Q2 2025 FTI Consulting Inc Earnings Call
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Speaker Change: I would now like to turn the conference over to Mollie Hawkes head of Investor Relations. Please go ahead.
Mollie Hawkes: Good morning, welcome to the STI consulting conference call to discuss the company's second quarter 2025 earnings results as reported this morning.
Mollie Hawkes: 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 the private Securities Litigation Reform Act, including the company's outlook and expectations for the full year 2025 based on management's current beliefs and expectations.
Mollie Hawkes: These forward looking statements involve many risks and uncertainties assumptions and estimates and other factors that could cause actual results to differ materially from such statements.
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.
Mollie Hawkes: A copy of which is available on our website at www Dot Sci consulting dot com as.
Mollie Hawkes: As well as other disclosures under the heading of risk factors and forward looking information in our annual report on Form 10-K for the year ended December 31, 2024, our quarterly reports on Form 10-Q and in our other filings with the SEC.
Mollie Hawkes: Investors are cautioned not to place undue reliance on any forward looking statements, which speak only as of the date of this earnings call and will not be updated.
Welcome to the FTI Consulting. Second quarter, 2025 earnings conference call.
Mollie Hawkes: STI consulting assumes no obligation to update these forward looking statements, whether as a result of new information future events or otherwise, except as required by applicable law.
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Mollie Hawkes: During the call, we will discuss certain non-GAAP financial measures or discussion of any non-GAAP financial measures addressed on this call and reconciliations to the most directly comparable GAAP measures are included in the press release and the accompanying financial tables that we issued this morning.
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Please note today's event is being recorded.
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 excel and a PDF of our historical financial and operating data, which have been updated to include our second quarter 2025 results.
Molly Hawks: I would now like to turn the conference over to Molly Hawks at an investor relation. Please go ahead.
Molly Hawks: Good morning. Welcome to the FTI Consulting conference call to discuss the company's second quarter 2025 earnings results as reported this morning.
Molly Hawks: Management will begin with formal remarks after which they will take your questions.
Mollie Hawkes: With these formalities out of the way I am joined today by Steve Gunby, our CEO and chairman and others several ball our Chief Financial Officer at this time I will turn the call over to our CEO and chairman Steve Gunby. Thank you Mollie and welcome everyone and thank you all for joining us today.
Molly Hawks: Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the private Securities. Litigation Reform, Act, including the company's Outlook and expectations for the full year, 2025 based on Management's, current beliefs and expectations
Mollie Hawkes: As I assume some of you have seen this morning.
Mollie Hawkes: Already we reported strong second quarter results today.
Mollie Hawkes: In that regard I thought it might be interesting too.
Molly Hawks: these forward-looking statements involve, many risks, and uncertainties assumptions, and estimates, and other factors that could cause actual results to differ materially from such statements,
In your mind back might remember when we talked about the outlook for this year.
Mollie Hawkes: We talked about 2025 being a challenging year.
Mollie Hawkes: If you remember we cited a fair number of potential reasons.
Mollie Hawkes: First we were cycling a really strong first half of 2020 for second and probably more important we had slowed revenue momentum coming into 2025.
Molly Hawks: 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 what is available on our website at www.tic consulting.com.
Mollie Hawkes: Third we were facing disruption and our compass lexicon business.
Mollie Hawkes: Fourth although at the end of last year. The market was forecasting an M&A boom in 2025 of whom are that would of course benefited alone number of our businesses and the early part of the year the market has suspended those expectations.
Molly Hawks: 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, our quarterly reports on form 10 q and in our other filings with the SEC,
Molly Hawks: Investors are cautioned not to place undue Reliance on any board looking statements which speak only as the date of this earnings call and will not be updated.
Mollie Hawkes: While <unk> was sorry, it was facing uncertainty.
Mollie Hawkes: Due to potentially change the regulatory environment.
Mollie Hawkes: And six the good thing we were continuing to find great talent to invest in which of course is a fabulous thing for the medium and long term, but typically as a drag on the P&L in the short term.
Molly Hawks: FTI Consulting assumes, no obligation to update. These forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
Mollie Hawkes: So when we added all that up.
Mollie Hawkes: It led us to give the weakest guidance and I think we've ever provided during my tenure.
Mollie Hawkes: With a 1% revenue growth at the midpoint of the guidance and the possibility.
Molly Hawks: Financial measures addressed on this call and reconciliations to the most directly comparable. Gaap measures are included in the press release and the accompanying Financial tables that we issued this morning.
Mollie Hawkes: Within the range that we forecasted of a down year and adjusted earnings per share for the first time in many many years.
Mollie Hawkes: So given that backdrop.
Mollie Hawkes: Where are we.
Molly Hawks: Lastly, there are 2 items that have been posted to the investor relations section of our website for your reference. These include a quarterly earnings presentation and Excel and a PDF of our historical financial and operating data, which have been updated to include our second quarter 2025 results,
Mollie Hawkes: Through the year.
Mollie Hawkes: Find that question interesting first.
Mollie Hawkes: Most of those negative things have come true.
Mollie Hawkes: And actually the negative impacts in econ in tech have been even larger than we expected.
Mollie Hawkes: Yes.
Mollie Hawkes: Results, we've been delivering up and solid.
Steve Gumby: With these formalities of the way I'm joined today by Steve Gumby, our CEO and chairman and AJ sbal our Chief Financial Officer. At this time, I will turn the call over to our CEO and chairman Steve Gumby. Thank you. Molly, welcome everyone. And thank you all for joining us today.
Mollie Hawkes: As our best estimates for the prospects for the rest of the year.
Steve Gumby: as I assume some of you have seen this morning,
Speaker Change: So how is that possible.
Steve Gumby: Already. We reported strong second quarter results today.
Speaker Change: And what does that mean.
Speaker Change: To me that juxtaposition.
Speaker Change: The juxtaposition of the headwinds we have faced.
Steve Gumby: Regard. I thought it might be interesting to bring our mind back. We might remember that when we talked about the outlook for this year.
Speaker Change: With the results we are able to deliver.
Steve Gumby: We talked about 2025 being a challenging year.
Speaker Change: To me is a powerful illustration.
Speaker Change: Illustration, yet again.
Steve Gumby: and if you remember, we cited a fair number of potential reasons,
Speaker Change: So just how strong this company actually is.
Speaker Change: Just how resilient we are a powerful enough company.
Steve Gumby: First, we were cycling a really strong first half of 2024 second and probably more important. We had slowed Revenue momentum coming into 2025
Speaker Change: B weathering as formidable set of headwinds as I've ever seen for this company.
Steve Gumby: Third, we were facing disruption and our Compass lexecon business.
Speaker Change: Weathering them perfectly.
Speaker Change: But whether and I'm pretty damn well.
Speaker Change: Yeah.
Speaker Change: So let me say a few words on the various businesses starting with the businesses had the most financial challenges. This year and then moving on to some of the businesses that have had strong financial performance.
Steve Gumby: Forth. Although at the end of last year, the market was forecasting. An m&a boom. In 2025 a boom of that would of course benefit an number of our businesses. By the early part of the year, the market has suspended those expectations.
Steve Gumby: Fifth.
Speaker Change: I'm sure you noticed that Texas had some financial challenges this year.
Steve Gumby: Well, FOC was soaring. It was basing on certainty due to potentially changed regulatory environment.
Speaker Change: Let me bring your mind back.
Speaker Change: I think as you know our tech business has been soaring prior to this year with I think the fastest organic growth of any of our major competitors for the past five years one year.
Steve Gumby: And 6, the good thing we were continuing to fight great talent to invest in which, of course, is a fabulous thing for the medium and long term. But typically as a drag on the p&l in the short term,
Steve Gumby: so, when we added all that up,
Speaker Change: That tech team is focused on the toughest most complicated jobs they work, particularly at the leading law firms on jobs that require processing massive amounts of data some of them very complicated emerging forms of data.
Steve Gumby: It led us to give the weakest guidance that I think we've ever provided during my tenure.
Steve Gumby: With a 1% Revenue growth that the midpoint of the guidance and the possibility.
Speaker Change: And processing of mass.
Speaker Change: Figuring out with the attorneys what it all means as a consequence of that those capabilities <unk> has become a great business with a great team and has had a great run.
Steve Gumby: Within the range that we we we forecasted of a Down year in adjusted earnings per share for the first time in many, many years.
Steve Gumby: To given that backdrop.
Steve Gumby: Where are we halfway through the year?
Speaker Change: This year.
Speaker Change: I find that question. Interesting first.
Speaker Change: The market has been hit.
Speaker Change: Because of the shortage of major deals and because the number of major deals got way through versus requiring a second request.
Speaker Change: Most of those negative things have come true.
Speaker Change: Given our strength in second request, which if you don't know and second request refers to the additional demand for information brand for merger clearance.
Speaker Change: And actually the negative impacts in econ and Tech have been even larger than we expected. And yet,
Speaker Change: Results. We've been delivering have been solid.
Speaker Change: As are our best estimates for the prospects for the rest of the year.
Speaker Change: Our strengthened second request that change in policy has hit us probably at least as hard as anyone else.
Speaker Change: So how is that possible?
Speaker Change: And what does that mean?
Speaker Change: And important we don't expect those headwinds to go away immediately.
Speaker Change: To me that ducks the position.
Speaker Change: So in addition to a not great first half of the year, we are not forecasting.
Speaker Change: The juxtaposition of the headwinds, we have faced.
Speaker Change: With the results, we are able to deliver.
Speaker Change: A great second half of the year for this business.
Speaker Change: Having said that.
Speaker Change: To me, is a powerful illustration yet again, but just how strong this company actually is.
Speaker Change: None of that challenges the underlying strength of this business.
Speaker Change: The ability to juggling 10 situations figure out how to deal with emerging data leverage new technologies, nor does it undermine that incredible capability of our people nor the trust that the leading law firms and the leading corporations have in our people and our capabilities.
Speaker Change: Just how resilient we are a powerful enough company to actually be weathering as formidable a set of headwinds as I've ever seen for this company.
Speaker Change: Not weathering them perfectly.
Speaker Change: But whether in them pretty damn well.
Speaker Change: My experience in fact is that in slow markets over any extended period of time, they tend to favor and benefit people like us. The most capable competitors in my experience in markets like this weaker competitors will be forced to cut corners.
Speaker Change: So let me say a few words on the various businesses, starting with the businesses had had the most Financial challenges this year and then moving on to some of the businesses that have had strong financial performance,
Speaker Change: I'm sure you noticed that Tech has had some Financial challenges this year.
Speaker Change: Either cut corners with respect to their people.
Speaker Change: Let me bring your mind back.
Speaker Change: For their work.
Speaker Change: And that creates real opportunity for the strongest competitor.
Speaker Change: While this year is clearly a very tough year.
