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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, 2020
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 22, 2020
Common Stock, $0.01 par value35,661,709



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,
 20202019
(Unaudited)
Assets 
Current assets  
Cash and cash equivalents$304,658 $369,373 
Accounts receivable:
Billed receivables603,832 540,584 
Unbilled receivables482,586 418,288 
Allowance for doubtful accounts and unbilled services(323,658)(265,500)
Accounts receivable, net762,760 693,372 
Current portion of notes receivable34,089 35,106 
Prepaid expenses and other current assets74,223 80,810 
Total current assets1,175,730 1,178,661 
Property and equipment, net95,544 93,672 
Operating lease assets153,818 159,777 
Goodwill1,223,764 1,202,767 
Other intangible assets, net43,652 38,432 
Notes receivable, net66,078 69,033 
Other assets35,812 40,800 
Total assets$2,794,398 $2,783,142 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, accrued expenses and other$164,493 $158,936 
Accrued compensation397,147 416,903 
Billings in excess of services provided46,621 36,698 
Total current liabilities608,261 612,537 
Long-term debt, net308,454 275,609 
Noncurrent operating lease liabilities161,976 176,378 
Deferred income taxes150,572 151,352 
Other liabilities90,638 78,124 
Total liabilities1,319,901 1,294,000 
Commitments and contingent liabilities (Note 11)
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 — 36,028 (2020) and 37,390 (2019)
360 374 
Additional paid-in capital46,642 216,162 
Retained earnings1,568,546 1,413,453 
Accumulated other comprehensive loss(141,051)(140,847)
Total stockholders' equity1,474,497 1,489,142 
Total liabilities and stockholders' equity$2,794,398 $2,783,142 
 
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,
 2020201920202019
Revenues$622,249 $593,106 $1,834,694 $1,750,499 
Operating expenses
Direct cost of revenues417,179 380,892 1,232,437 1,116,224 
Selling, general and administrative expenses122,102 127,951 375,989 371,042 
Special charges7,103  7,103  
Amortization of other intangible assets2,795 2,125 7,440 5,838 
 549,179 510,968 1,622,969 1,493,104 
Operating income73,070 82,138 211,725 257,395 
Other income (expense)    
Interest income and other(3,340)2,973 3,879 5,741 
Interest expense(5,151)(4,832)(15,169)(14,371)
 (8,491)(1,859)(11,290)(8,630)
Income before income tax provision64,579 80,279 200,435 248,765 
Income tax provision14,407 19,857 45,342 61,100 
Net income$50,172 $60,422 $155,093 $187,665 
Earnings per common share — basic$1.41 $1.65 $4.30 $5.09 
Earnings per common share — diluted$1.35 $1.59 $4.11 $4.92 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax
         expense of $0
$21,330 $(16,633)$(204)$(16,225)
Total other comprehensive income (loss), net of tax21,330 (16,633)(204)(16,225)
Comprehensive income$71,502 $43,789 $154,889 $171,440 
 
See accompanying notes to condensed consolidated financial statements
4


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
 
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
 
 SharesAmountTotal
Balance at December 31, 201937,390 $374 $216,162 $1,413,453 $(140,847)$1,489,142 
Net income— $— $— $56,747 $— $56,747 
Other comprehensive loss:
Cumulative translation adjustment— — — — (31,102)(31,102)
Issuance of common stock in
connection with:
Exercise of options34 1 1,206 — — 1,207 
           Restricted share grants, less net
             settled shares of 58
136 1 (6,768)— — (6,767)
           Stock units issued under incentive
compensation plan
— — 2,314 — — 2,314 
Purchase and retirement of common
stock
(450)(5)(50,306)— — (50,311)
Share-based compensation— — 7,454 — — 7,454 
Balance at March 31, 202037,110 $371 $170,062 $1,470,200 $(171,949)$1,468,684 
Net income— $— $— $48,174 $— $48,174 
Other comprehensive income:
Cumulative translation adjustment— — — — 9,568 9,568 
Issuance of common stock in
connection with:
Exercise of options33 — 1,191 — — 1,191 
           Restricted share grants, less net
             settled shares of 18
38 1 (2,155)— — (2,154)
Purchase and retirement of common
stock
(471)(5)(51,048)— — (51,053)
Share-based compensation— — 4,693 — — 4,693 
Balance at June 30, 202036,710 $367 $122,743 $1,518,374 $(162,381)$1,479,103 
Net income— $— $— $50,172 $— $50,172 
Other comprehensive income:
Cumulative translation adjustment— — — — 21,330 21,330 
Issuance of common stock in
connection with:
Exercise of options43 — 1,536 — — 1,536 
           Restricted share grants, less net
             settled shares of 2
24 — (207)— — (207)
Purchase and retirement of common
stock
(749)(7)(82,859)— — (82,866)
Share-based compensation— — 5,429 — — 5,429 
Balance at September 30, 202036,028 $360 $46,642 $1,568,546 $(141,051)$1,474,497 
5


