EX-99.1 2 d578348dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

FTI Consulting, Inc.

555 12th Street NW

Washington, DC 20004

+1.202.312.9100

Investor & Media Contact:

Mollie Hawkes

+1.617.747.1791

mollie.hawkes@fticonsulting.com

FTI Consulting Reports Record First Quarter 2018 Financial Results

 

    First Quarter 2018 Revenues of $497.8 million, Up 11.5% Compared to Prior Year Quarter

 

    First Quarter Fully Diluted and Adjusted EPS of $1.04 Compared to $0.34 in Prior Year Quarter

Washington, D.C., Apr. 26, 2018 — FTI Consulting, Inc. (NYSE: FCN) today released its financial results for the quarter ended March 31, 2018.

First quarter 2018 revenues of $497.8 million increased $51.4 million, or 11.5%, compared to revenues of $446.3 million in the prior year quarter. Excluding the estimated positive impact from foreign currency translation (“FX”), revenues increased by $39.4 million, or 8.8%, compared to the prior year quarter. The increase in revenues was primarily driven by higher demand within the Corporate Finance & Restructuring and Forensic and Litigation Consulting segments. Net income of $38.9 million compared to $14.0 million in the prior year quarter. The increase was largely due to higher revenues and a lower effective income tax rate. Adjusted EBITDA was $72.3 million, or 14.5% of revenues, compared to $38.3 million, or 8.6% of revenues, in the prior year quarter. The increase in Adjusted EBITDA was primarily due to higher revenues and improved utilization. First quarter 2018 fully diluted earnings per share (“EPS”) and Adjusted EPS of $1.04 compared to $0.34 in the prior year quarter.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting, said, “Our record first quarter results, together with our strong second half of 2017, reflect the enormous efforts our leaders and professionals have made in listening to our clients and investing heavily to deliver on core client needs. Though quarters will always have some volatility, the overall improvement of our positions over these past several years is gratifying and powerful.”

Cash Position and Capital Allocation

Net cash used in operating activities was $69.2 million for the quarter ended March 31, 2018 compared to $93.1 million for the quarter ended March 31, 2017. The year-over-year reduction in the use of operating cash resulted from improved cash collections.


During the quarter, the Company used approximately $14.2 million to repurchase 337,075 shares of its common stock at an average price per share of $42.17. As of March 31, 2018, approximately $99.1 million remained available for stock repurchases under the Company’s $300.0 million share repurchase authorization.

Total debt was $445.0 million at March 31, 2018 compared to total debt of $400.0 million at December 31, 2017 and $407.0 million at March 31, 2017. Cash and cash equivalents were $152.0 million at March 31, 2018 compared to $190.0 million at December 31, 2017 and $121.0 million at March 31, 2017. Total debt, net of cash, was $293.0 million at March 31, 2018, up from $210.0 million at December 31, 2017 and $286.0 million at March 31, 2017.

First Quarter 2018 Segment Results

Corporate Finance & Restructuring

Revenues in the Corporate Finance & Restructuring segment increased $37.0 million, or 35.0%, to $142.9 million in the quarter compared to $105.9 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $34.3 million, or 32.4%, compared to the prior year quarter. The increase in revenues was due to higher demand for restructuring, business transformation and transaction services. Adjusted Segment EBITDA was $34.8 million, or 24.4% of segment revenues, compared to $10.3 million, or 9.7% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues with improved utilization.

Forensic and Litigation Consulting

Revenues in the Forensic and Litigation Consulting segment increased $16.6 million, or 14.9%, to $128.0 million in the quarter compared to $111.4 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $14.9 million, or 13.3%, compared to the prior year quarter. The increase in revenues was primarily driven by increased demand for construction solutions, investigations and health solutions services. Adjusted Segment EBITDA was $25.8 million, or 20.1% of segment revenues, compared to $13.5 million, or 12.1% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues with improved utilization.