Speaker Change: I think, as, you know, our Tech business has been soaring prior to this year with, I think the fastest organic growth of any, of our major competitors for the past, 5, or so years.
Speaker Change: It has in no way changed my conviction about the strength of this business the strength of the team and where this business will get to over time.
Speaker Change: That Tech team is focused on the toughest, most complicated jobs, they work particularly with the leading Law Firm.
Speaker Change: Let me switch to the other business that is <unk>.
Speaker Change: On jobs that require processing massive amounts of data. Some of them, very complicated emerging forms of data,
Speaker Change: Economic challenges this year.
Speaker Change: And processing it fast.
Speaker Change: Our compass lexicon businesses adjusted EBITDA will be hit substantially this year.
Speaker Change: But of course remains an enormously capable organization.
Speaker Change: Figuring out what the attorneys, what it all means. As a consequence of that, those capabilities Tech has become a great business with a great team and has had a great run.
Speaker Change: This year.
Speaker Change: It remains the leading group of economists in the world.
Speaker Change: The market has been hit.
Speaker Change: And a strong leadership team.
Speaker Change: <unk> reputation has meant we've been able to attract.
Speaker Change: Because of the shortage of major deals and because the number of major deals got waved through versus requiring second requests.
Speaker Change: Terrific additional folks into this organization this year academics with unbelievable backgrounds and leading professionals.
Speaker Change: The admin are strengths and second requests, which if you don't know, the second request refers to the additional demand for information for an for for merger clearance.
Speaker Change: So we can't gain save the financials.
Speaker Change: Given our strength and the second request for that.
Speaker Change: We'll take this year.
Speaker Change: And I would not want to suggest that the rebound from that financial hit will be immediate.
Speaker Change: Let the countless lexicon team and I see the people who are here.
Speaker Change: An important, we don't expect those headwinds to go away immediately.
The terrific people in Chicago, where I spent a lot of time with last week.
Speaker Change: So in addition to a, not great, first half of the year, we are not forecasting.
Speaker Change: On the West coast on the East Coast in EMEA and Asia together with the great folks who've joined recently as.
Speaker Change: A great second half of the year for this difference.
Speaker Change: Having said that?
Speaker Change: As the foundation of the next generation of success for this great institution that has been a leader for a long time, the nextgen generation of insightful work and a desk next generation of success for the best economic team and the business.
Speaker Change: None of that challenge.
Speaker Change: So we do see a major hit to the economics of this business this year.
Speaker Change: The ability to juggle intense situations figure out how to deal with emerging data, leverage, new technologies, nor does it. Undermine the incredible capability of our people, nor the trust that the leading law firms. And the leading corporations have in our people and our capabilities.
Speaker Change: We do not see a permanent hit.
Speaker Change: Let me turn to some of the businesses.
Speaker Change: Major contributors to our financials this year.
Speaker Change: <unk> as you know like in every business, we have had over the years a number of quarters, where this business underperformed its potential just remember back to Covid, we're coming out of Covid.
Speaker Change: My in my experience, in fact, is that in slow markets over any extended period of time, they tend to favor and benefit People Like Us the most capable competitors in my experience in markets, like this weaker competitors will be forced to cut corners.
Speaker Change: Either cut Corners with respect to their people.
Speaker Change: Or their work.
Speaker Change: But we have always believed in the <unk> team.
Speaker Change: And that creates real opportunity for the strongest competitor. So while this year is clearly a very tough year for that,
Speaker Change: <unk> team and the powerful group of capabilities within that team, even when it wasn't showing up in the P&L and the team there has been creative and insightful and investing in places, where we have conviction about where we can be the leaders on the most important client matters, whether it's in risk and investigation cyber security financial services construction.
Speaker Change: To change my conviction about the strength of this business. The
Speaker Change: Strength of the team and where this business will get to over time.
Speaker Change: Let me switch to the other business. That
Speaker Change: is economic challenges this year.
Speaker Change: Our Compass lexecon business is adjusted, Eva will be hit substantially this year.
Speaker Change: <unk> solutions or in some of the underlying capabilities like data and analytics.
Speaker Change: But it, of course remains an enormously capable organization.
Speaker Change: The result of that commitment has shown up powerfully in the last few quarters with.
Speaker Change: It Remains the leading group of economists in the world.
Speaker Change: With us winning some of the most major jobs in the market even in the face of the headwinds.
Speaker Change: As a consequence this year, even with the regulatory headwinds.
Speaker Change: And the strong leadership team of complex, lexicon as reputation has meant. We've been able to attract
Speaker Change: We have had so far a record first half of the year.
Speaker Change: By far <unk>.
Speaker Change: Terrific, additional focus into this organization. This year academics with unbelievable backgrounds and leading professionals.
Speaker Change: <unk>.
Speaker Change: And though one can always speculate that the regulatory headwinds could intensify and therefore slower momentum a bit as the year goes on I remain incredibly enthused by what I see is enormous.
Speaker Change: So we can't gain say the financial at that. We will take this year.
Speaker Change: and I would not want to suggest that the rebound from that Financial hit will be immediate
Speaker Change: <unk> with its terrific group of people going forward.
Speaker Change: But the comp team and I see the people who are here.
Speaker Change: Corp Fin is of course, our largest and most multifaceted business and therefore, the most difficult to summarize briefly.
Speaker Change: And the sub businesses have macro drivers that never cut all the way the same way for each of the sub businesses.
Speaker Change: But when you cut through it what we have found that as we continue to support each of the sub businesses independent of a given quarter's current macro economic factors.
Speaker Change: The terrific people in Chicago who are spent a lot of time with last week. People on the west coast on the east coast in Amia and Asia together with the great folks who have joined recently as the foundation of the next generation of success. For this great institution that has been a leader for a long time. The next gen generation of insightful work and the death next generation of success for the best economic team in the business.
Speaker Change: We continue to attract and develop great people, even if we're in a down cycle for those businesses.
Speaker Change: So we do see a major hit to the economics of this business this year.
Speaker Change: We do not see a permanent hit.
Speaker Change: What it means is although those sub businesses 10, and our occasionally down for a period and they surely of zigzags.
Speaker Change: Let me turn to some of the businesses that have been major contributors to our financials this year.
Speaker Change: Overall, it adds up to an upward sloping line a powerful.
Speaker Change: FLC. As you know, like in every business we have had over the years, a number of quarters where this business underperformed this potential,
Speaker Change: Upward sloping line.
Speaker Change: just remember, back to Koh, we're coming out of Co
Speaker Change: Let me give you just a couple of examples of the many actions we took in slow periods that are contributing to <unk> success. This year.
Speaker Change: Our transaction businesses like all transaction businesses have volatility and they get a bad quarters.
Speaker Change: With the team there noticed there that we were gaining share even during those bad quarter.
Speaker Change: And they were gratified by the fact that the private equity market began to appreciate the quality of our offerings.
Speaker Change: And we are starting to ask us if we could help in further areas Doj.
Speaker Change: But we have always believed in the FLC team, the FLC team and the powerful group of capabilities within that team, even when it wasn't showing up in the pnl and the team there has been creative and insightful in investing in places where we have conviction about where we can be the leaders on the most important client matters, whether it's in risk and investigation cyber security for financial services, Construction Solutions, or in some of the underlying capabilities like data and Analytics.
Speaker Change: Key adjacencies, not just financial due diligence, but adjacencies like merger integration carve outs tax structure human capital strategically diligence strat comm and more.
Speaker Change: The result of that commitment has.
Speaker Change: Shown up.
Speaker Change: In the last few quarters.
Speaker Change: with us winning some of the most major jobs in the market, even in the face of the headwinds,
Speaker Change: And so the team continues to invest in those areas during the good quarters.
Speaker Change: As a consequence this year, even with the regulatory headwinds.
Speaker Change: We have had so far a record first half of the year.
Speaker Change: But also during some of the quarters when the deal market was down.
Speaker Change: By far for FLC.
Speaker Change: And those investments of course cost us money.
Speaker Change: With that commitment it turns helped us further develop and gain share in specific areas as well as develop deeper relationships with those core clients.
Speaker Change: And though 1 can always speculate that the regulatory headwinds could intensify and therefore slower momentum a bit as the year goes on. I remain incredibly enthused about what I see as enormous potential for this terrific group of people going forward.
Speaker Change: As a consequence this year in a year when there aren't that many transactions in the market.
Speaker Change: And the ones we are helping we are helping in a much broader way.
Corp Vin is, of course, our largest and most multifaceted business. And therefore, the most difficult to summarize briefly
Speaker Change: So in a down market.
Speaker Change: <unk> are up.
Speaker Change: And the sub businesses have macro drivers that never cut, all the way the same way for each of the sub businesses.
Speaker Change: Similarly, our team has not sat still with a market that many consider our most mature market, which is core restructuring.
Speaker Change: Not only have we dramatically grown our businesses overseas, we have continued to invest and capabilities in the U S and around the World for example from an industry perspective.
Speaker Change: but when you cut through it, what we have found that is we continue to support each of the sub businesses independent of a given quarter's current macro economic factors,
Speaker Change: we continue to track and develop great people, even if we're in a down cycle, for those businesses,
Speaker Change: For example, a few years ago, we weren't winning any major work in the airlines industry. Today, we have a tremendous share of the airlines work in the U S and around the World is these sorts of moves in transactions and core restructuring, but also a whole lot of other places that have allowed our corp fin business as shine not only this year, but over now.
Speaker Change: What it means is, although those sub businesses can and are occasionally down for a period and they surely have zigzags.
Speaker Change: Adds up to a upward, sloping line, a powerful.
Speaker Change: Powerful upward sloping line.
Speaker Change: Many years.
Speaker Change: It of course has had its ups and downs, but its relentless focus on making the right bets.
Speaker Change: Let me give you just a couple examples of the many actions we took in slow periods that are contributing to corporate success this year.
Speaker Change: Has allowed it to more than triple the revenue and more than quadrupled the adjusted EBITDA.
Speaker Change: Our transaction business is like all transaction businesses have volatility and they can have bad quarters.
Speaker Change: 10, or so years ago.
Speaker Change: but the team there noticed there that we were gaining share, even during those bad quarters,
Speaker Change: And in my view.
Speaker Change: The Corp fin successful many many chapters left.
Speaker Change: And they were gratified by the fact that the private Equity Market began to appreciate the quality of our offerings.
Speaker Change: Finally, but not least stratcom his willingness to invest in key areas like cyber security response public Affairs crisis communications, even through a slow corners that has faced over the last couple of years is why strat comm today.
Speaker Change: And was starting to ask us if we could help in further areas.
Speaker Change: The agencies not just financials due diligence, but adjacencies like merger integration carve outs, tax structure, human capital strategic, due diligence stratcom and more.
Speaker Change: It is helping the company.
Speaker Change: Harry the Companys financial load.
Speaker Change: And so the team continued to invest in those areas during the good quarters.
