8-K
FTI CONSULTING, INC DC false 0000887936 0000887936 2019-10-24 2019-10-24

 

 

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 24, 2019

 

FTI CONSULTING, INC.

(Exact Name of Registrant as Specified in Charter)

 

Maryland

 

001-14875

 

52-1261113

(State or other jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

555 12th Street NW, Washington, D.C. 20004

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (202) 312-9100

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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

Title of each class

 

Trading

symbol(s)

 

Name of each exchange

on which registered

Common Stock, par value $0.01 per share

 

FCN

 

New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  

 

 


ITEM 2.02. Results of Operations and Financial Condition

On October 24, 2019, FTI Consulting, Inc. (“FTI Consulting”) announced financial results for the three-months and nine-months ended September 30, 2019 and updated its guidance for the year ending December 31, 2019. A copy of the press release (including accompanying financial tables) (the “Press Release”) is attached as Exhibit 99.1 to this Current Report on Form 8-K and hereby is incorporated by reference herein.

ITEM 7.01. Regulation FD Disclosure

In the Press Release, FTI Consulting uses information derived from consolidated and segment financial information that may not be presented in its financial statements or prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). Certain of these measures are considered “non-GAAP financial measures” under rules promulgated by the Securities and Exchange Commission. Specifically, FTI Consulting has 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

FTI Consulting has included the definitions of “Segment Operating Income (Loss)” and “Adjusted Segment EBITDA,” which are financial measures presented in accordance with GAAP, in order to more fully define the components of certain non-GAAP financial measures. FTI Consulting evaluates the performance of its operating segments based on Adjusted Segment EBITDA, and Segment Operating Income (Loss) is a component of the definition of Adjusted Segment EBITDA. FTI Consulting defines “Segment Operating Income (Loss)” as a segment’s share of consolidated operating income. FTI Consulting defines “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. FTI Consulting uses Segment Operating Income (Loss) for the purpose of calculating Adjusted Segment EBITDA. FTI Consulting defines “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. FTI Consulting uses Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of its segments because FTI Consulting believes it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.

FTI Consulting defines “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. FTI Consulting defines “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. FTI Consulting defines Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenues. FTI Consulting believes that the non-GAAP financial measures, which exclude the effects of remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges, when considered together with its GAAP financial results and GAAP financial measures, provide management and investors with a more complete understanding of FTI Consulting’s operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of FTI Consulting’s competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in FTI Consulting’s industry. Therefore, FTI Consulting also believes that these measures, considered along with corresponding GAAP financial measures, provide management and investors with additional information for comparison of its operating results with the operating results of other companies.

FTI Consulting defines “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, 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. FTI Consulting uses Adjusted Net Income for the purpose of calculating Adjusted EPS. Management of FTI Consulting uses Adjusted EPS to assess total company operating performance on a consistent basis. FTI Consulting believes that these non-GAAP financial measures, when considered together with its corresponding GAAP financial measures, provides management and investors with an additional understanding of its business operating results, including underlying trends.

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

1


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 FTI Consulting’s Consolidated Statements of Comprehensive Income. Reconciliations of Non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the accompanying tables to the Press Release.

The information included herein, including Exhibit 99.1 furnished herewith, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filing pursuant to the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing, except as expressly set forth by specific reference in such filing.

ITEM 9.01. Financial Statements and Exhibits

(d) Exhibits

 

99.1

   

Press Release dated October 24, 2019 of FTI Consulting, Inc.

         
 

104

   

The Cover Page from FTI Consulting’s Current Report on Form 8-K dated October 24, 2019, formatted in Inline XBRL.

2


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, FTI Consulting, Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

FTI CONSULTING, INC.

             

Dated: October 25, 2019

 

 

    

 

By: /s/ CURTIS P. LU

 

 

 

Curtis P. Lu

 

 

 

General Counsel

3

EX-99.1

Exhibit 99.1

FTI Consulting, Inc.