Economic Consulting

Revenues in the Economic Consulting segment decreased $6.1 million, or 4.4%, to $133.1 million in the quarter compared to $139.2 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues decreased $9.9 million, or 7.1%, compared to the prior year quarter. The decrease in revenues was primarily due to lower demand for antitrust services in North America. Adjusted Segment EBITDA was $19.1 million, or 14.4% of segment revenues, compared to $20.1 million, or 14.4% of segment revenues, in the prior year quarter. The decrease in Adjusted Segment EBITDA was primarily due to lower revenues, which was partially offset by lower variable compensation costs.

Technology

Revenues in the Technology segment decreased $5.2 million, or 11.2%, to $40.9 million in the quarter compared to $46.1 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues decreased $6.0 million, or 12.9%, compared to the prior year quarter. The decrease in revenues was primarily due to lower demand for managed review services, largely related to a decline in demand for merger and acquisition-related “second request” services. Adjusted Segment EBITDA was $5.7 million, or 14.0% of segment revenues, compared to $7.8 million, or 16.9% of segment revenues, in the prior year quarter. The decrease in Adjusted Segment EBITDA was primarily due to lower revenues.


Strategic Communications

Revenues in the Strategic Communications segment increased $9.1 million, or 20.7%, to $52.8 million in the quarter compared to $43.7 million in the prior year quarter. Excluding the estimated positive impact from FX, revenues increased $6.2 million, or 14.1%, compared to the prior year quarter. The increase in revenues was primarily due to an increase in both project- and retainer-based revenues. Adjusted Segment EBITDA was $9.9 million, or 18.7% of segment revenues, compared to $4.3 million, or 9.7% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues.

First Quarter 2018 Conference Call

FTI Consulting will host a conference call for analysts and investors to discuss first quarter 2018 financial results at 9:00 a.m. Eastern Time on April 26, 2018. The call can be accessed live and will be available for replay over the internet for 90 days by logging onto the Company’s investor relations website here.

About FTI Consulting

FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. With more than 4,600 employees located in 28 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges and make the most of opportunities. The Company generated $1.81 billion in revenues during fiscal year 2017. More information can be found at www.fticonsulting.com.

Use of Non-GAAP Measures

In the accompanying analysis of financial information, we sometimes use information derived from consolidated and segment financial information that may not be presented in our financial statements or prepared in accordance with generally accepted accounting principles (GAAP). Certain of these measures are considered non-GAAP financial measuresunder the Securities and Exchange Commission (SEC) rules. Specifically, we have referred to the following non-GAAP measures:

 

    Total Segment Operating Income

 

    Adjusted EBITDA

 

    Total Adjusted Segment EBITDA

 

    Adjusted EBITDA Margin

 

    Adjusted Net Income

 

    Adjusted Earnings per Diluted Share

 

    Free Cash Flow

We have included the definitions of Segment Operating Income and Adjusted Segment EBITDA below in order to more fully define the components of certain non-GAAP financial measures presented in this earnings release. We define Segment Operating Income as a segment’s share of Consolidated Operating Income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment


Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s share of Consolidated Operating Income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.

We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenues. We believe that the non-GAAP financial measures, which exclude the effects of remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges, when considered together with our GAAP financial results and GAAP measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating results with the operating results of other companies.

We define Adjusted Net Income and Adjusted Earnings per Diluted Share (Adjusted EPS), which are non-GAAP financial measures, as net income and earnings per diluted share (EPS), respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of debt and the adjustment related to the adoption of the 2017 U.S. Tax Cuts and Jobs Act (2017 Tax Act). We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that this non-GAAP financial measure, which excludes the effects of the remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of debt and the adjustment related to the adoption of the 2017 Tax Act, when considered together with our GAAP financial results, provides management and investors with an additional understanding of our business operating results, including underlying trends.

We define Free Cash Flow as net cash provided by operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with an additional understanding of the Company’s ability to generate cash for ongoing business operations and other capital deployment.

Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Consolidated Statements of Comprehensive Income. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables accompanying this press release.