Speaker Change: While at the same time continuing to build its brand I think its up something like 14% and revenue.
But also during some of the quarters when the deal Market was down
Speaker Change: And those Investments of course, cost us money.
Speaker Change: Over 30% and adjusted EBITDA This year.
Speaker Change: but that commitment, it turns helped us further develop
Speaker Change: Stepping back.
Speaker Change: This year overall.
Speaker Change: And gain share in specific areas as well as develop deeper relationships with those core clients.
Speaker Change: Of course.
Speaker Change: Is not the sort of growth year than I aspire to.
Speaker Change: As a consequence this year, in a year, when there aren't that many transactions in the market.
Speaker Change: It is not the sort of growth year, we've delivered.
Speaker Change: On the ones we are helping we are helping in a much broader way.
Speaker Change: Many more times than not over the last while.
so, in a down Market,
Speaker Change: we are up.
Speaker Change: But in the face of by far the most significant headwinds I have seen in the 11 years I've been here.
Speaker Change: We are nevertheless.
Speaker Change: Similarly, our team has not sat still with the market that many consider our most mature Market, which is core restructuring.
Speaker Change: Able to deliver a solid year.
Speaker Change: We are having a solid year not only while fighting off the headwinds, but while reinvesting in our terrific compass lexicon business supporting our tech businesses as well as investing in terrific opportunities in Corp fin MLC.
Speaker Change: Not only have we dramatically grown our businesses overseas. We have continued to invest at capabilities in the US and around the world. For example, from an industry perspective,
Speaker Change: Example.
Speaker Change: And by the way, our other econ businesses, which by the way are doing incredibly well this year.
Speaker Change: And investing in Strat comm and in EMEA, and in Asia, and Australia, and Latam and yes also in the supposedly.
Speaker Change: Few years ago, we weren't winning any major work in the airlines industry. Today, we have a tremendous share of the airlines work in the US and around the world.
Speaker Change: Your U S.
Speaker Change: We have been able to do that because of the success of the previous generation of investments.
It is these sorts of Moves In transactions and core restructuring, but also a whole lot of other places that have allowed our Corp and businesses shine, not only this year, but over now many years,
Speaker Change: And are now, allowing us to win the biggest airline clubs or cyber jobs or investigations or mergers or bankruptcy and doing so in many more parts of the globe than ever before.
Speaker Change: It, of course, has had its up and downs, but it's Relentless focus on making the right bets.
Speaker Change: Yes, the growth we're seeing this year is obviously not what I aspire to or what we aspire to and not of course, what we've delivered in there in recent years.
Speaker Change: Has allowed it to more than triple the revenue and more than quadruple the adjusted IBA.
Speaker Change: Of 10 or so years ago.
Speaker Change: And in my view,
Speaker Change: But in some strange way this year is turning out for me to be an incredible positive reinforcement.
Speaker Change: The corporate been successful had many, many doctors left.
Speaker Change: My conviction in the power of this company the future of this company if we can have this.
Speaker Change: This solid a year.
Speaker Change: In the face of all the headwinds we faced this year, while at the same time reinvesting the business as we believe it.
Speaker Change: Finally, but not least stratcom willingness to invest in key areas like cyber security response, public affairs crisis Communications, even through slow quarters. That is faced over the last couple years is why stratcom today.
Speaker Change: Is helping the company.
Speaker Change: Carry the company's Financial load.
Speaker Change: Doesn't that speak.
Speaker Change: Two amazing strength of an institution our relevance in the market the quality of the group of professionals, we have the impact we're having with our clients.
Speaker Change: While at the same time, continuing to build its brand, I think it's up something like, 14% in revenue and like over 30% and adjusted to the other here.
Speaker Change: Stepping back.
Speaker Change: Our overall incredible resilience.
Speaker Change: This year overall.
Speaker Change: Of course.
Speaker Change: And powerful way probably more for me than if we had yet another year of double digit growth.
Speaker Change: Is not the sort of growth year that I aspire to.
Speaker Change: This year underscores the tremendous potential of this company going forward.
Speaker Change: It is not the sort of growth year we've delivered.
Speaker Change: Many more times than not over the last while.
Speaker Change: And so look forward to working with each of you.
Speaker Change: Over the next while to deliver on that potential.
Speaker Change: With that let me turn the call over to Ajay to take you through the details of the quarter. Okay. Thank you Steve.
Speaker Change: But in the face of by far, the most significant headwinds I have seen in the 11 years. I've been here we are. Nevertheless
Speaker Change: Able to deliver a solid year.
Ajay: Good morning, everybody.
Ajay: In my prepared remarks, I will take you through our company wide and segment results and discuss guidance for the full year.
Speaker Change: We are having a solid year not only while fighting off the headwinds but while reinvesting in our terrific Compass lexecon business, supporting our Tech businesses as well as investing in terrific opportunities in court pin FOC.
Ajay: Beginning with the second quarter results.
Ajay: We reported strong overall performance driven by our diverse business segments and the depth of our expertise.
Speaker Change: And by the way, our other econ businesses, which by the way, are doing incredibly well, this year.
Speaker Change: and investing in stratcom and in Amia and in Asia and Australia in the last ham and yes, also in the supposedly
Mature us.
Ajay: Despite headwinds in our technology and economics consulting segments.
Speaker Change: We have been able to do that because of the success of the previous generations of Investments.
Ajay: Reported nearly similar revenue and adjusted EBITDA compared to the prior year quarter.
Speaker Change: That are now allowing us to win the biggest Airline jobs or cyber jobs or investigations, or mergers or bankruptcy.
Ajay: Yes.
Speaker Change: Sorry, which you might recollect alright that was not RJ that Steve.
Speaker Change: And doing so in many more parts of the globe than ever before.
Speaker Change: Spilling coffee all over the table take a minute.
Speaker Change: Okay alright. Thanks.
Speaker Change: So yes, the growth we're seeing this year is obviously not what I aspire to or what we aspire to and not of course what we've delivered in the re in recent years,
Speaker Change: We reported nearly similar revenue and adjusted EBITDA compared to the prior year quarter, which you might recollect was an all time record quarter for revenue and adjusted EPS.
Speaker Change: but in some strange way this year is turning out for me to be an incredible positive reinforcement.
Speaker Change: Notably in corporate finance and restructuring and strategic communications.
Speaker Change: Of my conviction and the power of this company. The future of this company. If we can have this solid a year,
Speaker Change: We set new records for revenues and adjusted EBITDA This quarter.
Speaker Change: And in forensic and litigation consulting or SLC, we continued to perform remarkably well, despite the regulatory changes and related uncertainty.
Speaker Change: Doesn't that speak?
Speaker Change: Turning to our second quarter 2025 results in more detail revenues of $943 7 million compared to $949 2 million in the prior year quarter.
Speaker Change: To amazing strength of an institution, our relevance in the market, the quality of the group of professionals. We have the impact we're having with our clients.
Speaker Change: Our overall, incredible resilience.
Speaker Change: And a powerful way. Probably more.
Speaker Change: Than another year of double digit growth.
Speaker Change: Sequentially revenues increased $45 4 million or five 1% compared to $898 3 million in Q1 of 2025.
Speaker Change: With a tremendous potential of this company going forward.
Speaker Change: I so look forward to working with each of you.
Over the next while to deliver on that potential.
Speaker Change: Earnings per share of $2 13.
Speaker Change: Compared to $2.34 in the prior year quarter and $1 74 in Q1 of 2025.
Speaker Change: <unk> increased sequentially, primarily because we had a 55 special charge related to employee reduction actions in Q1.
Speaker Change: With that, let me turn the call over to AJ to take you through the details of the quarter. Okay, thank you Steve. Uh good morning everybody. In my prepared remarks, I will take you through our companywide and segment results and discuss, guidance for the full year.
Speaker Change: Net income of $71 7 million compared.
Speaker Change: Compared to $83 9 million in the prior year quarter the.
Speaker Change: The decrease in net income was primarily due to lower revenue and increase in direct costs, which includes higher forgivable loan amortization and FX re measurement loss compared to a gain in the prior year quarter and a higher effective tax rate.
AJ: Beginning, with the second quarter results, we reported strong overall performance driven by our diverse business segments, and the depth of our expertise.
AJ: Despite headwinds in our technology and economics Consulting segments, we reported nearly similar revenue and adjusted debit de compared to the prior year quarter.
Speaker Change: Which was partially offset by lower SG&A.
Speaker Change: SG&A expenses of $202 2 million.
Steve Gumby: Sorry, which you might recollect. All right. That was not AJ. That was Steve. Spilling coffee all over the table. Take a minute.
Speaker Change: Our 21, 4% of revenues compared to SG&A of $206 2 million or 21, 7% of revenues in the prior year quarter.
Speaker Change: You okay, thanks.
Speaker Change: The decrease in SG&A was primarily due to lower bad debt.
Speaker Change: We reported nearly similar revenue and adjusted ebit. Da compared to the prior year quarter which you might recollect was an all-time record quarter for revenues and adjusted yet.
Speaker Change: Notably in Q2, SG&A was up $17 $9 million compared to Q1.
Speaker Change: Notably in corporate finance and restructuring and strategic communication.
Speaker Change: Cause as expected legal settlements, we had in Q1 did not recur.
Speaker Change: We set new records for revenues and adjusted debit day this quarter.
Speaker Change: Adjusted EBITDA of $111 6 million or 11, 8% of revenue.
Speaker Change: <unk> $215 9 million or 12, 2% of revenues in the prior year quarter.
Speaker Change: And in forensic and Litigation Consulting or SLC, we continue to perform remarkably. Well despite the regulatory changes and related uncertainty
Speaker Change: Our second quarter effective tax rate of 22% compared to 18, 2% in the prior year quarter.
Speaker Change: Turning to our second quarter of 2025 results in more detail revenues of 943.7 million compared to 9 4 9. 2 2.
Speaker Change: Prior quarter tax rate was lower because of larger option exercises in Q2 of last year, and the resulting discrete tax adjustments.
Speaker Change: For the full year of 2025, we now expect our effective tax rate to be between 22 and 24%.
Sequentially revenues increased 45.4 million or 5.1%, compared to 8 9 8. 3 3.
Speaker Change: Weighted average shares outstanding a ratio for Q2 of $33 6 million shares compared to $35 8 million shares in the prior year quarter.
Speaker Change: Earnings per share of 2.13 compared to $2.34 in the prior year quarter and a $1.74 in q1 of 2025.
Speaker Change: Driven primarily by the repurchase of three 3 million shares in the first half of the year.
Speaker Change: EPS, increased sequentially primarily because we had a 55 cent special charge related to employee reduction actions in q1.
Speaker Change: The billable head count decreased by 126 professionals or 2% compared to the prior year quarter.
Speaker Change: Driven by approximately 8% declines in each of our economic consulting and strategic Communications segment.
