as we all hear every day there's huge amounts of uncertainty on those of macroeconomic factors.
Speaker Change: Lots of discussion of whether MA is coming back or not, but there's an increased chance of recession.
I don't think anybody knows what is going to happen.
Speaker Change: Right now, from our perspective, no signs are so definitive that we are changing our expectations for the reader.
Speaker Change: But stepping away from these short-term factors that can be material for the business, these short-term factors, of course, in no way, change the tremendous trajectory that this business has been on, or our tremendous conviction for the strength of this business in a medium term.
Speaker Change: Let me turn to Tech, which is another business that can be particularly affected by macro economic factors.
Speaker Change: In this business, as well as a recon business, we have record M&A's Second Request revenues in 2024. That's related to that, I trust.
Speaker Change: So our sense is that this business faces some real headwinds.
At least in that portion of the business
Speaker Change: I was talking to Sophie the other day in just the last couple of months, I think the team had something like six potential, second requests cancelled.
Speaker Change: Either because the deals were pulled, or because the regulatory authorities decided not to challenge.
Speaker Change: So understandably, that team is worried about the potential near-term deduence.
Speaker Change: Coming back from that, however, that tech team has by any measure I can see had the fastest organic growth rate in the industry for a number of years.
So, if you think about it, if we face headwinds...
Speaker Change: Those headwinds are likely to be even stronger for some of our competitors, many of whom have serious debt loads.
Speaker Change: In my experience, typically that would mean over me in terms that we will pick up talent. We will gain even more share.
Speaker Change: So, given that competitive strength, not just in M&A, but also in investigations and litigation businesses, as well as our continued investments in key areas like crypto, digital assets and AI. And he remained very bullish on this business of median and term trajectory.
But, to be clear, we also can't game say...
to head on to the team that's facing this year in 2025.
Speaker Change: Anycon Consulting, the set of departures we've seen in Compass Lexicon below the senior level has ended up being roughly consistent with what we guess would happen when we talked with you in February . All right.
Speaker Change: It is, of course, an important hit, but put it in perspective to total the part chose.
Speaker Change: For example, it's 10% of our head count econ and roughly put that business back to the head count level it was two years ago.
And the court can still leave us
Speaker Change: as the leading economic consulting firm globally. And I think the leading economic consulting firm globally, I thought.
Speaker Change: And of course, from the overall company perspective, it represents less than 2% of the company's total bank account.
Speaker Change: The key reason is that when circumstances like this occur, even if you do a terrific job, that the teams are doing a keep most of our people, you end up in many instances adjusting compensation levels, and that's clearly happening to you.
Speaker Change: So that's something I believe we talked about last time. There's been an additional development since last time, which I believe in the long term is a fabulous thing, but is adding to the near term financial pressure.
Speaker Change: which is that this business has, since we last talked, focused on enormous amount of tension and replenishing talent. I think we've spent more tension on that in our competition side than ever in the business
An important, with an enormous success in that endeavor.
Speaker Change: We have already been able to track an unbelievable set of academic affiliates and your annual rivals, many more and unbelievable talent more than we expected a couple of months ago and these are folks who bring expertise.
Speaker Change: across Antitrust. We have some additions to our financial economics business and across
Just healthcare, finance, TNT, Digital Assets, AI
Speaker Change: If you look at their website and I encourage you to do so and see the resumes, you'll see these are people who can remember this academic credentials.
Speaker Change: But in addition, in many cases, they have served previously continuing roles in government, including the FTC, the FCC and the FCC.
Speaker Change: And I was speculating with one person, I think in modern history, there might even be a couple of people who could be potential teachers with noble horizons.
Speaker Change: So, I hope you got my tone of voice that we're excited about these additions.
Speaker Change: I step back to my decisions, what they do is they enhance what has always been a case.
Speaker Change: My powerful confidence, my strong confidence in the medium-term prospects of this business.
This is a great test.
with terrific design.
Speaker Change: So, we have enormous confidence in where this business will be in the interim
Speaker Change: We need to say that our guess of the near-trumpian health end will be at least as hard as we speculate about February .
a bit more.
Speaker Change: Finally, our Stratcom business. Look, I think as you know, our Stratcom business had some struggled the last couple years.