555 12th Street NW

Washington, D.C. 20004

+1.202.312.9100

Investor & Media Contact:

Mollie Hawkes

+1.617.747.1791

mollie.hawkes@fticonsulting.com

FTI Consulting Reports Record Third Quarter 2019 Financial Results

 

   

Third Quarter 2019 Revenues of $593.1 Million, Up 15.6% Compared to $513.0 Million in Prior Year Quarter

 

   

Third Quarter 2019 EPS of $1.59, Up 39.5% Compared to $1.14 in Prior Year Quarter; Third Quarter 2019 Adjusted EPS of $1.63, Up 63.0% Compared to $1.00 in Prior Year Quarter

 

   

Company Raises Full Year 2019 Guidance Ranges for Revenues, EPS and Adjusted EPS to Reflect Record Year-to-Date 2019 Performance

Washington, D.C., October 24, 2019 — FTI Consulting, Inc. (NYSE: FCN) today released financial results for the quarter ended September 30, 2019.

Third quarter 2019 revenues of $593.1 million increased $80.1 million, or 15.6%, compared to revenues of $513.0 million in the prior year quarter. Excluding the estimated negative impact from foreign currency translation (“FX”), revenues increased $86.7 million, or 16.9%, compared to the prior year quarter. The increase in revenues was driven by higher demand across all business segments compared to the prior year quarter. Net income of $60.4 million compared to $44.3 million in the prior year quarter. The increase in net income was primarily due to higher operating profits in the Corporate Finance & Restructuring and Forensic and Litigation Consulting segments.

Adjusted EBITDA of $92.3 million, or 15.6% of revenues, compared to $67.4 million, or 13.1% of revenues, in the prior year quarter. The increase in Adjusted EBITDA was primarily due to higher revenues in the Corporate Finance & Restructuring and Forensic and Litigation Consulting segments, which was partially offset by higher compensation, primarily related to a 16.7% increase in billable headcount and higher variable compensation, as well as higher selling, general and administrative (“SG&A”) expenses compared to the prior year quarter.

Third quarter 2019 fully diluted earnings per share (“EPS”) of $1.59 compared to $1.14 in the prior year quarter. Third quarter 2019 EPS included $2.2 million of non-cash interest expense related to the Company’s 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”), which decreased EPS by $0.04. Third quarter 2018 EPS included a $6.2 million after-tax gain related to the sale of the Company’s Ringtail e-discovery software and related business (“Ringtail divestiture”), which increased EPS by $0.16. Third quarter 2019 Adjusted EPS of $1.63, which excludes the non-cash interest expense, compared to Adjusted EPS of $1.00 in the prior year quarter.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting, said, “These powerful results reflect our focus: investing in great professionals to enhance our ability to serve our clients as they navigate their most complex business challenges and opportunities.”


Cash Position and Capital Allocation

Net cash provided by operating activities of $131.3 million for the quarter ended September 30, 2019 compared to $120.9 million for the quarter ended September 30, 2018. The year-over-year increase in cash provided by operating activities was largely due to an increase in cash collected resulting from higher revenues compared to the prior year quarter, which was partially offset by an increase in compensation-related costs.

During the quarter, the Company repurchased 90,848 shares of its common stock at an average price per share of $85.11 for a total cost of $7.7 million. As of September 30, 2019, approximately $94.6 million remained available for stock repurchases under the Company’s $400.0 million stock repurchase authorization.

Cash and cash equivalents of $258.5 million at September 30, 2019 compared to $505.9 million at September 30, 2018 and $189.1 million at June 30, 2019. Total debt, net of cash, of $57.8 million at September 30, 2019 compared to $110.4 million at September 30, 2018 and $147.1 million at June 30, 2019. The sequential decrease in total debt, net of cash, was primarily due to an increase in cash provided by operating activities and repayment of borrowings under the Company’s revolving credit facility, which was partially offset by payments related to the August 2019 acquisition of Andersch AG.

