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FTI Consulting Reports Record Fourth Quarter and Full Year 2018 Financial Results
  • Full Year 2018 Revenues of $2.028 Billion, Up 12.2% Compared to $1.808 Billion in Prior Year
  • Full Year 2018 EPS of $3.93, Up 42.9% Compared to $2.75 in Prior Year; Full Year 2018 Adjusted EPS of $4.00, Up 72.4% Compared to $2.32 in Prior Year
  • Fourth Quarter 2018 Revenues of $505.0 Million, Up 8.0% Compared to Prior Year Quarter
  • Fourth Quarter EPS of $0.61 Compared to $1.78 in Prior Year Quarter, Which Included a $1.19 Benefit Related to the 2017 U.S. Tax Cuts and Jobs Act; Fourth Quarter Adjusted EPS of $0.83, Up 6.4% Compared to $0.78 in Prior Year Quarter
  • Announces $100 Million Increase in Share Repurchase Authorization and Introduces 2019 Guidance

WASHINGTON, Feb. 26, 2019 (GLOBE NEWSWIRE) -- FTI Consulting, Inc. (NYSE: FCN) today released record financial results for the fourth quarter and full year ended December 31, 2018.

For the full year 2018, revenues of $2.028 billion increased $220.1 million, or 12.2%, compared to revenues of $1.808 billion in the prior year. The increase in revenues was driven by higher demand across all business segments, with particular strength in the Corporate Finance & Restructuring and Forensic and Litigation Consulting segments. Net income of $150.6 million compared to $108.0 million in the prior year. The increase in net income was largely due to higher operating profits across all business segments and a $13.0 million gain related to the sale of the Company’s Ringtail e-discovery software and related business ("Ringtail divestiture"), which was partially offset by a $9.1 million loss on early extinguishment of debt related to the Company's redemption of $300.0 million of its 6.0% Senior Notes due 2022 (the "2022 Senior Notes"). 2017 net income included a $44.9 million discrete tax benefit, resulting from the adoption of the 2017 U.S. Tax Cuts and Jobs Act ("2017 Tax Act"), which was partially offset by a $40.9 million special charge related to headcount and real estate reductions.

Adjusted EBITDA of $265.7 million, or 13.1% of revenues, compared to $192.0 million, or 10.6% of revenues, in the prior year. The increase in Adjusted EBITDA was due to higher revenues, which was partially offset by an increase in compensation, primarily related to higher variable compensation and an increase in billable headcount, and higher selling, general and administrative ("SG&A") expenses.

Full year 2018 fully diluted earnings per share ("EPS") of $3.93 compared to $2.75 in the prior year. 2018 EPS included a $9.1 million loss on early extinguishment of debt, which decreased EPS by $0.17 and $3.0 million of non-cash interest expense related to the Company's 2.0% convertible senior notes ("2023 Convertible Notes"), which decreased EPS by $0.06. This was partially offset by the $13.0 million gain from the Ringtail divestiture, which increased EPS by $0.16. 2017 EPS included a $44.9 million discrete tax benefit related to the adoption of the 2017 Tax Act, which increased EPS by $1.14, and a $40.9 million special charge related to headcount and real estate reductions, which reduced EPS by $0.70. 2018 Adjusted EPS of $4.00, which excludes the loss on early extinguishment of debt, non-cash interest expense and gain from the Ringtail divestiture, compares to $2.32 in the prior year. The improvement in Adjusted EPS compared to the prior year period was primarily due to improved operating results. 2017 Adjusted EPS excluded the tax benefit related to the adoption of the 2017 Tax Act and the impact of special charges.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting, said, "I want to thank our clients and our teams for an outstanding year. In 2018, every one of our business segments delivered top- and bottom-line growth. These results reflect the efforts by our teams across the globe to continually strengthen our firm by attracting and developing the best professionals and building businesses behind them. This, in turn, allows us to do our job: support our clients as they navigate their largest and most complex issues."

