10-Q 1 fcn-20220930.htm 10-Q fcn-20220930
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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 September 30, 2022
OR
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)
 
  
Maryland52-1261113
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
555 12th Street NW
Washington,
DC20004
(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 classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par valueFCNNew 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 filerAccelerated filer
Non-accelerated filerSmaller 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. 
ClassOutstanding at October 20, 2022
Common Stock, $0.01 par value34,423,110



FTI CONSULTING, INC. AND SUBSIDIARIES
INDEX
 
  
Page 
   
  
 
  
 
  
 
  
 
  
 
  
  
  
 
  
  
  
  
  
  
  
 
2


PART I—FINANCIAL INFORMATION
FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
Item 1.Financial Statements
 
 September 30,December 31,
 20222021
(Unaudited)
Assets 
Current assets  
Cash and cash equivalents$327,047 $494,485 
 Accounts receivable, net947,993 754,120 
Current portion of notes receivable27,198 30,256 
Prepaid expenses and other current assets91,187 91,166 
Total current assets1,393,425 1,370,027 
Property and equipment, net144,713 142,163 
Operating lease assets195,339 215,995 
Goodwill1,212,541 1,232,791 
Intangible assets, net25,673 31,990 
Notes receivable, net54,144 53,539 
Other assets56,259 54,404 
Total assets$3,082,094 $3,100,909 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, accrued expenses and other$175,491 $165,025 
Accrued compensation422,985 507,556 
Billings in excess of services provided50,523 45,535 
Total current liabilities648,999 718,116 
Long-term debt, net314,756 297,158 
Noncurrent operating lease liabilities213,449 236,026 
Deferred income taxes161,486 170,612 
Other liabilities98,821 95,676 
Total liabilities1,437,511 1,517,588 
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 34,422 (2022) and 34,333 (2021)
344 343 
Additional paid-in capital 13,662 
Retained earnings1,868,424 1,698,156 
Accumulated other comprehensive loss(224,185)(128,840)
Total stockholders' equity1,644,583 1,583,321 
Total liabilities and stockholders' equity$3,082,094 $3,100,909 
 
See accompanying notes to condensed consolidated financial statements
3


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in thousands, except per share data)
(Unaudited)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Revenues$775,865 $702,228 $2,254,477 $2,099,991 
Operating expenses
Direct cost of revenues526,654 472,235 1,539,838 1,431,381 
Selling, general and administrative expenses159,186 138,600 476,097 399,076 
Amortization of intangible assets2,315 2,860 7,320 8,515 
 688,155 613,695 2,023,255 1,838,972 
Operating income87,710 88,533 231,222 261,019 
Other income (expense)    
Interest income and other7,771 5,175 10,418 5,297 
Interest expense(2,378)(5,073)(7,468)(15,164)
 5,393 102 2,950 (9,867)
Income before income tax provision93,103 88,635 234,172 251,152 
Income tax provision15,836 19,155 46,156 54,394 
Net income$77,267 $69,480 $188,016 $196,758 
Earnings per common share — basic$2.29 $2.07 $5.57 $5.88 
Earnings per common share — diluted$2.15 $1.96 $5.25 $5.58 
Other comprehensive loss, net of tax
Foreign currency translation adjustments, net of tax
expense of $0
$(48,475)$(18,607)$(95,345)$(18,042)
Total other comprehensive loss, net of tax(48,475)(18,607)(95,345)(18,042)
Comprehensive income$28,792 $50,873 $92,671 $178,716 
 
See accompanying notes to condensed consolidated financial statements
4


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
 
Accumulated
Other
Comprehensive
Loss
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
 