Third Quarter 2019 Segment Results

Corporate Finance & Restructuring

Revenues in the Corporate Finance & Restructuring segment increased $56.3 million, or 41.6%, to $191.7 million in the quarter compared to $135.4 million in the prior year quarter. Excluding the estimated negative impact from FX, revenues increased $57.7 million, or 42.6%, compared to the prior year quarter. The increase in revenues was due to higher demand for restructuring and business transformation and transactions services. Adjusted Segment EBITDA of $48.1 million, or 25.1% of segment revenues, compared to $26.8 million, or 19.8% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was due to higher revenues with improved utilization, which was partially offset by higher compensation, related to an increase in variable compensation and billable headcount and higher SG&A expenses.

Forensic and Litigation Consulting

Revenues in the Forensic and Litigation Consulting segment increased $16.0 million, or 12.6%, to $142.7 million in the quarter compared to $126.7 million in the prior year quarter. Excluding the estimated negative impact from FX, revenues increased $17.0 million, or 13.4%, compared to the prior year quarter. The increase in revenues was primarily due to higher demand for disputes and investigations services. Adjusted Segment EBITDA of $27.0 million, or 18.9% of segment revenues, compared to $22.0 million, or 17.3% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was due to higher revenues, which was partially offset by higher compensation, primarily related to an increase in billable headcount and higher SG&A expenses.

Economic Consulting

Revenues in the Economic Consulting segment increased $2.5 million, or 1.8%, to $141.7 million in the quarter compared to $139.2 million in the prior year quarter. Excluding the estimated negative impact from FX,


revenues increased $4.7 million, or 3.4%, compared to the prior year quarter. The increase in revenues was largely due to higher demand for non-merger and acquisition-related antitrust services. Adjusted Segment EBITDA of $19.4 million, or 13.7% of segment revenues, compared to $23.2 million, or 16.7% of segment revenues, in the prior year quarter. Adjusted Segment EBITDA declined compared to the prior year quarter, as the increase in revenues was more than offset by higher compensation, related to an increase in variable compensation and billable headcount and higher SG&A expenses.

Technology

Revenues in the Technology segment increased $0.4 million, or 0.7%, to $57.1 million in the quarter compared to $56.7 million in the prior year quarter. Excluding the estimated negative impact from FX, revenues increased $0.9 million, or 1.5%, compared to the prior year quarter. The increase in revenues was primarily due to higher demand for global cross-border investigations and litigation services, which was offset by lower demand for merger and acquisition-related “second request” services. Adjusted Segment EBITDA of $12.3 million, or 21.5% of segment revenues, compared to $11.5 million, or 20.2% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was due to higher revenues and lower SG&A expenses, largely due to a decline in research and development expense resulting from the September 2018 Ringtail divestiture, which was partially offset by higher compensation, due to an increase in billable headcount and variable compensation.

Strategic Communications

Revenues in the Strategic Communications segment increased $4.9 million, or 8.9%, to $60.0 million in the quarter compared to $55.1 million in the prior year quarter. Excluding the estimated negative impact from FX, revenues increased $6.4 million, or 11.7%, compared to the prior year quarter. The increase in revenues was primarily due to higher demand for project-based corporate reputation services in North America and Europe, the Middle East and Africa. Adjusted Segment EBITDA of $12.6 million, or 21.1% of segment revenues, compared to $10.8 million, or 19.6% of segment revenues, in the prior year quarter. The increase in Adjusted Segment EBITDA was due to higher revenues, which was partially offset by higher compensation, related to an increase in billable headcount and variable compensation and higher SG&A expenses.

2019 Guidance

Given the record year-to-date 2019 performance, the Company is raising its full year revenue, EPS and Adjusted EPS guidance for 2019. The Company now estimates that 2019 revenues will range between $2.250 billion and $2.300 billion. This compares to the previous revenue guidance of between $2.175 billion and $2.250 billion. The Company now estimates that 2019 EPS will range between $5.63 and $5.88. This compares to the previous EPS guidance of between $4.88 and $5.38. The Company now estimates that 2019 Adjusted EPS will range between $5.75 and $6.00. This compares to the previous Adjusted EPS guidance of between $5.00 and $5.50. The $0.12 per share variance between EPS and Adjusted EPS guidance for full year 2019 includes estimated non-cash interest expense of approximately $0.17 per share related to the Company’s 2023 Convertible Notes and the first quarter 2019 $0.05 per share tax gain related to the Ringtail divestiture.