Cash Position and Capital Allocation

Net cash provided by operating activities of $230.7 million for the year ended December 31, 2018 compared to $147.6 million for the year ended December 31, 2017. The increase was primarily due to higher cash collections resulting from increased revenues, which was partially offset by an increase in cash paid for salaries and benefits and higher income tax payments.

Cash and cash equivalents of $312.1 million at December 31, 2018 compared to $505.9 million at September 30, 2018 and $190.0 million at December 31, 2017. Total debt, net of cash, of $4.2 million at December 31, 2018 compared to $110.4 million at September 30, 2018 and $210.0 million at December 31, 2017. The sequential decline in total debt, net of cash, was primarily due to the redemption of the 2022 Senior Notes on November 15, 2018 and an increase in net cash provided by operating activities.

During the quarter, the Company repurchased 418,728 shares of its common stock at an average price per share of $63.31 for a total of $26.5 million. In full year 2018, the Company repurchased 755,803 shares of its common stock at an average price per share of $53.88 for a total of $40.7 million. Additionally, the Company used a portion of the proceeds from the issuance of the 2023 Convertible Notes to repurchase 196,050 shares at an average price per share of $76.51 for a total cost of $15.0 million. This was a separate repurchase transaction outside of the stock repurchase program. Between January 1, 2019 and February 22, 2019, the Company repurchased an additional 324,152 shares of its common stock at an average price per share of $66.68 for a total of $21.6 million. On February 21, 2019, the Company's Board of Directors authorized an additional $100.0 million to repurchase shares of FTI Consulting’s outstanding common stock pursuant to its stock repurchase program, for an aggregate authorization of $400.0 million. As of February 22, 2019, FTI Consulting had repurchased 6,206,673 shares of its outstanding common stock at an average price per share of $40.10 for an aggregate cost of approximately $249.0 million. After giving effect to share repurchases through such date and the increased authorization, FTI Consulting has approximately $151.0 million remaining available for common stock repurchases under the program. No time limit was established for the completion of the program, and the program may be suspended, discontinued or replaced by the Board at any time without prior notice.

Under the program, FTI Consulting may repurchase shares in open-market purchases or any other method in accordance with all applicable securities laws and regulations. The specific timing and amount of repurchases will be determined by FTI Consulting’s management, in its discretion, and will vary based on market conditions, securities law limitations and other factors. The repurchases may be funded using available cash on hand or a combination of cash and available borrowings under FTI Consulting’s senior secured revolving bank credit facility.

Fourth Quarter 2018 Results

Fourth quarter 2018 revenues of $505.0 million increased $37.3 million, or 8.0%, compared to revenues of $467.7 million in the prior year quarter. Excluding the estimated negative impact from foreign currency translation ("FX"), revenues increased by $42.3 million, or 9.0%, compared to the prior year quarter. The increase in revenues was driven by higher demand across all business segments, with particular strength in the Corporate Finance & Restructuring, Forensic and Litigation Consulting and Economic Consulting segments. Net income was $23.7 million compared to $66.9 million in the prior year quarter. The decrease was largely due to the $44.9 million discrete tax benefit related to the adoption of the 2017 Tax Act, which was recorded in the fourth quarter of 2017. Adjusted EBITDA was $53.7 million, or 10.6% of revenues, compared to $55.5 million, or 11.9% of revenues, in the prior year quarter. Adjusted EBITDA declined compared to the prior year quarter, as the increase in revenues was offset by an increase in compensation, primarily related to higher variable compensation and an increase in billable headcount, and higher SG&A expenses.

Fourth quarter 2018 EPS of $0.61 compared to $1.78 in the prior year quarter. EPS in the quarter included a $9.1 million loss on early extinguishment of debt, which decreased EPS by $0.17, and $2.1 million of non-cash interest expense related to the Company's 2023 Convertible Notes, which decreased EPS by $0.05. Fourth quarter 2017 EPS included the 2017 Tax Act benefit of $44.9 million, which increased EPS by $1.19, and a $10.8 million special charge related to headcount reductions, which reduced EPS by $0.19. Fourth quarter 2018 Adjusted EPS, of $0.83, which exclude the loss on early extinguishment of debt and non-cash interest expense, compared to $0.78 in the prior year quarter. Fourth quarter 2017 Adjusted EPS excluded the tax benefit related to the adoption of the 2017 Tax Act and the impact of special charges.