 SharesAmountTotal
Balance at December 31, 202134,333 $343 $13,662 $1,698,156 $(128,840)$1,583,321 
Net income— $— $— $59,321 $— $59,321 
Other comprehensive loss:
Cumulative translation adjustment— — — — (6,191)(6,191)
Issuance of common stock in connection with:
Exercise of options26 — 923 — — 923 
Restricted share grants, less net
             settled shares of 54
134 2 (7,836)— — (7,834)
Stock units issued under incentive
             compensation plan
— — 1,664 — — 1,664 
Purchase and retirement of common stock(22)— (3,098)— — (3,098)
 Cumulative effect due to adoption of new accounting standard— — (34,131)22,078 — (12,053)
 Conversion of convertible senior notes due 2023— — (2)— — (2)
Share-based compensation— — 5,967 — — 5,967 
 Reclassification of negative additional paid-in capital— — 22,851 (22,851)—  
Balance at March 31, 202234,471 $345 $ $1,756,704 $(135,031)$1,622,018 
Net income— $— $— $51,428 $— $51,428 
Other comprehensive loss:
Cumulative translation adjustment— — — — (40,679)(40,679)
Issuance of common stock in connection
with:
Exercise of options22 — 687 — — 687 
Restricted share grants, less net
settled shares of 55
47 — (8,907)— — (8,907)
Conversion of convertible senior notes
   due 2023
— — (11)— — (11)
Share-based compensation— — 6,083 — — 6,083 
 Reclassification of negative additional paid-in capital— — 2,647 (2,647)—  
Balance at June 30, 202234,540 $345 $499 $1,805,485 $(175,710)$1,630,619 
Net income— $— $— $77,267 $— $77,267 
Other comprehensive loss:
Cumulative translation adjustment— — — — (48,475)(48,475)
Issuance of common stock in connection
with:
Restricted share grants, less net
settled shares of 5
10 — (837)— — (837)
Purchase and retirement of common
   stock
(128)(1)(20,431)— — (20,432)
Share-based compensation— — 6,441 — — 6,441 
 Reclassification of negative additional paid-in capital— — 14,328 (14,328)—  
Balance at September 30, 202234,422 $344 $ $1,868,424 $(224,185)$1,644,583 
5


Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
 Common StockRetained
Earnings
 
 SharesAmountTotal
Balance at December 31, 202034,481 $345 $ $1,506,271 $(106,435)$1,400,181 
Net income— $— $— $64,496 $— $64,496 
Other comprehensive loss:
Cumulative translation adjustment— — — — (5,242)(5,242)
Issuance of common stock in connection with:
Exercise of options12 — 434 — — 434 
Restricted share grants, less net settled
   shares of 63
157 1 (7,232)— — (7,231)
Stock units issued under incentive
   compensation plan
— — 2,603 — — 2,603 
Purchase and retirement of common stock(422)(4)(3,047)(43,082)— (46,133)
Share-based compensation— — 7,242 — — 7,242 
Balance at March 31, 202134,228 $342 $ $1,527,685 $(111,677)$1,416,350 
Net income— $— $— $62,782 $— $62,782 
Other comprehensive income:
Cumulative translation adjustment— — — — 5,807 5,807 
Issuance of common stock in connection
with:
Exercise of options33 1 1,136 — — 1,137 
Restricted share grants, less net
settled shares of 13
21 — (1,814)— — (1,814)
Share-based compensation— — 4,948 — — 4,948 
Balance at June 30, 202134,282 $343 $4,270 $1,590,467 $(105,870)$1,489,210 
Net income— $— $— $69,480 $— $69,480 
Other comprehensive loss:
Cumulative translation adjustment— — — — (18,607)(18,607)
Issuance of common stock in connection
  with:
Exercise of options4 — 126 — — 126 
Restricted share grants, less net
   settled shares of 6
9 — (866)— — (866)
Share-based compensation— — 4,960 — — 4,960 
Balance at September 30, 202134,295 $343 $8,490 $1,659,947 $(124,477)$1,544,303 