Third Quarter 2019 Conference Call

FTI Consulting will host a conference call for analysts and investors to discuss third quarter financial results at 9:00 a.m. Eastern Time on Thursday, October 24, 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 the 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, which are GAAP financial measures, 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) 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 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, which is a non-GAAP financial measure, 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 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 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 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 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.

FINANCIAL TABLES FOLLOW

# # #


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

 

     September 30,
2019
    December 31,
2018
 
     (unaudited)        

Assets

    

Current assets

    

Cash and cash equivalents

   $ 258,470     $ 312,069  

Accounts receivable:

    

Billed receivables

     552,253       437,797  

Unbilled receivables

     455,342       319,205  

Allowances for doubtful accounts and unbilled services

     (268,132     (202,394
  

 

 

   

 

 

 

Accounts receivable, net

     739,463       554,608  

Current portion of notes receivable

     32,368       29,228  

Prepaid expenses and other current assets

     65,849       69,448  
  

 

 

   

 

 

 

Total current assets

     1,096,150       965,353  

Property and equipment, net

     92,135       84,577  

Operating lease assets

     152,064       —    

Goodwill

     1,197,406       1,172,316  

Other intangible assets, net

     41,247       34,633  

Notes receivable, net

     78,800       84,471  

Other assets

     32,467       37,771  
  

 

 

   

 

 

 

Total assets

   $ 2,690,269     $ 2,379,121  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities

    

Accounts payable, accrued expenses and other

   $ 158,136     $ 104,600  

Accrued compensation

     354,299       333,536  

Billings in excess of services provided

     34,349       44,434  
  

 

 

   

 

 

 

Total current liabilities

     546,784       482,570  

Long-term debt, net

     273,055       265,571  

Non-current operating lease liabilities

     171,410       —    

Deferred income taxes

     159,406       155,088  

Other liabilities

     78,380       127,067  
  

 

 

   

 

 

 

Total liabilities

     1,229,035       1,030,296  
  

 

 

   

 

 

 

Stockholders’ equity

    

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

     —         —    

Common stock, $0.01 par value; shares authorized — 75,000; shares issued and outstanding — 37,629 (2019) and 38,147 (2018)

     376       381  

Additional paid-in capital

     240,508       299,534  

Retained earnings

     1,384,392       1,196,727  

Accumulated other comprehensive loss

     (164,042     (147,817
  

 

 

   

 

 

 

Total stockholders’ equity

     1,461,234       1,348,825  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 2,690,269     $ 2,379,121  
  

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

 

     Three Months Ended
September 30,
 
     2019     2018  
     (unaudited)  

Revenues

   $ 593,106     $ 513,012  
  

 

 

   

 

 

 

Operating expenses

    

Direct cost of revenues

     380,892       336,477  

Selling, general and administrative expenses

     127,951       117,448  

Amortization of other intangible assets

     2,125       1,975  
  

 

 

   

 

 

 
     510,968       455,900  
  

 

 

   

 

 

 

Operating income

     82,138       57,112  
  

 

 

   

 

 

 

Other income (expense)

    

Interest income and other

     2,973       1,400  

Interest expense

     (4,832     (7,246

Gain on sale of business

     —         13,031  
  

 

 

   

 

 

 
     (1,859     7,185  
  

 

 

   

 

 

 

Income before income tax provision

     80,279       64,297  

Income tax provision

     19,857       19,964  
  

 

 

   

 

 

 

Net income

   $ 60,422     $ 44,333  
  

 

 

   

 

 

 

Earnings per common share — basic

   $ 1.65     $ 1.19  
  

 

 

   

 

 

 

Weighted average common shares outstanding — basic

     36,617       37,318  
  

 

 

   

 

 

 

Earnings per common share — diluted

   $ 1.59     $ 1.14  
  

 

 

   

 

 

 

Weighted average common shares outstanding — diluted

     37,938       38,756  
  

 

 

   

 

 

 

Other comprehensive loss, net of tax

    

Foreign currency translation adjustments, net of tax expense of $0 and $373

   $ (16,633   $ (4,180
  

 