Speaker Change: Partially offset by growth in forensic and litigation consulting or <unk>, and corporate finance and restructuring.
Speaker Change: Sequentially billable head count decreased by 187 professionals or two 9% with declines across all segments.
Speaker Change: Net income of 71.7 million compared to 83.9 million in the prior year quarter. The decrease in net income was primarily due to lower revenue and increase in direct costs which includes higher forgivable loan amortization and FX remeasurement loss compared to a gain in the prior year quarter and a higher effective tax rate which was partially offset by lower sgna.
Speaker Change: For us voluntary attrition is typically higher in Q2.
Speaker Change: Additionally, some of the impacted employees from our previously discussed Q1 head count actions imparted during Q2.
Speaker Change: Sgna expenses of 202.2 million or 21.4% of revenues compared to sgna of 206.2 million or 21.7% of revenues in the prior year quarter.
Speaker Change: The decrease in sgna was primarily due to lower bad debt.
Speaker Change: Of note in the second half of the year, we expect to welcome approximately 320 graduate from University.
Speaker Change: Now I will share some insights at the segment level.
Speaker Change: Notably in Q2 sgna was up, 17.9 million compared to q1, because as expected legal settlements, we had in q1 did not recur.
Speaker Change: In corporate finance and restructuring a record revenue of $379 2 million.
Speaker Change: Increased 9%.
Speaker Change: The increase in revenues was primarily due to increased demand for restructuring and transaction services and higher realized bill rate, which was partially offset by lower demand for transformation and strategy services.
Speaker Change: Adjusted EBA of 111.6 million or 11.8% of revenues compared to 115.900% of revenues in the prior year further.
Speaker Change: Record adjusted segment EBITDA of $81 7 million or 21, 5% of segment revenues compared to $66 5 million or 19, 1% of segment revenues in the prior year quarter.
Speaker Change: Our second quarter effective tax rate of 22% compared to 18.2% in the prior year quarter. The prior prior quarter tax rate was lower because of large option exercises in Q2 of last year and the resulting discrete tax adjustment.
Speaker Change: For the full year of 2025. We now expect our effective tax rate to be between 22 and 24%.
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: Weighted average shares outstanding or way. So, for Q2 of 33.6 million shares compared to 35.8 million shares in the prior year quarter,
Speaker Change: In the second quarter restructuring represented 49% transformation and strategy represented 26% and transactions represented 25% of segment revenues.
Speaker Change: In the first half of the year.
Speaker Change: This compares to a split of 43% for restructuring, 32% for transformation and strategy and 25% for transactions in the prior year quarter.
Speaker Change: Billable head count decreased by 126 professionals or 2%. Compared to the prior year quarter driven by approximately 8% declines in each of our economic Consulting and strategic communication segments partially offset by growth in forensic and Litigation Consulting or FLT and corporate finance and restructuring.
Speaker Change: Year over year restructuring revenues grew 25%.
Speaker Change: Sequentially, billable headcount decreased by 187% professionals, or 2.9% with declines, across all segments.
Speaker Change: And transactions revenues grew 10%.
Speaker Change: While the transformation and strategy revenues declined 13%.
Speaker Change: For us. Voluntary attrition, is typically higher in Q2.
Speaker Change: Sequentially, corporate finance and restructuring revenues increased $35 6 million.
Speaker Change: Additionally, some of the impacted employees from our previously, discussed E1 headcount, actions departed during Q2.
Speaker Change: Our 10, 4%.
Speaker Change: Primarily due to an 18% increase in restructuring revenues and a 12% increase in transactions.
Speaker Change: Of note in the second half of the year, we expect to welcome approximately 320 graduates from University.
Speaker Change: Which was partially offset by a 3% decline in transformation and strategy.
Speaker Change: Now, I will share some insights at the segment level.
Speaker Change: Adjusted segment, EBITDA increased $25 $7 million sequentially.
Speaker Change: Primarily due to higher revenues and lower SG&A, which was partially offset by an increase in compensation.
Speaker Change: In corporate finance, and restructuring, record revenue of 379.2, million increase 9%.
Speaker Change: Turning to <unk> revenues of $186 $5 million increased 10% the.
Speaker Change: The increase in revenues was primarily due to increased demand for restructuring and transaction services and higher realized Bill rate.
Speaker Change: The increase in revenues was primarily due to higher realized bill rates for risks and investigation data and analytics and construction solutions.
Speaker Change: Which was partially offset by lower demand for transformation and strategy services.
Speaker Change: The increase in revenues and risk and investigation, we saw particularly strong growth in our financial services and cyber security practices.
Speaker Change: Record adjusted segment e with da of 81.7 million or 21.5% of segment Revenue compared to 66.5 million or 19.1% of segments revenue's in the prior year quarter.
Speaker Change: Adjusted segment EBITDA of $31 2 million.
Speaker Change: Our 16, 7% of segment revenues compared to $15 million or eight 8% of segment revenues in the prior year quarter.
Speaker Change: The increase in adjusted segmenty with de or primarily due to higher Revenue which was partially offset by an increase in compensation.
Speaker Change: The increase in adjusted segment EBITDA was primarily due to higher revenue.
Speaker Change: Sequentially <unk> revenues decreased $4 1 million or two 1%, primarily due to lower risk and investigations revenues, which was partially offset by an increase in construction solutions.
Speaker Change: In the second quarter, restructuring represented 49% transformation and strategy represented 26% and transactions represented 25% of segment Revenue.
Speaker Change: Adjusted segment, EBITDA decreased $6 $3 million sequentially, primarily due to lower revenues and higher compensation.
Speaker Change: This compares to a split of 43% for restructuring, 32% for transformation and strategy and 25% for transactions, in the prior year quarter.
Speaker Change: Year over year restructuring revenues.
Speaker Change: G 25%.
Speaker Change: Of note, we have seen a slowdown in foreign corrupt practices act or FCP eight bases and monitor shifts.
Speaker Change: A transactions revenues grew 10%, while transformation and strategy revenues declined. 13%.
Speaker Change: As a result of the changing regulatory posture at the Doj and the SEC and the United States.
Speaker Change: Sequentially, corporate finance, and restructuring revenues, increased 35.6 million or 10.4%.
Speaker Change: Despite the reduced enforcement at the federal level.
Speaker Change: We are continuing to see strong performance in our financial services vertical.
Primarily due to an 18% increase in restructuring revenues and at 12% increase in transactions Revenue.
Speaker Change: Driven by continuing anti money laundering related work and a pickup in regulatory scrutiny at the state level.
Speaker Change: Which was partially offset by a 3% decline in transformation and strategy Revenue.
Speaker Change: A just a segment e with da increased 25.7 million sequentially.
Speaker Change: Moreover, we continue to work with our clients, who remain focused on internal controls and compliance regardless of changes in regulatory oversight.
Speaker Change: Primarily due to higher revenues and lower sgna, which was partially offset by an increase in compensation.
Speaker Change: turning to FLC the revenues of 186.5 million, increased 10%,
Speaker Change: Our economic consulting segment revenues of $191 $7 million decreased 17%.
Speaker Change: the increase in revenues was primarily due to higher realized Bill rate for risk and investigation data and analytics and Construction Solutions
Speaker Change: Excluding FX revenues decreased 19% the decrease in revenues was primarily due to lower demand for M&A related antitrust and non M&A related antitrust services, which was partially offset by higher realized bill rates for M&A related antitrust services and high.
Speaker Change: Of the increase in revenues and risk and investigation. We saw particularly strong growth in our financial services and cyber security practices.
Speaker Change: Demand for financial economic services.
Speaker Change: Adjusted segment EBITDA of $14 2 million or seven 4% of segment revenues compared to $44 $3 million or 19, 2% of segment revenues in the prior year quarter.
Speaker Change: Uh just a segment, even de of 31.2 million or 16.7% of segments revenues compared to 15 million or 8.8% of segments, revenues in the prior year quarter.
Speaker Change: The increase in adjusted segment de was primarily due to higher Revenue.
Speaker Change: The decrease in adjusted segment EBITDA was primarily due to lower revenues and an increase in forgivable loan amortization.
Speaker Change: Sequentially SLC, revenues decreased 4.1 million or 2.1% primarily due to lower risk and investigations revenues, which was partially offset by an increase in Construction Solutions Revenue.
Speaker Change: Which was partially offset by a decrease in compensation, which included a seven 9% decline in billable headcount.
Speaker Change: At just a segment D with de decreased 6.3 million sequentially primarily due to roll lower revenues and higher compensation.
Speaker Change: As you May Recollect our segment EBITDA in Q2 of last year was outsized due in part to the reversal of deferred revenue from a large client.
Speaker Change: Of note.
Speaker Change: We have seen a Slowdown in Foreign Corrupt Practices, Act or fcpa cases and monitorship.
Speaker Change: Which benefited adjusted segment EBITDA by approximately $8 $5 million in Q2 of 2024.
As a result of the changing regulatory posture at the doj and the SEC in the United States.
Speaker Change: Sequentially economic consulting revenues increased $11 8 million or.
Speaker Change: Our six 6%, primarily due to higher realized bill rates as well as higher demand for financial economic services, which was partially offset by lower demand for non M&A related antitrust services.
Speaker Change: Federal level We are continuing to see strong performance in our financial services vertical.
Speaker Change: Driven by continuing anti-money laundering related work and a pickup in regulatory scrutiny at the state level.
Speaker Change: Adjusted segment EBITDA was flat.
Speaker Change: The increase in revenues was offset by higher compensation and.
Speaker Change: Including higher forgivable loan amortization.
Speaker Change: Moreover, we continue to work with our clients who remain focused on internal controls and compliance regardless of changes in regulatory oversight.
Speaker Change: We issued a $162 million in forgivable loans to existing and new employees and affiliates net of repayments in Q1 of this year and $72 million in Q2 of this year.
Speaker Change: our economic Consulting, segments revenues of 191.7 million decreased 17%
Speaker Change: Mostly in our economic consulting segment.
Speaker Change: Or given the loan amortization generally ranges from three to six years.
Speaker Change: In technology revenues of $83 6 million decreased by 27, 9%.
Related, antirust services and higher demand for financial economic services.
Speaker Change: Excluding FX revenues decreased 28, 9%.
Speaker Change: The decrease in revenues was due to lower demand for M&A related second request services.
Speaker Change: Just a segment. Even the a of 14.2 million or 7.4% of segments, revenues compared to 44.3 million or 19.2% of segments revenues in the prior year quarter.
Speaker Change: Adjusted segment EBITDA of $5 3 million or six 3% of segment revenues compared to $20 9 million or 18, 1% per segment revenues in the prior year quarter.
Speaker Change: The decrease in adjusted segment e with de was primarily due to lower revenues and an increase in forgivable loan amortization.
Speaker Change: Which was partially offset by a decrease in compensation, which included a 7.9% decline in billable head count.