See accompanying notes to condensed consolidated financial statements
6


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
 Nine Months Ended September 30,
20222021
Operating activities
Net income$188,016 $196,758 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortization27,045 25,631 
Amortization and impairment of intangible assets7,320 8,515 
Acquisition-related contingent consideration863 (1,014)
Provision for expected credit losses13,101 14,816 
Share-based compensation18,491 17,150 
Amortization of debt discount and issuance costs and other1,588 8,551 
Deferred income taxes(9,140)5,128 
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, billed and unbilled(251,280)(115,544)
Notes receivable838 4,392 
Prepaid expenses and other assets(3,066)1,145 
Accounts payable, accrued expenses and other21,936 (22,745)
Income taxes3,940 18,025 
Accrued compensation(67,763)2,803 
Billings in excess of services provided7,672 (7,691)
Net cash provided by (used in) operating activities(40,439)155,920 
Investing activities  
Payments for acquisition of businesses, net of cash received(6,742)(9,833)
Purchases of property and equipment and other(38,935)(52,441)
Net cash used in investing activities(45,677)(62,274)
Financing activities  
Borrowings under revolving line of credit165,000 377,500 
Repayments under revolving line of credit(165,000)(352,500)
Purchase and retirement of common stock(23,530)(46,133)
Share-based compensation tax withholdings and other (15,663)(8,277)
Payments for business acquisition liabilities(4,848)(7,496)
Deposits and other7,092 1,928 
Net cash used in financing activities(36,949)(34,978)
Effect of exchange rate changes on cash and cash equivalents(44,373)(11,094)
Net increase (decrease) in cash and cash equivalents(167,438)47,574 
Cash and cash equivalents, beginning of period494,485 294,953 
Cash and cash equivalents, end of period$327,047 $342,527 
Supplemental cash flow disclosures
Cash paid for interest$8,012 $8,756 
Cash paid for income taxes, net of refunds$51,353 $31,240 
Non-cash investing and financing activities:
Issuance of stock units under incentive compensation plans$1,664 $2,603 
Business acquisition liabilities not yet paid$5,593 $ 
Non-cash additions to property and equipment    $4,970 $4,435 
See accompanying notes to condensed consolidated financial statements
7


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, 2021 filed with the SEC. 
2. New Accounting Standards
Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06 ("ASU 2020-06"), Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain events. On January 1, 2022, we adopted ASU 2020-06 using the modified retrospective method and recorded a cumulative-effect adjustment of approximately $22.1 million to the beginning balance of retained earnings at the date of adoption and a $16.4 million net increase to "Long-term debt, net" on the Condensed Consolidated Balance Sheets. As permitted by the guidance, prior comparative periods were not adjusted under this method.
Pursuant to ASU 2020-06, we are no longer permitted to separately account for the liability and equity components of convertible debt instruments. As such, the carrying amount of our 2.0% convertible senior notes due 2023 ("2023 Convertible Notes") is recognized as a liability as of September 30, 2022 on the Condensed Consolidated Balance Sheets. The ASU 2020-06 adoption also resulted in the derecognition of the embedded conversion option, net of tax effects, of approximately $34.1 million, which is included in “Additional paid-in capital,” as well as the derecognition of the related deferred tax liabilities of approximately $4.3 million on the Condensed Consolidated Balance Sheets.
The net effect of the adoption in the current and future periods as compared to prior periods is to reduce non-cash interest expense, or increase net income, as there is no longer a discount from the separation of the conversion feature within equity. The discount from recognition of debt issuance costs will be amortized over the effective life of the 2023 Convertible Notes using the effective interest method.
ASU 2020-06 also no longer allows the use of the treasury stock method for convertible instruments for purposes of calculating diluted earnings per share and instead requires application of the if-converted method. Under that method, diluted earnings per share will generally be calculated assuming that all of the convertible debt instruments were converted solely into shares of common stock at the beginning of the reporting period unless the result would be anti-dilutive. Effective January 1, 2022, pursuant to the terms of the indenture, dated as of August 20, 2018, as amended by the first supplemental indenture, dated as of January 1, 2022 (the "First Supplemental Indenture"), between us and U.S. Bank National Association, as trustee (as so amended, the "Indenture"), the principal amount of the 2023 Convertible Notes being converted is required to be paid in cash and only the premium due upon conversion, if any, is permitted to be settled in shares, cash or a combination of shares and cash. Consequently, the if-converted method produces a similar result as the treasury stock method, which was used prior to the adoption of ASU 2020-06 for the 2023 Convertible Notes.
8