Fourth Quarter 2018 Segment Results

Corporate Finance & Restructuring
Revenues in the Corporate Finance & Restructuring segment increased $14.3 million, or 10.9%, to $144.8 million in the quarter compared to $130.5 million in the prior year quarter. Excluding the estimated negative impact from FX, revenues increased $15.7 million, or 12.1%, compared to the prior year quarter. The increase in revenues was primarily due to higher demand for business transformation and transactions services. Adjusted Segment EBITDA was $24.3 million, or 16.8% of segment revenues, compared to $25.8 million, or 19.7% of segment revenues, in the prior year quarter. Adjusted Segment EBITDA declined compared to the prior year quarter, as the increase in revenues was offset by higher compensation, primarily related to higher variable compensation and an increase in billable headcount, and an increase in SG&A expenses.

Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment increased $11.2 million, or 9.3%, to $132.1 million in the quarter compared to $120.9 million in the prior year quarter. The increase in revenues was primarily driven by higher demand for construction solutions and disputes services. Adjusted Segment EBITDA was $21.5 million, or 16.3% of segment revenues, compared to $23.6 million, or 19.5% of segment revenues, in the prior year quarter. Adjusted Segment EBITDA declined compared to the prior year quarter, as the increase in revenues was offset by higher compensation, primarily related to an increase in billable headcount and higher variable compensation, and an increase in SG&A expenses.

Economic Consulting
Revenues in the Economic Consulting segment increased $7.3 million, or 6.1%, to $128.4 million in the quarter, compared to $121.1 million in the prior year quarter. The increase in revenues was primarily due to higher demand for antitrust and financial economics services. Adjusted Segment EBITDA was $12.1 million, or 9.4% of segment revenues, compared to $14.3 million, or 11.8% of segment revenues, in the prior year quarter. Adjusted Segment EBITDA declined compared to the prior year quarter, as the increase in revenues was offset by higher compensation, primarily related to higher variable compensation and an increase in billable headcount.

Technology
Revenues in the Technology segment increased $0.8 million, or 2.0%, to $41.7 million in the quarter compared to $40.9 million in the prior year quarter. The increase in revenues was due to higher demand for consulting services, primarily related to information governance, privacy and security services, which was partially offset by a $2.8 million decline in licensing revenues related to the Ringtail divestiture. Adjusted Segment EBITDA was $2.7 million, or 6.4% of segment revenues, compared to $3.0 million, or 7.3% of segment revenues, in the prior year quarter. Adjusted Segment EBITDA was slightly lower than the prior year quarter, as the increase in revenues and lower SG&A expenses, primarily related to a decline in research and development expenses, was more than offset by higher compensation, primarily related to higher variable compensation and an increase in billable headcount.

Strategic Communications
Revenues in the Strategic Communications segment increased $3.7 million, or 6.7%, to $58.0 million in the quarter compared to $54.3 million in the prior year quarter. Excluding the estimated negative impact from FX, revenues increased $4.7 million, or 8.7%, compared to the prior year quarter. The increase in revenues was due to an increase in both retainer- and project-based revenues, primarily related to public affairs and merger and acquisition-related services. Adjusted Segment EBITDA was $11.3 million, or 19.5% of segment revenues, compared to $10.5 million, or 19.4% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in variable compensation and SG&A expenses.

2019 Guidance

The Company estimates that revenues for full year 2019 will range between $2.000 billion and $2.100 billion. The Company estimates that full year 2019 EPS will range between $3.33 and $3.83 and that Adjusted EPS will range between $3.50 and $4.00. The variance between EPS and Adjusted EPS guidance for 2019 includes estimated non-cash interest expense of $0.17 per share related to the Company's 2023 Convertible Notes.