Speaker Change: Not fundamental struggles, not struggles in competitive position or bottom line results, but struggles getting back to the sort of growth.
Speaker Change: that have been proud to show for a number of years.
Speaker Change: I think that this quarter suggests we're beginning to get back in track. We still have a way to go to bring that road back up to our aspirations, but we're seeing good progress.
Speaker Change: that people are focused on supporting our clients amidst this unbelievable political and regulatory uncertainty.
Speaker Change: That strengthening of Stratcom was expected. We had confidence in the team. Overall, our performance this quarter was in line with what we're hoping to see from Stratcom at this point of the year, and simply reinforces our strong confidence that the business is medium-term prospects are strong.
Speaker Change: I've won a lot more detail through individuals' segments that I often do, I think given the uncertainty in the world, both Ajay and I thought they made a sense. But of course, then there's a question of when you step back from the individual segments, what does it all add up to?
Speaker Change: I think the answer with respect to this year is probably an answer to you coming into this call because of the answer that almost every company you're saying today.
What it means with respect to this year is that...
Uncertainty.
Speaker Change: And if you look at our guidance range, you realize that within our guidance ranges, scenario where even in the face of the complex lexicon disruption, we end up with a solid year.
Speaker Change: But it also encompasses a very real scenario for the very first time in my tenure who stood down and adjusted EPS.
So there's lots of uncertainty.
about the year.
Important, with that uncertainty, there's not to
Speaker Change: to shake my conviction about the powerful future this company has. Sure, we have challenges and there are headwinds in the market.
Speaker Change: For the last ten years, we have faced lots of challenges. There have been tremendous variability in market conditions. Periods of bust and various markets. If you remember right, there was a period where our testifiers couldn't testify because the courts were closed.
Speaker Change: And there's times when competitors have been crazily aggressive. As a consequence, we've had tremendous zigzag in individual businesses, and in geographies, and even substantial zigzags for the company as a whole in multiple quarters.
Speaker Change: So, we have also talked about the fact that it's through the Zigs and Zags.
Speaker Change: We remain committed to doing the right things for this business.
Speaker Change: Monitoring the market forces and adjusting where we have to, but underlying that, focusing on what matters in professional services, attacking dedicated people, great people, supporting those people who have a drive to make a difference for their clients and make a drive to make a difference for the people who are underlying who work for them and mentor those people.
Speaker Change: If you do that, you still have big things that are important to the business and perhaps over all.
Speaker Change: But through those Zigs and Zags, we've tracked and detained and developed many more great people than you ever lose. We build capability. You increase your relevance for the clients on their most important issues.
Speaker Change: As a consequence, those things is out surround a powerfully upward sloping line.
Speaker Change: For our clients, for our shareholders, for our old people. We have talked about that as a philosophy, we've talked about that as a theory.
I believe.
Speaker Change: The date of the last 10 years has turned out to be theory and to approve them.
Population
We will maintain that commitment.
Speaker Change: Include our commitments, I believe this company will continue to deliver a future that is extraordinary.
Right.
Ajay Sabherwal: With that, I'm going to turn the call over, Ajay, to give you two the details of the quarter.
Ajay Sabherwal: Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company wide and segment results for the quarter.
Ajay Sabherwal: Post Quarter of 2025 revenues of $898.3 million decreased, $30.3 million or 3.3% compared to the first quarter of last year.
Ajay Sabherwal: Sequentially, compared to Q4 of last year, our revenues were up slightly.
Ajay Sabherwal: Gap earnings per share of $1.74 compared to $2.23 in the prior year quarter.
Ajay Sabherwal: Adjusted EPS of $2.29 compared to $2.23 in the prior year quarter.
Ajay Sabherwal: The difference between our gap and adjusted EPS for the quarter reflects a $25.3 million on her first quarter special charge.
Ajay Sabherwal: Related to Severance and other employee-related costs which reduced GAPIPS by 55 cents.
Ajay Sabherwal: Net income of $61.8 million compared to $80 million in the prior year quarter.
Ajay Sabherwal: The decrease in net income was largely driven by lower revenues and the special charge, which was partially offset by a decrease in SGNA and direct costs.
Ajay Sabherwal: Direct costs of $608.9 million compared to $626 million in the prior year quarter.
