FTI CONSULTING, INC [FCN] Filings

10-Q 1 fcn-20240630.htm 10-Q fcn-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-14875

FTI CONSULTING, INC.

(Exact Name of Registrant as Specified in its Charter)


Maryland									52-1261113
(State or Other Jurisdiction of Incorporation or Organization)									(I.R.S. Employer Identification No.)

555 12th Street NW
Washington,
DC									20004
(Address of Principal Executive Offices)									(Zip Code)

(202) 312-9100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value

FCN

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class			Outstanding at July 18, 2024
Common Stock, $0.01 par value			35,902,232

FTI CONSULTING, INC. AND SUBSIDIARIES

INDEX


		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets—June 3 0 , 2024 and December 31, 2023	3

	Condensed Consolidated Statements of Comprehensive Income—Three and Six Months Ended June 3 0 , 2024 and 2023	4

	Condensed Consolidated Statements of Stockholders’ Equity—Three and Six Months Ended June 3 0 , 2024 and 2023	5

	Condensed Consolidated Statements of Cash Flows—Six Months Ended June 3 0 , 2024 and 2023	7

	Notes to Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	37

Item 1A.	Risk Factors	37

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	39

SIGNATURES		40

PART I—FINANCIAL INFORMATION

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)


Item 1.			Financial Statements


	June 30,		December 31,
	2024		2023
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	226,428	$	303,222




Accounts receivable, net	1,190,521		1,102,142
Current portion of notes receivable	45,145		30,997
Prepaid expenses and other current assets	107,117		119,092
Total current assets	1,569,211		1,555,453
Property and equipment, net	152,307		159,662
Operating lease assets	202,511		208,910
Goodwill	1,230,932		1,234,569
Intangible assets, net	18,377		18,285
Notes receivable, net	106,201		75,431
Other assets	78,105		73,568
Total assets	$	3,357,644	$	3,325,878
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable, accrued expenses and other	$	182,667	$	223,758
Accrued compensation	463,669		601,074
Billings in excess of services provided	67,558		67,937

Total current liabilities	713,894		892,769
Long-term debt	60,000		—
Noncurrent operating lease liabilities	214,517		223,774
Deferred income taxes	136,374		140,976
Other liabilities	83,479		86,939
Total liabilities	1,208,264		1,344,458
Commitments and contingencies (Note 10)
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 35,902 (2024) and 35,521 (2023)	359		355
Additional paid-in capital	33,955		16,760
Retained earnings	2,278,677		2,114,765
Accumulated other comprehensive loss	(163,611)		(150,460)
Total stockholders’ equity	2,149,380		1,981,420
Total liabilities and stockholders’ equity	$	3,357,644	$	3,325,878

See accompanying notes to condensed consolidated financial statements

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands, except per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues	$	949,156	$	864,591	$	1,877,709	$	1,671,297
Operating expenses
Direct cost of revenues	637,749		588,094		1,263,783		1,141,603
Selling, general and administrative expenses	206,235		186,371		408,105		370,584


Amortization of intangible assets	1,080		1,417		2,096		3,599
	845,064		775,882		1,673,984		1,515,786
Operating income	104,092		88,709		203,725		155,511
Other income (expense)
Interest income and other	1,909		(584)		3,490		(1,926)
Interest expense	(3,319)		(3,022)		(5,038)		(5,961)

	(1,410)		(3,606)		(1,548)		(7,887)
Income before income tax provision	102,682		85,103		202,177		147,624
Income tax provision	18,735		22,708		38,265		37,682
Net income	$	83,947	$	62,395	$	163,912	$	109,942
Earnings per common share — basic	$	2.38	$	1.87	$	4.67	$	3.30
Earnings per common share — diluted	$	2.34	$	1.75	$	4.58	$	3.09
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax expense of $0	$	(1,718)	$	6,396	$	(13,151)	$	16,246
Total other comprehensive income (loss), net of tax	(1,718)		6,396		(13,151)		16,246
Comprehensive income	$	82,229	$	68,791	$	150,761	$	126,188

See accompanying notes to condensed consolidated financial statements

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(Unaudited)


								Accumulated Other Comprehensive Loss
	Common Stock			Additional Paid-in Capital		Retained Earnings
	Shares	Amount								Total
Balance at December 31, 2023	35,521	$	355	$	16,760	$	2,114,765	$	(150,460)	$	1,981,420
Net income	—	$	—	$	—	$	79,965	$	—	$	79,965
Other comprehensive loss:
Cumulative translation adjustment	—	—		—		—		(11,433)		(11,433)
Issuance of common stock in connection with:
Exercise of options	106	1		3,897		—		—		3,898
Restricted share grants, less net settled shares of 57	70	1		(11,112)		—		—		(11,111)
Stock units issued under incentive compensation plan	—	—		2,805		—		—		2,805


Share-based compensation	—	—		8,812		—		—		8,812

Balance at March 31, 2024	35,697	$	357	$	21,162	$	2,194,730	$	(161,893)	$	2,054,356
Net income	—	$	—	$	—	$	83,947	$	—	$	83,947
Other comprehensive loss:
Cumulative translation adjustment	—	—		—		—		(1,718)		(1,718)
Issuance of common stock in connection with:
Exercise of options	180	2		6,714		—		—		6,716
Restricted share grants, less net settled shares of 15	25	—		(3,210)		—		—		(3,210)




Share-based compensation	—	—		9,289		—		—		9,289

Balance at June 30, 2024	35,902	$	359	$	33,955	$	2,278,677	$	(163,611)	$	2,149,380