Speaker Change: The decrease in adjusted segment EBITDA was primarily due to lower revenues, which was partially offset by a decrease in compensation, which included lower as needed consultant costs largely related to the decline in second request volume.
Speaker Change: As well as lower SG&A.
Speaker Change: Sequentially technology revenues decreased $13 6 million or 14% due to lower demand for M&A related second request services.
Speaker Change: As you may recollect, our segment with the a in Q2 of last year was outside due in part to the reversal of deferred revenue from a large client, which benefited the Justice segment, the a by approximately 8.5 million in Q2 of 2024
Speaker Change: Adjusted segment EBITDA decreased by $6 3 million.
Speaker Change: Primarily due to lower revenues, which was partially offset by lower compensation and SG&A.
Speaker Change: As Steve discussed we have had numerous second request engagement paused or canceled altogether, given the shifts in regulatory posture.
Speaker Change: Sequentially economic Consulting, revenues increase 11.8 million or 6.6% primarily due to higher realized bill rates as well as higher demand for financial economic Services, which was partially offset by lower demand for non- m&a. Related anti-rust services,
Speaker Change: Adjusted segment D with de was flat as the increase in revenues was offset by higher compensation.
Speaker Change: In strategic communications.
Speaker Change: Including higher forgivable loan, amortization.
Speaker Change: Record revenues of $102 7 million increase.
Speaker Change: Increased 28%.
Speaker Change: Excluding FX revenues increased 18, 6%.
Speaker Change: Primarily due to an $8 $4 million increase in pass through revenues and higher demand for corporate reputation and financial communication services.
Speaker Change: We issued a 162 million in forgivable loans to existing and new employees and Affiliates net of repayments in q1 of this year and 72 million in Q2 of this year.
Speaker Change: Mostly in our economic Consulting segment.
Speaker Change: And corporate reputation we are supporting our clients with critical crisis communications and cyber security issue.
Speaker Change: Forgivable loan amortization generally. Ranges from 3 to 6 years.
Speaker Change: Record adjusted segment EBITDA of $18 5 million or 18% of segment revenues.
Speaker Change: in technology revenues of 83.6 million decreased by 27.9%
Speaker Change: Third to $11 6 million or 13, 7% of segment revenues in the prior year quarter.
Speaker Change: Excluding FX revenues, decreased 28.9%.
Speaker Change: the decrease in revenues was due to lower demand for m&a related, second request services,
Speaker Change: The increase in adjusted segment EBITDA 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 increased $15 6 million or 18%, which includes a $5 7 million increase in pass through revenues and higher corporate reputation and public affairs.
Speaker Change: At just a segment e with the, a of 5.3 million or 6.3% of segments, revenues, compared to 20.9 million or 18.1% of segments, revenues in the prior year quarter.
Speaker Change: Adjusted segment EBITDA increased by $5 $6 million, primarily due to higher revenues, which was partially offset by higher pass through expenses and an increase in compensation and G&A.
Speaker Change: The decrease in adjusted segment e with de was primarily due to lower revenues which was partially offset by a decrease in compensation which included lower as needed. Consultant costs, largely related to the decline in second request volume.
Speaker Change: As well as lower sgna.
Speaker Change: Sequentially technology, revenues decreased 13.6 million or 14% due to lower demand for m&a related. Second request services
Speaker Change: Let me now discuss key cash flow and balance sheet items.
Adjusted segment D the da decreased by 6.3 million.
Speaker Change: Net cash provided by operating activities of $55 7 million.
Speaker Change: Compared to a $135 2 million for the second quarter of 2024.
Speaker Change: Primarily due to lower revenues, which was partially offset by lower compensation and sgna.
Speaker Change: The year over year decrease in net cash provided by operating activities was primarily due to an increase in forgivable loan issuances.
Speaker Change: As Steve discussed, we have had numerous second requesting engagements caused or canceled altogether given the shifts in regulatory posture.
Speaker Change: Compensation and income tax payments, which was partially offset by an increase in cash collection.
Speaker Change: in strategic communication record revenues of 102.7 million increased 20.8%
Speaker Change: During the quarter, we repurchased $2 192 million shares at an average price per share of $161.
Speaker Change: Excluding FX revenues increased 18.6%.
Speaker Change: For a total cost of $354 9 million.
Primarily due to an 8.4 million increase in pass through revenues and higher demand for corporate reputation and financial communication services.
Speaker Change: In the first half of 2025, we repurchased $3 three $3 9 million shares at an average price per share of $162.
Speaker Change: In corporate reputation, we are supporting our clients with critical crisis Communications and cyber security issues.
Speaker Change: Then for a total cost of $541 million.
Speaker Change: As of June 30 of 2025, approximately $309 $3 million remained available under our stock repurchase authorization.
Record adjusted segmenty with de of, 18.5 million or 18% of segment Revenue, compared to 11.6 million or 13.7% of segments, revenues in the prior year quarter.
Speaker Change: Free cash flow of $38 3 million in the quarter compared to $125 2 million for the prior year quarter. The decrease is primarily due to lower net cash provided by operating activities and an increase in cash used for purchases of property and equipment.
Speaker Change: The increase in adjusted segmenty with de was primarily due to higher Revenue which was partially offset, by higher pass through expenses and an increase in compensation.
Sequentially strategic Communications revenues increased 15.6 million or 18%.
Speaker Change: Total debt net of cash of $317 2 million on June 30 of 2025 compared to a negative $166 4 million on June 30 of 2024 and $8 9 million at March 31 2025.
Speaker Change: Which includes a 5.7 million increase in pass through revenues and higher corporate reputation and public affairs Revenue.
Speaker Change: Primarily due to higher revenues, which was partially offset by higher pass through expenses. And an increase in compensation, in FNA
Speaker Change: Sequential increase in total debt net of cash was primarily due to share repurchases and forgivable loan issuances.
Speaker Change: Let me now discuss key cash flow and balance sheet item.
Speaker Change: Turning to guidance.
Speaker Change: Given that we now have two quarters under our belt.
Speaker Change: Net cash provided by operating activities of 55.7 million compared to a 135.2 million for the second quarter of 2024.
Speaker Change: We are narrowing our guidance by modestly reducing the upper end of our revenue and adjusted EPS ranges for the year.
The year-over-year decrease in net cash, provided by operating activities was primarily due to an increase in forgivable loan issuances.
Speaker Change: We now estimate revenues will range between 366 billion and $3 76 billion.
Speaker Change: Compensation and income tax payments, which was partially offset by an increase in cash collection.
Speaker Change: Which compares to the prior range of between $3 66 billion and $3 81 billion.
Speaker Change: We now estimate EPS will range between $7 24.
Speaker Change: $7 <unk>.
Speaker Change: During the quarter. We repurchased 2.192 million shares at an average price per share of 161.88 for a total cost of 354.9 million.
Speaker Change: And adjusted EPS will range between $7 80.
Speaker Change: And $8 40.
Speaker Change: Which compares to the prior range of $7 80.
Speaker Change: $8 60.
Speaker Change: In the first half of 2025, we repurchased 3.3 319 million shares at an average price per share of $162.99. Then for a total cost of 541 million,
Speaker Change: The variance between EPS and adjusted EPS guidance is related to the first quarter of 2025 special charge.
Speaker Change: Our guidance is based on several key assumptions, including.
Speaker Change: as of June 30th, 2025 approximately 309.3 million remained available under our stock repurchase authorization,
Speaker Change: First our technology segment has been more negatively impacted by the slowdown in M&A and perhaps more so by the change in regulatory scrutiny than we expected.
Speaker Change: Particularly compared to the record M&A related revenues and large jobs, we had in 2024.
Free cash flow of 38.3 million in the quarter compared to 125.2 million for the prior year quarter. The decrease is primarily due to lower net cash provided by operating activities and an increase in cash used for purchases of property and equipment.
Speaker Change: For the balance of the year, we expect a gradual improvement in demand for M&A related services and technology.
Speaker Change: And we are seeing activity.
Speaker Change: Total debt. Net of cash of 317.2 million on June 30th, 2025 compared to negative, 166.4 million on June 30th 2024, and 8.9 million at March 31st 2025
Speaker Change: Putting this expectation with a number of new engagements.
Speaker Change: But we do not expect to see near the level of volume or size of cases, we benefited from in 2024.
Speaker Change: The sequential increase in total debt net of cash was primarily due to share repurchases and forgivable Loan issuances.
Speaker Change: Turning to guidance.
Speaker Change: Second in.
Speaker Change: In economic consulting we have also been more negatively impacted by shifts in antitrust enforcement.
Given that we now have 2 quarters under our belt.
Speaker Change: Especially in EMEA.
Speaker Change: In addition, we have been successful in attracting even more academic affiliates and senior professionals than we anticipated, which negatively impacts the P&L in the short term.
We are narrowing our guidance by modestly, reducing the upper end of our revenue and adjusted EPS ranges for the year.
Speaker Change: Our guidance assumes.
Speaker Change: We now estimate revenues will range between 3.66 billion and 3.76 billion which compares to the prior range of between 3.66 billion and 3.81 billion.
Speaker Change: <unk> adjusted segment EBITDA in economic consulting will reach a low point.
Speaker Change: Over the next few months.
Speaker Change: We now estimate EPS will range between 7.24 and 7.84.
Speaker Change: Third we are entering the second half of the year with good momentum we had in Q2 in many practices, including restructuring and corporate finance financial services, and cyber security and <unk> and <unk> strategic communications.
Speaker Change: And adjusted EPS will range within 7.80 and 8.40 which compares to the prior range of 7.80 and 8.60.
Speaker Change: Offsetting this somewhat is continuing weakness and transformation and strategy and corporate finance.
Speaker Change: The variance between EPs and adjusted EPS guidance is related to the first quarter of 2025 special charge.
Speaker Change: Paul.
Paul: We expect Q4, adjusted EPS to be lower than each of Q2 and Q3 adjusted EPS.
Speaker Change: Our guidance is based on several key assumptions. Including
Paul: Primarily because we expect our practitioners and clients to take vacation.
Paul: There is variability in this and there have been years, where Q4 adjusted EPS has exceeded Q2 and even on occasion Q3.
first, our technology segment has been more negatively impacted by The Slowdown in m&a and perhaps more. So by the change in regulatory scrutiny than we expected,
Speaker Change: but particularly compared to the record m&a, related revenues and large jobs we had in 2024
Paul: Even including these exceptions when Q4 has exceeded Q2 or Q3 over the last seven years on average our Q4 adjusted EPS was 13% below Q2, and 22% below Q3 adjusted EPS.
For the balance of the year. We expect a gradual Improvement in demand for m&a, related services in technology.
Paul: Finally, I must point out that our assumptions defined a midpoint in the range of guidance around such midpoint, which I characterize as our current best judgment.
And we are seeing activity supporting this expectation with a number of new engagement.