Fourth Quarter and Full Year 2018 Conference Call

FTI Consulting will host a conference call for analysts and investors to discuss fourth quarter and full year 2018 financial results at 9:00 a.m. Eastern Time on Tuesday, February 26, 2019. The call can be accessed live and will be available for replay over the internet for 90 days by logging onto the Company’s investor relations website here.

About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. With more than 4,700 employees located in 28 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges and make the most of opportunities. The Company generated $2.03 billion in revenues during fiscal year 2018. More information can be found at www.fticonsulting.com.

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

  • Total Segment Operating Income

  • Adjusted EBITDA

  • Total Adjusted Segment EBITDA

  • Adjusted EBITDA Margin

  • Adjusted Net Income

  • Adjusted Earnings per Diluted Share

  • Free Cash Flow

We have included the definitions of Segment Operating Income (Loss) and Adjusted Segment EBITDA below in order to more fully define the components of certain non-GAAP financial measures presented in this press release. We define Segment Operating Income (Loss), a GAAP financial measure, 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 (Loss) for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income (Loss) for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA, a GAAP financial measure, 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 Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenues.

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 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 Net Income and Adjusted Earnings per Diluted Share ("Adjusted EPS"), which are non-GAAP financial measures, as net income and earnings per diluted share ("EPS"), respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of debt, non-cash interest expense on convertible notes, gain or loss on sale of a business and the impact of adopting the 2017 U.S. Tax Cuts and Jobs Act (the "2017 Tax Act"). We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results, 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 provided by operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with an additional understanding of the Company’s ability to generate cash for ongoing business operations and other capital deployment.

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

Safe Harbor Statement

This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to acquisitions, share repurchases and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results. When used in this press release, words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes,"  "forecasts" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs and estimates will be achieved, and the Company’s actual results may differ materially from our expectations, beliefs and estimates. Further, preliminary results are subject to normal year-end adjustments. The Company has experienced fluctuating revenues, operating income and cash flows in prior periods and expects that this will occur from time to time in the future. Other factors that could cause such differences include declines in demand for, or changes in, the mix of services and products that we offer; the mix of the geographic locations where our clients are located or where services are performed; fluctuations in the price per share of our common stock; adverse financial, real estate or other market and general economic conditions; and other future events, which could impact each of our segments differently and could be outside of our control; the pace and timing of the consummation and integration of future acquisitions; the Company’s ability to realize cost savings and efficiencies, competitive and general economic conditions; retention of staff and clients; new laws and regulations, or changes thereto, including the 2017 Tax Act; and other risks described under the heading "Item 1A, Risk Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC, including the risks set forth under "Risks Related to Our Reportable Segments" and "Risks Related to Our Operations," and in the Company’s other filings with the SEC. We are under no duty to update any of the forward-looking statements to conform such statements to actual results or events and do not intend to do so.

Investor & Media Contact:
Mollie Hawkes
+1.617.747.1791
mollie.hawkes@fticonsulting.com

FINANCIAL TABLES FOLLOW



FTI CONSULTING, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)

     
    December 31,
    2018   2017
Assets        
Current assets        
Cash and cash equivalents   $ 312,069     $ 189,961  
Accounts receivable:        
Billed receivables   437,797     390,996  
Unbilled receivables   319,205     312,569  
Allowances for doubtful accounts and unbilled services   (202,394 )   (180,687 )
Accounts receivable, net   554,608     522,878  
Current portion of notes receivable   29,228     25,691  
Prepaid expenses and other current assets   69,448     55,649  
Total current assets   965,353     794,179  
Property and equipment, net   84,577     75,075  
Goodwill   1,172,316     1,204,803  
Other intangible assets, net   34,633     44,150  
Notes receivable, net   84,471     98,105  
Other assets   37,771     40,929  
Total assets   $ 2,379,121     $ 2,257,241  
Liabilities and Stockholders' Equity        
Current liabilities        
Accounts payable, accrued expenses and other   $ 104,600     $ 94,873  
Accrued compensation   333,536     268,513  
Billings in excess of services provided   44,434     46,942  
Total current liabilities   482,570     410,328  
Long-term debt, net   265,571     396,284  
Deferred income taxes   155,088     124,471  
Other liabilities   127,067     134,187  
Total liabilities   1,030,296     1,065,270  
Stockholders' equity        
Preferred stock, $0.01 par value; shares authorized — 5,000; none
outstanding
       