								Accumulated Other Comprehensive Loss
	Common Stock			Additional Paid-in Capital		Retained Earnings
	Shares	Amount								Total
Balance at December 31, 2022	34,026	$	340	$	—	$	1,858,103	$	(176,722)	$	1,681,721
Net income	—	$	—	$	—	$	47,547	$	—	$	47,547
Other comprehensive income:
Cumulative translation adjustment	—	—		—		—		9,850		9,850
Issuance of common stock in connection with:
Exercise of options	14	—		449		—		—		449
Restricted share grants, less net settled shares of 55	55	1		(9,514)		—		—		(9,513)
Stock units issued under incentive compensation plan	—	—		2,274		—		—		2,274
Purchase and retirement of common stock	(112)	(1)		(17,798)		—		—		(17,799)

Conversion of convertible senior notes due 2023	—	—		(6)		—		—		(6)
Share-based compensation	—	—		6,365		—		—		6,365
Reclassification of negative additional paid-in capital	—	—		18,230		(18,230)		—		—
Balance at March 31, 2023	33,983	$	340	$	—	$	1,887,420	$	(166,872)	$	1,720,888
Net income	—	$	—	$	—	$	62,395	$	—	$	62,395
Other comprehensive income:
Cumulative translation adjustment	—	—		—		—		6,396		6,396
Issuance of common stock in connection with:
Exercise of options	21	—		718		—		—		718
Restricted share grants, less net settled shares of 13	30	—		(2,408)		—		—		(2,408)



Conversion of convertible senior notes due 2023	—	—		(375)		—		—		(375)
Share-based compensation	—	—		7,538		—		—		7,538

Balance at June 30, 2023	34,034	$	340	$	5,473	$	1,949,815	$	(160,476)	$	1,795,152

See accompanying notes to condensed consolidated financial statements

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	Six Months Ended June 30,
	2024		2023
Operating activities
Net income	$	163,912	$	109,942
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	21,173		19,547
Amortization of intangible assets	2,096		3,599
Provision for expected credit losses	19,923		11,188
Share-based compensation	18,101		13,903
Deferred income taxes	(6,840)		(6,571)
Acquisition-related contingent consideration	(1,157)		3,543
Amortization of debt issuance costs and other	387		1,296


Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, billed and unbilled	(115,106)		(245,999)
Notes receivable	(45,197)		(22,539)
Prepaid expenses and other assets	(12,630)		(6,718)
Accounts payable, accrued expenses and other	(8,934)		(159)
Income taxes	(29,727)		(13,122)
Accrued compensation	(145,509)		(130,625)
Billings in excess of services provided	(84)		(2,485)
Net cash used in operating activities	(139,592)		(265,200)
Investing activities


Purchases of property and equipment and other	(14,700)		(29,027)
Maturity of short-term investment	25,246		—


Net cash provided by (used in) investing activities	10,546		(29,027)
Financing activities
Borrowings under revolving line of credit	520,000		245,000

Repayments under revolving line of credit	(460,000)		(220,000)


Purchase and retirement of common stock	—		(20,982)
Share-based compensation tax withholdings	(14,320)		(11,922)
Proceeds on stock option exercises	10,614		1,167
Deposits and other	2,023		(2,206)

Net cash provided by (used in) financing activities	58,317		(8,943)
Effect of exchange rate changes on cash and cash equivalents	(6,065)		15,021
Net decrease in cash and cash equivalents	(76,794)		(288,149)
Cash and cash equivalents, beginning of period	303,222		491,688
Cash and cash equivalents, end of period	$	226,428	$	203,539
Supplemental cash flow disclosures
Cash paid for interest	$	4,020	$	4,144
Cash paid for income taxes and tax credits, net of refunds	$	74,831	$	57,376
Non-cash financing activities:
Issuance of stock units under incentive compensation plans	$	2,805	$	2,274

See accompanying notes to condensed consolidated financial statements

FTI Consulting, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(dollar and share amounts in tables in thousands, except per share data)

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

The unaudited condensed consolidated financial statements of FTI Consulting, Inc., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”), presented herein, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and under the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Some of the information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. Certain prior period amounts have been reclassified to conform to the current period presentation. In management’s opinion, the interim financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods presented. All adjustments made were normal recurring accruals. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC.

Note 1 to the Consolidated Financial Statements included in Part II, Item 8, of our Annual Report on Form 10-K for the year ended December 31, 2023 describes the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

In August 2022, the Inflation Reduction Act (“IRA”) was enacted into law. The IRA, among other things, includes provisions that permit clean energy tax credits that are transferable to an unrelated third party in exchange for cash payment. When the control of the investment tax credits transfers, the acquired credits are recognized as deferred tax assets and are measured under Accounting Standards Codification Topic 740, Income Taxes. The difference between the purchase price and the tax basis of the purchased credits is recognized as deferred credits. The deferred credits are recognized in income tax expense in proportion to the reversal of the associated deferred tax asset. The amounts paid for the tax credits are presented in the “Cash paid for income taxes and tax credits, net of tax refunds” line in the supplemental cash flow disclosures.

2. New Accounting Standards

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands annual disclosures in an entity’s income tax rate reconciliation table and requires annual disclosures regarding cash taxes paid both in the United States (“U.S.”) (federal, state and local) and foreign jurisdictions. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.

3. Earnings per Common Share

Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under our equity compensation plans, including stock options and share-based awards (restricted share awards, restricted stock units and performance stock units), each using the treasury stock method.