Accounting Standards Not Yet Adopted
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance, which requires entities to provide disclosures on significant government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is effective for annual periods beginning after December 15, 2021 and impacts only annual financial statement footnote disclosures. 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 nine months ended September 30, 2022, we used the if-converted method for calculating the potential dilutive effect of the conversion feature of the principal amount of the 2023 Convertible Notes on earnings per common share, as required by the adoption of ASU 2020-06. Prior to the adoption of ASU 2020-06, we used the treasury stock method for calculating the potential dilutive effect of the conversion feature of the principal amount of the 2023 Convertible Notes on earnings per common share because we had the ability and intent to settle the principal amount of the outstanding 2023 Convertible Notes in cash. The conversion feature had a dilutive impact on earnings per common share for the three and nine months ended September 30, 2022 and 2021, as the average market price per share of our common stock for the periods exceeded the conversion price of $101.38 per share. See Note 8, "Debt" for additional information about the 2023 Convertible Notes.
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Numerator — basic and diluted    
Net income$77,267 $69,480 $188,016 $196,758 
Denominator
Weighted average number of common shares outstanding — basic
33,812 33,495 33,741 33,478 
Effect of dilutive share-based awards545 662 607 697 
Effect of dilutive stock options322 363 330 369 
Effect of dilutive convertible notes1,239 842 1,147 721 
Weighted average number of common shares outstanding — diluted
35,918 35,362 35,825 35,265 
Earnings per common share — basic$2.29 $2.07 $5.57 $5.88 
Earnings per common share — diluted$2.15 $1.96 $5.25 $5.58 
Antidilutive stock options and share-based awards 2 10 5 
4. Revenues
We generate the majority of our revenues by providing consulting services to our clients. Most of our consulting service contracts are based on one of the following types of contract arrangements:
Time and expense arrangements require the client to pay us based on the number of hours worked at contractually agreed-upon rates. We recognize revenues for these contract arrangements based on hours incurred and contracted rates utilizing a right-to-invoice practical expedient because we have a right to consideration for services completed to date. When a time and expense arrangement has a not-to-exceed or "cap" amount and we expect to perform work in excess of the cap, we recognize revenues up to the cap amount specified by the client, based on the efforts or hours incurred as a percentage of total efforts or hours expected to be incurred (i.e., proportional performance method).
9


Fixed-fee arrangements require the client to pay a fixed fee in exchange for a predetermined set of professional services. We recognize revenues earned to date by applying the proportional performance method. Generally, these arrangements have one performance obligation.
Performance-based or contingent arrangements represent forms of variable consideration. In these arrangements, our fees are based on the attainment of contractually defined objectives with our client, such as completing a business transaction or assisting the client in achieving a specific business objective. We recognize revenues earned to date in an amount that is probable not to reverse and by applying the proportional performance method when the criteria for over time revenue recognition are met.
Certain fees in our time and materials arrangements may be subject to approval by a third party, such as a bankruptcy court or other regulatory agency. In such cases, we record revenues based on the amount we estimate we will be entitled to in exchange for our services and only to the extent a significant reversal of revenues is not likely to occur when the uncertainty associated with the estimate is subsequently resolved. Potential fee reductions imposed by bankruptcy courts and other regulatory agencies or negotiated with specific clients are estimated on a specific identification basis. Our estimates may vary depending on the nature of the engagement, client economics, historical experience and other appropriate factors. When there are changes in our estimates of potential fee reductions, we record such changes to revenues with a corresponding offset to our billed and unbilled accounts receivable.
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 immaterial for the three months ended September 30, 2022 and $12.5 million for the nine months ended September 30, 2022, and $11.5 million and $23.0 million for the three and nine months ended September 30, 2021, respectively.
Unfulfilled performance obligations primarily consist of fees not yet recognized on certain fixed-fee arrangements and performance-based and contingent arrangements. As of September 30, 2022 and December 31, 2021, the aggregate amount of the remaining contract transaction price allocated to unfulfilled performance obligations was $2.5 million and $3.7 million, respectively. We expect to recognize the majority of the related revenues over the next 24 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 September 30, 2022 and $3.8 million as of December 31, 2021.
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 $1.0 million as of September 30, 2022 and immaterial as of December 31, 2021.
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:
September 30,
2022
December 31,
2021
Accounts receivable:
Billed receivables$636,288 $542,056 
Unbilled receivables352,711 248,681 
Allowance for expected credit losses(41,006)(36,617)
Accounts receivable, net$947,993 $754,120 
10