Common stock, $0.01 par value; shares authorized — 75,000; shares
issued and outstanding — 38,147 (2018) and 37,729 (2017)
  381     377  
Additional paid-in capital   299,534     266,035  
Retained earnings   1,196,727     1,045,774  
Accumulated other comprehensive loss   (147,817 )   (120,215 )
Total stockholders' equity   1,348,825     1,191,971  
Total liabilities and stockholders' equity   $ 2,379,121     $ 2,257,241  
                 


FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)

   
  Three Months Ended
December 31,
 
  2018   2017
   
  (unaudited)
Revenues $ 504,993     $ 467,711  
Operating expenses      
Direct cost of revenues 340,162     307,566  
Selling, general and administrative expenses 118,163     112,043  
Special charges     10,811  
Amortization of other intangible assets 1,865     2,766  
  460,190     433,186  
Operating income 44,803     34,525  
Other income (expense)      
Interest income and other 2,903     452  
Interest expense (7,076 )   (6,547 )
Loss on early extinguishment of debt (9,072 )    
  (13,245 )   (6,095 )
Income before income tax provision (benefit) 31,558     28,430  
Income tax provision (benefit) 7,834     (38,458 )
Net income $ 23,724     $ 66,888  
Earnings per common share ― basic $ 0.63     $ 1.81  
Weighted average common shares outstanding ― basic 37,368     36,906  
Earnings per common share ― diluted $ 0.61     $ 1.78  
Weighted average common shares outstanding ― diluted 38,628     37,643  
Other comprehensive income (loss), net of tax      
Foreign currency translation adjustments, net of tax expense of $0 and $0 $ (10,185 )   $ 1,886  
Total other comprehensive income (loss), net of tax (10,185 )   1,886  
Comprehensive income $ 13,539     $ 68,774  
               



FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share data)

   
  Year Ended
December 31,
 
  2018   2017
   
   
Revenues $ 2,027,877     $ 1,807,732  
Operating expenses      
Direct cost of revenues 1,328,074     1,215,560  
Selling, general and administrative expenses 465,636     432,013  
Special charges     40,885  
Amortization of other intangible assets 8,162     10,563  
  1,801,872     1,699,021  
Operating income 226,005     108,711  
Other income (expense)      
Interest income and other 4,977     3,752  
Interest expense (27,149 )   (25,358 )
Gain on sale of business 13,031      
Loss on early extinguishment of debt (9,072 )    
  (18,213 )   (21,606 )
Income before income tax provision (benefit) 207,792     87,105  
Income tax provision (benefit) 57,181     (20,857 )
Net income $ 150,611     $ 107,962  
Earnings per common share ― basic $ 4.06     $ 2.79  
Weighted average common shares outstanding ― basic 37,098     38,697  
Earnings per common share ― diluted $ 3.93     $ 2.75  
Weighted average common shares outstanding ― diluted 38,318     39,192  
Other comprehensive income (loss), net of tax      
Foreign currency translation adjustments, net of tax expense of $373 and $0 $ (27,602 )   $ 30,664  
Total other comprehensive income (loss), net of tax (27,602 )   30,664  
Comprehensive income $ 123,009     $ 138,626  
               


FTI CONSULTING, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands, except per share data)

         
    Three Months Ended
December 31,
  Year Ended
December 31,
    2018   2017   2018   2017
         