For the three and six months ended June 30, 2023, we used the if-converted method for calculating the potential dilutive effect of the conversion feature of the principal amount of our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”) on earnings per common share. The conversion feature had a dilutive impact on earnings per common share for the three and six months ended June 30, 2023, as the average market price per share of our common stock for the period exceeded the conversion price of $101.38 per share. During the three and six months ended June 30, 2024, there were no 2023 Convertible Notes outstanding.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Numerator — basic and diluted
Net income	$	83,947	$	62,395	$	163,912	$	109,942
Denominator
Weighted average number of common shares outstanding — basic	35,221		33,359		35,099		33,331
Effect of dilutive share-based awards	513		550		531		562
Effect of dilutive stock options	111		297		186		301
Effect of dilutive convertible notes	—		1,444		—		1,372
Weighted average number of common shares outstanding — diluted	35,845		35,650		35,816		35,566
Earnings per common share — basic	$	2.38	$	1.87	$	4.67	$	3.30
Earnings per common share — diluted	$	2.34	$	1.75	$	4.58	$	3.09
Antidilutive stock options and share-based awards	40		3		32		6

4. Revenues

We generate the majority of our revenues by providing consulting services to our clients. Revenues are recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer and in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate services that we provide to our customers. If, at the outset of an arrangement, we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met.

Revenues recognized during the current period may include revenues from performance obligations satisfied or partially satisfied in previous periods. This primarily occurs when the estimated transaction price has changed based on our current probability assessment over whether the agreed-upon outcome for our performance-based and contingent arrangements will be achieved. The aggregate amount of revenues recognized related to a change in the transaction price in the current period, which related to performance obligations satisfied or partially satisfied in a prior period, was $8.9 million and $11.2 million for the three and six months ended June 30, 2024, respectively, and $7.8 million and $5.4 million for the three and six months ended June 30, 2023, respectively.

Unfulfilled performance obligations primarily consist of fees not yet recognized on certain fixed-fee arrangements and performance-based and contingent arrangements. As of June 30, 2024 and December 31, 2023, the aggregate amount of the remaining contract transaction price allocated to unfulfilled performance obligations was $23.1 million and $34.6 million, respectively. We expect to recognize the majority of the related revenues over the next 36 months. We elected to utilize the optional exemption to exclude from this disclosure fixed-fee and performance-based and contingent arrangements with an original expected duration of one year or less and to exclude our time and expense arrangements for which revenues are recognized using the right-to-invoice practical expedient.

Contract assets are defined as assets for which we have recorded revenues but are not yet entitled to receive our fees because certain events, such as completion of the measurement period or client approval, must occur. The contract asset balance was immaterial as of June 30, 2024 and December 31, 2023.

Contract liabilities are defined as liabilities incurred when we have received consideration but have not yet performed the agreed-upon services. This may occur when clients pay fees before work begins. The contract liability balance was immaterial as of June 30, 2024 and December 31, 2023.

5. Accounts Receivable and Allowance for Expected Credit Losses

The following table summarizes the components of “Accounts receivable, net” as presented on the Condensed Consolidated Balance Sheets:


	June 30, 2024		December 31, 2023
Accounts receivable:
Billed receivables	$	818,240	$	745,371
Unbilled receivables	443,723		421,488
Allowance for expected credit losses	(71,442)		(64,717)
Accounts receivable, net	$	1,190,521	$	1,102,142

The following table summarizes the total provision for expected credit losses and write-offs:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Provision for expected credit losses	$	8,503	$	4,176	$	19,923	$	11,188
Write-offs	$	9,511	$	1,665	$	19,881	$	9,553

Our provision for expected credit losses includes recoveries, direct write-offs and charges to other accounts. Billed accounts receivables are written off when the potential for recovery is considered remote.

6. Goodwill and Intangible Assets

Goodwill

The table below summarizes the changes in the carrying amount of goodwill by reportable segment:


	Corporate Finance & Restructuring (1)		Forensic and Litigation Consulting (1)		Economic Consulting (1)		Technology (1)		Strategic Communications (2)		Total
Balance at December 31, 2023	$	540,991	$	213,415	$	268,482	$	96,802	$	114,879	$	1,234,569

Foreign currency translation adjustment	(2,288)		(571)		(185)		(10)		(583)		(3,637)

Balance at June 30, 2024	$	538,703	$	212,844	$	268,297	$	96,792	$	114,296	$	1,230,932

(1) There were no accumulated impairment losses for the Corporate Finance & Restructuring (“Corporate Finance”), Forensic and Litigation Consulting (“FLC”), Economic Consulting or Technology segments as of June 30, 2024 and December 31, 2023.

(2) Amounts for our Strategic Communications segment include gross carrying values of $308.4 million and $309.0 million as of June 30, 2024 and December 31, 2023, respectively, and accumulated impairment losses of $194.1 million as of June 30, 2024 and December 31, 2023.

Intangible Assets

Intangible assets were as follows:


	June 30, 2024						December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizing intangible assets
Customer relationships	$	29,035	$	17,638	$	11,397	$	27,000	$	16,640	$	10,360
Trademarks	9,426		7,712		1,714		9,712		7,129		2,583
Acquired software and other	865		699		166		888		646		242
	39,326		26,049		13,277		37,600		24,415		13,185
Non-amortizing intangible assets
Trademarks	5,100		—		5,100		5,100		—		5,100
Total	$	44,426	$	26,049	$	18,377	$	42,700	$	24,415	$	18,285

Intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of $1.1 million and $2.1 million during the three and six months ended June 30, 2024, respectively, and $1.4 million and $3.6 million for the three and six months ended June 30, 2023, respectively.

7. Financial Instruments

The fair values of all financial instruments are estimated to be equal to their carrying values as of June 30, 2024 and December 31, 2023. We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted discounted cash flow model or a Monte Carlo pricing model. These fair value estimates represent Level 3 measurements as they are based on significant inputs not observed in the market and reflect our own assumptions. Significant increases (or decreases) in these unobservable inputs in isolation would result in significantly lower (or higher) fair values. We reassess the fair value of our acquisition-related contingent consideration at each reporting period based on additional information as it becomes available. The fair value of acquisition-related contingent consideration was $5.1 million and $12.8 million as of June 30, 2024 and December 31, 2023, respectively. There were no other assets or liabilities subject to Level 3 fair value measurements as of June 30, 2024 and December 31, 2023.

8. Debt

The table below presents the components of the Company’s debt:


	June 30, 2024		December 31, 2023

Credit Facility	$	60,000	$	—



Long-term debt (1)	$	60,000	$	—

(1)There were no current portions of long-term debt as of June 30, 2024 and December 31, 2023.

In November 2022, we entered into the second amended and restated credit agreement governing our senior secured bank revolving credit facility (“Credit Facility”) to, among other things, (i) extend the maturity to November 21, 2027, (ii) increase the revolving line of credit limit from $550.0 million to $900.0 million, and (iii) increase the incremental facility from $150.0 million to a maximum of $300.0 million, subject to certain conditions, and incurred an additional $4.0 million of debt issuance costs. The Credit Facility is guaranteed by substantially all of our wholly owned domestic subsidiaries and is secured by a first priority security interest in substantially all of the assets of FTI Consulting and such domestic subsidiaries.

Borrowings under the Credit Facility bear interest at a rate equal to, in the case of: (i) U.S. Dollars (“USD”), at our option, Adjusted Term Secured Overnight Financing Rate (“SOFR”) or Adjusted Daily Simple SOFR, (ii) euro, Euro Interbank Offered Rate, (iii) British pound, Sterling Overnight Index Average Reference Rate, (iv) Australian dollars, Bank Bill Swap Reference Bid Rate, (v) Canadian dollars, Canadian Dollar Offered Rate, (vi) Swiss franc, Swiss Average Rate Overnight, and (vii) Japanese yen, Tokyo Interbank Offered Rate, in each case, plus an applicable margin that will fluctuate between 1.25% per annum and 2.00% per annum based upon the Company’s Consolidated Total Net Leverage Ratio (as defined in the Credit Facility) at such time or, in the case of USD borrowings, an alternative base rate plus an applicable margin that will fluctuate

between 0.25% per annum and 1.00% per annum based upon the Company’s Consolidated Total Net Leverage Ratio at such time. The alternative base rate is a fluctuating rate per annum equal to the highest of (1) the federal funds rate plus the sum of 50 basis points, (2) the rate of interest in effect for such day as the prime rate announced by Bank of America, and (3) the one-month Term SOFR plus 100 basis points.

Under the Credit Facility, we are required to pay a commitment fee rate that fluctuates between 0.20% and 0.35% per annum and a letter of credit fee rate that fluctuates between 1.25% and 2.00% per annum, in each case, based upon the Company’s Consolidated Total Net Leverage Ratio.

The Company classified the borrowings under the Credit Facility as long-term debt in the accompanying Condensed Consolidated Balance Sheets, as we have the intent and unilateral ability to refinance any borrowings on a continuous basis through the maturity of the Credit Facility on November 21, 2027.

There were $3.0 million and $3.4 million of unamortized debt issuance costs related to the Credit Facility as of June 30, 2024 and December 31, 2023, respectively. These amounts are included in “Other assets” on our Condensed Consolidated Balance Sheets.

9. Leases

We lease office space and equipment under non-cancelable operating leases. The table below summarizes the carrying amount of our operating lease assets and liabilities:


Leases	Classification	June 30, 2024		December 31, 2023
Assets
Operating lease assets	Operating lease assets	$	202,511	$	208,910
Total lease assets		$	202,511	$	208,910
Liabilities
Current
Operating lease liabilities	Accounts payable, accrued expenses and other	$	37,547	$	33,864
Noncurrent
Operating lease liabilities	Noncurrent operating lease liabilities	214,517		223,774
Total lease liabilities		$	252,064	$	257,638

The table below summarizes total lease costs:


	Three Months Ended June 30,				Six Months Ended June 30,
Lease Cost	2024		2023		2024		2023
Operating lease costs	$	12,364	$	12,965	$	24,908	$	25,948
Short-term lease costs	952		708		1,394		1,400
Variable lease costs and other	3,696		2,985		6,783		5,778
Total lease cost, net	$	17,012	$	16,658	$	33,085	$	33,126

The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases and includes a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheets:


	As of June 30, 2024
2024 (remaining)	$	26,952
2025	50,846
2026	44,950
2027	43,567
2028	35,126
Thereafter	114,052
Total future lease payments	315,493
Less: imputed interest	(63,429)
Total	$	252,064

The table below includes cash paid for our operating lease liabilities, other non-cash information, our weighted average remaining lease term and weighted average discount rate:


	Six Months Ended June 30,
		2024			2023
Cash paid for amounts included in the measurement of operating lease liabilities		$	27,501		$	28,039

Operating lease assets obtained in exchange for lease liabilities		$	13,018		$	19,671

Weighted average remaining lease term (years)
Operating leases		7.5			8.1

Weighted average discount rate
Operating leases		5.9		%	5.7		%

10. Commitments and Contingencies

We are subject to legal actions arising in the ordinary course of business. In management’s opinion, we believe we have adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions. We are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect on our financial condition or results of our operations.

11. Share-Based Compensation

During the six months ended June 30, 2024, we granted 67,493 restricted share awards, 58,405 restricted stock units and 75,994 performance stock units under the FTI Consulting, Inc. 2017 Omnibus Incentive Compensation Plan, our employee equity compensation plan. Our performance stock units are presented at the maximum potential payout percentage of 150% of target shares granted. These awards are recorded as equity on the Condensed Consolidated Balance Sheets. During the six months ended June 30, 2024, 12,212 shares of restricted stock, 1,059 restricted stock units and no stock options were forfeited prior to the completion of the applicable vesting requirements. Additionally, 988 performance stock units were forfeited during the six months ended June 30, 2024, arising from award targets that were not achieved.

Total share-based compensation expense, net of forfeitures is detailed in the following table:


	Three Months Ended June 30,				Six Months Ended June 30,
Income Statement Classification	2024		2023		2024		2023
Direct cost of revenues	$	5,081	$	4,562	$	10,799	$	9,261
Selling, general and administrative expenses	5,406		3,863		9,906		8,907

Total share-based compensation expense	$	10,487	$	8,425	$	20,705	$	18,168

12. Stockholders’ Equity

2016 Stock Repurchase Program

On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the “Repurchase Program”). On each of May 18, 2017, December 1, 2017, February 21, 2019 and February 20, 2020, our Board of Directors authorized an additional $100.0 million. On each of July 28, 2020 and December 3, 2020, our Board of Directors authorized an additional $200.0 million. On December 1, 2022, our Board of Directors authorized an additional $400.0 million, increasing the Repurchase Program to an aggregate authorization of $1.3 billion. No time limit has been established for the completion of the Repurchase Program, and the Repurchase Program may be suspended, discontinued or replaced by the Board of Directors at any time without prior notice. As of June 30, 2024, we had $460.7 million available under the Repurchase Program to repurchase additional shares.

The following table details our stock repurchases under the Repurchase Program:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Shares of common stock repurchased and retired	—		—		—		112
Average price paid per share	$	—	$	—	$	—	$	158.70
Total cost	$	—	$	—	$	—	$	17,797

As we repurchase our common shares, we reduce stated capital on our Condensed Consolidated Balance Sheets for the $0.01 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction to additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings.

Common Stock Outstanding

Common stock outstanding was approximately 35.9 million shares and 35.5 million shares as of June 30, 2024 and December 31, 2023, respectively. Common stock outstanding includes unvested restricted stock awards, which are considered issued and outstanding under the terms of the restricted stock award agreements.

13. Segment Reporting

We manage our business in five reportable segments: Corporate Finance, FLC, Economic Consulting, Technology and Strategic Communications.

Our Corporate Finance segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, lenders, governments and other financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of services centered around four core offerings: Business Transformation, Strategy, Transactions and Turnaround & Restructuring.

Our FLC segment provides law firms, companies, boards of directors, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services across risk and investigations and disputes, supported by our data & analytics technology-enabled solutions, with a focus on highly regulated industries. Our services are centered around five core offerings: Construction, Projects & Assets and Environmental Solutions, Data & Analytics, Disputes, Healthcare Risk Management & Advisory, and Risk and Investigations.

Our Economic Consulting segment, including subsidiary Compass Lexecon LLC, provides law firms, companies, government entities and other interested parties with analyses of complex economic issues for use in international arbitration, legal and regulatory proceedings, and strategic decision making and public policy debates around the world. We deliver a wide range of services centered around three core offerings: Antitrust & Competition Economics, Financial Economics and International Arbitration.

Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting services. Our professionals help organizations better address risk as the growing volume and variety of enterprise and emerging data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert and analytics-powered solutions driven by investigations, litigation, antitrust and competition, merger & acquisition, restructuring and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security Services.

Our Strategic Communications segment develops and executes communications strategies to help management teams, boards of directors, law firms, governments and regulators manage change and mitigate risk surrounding transformational and disruptive events, including transactions, investigations, disputes, crises, regulation and legislation. We deliver a wide range of services centered around three core offerings: Corporate Reputation, Financial Communications and Public Affairs.

We evaluate the performance of our operating segments based on Adjusted Segment EBITDA, a GAAP financial measure. 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 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 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.

The table below presents revenues and Adjusted Segment EBITDA for our reportable segments:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues
Corporate Finance (1)	$	347,971	$	317,912	$	713,981	$	633,564
FLC (1)	169,496		164,760		345,570		322,499
Economic Consulting	230,873		201,822		435,421		371,417
Technology	115,875		97,444		216,588		188,062
Strategic Communications	84,941		82,653		166,149		155,755
Total revenues	$	949,156	$	864,591	$	1,877,709	$	1,671,297
Adjusted Segment EBITDA
Corporate Finance (1)	$	66,467	$	45,510	$	141,692	$	97,357
FLC (1)	14,994		25,598		48,703		47,382
Economic Consulting	44,296		35,523		58,446		49,716
Technology	20,930		20,087		35,511		35,453
Strategic Communications	11,611		12,263		24,037		21,819
Total Adjusted Segment EBITDA	$	158,298	$	138,981	$	308,389	$	251,727

(1)Effective July 1, 2023, prior period segment information for the Corporate Finance and FLC segments has been recast in this Quarterly Report on Form 10-Q to include the reclassification of a portion of the Company’s health solutions practice in the FLC segment to our realigned business transformation practice within our Corporate Finance segment.

The table below reconciles net income to Total Adjusted Segment EBITDA:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	83,947	$	62,395	$	163,912	$	109,942
Add back:
Income tax provision	18,735		22,708		38,265		37,682
Interest income and other	(1,909)		584		(3,490)		1,926
Interest expense	3,319		3,022		5,038		5,961

Unallocated corporate expenses	42,884		39,026		82,415		73,761
Segment depreciation expense	10,242		9,829		20,153		18,856
Amortization of intangible assets	1,080		1,417		2,096		3,599


Total Adjusted Segment EBITDA	$	158,298	$	138,981	$	308,389	$	251,727


Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion and analysis of our consolidated financial condition, results of operations, and liquidity and capital resources for the three and six months ended June 30, 2024 and 2023, and significant factors that could affect our prospective financial condition and results of operations. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”). In addition to historical information, the following discussion includes forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations and intentions. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements.

BUSINESS OVERVIEW

FTI Consulting, Inc., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”), 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. Individually, each of our segments and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact. Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from proactive risk management to rapid response to unexpected events and dynamic environments.

We report financial results for the following five reportable segments:

Our Corporate Finance & Restructuring (“Corporate Finance”) segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, lenders, governments and other financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of services centered around four core offerings: Business Transformation, Strategy, Transactions and Turnaround & Restructuring.

Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, boards of directors, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services across risk and investigations and disputes, supported by our data & analytics technology-enabled solutions, with a focus on highly regulated industries. Our services are centered around five core offerings: Construction, Projects & Assets and Environmental Solutions, Data & Analytics, Disputes, Healthcare Risk Management & Advisory, and Risk and Investigations.

Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting services. Our professionals help organizations better address risk as the growing volume and variety of enterprise and emerging data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert and analytics-powered solutions driven by investigations, litigation, antitrust and competition, merger & acquisition (“M&A”), restructuring and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security Services.

We derive substantially all of our revenues from providing professional services to both U.S. and international clients. Most of our services are rendered under time and expense contract arrangements, which require the client to pay us based on the number of hours worked at contractually agreed-upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs. Certain contracts are rendered under fixed-fee arrangements, which require the client to pay a fixed fee in exchange for a predetermined set of professional services. Fixed-fee arrangements may require certain clients to pay us a recurring retainer.

Our contract arrangements may also contain success fees or performance-based arrangements in which our fees are based on the attainment of contractually defined objectives with our client. This type of success fee may supplement a time and expense or fixed-fee arrangement. Success fee revenues may cause variations in our revenues and operating results due to the timing of when achieving the performance-based criteria becomes probable. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.

In our Technology segment, certain clients are billed based on the amount of data storage used or the volume of information processed. Unit-based revenues are defined as revenues billed on a per item, per page or another unit-based method and include revenues from data processing and hosting. Unit-based revenues include revenues associated with licensed software products made available to customers via a web browser (“on-demand”). On-demand revenues are charged on a unit or monthly basis and include, but are not limited to, processing and review related functions.

Our financial results are primarily driven by:

•the number, size and type of engagements we secure;

•the rate per hour or fixed charges we charge our clients for services;

•the utilization rates of the revenue-generating professionals we employ;

•the timing of revenue recognition related to revenues subject to certain performance-based contingencies;

•the number of revenue-generating professionals;

•the types of assignments we are working on at different times;

•the length of the billing and collection cycles; and

•the geographic locations of our clients or locations in which services are rendered.

We define acquisition growth as revenues of acquired companies in the first 12 months following the effective date of an acquisition. When significant, we identify the impact of acquisition-related revenue growth.

When significant, we identify the estimated impact of foreign currency (“FX”) driven by our businesses with functional currencies other than the U.S. dollar (“USD”). The estimated impact of FX on the period-to-period performance results is calculated as the difference between the prior period results, multiplied by the average FX exchange rates to USD in the current period and the prior period results, multiplied by the average FX exchange rates to USD in the prior period.

Non-GAAP Financial 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 in the U.S. (“GAAP”). Certain of these financial measures are considered not in conformity with GAAP (“non-GAAP financial measures”) under the SEC rules. Specifically, we have referred to the following non-GAAP financial 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, which are GAAP financial measures, below in order to more fully define the components of certain non-GAAP financial measures in the accompanying analysis of financial information. As described in Note 13, “Segment Reporting” in Part I, Item 1, of this

Quarterly Report on Form 10-Q, we evaluate the performance of our operating segments based on Adjusted Segment EBITDA, and Segment Operating Income is a component of the definition of Adjusted Segment EBITDA.

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, gain or loss on sale of a business and losses on early extinguishment of debt. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial 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 non-GAAP financial measures, considered along with corresponding GAAP financial measures, provide management and investors with additional information for comparison of our operating results with the operating results of other companies. We define Adjusted EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues.

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, the gain or loss on sale of a business and losses on early extinguishment of debt. 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 these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with an additional understanding of our business operating results, including underlying trends.

We define Free Cash Flow, which is a non-GAAP financial measure, as net cash used in 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 Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this report.

EXECUTIVE HIGHLIGHTS


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(dollar amounts in thousands, except per share data)				(dollar amounts in thousands, except per share data)
Revenues	$	949,156	$	864,591	$	1,877,709	$	1,671,297

Net income	$	83,947	$	62,395	$	163,912	$	109,942
Adjusted EBITDA	$	115,921	$	100,230	$	226,994	$	178,657
Earnings per common share — diluted	$	2.34	$	1.75	$	4.58	$	3.09
Adjusted earnings per common share — diluted	$	2.34	$	1.75	$	4.58	$	3.09
Net cash provided by (used in) operating activities	$	135,226	$	(10,994)	$	(139,592)	$	(265,200)
Total number of employees	8,037		7,853		8,037		7,853

Second Quarter 2024 Executive Highlights

Revenues

Revenues for the three months ended June 30, 2024 increased $84.6 million, or 9.8%, to $949.2 million, compared to the three months ended June 30, 2023, primarily due to higher demand in our Corporate Finance, Economic Consulting and Technology segments.

Net income

Net income for the three months ended June 30, 2024 increased $21.6 million, or 34.5%, to $83.9 million, compared to the three months ended June 30, 2023. The increase in net income was primarily due to higher revenues, a lower effective tax rate and an FX remeasurement gain compared to a loss in the same quarter in the prior year, which was partially offset by an increase in direct compensation and selling, general and administrative (“SG&A”) expenses.

Adjusted EBITDA

Adjusted EBITDA for the three months ended June 30, 2024 increased $15.7 million, or 15.7%, to $115.9 million, compared to the three months ended June 30, 2023. Adjusted EBITDA Margin of 12.2% for the three months ended June 30, 2024 compared to 11.6% for the three months ended June 30, 2023. The increase in Adjusted EBITDA was primarily due to higher revenues, which was partially offset by increased direct compensation and SG&A expenses.

EPS and Adjusted EPS

EPS for the three months ended June 30, 2024 increased $0.59 to $2.34 compared to $1.75 for the three months ended June 30, 2023. The increase in EPS was primarily due to higher net income as described above.

Adjusted EPS was equal to EPS for the three months ended June 30, 2024 and 2023, respectively.

Liquidity and Capital Allocation

Net cash provided by operating activities for the three months ended June 30, 2024 increased $146.2 million to $135.2 million, compared to net cash used in operating activities of $11.0 million for the three months ended June 30, 2023. The increase in net cash provided by operating activities was primarily due to an increase in cash collections resulting from higher revenues, which was partially offset by higher operating expenses and an increase in compensation payments, primarily related to variable compensation, annual salary increases and headcount growth. Days sales outstanding (“DSO”) of 105 days at June 30, 2024 compared to 111 days at June 30, 2023. The decrease in DSO was primarily due to cash collections that outpaced the increase in revenues.

Free Cash Flow was an inflow of $125.2 million and an outflow of $22.0 million for the three months ended June 30, 2024 and 2023, respectively. The increase in Free Cash Flow for the three months ended June 30, 2024 was primarily due to higher net cash provided by operating activities, as described above, and a decrease in net cash used for purchases of property and equipment.

Headcount

The following table includes the net headcount additions (reductions) by segment and in total for the six months ended June 30, 2024.


	Billable Headcount
		Corporate Finance	FLC	Economic Consulting	Technology	Strategic Communications	Total	Non-Billable Headcount	Total Headcount
December 31, 2023		2,215	1,447	1,089	628	971	6,350	1,640	7,990
Additions (reductions), net		(30)	16	2	18	10	16	49	65
March 31, 2024		2,185	1,463	1,091	646	981	6,366	1,689	8,055
Additions (reductions), net		(18)	(6)	(15)	16	(9)	(32)	14	(18)
June 30, 2024		2,167	1,457	1,076	662	972	6,334	1,703	8,037


Percentage change in headcount from December 31, 2023		(2.2)%	0.7%	(1.2)%	5.4%	0.1%	(0.3)%	3.8%	0.6%

CONSOLIDATED RESULTS OF OPERATIONS

Segment and Consolidated Operating Results:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands, except per share data)				(in thousands, except per share data)
Revenues
Corporate Finance (1)	$	347,971	$	317,912	$	713,981	$	633,564
FLC (1)	169,496		164,760		345,570		322,499
Economic Consulting	230,873		201,822		435,421		371,417
Technology	115,875		97,444		216,588		188,062
Strategic Communications	84,941		82,653		166,149		155,755
Total revenues	$	949,156	$	864,591	$	1,877,709	$	1,671,297
Segment operating income
Corporate Finance (1)	$	63,193	$	42,116	$	135,112	$	90,092
FLC (1)	13,100		23,885		45,067		44,173
Economic Consulting	42,952		34,024		55,817		46,724
Technology	17,137		16,432		28,076		28,322
Strategic Communications	10,594		11,278		22,068		19,961
Total segment operating income	146,976		127,735		286,140		229,272
Unallocated corporate expenses	(42,884)		(39,026)		(82,415)		(73,761)
Operating income	104,092		88,709		203,725		155,511
Other income (expense)
Interest income and other	1,909		(584)		3,490		(1,926)
Interest expense	(3,319)		(3,022)		(5,038)		(5,961)

	(1,410)		(3,606)		(1,548)		(7,887)
Income before income tax provision	102,682		85,103		202,177		147,624
Income tax provision	18,735		22,708		38,265		37,682
Net income	$	83,947	$	62,395	$	163,912	$	109,942
Earnings per common share — basic	$	2.38	$	1.87	$	4.67	$	3.30
Earnings per common share — diluted	$	2.34	$	1.75	$	4.58	$	3.09

Reconciliation of Net Income to Adjusted EBITDA:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands)				(in thousands)
Net income	$	83,947	$	62,395	$	163,912	$	109,942
Add back:
Income tax provision	18,735		22,708		38,265		37,682
Interest income and other	(1,909)		584		(3,490)		1,926
Interest expense	3,319		3,022		5,038		5,961

Depreciation and amortization	10,749		10,104		21,173		19,547
Amortization of intangible assets	1,080		1,417		2,096		3,599


Adjusted EBITDA	$	115,921	$	100,230	$	226,994	$	178,657

Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS:

Net Income and EPS were equal to Adjusted Net Income and Adjusted EPS, respectively, for the three and six months ended June 30, 2024 and 2023.

Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands)				(in thousands)
Net cash provided by (used in) operating activities	$	135,226	$	(10,994)	$	(139,592)	$	(265,200)
Purchases of property and equipment	(10,060)		(11,052)		(14,701)		(29,085)
Free Cash Flow	$	125,166	$	(22,046)	$	(154,293)	$	(294,285)

Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Revenues and operating income

See “Segment Results” for an expanded discussion of revenues, gross profit and SG&A expenses.