Safe Harbor Statement

This press release includes forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to acquisitions, share repurchases and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results. When used in this press release, words such as estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and estimates will be achieved, and the Company’s actual results may differ materially from our expectations, beliefs and estimates. Further, preliminary results are subject to normal year-end adjustments. The Company has experienced fluctuating revenues, operating income and cash flows in prior periods and expects that this will occur from time to time in the future. Other factors that could cause such differences include declines in demand for, or changes in, the mix of services and products that we offer, the mix of the geographic locations where our clients are located or where services are performed, fluctuations in the price per share of our common stock, adverse financial, real estate, or other market and general economic conditions, and other future events, which could impact each of our segments differently and could be outside of our control, the pace and timing of the consummation and integration of future acquisitions, the Company’s ability to realize cost savings and efficiencies, competitive and general economic conditions, retention of staff and clients, new laws and regulations, or changes thereto, including the 2017 Tax Act, and other risks described under the heading “Item 1A, Risk Factors” in the Company’s annual report on Form 10-K for the year ended December 31, 2017, filed with the SEC, including the risks set forth under “Risks Related to Our Reportable Segments” and “Risks Related to Our Operations,” and in the Company’s other filings with the SEC. We are under no duty to update any of the forward-looking statements to conform such statements to actual results or events and do not intend to do so.

FINANCIAL TABLES FOLLOW

# # #


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

     March 31,     December 31,  
     2018     2017  
     (unaudited)        

Assets

    

Current assets

    

Cash and cash equivalents

   $ 152,044     $ 189,961  

Accounts receivable:

    

Billed receivables

     417,085       390,996  

Unbilled receivables

     367,516       312,569  

Allowances for doubtful accounts and unbilled services

     (201,013     (180,687
  

 

 

   

 

 

 

Accounts receivable, net

     583,588       522,878  

Current portion of notes receivable

     29,371       25,691  

Prepaid expenses and other current assets

     50,775       55,649  
  

 

 

   

 

 

 

Total current assets

     815,778       794,179  

Property and equipment, net

     75,586       75,075  

Goodwill

     1,208,011       1,204,803  

Other intangible assets, net

     42,390       44,150  

Notes receivable, net

     91,215       98,105  

Other assets

     43,472       40,929  
  

 

 

   

 

 

 

Total assets

   $ 2,276,452     $ 2,257,241  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities

    

Accounts payable, accrued expenses and other

   $ 105,966     $ 94,873  

Accrued compensation

     191,055       268,513  

Billings in excess of services provided

     46,446       46,942  
  

 

 

   

 

 

 

Total current liabilities

     343,467       410,328  

Long-term debt, net

     441,473       396,284  

Deferred income taxes

     129,274       124,471  

Other liabilities

     124,804       134,187  
  

 

 

   

 

 

 

Total liabilities

     1,039,018       1,065,270  
  

 

 

   

 

 

 

Stockholders’ equity

    

Preferred stock, $0.01 par value; shares authorized — 5,000; none outstanding

     —         —    

Common stock, $0.01 par value; shares authorized — 75,000; shares issued and outstanding — 37,720 (2018) and 37,729 (2017)

     377       377  

Additional paid-in capital

     261,765       266,035  

Retained earnings

     1,085,061       1,045,774  

Accumulated other comprehensive loss

     (109,769     (120,215
  

 

 

   

 

 

 

Total stockholders’ equity

     1,237,434       1,191,971  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,276,452     $ 2,257,241  
  

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

 

     Three Months Ended
March 31,
 
     2018     2017  
     (unaudited)  

Revenues

   $ 497,774     $ 446,344  
  

 

 

   

 

 

 

Operating expenses

    

Direct cost of revenues

     321,117       309,072  

Selling, general and administrative expenses

     112,128       107,690  

Amortization of other intangible assets

     2,270       2,493  
  

 

 

   

 

 

 
     435,515       419,255  
  

 

 

   

 

 

 

Operating income

     62,259       27,089  
  

 

 

   

 

 

 