 

   

 

 

 

Total other comprehensive loss, net of tax

     (16,633     (4,180
  

 

 

   

 

 

 

Comprehensive income

   $ 43,789     $ 40,153  
  

 

 

   

 

 

 


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share data)

 

     Nine Months Ended
September 30,
 
     2019     2018  
     (unaudited)  

Revenues

   $ 1,750,499     $ 1,522,884  
  

 

 

   

 

 

 

Operating expenses

    

Direct cost of revenues

     1,116,224       987,912  

Selling, general and administrative expenses

     371,042       347,473  

Amortization of other intangible assets

     5,838       6,297  
  

 

 

   

 

 

 
     1,493,104       1,341,682  
  

 

 

   

 

 

 

Operating income

     257,395       181,202  
  

 

 

   

 

 

 

Other income (expense)

    

Interest income and other

     5,741       2,074  

Interest expense

     (14,371     (20,073

Gain on sale of business

     —         13,031  
  

 

 

   

 

 

 
     (8,630     (4,968
  

 

 

   

 

 

 

Income before income tax provision

     248,765       176,234  

Income tax provision

     61,100       49,347  
  

 

 

   

 

 

 

Net income

   $ 187,665     $ 126,887  
  

 

 

   

 

 

 

Earnings per common share — basic

   $ 5.09     $ 3.43  
  

 

 

   

 

 

 

Weighted average common shares outstanding — basic

     36,851       37,008  
  

 

 

   

 

 

 

Earnings per common share — diluted

   $ 4.92     $ 3.32  
  

 

 

   

 

 

 

Weighted average common shares outstanding — diluted

     38,107       38,214  
  

 

 

   

 

 

 

Other comprehensive loss, net of tax

    

Foreign currency translation adjustments, net of tax expense of $0 and $373

   $ (16,225   $ (17,417
  

 

 

   

 

 

 

Total other comprehensive loss, net of tax

     (16,225     (17,417
  

 

 

   

 

 

 

Comprehensive income

   $ 171,440     $ 109,470  
  

 

 

   

 

 

 


FTI CONSULTING, INC.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands, except per share data)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2019     2018     2019     2018  
     (Unaudited)     (Unaudited)  

Net income

   $ 60,422     $ 44,333     $ 187,665     $ 126,887  

Add back:

        

Non-cash interest expense on convertible notes

     2,166       938       6,411       938  

Tax impact of non-cash interest expense on convertible notes

     (563     (241     (1,666     (241

Gain on sale of business

     —         (13,031     —         (13,031

Tax impact of gain on sale of business (1)

     —         6,798       (2,097     6,798  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted net income

   $ 62,025     $ 38,797     $ 190,313     $ 121,351  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share — diluted

   $ 1.59     $ 1.14     $ 4.92     $ 3.32  

Add back:

        

Non-cash interest expense on convertible notes

     0.06       0.03       0.17       0.03  

Tax impact of non-cash interest expense on convertible notes

     (0.02     (0.01     (0.04     (0.01

Gain on sale of business

     —         (0.34     —         (0.34

Tax impact of gain on sale of business (1)

     —         0.18       (0.06     0.18  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted earnings per common share — diluted

   $ 1.63     $ 1.00     $ 4.99     $ 3.18  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common shares outstanding — diluted

     37,938       38,756       38,107       38,214  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

In 2019, represents a discrete tax adjustment resulting from a change in estimate related to the accounting for the sale of Ringtail.


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)

   $ 5.63     $ 5.88  

Non-cash interest expense on convertible notes, net of tax

     0.17       0.17  

Tax impact of gain on sale of business

     (0.05     (0.05
  

 

 

   

 

 

 

Guidance on estimated adjusted earnings per common share (non-GAAP) (1)

   $ 5.75     $ 6.00  
  

 

 

   

 

 

 

 

(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, or 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 TO ADJUSTED EBITDA

(in thousands)

 

Three Months Ended September 30, 2019
(unaudited)                                         

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

Net income

                    $ 60,422  

Interest income and other

                      (2,973

Interest expense

                      4,832  

Income tax provision

                      19,857  
                   

 