Speaker Change: But we do not expect to see near the level of volume or size of cases. We benefited from in 2024
Second.
Paul: Often we find to actual results or beyond such range, because ours is largely a fixed cost business in the short term and small variations in revenue may have an outsized impact on income.
In economic Consulting, we have also been more negatively impacted by shifts in antitrust enforcement especially in AIA.
Paul: Before I close I want to emphasize a few key themes that I believe underscore the attractiveness of our company.
Speaker Change: In addition, we have been successful in attracting even more academic affiliate and Senior professionals than we anticipated, which negatively impacts the p&l in the short term.
Speaker Change: Our guidance assumed.
Paul: First our diverse portfolio of businesses is uniquely resilient, which can allow us to grow not only in regardless of business cycle, but also when any one of our businesses is facing unique headwinds.
Speaker Change: Consulting will reach a low point.
Speaker Change: Over the next few months.
Paul: Such as we have experienced in economic consulting and technology this year.
Paul: Second we are under Levered.
Third, we are entering the second half of the year with good momentum. We had in Q2, in many practices, including restructuring in, corporate finance, financial services, and cyber security in FLC, and in strategic communication.
Paul: And have deep flexibility to deploy capital to boost shareholder value as we have done this year.
Speaker Change: Of setting this somewhat is continuing weakness in transformation and strategy in corporate finance.
Speaker Change: 4.
Paul: Third we are seeing more investment opportunities now than ever before globally.
Speaker Change: We expect Q4 adjusted EPS to be lower than each of Q2 and Q3 adjusted eps.
Paul: As Steve said, we are determined to continue to invest in great talent.
Speaker Change: Primarily because we expect our practitioners and clients to take vacation.
Paul: For our.
Paul: Management team is focused on both growth and profitability.
Paul: As demonstrated by the cost actions, we took earlier in the year along with a relentless focus on hiring strong talent when it is available while boosting utilization and rates.
there is variability in this and there have been years, where Q4 adjusted EPS has exceeded due to and even on occasion, Q3
Paul: With that let's open the call up for your questions.
Paul: Thank you we will now begin the question and answer session.
Speaker Change: Even including these exceptions when Q4 has exceeded Q2, or Q3 over the last 7 years on average, our Q4 adjusted EPS was 13% below, Q2 and 22% below Q3 adjusted eps.
Paul: Ask a question you May press Star then one on your telephone keypad.
Paul: You are using a speakerphone please pick up your handset before pressing the keys.
Paul: Your question. Please press Star then two.
Speaker Change: Finally, I must point out that our assumptions, Define a midpoint, and a range of guidance around such midpoint, which I characterize as our current best judgment.
Speaker Change: Today's first question comes from Andrew Nicholas with William Blair. Please go ahead.
Andrew Nicholas: Hi, good morning, Thanks for taking my questions.
Andrew Nicholas: Maybe I'll start with economic consulting in the detergents that receive.
Speaker Change: Often we find actual results are Beyond such range because ours is largely a fixed cost business in the short term and small variations in Revenue may have an outsized impact on income.
Speaker Change: Relative to the technology segment could you flush that out a little bit I mean, it looks like sequentially economic consulting was actually quite strong I think the tax you mentioned, some paused or canceled second request. So is that just non M&A driven strength or are there some onetime items.
Speaker Change: Before I close, I want to emphasize a few key things that I believe underscore the attractiveness of our company.
Speaker Change: Revenue in economic consulting in the second quarter that you don't expect to persist through the back half of the year just some additional color there would be great.
Speaker Change: first, our diverse portfolio of businesses is uniquely resilient, which can allow us to grow not only regardless of business cycle, but also, when any 1 of our businesses is facing unique Edwin,
Speaker Change: That you answered the question in your question it is non M&A related activity.
Speaker Change: Such as we have experienced in economic Consulting and Technology this year?
Speaker Change: And Thats right and then and maybe just.
Second, we are under levered.
Speaker Change: Just sticking with economic consulting you talked a lot about it.
Speaker Change: Crude and your success, bringing in new professionals.
Speaker Change: And have deep flexibility to deploy Capital to boost shareholder value as we have done this year.
Speaker Change: Sure for professionals that are maybe more academically oriented historically can you talk a little bit about.
Third, we are seeing more investment opportunities now than ever before globally.
Speaker Change: When you have a better sense for their commercial capability is that something that you already have a ton of confidence there in or what the timeline would be for kind of getting a sense of.
Speaker Change: As Steve said, we are determined to continue to invest in great talent.
Speaker Change: Those new professionals in terms of replacing some of the departures.
Andrew Nicholas: It's a good question Andrew.
Speaker Change: Steve.
Speaker Change: Look let's be clear right. This is something we've done for a long time that the origins of this company are academics right I mean, the origins of this company is.
Speaker Change: Forth. Our management team is focused on both growth and profitability as demonstrated by the cost actions. We took earlier in the year along with a Relentless focus on hiring strong Talent when it is available while boosting utilization and rates.
Speaker Change: As academics come up with new insights into markets.
Speaker Change: With that, let's open the call up for your questions.
Speaker Change: They wrote that in academic journals, and then like the courts found it was persuasive and so then the lawyers ask those academics to come testify because the courts found them pretty persuasive and so this is the origins of our complex spine business.
Speaker Change: Question.
Speaker Change: To ask a question, you may press star 1 on your telephone key.
Speaker Change: If you are using a speaker-phone, please pick up your handset before pressing the keys.
Speaker Change: To which are all your question. Please press star and 2
Speaker Change: Ahead of our complex in our business as a former Dean of the University of Chicago Law School, but this is this is that the origins of our company, we've always had academic affiliates.
Today's first question comes from Andrew, Nicholas with William. Blair, please go ahead.
Speaker Change: The major contributors.
Speaker Change: Contributors to the business so occasionally they are.
Hi, good morning, thanks for taking my question. Um maybe I'll I'll start with economic Consulting and and the Divergence that we're seeing
Speaker Change: So busy that they decided to give up their academic career and come in full time for us, but basically that's the origins of our business would you end up is a mixture of people who.
Speaker Change: Have been testifying for a while and who are.
Speaker Change: Actively trying to juggle their teaching loads in our research.
Speaker Change: And men's amount.
Speaker Change: Testifying experience and then you have new people who are like some people. We just hired I think Dan was saying our potential future Nobel Prize winners, who haven't testified very much and Dennis Carlson.
Speaker Change: Relative to the technology segment. Could you flush that out a little bit? I mean, it looks like sequentially. Economic Consulting was was, actually quite strong. I think the tech. You, you mentioned some, some paused or canceled second request. So is that just non m&a, driven strength, or are there some 1-time items in in revenue, and economic Consulting in the second quarter, that that you don't expect to persist to the back. After the year, just to some additional color. There would be great.
Speaker Change: The leading IL person.
Speaker Change: That you answered the question in your question it is non m&a related activity.
Speaker Change: And the World remembers when he was junior and Richard Posner.
Speaker Change: and then, and maybe just
Speaker Change: Uh huh.
Speaker Change: But his arm around him and said, yes, you can't wait.
Speaker Change: Way too complicated for jewelry to understand and put his arm around him and said your points are important but you have to figure out how to communicate that in a different way and coach them. So it's a range in that 20 or so people who are in the first half of this year I think Dan would say we have a range from really experienced test the fires and people who have currently big books.
Speaker Change: Business, a few people not too many of those to people who have some experience testifying who are probably going to grow their book of business that people are much more in the early stages to your question of how long I suspect a year from now we'll have a better sense of how this is all unfolding, but it doesn't not not not in the next month or two but does that help a little bit Andrew.
Speaker Change: Yeah, it's a good question. Andrew. Um, Miss Steve, uh look, let's be clear, right? This is this is something we've done for a long time. Like the origins of this company are academics, right? I mean, the origins of this company is
Andrew Nicholas: No that's great.
Speaker Change: As academics come up with new insights into markets.
Andrew Nicholas: Really good color and helps me better understand because I appreciate that and then if.
Andrew Nicholas: If I could transition just maybe one more question on the restructuring environment.
Andrew Nicholas: Thank you to 25% growth year over year.
Andrew Nicholas: I think thats.
Speaker Change: Uh, they wrote that in academic journals and then like the courts found, it was persuasive. And so then they the lawyers asked those academics to come testify because the courts found them pretty persuasive. And so that this is the origin of our Compass lexecon business.
Andrew Nicholas: A record quarter for the bankruptcy restructuring practice, so could you just kind of talk about.
Andrew Nicholas: What what's driving that is there any big engagements that are making that especially strong or if it is maybe like some of that.
Speaker Change: Um, you know that the head of our complex and our business is a former dean of the University of Chicago Law School. So this is, this is the, the origins of our company and we've always had academic affiliates.
Speaker Change: The major, uh, contributors to the business occasionally they have.
Andrew Nicholas: High level data, we see.
Andrew Nicholas: Also a function of.
Andrew Nicholas: Tailwind from the macro thank you.
Andrew Nicholas: So with Andrew.
Andrew Nicholas: Delighted by that performance in Europe that trade is exactly right.
Speaker Change: Been so busy that they decided to give up their academic career and come in full time for us. But, but basically, that's the origins of our business when you end up as a mixture of people who, you know, have been testifying for a while and who are, you know,
Andrew Nicholas: And it comes more than anything else that comes from the best restructuring professionals in the world not just in the United States within the U K, Germany.
Actively trying to juggle their teaching, loads and their research and and immense amounts of uh of testifying experience. And then you have new people, you know who are like
Andrew Nicholas: In Hong Kong and Australia.
Andrew Nicholas: I mean, we are the leading technology restructuring practice Latin America as well as in America. So that's that's the main point I am going to give you some details, but I don't want you to lose that.
Speaker Change: Some people we just hired, I think Dan would say our potential future Nobel Prize winners who haven't testified very much and uh you know, Dennis Carlton.
Speaker Change: The leading IO person.
Andrew Nicholas: In terms of the details look last time, I remember I talked about Dallas right. So theres been some matters from tariffs.
Andrew Nicholas: 60% of your cost of goods sold coming from overseas and you've got 20% to ryzen, but Boston you're over Levered to begin with you're in trouble.
Andrew Nicholas: So theres some of that.
Andrew Nicholas: Other much bigger element is SME cases, remember that all liability management exercises.
Andrew Nicholas: All bunch of them have come back for a second round of bankruptcy.
In in the world remembers when he was Junior and Richard Posner, uh, uh, put his arm around him and said, yeah, you can't, you know, that's way too complicated for a jury to understand and put his arm around him and said your points are important but you have to figure out how to communicate that in a different way and and Coach them. So it's a range you know in the 20 or so people we fired in the first half of this year I think Dan would say we have a range from really experienced testifiers and and people who have currently big books of business, a few people, not too many of those to people who have some experience testifying who are probably going to grow their book of business to people who are much more in the early stages.