Other income (expense)

    

Interest income and other

     (1,800     605  

Interest expense

     (6,244     (5,801
  

 

 

   

 

 

 
     (8,044     (5,196
  

 

 

   

 

 

 

Income before income tax provision

     54,215       21,893  

Income tax provision

     15,270       7,877  
  

 

 

   

 

 

 

Net income

   $ 38,945     $ 14,016  
  

 

 

   

 

 

 

Earnings per common share — basic

   $ 1.06     $ 0.35  
  

 

 

   

 

 

 

Weighted average common shares outstanding — basic

     36,700       40,527  
  

 

 

   

 

 

 

Earnings per common share — diluted

   $ 1.04     $ 0.34  
  

 

 

   

 

 

 

Weighted average common shares outstanding — diluted

     37,612       41,245  
  

 

 

   

 

 

 

Other comprehensive income, net of tax

    

Foreign currency translation adjustments, net of tax expense of $0

   $ 10,446     $ 7,370  
  

 

 

   

 

 

 

Total other comprehensive income, net of tax

     10,446       7,370  
  

 

 

   

 

 

 

Comprehensive income

   $ 49,391     $ 21,386  
  

 

 

   

 

 

 


FTI CONSULTING, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share data)

 

     Three Months Ended
March 31,
 
     2018      2017  
     (Unaudited)  

Net income

   $ 38,945      $ 14,016  

Add back:

     

Remeasurement of acquisition-related contingent consideration

     —          166  

Tax impact of remeasurement of acquisition-related contingent consideration

     —          (65
  

 

 

    

 

 

 

Adjusted net income

   $ 38,945      $ 14,117  
  

 

 

    

 

 

 

EPS and Adjusted EPS — diluted

   $ 1.04      $ 0.34  
  

 

 

    

 

 

 

Weighted average number of common shares outstanding — diluted

     37,612        41,245  
  

 

 

    

 

 

 


FTI CONSULTING, INC.

RECONCILIATION OF NET INCOME AND OPERATING INCOME TO ADJUSTED EBITDA

(in thousands)

 

Three Months Ended March 31, 2018

(unaudited)                                             

  Corporate
Finance &
Restructuring
    Forensic and
Litigation
Consulting
    Economic
Consulting
    Technology     Strategic
Communications
    Unallocated
Corporate
    Total  

Net income

              $ 38,945  

Interest income and other

                1,800  

Interest expense

                6,244  

Income tax provision

                15,270  
             

 

 

 

Operating income

  $ 33,211     $ 24,330     $ 17,648     $ 2,593     $ 8,365     $ (23,888   $ 62,259  

Depreciation and amortization

    802       1,028       1,364       3,077       593       901       7,765  

Amortization of other intangible assets

    791       399       124       62       894       —         2,270  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 34,804     $ 25,757     $ 19,136     $ 5,732     $ 9,852     $ (22,987   $ 72,294  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three Months Ended March 31, 2017

(unaudited)                                             

  Corporate
Finance &
Restructuring
    Forensic and
Litigation
Consulting
    Economic
Consulting
    Technology     Strategic
Communications
    Unallocated
Corporate
    Total  

Net income

              $ 14,016  

Interest income and other

                (605

Interest expense

                5,801  

Income tax provision

                7,877  
             

 

 

 

Operating income

  $ 8,749     $ 11,924     $ 18,502     $ 4,440     $ 2,527     $ (19,053   $ 27,089  

Depreciation and amortization

    781       1,173       1,454       3,206       602       1,355       8,571  

Amortization of other intangible assets

    795       424       154       158       962       —         2,493  

Remeasurement of acquisition-related contingent consideration

    —         —         —         —         166       —         166  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  $ 10,325     $ 13,521     $ 20,110     $ 7,804     $ 4,257     $ (17,698   $ 38,319  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


FTI CONSULTING, INC.