 

 

Operating income

   $ 46,007      $ 25,534      $ 17,943      $ 9,094      $ 11,343      $ (27,783   $ 82,138  

Depreciation and amortization

     964        1,188        1,426        3,192        619        691       8,080  

Amortization of other intangible assets

     1,113        286        44        —          682        —         2,125  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 48,084      $ 27,008      $ 19,413      $ 12,286      $ 12,644      $ (27,092   $ 92,343  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Nine Months Ended September 30, 2019
(unaudited)                                    

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

Net income

                    $ 187,665  

Interest income and other

                      (5,741

Interest expense

                      14,371  

Income tax provision

                      61,100  
                   

 

 

 

Operating income

   $ 130,470      $ 82,753      $ 62,179      $ 30,080      $ 30,691      $ (78,778   $ 257,395  

Depreciation and amortization

     2,821        3,448        4,454        7,804        1,782        2,074       22,383  

Amortization of other intangible assets

     2,646        865        133        —          2,194        —         5,838  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 135,937      $ 87,066      $ 66,766      $ 37,884      $ 34,667      $ (76,704   $ 285,616  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 


FTI CONSULTING, INC.

RECONCILIATION OF NET INCOME AND OPERATING INCOME TO ADJUSTED EBITDA

(in thousands)

 

Three Months Ended September 30, 2018
(unaudited)                                          

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

Net income

                    $ 44,333  

Interest income and other

                      (1,400

Interest expense

                      7,246  

Gain on sale of business

                      (13,031

Income tax provision

                      19,964  
                   

 

 

 

Operating income

   $ 25,252      $ 20,625      $ 21,713      $ 7,926      $ 9,402      $ (27,806   $ 57,112  

Depreciation and amortization

     779        1,036        1,468        3,537        568        907       8,295  

Amortization of other intangible assets

     767        309        57        10        832        —         1,975  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 26,798      $ 21,970      $ 23,238      $ 11,473      $ 10,802      $ (26,899   $ 67,382  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Nine Months Ended September 30, 2018
(unaudited)                                          

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

Net income

                    $ 126,887  

Interest income and other

                      (2,074

Interest expense

                      20,073  

Gain on sale of business

                      (13,031

Income tax provision

                      49,347  
                   

 

 

 

Operating income

   $ 92,504      $ 71,128      $ 53,385      $ 14,486      $ 27,275      $ (77,576   $ 181,202  

Depreciation and amortization

     2,534        3,195        4,209        10,141        1,747        2,722       24,548  

Amortization of other intangible assets

     2,341        1,019        252        86        2,599        —         6,297  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Adjusted EBITDA

   $ 97,379      $ 75,342      $ 57,846      $ 24,713      $ 31,621      $ (74,854   $ 212,047  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 


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 September 30, 2019 (unaudited)

              

Corporate Finance & Restructuring

   $ 191,698      $ 48,084       25.1     70   $ 449        1,177  

Forensic and Litigation Consulting

     142,651        27,008       18.9     61   $ 336        1,326  

Economic Consulting

     141,715        19,413       13.7     70   $ 512        764  

Technology (1)

     57,083        12,286       21.5     N/M       N/M        348  

Strategic Communications (1)

     59,959        12,644       21.1     N/M       N/M        719  
  

 

 

    

 

 

   

 

 

        

 

 

 
   $ 593,106      $ 119,435       20.1          4,334  
  

 

 

    

 

 

   

 

 

        

 

 

 

Unallocated Corporate

        (27,092         
     

 

 

          

Adjusted EBITDA

      $ 92,343       15.6       
     

 

 

          

Nine Months Ended September 30, 2019 (unaudited)

              

Corporate Finance & Restructuring

   $ 542,667      $ 135,937       25.0     70   $ 451        1,177  

Forensic and Litigation Consulting

     427,518        87,066       20.4     64   $ 336        1,326  

Economic Consulting

     439,488        66,766       15.2     76   $ 500        764  

Technology (1)

     164,051        37,884       23.1     N/M       N/M        348  

Strategic Communications (1)