Ajay Sabherwal: The decrease in direct costs was primarily due to lower variable compensation and contractor costs, which was partially offset by higher benefits and salaries.
Ajay Sabherwal: SG&A of $184.3 million or 20.5% of revenues compared to SG&A of $201.9 million or 21.7% of revenues in the first quarter of 2024.
Ajay Sabherwal: The decrease in S.V.A. was primarily due to a benefit from litigation settlements.
Q1 and lower bad debt.
Ajay Sabherwal: Plus quarter 2025 adjusted EBITDA of $115.2 million or 12.8% of revenues compared to $111.1 million or 12% of revenues in the prior year quarter.
Ajay Sabherwal: Our first quarter 2025 effective tax rate of 23.3% compared to 19.6% in the prior year quarter.
Ajay Sabherwal: The prior year quarter tax rate was exceptionally low because of large option exercises in Q1 of last year and the resulting discrete tax adjustment.
Ajay Sabherwal: Weighted average shares outstanding are way so for Q1 of 35.5 million shares compared to 35.8 million shares in the prior year quarter.
Ajay Sabherwal: Billable headcount increased by 0.5% compared to the prior year quarter, with the largest increases in corporate finance and restructuring, forensic and litigation consulting and technology, which was partially offset by headcount declines in economic consulting and strategic communications.
Ajay Sabherwal: Sequentially, Villebel Headcount decreased by 3.6% and Non-Villebel Headcount decreased by 1.8%. The sequential decreases in Headcount were primarily due to Headcount actions.
Speaker Change: taken across our business to better align with demand and the debauchers Steve mentioned in our economic consulting segment.
Thank you.
Now, Turning to our Performance at the Segment Level
Speaker Change: In corporate finance and restructuring, revenues of $343.6 million decreased 6.1% compared to our record first quarter 24 revenues.
Speaker Change: The decrease in revenues was primarily due to lower demand and realize bill rates for transformation and strategy and restructuring services.
Speaker Change: which was partially offset by higher realized bill rates for transaction services and an increase in success fees.
In the quarter, re-structuring represented 46% of segment revenues.
Transformation and Strategy is represented 29% of segment revenues.
and transactions represented 25% of segment revenues.
Speaker Change: This compares to a split of 47% for restructuring, 31% for transformation and strategy, and 22% for transactions in the prior year quarter.
Speaker Change: Adjusted segment EBITDA of $55.9 million or 16.3% of segment revenues compared to $75.2 million or 20.6% of segment revenues in the prior year quarter.
Speaker Change: The decrease in adjusted segmented the DA was primarily due to lower revenues, which was partially offset by lower compensation.
Speaker Change: Sequentially, corporate finance and restructuring revenues increased 2.4%, as 19.5% growth in transactions.
Speaker Change: More than offset a 3.9% decline in transformation and strategy, and a 1.5% decline in restructuring.
Speaker Change: Adjust the segment with DA increased $11.2 million sequentially, primarily due to higher revenues and lower compensation.
Turning to Forensic and Litigation from Sulting or FLC
Record revenues of $190.6 million increased 8.3%.
Acquisition-related revenues contributed $1.3 million in the quarter.
Speaker Change: Excluding acquisition related revenues, the increase in revenues was primarily due to higher realized bill rates for risk and investigation services and higher realized bill rates and demand for data and analytics services.
Speaker Change: We are supporting incident response, readiness, and regulatory compliance in cybersecurity.
Investigations in consumer finance and anti-money laundering in financial services
Speaker Change: and we design and implement compliance programs related to export controls and
Speaker Change: Adjust the segmented with DA of $37.5 million, or 19.7% of second revenues compared to $33.7 million or 19.1% of second revenues in the prior year quarter.
Speaker Change: The increase in adjusted segmenting the DA was primarily due to higher revenues, which was partially offset by an increase in compensation and S-GNA expenses.
Speaker Change: Sequentially, FLC revenues increased 8.4%, primarily due to higher risk and investigations and construction solutions revenues.
Speaker Change: As Justice segment EBDA increased by $19.5 million sequentially, primarily due to higher revenues and lower S.T.A. expenses.
In economic consulting, revenues of $179.9 million decreased 12.1 percent.