 Common StockAdditional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
 
 SharesAmountTotal
Balance at December 31, 201838,147 $381 $299,534 $1,196,727 $(147,817)$1,348,825 
Net income— $— $— $62,645 $— $62,645 
Other comprehensive income:
Cumulative translation adjustment— — — — 5,223 5,223 
Issuance of common stock in
   connection with:
Exercise of options55 1 2,211 — — 2,212 
 Restricted share grants, less net
     settled shares of 38
153 1 (2,740)— — (2,739)
Stock units issued under incentive
   compensation plan
— — 1,346 — — 1,346 
Purchase and retirement of common stock
(328)(3)(21,880)— — (21,883)
Share-based compensation— — 6,393 — — 6,393 
Balance at March 31, 201938,027 $380 $284,864 $1,259,372 $(142,594)$1,402,022 
Net income— $— $— $64,598 $— $64,598 
Other comprehensive loss:
Cumulative translation adjustment— — — — (4,815)(4,815)
Issuance of common stock in
connection with:
Exercise of options87 1 3,075 — — 3,076 
Restricted share grants, less net settled shares of 17
78 1 (1,352)— — (1,351)
Purchase and retirement of common stock
(580)(6)(48,326)— — (48,332)
Share-based compensation— — 3,814 — — 3,814 
Balance at June 30, 201937,612 $376 $242,075 $1,323,970 $(147,409)$1,419,012 
Net income— $— $— $60,422 $— $60,422 
Other comprehensive loss:
Cumulative translation adjustment— — — — (16,633)(16,633)
Issuance of common stock in
connection with:
Exercise of options94 1 3,568 — — 3,569 
 Restricted share grants, less net
     settled shares of 13
14  (1,322)— — (1,322)
      Stock units issued under incentive
compensation plan
— — 67 — — 67 
Purchase and retirement of common
stock
(91)(1)(7,733)— — (7,734)
Share-based compensation— — 3,853 — — 3,853 
Balance at September 30, 201937,629 $376 $240,508 $1,384,392 $(164,042)$1,461,234 

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,
20202019
Operating activities
Net income$155,093 $187,665 
Adjustments to reconcile net income to net cash provided by operating
   activities:
  
Depreciation and amortization23,655 22,384 
Amortization and impairment of other intangible assets7,440 5,838 
Acquisition-related contingent consideration4,652 717 
Provision for doubtful accounts15,608 13,552 
Share-based compensation17,576 14,060 
Amortization of debt discount and issuance costs9,028 8,666 
Deferred income taxes(1,658)4,084 
Other45 248 
Changes in operating assets and liabilities, net of effects from
   acquisitions:
Accounts receivable, billed and unbilled(86,491)(191,644)
Notes receivable3,346 2,521 
Prepaid expenses and other assets8,294 (5,817)
Accounts payable, accrued expenses and other7,713 (7,332)
Income taxes(14,635)26,693 
Accrued compensation(18,985)5,156 
Billings in excess of services provided10,296 (9,925)
Net cash provided by operating activities140,977 76,866 
Investing activities  
Payments for acquisition of businesses, net of cash received(25,271)(18,791)
Purchases of property and equipment(25,663)(27,026)
Other558 55 
Net cash used in investing activities(50,376)(45,762)
Financing activities  
Borrowings under revolving line of credit149,500 45,000 
Repayments under revolving line of credit(124,500)(45,000)
Purchase and retirement of common stock(175,832)(77,949)
Net issuance of common stock under equity compensation plans(5,195)3,176 
Payments for business acquisition liabilities(3,948)(2,282)
Deposits and other4,561 535 
Net cash used in financing activities(155,414)(76,520)
Effect of exchange rate changes on cash and cash equivalents98 (8,183)
Net decrease in cash and cash equivalents(64,715)(53,599)
Cash and cash equivalents, beginning of period369,373 312,069 
Cash and cash equivalents, end of period$304,658 $258,470 
Supplemental cash flow disclosures
Cash paid for interest$7,115 $7,264 
Cash paid for income taxes, net of refunds$61,636 $29,885 
Non-cash investing and financing activities:
Issuance of stock units under incentive compensation plans$2,314 $1,413 
Purchase and retirement of common stock not yet paid$8,540 $ 
Business acquisition liabilities not yet paid$3,460 $14,004 
 