Andrew Nicholas: And that is even though.
Speaker Change: Your question of how long I suspect a year from now will have a better sense of how
Andrew Nicholas: <unk> are tight and you would argue that worldwide restructuring strong there is a huge amount of <unk> and even <unk>.
Speaker Change: Is all unfolding, but if it doesn't not, not, not not in the next month or 2, but does that help a little bit Andrew?
Andrew Nicholas: Liquidity that was in the market and not all of those companies are going to turn around with the time that they were given with the LMA exercises. So we are even seeing matters that had SME happened in the fourth quarter of 2024.
Andrew: No, that's, that's great. You're the really, really good color and and helps me better understand it. So I appreciate that. And then, um, if I could transition just maybe 1 more question on, on the restructuring environment, um, I think you said 25% growth year-over-year,
um,
Andrew Nicholas: So that's the second piece and the third piece is we are we have built a lot of vertical lines of expertise, which is giving us a lot more of company side work.
Andrew Nicholas: That proportion has gone up a lot and those matters start earlier and usually have longer loan.
Andrew: I think that's the a record quarter for the bankruptcy, restructuring practice. So, could you just kind of talk about? You know what, what's driving that is there any big engagements that are making that, especially strong, or if it is, maybe like some of the um you know, high-level data we've seen uh also a function of
Andrew Nicholas: Take longer and have larger fees.
Andrew: You know, Tailwind from the macro. Thank you.
Speaker Change: We're absolutely delighted.
Speaker Change: That's great. Thanks, so much.
Speaker Change: Thank you Andrew.
Speaker Change: And our next question today comes from Tobey Sommer with tourists. Please go ahead.
Tobey Sommer: I was wondering if you could comment on.
Tobey Sommer: Youre hiring senior professional.
Andrew: So, what Andrew, we're we're delighted by that performance and you you read that phrase. Exactly. Right. And it comes more than anything else that comes from, you know, the best restructuring Professionals in the world, not just in the United States. But in the UK in Germany and
Tobey Sommer: Year to date.
Tobey Sommer: Maybe.
Tobey Sommer: The forecast.
Tobey Sommer: Would you expect to continue the same pace.
Tobey Sommer: Senior consultant hiring and growth.
In in Hong Kong in Australia. I mean, we are the leading technology restructuring practice Latin America as well Latin America. So that's that's the main point. I'm going to give you some details but I don't want you to lose that.
Tobey Sommer: And the VA.
Tobey Sommer: Good morning, Tobey, Thanks for asking look I think our the.
Tobey Sommer: <unk> say that.
Tobey Sommer: We hired more senior professionals.
Tobey Sommer: This so far this year than we have ever higher in the first half of the year now I always find that a little funny, because I always think of some of the people. We say we hired this year I think of us hiring.
Andrew: Um in terms of the details look last time I remember I talked about that, right? So there's been some Matters from Paris, you know. If you have 60% off your cost of goods, sold coming from overseas and you get a 1020 percent rise in the cost and you're over lever to begin with, you're in trouble.
Andrew: So there's some of that.
Tobey Sommer: Middle or end of last year. So some of this is when they show up because if they go on we hire them in the middle end of next year, but they are on garden leave for six months, we don't actually show them and announce them until they are here okay. So.
Tobey Sommer: Last year I was telling you about how the phone was reading off the hook and we're having all those conversations not all those people showed up last year. They show up this year and they show up in the first half of the year, but it is a terrific thing and look I would say you never know.
Tobey Sommer: What we are is hiring when great people are available.
Tobey Sommer: And if great people.
The other much bigger element is lme cases. Remember that old liability management exercises? Well, a whole bunch of them have come back for a second round of bankruptcy. Uh, and that is even though, you know, spreads are are, are tight and you would argue that, well, why is restructuring strong? There is a huge amount of lme. And even prior to lme, you know, um, liquidity, that was in the market and not all of those companies are going to turn around with the time that they were given with the lme exercises. So, we are even seeing matters that had lme happen in the fourth quarter of 2024.
Tobey Sommer: If great.
Tobey Sommer: We don't know like you remember last year Pwc had all sorts of trouble in Australia, and all of a sudden we got I don't know what it is 7% or nine partners.
Tobey Sommer: Will it be 60 or 70 staff by its all told that wasn't portal, but when you find the quality of the people that are available and you think they really fit in with the culture. We jump on those opportunities in Australia is having another set of opportunities now because of disruptions for competitors. So if there is further disruption and competitors, we will hire at least as fast as I said there is not.
Speaker Change: Larger fees were absolutely delighted.
Speaker Change: That's great. Thanks so much.
Speaker Change: Thank you, Andrew.
Tobey Sommer: It'll slow down, but it's really more supply side driven as it makes sense.
Speaker Change: And our next question, today comes from TV summer with truist. Please go ahead.
Tobey Sommer: It does.
Tobey Sommer: From an overall U S regulatory perspective.
What do you.
Tobey Sommer: Is it a net positive or negative, but I understand there are a lot of discrete elements together.
Speaker Change: I was wondering if you could comment on your hiring of senior professional.
Tobey Sommer: Second word.
Tobey Sommer: You mentioned four states stepping.
Tobey Sommer: How do you how do you think Scott.
Tobey Sommer: Okay.
Speaker Change: Uh, year to date and and maybe I don't know the forecast. But, uh, would you expect to continue the same page to uh, senior consultant hiring and growth uh, through the end of the year?
Tobey Sommer: I, we have lots of debates about that I mean.
Speaker Change: um, I think
Tobey Sommer: We have clarity on sub practices, which way it cuts how it all cuts overall is very hard to say.
Speaker Change: Morning, Toby, thanks for asking. Um look I I think our the the numbers say that uh the uh we hired more senior professionals
Tobey Sommer: I don't I don't have a good answer for that I mean, clearly regulatory headwinds.
Tobey Sommer: <unk>.
Tobey Sommer: R R potentially affecting negatively our <unk> business.
Speaker Change: This so far this year than we have ever hired in the first half of the year. Now, I always find that a little funny because I always think of some, of the people we say, we hired this year, I think of us hiring
Tobey Sommer: And they clearly are affecting our tech in econ business right in a negative way but.
Tobey Sommer: Some macro factors are in some regulatory changes like Paris, and so forth, which helped generate revenue for our Corp fin business.
Tobey Sommer: I had the guess I would've said, it's more headwinds overall this year.
Tobey Sommer: Then it is tailwind is what I would guess, but it's hard to be.
Tobey Sommer: Precise on it you agree with that.
Tobey Sommer: I don't know exact precise for the reasons you mentioned, but our our practitioners FMC is remarkable.
Speaker Change: Middle of end of last year. So some of this is when we they show up because if they go on we hire them in the middle of the next year but they are on Garden lead for 6 months, we don't actually show them and announce them until they're here. Okay, so I think last year I was telling you about how the phone was reading off the hook, and we're having all those conversations. Not all those people showed up last year, they show up this year and they show up in the first half of the year, but it's a terrific thing. And look, I would say, you know, you never know, uh, what we are is
Speaker Change: Is hiring when great people are available.
Speaker Change: and if great people, you know, um,
Tobey Sommer: The abundance would have guessed guests in our forecast that.
Tobey Sommer: Monitor ship to go away then the business would go away, but performance is the opposite.
Tobey Sommer: And has that has us that's not the market the market is not giving us that our guys are our folks are getting that right.
Tobey Sommer: So we did that at least.
Tobey Sommer: That color is helpful.
Speaker Change: Ed mentioned, the low points of economic May happen in the next column rock body is that our.
A great if if you know you don't know like, you know, remember last year you know, PWC had all sorts of trouble in Australia and all of the sudden we got I don't know what it is 7 or 9 Partners and I'd probably be 60 or 70 staff by it's all told that wasn't foretold but when you find the, the quality of the people that are available and you think they really fit in with the culture, you jump on those opportunities and Australia's having another set of opportunities now because of disruptions for competitors. So, if there is further disruption and competitors, we will hire at least as fast as possible.
Tobey Sommer: Revenue or EBITDA.
there's not, it'll
Speaker Change: All the above.
Speaker Change: Some background noise can you just say that again I couldnt understand the question.
Speaker Change: It's really more supply side driven. Does that make sense?
Speaker Change: Yes, sorry.
Speaker Change: It does, um, from an overall us regulatory perspective.
Speaker Change: For the current business you said it would bottom in the next few months is that my revenue EBIT dollar EBITDA margin comment.
Speaker Change: Yes.
Speaker Change: So the comment was on EBITDA. So let me explain it. So there is simply put there is cost in this revenue.
Speaker Change: What do you, is it a, net positive or a net negative? But I understand that a lot of discrete elements, whether it's F GPA, second worthless. But then we mentioned for the state stepping in,
Yeah. How do you, how do you think that net stuff like
Speaker Change: So on the cost side.
I've told you how much we gave him forgivable loans in Q1 on which we gave in forgivable loans in Q2 with telcos the amortization in Q2, our direct costs went up a lot because of that forgivable loan amortization, which is laid out in.
I we have lots of debates about that. I mean, you we have Clarity on sub practices which way it cuts
Speaker Change: And clarity in our 10-Q.
Speaker Change: How it all cuts. The overall is very hard to say, you know, um, I I don't, I don't have a good answer for that. I mean, you know, clearly regulatory headwinds um,
Speaker Change: So if the volume of such forgivable loans starts falling which it has it was lower than Q1, I expect Q3 to be much much lower than Q2 than such amortization will go up a little bit but not as much as it went up from Q2 to Q1, so I see the cost.
Speaker Change: Are are are potentially affecting negatively, our FLC business, you know, but but uh and it clearly are affecting our Tech and econ businesses right in a negative way, you know. But but
Speaker Change: <unk>.
You know, some macro factors are and some regulatory changes like Paris and so forth have helped generate revenue for our corporate business.
Speaker Change: As I said low point that means it's not low point in Q2. There is a further low point in Q3 of two four at some point. So there so but that will be the low point and beyond that the postured even now.
Speaker Change: On the revenue side, we have taken quite a hit by the people that who have left and what have you.
Speaker Change: Tie at the gas. I would have said it's more headwinds overall this year than than it is still with uh, is what I would guess, but but it's hard to price on it. Yeah, you agree with that the more the
Speaker Change: But we see it flattening out we already see that in some of that in Q2 and I see that further in Q3 and Q4 net of the two as EBITDA I expect the low point and then gradual recovery.
Speaker Change: I don't know exactly because for the reasons you mentioned but our our practitioners, I mean, the FLC is remarkable.
Speaker Change: Okay. Thank you I'll get back in the Seattle.
Tobey Sommer: Thank you Tobey.
Speaker Change: Thank you and our final question today comes from James <unk> of Goldman Sachs. Please go ahead.
Speaker Change: The abundance would have guessed. We guessed in our forecast that, you know, there is. If if the monitor trip to go away, then there's business would go away. But performance is the opposite. And, and as that is us, that's not the market, the Market's not giving us that our guys are are folks are getting that, right? That's a possible.
James: Good morning, and thanks for taking the questions.
James: The continued weakness in our transformation strategy, which I think was interesting to me could you just.
James: Dig in perhaps a little bit more on the drivers as you look at.
James: Right now and as you look ahead and then perhaps.
Speaker Change: Toby, yeah. That that color is helpful. Um, you mentioned the low points of Economics may happen in the next few months that are around all the books. There's some background noise. Can you just say that again, I couldn't understand the question.
James: Your views on what would cause this to turnaround.
Speaker Change: Thank you James.
Speaker Change: Yeah, sorry for the econ business. You said it would bottom in the next few months is that revenue or even margin coming?
Speaker Change: Good question. So first several things to think about it first look we're comparing with the prior year first half that was huge.
Speaker Change: Year over year comparison is what we are up against so I just want to just to be fair to do that group. That's what we are good success has sometimes it's footfall so that year over year comparison is one one.
Speaker Change: But you are right, it's sequentially week, as well and the weaknesses across the board geographically, but more so overseas, especially more so in the middle East, where perhaps with the oil price decline folks have gotten a little bit more focused on consulting spend that's not just unique to us.
Speaker Change: It's for the entire space and then going further we're doing more matters, which are the cost takeout matters, where theres a success fee band. So our folks are actually doing great work in that area, where not all of the revenue shows up because youre going to get a success fee.
Speaker Change: That's becoming a larger portion of our business and then the final point I'd make there is a lot of our transformation people at the junior levels are somewhat fungible. They also help and transactions and restructuring and what have you. So it's a great team and we're getting lots of opportunities to add to it.
Speaker Change: Very clear.
Speaker Change: So I think you added something like $310 million of debt this quarter.
Speaker Change: You alluded to substantial capacity to potentially add more leverage.
Speaker Change: Could you just.
Speaker Change: Perhaps provide some color on the way you think about that capacity.
Speaker Change: Is there a maximum level is there a ratio we should be thinking about.
Speaker Change: For measuring that.
Speaker Change: The amount of leverage that you could theoretically take on.
Speaker Change: Sure.
Speaker Change: So on a gross debt to EBITDA trailing 12 months were one two times.
Speaker Change: On a net debt or a rounding error.
And that's after buying back half a billion dollars of stock issuing forgivable loans paying bonuses in March and April remember at the end of the year is when we get a big cash collections. So that's point number one our competitors are anywhere between six and 11 times Levered just by the way.
Speaker Change: So our relative capacity is enormous alright, that's number one number two leverage.
Speaker Change: As an outcome it is not a target.
Speaker Change: If we if the shares if the share prices like you saw we bought have I'm not going to telegraph, what we're going to do next but opportunistically. We can buyback a lot leverage is an outcome if there.
Speaker Change: If there is acquisitions that we can buy ads.
Speaker Change: At the kind of filter rehab, if theres hiring that we continue to do a talented people leverages an outcome not a target I'm not going to give a number.
Speaker Change: Great very helpful.
Speaker Change: Just one more on tech which is.
Speaker Change: The EBITDA margin came in a bit lower and you talked about the trends in that business, but I guess.
Speaker Change: How should we think about the margin trajectory there given the weaker operating backdrop for that segment.
Speaker Change: I mean look strategically. This is this is clearly a tough year and.
Speaker Change: What happens is when there's a slow year is.
Speaker Change: One who has capacity in the pricing in an industry, that's always tougher pricing disconnects gets tougher.
Speaker Change: And so.
Speaker Change: Not all of our jobs are totally price sensitive, but we're not going to allow our core clients.
Speaker Change: Get forced to a competitor and we need to match comp and so I suspect and I don't know how specific RJ once again I am not expecting great margins out of this business any time.
Speaker Change: And the rest of this year.
Having said that.
Speaker Change: I just want to be clear again, if you look at the industry structure, we are.
Speaker Change: The leaders in the most complicated jobs.
Speaker Change: We have to <unk> prior point about some of the competitors most of our competitors are private equity owned and have a lot of them have one five times sales of that to.
Speaker Change: So the last point that we had one five time sales that we would have $5 $5 billion of debt not a 10th of that which is what Andre said at the peak of the year a 10th of that.
Speaker Change: If we if the shares if the share prices like you saw we bought have I'm not going to telegraph, what we're going to do next but opportunistically, we can buyback a lot leverage is an outcome.
Speaker Change: I think we are under a lot less pressure than our competitors. So I think this is.
Speaker Change: If this situation were to continue for a while I think there'll be a shakeout and we benefit from it and if it doesn't it but either way the margins will come back, but I'm, just not expecting it and I'm not putting pressure on that group to make them come back this year.
Speaker Change: If there's acquisitions that we can buy ads.
Speaker Change: At the kind of filter rehab, if theres hiring that we continue to do a talented people leverages an outcome not a target I'm not going to give a number.
Speaker Change: I Hope that's Super helpful last one for me just.
Speaker Change: I know there's been a lot of discussion around the econ consulting business.
Speaker Change: Great very helpful.
Speaker Change: I think you'd previously talked about a $35 million plus hit to EBITDA is that is that still the right number.
Speaker Change: Just one more on tech which is.
Speaker Change: The EBITDA margin came in a bit lower and you talked about the trends in that business, but I guess.
Speaker Change: Or is there something larger or smaller.
Speaker Change: How should we think about the margin trajectory there given the weaker operating backdrop for that segment.
Speaker Change: So it's larger and I think I, even last call to hint to that it was already origin that look there's been two things that that have made that number larger.
Speaker Change: I mean look strategically. This is this is clearly a tough year and.
Speaker Change: One is a good thing one it was not a good thing. The good thing is when we first gave you that number we did not have any idea about the ability to attract the talent that we've had and that talent of course is a good thing but it.
Speaker Change: What happens is when there is a slow year is.
Speaker Change: Everybody has capacity in the pricing in an industry, that's always tougher pricing disconnects gets tougher and so.
Speaker Change: As Jay has indicated a lot of forgivable loans and as prior question not everybody in that with us forgivable loans.
Speaker Change: Not all of our jobs are totally price sensitive, but we're not going to allow our core clients.
Speaker Change: Can bring business immediately and so theres a theres a lag on the returns on that alright. So thats. The good thing, but that added of course to the cost this year.
Speaker Change: Get forced to a competitor we need to match comp and so I suspect and I don't know how specific RJ once again I am not expecting great margins out of this business any time.
Speaker Change: They're surprised that is.
Speaker Change: Which is unrelated to anything we do at the time as just arent.
Speaker Change: The market there has been a market phenomenon, particularly in EMEA, we have the best business by far in EMEA of any of any competitor and that has not been a particularly affected by competitive disruptions.
Speaker Change: And the rest of this year.
Speaker Change: Having said that.
Speaker Change: I just want to be clear again, if you look at the industry structure, we are.
Speaker Change: The leaders in the most complicated jobs.
Speaker Change: But our revenue was much lower than we expected it to be just some market stuff in EMEA and so that's flowed through the bottom line. So those two things have had an impact.
Speaker Change: We have to <unk> prior point about some of the competitors most of our competitors are private equity owned and have a lot of them have one five time sales of that to.
Speaker Change: Look I don't know RJ, probably won't let me give you a specific numbers, but I would say I think we're down.
Speaker Change: The last point, if we had one five time sales that we would have $5 $5 billion of debt not a 10th of that which is what Andre said at the peak of the year a 10th of that.
Speaker Change: I don't know between $25 million to $30 million versus last year and I suspect if you.
Speaker Change: <unk> that Delta you probably wouldn't be far off from the right number.
Speaker Change: I think we are under a lot less pressure than our competitors. So I think this is.
Speaker Change: I guess am I allowed to say that.
Speaker Change: That would be within the range, Okay, Alright does that help James.
Speaker Change: If this situation were to continue for a while I think there'll be a shakeout and we benefit from it and if it doesn't it but either way the margins will come back, but I'm, just not expecting it and I am not putting pressure on that group to make them come back this year.
James: Incredibly helpful and thank you for taking all my questions.
Speaker Change: Thank you to all of you for your time and support and I just want to come back to the theme I wanted to be clear.
Speaker Change: Does that help that's super helpful last one for me just.
Speaker Change: So we are having a solid year in the face of some unbelievable set of headwinds which to me is as is.
Speaker Change: I know there's been a lot of discussion around the econ consulting business.
Speaker Change: I think you'd previously talked about a $35 million plus hit to EBITDA is that is that still the right number.
Speaker Change: Having wonderful years as opposed to solid years.
Speaker Change: We're not down remarkably huge amount we are having a solid year to me. It just shows you. The power of this institution and I think we will continue to surprise people on where we take it over the next few years. Thank you for your support.
Speaker Change: Or is there something larger or smaller.
Speaker Change: So it's larger and I think I, even last call hinted that it was already origin that look there's been two things that that have made that number larger.
Speaker Change: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
Speaker Change: One is a good thing one it was not a good thing. The good thing is when we first gave you that number we did not have any idea about the ability to attract the talent that we've had that challenge of course is a good thing but it.
Speaker Change: As <unk> indicated a lot of forgivable loans and as prior question not everybody in that with US forgivable loans can bring business immediately and so there's a there's a lag on the returns on that all right. So that's the good thing, but that added of course to the costs. This year.
Speaker Change: They're surprised that is.
Speaker Change: Which is unrelated to anything we do at the time as just arent.
Speaker Change: The market there has been a market phenomenon, particularly in EMEA, we have the best business by far in EMEA of any of any competitor and that has not been a particularly affected by competitive disruptions.
Speaker Change: But our revenue was much lower than we expected it to be just some market stuff in EMEA and so that's flowed through the bottom line. So those two things have had an impact.
Speaker Change: Look I don't know RJ, probably won't let me give you a specific numbers, but I would say I think we're down.
Speaker Change: I don't know between 25% to $30 million versus last year and I suspect if you.
Speaker Change: <unk> that Delta you probably wouldn't be far off from the right number.
Speaker Change: I guess am I allowed to say that.
James: That would be within the range, Okay, Alright does that help James.
Speaker Change: Incredibly helpful and thank you for taking all my questions.
Speaker Change: No. Thank you to all of you for your time and support and I just want to come back to the theme I want to be clear.
Speaker Change: We are having a solid year in the face of some unbelievable set of headwinds which to me is.
Speaker Change: I like having wonderful years as opposed to solid years.
Speaker Change: We're not down remarkably huge amount we are having a solid year to me. It just shows you. The power of this institution and I think we will continue to surprise people on where we take it over the next few years. Thank you for your support.
Speaker Change: Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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Speaker Change: Okay.