We maintain an allowance for expected credit losses, which represents the estimated aggregate amount of credit risk arising from the inability or unwillingness of specific clients to pay our fees or disputes that may affect our ability to fully collect our billed accounts receivable. We record our estimate of lifetime expected credit losses concurrently with the initial recognition of the underlying receivable. Accounts receivable, net of the allowance for expected credit losses, represents the amount we expect to collect. At each reporting date, we adjust the allowance for expected credit losses to reflect our current estimate.
The following table summarizes the total provision for expected credit losses and write-offs:
 Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Provision for expected credit losses (1)
$4,348 $6,580 $13,101 $14,816 
Write-offs$3,877 $5,746 $9,917 $15,464 
(1)    Adjustments to the allowance for expected credit losses are recorded to selling, general & administrative ("SG&A") expenses on the Condensed Consolidated Statements of Comprehensive Income.
We estimate the current-period provision for expected credit losses on a specific identification basis. Our judgments regarding a specific client’s credit risk considers factors such as the counterparty’s creditworthiness, knowledge of the specific client’s circumstances and historical collection experience for similar clients. Other factors include, but are not limited to, current economic conditions and forward-looking estimates. Our actual experience may vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional provisions for expected credit losses in future periods. The risk of credit losses may be mitigated to the extent that we received a retainer from some of our clients prior to performing services. 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, 2021$501,046 $237,929 $268,858 $96,811 $128,147 $1,232,791 
Acquisitions (3)
11,332     11,332 
Foreign currency translation
adjustment and other
(2,026)(5,870)(1,612)(61)(22,013)(31,582)
Balance at September 30, 2022$510,352 $232,059 $267,246 $96,750 $106,134 $1,212,541 
(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 September 30, 2022 and December 31, 2021.
(2)    Amounts for our Strategic Communications segment include gross carrying values of $300.3 million and $322.3 million as of September 30, 2022 and December 31, 2021, respectively, and accumulated impairment losses of $194.1 million as of September 30, 2022 and December 31, 2021.
(3)    During the nine months ended September 30, 2022, we acquired a business that was assigned to the Corporate Finance segment. We recorded $11.3 million in goodwill based on a purchase price allocation as a result of the acquisition. We have included the results of the acquired business’s operations in the Corporate Finance segment since its acquisition date.
11


Intangible Assets
Intangible assets were as follows:
 September 30, 2022December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizing intangible assets      
Customer relationships (1)
$79,347 $63,546 $15,801 $83,101 $63,124 $19,977 
Trademarks (1)
8,886 4,648 4,238 10,965 4,732 6,233 
Acquired software and other (1)
967 433 534 3,114 2,434 680 
89,200 68,627 20,573 97,180 70,290 26,890 
Non-amortizing intangible assets
Trademarks 5,100 — 5,100 5,100 — 5,100 
Total$94,300 $68,627 $25,673 $102,280 $70,290 $31,990 
(1)During the nine months ended September 30, 2022, we acquired a business, and its related intangible assets were assigned to the Corporate Finance segment.
Intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of $2.3 million and $7.3 million for the three and nine months ended September 30, 2022, respectively, and $2.9 million and $8.5 million for the three and nine months ended September 30, 2021, respectively.
We estimate our future amortization expense for our intangible assets with finite lives to be as follows:
Year
As of
September 30, 2022 (1)
2022 (remaining)$2,277 
20235,844 
20243,692 
20253,047 
20261,988 
Thereafter3,725 
 $20,573 
(1)Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, impairments, changes in useful lives, or other relevant factors or changes.
Intercompany Intellectual Property Licensing Agreement
During the three months ended September 30, 2022, a U.S. subsidiary of the Company (the “Licensor”) entered into an intellectual property license agreement with certain foreign subsidiaries of the Company in consideration of royalty payments that have been partially prepaid (the "License Agreement"). The prepaid royalties remitted to the Licensor are taxable in the U.S. for the year ended December 31, 2022 and represent intangible assets in the foreign subsidiaries that are eliminated in consolidation. The impact on the U.S. current income tax provision was mainly offset by a deferred foreign income tax benefit related to the future tax deductions arising from amortization of intangible assets in the foreign subsidiaries. The License Agreement provides sufficient future taxable income in the U.S. to fully utilize the Company’s existing foreign tax credits in the U.S., which were previously subject to a valuation allowance. The impact on the tax rate for the three and nine months ended September 30, 2022 was a combined $8.3 million tax benefit.
12