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, 2019 filed with the SEC.  
2. New Accounting Standards
 Recently Adopted Accounting Standards
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-15 ("ASU 2018-15"), Internal Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, which requires companies to capitalize implementation costs of a hosting arrangement that is a service contract and expense those costs over the term of the hosting arrangement. On January 1, 2020, we prospectively adopted ASU 2018-15 for eligible costs incurred on or after the adoption date. The adoption of this standard resulted in the recognition of additional internal use software costs, which are included in the “Property and equipment, net” financial statement line item on the Condensed Consolidated Balance Sheets. The impact was not material on the Condensed Consolidated Balance Sheets as of September 30, 2020 or on the Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Statements of Stockholders’ Equity or Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2020.
Accounting Standards Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to reduce the complexity in accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying and amending existing guidance. The amendments in this ASU are effective for annual periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.
In August 2020, the FASB issued 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 areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.

3. Earnings Per Common Share
Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under our equity compensation plans, including stock options and restricted shares (restricted share awards, restricted stock units and performance stock units), each using the treasury stock method.
8


Because we expect to settle the principal amount of the outstanding 2.0% convertible senior notes due 2023 ("2023 Convertible Notes") in cash, we use the treasury stock method for calculating the potential dilutive effect of the conversion feature on earnings per common share, if applicable. The conversion feature had a dilutive impact on earnings per common share for the three and nine months ended September 30, 2020 and 2019, as the average market price per share of our common stock for the period exceeded the conversion price of $101.38 per share. See Note 9, "Debt" for additional information about the 2023 Convertible Notes.
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
Numerator — basic and diluted    
Net income$50,172 $60,422 $155,093 $187,665 
Denominator
Weighted average number of common shares outstanding — basic
35,639 36,617 36,073 36,851 
Effect of dilutive convertible notes 337 21 425 7 
Effect of dilutive stock options402 471 436 454 
Effect of dilutive restricted shares708 829 774 795 
Weighted average number of common shares outstanding — diluted
37,086 37,938 37,708 38,107 
Earnings per common share — basic$1.41 $1.65 $4.30 $5.09 
Earnings per common share — diluted$1.35 $1.59 $4.11 $4.92 
Antidilutive stock options and restricted shares83 1 50 24 
4. Special Charges
During the three and nine months ended September 30, 2020, we recorded a special charge of $7.1 million, which consists of the following components:
$4.7 million of lease abandonment and other relocation costs associated with the consolidation of office space in New York, New York. The lease abandonment costs include non-cash charges of $4.4 million related to accelerated amortization on operating lease assets and accelerated depreciation on lease-related property and equipment; and
$2.4 million of employee severance and other employee-related costs associated with performance-related actions in our Forensic and Litigation Consulting ("FLC") segment that impacted 16 employees. All of these amounts will be paid in cash within the next twelve months.
There were no special charges recorded during the three and nine months ended September 30, 2019.
The following table details the special charge by segment:
 Three Months Ended September 30,Nine Months Ended September 30,
 20202020
Corporate Finance & Restructuring $861 $861 
FLC3,484 3,484 
Economic Consulting35 35 
Technology 276 276 
Strategic Communications 2,074 2,074 
Segment special charge 6,730 6,730 
Unallocated Corporate 373 373 
Total $7,103 $7,103 