    (Unaudited)    
Net income   $ 23,724     $ 66,888     $ 150,611     $ 107,962  
Add back:                
Special charges       10,811         40,885  
Tax impact of special charges       (3,635 )       (13,570 )
Loss on early extinguishment of debt   9,072         9,072      
Tax impact of loss on early extinguishment of debt   (2,359 )       (2,359 )    
Remeasurement of acquisition-related contingent
  consideration
              702  
Tax impact of remeasurement of acquisition-
  related contingent consideration
              (269 )
Non-cash interest expense on convertible notes   2,080         3,019      
Tax impact of non-cash interest expense on
  convertible notes
  (534 )       (775 )    
Gain on sale of business           (13,031 )    
Tax impact of gain on sale of business           6,798      
Impact of 2017 Tax Act       (44,870 )       (44,870 )
Adjusted net income   $ 31,983     $ 29,194     $ 153,335     $ 90,840  
Earnings per common share — diluted   $ 0.61     $ 1.78     $ 3.93     $ 2.75  
Add back:                
Special charges       0.29         1.04  
Tax impact of special charges       (0.10 )       (0.34 )
Loss on early extinguishment of debt   0.23         0.23      
Tax impact of loss on early extinguishment of debt   (0.06 )       (0.06 )    
Remeasurement of acquisition-related contingent
  consideration
              0.02  
Tax impact of remeasurement of acquisition-
  related contingent consideration
              (0.01 )
Non-cash interest expense on convertible notes   0.06         0.08      
Tax impact of non-cash interest expense on
  convertible notes
  (0.01 )       (0.02 )    
Gain on sale of business           (0.34 )    
Tax impact of gain on sale of business           0.18      
Impact of 2017 Tax Act       (1.19 )       (1.14 )
Adjusted earnings per common share — diluted   $ 0.83     $ 0.78     $ 4.00     $ 2.32  
Weighted average number of common shares
  outstanding ― diluted
  38,628     37,643     38,318     39,192  
                         

FTI CONSULTING, INC.
RECONCILIATION OF EPS GUIDANCE TO ADJUSTED EPS GUIDANCE

     
    Year Ended December 31, 2019
    Low   High
Guidance on estimated earnings per common share – diluted (GAAP) (1)   $ 3.33     $ 3.83  
  Non-cash interest expense on convertible notes, net of tax   0.17     0.17  
Guidance on estimated adjusted earnings per common share (Non-GAAP) (1)   $ 3.50     $ 4.00  
                 
___________________________________                

(1)  The forward-looking guidance on estimated 2019 EPS and Adjusted EPS does not reflect other gains and losses (all of which would be excluded from Adjusted EPS) related to the future impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of debt, gain or loss on sale of a business as these items are dependent on future events that are uncertain and difficult to predict. The forward-looking guidance excludes any shares of common stock potentially issuable upon conversion of the 2023 Convertible Notes from the calculation of EPS.

FTI CONSULTING, INC.
RECONCILIATION OF NET INCOME AND OPERATING INCOME (LOSS) TO ADJUSTED EBITDA
(in thousands)

                             
Three Months Ended December 31, 2018 (unaudited)   Corporate
Finance &
Restructuring
  Forensic and
Litigation
Consulting
  Economic
Consulting
  Technology   Strategic
Communications
  Unallocated
Corporate
  Total
Net income                           $ 23,724  
Interest income and other                           (2,903 )
Interest expense                           7,076  
Loss on early extinguishment of debt                           9,072  
Income tax provision                           7,834  
Operating income   $ 22,620     $ 20,134     $ 10,667     $ 426     $ 9,975     $ (19,019 )   $ 44,803  
Depreciation and amortization   894     1,042     1,398     2,248     555     835     6,972  
Amortization of other intangible assets   767     303     44         767         1,881  
Adjusted EBITDA   $ 24,281     $ 21,479     $ 12,109     $ 2,674     $ 11,297     $ (18,184 )   $ 53,656  
                             
Year Ended December 31, 2018   Corporate
Finance &
Restructuring
  Forensic and
Litigation
Consulting
  Economic
Consulting
  Technology   Strategic
Communications
  Unallocated
Corporate
  Total
Net income                           $ 150,611  
Interest income and other                           (4,977 )
Interest expense                           27,149  
Gain on sale of business                           (13,031 )
Loss on early extinguishment of debt                           9,072  
Income tax provision                           57,181  
Operating income   $ 115,124     $ 91,262     $ 64,052     $ 14,912     $ 37,250     $ (96,595 )   $ 226,005  
Depreciation and amortization   3,428     4,237     5,607     12,405     2,302     3,557     31,536  
Amortization of other intangible assets   3,108     1,322     296     70     3,366         8,162  
Adjusted EBITDA   $ 121,660     $ 96,821     $ 69,955     $ 27,387     $ 42,918     $ (93,038 )   $ 265,703  
                             
Three Months Ended December 31, 2017 (unaudited)   Corporate
Finance &
Restructuring
  Forensic and
Litigation
Consulting
  Economic
Consulting
  Technology   Strategic
Communications
  Unallocated
Corporate
  Total
Net income                           $ 66,888  
Interest income and other                           (452 )
Interest expense                           6,547  
Income tax benefit                           (38,458 )
Operating income (loss)   $ 21,332     $ 20,286     $ 12,120     $ (1,079 )   $ 4,840     $ (22,974 )   $ 34,525  
Depreciation and amortization   815     1,042     1,316     2,664     673     899     7,409  
Amortization of other intangible assets   1,218     396     134     158     860         2,766  
Special charges   2,391     1,889     714     1,230     4,153     434     10,811  
Adjusted EBITDA   $ 25,756     $ 23,613     $ 14,284     $ 2,973     $ 10,526     $ (21,641 )   $ 55,511  
                             
Year Ended December 31, 2017   Corporate
Finance &
Restructuring
  Forensic and
Litigation
Consulting
  Economic
Consulting
  Technology   Strategic
Communications
  Unallocated
Corporate
  Total
Net income                           $ 107,962  
Interest income and other                           (3,752 )
Interest expense                           25,358  
Income tax benefit                           (20,857 )
Operating income   $ 70,234     $ 54,520     $ 49,154     $ 4,795     $ 13,148     $ (83,140 )   $ 108,711  
Depreciation and amortization   3,175     4,259     5,589     11,684     2,405     4,065     31,177  
Amortization of other intangible assets   4,014     1,592     597     635     3,725         10,563  
Special charges   5,440     12,334     6,624     5,057     7,752     3,678     40,885  
Remeasurement of acquisition-related
  contingent consideration
                  702         702  
Adjusted EBITDA   $ 82,863     $ 72,705     $ 61,964     $ 22,171     $ 27,732     $ (75,397 )   $ 192,038  
                                                         



FTI CONSULTING, INC.
OPERATING RESULTS BY BUSINESS SEGMENT

                       
   

Segment
Revenues
  Adjusted
EBITDA
  Adjusted
EBITDA

Margin
  Utilization    Average
Billable
Rate
  Revenue-
Generating
Headcount
   (in thousands)               (at period end)
Three Months Ended December 31, 2018 (unaudited)                      
Corporate Finance & Restructuring $ 144,784     $ 24,281     16.8 %   61 %   $ 458     948  
Forensic and Litigation Consulting 132,083     21,479     16.3 %   63 %   $ 330     1,153  
Economic Consulting 128,396     12,109     9.4 %   67 %   $ 530     708  
Technology (1) 41,720     2,674     6.4 %   N/M       N/M     306  
Strategic Communications (1) 58,010     11,297     19.5 %   N/M       N/M     641  
  $ 504,993     $ 71,840     14.2 %                 3,756  
Unallocated Corporate     (18,184 )                
Adjusted EBITDA     $ 53,656     10.6 %            
                       
Year Ended December 31, 2018                      
Corporate Finance & Restructuring $ 564,479     $ 121,660     21.6 %   66 %   $ 433     948  
Forensic and Litigation Consulting 520,333     96,821     18.6 %   64 %   $ 326     1,153  
Economic Consulting 533,979     69,955     13.1 %   69 %   $ 519     708  
Technology (1) 185,755     27,387     14.7 %   N/M       N/M     306  
Strategic Communications (1) 223,331     42,918     19.2 %   N/M       N/M     641  
  $ 2,027,877     $ 358,741     17.7 %           3,756  
Unallocated Corporate     (93,038 )                
Adjusted EBITDA     $ 265,703     13.1 %            
                       
Three Months Ended December 31, 2017 (unaudited)                      
Corporate Finance & Restructuring $ 130,532     $ 25,756     19.7 %   62 %   $ 434     901  
Forensic and Litigation Consulting 120,869     23,613     19.5 %   63 %   $ 330     1,067  
Economic Consulting 121,051     14,284     11.8 %   64 %   $ 542     683  
Technology (1) 40,915     2,973     7.3 %   N/M       N/M     292  
Strategic Communications (1) 54,344     10,526     19.4 %   N/M       N/M     630  
  $ 467,711     $ 77,152     16.5 %           3,573  
Unallocated Corporate     (21,641 )                
Adjusted EBITDA     $ 55,511     11.9 %            
                       
Year Ended December 31, 2017                      
Corporate Finance & Restructuring $ 482,041     $ 82,863     17.2 %   61 %   $ 396     901  
Forensic and Litigation Consulting 462,324     72,705     15.7 %   61 %   $ 321     1,067  
Economic Consulting 496,029     61,964     12.5 %   67 %   $ 524     683  
Technology (1) 174,850     22,171     12.7 %   N/M       N/M     292  
Strategic Communications (1) 192,488     27,732     14.4 %   N/M       N/M     630  
  $ 1,807,732     $ 267,435     14.8 %                 3,573  
Unallocated Corporate     (75,397 )                
Adjusted EBITDA     $ 192,038     10.6 %            
                       
                       
N/M Not meaningful                      
(1) The majority of the Technology and Strategic Communications segments' revenues are not generated based on billable hours. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.
 


FTI CONSULTING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

  Year Ended
December 31,
 
  2018   2017
   
   
Operating activities      
Net income $ 150,611     $ 107,962  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 31,536     31,177  
Amortization and impairment of other intangible assets 8,162     10,563  
Acquisition-related contingent consideration 479     2,291  
Provision for doubtful accounts 17,872     15,386  
Non-cash share-based compensation 15,577     16,030  
Amortization of debt discount and issuance costs 5,456     1,984  
Loss on early extinguishment of debt 9,072      
Gain on sale of business (13,031 )    
Other 769     611  
Changes in operating assets and liabilities, net of effects from acquisitions:      
Accounts receivable, billed and unbilled (72,034 )   (50,831 )
Notes receivable 8,987     14,928  
Prepaid expenses and other assets (2,258 )   629  
Accounts payable, accrued expenses and other 8,908     4,421  
Income taxes 11,941     (25,768 )
Accrued compensation 52,510     1,795  
Billings in excess of services provided (3,885 )   16,447  
  Net cash provided by operating activities 230,672     147,625  
Investing activities      
Proceeds from sale of business 50,283      
Payments for acquisition of businesses, net of cash received     (8,929 )
Purchases of property and equipment (32,270 )   (32,004 )
Other 731     295  
  Net cash provided by (used in) investing activities 18,744     (40,638 )
Financing activities      
Borrowings (repayments) under revolving line of credit, net (100,000 )   30,000  
Proceeds from issuance of convertible notes 316,250      
Payments of long-term debt (300,000 )    
Payments of debt issue and debt prepayment costs (16,149 )    
Purchase and retirement of common stock (55,738 )   (168,094 )
Net issuance of common stock under equity compensation plans 38,475     (504 )
Payments for acquisition-related contingent consideration (3,029 )   (5,161 )
Deposits and other 2,672     2,825  
  Net cash used in financing activities (117,519 )   (140,934 )
Effect of exchange rate changes on cash and cash equivalents (9,789 )   7,750  
Net increase (decrease) in cash and cash equivalents 122,108     (26,197 )
Cash and cash equivalents, beginning of period 189,961     216,158  
Cash and cash equivalents, end of period $ 312,069     $ 189,961  
               

 

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FTI Consulting, Inc.