     176,775        34,667       19.6     N/M       N/M        719  
  

 

 

    

 

 

   

 

 

        

 

 

 
   $ 1,750,499      $ 362,320       20.7          4,334  
  

 

 

    

 

 

   

 

 

        

 

 

 

Unallocated Corporate

        (76,704         
     

 

 

          

Adjusted EBITDA

      $ 285,616       16.3       
     

 

 

          

Three Months Ended September 30, 2018 (unaudited)

              

Corporate Finance & Restructuring

   $ 135,418      $ 26,798       19.8     65   $ 414        926  

Forensic and Litigation Consulting

     126,684        21,970       17.3     63   $ 327        1,129  

Economic Consulting

     139,166        23,238       16.7     71   $ 540        705  

Technology (1)

     56,692        11,473       20.2     N/M       N/M        303  

Strategic Communications (1)

     55,052        10,802       19.6     N/M       N/M        652  
  

 

 

    

 

 

   

 

 

        

 

 

 
   $ 513,012      $ 94,281       18.4          3,715  
  

 

 

    

 

 

   

 

 

        

 

 

 

Unallocated Corporate

        (26,899         
     

 

 

          

Adjusted EBITDA

      $ 67,382       13.1       
     

 

 

          

Nine Months Ended September 30, 2018 (unaudited)

              

Corporate Finance & Restructuring

   $ 419,695      $ 97,379       23.2     67   $ 425        926  

Forensic and Litigation Consulting

     388,250        75,342       19.4     65   $ 328        1,129  

Economic Consulting

     405,583        57,846       14.3     70   $ 515        705  

Technology (1)

     144,035        24,713       17.2     N/M       N/M        303  

Strategic Communications (1)

     165,321        31,621       19.1     N/M       N/M        652  
  

 

 

    

 

 

   

 

 

        

 

 

 
   $ 1,522,884      $ 286,901       18.8          3,715  
  

 

 

    

 

 

   

 

 

        

 

 

 

Unallocated Corporate

        (74,854         
     

 

 

          

Adjusted EBITDA

      $ 212,047       13.9       
     

 

 

          

N/M Not meaningful

 

(1) 

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


FTI CONSULTING, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Nine Months Ended
September 30,
 
     2019     2018  
     (unaudited)  

Operating activities

    

Net income

   $ 187,665     $ 126,887  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     22,384       24,548  

Amortization and impairment of other intangible assets

     5,838       6,297  

Acquisition-related contingent consideration

     717       355  

Provision for doubtful accounts

     13,552       11,951  

Non-cash share-based compensation

     14,060       12,219  

Amortization of debt discount and issuance costs

     8,666       2,604  

Gain on sale of business

     —         (13,031

Other

     248       751  

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

    

Accounts receivable, billed and unbilled

     (191,644     (130,369

Notes receivable

     2,521       2,659  

Prepaid expenses and other assets

     (5,817     (174

Accounts payable, accrued expenses and other

     (7,332     16,150  

Income taxes

     30,777       28,922  

Accrued compensation

     5,156       7,207  

Billings in excess of services provided

     (9,925     (10,704
  

 

 

   

 

 

 

Net cash provided by operating activities

     76,866       86,272  
  

 

 

   

 

 

 

Investing activities

    

Proceeds from sale of business

     —         50,283  

Payments for acquisition of businesses, net of cash received

     (18,791     —    

Purchases of property and equipment

     (27,026     (27,841

Other

     55       741  
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (45,762     23,183  
  

 

 

   

 

 

 

Financing activities

    

Repayments under revolving line of credit, net

     —         (100,000

Proceeds from issuance of convertible notes

     —         316,250  

Payments of debt issue costs

     —         (8,048

Deposits

     535       2,327  

Purchase and retirement of common stock

     (77,949     (29,220

Net issuance of common stock under equity compensation plans

     3,176       31,241  

Payments for business acquisition liabilities

     (2,282     (3,029
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (76,520     209,521  
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (8,183     (3,070
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (53,599     315,906  

Cash and cash equivalents, beginning of period

     312,069       189,961  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 258,470     $ 505,867