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5. 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 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 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.
Fixed-fee arrangements require the client to pay a pre-established 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.
Revenues are recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer and in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate services that we provide to our customers.
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 $2.6 million and $15.1 million for the three and nine months ended September 30, 2020, respectively, and $7.0 million and $23.5 million for the three and nine months ended September 30, 2019, 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, 2020 and December 31, 2019, the aggregate amount of unfulfilled performance obligations was $3.1 million and $2.3 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 revenue 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, 2020 and $1.3 million as of December 31, 2019.
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, 2020 and immaterial as of December 31, 2019.
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6. Accounts Receivable and Allowance for Doubtful Accounts
Timing of revenue recognition often differs from the timing of billing to our customers. Generally, we transfer goods or services to a customer before the customer pays consideration or payment is due. If we have an unconditional right to invoice and receive payment for goods or services already provided, we record billed and unbilled receivables on our Condensed Consolidated Balance Sheets. Our contract terms generally include a requirement of payment within 30 days when no contingencies exist. Payment terms and conditions vary depending on the jurisdiction, market and type of service, and whether regulatory or other third-party approvals are required. At times, we may execute contracts in a form provided by customers that might include different payment terms and contracts may be negotiated at the client’s request.
We record adjustments to the allowance for doubtful accounts and unbilled services as a reduction in revenues when there are changes in estimates of fee reductions, such as those fee reductions imposed by bankruptcy courts and other regulatory institutions for both billed and unbilled accounts receivable. The allowance for doubtful accounts and unbilled services is also adjusted after the related work has been billed to the client and we determine that all or a portion of the accounts receivable is not expected to be collected.
Adjustments to the allowance for doubtful accounts and unbilled services related to expected credit losses are recorded to selling, general and administrative ("SG&A") expenses on the Condensed Consolidated Statements of Comprehensive Income as bad debt expense. Judgment is required to assess collectability and to adjust the allowance for doubtful accounts and unbilled services to the current estimate of expected credit losses. Our judgments consider customer specific risks such as the counterparty’s creditworthiness and historical collection experience. Other factors include but are not limited to current economic conditions and forward-looking estimates.
Our billed accounts receivables are written off when the potential for recovery is considered remote. The following table summarizes total bad debt expense and write-offs for the three and nine months ended September 30, 2020:
 Three Months Ended September 30,Nine Months Ended September 30,
2020201920202019
Bad debt expense$3,984 $7,292 $15,608 $13,552 
Write-offs6,182 2,951 19,707 8,869 
7. Goodwill and Other Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill by reportable segment:   
Corporate
Finance &
Restructuring
FLCEconomic
Consulting
TechnologyStrategic
Communications
Total
Balance at December 31, 2019      
Goodwill$478,842 $232,120 $268,677 $96,770 $320,497 $1,396,906 
Accumulated goodwill impairment— — — — (194,139)(194,139)
Goodwill, net at December 31, 2019478,842 232,120 268,677 96,770 126,358 1,202,767 
Acquisitions20,532 — — — — 20,532 
Foreign currency translation
adjustment and other
2,300 (600)(7)(29)(1,199)465 
Balance at September 30, 2020
Goodwill501,674 231,520 268,670 96,741 319,298 1,417,903 
Accumulated goodwill impairment— — — — (194,139)(194,139)
Goodwill, net at September 30, 2020$501,674 $231,520 $268,670 $96,741 $125,159 $1,223,764 
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During the three months ended September 30, 2020, we acquired a strategy consulting and investment banking business that was assigned to the Corporate Finance & Restructuring ("Corporate Finance") segment. We recorded $20.5 million in goodwill based on a preliminary 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.
Other Intangible Assets
Other intangible assets were as follows:  
 September 30, 2020December 31, 2019
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizing intangible assets      
Customer relationships (1)
$110,502 $82,343 $28,159 $99,613 $76,808 $22,805 
Trademarks (1)
11,401 2,108 9,293 9,855 653 9,202 
Acquired software and other 3,537 2,437 1,100 3,386 2,061 1,325 
125,440 86,888 38,552 112,854 79,522 33,332 
Non-amortizing intangible assets
Trademarks 5,100 — 5,100 5,100 — 5,100 
Total$130,540 $86,888 $43,652 $117,954 $79,522 $38,432 
(1) During the three months ended September 30, 2020, we acquired a strategy consulting and investment banking business, and its related intangible assets were assigned to the Corporate Finance segment.