Unallocated corporate expenses

Unallocated corporate expenses for the three months ended June 30, 2024 increased $3.9 million, or 9.9%, to $42.9 million compared to $39.0 million for the three months ended June 30, 2023. The increase was primarily due to higher compensation expenses and investments related to artificial intelligence (“AI”) capabilities, which was partially offset by lower expenses for corporate initiatives.

Interest income and other

Interest income and other, which includes FX gains and losses, increased $2.5 million to $1.9 million for the three months ended June 30, 2024 compared to a $0.6 million loss for the three months ended June 30, 2023. The increase was primarily due to a $0.5 million FX gain for the three months ended June 30, 2024 compared to a $2.4 million FX loss for the three months ended June 30, 2023.

FX gains and losses, both realized and unrealized, relate to the remeasurement or settlement of monetary assets and liabilities that are denominated in a currency other than an entity’s functional currency. These monetary assets and liabilities include cash, as well as third-party and intercompany receivables and payables.

Interest expense

Interest expense for the three months ended June 30, 2024 increased $0.3 million, or 9.8%, to $3.3 million compared to $3.0 million for the three months ended June 30, 2023. The increase was primarily due to higher interest rates on our borrowings, which was partially offset by lower borrowings. Our borrowings in the prior year quarter included amounts owed on our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”), which matured in August 2023, as well as our borrowings on our senior secured bank revolving credit facility (“Credit Facility”).

Income tax provision

Our income tax provision decreased $4.0 million, or 17.5%, to $18.7 million for the three months ended June 30, 2024 compared to $22.7 million for the three months ended June 30, 2023. Our effective tax rate of 18.2% for the three months ended June 30, 2024 compared to 26.7% for the three months ended June 30, 2023. The decrease in the income tax provision was primarily due to a favorable tax benefit related to share-based compensation, as a larger number of non-qualified stock options were exercised compared to the prior year quarter, and a decrease in foreign taxes as compared to the three months ended June 30, 2023.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Revenues and operating income

See “Segment Results” for an expanded discussion of revenues, gross profit and SG&A expenses.

Unallocated corporate expenses

Unallocated corporate expenses for the six months ended June 30, 2024 increased $8.7 million, or 11.7%, to $82.4 million compared with $73.8 million for the six months ended June 30, 2023. The increase was primarily due to higher compensation expenses, investments related to AI capabilities and an increase legal expenses, which was partially offset by lower expenses for corporate initiatives.

Interest income and other

Interest income and other, which includes FX gains and losses, increased $5.4 million to $3.5 million for the six months ended June 30, 2024 compared with a $1.9 million loss for the six months ended June 30, 2023. The increase was primarily due to a $6.7 million FX loss for the six months ended June 30, 2023 that did not recur during the six months ended June 30, 2024, which was partially offset by a $1.1 million decrease in interest income.

Interest expense

Interest expense for the six months ended June 30, 2024 decreased $0.9 million to $5.0 million compared with $6.0 million for the six months ended June 30, 2023. The decrease was primarily due to lower borrowings, which was partially offset by higher interest rates on our borrowings. Our borrowings in the same period in the prior year included amounts owed on our 2023 Convertible Notes, which matured in August 2023, as well as borrowings on our Credit Facility.

Income tax provision

Our income tax provision increased $0.6 million, or 1.5%, to $38.3 million for the six months ended June 30, 2024 compared to $37.7 million for the six months ended June 30, 2023. Our effective tax rate of 18.9% for the six months ended June 30, 2024 compared to 25.5% for the six months ended June 30, 2023. The increase in the income tax provision was due to an increase in income before income tax provision, which was partially offset by a decrease in the tax rate. The tax rate for the six months ended June 30, 2024 was impacted by a favorable tax benefit related to share-based compensation, as a larger number of non-qualified stock options were exercised as compared to the same period in the prior year, and a decrease in foreign taxes as compared to the six months ended June 30, 2023.

SEGMENT RESULTS

Total Adjusted Segment EBITDA

We evaluate the performance of each of our operating segments based on Adjusted Segment EBITDA, which is a GAAP financial measure. The following table reconciles net income to Total Adjusted Segment EBITDA, a non-GAAP financial measure, for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

	(in thousands)				(in thousands)
Net income	$	83,947	$	62,395	$	163,912	$	109,942
Add back:
Income tax provision	18,735		22,708		38,265		37,682
Interest income and other	(1,909)		584		(3,490)		1,926
Interest expense	3,319		3,022		5,038		5,961

Unallocated corporate expenses	42,884		39,026		82,415		73,761
Total segment operating income	146,976		127,735		286,140		229,272
Add back:
Segment depreciation expense	10,242		9,829		20,153		18,856
Amortization of intangible assets	1,080		1,417		2,096		3,599


Total Adjusted Segment EBITDA	$	158,298	$	138,981	$	308,389	$	251,727

Other Segment Operating Data


	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
Number of revenue-generating professionals (at period end):
Corporate Finance (1)	2,167			2,170			2,167			2,170
FLC (1)	1,457			1,441			1,457			1,441
Economic Consulting	1,076			1,039			1,076			1,039
Technology (2)	662			589			662			589
Strategic Communications	972			992			972			992
Total revenue-generating professionals	6,334			6,231			6,334			6,231
Utilization rates of billable professionals: (3)
Corporate Finance (1)	60		%	58		%	61		%	59		%
FLC (1)	58		%	58		%	58		%	58		%
Economic Consulting	70		%	69		%	69		%	68		%
Average billable rate per hour: (4)
Corporate Finance (1)	$	496		$	482		$	505		$	480
FLC