FTI sulting(FCN) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 14.5% revenue growth for the quarter, with record revenues of $864.6 million, up from$ 755 million in the prior-year quarter [33][34] - Net income increased by 21.3% to $62.4 million, compared to$ 51.4 million in the prior-year quarter [34] - Adjusted EBITDA rose by 31.6% to $100.2 million, representing 11.6% of revenues, compared to 10.1% in the prior-year quarter [35][33] - Earnings per share (EPS) increased to$ 1.75 from $1.43 in the prior-year quarter [34] Business Line Data and Key Metrics Changes - Corporate Finance & Restructuring revenues increased by 8.4% to$ 300.4 million, driven by higher demand for restructuring services, which grew by 32% year-over-year [70][71] - The FLC segment saw revenues of $182.2 million, a 10.9% increase, primarily due to higher demand for investigations and data analytics services [39] - Economic Consulting revenues increased by 23% to$ 201.8 million, attributed to higher realized bill rates and increased demand for antitrust services [40] - Technology segment revenues grew by 25.3% to $97.4 million, driven by demand for investigations and litigation services [75] Market Data and Key Metrics Changes - The company experienced a 6.7% total attrition rate in the first half of 2023, down from 9.9% in the same period of 2022, indicating improved talent retention [79] - Billable headcount increased by 11.3% year-over-year, with 634 new professionals added [36] - Non-billable headcount also rose by 11.8%, reflecting the company's commitment to talent acquisition despite economic uncertainties [36] Company Strategy and Development Direction - The company aims to balance short-term performance with long-term growth, emphasizing the importance of attracting and retaining top talent [5][31] - Management is focused on investing in high-demand areas, even if it negatively impacts short-term earnings, to ensure future growth [46][31] - The company is committed to maintaining a strong balance sheet, allowing for potential share buybacks and acquisitions when opportunities arise [47] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by inflation and increased costs, which have pressured margins despite revenue growth [58][79] - The company is lowering its full-year guidance due to weaker-than-expected performance in the first half, but remains optimistic about long-term growth prospects [55][63] - Management highlighted the importance of adapting to changing market conditions and maintaining a focus on client needs [88][112] Other Important Information - SG&A expenses increased to$ 186.4 million, representing 21.6% of revenues, primarily due to higher compensation and outside services expenses [68] - Free cash flow was an outflow of $22 million in the quarter, with total debt net of cash increasing to$ 137.2 million [77] Q&A Session Summary Question: Will there be G&A leverage in '23? - Management indicated that they expect G&A leverage in the second half of the year, with lower G&A compared to the first half [128] Question: How does inflation impact cost and bill rates? - Management acknowledged a mismatch between rising costs and bill rates, but noted that they are not seeing significant pressure from realization issues [103][104] Question: What is the outlook for restructuring growth? - Management expects slower restructuring growth in the second half, with moderate growth in transactions [106] Question: How will the upcoming U.S. presidential election affect business? - Management expressed uncertainty about the election's impact but emphasized their focus on attracting talent and meeting client needs regardless of external factors [116] Question: What are the dynamics in the antitrust space? - Management highlighted their strong position in antitrust consulting and anticipated increased demand due to regulatory changes [111][112]