Speaker Change: The decrease in revenues was primarily due to lower demand for emanate related antitrust, financial economics, and non-eminate related antitrust services.
which was partially offset by higher realized bin rates.
Thank you. Thank you.
Speaker Change: The Departures in the Competition Practice in Compass, Lexicon and there is nothing uncertainty for that practice.
Speaker Change: Impacted revenue adversely as did the reduction in the number of large mergers and acquisitions.
Speaker Change: Adjust the segment with the A of $14.4 million or 8% of segment revenues compared to $14.2 million or $6.9% of segment revenues in the prior year quarter.
Speaker Change: The increase in adjusted segmented with DA was primarily due to lower compensation, which includes the impact from a 6.6% decline in billable headcount and lower bad debt expense
Speaker Change: Sequentially, Economic Consulting Revenues Decreased 12.7% primarily due to lower demand for emanated related antitrust services and lower realized bill rates for non-aminated antitrust services.
Speaker Change: Technology's revenues of $97.2 million decreased, 3.5%. The decrease in revenues was primarily due to lower demand for M&A-related second request services, which was partially offset by higher demand for investigation services.
Speaker Change: Adjust the segment with the A of $11.6 million, or $11.9% of segment revenues compared to $14.6 million, or $14.5% of segment revenues in the prior year quarter.
Speaker Change: The decrease in adjusted segmented with the A was primarily due to lower revenues which was partially offset by lower bad debt.
Speaker Change: Sequentially, technologies have been used in 3 is 7.2%, primarily due to higher
Speaker Change: Adjusted segment, EBDA increased $5 million sequentially, primarily due to higher revenues.
Speaker Change: Words noting, our technology team had several emanated second request matters that largely began and subsequently concluded in Q1.
Speaker Change: And we do not expect the sequentialing freeze in M&A-related activity in Q1 to continue in Q2, given the broader market slowdown, Steve spoke to.
Speaker Change: Words noting, the Federal Premurger Notification Program, administered under the Harts Scott Rodino Act recorded just 89 transactions in March 2025.
Marking the lowest monthly filing total in nearly five years.
Speaker Change: To put this in perspective, this compares to a monthly average of 188 transactions in the prior 12 month period.
Strategic Communications Record Revenues of $87 million increased 7.2 percent.
Speaker Change: The increase in revenues was primarily due to a $3.5 million increase in pass-through revenues and higher demand for corporate reputation services
Speaker Change: As we support clients with important cybersecurity, regulatory advocacy and crisis communications
Speaker Change: Adjust the segment with the A of $12.9 million or $14.8% of segment revenues compared to $12.4 million or 15.3% of segment revenues in the prior year further.
Speaker Change: The increase in adjusted segment EBDA was primarily due to higher revenues, which was partially offset by higher pass-through expenses and an increase in compensation.
Speaker Change: Sequentially, strategic communications revenues were up, 1.5%, primarily driven by an increase and passed through revenues.
Speaker Change: Adjust the segmented with DA, decreased $0.9 million, primarily due to higher pass through expenses, which were partially offset by lower direct compensation and SGNA 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: Netcash used in operating activities of $465.2 million compared to $274.8 million used in the prior year quota.
Speaker Change: The year-over-year increase in net cash used in operating activities was primarily due to an increase in forgivable loan issuances.
Higher Variable Compensation and a Decrease in Cash Collections.
Speaker Change: Noteworthy Disquarter, we funded $162 million in forgivable loans, net of repayments to both retain professionals and attract new academic affiliates, mostly in our economic
During the quarter, we repurchased 1,126,995 shares.
Speaker Change: At an average price per share of $165.15, for a total cost of $186.1 million.
Subsequent to quarter-end
Speaker Change: And as of April 22, 2025, we have repurchased a further 602,549 shares at an average price per share of $159.33.
Speaker Change: You may have noticed that our Board of Directors has authorized an additional $400 million
Speaker Change: As of April 22nd, 2025, we had approximately $568.3 million remaining available for share repurchases under the program, including the additional amount approved by our both.
Turning to Guidance
Speaker Change: As a typical, we will re-evaluate guidance once we have another quarter under our belt, at the end of the second quarter to see if any changes are warranted.
Speaker Change: Now, though an aggregate, this quarter we beat our earnings expectations.
Speaker Change: Let me share some of the considerations that impact our projections.