OPERATING RESULTS BY BUSINESS SEGMENT

 

     Segment
Revenues
     Adjusted
EBITDA
    Adjusted
EBITDA

Margin
     Utilization      Average
Billable
Rate
     Revenue-
Generating
Headcount
 
     (in thousands)                          (at period end)  

Three Months Ended March 31, 2018

(unaudited)

                

Corporate Finance & Restructuring

   $ 142,922      $ 34,804       24.4%        71%      $ 444        910  

Forensic and Litigation Consulting

     128,039        25,757       20.1%        67%      $ 326        1,072  

Economic Consulting

     133,109        19,136       14.4%        71%      $ 543        689  

Technology (1)

     40,914        5,732       14.0%        N/M        N/M        288  

Strategic Communications (1)

     52,790        9,852       18.7%        N/M        N/M        630  
  

 

 

    

 

 

   

 

 

          

 

 

 
   $ 497,774      $ 95,281       19.1%              3,589  
  

 

 

    

 

 

   

 

 

          

 

 

 

Unallocated Corporate

        (22,987           
     

 

 

            

Adjusted EBITDA

      $ 72,294       14.5%           
     

 

 

            

Three Months Ended March 31, 2017

(unaudited)

                

Corporate Finance & Restructuring

   $ 105,901      $ 10,325       9.7%        59%      $ 377        900  

Forensic and Litigation Consulting

     111,406        13,521       12.1%        60%      $ 330        1,110  

Economic Consulting

     139,221        20,110       14.4%        72%      $ 554        660  

Technology (1)

     46,087        7,804       16.9%        N/M        N/M        296  

Strategic Communications (1)

     43,729        4,257       9.7%        N/M        N/M        657  
  

 

 

    

 

 

   

 

 

          

 

 

 
   $ 446,344      $ 56,017       12.6%              3.623  
  

 

 

    

 

 

   

 

 

          

 

 

 

Unallocated Corporate

        (17,698           
     

 

 

            

Adjusted EBITDA

      $ 38,319       8.6%           
     

 

 

            

 

N/M Not meaningful    

(1)  The majority of the Technology and Strategic Communications segments’ revenues are not generated based on billable hours. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Three Months Ended
March 31,
 
     2018     2017  
     (unaudited)  

Operating activities

    

Net income

   $ 38,945     $ 14,016  

Adjustments to reconcile net income to net cash used in operating activities:

    

Depreciation and amortization

     7,765       8,571  

Amortization and impairment of other intangible assets

     2,270       2,493  

Acquisition-related contingent consideration

     396       395  

Provision for doubtful accounts

     5,676       3,551  

Non-cash share-based compensation

     4,676       7,281  

Non-cash interest expense and other

     591       508  

Changes in operating assets and liabilities, net of effects from acquisitions:

    

Accounts receivable, billed and unbilled

     (61,677     (52,489

Notes receivable

     2,622       7,153  

Prepaid expenses and other assets

     (378     553  

Accounts payable, accrued expenses and other

     9,348       287  

Income taxes

     13,480       3,650  

Accrued compensation

     (92,501     (92,561

Billings in excess of services provided

     (413     3,505  
  

 

 

   

 

 

 

Net cash used in operating activities

     (69,200     (93,087
  

 

 

   

 

 

 

Investing activities

    

Purchases of property and equipment

     (7,680     (5,831

Other

     27       127  
  

 

 

   

 

 

 

Net cash used in investing activities

     (7,653     (5,704
  

 

 

   

 

 

 

Financing activities

    

Borrowings under revolving line of credit, net

     45,000       37,000  

Deposits

     1,431       3,069  

Purchase and retirement of common stock

     (14,220     (36,918

Net issuance of common stock under equity compensation plans

     4,215       (812

Payments for acquisition-related contingent consideration

     (2,502     —    
  

 

 

   

 

 

 

Net cash provided by financing activities

     33,924       2,339  
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     5,012       1,253  
  

 

 

   

 

 

 

Net decrease in cash and cash equivalents

     (37,917     (95,199

Cash and cash equivalents, beginning of period

     189,961       216,158  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 152,044     $ 120,959