7. Financial Instruments
The table below presents the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of September 30, 2022 and December 31, 2021:
September 30, 2022
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities
Acquisition-related contingent consideration (1)(2)
$12,847 $ $ $12,847 
2023 Convertible Notes (3)
314,756  519,300  
Total$327,603 $ $519,300 $12,847 
December 31, 2021
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities   
Acquisition-related contingent consideration (1)
$15,110 $ $ $15,110 
2023 Convertible Notes (3)
297,158  466,619  
Total$312,268 $ $466,619 $15,110 
(1)The short-term portion is included in “Accounts payable, accrued expenses and other” and the long-term portion is included in “Other liabilities” on the Condensed Consolidated Balance Sheets.
(2)During the nine months ended September 30, 2022, we acquired a business that was assigned to our Corporate Finance segment and recorded an acquisition-related contingent consideration liability.
(3)The carrying value as of September 30, 2022 includes unamortized deferred debt issuance costs. The carrying value as of December 31, 2021 includes unamortized deferred debt issuance costs and debt discount.
The fair values of financial instruments not included in the tables above are estimated to be equal to their carrying values as of September 30, 2022 and December 31, 2021.
We estimate the fair value of our 2023 Convertible Notes based on their last actively traded prices. The fair value of our 2023 Convertible Notes is classified within Level 2 of the fair value hierarchy because it is traded in less active markets.
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.
13


The change in our liability for acquisition-related contingent consideration for our Level 3 financial instruments is as follows:
Contingent Consideration
Balance at December 31, 2021$15,110 
Additions5,370 
Accretion expense (1)
(979)
Payments(4,430)
Foreign currency translation adjustment (2)
(115)
Balance at March 31, 2022$14,956 
Accretion expense (1)
1,112 
Payments(2,240)
Foreign currency translation adjustment (2)
(465)
Balance at June 30, 2022$13,363 
Accretion expense (1)
730 
Payments(1,000)
Foreign currency translation adjustment and other (2)
(246)
Balance at September 30, 2022$12,847 
Contingent Consideration
Balance at December 31, 2020$20,118 
Accretion expense (1)
1,289 
Payments(1,000)
Foreign currency translation adjustment (2)
(612)
Balance at March 31, 2021$19,795 
Additions1,093 
Accretion expense (1)
676 
Payments(4,122)
Foreign currency translation adjustment (2)
264 
Remeasurement gain (3)
(3,095)
Balance at June 30, 2021$14,611 
Accretion expense (1)
116 
Foreign currency translation adjustment (2)
(159)
Balance at September 30, 2021$14,568 
(1)Accretion expense is included in SG&A expenses on the Condensed Consolidated Statements of Comprehensive Income.
(2)Foreign currency translation adjustments are included in "Other comprehensive loss, net of tax" on the Condensed Consolidated Statements of Comprehensive Income.
(3)Remeasurement gain or loss resulting from a change in the fair value of an acquisition's contingent consideration liability is recorded in SG&A expenses on the Condensed Consolidated Statements of Comprehensive Income.
14


8. Debt
The table below presents the components of the Company’s debt: 
September 30, 2022December 31, 2021
2023 Convertible Notes
$316,222 $316,245 
Total debt316,222 316,245 
Less: deferred debt discount (1)
 (16,724)
Less: deferred debt issuance costs(1,466)(2,363)