Other intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of $2.8 million and $7.4 million for the three and nine months ended September 30, 2020, respectively, and $2.1 million and $5.8 million for the three and nine months ended September 30, 2019, respectively.
We estimate our future amortization expense for our intangible assets with finite lives to be as follows: 
Year
As of
September 30, 2020 (1)
2020 (remaining)$2,792 
202110,642 
20228,519 
20234,821 
20243,388 
Thereafter8,390 
 $38,552 
(1)Actual amortization expense to be reported in future periods could differ from these estimates because of new intangible asset acquisitions, impairments, changes in useful lives, or other relevant factors or changes.
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8. Financial Instruments
The following table presents the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of September 30, 2020 and December 31, 2019:
September 30, 2020
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities
Acquisition-related contingent consideration, including
   current portion (1)(2)
$18,545 $ $ $18,545 
2023 Convertible Notes (3)
283,454  394,079  
Total$301,999 $ $394,079 $18,545 
December 31, 2019
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities   
Acquisition-related contingent consideration, including
   current portion (1)
$14,826 $ $ $14,826 
2023 Convertible Notes (3)
275,609  398,016  
Total$290,435 $ $398,016 $14,826 
(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 three months ended September 30, 2020, we acquired a strategy consulting and investment banking business that was assigned to the Corporate Finance segment and recorded an acquisition-related contingent consideration liability.
(3)The carrying values include unamortized deferred debt issue costs and debt discount.
The fair values of financial instruments not included in the tables above are estimated to be equivalent to their carrying values as of September 30, 2020 and December 31, 2019.
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 simulation. 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. We have multiple valuation models that use different inputs and assumptions based on the timing of the acquisitions. As a result, the significant unobservable inputs used in these models vary. The acquisition-related contingent consideration subject to the probability-weighted discounted cash flow model was valued using significant unobservable inputs including a discount rate of 13.5% and future cash flows. The acquisition-related contingent consideration liabilities subject to the Monte Carlo simulation were valued using significant unobservable inputs including volatility rates between 31.5% and 35.0% and discount rates between 14.0% and 13.0%, which reflect the weighted average of our cost of debt and adjusted cost of equity of the acquired companies, and future cash flows. 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:
Liability for Acquisition-Related Contingent Consideration
Balance at December 31, 2019$14,826 
Accretion expense (1)
506 
Foreign currency translation adjustment (2)
(148)
Balance at March 31, 2020$15,184 
Accretion expense (1)
614 
Payments(4,692)
Foreign currency translation adjustment (2)
88 
Balance at June 30, 2020$11,194 
Additions (3)
3,460 
Accretion expense (1)
3,532 
Foreign currency translation adjustment (2)
359 
Balance at September 30, 2020$18,545 
Liability for Acquisition-Related Contingent Consideration
Balance at December 31, 2018$3,698 
Accretion expense (1)
93 
Balance at March 31, 2019$3,791 
Accretion expense (1)
93 
Payments(1,000)
Balance at June 30, 2019$2,884 
Additions (3)
14,004 
Accretion expense (1)
531 
Foreign currency translation adjustment (2)
(333)
Balance at September 30, 2019$17,086 
(1)Accretion expense is included in "Selling, general and administrative expenses" on the Condensed Consolidated Statements of Comprehensive Income.
(2)Foreign currency translation adjustments are included in "Other comprehensive income (loss), net of tax" on the Condensed Consolidated Statements of Comprehensive Income.
(3)During the three months ended September 30, 2020 and 2019, we acquired businesses that were assigned to the Corporate Finance segment.
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9. Debt
The table below summarizes the components of the Company’s debt: