fcn-20201231
false2020FY0000887936us-gaap:AccountingStandardsUpdate201409MemberP1YP1YP2YP2Y0.0098643us-gaap:AccountsPayableAndAccruedLiabilitiesCurrentus-gaap:AccountsPayableAndAccruedLiabilitiesCurrent00008879362020-01-012020-12-31iso4217:USD00008879362020-06-30xbrli:shares00008879362021-02-1700008879362020-12-3100008879362019-12-31iso4217:USDxbrli:shares00008879362019-01-012019-12-3100008879362018-01-012018-12-310000887936us-gaap:CommonStockMember2017-12-310000887936us-gaap:AdditionalPaidInCapitalMember2017-12-310000887936us-gaap:RetainedEarningsMember2017-12-310000887936us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-3100008879362017-12-310000887936us-gaap:RetainedEarningsMember2018-01-012018-12-310000887936us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-12-310000887936us-gaap:CommonStockMember2018-01-012018-12-310000887936us-gaap:AdditionalPaidInCapitalMember2018-01-012018-12-3100008879362017-01-012017-12-310000887936us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2017-12-310000887936srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2017-12-310000887936us-gaap:CommonStockMember2018-12-310000887936us-gaap:AdditionalPaidInCapitalMember2018-12-310000887936us-gaap:RetainedEarningsMember2018-12-310000887936us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-3100008879362018-12-310000887936us-gaap:RetainedEarningsMember2019-01-012019-12-310000887936us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310000887936us-gaap:CommonStockMember2019-01-012019-12-310000887936us-gaap:AdditionalPaidInCapitalMember2019-01-012019-12-310000887936us-gaap:CommonStockMember2019-12-310000887936us-gaap:AdditionalPaidInCapitalMember2019-12-310000887936us-gaap:RetainedEarningsMember2019-12-310000887936us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000887936us-gaap:RetainedEarningsMember2020-01-012020-12-310000887936us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310000887936us-gaap:CommonStockMember2020-01-012020-12-310000887936us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2020-12-310000887936us-gaap:CommonStockMember2020-12-310000887936us-gaap:AdditionalPaidInCapitalMember2020-12-310000887936us-gaap:RetainedEarningsMember2020-12-310000887936us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-31fcn:segmentxbrli:pure0000887936us-gaap:NonUsMemberus-gaap:GeographicConcentrationRiskMemberus-gaap:SalesRevenueNetMember2020-01-012020-12-310000887936srt:RevisionOfPriorPeriodReclassificationAdjustmentMember2020-12-310000887936fcn:FurnitureEquipmentAndInternalUseSoftwareMembersrt:MinimumMember2020-01-012020-12-310000887936fcn:FurnitureEquipmentAndInternalUseSoftwareMembersrt:MaximumMember2020-01-012020-12-310000887936us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2020-01-012020-12-310000887936srt:MinimumMember2020-01-012020-12-310000887936srt:MaximumMember2020-01-012020-12-31fcn:optionToExtend0000887936srt:MaximumMember2020-12-310000887936fcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMember2020-12-310000887936fcn:StockOptionsAndRestrictedSharesMember2020-01-012020-12-310000887936fcn:StockOptionsAndRestrictedSharesMember2019-01-012019-12-310000887936fcn:StockOptionsAndRestrictedSharesMember2018-01-012018-12-3100008879362021-01-012020-12-3100008879362020-01-012019-12-310000887936us-gaap:ContractTerminationMember2020-01-012020-12-310000887936us-gaap:EmployeeSeveranceMember2020-01-012020-12-31fcn:employee0000887936us-gaap:OperatingSegmentsMemberfcn:CorporateFinanceRestructuringMember2020-01-012020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:ForensicAndLitigationConsultingMember2020-01-012020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:EconomicConsultingMember2020-01-012020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:TechnologyMember2020-01-012020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:StrategicCommunicationsMember2020-01-012020-12-310000887936us-gaap:OperatingSegmentsMember2020-01-012020-12-310000887936us-gaap:CorporateNonSegmentMember2020-01-012020-12-310000887936fcn:OmnibusPlanTwoThousandSeventeenMember2020-12-310000887936us-gaap:EmployeeStockOptionMemberus-gaap:CostOfSalesMember2020-01-012020-12-310000887936us-gaap:RestrictedStockMemberus-gaap:CostOfSalesMember2020-01-012020-12-310000887936us-gaap:EmployeeStockOptionMemberus-gaap:CostOfSalesMember2019-01-012019-12-310000887936us-gaap:RestrictedStockMemberus-gaap:CostOfSalesMember2019-01-012019-12-310000887936us-gaap:EmployeeStockOptionMemberus-gaap:CostOfSalesMember2018-01-012018-12-310000887936us-gaap:RestrictedStockMemberus-gaap:CostOfSalesMember2018-01-012018-12-310000887936us-gaap:EmployeeStockOptionMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-12-310000887936us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockMember2020-01-012020-12-310000887936us-gaap:EmployeeStockOptionMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2019-01-012019-12-310000887936us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockMember2019-01-012019-12-310000887936us-gaap:EmployeeStockOptionMemberus-gaap:SellingGeneralAndAdministrativeExpensesMember2018-01-012018-12-310000887936us-gaap:SellingGeneralAndAdministrativeExpensesMemberus-gaap:RestrictedStockMember2018-01-012018-12-310000887936us-gaap:EmployeeStockOptionMember2020-01-012020-12-310000887936us-gaap:RestrictedStockMember2020-01-012020-12-310000887936us-gaap:EmployeeStockOptionMember2019-01-012019-12-310000887936us-gaap:RestrictedStockMember2019-01-012019-12-310000887936us-gaap:EmployeeStockOptionMember2018-01-012018-12-310000887936us-gaap:RestrictedStockMember2018-01-012018-12-310000887936us-gaap:RestrictedStockMember2019-12-310000887936us-gaap:RestrictedStockMember2020-12-310000887936us-gaap:RestrictedStockUnitsRSUMember2019-12-310000887936us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-12-310000887936us-gaap:RestrictedStockUnitsRSUMember2020-12-310000887936us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-12-310000887936us-gaap:RestrictedStockUnitsRSUMember2018-01-012018-12-310000887936us-gaap:PerformanceSharesMembersrt:MinimumMember2020-01-012020-12-310000887936us-gaap:PerformanceSharesMembersrt:MaximumMember2019-01-012019-12-310000887936us-gaap:PerformanceSharesMembersrt:MaximumMember2020-01-012020-12-310000887936us-gaap:PerformanceSharesMember2019-12-310000887936us-gaap:PerformanceSharesMember2020-01-012020-12-310000887936us-gaap:PerformanceSharesMember2020-12-310000887936us-gaap:PerformanceSharesMember2019-01-012019-12-310000887936us-gaap:PerformanceSharesMember2018-01-012018-12-310000887936fcn:RestrictedStockAndPerformanceStockUnitsMember2020-01-012020-12-310000887936fcn:RestrictedStockAndPerformanceStockUnitsMember2019-01-012019-12-310000887936fcn:RestrictedStockAndPerformanceStockUnitsMember2018-01-012018-12-310000887936us-gaap:LeaseholdImprovementsMember2020-12-310000887936us-gaap:LeaseholdImprovementsMember2019-12-310000887936us-gaap:ConstructionInProgressMember2020-12-310000887936us-gaap:ConstructionInProgressMember2019-12-310000887936us-gaap:FurnitureAndFixturesMember2020-12-310000887936us-gaap:FurnitureAndFixturesMember2019-12-310000887936fcn:ComputerEquipmentandSoftwareMember2020-12-310000887936fcn:ComputerEquipmentandSoftwareMember2019-12-310000887936fcn:CorporateFinanceRestructuringMember2018-12-310000887936fcn:ForensicAndLitigationConsultingMember2018-12-310000887936fcn:EconomicConsultingMember2018-12-310000887936fcn:TechnologyMember2018-12-310000887936fcn:StrategicCommunicationsMember2018-12-310000887936fcn:CorporateFinanceRestructuringMember2019-01-012019-12-310000887936fcn:ForensicAndLitigationConsultingMember2019-01-012019-12-310000887936fcn:EconomicConsultingMember2019-01-012019-12-310000887936fcn:TechnologyMember2019-01-012019-12-310000887936fcn:StrategicCommunicationsMember2019-01-012019-12-310000887936fcn:CorporateFinanceRestructuringMember2019-12-310000887936fcn:ForensicAndLitigationConsultingMember2019-12-310000887936fcn:EconomicConsultingMember2019-12-310000887936fcn:TechnologyMember2019-12-310000887936fcn:StrategicCommunicationsMember2019-12-310000887936fcn:CorporateFinanceRestructuringMember2020-01-012020-12-310000887936fcn:ForensicAndLitigationConsultingMember2020-01-012020-12-310000887936fcn:EconomicConsultingMember2020-01-012020-12-310000887936fcn:TechnologyMember2020-01-012020-12-310000887936fcn:StrategicCommunicationsMember2020-01-012020-12-310000887936fcn:CorporateFinanceRestructuringMember2020-12-310000887936fcn:ForensicAndLitigationConsultingMember2020-12-310000887936fcn:EconomicConsultingMember2020-12-310000887936fcn:TechnologyMember2020-12-310000887936fcn:StrategicCommunicationsMember2020-12-310000887936us-gaap:CustomerRelationshipsMember2020-01-012020-12-310000887936us-gaap:CustomerRelationshipsMember2020-12-310000887936us-gaap:CustomerRelationshipsMember2019-12-310000887936us-gaap:TradeNamesMember2020-01-012020-12-310000887936us-gaap:TradeNamesMember2020-12-310000887936us-gaap:TradeNamesMember2019-12-310000887936us-gaap:ComputerSoftwareIntangibleAssetMember2020-01-012020-12-310000887936us-gaap:ComputerSoftwareIntangibleAssetMember2020-12-310000887936us-gaap:ComputerSoftwareIntangibleAssetMember2019-12-310000887936us-gaap:TradeNamesMember2020-12-310000887936us-gaap:TradeNamesMember2019-12-31fcn:note0000887936us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310000887936us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310000887936us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310000887936us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310000887936us-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310000887936us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000887936us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000887936us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000887936fcn:ProbabilityWeightedMemberus-gaap:MeasurementInputDiscountRateMember2020-12-310000887936us-gaap:MeasurementInputPriceVolatilityMembersrt:MinimumMemberfcn:MonteCarloMember2020-12-310000887936us-gaap:MeasurementInputPriceVolatilityMembersrt:MaximumMemberfcn:MonteCarloMember2020-12-310000887936srt:MinimumMemberus-gaap:MeasurementInputDiscountRateMemberfcn:MonteCarloMember2020-12-310000887936us-gaap:MeasurementInputDiscountRateMembersrt:MaximumMemberfcn:MonteCarloMember2020-12-310000887936fcn:ConvertibleNoteDue2023Member2020-12-310000887936fcn:ConvertibleNoteDue2023Member2019-12-310000887936fcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMember2018-08-20fcn:trading_day0000887936us-gaap:DebtInstrumentRedemptionPeriodOneMemberfcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMember2020-01-012020-12-31fcn:business_day0000887936fcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMemberus-gaap:DebtInstrumentRedemptionPeriodTwoMember2020-01-012020-12-310000887936fcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMember2020-01-012020-12-310000887936fcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMember2019-01-012019-12-310000887936fcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMember2018-01-012018-12-310000887936us-gaap:SeniorNotesMemberfcn:SeniorNotesSixPointZeroPercentDueTwentyTwentyTwoMember2018-11-150000887936us-gaap:SeniorNotesMemberfcn:SeniorNotesSixPointZeroPercentDueTwentyTwentyTwoMember2018-11-152018-11-150000887936us-gaap:LineOfCreditMemberfcn:CreditFacilityMember2015-06-260000887936us-gaap:LineOfCreditMemberfcn:CreditFacilityMember2018-11-300000887936us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMembersrt:MinimumMemberfcn:CreditFacilityMember2018-11-012018-11-300000887936us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LineOfCreditMemberfcn:CreditFacilityMembersrt:MaximumMember2018-11-012018-11-300000887936us-gaap:BaseRateMemberus-gaap:LineOfCreditMembersrt:MinimumMemberfcn:CreditFacilityMember2018-11-012018-11-300000887936us-gaap:BaseRateMemberus-gaap:LineOfCreditMemberfcn:CreditFacilityMembersrt:MaximumMember2018-11-012018-11-300000887936us-gaap:LineOfCreditMembersrt:MinimumMemberfcn:CreditFacilityMember2020-01-012020-12-310000887936us-gaap:LineOfCreditMemberfcn:CreditFacilityMembersrt:MaximumMember2020-01-012020-12-310000887936us-gaap:LineOfCreditMemberfcn:CreditFacilityMember2019-12-310000887936us-gaap:LineOfCreditMemberfcn:CreditFacilityMember2020-12-310000887936us-gaap:LineOfCreditMember2020-12-310000887936fcn:ConvertibleNoteDue2023Memberus-gaap:SeniorNotesMember2018-08-202018-08-20fcn:lease_option0000887936srt:MinimumMember2020-12-3100008879362020-10-2600008879362020-10-262020-10-260000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2016-06-020000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2020-02-200000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2017-05-180000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2019-02-210000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2017-12-010000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2020-07-280000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2020-12-030000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2020-01-012020-12-310000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2019-01-012019-12-310000887936fcn:TwoThousandSixteenStockRepurchaseProgramMember2018-01-012018-12-310000887936fcn:A2018StockRepurchaseProgramMember2018-08-130000887936fcn:A2018StockRepurchaseProgramMember2018-08-162018-08-160000887936country:US2020-01-012020-12-310000887936country:US2019-01-012019-12-310000887936country:US2018-01-012018-12-310000887936country:GB2020-01-012020-12-310000887936country:GB2019-01-012019-12-310000887936country:GB2018-01-012018-12-310000887936fcn:CorporateFinanceRestructuringMember2018-01-012018-12-310000887936fcn:ForensicAndLitigationConsultingMember2018-01-012018-12-310000887936fcn:EconomicConsultingMember2018-01-012018-12-310000887936fcn:TechnologyMember2018-01-012018-12-310000887936fcn:StrategicCommunicationsMember2018-01-012018-12-310000887936us-gaap:MaterialReconcilingItemsMember2020-01-012020-12-310000887936us-gaap:MaterialReconcilingItemsMember2019-01-012019-12-310000887936us-gaap:MaterialReconcilingItemsMember2018-01-012018-12-310000887936us-gaap:OperatingSegmentsMemberfcn:CorporateFinanceRestructuringMember2020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:CorporateFinanceRestructuringMember2019-12-310000887936us-gaap:OperatingSegmentsMemberfcn:ForensicAndLitigationConsultingMember2020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:ForensicAndLitigationConsultingMember2019-12-310000887936us-gaap:OperatingSegmentsMemberfcn:EconomicConsultingMember2020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:EconomicConsultingMember2019-12-310000887936us-gaap:OperatingSegmentsMemberfcn:TechnologyMember2020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:TechnologyMember2019-12-310000887936us-gaap:OperatingSegmentsMemberfcn:StrategicCommunicationsMember2020-12-310000887936us-gaap:OperatingSegmentsMemberfcn:StrategicCommunicationsMember2019-12-310000887936us-gaap:OperatingSegmentsMember2020-12-310000887936us-gaap:OperatingSegmentsMember2019-12-310000887936us-gaap:CorporateNonSegmentMember2020-12-310000887936us-gaap:CorporateNonSegmentMember2019-12-310000887936country:US2020-01-012020-12-310000887936country:US2019-01-012019-12-310000887936country:US2018-01-012018-12-310000887936country:GB2020-01-012020-12-310000887936country:GB2019-01-012019-12-310000887936country:GB2018-01-012018-12-310000887936fcn:AllOtherCountriesMember2020-01-012020-12-310000887936fcn:AllOtherCountriesMember2019-01-012019-12-310000887936fcn:AllOtherCountriesMember2018-01-012018-12-310000887936country:US2020-12-310000887936country:GB2020-12-310000887936fcn:AllOtherCountriesMember2020-12-310000887936country:US2019-12-310000887936country:GB2019-12-310000887936fcn:AllOtherCountriesMember2019-12-3100008879362020-01-012020-03-3100008879362020-04-012020-06-3000008879362020-07-012020-09-3000008879362020-10-012020-12-3100008879362019-01-012019-03-3100008879362019-04-012019-06-3000008879362019-07-012019-09-3000008879362019-10-012019-12-31


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☒    No  ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  ☒
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant was $3.7 billion, based on the closing sales price of the registrant’s common stock on June 30, 2020, the last business day of the registrant's most recently completed second fiscal quarter.
The number of shares of the registrant’s common stock outstanding as of February 17, 2021 was 34,240,806.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of our definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after the end of our 2020 fiscal year are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.




FTI CONSULTING, INC. AND SUBSIDIARIES
Annual Report on Form 10-K
Fiscal Year Ended December 31, 2020


TABLE OF CONTENTS
  Page
PART I
  
Item 1.Business
  
Item 1A.Risk Factors
  
Item 1B.Unresolved Staff Comments
  
Item 2.Properties
  
Item 3.Legal Proceedings
  
Item 4.Mine Safety Disclosures
 
PART II
  
Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
  
Item 6.Selected Financial Data
  
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations
  
Item 7A.Quantitative and Qualitative Disclosures about Market Risk
  
Item 8.Financial Statements and Supplementary Data
  
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
Item 9A.Controls and Procedures
  
Item 9B.Other Information
 
PART III
  
Item 10.Directors, Executive Officers and Corporate Governance
  
Item 11.Executive Compensation
  
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
Item 13.Certain Relationships and Related Transactions and Director Independence
  
Item 14.Principal Accountant Fees and Services
 
PART IV
  
Item 15.Exhibits and Financial Statement Schedule
Item 16.Form 10-K Summary



FTI CONSULTING, INC.
PART I
Forward-Looking Information
This Annual Report on Form 10-K (the “Annual Report”) includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, future capital allocations and expenditures, expectations, plans or intentions relating to acquisitions, share repurchases and other matters, business trends, new, or changes to, laws and regulations and other information that is not historical. Forward-looking statements often contain words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” and variations of such words or similar expressions. All forward-looking statements, including, without limitation, management’s financial guidance and examination of operating trends, are based upon our historical performance and our current plans, estimates and expectations at the time we make them, and various assumptions. There can be no assurance that management’s expectations, beliefs, forecasts and projections will result or be achieved. Our actual financial results, performance or achievements could differ materially from those expressed in, or implied by, any forward-looking statements. The inclusion of any forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates, forecasts or expectations contemplated by us will be achieved. Given these risks, uncertainties and other factors, you should not place undue reliance on any forward-looking statements.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in, or implied by, statements in this Annual Report. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Annual Report are set forth in this report, including under the heading “Risk Factors” in Part I, Item 1A of this Annual Report. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Annual Report and are expressly qualified in their entirety by the cautionary statements included herein. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances and do not intend to do so.
ITEM 1.    BUSINESS
Unless otherwise indicated or required by the context, when we use the terms “Company,” “FTI Consulting,” “we,” “us” and “our,” we mean FTI Consulting, Inc., a Maryland corporation, and its consolidated subsidiaries.
Company Overview
General
FTI Consulting is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. Individually, each of our segments and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact. Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from proactive risk management to rapid response to unexpected events and dynamic environments.
We report financial results for the following five reportable segments:
Corporate Finance & Restructuring;
Forensic and Litigation Consulting;
Economic Consulting;
Technology; and
Strategic Communications.
We work closely with our clients to help them anticipate, illuminate and overcome complex business challenges and make the most of opportunities arising from factors such as the economy, financial and credit markets, governmental legislation and regulation, and litigation. We provide our clients with expert advice and solutions involving business transformation, transactions, turnaround, restructuring and bankruptcy, construction & environmental solutions, data & analytics, disputes, health solutions, risk and investigations, antitrust & competition economics, financial economics, international arbitration, corporate legal operations, electronic discovery (or “e-discovery”) services and expertise, information governance, privacy and
1



security services, corporate reputation, financial communications and public affairs. Our experienced professionals are acknowledged leaders in their chosen field not only for their level of knowledge and understanding, but for their ability to structure practical workable solutions to complex issues and real-world problems. Our clients include Fortune 500 corporations, FTSE 100 companies, global banks, major law firms, and local, state and national governments and agencies around the globe. In addition, major United States (“U.S.”) and international law firms refer us or engage us on behalf of their clients. We believe clients retain us because of our recognized expertise and capabilities in highly specialized areas, as well as our reputation for successfully meeting our clients’ needs.
Our operations span the globe encompassing locations within: (i) the Americas, consisting of our 51 U.S. offices located in 23 states, four offices located in Canada and six offices serving Latin America located in Argentina, Brazil, Colombia, Mexico, the Cayman Islands and the Virgin Islands (British); (ii) Asia and the Pacific, consisting of 18 offices located in Australia, China (including Hong Kong), India, Indonesia, Japan, South Korea, Malaysia and Singapore; and (iii) Europe, Middle East and Africa (“EMEA”), consisting of 35 offices located in Belgium, Denmark, Finland, France, Germany, Ireland, Israel, Qatar, South Africa, Spain, United Arab Emirates and the United Kingdom (“U.K.”).
We derive the majority of our revenues from providing professional services to clients in the U.S. For the year ended December 31, 2020, we derived approximately 63% and 37% of our consolidated revenues from the work of professionals who are assigned to locations inside and outside the U.S., respectively.
Summary Financial and Other Information
The following table sets forth the percentage of consolidated revenues for the last two years contributed by each of our five reportable segments.
 Year Ended December 31,
Reportable Segment20202019
Corporate Finance & Restructuring37 %31 %
Forensic and Litigation Consulting20 %25 %
Economic Consulting25 %25 %
Technology%%
Strategic Communications%10 %
Total100 %100 %
The following table sets forth the number of offices and countries in which each segment operates, as well as the number of revenue-generating professionals in each of our reportable segments.
 December 31, December 31,
 202020202019
 OfficesCountriesBillable HeadcountBillable Headcount
Corporate Finance & Restructuring56 18 1,655 1,194 
Forensic and Litigation Consulting61 18 1,343 1,351 
Economic Consulting47 18 891 790 
Technology38 13 408 361 
Strategic Communications36 17 770 728 
Total5,067 4,424 

2



Our Reportable Segments
The Company is organized into five reportable segments, each of which seeks to be a global leader in its own right by serving as a trusted advisor when our clients are presented with challenging issues and the risks are high.
Corporate Finance & Restructuring
Our Corporate Finance & Restructuring (“Corporate Finance”) segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, banks, lenders, and other financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of services centered around three core offerings: business transformation, transactions and turnaround, restructuring and bankruptcy.
In 2020, our Corporate Finance segment offered the following services:
Business Transformation. We provide business transformation services that support clients through transformational change, disruption and M&A to drive sustainable growth and value, including the following offerings:
Executive Compensation
Interim Management
Merger Integration & Carve-outs
Office of the CFO Solutions
Performance Improvement
Transactions. We provide services that support clients to strategize, structure, conduct diligence, integrate, carve-out, value and communicate around business transactions, including the following offerings:
Investment Banking & Transaction Opinions
Lender Services
Structured Finance
Tax Advisory
Transaction Services
Valuation & Financial Advisory Services
Turnaround, Restructuring and Bankruptcy. We provide advisory services to help our clients stabilize finances and operations to reassure creditors and other stakeholders that proactive steps are being taken to preserve and enhance value, including the following offerings:
Company Advisory
Contentious Insolvency
Creditor Advisory
Dispute Advisory/Litigation Support
Interim Management
Forensic and Litigation Consulting
Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, government entities and other interested parties with a multidisciplinary and independent range of services in risk and investigations and disputes, including a focus on highly regulated industries, such as our construction & environmental solutions and health solutions services. These services are supported by our data & analytics services which help our clients analyze large, disparate sets of data related to their business operations and support our clients during regulatory inquiries and commercial disputes. We deliver a wide range
3



of services centered around five core offerings: construction & environmental solutions, data & analytics, disputes, health solutions and risk and investigations.
In 2020, our FLC segment offered the following services:
Construction & Environmental Solutions. We provide commercial management, risk-based advisory and dispute resolution services for complex construction projects across all industries and help organizations deal with environmental issues or programmatic challenges. Our key services include the following offerings:
Asset Lifecycle Management
Capital Program Risk Management
Cost Analytics & Auditing Services
Data & Analytics. We provide strategic business solutions to clients requiring in-depth analysis of large, disparate sets of financial, operational and transactional data where our professionals work hand-in-hand with industry, regulatory, legal and topical specialists. Our key services include the following offerings:
Anti-corruption and Anti-money Laundering
Dispute Resolutions
Identifying Sanction Breaches and Fraud
Investigations and Remediation
Disputes. We provide courts and tribunals, parties to disputes, and their legal counsel clear, reliable and objective advice on matters within our expertise, from discovery and investigation to expert witness testimony and damage quantification in international arbitration and dispute resolution consulting. We support our global clients with disputes of all kinds, including the following offerings:
Claims in International Public Law
Complex Commercial and Regulatory Disputes
Financial Products and Broker-dealer Disputes
Insurance-related Disputes
Intellectual Property
Labor & Employment
Health Solutions. We work with a variety of healthcare and life sciences clients to discern innovative solutions that optimize performance in the short-term and prepare for future strategic, operational, financial, and legal challenges. Our diverse team of experts address challenges across the spectrum of healthcare disciplines with specialized capabilities. Our key services include the following offerings:
Investigations
Life Sciences
Performance Improvement
Quality and Compliance
Regulatory Risk
Risk and Investigations. We provide compliance, investigative, litigation consulting and remediation expertise on a wide range of investigations to boards of directors, executive management, in-house counsel and their outside legal advisors at law firms. Our experts conduct investigations over a wide scope of issues and allegations, including the following offerings:
Anti-money Laundering
4



Cybersecurity
Embezzlement and Other Types of Corruption
Export Controls & Sanctions
Financial Reporting Fraud
Foreign Corrupt Practices Act ("FCPA") Violations
Ponzi Schemes
Workplace Discrimination
Economic Consulting
Our Economic Consulting segment, including subsidiary Compass Lexecon LLC (“Compass Lexecon”), provides law firms, companies, government entities and other interested parties with analyses of complex economic issues for use in international arbitration, legal and regulatory proceedings, and strategic decision making and public policy debates around the world. We deliver a wide range of services centered around three core offerings: antitrust & competition economics, financial economics and international arbitration.
In 2020, our Economic Consulting segment offered the following services:
Antitrust & Competition Economics. We perform sophisticated economic analyses and provide expert testimony on international and regulatory antitrust and competition proceedings and practices, including the following offerings:
Damages Analysis
M&A-Related Antitrust
Non-M&A-Related Antitrust
Financial Economics. We perform sophisticated economic analysis and modeling of issues and provide expert testimony relating to M&A transactions, antitrust litigation, commercial disputes, international arbitration, regulatory proceedings and a wide range of securities litigation to regulated and unregulated industries and government regulators, including the following offerings:
Rate Setting
Securities Litigation & Risk Management
Transfer Pricing
Valuation
International Arbitration. We work with companies, governments and members of the international bar to provide independent advice and expert testimony relating to business valuations and economic damages in a wide variety of commercial and treaty disputes before international arbitration tribunals, including the following offerings:
Business Valuations
Commercial and Treaty Disputes
Economic Damages
Litigation Support
Technology
Our Technology segment provides companies, law firms and government entities with a comprehensive global portfolio of e-discovery, information governance, privacy and security and corporate legal operations solutions. We deliver a full spectrum of services including data collection, data processing, document review, hosting, advanced analytics and consulting.
5



In 2020, our Technology segment offered the following services:
Corporate Legal Operations. We provide solutions to companies to streamline and optimize legal operations across their organization, in the context of adherence to compliance and minimization of risk, including the following offerings:
Advisory on Governance, Policy, Standards and Execution
Contract Intelligence
Subscriptions and Managed Services
E-discovery Services and Expertise. We provide services to design, manage and host e-discovery workflows on multiple software platforms through our proprietary Acuity® managed review product and other platforms to maximize responsiveness and minimize costs, including the following offerings:
Consulting and Data Analytics
Data Collection and Digital Forensics
E-discovery and Data Compliance Management
Managed Document Review
Information Governance, Privacy and Security Services. We develop and implement information governance solutions that reduce corporate risk, decrease storage costs, secure data, improve the e-discovery process and enable faster and deeper insight into data and expert testimony defending methods and documentation, including the following offerings:
Data Remediation and Disposition for Compliance and Risk Management
General Data Protection and Privacy
Migration of Data to Cloud Applications
Regulatory Readiness Advisory and Implementation
Strategic Communications
Our Strategic Communications segment develops and executes communications strategies to help management teams, boards of directors, law firms, governments and regulators manage change and mitigate risk surrounding transformational and disruptive events, including transactions, investigations, disputes, crises, regulation and legislation. We deliver a wide range of services centered around three core offerings: corporate reputation, financial communications and public affairs.
In 2020, our Strategic Communications segment offered the following services:
Corporate Reputation. We design and provide communications to protect and enhance business reputations, build an organization's public profile and support business outcomes, including the following offerings:
Crisis & Issues Management
Digital, Analytics & Insights
Litigation Communications
Financial Communications. We design and provide communications strategies to help business leaders deliver consistent and credible narratives to raise capital, engage with investors and navigate transitional business events, including the following offerings:
Corporate Governance & Shareholder Activism
M&A Communications
Restructuring & Financial Issues
6



Public Affairs. We combine public policy, capital markets and sector-specific expertise to offer unique insights for clients operating at the critical intersection between business and government, including the following offerings:
Government Investigations
Government Relations
Public Affairs Research & Opinion Polling
Public Affairs Support of Business Strategies
Public Policy Advocacy
Our Industry Specializations
We employ professionals across our segments and practices who are qualified to provide our core services plus a range of specialized consulting services and solutions that address the strategic, reputational, operational, financial, regulatory, legal and other needs of specific industries. The major industry groups that we service include:
Aerospace & Defense
Agriculture
Airlines & Aviation
Automotive & Industrial
Construction
Energy, Power & Products
Environmental
Financial Services
Healthcare & Life Sciences
Hospitality, Gaming & Leisure
Insurance
Mining
Public-Sector & Government Contracts
Real Estate
Retail & Consumer Products
Telecom, Media & Technology
Transportation & Logistics
7



Our Business Drivers
Factors that drive demand for our business offerings include:
Developing Markets. The growth of multinational companies and global consolidation can precipitate antitrust and competition scrutiny and the spread internationally of issues and practices that historically have been more common in the U.S., such as increased and complex litigation, corporate restructuring and bankruptcy activities, and antitrust and competition scrutiny. Companies in the developing world and multinational companies can benefit from our expert advice to access capital and business markets, comply with the regulatory and other requirements of multiple countries, structure M&A transactions and conduct due diligence, which drives demand for the services of all of our segments.
Financial Markets. Financial market factors, including credit and financing availability, terms and conditions, the willingness of financial institutions to provide debt modifications or relief, corporate debt levels, default rates and capital markets transactions, are significant drivers of demand for our business offerings, particularly our Corporate Finance segment.
Litigation and Disputes. Litigation and business disputes, the complexity of the issues presented, and the amount of potential damages and penalties drive demand for the services offered by many of our segments, particularly our FLC, Economic Consulting and Technology segments. Law firms and their clients, as well as government regulators and other interested third parties, rely on independent outside resources to evaluate claims, facilitate discovery, assess damages, provide expert reports and testimony, manage the pre-trial and in-trial process, and effectively present evidence.
M&A Activity. M&A activity is an important driver for all of our segments. We offer services across all phases of the M&A lifecycle. Our services during the pre-transaction phase include government competition advice and pre-transaction analysis. Our services during the negotiation phase include due diligence, negotiation and other transaction advisory services, government competition and antitrust regulation services, expert witness testimony, asset valuations and financial communications advice. Our services following the close of a transaction include post-M&A integration, transformation and disputes services.
Operational Challenges and Opportunities. Operational challenges and opportunities drive demand for services across all of our segments. Businesses facing challenges require the evaluation and re-evaluation of strategy, risks and opportunities as a result of crisis-driven situations, competition, regulation, innovation and other events that arise in the course of business. These challenges include enterprise risk management, global expansion, competition from established companies, emerging businesses and technologies doing business in emerging markets, and new and changing regulatory requirements and legislation. Management, companies and their boards need outside help to recognize, understand and evaluate such events and effect change, which drives demand for independent expertise that can combine general business acumen with the specialized technical expertise of our service offerings and industry expertise.
Regulatory Complexity, Public Scrutiny and Investigations. Regulatory complexity, public scrutiny and investigations drive demand for services across all of our segments. Increasingly complex global regulations and legislation, greater scrutiny of corporate governance, instances of corporate malfeasance, and more stringent and complex reporting requirements drive demand for our service offerings. The need to understand and address the impact of regulation and legislation, as well as the increasing costs of doing business, has prompted companies to focus on better assessing and managing risks and opportunities. In addition, boards of directors, audit committees and independent board committees have been increasingly tasked with conducting internal investigations of financial wrongdoing, regulatory non-compliance and other issues. These factors and laws, such as the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act in the U.S., have contributed to the demand for independent consultants and experts to investigate and provide analyses to support the work of outside legal counsel, accountants and other advisors. These types of investigations also increasingly demand the use of multiple disciplinary service offerings like ours, which combine skills and capabilities across segments and practices with industry expertise.
8



Our Competitive Strengths
We compete primarily on the basis of the breadth of our services, the quality of our work, the prominence of our professionals, our geographic reach, our reputation and performance record, our specialized industry expertise and our strong client relationships. We believe our success is driven by a combination of long-standing competitive strengths, including:
Pre-eminent Positions and Professionals. We believe that we have pre-eminent market positions and professionals. During 2020, the awards and recognitions received by the Company include the following:
FTI Consulting and Compass Lexecon led the Who’s Who Legal Consulting Experts Guide for the fifth consecutive year with 154 experts recognized.
FTI Consulting named to Forbes magazine's list of America’s Best Management Consulting Firms for the fifth consecutive year, recognized in 14 sectors and functional areas.
FTI Consulting recognized as Consulting Firm of the Year by Who’s Who Legal for the fourth consecutive year.
FTI Consulting subsidiary Compass Lexecon ranked #1 on Global Arbitration Review’s GAR 100 Expert Witness Firms’ Power Index for the third consecutive year.
FTI Consulting recognized as a Pacesetter in Financial Crisis Management by ALM Intelligence.
FTI Consulting ranked #1 U.S. Restructuring Advisor by The Deal for the 13th consecutive year.
Diversified Service Offerings. Our five reportable segments offer a diversified portfolio of practices providing services across our four geographic regions. Our broad range of practices and services, the diversity of our revenue streams, our specialized industry expertise and our global reach distinguish us from our competitors. This diversity helps to mitigate the impact of crises, events and changes in a particular practice, industry or country.
Diversified Portfolio of Elite Clients. We provide services to a diverse group of clients, including Fortune 500 companies, FTSE 100 companies, global financial institutions, banks, private equity funds and local, state and national governments and agencies in the U.S. and other countries. Additionally, 96 of the 100 law firms as ranked by American Lawyer Global 100: Most Revenue List refer or engage us on behalf of numerous clients on multiple matters.
Demand for Integrated Solutions and a Consultative Approach. Our breadth and depth of practice and service offerings and industry expertise across the globe drive demand by clients that seek our integrated services and consultative approach covering different aspects of event-driven occurrences, reputational issues and transactions across different jurisdictions.
Strong Cash Flow. Our business model has several characteristics that produce consistent cash flows. Our strong cash flow supports business operations, capital expenditures and our ability to service our indebtedness and pursue our growth and other strategies.
Our Business Strategy
We build client relationships based on the quality of our services, our brand and the reputation of our professionals. We provide diverse complementary services to meet our clients’ needs around the world. We emphasize client service and satisfaction. We aim to build strong brand recognition. The following are key elements of our business strategy:
Leverage Our Practitioners' and Businesses' Expertise, Geographic Reach, Diverse Service Offerings and Client Relationships. We work hard to maintain and strengthen our core practices and competencies. We believe that our recognized expertise, geographic reach, diverse service offerings and client relationships, coupled with our successful track record of serving as a trusted advisor for our clients when they are facing their greatest challenges and opportunities, are the most critical elements in a decision to retain us. Many of our professionals are recognized experts in their respective fields.
Grow Organically. Our strategy is to identify where we are best positioned to help our clients solve their most complex issues, invest behind those positions and leverage that success to grow organically.
Strategic Acquisitions. We consider strategic and opportunistic acquisition opportunities on a selective basis. We seek to integrate completed acquisitions and manage investments in a way that fosters organic growth, expands our
9



geographic presence or complements our segments, practices, services and industry positions. We typically structure our acquisitions to retain the services of key individuals from the acquired companies.
Enhance Profitability. We endeavor to leverage our investments to build positions that will support profitable growth on a sustained basis through a variety of economic conditions.
Enhance Value through Capital Allocation. The strength of our balance sheet gives us the flexibility to allocate capital and create shareholder value in numerous ways, including investments in organic growth, share repurchases and acquisitions, among other capital allocation vehicles.
Marketing. We rely primarily on our senior professionals to identify and pursue business opportunities. Referrals from clients, law firms and other intermediaries and our reputation from prior engagements are also key factors in securing new business. Our professionals often learn about new business opportunities from their frequent contact and close working relationships with clients. In marketing our services, we emphasize our experience, the quality of our services and our professionals’ particular areas of expertise, as well as our ability to quickly staff large engagements across multiple jurisdictions. While we aggressively seek new business opportunities, we maintain high professional standards and carefully evaluate potential new client relationships and engagements before accepting them. We also employ or contract with sales professionals who are tasked primarily with marketing the services of our Corporate Finance, FLC, Technology and Strategic Communications segments.
Human Capital Resources
At FTI Consulting, we are united to provide the highest quality services to our clients. We do this by attracting and retaining experts in their fields, empowering a diverse international workforce, providing opportunities for advancement and personal growth, and supporting the communities in which we do business. As of December 31, 2020, we employed 6,321 employees, of which 5,067 were revenue-generating professionals. We also engage independent contractors, who exclusively provide services to FTI Consulting, to supplement our professionals on client engagements as needed.
We advance the best interests of all our stakeholders through:
Attracting and Retaining Highly Qualified Professionals. Our professionals are crucial to delivering our services to clients and generating new business. Through our substantial staff of highly qualified professionals, we can handle a large number of complex global assignments simultaneously. To attract and retain highly qualified professionals, many of whom have an established and widely recognized name in their respective field, we offer significant compensation opportunities, including sign-on bonuses, forgivable loans, retention bonuses, cash incentive bonuses and equity compensation, along with a competitive benefits package and the opportunity to work on challenging global engagements with highly skilled peers.
Experts in their Fields. Our professionals include PhDs, MBAs, JDs, CPAs, CPA-ABVs (CPAs accredited in business valuations), CPA-CFFs (CPAs certified in financial forensics), CRAs (certified risk analysts), Certified Turnaround Professionals, Certified Insolvency and Reorganization Advisors, Certified Fraud Examiners, ASAs (accredited senior appraisers), construction engineers and former senior government officials.
Inclusive and High-Performing Culture. We foster a culture where our professionals can grow their career and achieve their full potential. We also hire and strive to retain professionals with the diverse set of qualities, backgrounds and expertise that our clients and teams demand. We offer robust Diversity, Inclusion & Belonging programs and trainings to our employees across the globe at every level.
Talent Development. We support the development of our professionals at all levels of their career. Our robust talent development program includes induction programs for new hires, milestone programs to prepare promotes for success in their new roles and leadership readiness programs to help our people build the skills needed to advance to our most senior positions. These multi-day training programs are further supplemented by self-directed e-learning programs, among other segment-level talent development opportunities.
Corporate Citizenship. We practice responsible corporate citizenship to drive positive change in the communities in which we do business. All full-time FTI Consulting employees are eligible to participate in our Corporate Citizenship program, which includes matching employee charitable gifts, paid time off for volunteering and corporate-sponsored pro bono engagements.
10



Employment Agreements
As of December 31, 2020, we had written employment agreements with substantially all of our 615 Senior Managing Directors and equivalent personnel (collectively, “SMD”). These arrangements generally provide for fixed salary and eligibility for incentive payment programs (which, in some cases, may be based on financial measures such as EBITDA or relative total shareholder return), salary continuation benefits, accrued bonuses and other benefits beyond the termination date if an SMD leaves our employment for specified reasons prior to the expiration date of the employment agreement. The length and amount of payments to be paid by us following the termination or resignation of an SMD may vary, depending on whether the employee resigned with or without “good reason” or was terminated by us with or without “cause,” retired or did not renew, died or became “disabled,” or was terminated as a result of a “change in control” (all such terms as defined in such SMD’s employment agreement). All of our written employment agreements with an SMD requires some notice period be given by us or the SMD prior to termination of employment and include covenants providing for restrictions on the SMD competing against, and soliciting employees from, the Company for a specified period of time following the end of the SMD's employment.
Incentive, Retention and Sign-on Payments
Our SMDs, consultants and other professionals may receive incentive, retention or sign-on payments, on a case-by-case basis, through unsecured general recourse forgivable loans, equity awards or other payments (collectively, “Retention Awards”). We believe that providing these multi-year Retention Awards greatly enhances our ability to attract and retain our key professionals.  
Some or all of the principal amount and accrued interest of the loans we make will be forgiven by us upon the passage of time, or their repayment will be funded by us through additional cash bonus compensation, provided that the recipient is an employee or consultant on the forgiveness date. In addition, upon certain termination events, accrued interest and the outstanding principal balance may be forgiven, including upon death, disability and, in some cases, retirement or termination by the Company without cause or the recipient with good reason, or the recipient may be required to repay the unpaid accrued interest and outstanding principal balance upon certain other termination events such as voluntary resignation, as provided in the applicable promissory note. The value of the forgivable loans we have made, in the aggregate, as well as on an individual basis, has been, and we anticipate will continue to be, significant. Our executive officers and outside directors are not eligible to receive loans, and no loans have been made to them.
Recipients of sign-on or other retention payments, other than loans, may be required to repay a portion or all of the original payment upon certain termination events. These awards are typically smaller amounts in nature than forgivable loans and have a shorter service requirement than forgivable loans.
Our executive officers, other members of senior management and outside directors, as well as employees and independent service providers, have received and will continue to receive equity awards, which may include stock options and share-based awards (including awards in the form of restricted stock, performance-based restricted stock units, deferred restricted stock units, and cash-settled stock appreciation rights and units), on a case-by-case basis, to the extent that shares are available under our stockholder-approved equity compensation plans. The value of such equity and cash-based awards, in the aggregate, as well as on an individual basis, has been and is expected to continue to be significant.
Select SMDs may participate in certain incentive compensation programs, such as the Key Senior Managing Director Incentive Plan (the “KSIP”) or our Senior Managing Director Incentive Compensation Program (the “ICP”). The ICP was closed to new participants effective January 2015. Participants in the KSIP are recommended by management and approved by the Compensation Committee of the Board of Directors of the Company. The KSIP and ICP provide for a combination of forgivable loans, equity awards and retention bonuses that are paid over a range of four to 10 years depending on the program and economic value of the award. These programs may require participants to defer a portion of their bonus in the form of cash or restricted stock over a two- to three-year period.
Clients
During the year ended December 31, 2020, no single client accounted for more than 10% of our consolidated revenues and no reportable segment had a single client that accounted for more than 10% of its respective total segment revenues. In some cases, we may have engagements through law firms that represent a larger percentage of our consolidated revenues or the revenues of a segment; however, in these situations, each law firm engages us on behalf of multiple clients.
11



Competition
We compete with different companies or businesses of companies depending on the particular nature of a proposed engagement and the requested types of service(s) or the location of the client or delivery of the service(s) or product(s). Our businesses are highly competitive. Our competitors include large organizations, such as the global accounting firms and large management and financial consulting companies, that offer a broad range of consulting services; investment banking firms; information technology ("IT") consulting and software companies that offer niche services that are the same or similar to services or products offered by one or more of our segments and small firms and independent contractors that provide one or more specialized services.
We compete primarily on the basis of the breadth of our services, the quality of our work, the prominence of our professionals, our geographic reach, our reputation and performance record, our specific industry expertise, our ability to staff multiple significant engagements across disciplines and industries in multiple locations, and our strong client relationships. Our Technology segment, particularly with respect to hosting and e-discovery services, and to a lesser extent our other segments, may also compete on price, although the critical nature of the services provided by our Corporate Finance, FLC and Economic Consulting segments typically makes price a secondary consideration. Since our businesses depend in large part on professional relationships, there are low barriers of entry for professionals, including our professionals, electing to work independently, start their own firms or change employers.
Our Corporate Finance segment primarily competes with specialty boutiques and publicly traded companies providing restructuring, bankruptcy and M&A services and, to a lesser extent, large investment banks and global accounting firms.
Our FLC segment primarily competes with other large consulting companies and global accounting firms with service offerings similar to ours.
Our Economic Consulting segment primarily competes with individually recognized economists, specialty boutiques and large consulting companies with service offerings similar to ours.
Our Technology segment primarily competes with consulting and/or software providers specializing in e-discovery, electronically stored information and the management of electronic content. Competitors may offer products and/or services intended to address one piece or more of those areas. There continues to be significant consolidation of companies providing products and services similar to our Technology segment, through M&A and other transactions, which may provide competitors access to greater financial and other resources than those of FTI Consulting. This industry is subject to significant and rapid innovation. Larger competitors may be able to react more quickly to new regulatory or legal requirements and other changes and may be able to innovate more quickly and efficiently.
Our Strategic Communications segment competes with large public relations firms, as well as boutique M&A, crisis communications and public affairs firms.
Some service providers are larger than we are and, on certain engagements, may have an advantage over us with respect to one or more competitive factors. Specialty boutiques or smaller local or regional firms, while not offering the range of services we provide, may compete with us on the basis of geographic proximity, specialty services or pricing advantages.
Corporate Information
Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol FCN. Our executive offices are located at 555 12th Street NW, Washington, D.C. 20004. Our telephone number is 202-312-9100. Our website is http://www.fticonsulting.com.
Available Information
We make available, free of charge, on or through our website at http://www.fticonsulting.com, our annual, quarterly and current reports and any amendments to those reports, our proxy statements, as well as our other filings with the Securities and Exchange Commission ("SEC"), as soon as reasonably practicable after electronically filing them with the SEC. Information posted on our website is not part of this Annual Report or any other report filed with the SEC in satisfaction of the requirements of the Exchange Act. Copies of this Annual Report, as well as other periodic reports filed with the SEC, may also be requested at no charge from our Corporate Secretary at FTI Consulting, Inc., 6300 Blair Hill Lane, Suite 303, Baltimore, MD 21209, telephone number 410-591-4867.
12



ITEM 1A.    RISK FACTORS
All of the following risks could materially and adversely affect our business, financial condition and results of operations. In addition to the risks discussed below and elsewhere in this Annual Report, other risks and uncertainties not currently known to us or that we currently consider immaterial could, in the future, materially and adversely affect our business, financial condition and financial results.
Risks Related to Coronavirus Disease 2019 ("COVID-19")
The COVID-19 pandemic has had, and could continue to have, a negative impact on our financial results and it could potentially have a material adverse impact on our business, financial condition and results of operations, the extent of which is not predictable.
The COVID-19 pandemic has created volatility, uncertainty and economic disruption for FTI Consulting, our clients and vendors, and the markets in which we do business. Government and client actions and related events around the world have impacted, and we expect will continue to impact, how we do business and the services that we provide, for a sustained period. The impact depends on many factors that continue to evolve and are out of our control. Those factors include, among other things, (i) the duration of the COVID-19 pandemic and the types and magnitude of adverse impacts on regional economies, individually, and the global economy, as a whole; (ii) the health and welfare of our employees and contractors and those of our clients and vendors; (iii) evolving business and government actions in response to the pandemic, including moratoriums by governments and regulators on rule making and regulatory and legal proceedings, and stay at home, social distancing measures and travel bans; (iv) the varying impact that the pandemic may have on different industries; (v) the response of our clients or prospective clients to the pandemic, including delays, stoppages or terminations of existing engagements or hiring decisions; (vi) the varying demand for the types of services we offer in the geographic regions in which we offer them; (vii) our ability to continue to effectively market our services; (viii) our ability to replace engagements as they end or are terminated, stopped or delayed; (ix) the ability of our professionals to effectively provide services, including as a result of travel restrictions or the need to work remotely; (x) the type, size, profitability and geographic locations of our engagements; (xi) the ability of our clients to pay, to make timely payments or to pay in full; and (xii) the timing of finding effective treatments or a cure. In some cases, such events have resulted in fewer or delayed engagements, less profitable engagements, reduction of existing or new work, a less profitable mix of work, or reduction in operations. Any of these events and others we have not yet identified have, and could continue to, cause or contribute to the risks and uncertainties facing the Company and our clients and could materially adversely affect our business or portions thereof, and our financial condition, results of operations and/or stock price.
The COVID-19 pandemic has impacted, and could continue to impact, our segments and practices, the types of services they provide, and the regions in which we operate, differently.
The COVID-19 pandemic has impacted, and we expect will continue to impact, the operations of our reportable segments and practices, the services they provide or the regions in which we operate, differently. Current disruptions to our business include governmental actions that delay certain other actions, such as moratoriums on bankruptcies by various jurisdictions, and moratoriums or delays imposed by other governmental or regulatory authorities on legal proceedings, regulatory proceedings and rulemaking. The cancellation, stoppage, delay or decline in number and size of M&A transactions, litigation and governmental and regulatory proceedings, antitrust and competition matters, or other types of investigations and matters on which the Company advises, as well as disruptions in capital markets, has negatively impacted, and could continue to negatively impact, the financial results of one or more of each of our segments or regions. If the Company’s ability to market its services is impaired, in some cases the Company has been, and may continue to be, unable to replace engagements that are delayed, stopped or terminated or are otherwise completed with comparable, larger or more profitable engagements on a timely basis, or to maintain the utilization of its revenue generating professionals or to reassign professionals among segments and practices, in which case such events could adversely affect the financial condition, results of operations or prospects of a segment, practice or region or the Company as a whole.
The COVID-19 pandemic could heighten risks related to, or otherwise negatively impact the effectiveness of, cybersecurity, information technology, financial reporting and other corporate functions that the Company relies upon to operate.
The Company has encountered, and may continue to encounter, operational risks arising from changes in the way the Company conducts business during the COVID-19 pandemic. The majority of our employees and contractors, as well as our clients, are working remotely and rely heavily on technology to perform their jobs. Risks arising from our reliance on remote communications, virtual meetings and other forms of technology could include elevated cybersecurity risks and difficulty protecting company and client confidential communications. The Company may also experience impairments or declines in the effectiveness, capabilities and capacity of certain technology we employ, including issues with virtual meetings or other remote communications systems. Certain employees or regions could experience difficulties accessing and maintaining Internet connections or issues with saving and retrieving information from cloud-based and other computing systems relied on by the
13



Company. Furthermore, the Company’s increased reliance during the pandemic on technology for conducting certain corporate functions, such as financial reporting and internal controls, and internal audit, may not be as effective as our historical practice of reliance on a combination of technology and in-person resources. The Company’s investment of time and resources to assure the functionality of the Company’s systems and mitigate technological risks may be more difficult to achieve or not wholly successful. If the Company experiences cybersecurity issues, is unable to protect confidential information, or is unable to adequately provide services or perform corporate functions, all or portions of the Company’s ability to conduct business and operate may be impaired. In such event, the Company’s financial condition and results of operations could be materially adversely affected.
The COVID-19 pandemic could adversely impact the health and welfare of our client-facing professionals, as well as our executive officers and other employees of our Company, which could have a material adverse effect on our ability to secure or perform client engagements and our results of operations.
Our client-facing professionals provide unique and highly specialized skills and knowledge to our clients. We rely heavily on our client-facing professionals, including the leaders of our segment and regional operations, to secure and perform client engagements. If the health and welfare of client-facing professionals or employees providing critical corporate functions, including our executive officers, deteriorates, the number of employees so afflicted becomes significant, or an employee with skills and knowledge that cannot be replicated in our organization is impaired due to the COVID-19 pandemic, our ability to win business and provide services, as well as utilization, employee morale, client relationships, business prospects, and results of operations of one or more of our segments or practices, or the Company as a whole, could be materially adversely affected.
Risks Related to Our Reportable Segments
Changes in capital markets, M&A activity, legal or regulatory requirements, general economic conditions and monetary or geopolitical disruptions, as well as other factors beyond our control, could reduce demand for our practice offerings or services, in which case our revenues and profitability could decline.

Different factors outside of our control could affect demand for a segment’s practices and our services. These include: (i) fluctuations in U.S. and/or global economies, including economic downturns or recessions and the strength and rate of any general economic recoveries; (ii) the U.S. or global financial markets and the availability, costs, and terms of credit and credit modifications; (iii) level of leverage incurred by countries or businesses; (iv) M&A activity; (v) frequency and complexity of significant commercial litigation; (vi) overexpansion by businesses causing financial difficulties; (vii) business and management crises, including the occurrence of alleged fraudulent or illegal activities and practices; (viii) new and complex laws and regulations, repeals of existing laws and regulations or changes of enforcement of laws, rules and regulations, including antitrust/competition reviews of proposed M&A transactions; (ix) other economic, geographic or political factors; and (x) general business conditions.
We are not able to predict the positive or negative effects that future events or changes to the U.S. or global economies will have on our business or the business of any particular segment. Fluctuations, changes and disruptions in financial, credit, M&A and other markets, political instability and general business factors could impact various segments’ operations and could affect such operations differently. Changes to factors described above, as well as other events, including by way of example, contractions of regional economies, or the economy of a particular country, trade restrictions, monetary systems, banking, real estate and retail or other industries; debt or credit difficulties or defaults by businesses or countries; new, repeals of or changes to laws and regulations, including changes to the bankruptcy and competition laws of the U.S. or other countries; tort reform; banking reform; a decline in the implementation or adoption of new laws or regulation, or in government enforcement, litigation or monetary damages or remedies that are sought; or political instability may have adverse effects on one or more of our segments or service, practice or industry offerings.
Our revenues, operating income and cash flows are likely to fluctuate.
We experience fluctuations in our revenues and cost structure and the resulting operating income and cash flows and expect that this will continue to occur in the future. We experience fluctuations in our annual and quarterly financial results, including revenues, operating income and earnings per share, for reasons that include: (i) the types and complexity, number, size, timing and duration of client engagements; (ii) the timing of revenues; (iii) the utilization of revenue-generating professionals, including the ability to adjust staffing levels up or down to accommodate the business and prospects of the applicable segment and practice; (iv) the time it takes before a new hire becomes profitable; (v) the geographic locations of our clients or the locations where services are rendered; (vi) billing rates and fee arrangements, including  the opportunity and ability to successfully reach milestones, and complete engagements and collect success fees and other outcome-contingent or performance-based fees; (vii) the length of billing and collection cycles and changes in amounts that may become uncollectible; (viii) changes in the frequency and complexity of government regulatory and enforcement activities; (ix) business and asset
14



acquisitions; (x) fluctuations in the exchange rates of various currencies against the U.S. dollar; and (xi) economic factors beyond our control.
The results of different segments and practices may be affected differently by the above factors. Certain of our practices, particularly our restructuring practice, tend to experience their highest demand during periods when market and/or industry conditions are less favorable for many businesses.  For example, in periods of limited credit availability, reduced M&A activity and/or declining business and/or consumer spending, while not always the case, there may be increased restructuring opportunities that will cause our restructuring practice to experience high demand. On the other hand, those same factors may cause a number of our other segments and practices, such as our antitrust and competition practice in Economic Consulting, to experience reduced demand. The positive effects of certain events or factors on certain segments and practices may not be sufficient to overcome the negative effects of those same events or factors on other parts of our business. In addition, our mix of practice offerings adds complexity to the task of predicting revenues and results of operations and managing our staffing levels and expenditures across changing business cycles and economic environments.
Our results are subject to seasonal and similar factors, such as during the fourth quarter when our professionals and our clients typically take vacations. We may also experience fluctuations in our operating income and related cash flows because of increases in employee compensation, including changes to our incentive compensation structure and the timing of incentive payments, which we generally pay during the first quarter of each year, or hiring or retention payments, which are paid throughout the year. Also, the timing of investments or acquisitions and the cost of integrating them may cause fluctuations in our financial results, including operating income and cash flows. This volatility makes it difficult to forecast our future results with precision and to assess accurately whether increases or decreases in any one or more quarters are likely to cause annual results to exceed or fall short of previously issued guidance. While we assess our annual guidance at the end of each quarter and update such guidance when we think it is appropriate, unanticipated future volatility can cause actual results to vary significantly from our guidance, even where that guidance reflects a range of possible results and has been updated to take account of partial-year results.
If we do not effectively manage the utilization of our professionals or billable rates, our financial results could decline.
Our failure to manage the utilization of our professionals who bill on an hourly basis, or maintain or increase the hourly rates we charge our clients for our services, could result in adverse consequences, such as non- or lower-revenue-generating professionals, increased employee turnover, fixed compensation expenses in periods of declining revenues, the inability to appropriately staff engagements (including adding or reducing staff during periods of increased or decreased demand for our services), or special charges associated with reductions in staff or operations. Reductions in workforce or increases of billable rates will not necessarily lead to savings. In such events, our financial results may decline or be adversely impacted. A number of factors affect the utilization of our professionals. Some of these factors we cannot predict with certainty, including general economic and financial market conditions; the complexity, number, type, size and timing of client engagements; the level of demand for our services; appropriate professional staffing levels, in light of changing client demands and market conditions; utilization of professionals across segments and geographic regions; competition; and acquisitions. In addition, our global expansion into or within locations where we are not well-known or where demand for our services is not well-developed could also contribute to low or lower utilization rates in certain locations.
Segments may enter into engagements such as fixed-fee and time and materials with caps. Failure to effectively manage professional hours and other aspects of alternative fee engagements may result in the costs of providing such services exceeding the fees collected by the Company. Failure to successfully complete or reach milestones with respect to contingent fee or success fee assignments may also lead to lower revenues or the costs of providing services under those types of arrangements may exceed the fees collected by the Company.
Factors that could negatively affect utilization in our segments include:
Corporate Finance The completion of bankruptcy proceedings; the timing of the completion of other engagements; fewer and smaller restructuring (including bankruptcy) cases; a recovering or strong economy; easy credit availability; low interest rates; and fewer, smaller and less complex M&A and restructuring activity; or less capital markets activity.
FLC The settlement of litigation; less frequent instances of significant mismanagement, fraud, wrongdoing or other business problems that could result in fewer or less complex business engagements; fewer and less complex legal disputes; fewer class action suits; the timing of the completion of engagements; less government regulation or fewer regulatory investigations; and the timing of government investigations and litigation.
Economic Consulting Fewer, smaller and less complex M&A activity; less capital markets activity or fewer complex transactions; a reduced number of regulatory filings and less litigation, reduced or less aggressive antitrust and competition regulation or enforcement; fewer government investigations and proceedings; and the timing of client utilization of our services.
15



Technology The settlement of litigation; a decline in volume and complexity of litigation proceedings and governmental investigations; a decline in volume and the timing of M&A activities and reduced or less aggressive enforcement of antitrust and competition regulations.
Strategic Communications Fewer event-driven crises affecting businesses; general economic decline that may reduce certain discretionary spending by clients; a decline in capital markets activity, including M&A; and fewer public securities offerings.
Our segments may face risks of fee non-payment, clients may seek to renegotiate existing fees and contract arrangements, and clients may not accept billable rate or price increases, which could result in loss of clients, fee write-offs, reduced revenues and less profitable business.
In some cases, our segments are engaged by certain clients who are experiencing or anticipate experiencing financial distress or are facing complex challenges, are engaged in litigation or regulatory or judicial proceedings, or are facing foreclosure of collateral or liquidation of assets. This may be true in light of general economic conditions; lingering effects of past economic slowdowns or recession; or business- or operations-specific reasons. Such clients may not have sufficient funds to continue operations or to pay for our services. We typically do not receive retainers before we begin performing services on a client’s behalf in connection with a significant number of engagements in our segments. In the cases where we have received retainers, we cannot assure the retainers will adequately cover our fees for the services we perform on behalf of these clients. With respect to bankruptcy cases, bankruptcy courts have the discretion to require us to return all, or a portion of, our fees.
We may receive requests to discount our fees or to negotiate lower rates for our services and to agree to contract terms relative to the scope of services and other terms that may limit the size of an engagement or our ability to pass-through costs. We consider these requests on a case-by-case basis. We routinely receive these types of requests and expect this to continue in the future. In addition, our clients and prospective clients may not accept rate increases that we put into effect or plan to implement in the future. Fee discounts, pressure not to increase or pressure to decrease our rates, and less advantageous contract terms could result in the loss of clients, lower revenues and operating income, higher costs and less profitable engagements. More discounts or write-offs than we expect in any period would have a negative impact on our results of operations. There is no assurance that significant client engagements will be renewed or replaced in a timely manner or at all, or that they will generate the same volume of work or revenues or be as profitable as past engagements.
Certain of our clients prefer fixed and other alternative fee arrangements that place revenue ceilings or other limitations on our fee structure or may shift more of our revenue-generating potential to back-end contingent and success fee arrangements. With respect to such alternative fee arrangements, we may discount our rates initially, which could mean that the cost of providing services exceeds the fees collected by the Company during all or a portion of the term of the engagement. In such cases, the Company’s failure to manage the engagement efficiently or collect the success or performance fees could expose the Company to a greater risk of loss on such engagement than other fee arrangements or may cause variations in the Company’s revenues and operating results due to the timing of achievement of the performance-based criteria, if achieved at all. A segment’s ability to service clients with these fee arrangements at a cost that does not directly correlate to time and materials may negatively impact or result in a loss of the profitability of such engagements, adversely affecting the financial results of the segment.
Our Technology segment faces certain risks, including (i) industry consolidation and a highly competitive environment, (ii) client concentration, (iii) downward pricing pressure, (iv) technology changes and obsolescence, and (v) failure to protect intellectual property ("IP") used by the segment, which individually or together could cause the financial results and prospects of this segment and the Company to decline.
Our Technology segment faces significant competition from other consulting and/or software providers specializing in e-discovery and the management of electronic content. There continues to be consolidation of companies providing products and services similar to those offered by our Technology segment, which may provide competitors access to greater financial and other resources than those of the Company. Larger competitors may be able to react more quickly to new regulatory or legal requirements and other changes, or innovate more quickly and efficiently. Our Technology segment has been experiencing increasing competition from companies providing similar services at lower prices, particularly with respect to hosting and e-discovery services.
The success of our Technology segment and its ability to compete depends significantly on the IP rights we license from third-parties. There is no assurance that (i) the software we license to provide our services will remain competitive or technologically innovative, (ii) new, innovative or improved software or products will not be developed by others that will compete more effectively with the software or products we currently license or use to service our customers, or (iii) we can enter into licenses or other agreements on economically advantageous terms to license or enter into other agreements to use new or more innovative third-party software and products to provide our services. If our Technology segment is unable to license or
16



otherwise use competitively innovative or technologically advanced software and products to provide our services, we could be unable to retain clients, grow our business and capitalize on market opportunities, which would adversely affect our operating margins and financial results.
Unauthorized use and misuse of IP by employees or third parties could have a material adverse effect on our business, financial condition and results of operations. The available legal remedies for unauthorized use or misuse of IP may not adequately compensate us for the damages caused by such unauthorized use or misuse and consequences arising from such actions.
We face certain risks relating to cybersecurity, the failure to protect the confidentiality of client information against misuse or disclosure, and the use or misuse of social media.
Our reputation for maintaining the confidentiality of proprietary, confidential and trade secret information is critical to the success of our segments. In addition, our Technology segment is dependent on providing secure storage of, and access to, client information as a service. We routinely face cyber-based attacks and attempts by hackers and similar unauthorized users to gain access to or corrupt our information technology systems, which so far, to our knowledge, have been unsuccessful. Such attacks could harm our overall professional reputation, disrupt our business operations, cause us to incur unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information. We expect to continue to face such attempts. Although we seek to prevent, detect and investigate these network security incidents, and take steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in the future or that our security measures will be effective. If we fail to effectively protect the confidentiality of our clients’ or our own IP and proprietary information from disclosure or misuse by our employees, contractors or third parties, the financial results of the affected segment or the Company would be adversely affected. There is no certainty that we can maintain the confidentiality or prevent the misuse of our or our clients' information.
The use or misuse of social media by employees or others could reflect negatively on us or our clients and could have a material adverse effect on our business, financial condition and results of operations. The available legal remedies for the use or misuse of social media may not adequately compensate us for the damages caused by such use or misuse and consequences arising from such actions.
We may not manage our growth effectively, and our profitability may suffer.
We experience fluctuations in growth of our different segments, practices and services, including periods of rapid or declining growth. Periods of rapid expansion may strain our management team or human resources and information systems. To manage growth successfully, we may need to add qualified managers and employees and periodically update our operating, financial and other systems, as well as our internal procedures and controls. We also must effectively motivate, train and manage a larger professional staff. If we fail to add or retain qualified managers, employees and contractors when needed, estimate costs, or otherwise manage our growth effectively, our business, financial results and financial condition may suffer.
We cannot assure that we can successfully manage growth through acquisitions and the integration of the companies and assets we acquire or that they will result in the financial, operational and other benefits that we anticipate. Some acquisitions may not be immediately accretive to earnings, and some expansion may result in significant expenditures.
In periods of declining growth, underutilized employees and contractors may result in expenses and costs being a greater percentage of revenues. In such situations, we will have to weigh the benefits of decreasing our workforce or limiting our service offerings and saving costs against the detriment that the Company could experience from losing valued professionals and their industry expertise and clients.
Risks Related to Our Operations
Our international operations involve special risks.
Our international operations involve financial and business risks that differ from or are in addition to those faced by our U.S. operations, including: (i) cultural and language differences; (ii) limited “brand” recognition; (iii) different employment laws and rules, employment or service contracts, compensation methods, and social and cultural factors that could result in employee turnover, lower utilization rates, higher costs and cyclical fluctuations in utilization that could adversely affect financial and operating results; (iv) foreign currency disruptions and currency fluctuations between the U.S. dollar and foreign currencies that could adversely affect financial and operating results; (v) different legal and regulatory requirements and other barriers to conducting business; (vi) greater difficulties in resolving the collection of receivables when legal proceedings are necessary; (vii) greater difficulties in managing our non-U.S. operations, including client relationships, in certain locations; (viii) disparate systems, policies, procedures and processes; (ix) failure to comply with the FCPA and anti-bribery laws of other
17



jurisdictions; (x) higher operating costs; (xi) longer sales and/or collections cycles; (xii) potential restrictions or adverse tax consequences resulting from the repatriation of foreign earnings, such as trapped foreign losses and importation or withholding taxes; (xiii) different or less stable political and/or economic environments; (xiv) potential increased regulatory and legal complexities surrounding uncertainties related to the U.K.’s exit from the European Union, commonly referred to as Brexit; (xv) conflicts between and among the U.S. and countries in which we conduct business, including those arising from trade disputes or disruptions, the termination or suspension of treaties, or boycotts; (xvi) civil disturbances or other catastrophic events that reduce business activity; and (xvii) political interference with our ability to conduct business in the applicable jurisdiction.
If we are not able to quickly adapt to or effectively manage our operations in geographic markets outside the U.S., our business prospects and results of operations could be negatively impacted.
Failure to comply with governmental, regulatory and legal requirements or with our company-wide Code of Ethics and Business Conduct, Anti-Corruption Policy, Policy on Inside Information and Insider Trading, and other policies could lead to governmental or legal proceedings that could expose us to significant liabilities and damage our reputation.
We have a robust Code of Ethics and Business Conduct, Anti-Corruption Policy, Policy on Inside Information and Insider Trading, and other policies and procedures that are designed to educate and establish the standards of conduct that we expect from our executive officers, outside directors, employees, and independent consultants and contractors. These policies require strict compliance with U.S. and local laws and regulations applicable to our business operations, including those laws and regulations prohibiting improper payments to government officials. In addition, as a corporation whose securities are registered under the Securities Act and publicly traded on the NYSE, our executive officers, outside directors, employees and independent contractors are required to comply with the prohibitions against insider trading of our securities. In addition, we impose certain restrictions on the trading of securities of our clients. Nonetheless, we cannot assure our stakeholders that our policies, procedures and related training programs will ensure full compliance with all applicable legal requirements. Illegal or improper conduct by our executive officers, directors, employees, independent consultants or contractors, or others who are subject to our policies and procedures could damage our reputation in the U.S. and internationally, which could adversely affect our existing client relationships or adversely affect our ability to attract and retain new clients, or lead to litigation or governmental or regulatory proceedings in the U.S. or foreign jurisdictions, which could result in civil or criminal penalties, including substantial monetary awards, fines and penalties, as well as disgorgement of profits.
We may be required to recognize goodwill impairment charges, which could materially affect our financial results.
We assess our goodwill, intangible assets and long-lived assets as required by Generally Accepted Accounting Principles in the United States to determine whether they are impaired and, if they are, to record appropriate impairment charges. Factors we consider include significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. We have previously recorded impairment charges to the carrying value of goodwill of certain segments and it is possible that we may be required to record significant impairment charges in the future. Such charges have had and could have a material adverse impact on our results of operations.
The compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely impact our financial results.
The Company’s own confidential and proprietary information and that of our clients could be compromised, whether intentionally or unintentionally, by our employees, consultants or vendors. A compromise of the security of our information technology systems leading to theft or misuse of our own or our clients’ proprietary or confidential information, or the public disclosure or use of such information by others, could result in losses, third-party claims against us and reputational harm, including the loss of clients. The theft or compromise of our or our clients’ information could negatively impact our reputation, financial results and prospects. In addition, if our reputation is damaged due to a data security breach, our ability to attract new engagements and clients may be impaired or we may be subjected to damages or penalties, which could negatively impact our businesses, financial results or financial condition.
Governmental focus on data privacy and security has increased, and could continue to increase, our costs of operations.
In reaction to publicized incidents in which electronically stored personal and other information has been lost, accessed or stolen, or transmitted by or to third parties without permission, U.S. and non-U.S. governmental authorities have proposed or adopted or are considering proposing or adopting data security and/or data privacy statutes or regulations, including the California Consumer Privacy Act and the General Data Protection Regulation of the European Union. Continued governmental focus and regulation of data security and privacy may lead to additional legislative and regulatory actions, which could increase the complexity of doing business in the U.S. or the applicable jurisdiction. The increased emphasis on information security and
18



the requirements to comply with applicable U.S. and foreign data security and privacy laws and regulations has increased, and is expected to continue to increase, our related costs of doing business and could negatively impact our financial results.
Risks Related to Our People
Our failure to recruit and retain qualified professionals and manage headcount needs and utilization could negatively affect our financial results and our ability to staff client engagements, maintain relationships with clients and drive future growth.
We deliver sophisticated professional services to our clients. Our success is dependent, in large part, on our ability to keep our supply of skills and human resources in balance with client demand around the world. To attract and retain clients, we need to demonstrate professional acumen and build trust and strong relationships. Our professionals have highly specialized skills. They also develop strong bonds with the clients they serve. Our continued success depends upon our ability to attract and retain professionals who have expertise, a good reputation and client relationships critical to maintaining and developing our business. We face intense competition in recruiting and retaining highly qualified professionals to drive our organic growth and support expansion of our services and geographic footprint. We cannot assure that we will be able to attract or retain qualified professionals to maintain or expand our business. If we are unable to successfully integrate, motivate and retain qualified professionals, our ability to continue to secure work may suffer. Moreover, competition has caused our costs of retaining and hiring qualified professionals to increase, a trend that could continue and could adversely affect our operating margins and financial results.
Despite fixed terms or renewal provisions, we could face retention issues during and at the end of the terms of those agreements and large compensation expenses to secure extensions. There is no assurance we will enter into new or extend existing employment agreements with our professionals. We monitor contract expirations carefully to commence dialogues with professionals regarding their employment in advance of the actual contract expiration dates. Our goal is to renew employment agreements when advisable and to stagger the expirations of the agreements if possible. Because of the concentration of contract expirations in certain years, we may experience high turnover or other adverse consequences, such as higher costs, loss of clients and engagements or difficulty in staffing engagements, if we are unable to renegotiate employment agreements or the costs of retaining qualified professionals become too high. The implementation of new compensation arrangements may result in the concentration of potential turnover in future years.
Our people are our primary assets and account for the majority of our expenses. During periods of reduced demand for our services, or in response to unfavorable changes in market or industry conditions, we may seek to align our cost structure more closely with our revenues and increase our utilization rates by reducing headcount and eliminating or consolidating underused locations in affected reportable segments or practices. Following such actions, in response to subsequent increases in demand for our services, including as a result of favorable changes in market or industry conditions, we may need to hire, train and integrate additional qualified and skilled personnel and may be unable to do so to meet our needs or our clients’ demands on a timely basis. If we are unable to manage staffing levels on a timely basis in light of changing opportunities or conditions, including as a result of the COVID-19 pandemic, our ability to accept or service business opportunities and client engagements, take advantage of positive market and industry developments, and realize future growth could be negatively affected, which could negatively impact our revenues and profitability. In addition, while increased utilization resulting from headcount reductions may enhance our profitability in the near term, it could negatively affect our business over the longer term by limiting the time our professionals have to seek out and cultivate new client relationships and win new projects.
We incur substantial costs to hire and retain our professionals, and we expect these costs to continue and to grow.
We may pay hiring or retention bonuses to secure the services of professionals. Those payments have taken the form of unsecured general recourse forgivable loans, stock options, restricted stock, cash-based stock appreciation rights and other equity- and cash-based awards, and cash payments to attract and retain our professional employees. We make forgivable loans to KSIP participants and may provide forgivable or other types of loans to new hires and professionals who join us in connection with acquisitions, as well as to select current employees and other professionals on a case-by-case basis. The aggregate amount of loans to professionals is significant. We expect to continue issuing unsecured general recourse forgivable loans.
We also provide significant additional payments under the KSIP and annual recurring equity or cash awards under the ICP, the Executive Committee incentive compensation arrangements and other compensation programs, including awards in the form of restricted stock and other stock- or cash-based awards or, alternatively, cash if we do not have adequate equity securities available under stockholder-approved equity plans.
In addition, our Economic Consulting segment has contracts with select economists or professionals that provide for compensation equal to a percentage of such individual’s annual collected client fees plus a percentage of the annual fees generated by junior professionals working on engagements managed by such professionals, which results in compensation
19



expenses for that segment being a higher percentage of segment revenues and Adjusted Segment EBITDA than the compensation paid by other segments. We expect that these arrangements will continue and that the Company may enter into similar arrangements with other economists and professionals hired by the Company.
We rely heavily on our executive officers and the heads of our segments and industry and regional leaders for the success of our business.
We rely heavily on our executive officers and our segment, industry and regional leaders to manage our operations. Given the highly specialized nature of our services and the scale of our operations, our executive officers and the heads of our segments and industry and regional leaders must have a thorough understanding of our service offerings, as well as the skills and experience necessary to manage a large organization in diverse geographic locations. We are unable to predict with certainty the impact that leadership transitions may have on our business operations, prospects, financial results, client relationships, or employee retention or morale.
Professionals may leave our Company to form or join competitors, and we may not have, or may choose not to pursue, legal recourse against such professionals.
Our professionals typically have close relationships with the clients they serve, based on their expertise and bonds of personal trust and confidence. Therefore, the barriers to our professionals pursuing independent business opportunities or joining our competitors should be considered low. Although our clients generally contract for services with us as a company, and not with an individual professional, in the event that a professional leaves, such clients may decide that they prefer to continue working with a specific professional rather than with our Company. Substantially all of our written employment agreements with our Senior Managing Directors and equivalent employees include non-competition and non-solicitation covenants. These restrictions have generally been drafted to comply with state “reasonableness” standards. However, states generally interpret restrictions on competition narrowly and in favor of employees. Therefore, a state may hold certain restrictions on competition to be unenforceable. In the case of employees outside the U.S., we draft non-competition provisions in an effort to comply with applicable foreign law. In the event an employee departs and acts in a way that we believe violates his or her non-competition or non-solicitation agreement, we will consider any legal remedies we may have against such person on a case-by-case basis. We may decide that preserving cooperation and a professional relationship with a former employee or client, or other concerns, outweighs the benefits of any possible legal recourse. We may also decide that the likelihood of success does not justify the costs of pursuing a legal remedy. Therefore, there may be times we may decide not to pursue legal action, even if it is available to us.
Risks Related to Our Client Relationships
If we are unable to accept client engagements due to real or perceived relationship issues, our revenues, growth, client engagements and prospects may be negatively affected.
Our inability to accept engagements from existing or prospective clients, represent multiple clients in connection with the same or competitive engagements, or any requirement that we resign from a client engagement may negatively impact our revenues, growth and financial results. While we follow internal practices to assess real and potential issues in the relationships between and among our clients, engagements, segments, practices and professionals, such concerns cannot always be avoided. For example, we generally will not represent parties adverse to each other in the same matter. Under U.S. federal bankruptcy rules, we generally may not represent both a debtor and its creditors in the same proceeding, and we are required to notify the U.S. Trustee of real or potential conflicts. Even if we begin a bankruptcy-related engagement, the U.S. Trustee could find that we no longer meet the disinterestedness standard because of real or potential changes in our status as a disinterested party and order us to resign, which could result in disgorgement of fees. Acquisitions may require us to resign from a client engagement because of relationship issues that are not currently identifiable. In addition, businesses that we acquire or employees who join us may not be free to accept engagements they could have accepted prior to our acquisition or hire because of relationship issues.
Claims involving our services or adverse publicity could harm our overall professional reputation and our ability to compete and attract business or hire or retain qualified professionals.
Our engagements involve matters that may result in a severe impact on a client’s business, cause the client a substantial monetary loss or prevent the client from pursuing business opportunities. Our ability to attract new clients and generate new and repeat engagements or hire professionals depends upon our ability to maintain a high degree of client satisfaction, as well as our reputation among industry professionals. As a result, any claims against us involving the quality of our services may be more damaging than similar claims against businesses in other industries.
20



From time to time, we may accept clients or perform engagements that may be viewed as controversial or that generate adverse publicity relating to our involvement or the services that we provide. Such controversial engagements or negative reactions may adversely affect our reputation or the reputations of our employees and other professionals who provide services, or may otherwise harm our ability to attract or retain clients, employees and other professionals, all of which could have an adverse effect on our results of operations, business or prospects.
We may incur significant costs and may lose engagements as a result of claims by our clients regarding our services.
Many of our engagements involve complex analysis and the exercise of professional judgment, including litigation and governmental investigatory matters where we act as experts. Therefore, we are subject to the risk of professional and other liabilities. Although we believe we maintain an appropriate amount of insurance, it is limited. Damages and/or expenses resulting from any successful claim against us, for indemnity or otherwise, in excess of the amount of insurance coverage will be borne directly by us and could harm our profitability and financial resources. Any claim by a client or third party against us could expose us to reputational issues that adversely affect our ability to attract new or maintain existing engagements or clients or qualified professionals or other employees, consultants or contractors.
Our clients may terminate our engagements with little or no notice and without penalty, which may result in unexpected declines in our utilization and revenues.
Our engagements center on transactions, disputes, litigation and other event-driven occurrences that require independent analysis or expert services. Transactions may be postponed or canceled, litigation may be settled or dismissed, and disputes may be resolved, in each case with little or no prior notice to us. If we cannot manage our work in process, our professionals may be underutilized until we can reassign them or obtain new engagements, which can adversely affect financial results.
The engagement letters that we typically enter into with clients do not obligate them to continue to use our services. Typically, our engagement letters permit clients to terminate our services at any time without penalties. In addition, our business involves large client engagements that we staff with a substantial number of professionals. At any time, one or more client engagements may represent a significant portion of a segment’s revenues. If we are unable to replace clients or revenues as engagements end or if clients unexpectedly cancel engagements with us or curtail the scope of our engagements and we are unable to replace the revenues from those engagements, eliminate the costs associated with those engagements or find other engagements to utilize our professionals, the financial results of the Company could be adversely affected.
We may not have, or may choose not to pursue, legal remedies against clients that terminate their engagements.
The engagement letters that we typically have with clients do not obligate them to continue to use our services and permit them to terminate the engagement without penalty at any time. Even if the termination of an ongoing engagement by a client could constitute a breach of the client’s engagement agreement, we may decide that preserving the overall client relationship is more important than seeking damages for the breach and, for that or other reasons, decide not to pursue any legal remedies against a client, even though such remedies may be available to us. We make the determination whether to pursue any legal actions against a client on a case-by-case basis.
Failures of our internal information technology systems controls may harm our overall professional reputation and disrupt our business operations.
Our reputation for providing secure information storage and maintaining the confidentiality of proprietary, confidential and trade secret information is critical to the success of our businesses, especially our Technology segment, which hosts client information as a service. We routinely face cyber-based attacks and attempts by hackers and similar unauthorized users to gain access to or corrupt our information technology systems, which so far, to our knowledge, have been unsuccessful. Such attacks could harm our overall professional reputation and disrupt our business operations, cause us to incur unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information. We expect to continue to face such attempts. Although we seek to prevent, detect and investigate these network security incidents and have taken steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in the future or that our security measures will be effective.
Risks Related to Competition
If we fail to compete effectively, we may miss new business opportunities or lose existing clients, and our revenues and profitability may decline.
The market for some of our consulting services is highly competitive. We do not compete against the same companies across all of our segments, practices, services, industries or geographic regions. Instead, we compete with different companies
21



or businesses of companies depending on the particular nature of a proposed engagement and the types of requested service(s) and the location of the client or delivery of the service(s). Our operations are highly competitive.
Our competitors include large organizations, such as the global accounting firms and the large management and financial consulting companies that offer a broad range of consulting services; investment banking firms; IT consulting and software companies, which offer niche services that are the same or similar to services or products offered by one or more of our segments; and small firms and independent contractors that focus on specialized services. Some of our competitors have significantly more financial resources, a larger national or international presence, larger professional staffs and greater brand recognition than we do. Some have lower overhead and other costs and can compete through lower cost-service offerings.
Since our business depends in large part on professional relationships, our business has low barriers to entry for professionals electing to start their own firms or work independently. In addition, it is relatively easy for professionals to change employers.
If we cannot compete effectively or if the costs of competing, including the costs of hiring and retaining professionals, become too expensive, our revenue growth and financial results could be negatively affected and may differ materially from our expectations.
We may face competition from parties who sell us their businesses and from professionals who cease working for us.
In connection with our acquisitions, we generally obtain non-solicitation agreements from the professionals we hire, as well as non-competition agreements from senior managers and professionals. The agreements prohibit such individuals from competing with us during the term of their employment and for a fixed period afterwards and from seeking to solicit our employees or clients. In some cases, but not all, we may obtain non-competition or non-solicitation agreements from parties who sell us their businesses or assets. The duration of post-employment non-competition and non-solicitation agreements typically ranges from six to 12 months. Non-competition agreements with the sellers of businesses or assets that we acquire typically continue longer than 12 months. Certain activities may be carved out of, or otherwise may not be prohibited by, these arrangements. We cannot assure that one or more of the parties from whom we acquire a business or assets, or who do not join us or leave our employment, will not compete with us or solicit our employees or clients in the future. States and foreign jurisdictions may interpret restrictions on competition narrowly and in favor of employees or sellers. Therefore, certain restrictions on competition or solicitation may be unenforceable. In addition, we may not pursue legal remedies if we determine that preserving cooperation and a professional relationship with a former employee or his or her clients, or other concerns, outweighs the benefits of any possible legal recourse or the likelihood of success does not justify the costs of pursuing a legal remedy. Such persons, because they have worked for our Company or a business that we acquire, may be able to compete more effectively with us, or be more successful in soliciting our employees and clients, than unaffiliated third parties.
Risks Related to Acquisitions
We may have difficulty integrating acquisitions or convincing clients to allow assignment of their engagements to us, which can reduce the benefits we receive from acquisitions.
The process of managing and integrating acquisitions into our existing operations may result in unforeseen operating difficulties and may require significant financial, operational and managerial resources that would otherwise be available for the operation, development and organic expansion of our existing operations. To the extent that we misjudge our ability to properly manage and integrate acquisitions, we may have difficulty achieving our operating, strategic and financial objectives.
Acquisitions also may involve a number of special financial, business and operational risks, such as: (i) difficulties in integrating diverse corporate cultures and management styles; (ii) disparate policies and practices; (iii) client relationship issues; (iv) decreased utilization during the integration process; (v) loss of key existing or acquired personnel; (vi) increased costs to improve or coordinate managerial, operational, financial and administrative systems; (vii) dilutive issuances of equity securities, including convertible debt securities, to finance acquisitions; (viii) the assumption of legal liabilities; (ix) future earn-out payments or other price adjustments; (x) potential future write-offs relating to the impairment of goodwill or other acquired intangible assets or the revaluation of assets; (xi) difficulty or inability to collect receivables; and (xii) undisclosed liabilities.
In addition to the integration challenges mentioned above, our acquisitions of non-U.S. companies offer distinct integration challenges relating to foreign laws and governmental regulations, including tax and employee benefit laws, and other factors relating to operating in countries other than the U.S., which we have addressed above in the discussion regarding the difficulties we may face operating globally.
Asset transactions may require us to seek client consents to the assignment of their engagements to us or a subsidiary. All clients may not consent to assignments. In certain cases, such as government contracts and bankruptcy engagements, the
22



consent of clients cannot be solicited until after the acquisition has closed. Further, such engagements may be subject to security clearance requirements or bidding provisions with which we might not be able to comply. There is no assurance that clients of the acquired entity or local, state, federal or foreign governments will agree to novate or assign their contracts to us.
The Company may also hire groups of selected professionals from another company. In such event, there may be restrictions on the ability of the professionals who join the Company to compete and work on client engagements. In addition, the Company may enter into arrangements with the former employers of those professionals regarding limitations on their work until any time restrictions pass. In such circumstances, there is no assurance that the Company will enter into mutually agreeable arrangements with any former employer, and the utilization of such professionals may be limited, and our financial results could be negatively affected until their restrictions end. The Company could also face litigation risks from group hires.
We may have a different system of governance and management from a company we acquire or its parent, which could cause professionals who join us from an acquired company to leave us.
Our governance and management policies and practices will not mirror the policies and practices of an acquired company or its parent. In some cases, different management practices and policies may lead to workplace dissatisfaction on the part of professionals who join our Company. Some professionals may choose not to join our Company or leave after joining us. Existing professionals may leave us as well. The loss of key professionals may harm our business and financial results and cause us not to realize the anticipated benefits of the acquisition.
Risks Related to Our Indebtedness
Our leverage could adversely affect our financial condition or operating flexibility if the Company fails to comply with operating covenants under applicable debt instruments.
Our senior secured bank revolving credit facility (the "Credit Facility"), or our other indebtedness outstanding from time to time, contains or may contain operating covenants that may, subject to exceptions, limit our ability and the ability of our subsidiaries to, among other things: (i) create, incur or assume certain liens; (ii) make certain restricted payments, investments and loans; (iii) create, incur or assume additional indebtedness or guarantees; (iv) create restrictions on the payment of dividends or other distributions to us from our restricted subsidiaries; (v) engage in M&A transactions, consolidations, sale-leasebacks, joint ventures, and asset and security sales and dispositions; (vi) pay dividends or redeem or repurchase our capital stock; (vii) alter the business that we and our subsidiaries conduct; (viii) engage in certain transactions with affiliates; (ix) modify the terms of certain indebtedness; (x) prepay, redeem or purchase certain indebtedness; and (xi) make material changes to accounting and reporting practices.
In addition, the Credit Facility includes a financial covenant that requires us not to exceed a maximum consolidated total net leverage ratio (the ratio of funded debt (less unrestricted cash up to $150.0 million) to Consolidated EBITDA, as defined in the Credit Facility).
Operating results below a certain level or other adverse factors, including a significant increase in interest rates, could result in us being unable to comply with certain covenants. If we violate any applicable covenants and are unable to obtain waivers, our agreements governing our indebtedness or other applicable agreement could be declared in default and could be accelerated, which could permit, in the case of secured debt, the lenders to foreclose on our assets securing the debt thereunder. If the indebtedness is accelerated, we may not be able to repay our debt or borrow sufficient funds to refinance it. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on terms that are acceptable to us. If our debt is in default for any reason, our cash flows, financial results or financial condition could be materially and adversely affected. In addition, complying with these covenants may cause us to take actions that are not favorable to holders of our outstanding indebtedness and may make it more difficult for us to successfully execute our business strategy and compete against companies that are not subject to such restrictions.
We and our subsidiaries may incur significant additional indebtedness.
We and our subsidiaries may incur substantial additional indebtedness, including additional secured indebtedness, in the future. The terms of the indenture, dated as of August 20, 2018, between us and U.S. Bank National Association, as trustee (the "Indenture") governing the 2.0% Convertible Senior Notes due 2023 (the “2023 Convertible Notes”) do not restrict us from incurring additional debt, securing existing or future debt, recapitalizing our debt or taking a number of other actions that are not limited by the terms of the Indenture. The terms of the agreements governing our Credit Facility and other indebtedness limit, but do not prohibit, us from incurring additional indebtedness.
23



Our ability to incur additional indebtedness may have the effect of reducing the funds available to pay amounts due with respect to our indebtedness. If we incur new indebtedness or other liabilities, the related risks that we and our subsidiaries may face could intensify.
We may not be able to generate sufficient cash to service our indebtedness, and we may be forced to take other actions to satisfy our payment obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our indebtedness depends on our future performance, including the performance of our subsidiaries, which will be affected by financial, business and economic conditions, competition and other factors. We will not be able to control many of these factors, such as the general economy, economic conditions in the industries in which we operate and competitive pressures. Our cash flow may not be sufficient to allow us to pay principal and interest on our indebtedness and to meet our other obligations. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures or to sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In addition, the terms of existing or future debt agreements, including our Credit Facility, may restrict us from pursuing any of these alternatives.
In the event that we need to refinance all or a portion of our outstanding indebtedness before maturity or as it matures, we may not be able to obtain terms as favorable as the terms of our existing indebtedness or refinance our existing indebtedness at all. If interest rates or other factors existing at the time of refinancing result in higher interest rates upon refinancing, we will incur higher interest expense. Furthermore, if any rating agency changes our credit rating or outlook, our debt and equity securities could be negatively affected, which could adversely affect our financial condition and financial results.
Our Credit Facility is guaranteed by substantially all of our domestic subsidiaries and will be required to be guaranteed by future domestic subsidiaries, including those that join us in connection with acquisitions.
Substantially all of our U.S. subsidiaries guarantee our obligations under our Credit Facility, and substantially all of their assets are pledged as collateral for the Credit Facility. Future U.S. subsidiaries will be required to provide similar guarantees under the Credit Facility. If we default on any guaranteed indebtedness, our U.S. subsidiaries could be required to make payments under their guarantees, and our senior secured creditors could foreclose on our U.S. subsidiaries’ assets to satisfy unpaid obligations, which would materially adversely affect our business and financial results.
We may not have the ability to raise the funds necessary to settle conversions of the 2023 Convertible Notes or to repurchase the 2023 Convertible Notes upon a fundamental change, and the agreements governing our other indebtedness contain, and our future debt may contain, limitations on our ability to pay cash upon conversion or repurchase of the 2023 Convertible Notes.
Holders of the 2023 Convertible Notes will have the right to require us to repurchase their 2023 Convertible Notes upon the occurrence of a fundamental change at a fundamental change repurchase price equal to 100% of the principal amount of the 2023 Convertible Notes to be repurchased, plus any accrued and unpaid interest. In addition, upon conversion of the 2023 Convertible Notes, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the 2023 Convertible Notes being converted in accordance with the terms of the Indenture governing the 2023 Convertible Notes. However, we may not have enough available cash or be able to obtain financing at the time we are required to make repurchases of the 2023 Convertible Notes. Our Credit Facility prohibits us from making any cash payments on the conversion or repurchase of the 2023 Convertible Notes if a default or an event of default under that facility exists or would result from such conversion or repurchase, or if, after giving effect to such conversion or repurchase (and any additional indebtedness incurred in connection with such conversion or a repurchase), we would not be in pro forma compliance with certain financial tests under the Credit Facility.
The conditional conversion feature of the 2023 Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of the 2023 Convertible Notes is triggered, holders of the 2023 Convertible Notes will be entitled to convert the 2023 Convertible Notes at their option at any time during specific periods listed in the Indenture governing the 2023 Convertible Notes. If one or more holders elect to convert their 2023 Convertible Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert their 2023 Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding
24



principal of the 2023 Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
The accounting method for convertible debt securities that may be settled in cash, such as the 2023 Convertible Notes, could have a material effect on our reported financial results.
Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), an entity must separately account for the liability and equity components of convertible debt instruments (such as the 2023 Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the 2023 Convertible Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the 2023 Convertible Notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the 2023 Convertible Notes to their face amount over the term of the 2023 Convertible Notes. We will report lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading price of our common stock and the trading price of the 2023 Convertible Notes.
In addition, under certain circumstances, convertible debt instruments (such as the 2023 Convertible Notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the 2023 Convertible Notes are not included in the calculation of diluted earnings per share, except to the extent that the conversion value of the 2023 Convertible Notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, is issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the 2023 Convertible Notes, then our diluted earnings per share would be adversely affected.
Our variable rate indebtedness will subject us to interest rate risk, which could cause our annual debt service obligations to increase significantly.
Borrowings under our Credit Facility will be at variable rates of interest, which expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our cash flow could be adversely affected. An increase in debt service obligations under our variable rate indebtedness could affect our ability to make payments required under the terms of the agreements governing our indebtedness or our other indebtedness outstanding from time to time.
In July 2017, the Financial Conduct Authority ("FCA") of the United Kingdom, which regulates the London Interbank Offering Rate (“LIBOR”), announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. On December 4, 2020, however, the ICE Benchmark Administration Limited (“IBA”), which is the administrator that publishes LIBOR, published its consultation of the market on its intention to cease the publication of all settings of non-U.S. dollar LIBOR and only the one-week and two-month U.S. dollar LIBOR settings on December 31, 2021, with the publication of the remaining U.S. dollar LIBOR settings being discontinued after June 30, 2023, subject to any rights of the FCA to compel the IBA to continue publication (the “IBA Consultation”). The IBA Consultation closed on January 25, 2021 and the IBA intends to share the results with the FCA and publish shortly thereafter a statement summarizing responses from the IBA Consultation. In connection with the IBA Consultation, the FCA issued a statement supporting IBA’s stated intention to extend the expected cessation date for the dominant tenors of U.S. dollar to June 30, 2023. Our Credit Facility, which was undrawn at December 31, 2020 and is indexed to LIBOR, provides for multiple LIBOR currency and tenor options and may be used in the future. Although our Credit Facility provides for alternative reference rates, such alternative reference rates and the consequences of the phase out of LIBOR cannot be entirely predicted at this time. An alternative reference rate could be higher or more volatile than LIBOR prior to its discontinuance, which could result in an increase in the cost of our indebtedness, impact our ability to refinance some or all of our existing indebtedness or otherwise have a material adverse impact on our business, financial condition and results of operations. Furthermore, there can be no assurance given as to whether all tenor settings of LIBOR will actually cease to be available after 2021, whether certain U.S. dollar LIBOR settings will actually be available until June 30, 2023 or whether U.S. dollar LIBOR or such other LIBOR currency will be replaced by an alternative market benchmark in place of U.S. dollar LIBOR or such other LIBOR currency, as the case may be.

25



ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.
ITEM 2.    PROPERTIES
Our executive offices located in Washington, D.C., consist of 100,511 square feet under a lease expiring April 2028. Our principal corporate office located in Bowie, Maryland, consists of 30,835 square feet under a lease expiring April 2028. In October 2020, we entered into a material lease agreement, amending and restating the lease agreement entered into during August 2020, for our new principal office space in New York, New York for an initial fixed term of 15 years, subject to two renewal options of five years each. We also lease offices to support our operations in 36 other cities across the U.S., including Chicago, Denver, Houston, Dallas, Los Angeles and San Francisco, and we lease office space to support our international locations in 27 countries — the U.K., Ireland, Finland, France, Germany, Spain, Belgium, Israel, Denmark, Australia, Malaysia, China (including Hong Kong), Japan, Singapore, the United Arab Emirates, South Korea, South Africa, Argentina, Brazil, Colombia, Mexico, Canada, Indonesia, India, Qatar, the Cayman Islands and the British Virgin Islands. We believe our existing leased facilities are adequate to meet our current requirements and that suitable space will be available as needed.
ITEM 3.    LEGAL PROCEEDINGS
From time to time in the ordinary course of business, we are subject to claims, asserted or unasserted, or named as a party to lawsuits or investigations. Litigation, in general, and IP and securities litigation, in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings cannot be predicted with any certainty, and in the case of more complex legal proceedings, such as IP and securities litigation, the results are difficult to predict at all. We evaluate litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we establish reserves and/or disclose the relevant litigation claims or legal proceedings, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from those anticipated at the time. We currently are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect on our financial condition or results of our operations.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
26



PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Common Stock
Our common stock currently trades on the New York Stock Exchange (the “NYSE”) under the symbol FCN. As of January 29, 2021, the number of holders of record of our common stock was 216.
Securities Authorized for Issuance under Equity Compensation Plans
The following table includes the number of shares of common stock of the Company authorized or to be issued upon exercise of outstanding options, warrants and rights awarded under our employee equity compensation plans as of December 31, 2020:
 (a) (b)(c) 
Plan CategoryNumber of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and RightsNumber of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) 
 (in thousands, except per share data) 
Equity compensation plans approved by our
security holders
484 
(1)
$36.14 1,311 
(3)
Equity compensation plans not approved by our
security holders
54 
(2)
36.75 —  
Total538  $36.20 1,311  
(1)Includes up to (i) 19,748 shares of common stock issuable upon vesting and exercise of outstanding stock options granted under our 2006 Global Long-Term Incentive Plan (as Amended and Restated Effective as of May 14, 2008) and (ii) 464,764 shares of common stock issuable upon vesting and exercise of outstanding stock options granted under our 2009 Omnibus Incentive Compensation Plan (as Amended and Restated Effective as of June 3, 2015).
(2)Includes up to 53,552 shares of common stock issuable upon exercise of fully vested stock options granted as employment inducement on July 30, 2014 to an executive officer hire pursuant to Rule 303.08 of the NYSE.
(3)Includes 1,310,586 shares of common stock available for issuance under our 2017 Omnibus Incentive Compensation Plan, all of which are available for stock-based awards.
Sales of Unregistered Securities
None.
27



Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information with respect to purchases we made of our common stock during the fourth quarter of 2020:
 Total
Number of
Shares
Purchased
 Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program (1)
 Approximate
Dollar Value
That May Yet Be
Purchased
Under the
Program
 (in thousands, except per share data)
October 1 through October 31, 2020599 
(2)
$109.09 599 
(5)
$117,084 
November 1 through November 30, 2020773 
(3)
$103.06 769 
(6)
$37,839 
December 1 through December 31, 2020241 
(4)
$106.94 231 
(7)
$213,191 
Total1,613   1,599   
(1)On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the “Repurchase Program”). On each of May 18, 2017, December 1, 2017, February 21, 2019 and February 20, 2020, our Board of Directors authorized an additional $100.0 million, respectively. On each of July 28, 2020 and December 3, 2020, our Board of Directors authorized an additional $200.0 million, respectively, increasing the Repurchase Program to an aggregate authorization of $900.0 million. No time limit has been established for the completion of the Repurchase Program, and the Repurchase Program may be suspended, discontinued or replaced by the Board of Directors at any time without prior notice. During the year ended December 31, 2020, we repurchased an aggregate of 3,268,906 shares of our outstanding common stock under the Repurchase Program at an average price of $108.11 per share for a total cost of approximately $353.4 million.
(2)Includes 367 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.
(3)Includes 3,677 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.
(4)Includes 10,758 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.
(5)During the month ended October 31, 2020, we repurchased and retired 598,730 shares of common stock, at an average price per share of $109.09, for an aggregate cost of $65.3 million.
(6)During the month ended November 30, 2020, we repurchased and retired 768,889 shares of common stock, at an average price per share of $103.04, for an aggregate cost of $79.2 million.
(7)During the month ended December 31, 2020, we repurchased and retired 230,921 shares of common stock, at an average price per share of $106.72, for an aggregate cost of $24.6 million.
28



ITEM 6.    SELECTED FINANCIAL DATA
We derived the selected financial data presented below for the periods or dates indicated from our consolidated financial statements. The data below should be read in conjunction with our consolidated financial statements, related notes and other financial information appearing in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 8 of this Annual Report on Form 10-K (the "Annual Report").
A number of factors have caused our results of operations and financial position to vary significantly from one year to the next and can make it difficult to evaluate period-to-period comparisons. The most significant of these factors include: acquisitions, special charges and stock repurchases.
Income Statement, Balance Sheet and Stockholders' Equity Data
 Year Ended December 31,
 20202019201820172016
 (in thousands, except per share data)
Income Statement Data     
Revenues$2,461,275 $2,352,717 $2,027,877 $1,807,732 $1,810,394 
Operating expenses    
Direct cost of revenues1,672,711 1,534,896 1,328,074 1,215,560 1,210,771 
Selling, general and administrative expenses488,411 504,074 465,636 432,013 436,716 
Special charges7,103 — — 40,885 10,445 
Amortization of intangible assets10,387 8,152 8,162 10,563 10,306 
 2,178,612 2,047,122 1,801,872 1,699,021 1,668,238 
Operating income282,663 305,595 226,005 108,711 142,156 
Other income (expense)
Interest income and other(412)2,061 4,977 3,752 10,466 
Interest expense(19,805)(19,206)(27,149)(25,358)(24,819)
Gain on sale of business— — 13,031 — — 
Loss on early extinguishment of debt— — (9,072)— — 
Income before income tax provision (benefit)262,446 288,450 207,792 87,105 127,803 
Income tax provision (benefit)51,764 71,724 57,181 (20,857)42,283 
Net income$210,682 $216,726 $150,611 $107,962 $85,520 
Earnings per common share — basic$5.92 $5.89 $4.06 $2.79 $2.09 
Earnings per common share — diluted$5.67 $5.69 $3.93 $2.75 $2.05 
Weighted average number of common shares
   outstanding
     
Basic35,602 36,774 37,098 38,697 40,943 
Diluted37,149 38,111 38,318 39,192 41,709 
 December 31,
 20202019201820172016
 (in thousands)
Balance Sheet Data     
Cash and cash equivalents$294,953 $369,373 $312,069 $189,961 $216,158 
Working capital (1)
$459,536 $566,124 $482,783 $383,851 $404,716 
Total assets$2,777,363 $2,783,142 $2,379,121 $2,257,241 $2,225,368 
Long-term debt, net$286,131 $275,609 $265,571 $396,284 $365,528 
Stockholders’ equity$1,400,181 $1,489,142 $1,348,825 $1,191,971 $1,207,358 
(1)Working capital is defined as current assets less current liabilities.
29



 Year Ended December 31,
 20202019201820172016
(in thousands)
Stockholders' Equity Data
Shares of common stock repurchased and retired3,269 1,258 952 4,674 537 
Total cost$353,385 $105,915 $55,722 $168,001 $21,479 

30



ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of our consolidated financial condition, results of operations and liquidity and capital resources for each of the two years in the period ended December 31, 2020 and significant factors that could affect our prospective financial condition and results of operations. This discussion should be read in conjunction with our consolidated financial statements and notes included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report. For a similar discussion and analysis of our results for the year ended December 31, 2019 compared with our results for the year ended December 31, 2018, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report for the year ended December 31, 2019, filed with the United States ("U.S.") Securities and Exchange Commission (“SEC”) on February 25, 2020. Historical results and any discussion of prospective results may not indicate our future performance.
Business Overview
FTI Consulting is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. Individually, each of our segments and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact. Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from proactive risk management to rapid response to unexpected events and dynamic environments.  
We report financial results for the following five reportable segments:
Our Corporate Finance & Restructuring (“Corporate Finance”) segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, banks, lenders, and other financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of services centered around three core offerings: business transformation, transactions and turnaround, restructuring and bankruptcy.

Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, government entities and other interested parties with a multidisciplinary and independent range of services in risk and investigations and disputes, including a focus on highly regulated industries such as our construction & environmental solutions and health solutions services. These services are supported by our data & analytics services which help our clients analyze large, disparate sets of data related to their business operations and support our clients during regulatory inquiries and commercial disputes. We deliver a wide range of services centered around five core offerings: construction & environmental solutions, data & analytics, disputes, health solutions and risk and investigations.
Our Economic Consulting segment, including subsidiary Compass Lexecon LLC, provides law firms, companies, government entities and other interested parties with analyses of complex economic issues for use in international arbitration, legal and regulatory proceedings, and strategic decision making and public policy debates around the world. We deliver a wide range of services centered around three core offerings: antitrust & competition economics, financial economics and international arbitration.
Our Technology segment provides companies, law firms and government entities with a comprehensive global portfolio of e-discovery, information governance, privacy and security and corporate legal operations solutions. We deliver a full spectrum of services including data collection, data processing, document review, hosting, advanced analytics and consulting.
Our Strategic Communications segment develops and executes communications strategies to help management teams, boards of directors, law firms, governments and regulators manage change and mitigate risk surrounding transformational and disruptive events, including transactions, investigations, disputes, crises, regulation and legislation. We deliver a wide range of services centered around three core offerings: corporate reputation, financial communications and public affairs.
We derive substantially all of our revenues from providing professional services to both U.S. and global clients. Most of our services are rendered under time and expense arrangements that obligate the client to pay us a fee for the hours that we incur at agreed-upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, which may include the cost of producing our work product and other direct expenses that we incur on behalf of the client, such as travel costs. We also render services for which certain clients may be required to pay us a fixed-fee or recurring retainer. These arrangements are generally cancelable at any time. Some of our engagements contain performance-based arrangements in which we earn a contingent or success fee when and if certain predefined outcomes occur. This type of success fee may supplement a time and expense or fixed-fee arrangement. Success fee revenues may cause variations in our revenues and operating results due to the
31



timing of when achieving the performance-based criteria becomes probable. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.
In our Technology segment, certain clients are billed based on the amount of data storage used or the volume of information processed. Unit-based revenues are defined as revenues billed on a per item, per page or some other unit-based method and include revenues from data processing and hosting. Unit-based revenues include revenues associated with the software products that are made available to customers via a web browser (“on-demand”). On-demand revenues are charged on a unit or monthly basis and include, but are not limited to, processing and review related functions.
Our financial results are primarily driven by:
the number, size and type of engagements we secure;
the rate per hour or fixed charges we charge our clients for services;
the utilization rates of the revenue-generating professionals we employ;
the timing of revenue recognition related to revenues subject to certain performance-based contingencies;
the number of revenue-generating professionals;
the types of assignments we are working on at different times;
the length of the billing and collection cycles; and
the geographic locations of our clients or locations in which services are rendered.
We define acquisition growth as revenues of acquired companies in the first 12 months following the effective date of an acquisition. Our definition of organic growth is the change in revenues, excluding the impact of all such acquisitions.
When significant, we identify the estimated impact of foreign currency (“FX”) driven by our businesses with functional currencies other than the U.S. dollar (“USD”). The estimated impact of FX on the period-to-period performance results is calculated as the difference between the prior period results multiplied by the average FX exchange rates to USD in the current period and the prior period results, multiplied by the average FX exchange rates to USD in the prior period.
Non-GAAP Financial Measures
In the accompanying analysis of financial information, we sometimes use information derived from consolidated and segment financial information that may not be presented in our financial statements or prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Certain of these financial measures are considered not in conformity with GAAP ("non-GAAP financial measures”) under the SEC rules. Specifically, we have referred to the following non-GAAP financial measures:
Total Segment Operating Income
Adjusted EBITDA
Total Adjusted Segment EBITDA
Adjusted EBITDA Margin
Adjusted Net Income
Adjusted Earnings per Diluted Share
Free Cash Flow
We have included the definitions of Segment Operating Income and Adjusted Segment EBITDA, which are GAAP financial measures, below in order to more fully define the components of certain non-GAAP financial measures in the accompanying analysis of financial information. As described in Note 20, “Segment Reporting” in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report, we evaluate the performance of our operating segments based on Adjusted Segment EBITDA, and Segment Operating Income is a component of the definition of Adjusted Segment EBITDA.
32



We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash. We define 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 and the gain or loss on sale of a business. 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 and Consolidated Statements of Cash Flows. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this report.
33



Full Year 2020 Executive Highlights
Financial Highlights 
 Year Ended December 31,
 20202019% Increase (Decrease)
 (dollar amounts in thousands, except per share amounts)
Revenues$2,461,275 $2,352,717 4.6 %
Special charges (1)
$7,103 $— 100.0 %
Net income$210,682 $216,726 -2.8 %
Adjusted EBITDA$332,271 $343,900 -3.4 %
Earnings per common share — diluted$5.67 $5.69 -0.4 %
Adjusted earnings per common share — diluted$5.99 $5.80 3.3 %
Net cash provided by operating activities$327,069 $217,886 50.1 %
Total number of employees 6,321 5,567 13.5 %
(1)Excluded from non-GAAP financial measures.
Revenues
Revenues for the year ended December 31, 2020 increased $108.6 million, or 4.6%, as compared with the year ended December 31, 2019. Acquisition-related revenues contributed $40.7 million, or 1.7%, compared with 2019. Excluding the acquisition-related revenues, revenues increased $67.8 million, or 2.9%, primarily due to increased demand for our Corporate Finance segment, which was partially offset by lower demand for our FLC segment, as well as a $38.5 million decrease in pass-through revenues, primarily resulting from a Coronavirus Disease 2019 ("COVID-19") pandemic related decline in billable travel and entertainment expenses, compared with 2019.
Special Charges
During the year ended December 31, 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 FLC segment that impacted 16 employees. All of these amounts will be paid in cash within the next 12 months.
There were no special charges recorded during the year ended December 31, 2019.
The following table details the special charges by segment:
 
Year Ended
December 31, 2020
 (in thousands)
Corporate Finance$861 
FLC3,484 
Economic Consulting35 
Technology 276 
Strategic Communications 2,074 
Segment special charge 6,730 
Unallocated Corporate 373 
Total $7,103 
34



Net income
Net income for the year ended December 31, 2020 decreased $6.0 million, or 2.8%, as compared with the year ended December 31, 2019. The decrease in net income was due to higher compensation expenses, primarily related to a 14.5% increase in billable headcount and higher variable compensation, as well as a special charge of $7.1 million, which were partially offset by an increase in revenues, a decline in selling, general and administrative ("SG&A") expenses and a lower effective tax rate, primarily due to a combined $11.2 million tax benefit from the use of foreign tax credits and the deferred tax benefit of an intellectual property license agreement between subsidiaries.
Adjusted EBITDA
Adjusted EBITDA for the year ended December 31, 2020 decreased $11.6 million, or 3.4%, as compared with the year ended December 31, 2019. Adjusted EBITDA was 13.5% of revenues for the year ended December 31, 2020 compared with 14.6% of revenues for the year ended December 31, 2019. The decrease in Adjusted EBITDA, which excludes the special charge, was due to higher compensation expenses, primarily related to a 14.5% increase in billable headcount and higher variable compensation, which were partially offset by an increase in revenues and a decline in SG&A expenses.
EPS and Adjusted EPS
EPS for the year ended December 31, 2020 decreased $0.02 to $5.67 compared with $5.69 for the year ended December 31, 2019. 2020 EPS included a $7.1 million special charge, which reduced EPS by $0.14. The decrease in EPS was primarily due to the lower operating results described above, which were partially offset by a lower effective tax rate and a decline in diluted weighted average shares outstanding.
Adjusted EPS for the year ended December 31, 2020 increased $0.19 to $5.99 compared with $5.80 for the year ended December 31, 2019. Adjusted EPS for the year ended December 31, 2020 excludes the $7.1 million special charge and $9.1 million of non-cash interest expense related to the 2.0% convertible senior notes due 2023 (the "2023 Convertible Notes"), which increased Adjusted EPS by $0.14 and $0.18, respectively. Adjusted EPS for the year ended December 31, 2019 excluded $8.6 million of non-cash interest expense related to the 2023 Convertible Notes, which increased Adjusted EPS by $0.17 and a discrete tax adjustment resulting from a change in estimate related to the accounting for the Ringtail e-discovery software and related business divestiture (collectively, "Ringtail Divestiture"), which decreased Adjusted EPS by $0.06.
Liquidity and Capital Allocation
Net cash provided by operating activities for the year ended December 31, 2020 increased $109.2 million to $327.1 million compared with $217.9 million for the year ended December 31, 2019. The increase in net cash provided by operating activities was primarily due to higher cash collections, combined with lower non-compensation-related operating costs, which were partially offset by higher compensation, primarily related to headcount growth, and an increase in income tax payments. Days sales outstanding (“DSO”) was 95 days as of December 31, 2020 compared with 97 days as of December 31, 2019.
A portion of net cash provided by operating activities was used to repurchase and retire approximately 3.3 million shares of our common stock under our Repurchase Program for an average price per share of $108.11, at a total cost of $353.4 million during the year ended December 31, 2020. We had $213.2 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2020.
Free Cash Flow was an inflow of $292.2 million and $175.8 million for the years ended December 31, 2020 and 2019, respectively. The increase was primarily due to higher net cash provided by operating activities, as described above.
Other Strategic Activities
During the year ended December 31, 2020, we acquired certain assets of Delta Partners Group Limited, a leading telecom, media and technology focused strategy consulting and investment banking firm with offices in Dubai, New York, Singapore, Barcelona, Johannesburg, San Francisco and Sydney.
Also, during the year ended December 31, 2020, we entered into a material lease agreement for our new principal office space in New York, New York to consolidate existing office space into fewer locations and in anticipation of future office space needs in view of our current leases, which are scheduled to expire in November 2021.
35



COVID-19 Pandemic
The COVID-19 pandemic has created global volatility, economic uncertainty and general market disruption. During the year ended December 31, 2020, the COVID-19 pandemic impacted each of our segments, practices and regions differently. In general, limitations in our ability to service our clients due to social distancing, travel restrictions and remote work negatively impacted our financial results, though we benefited from a decline in travel and entertainment expenses. In addition, we experienced a reduction in demand, and in some cases delays, in our ability to provide certain services due to regulatory moratoriums and postponements of legal proceedings and investigations. These events arising from the COVID-19 pandemic negatively impacted our segment results to a varied extent during the year ended December 31, 2020, but they particularly negatively impacted our FLC segment. While restructuring and bankruptcy services provided by our Corporate Finance segment experienced increased demand as compared with the year ended December 31, 2019 as a result of the adverse economic impact of the COVID-19 pandemic, during the second half of 2020 we experienced a decline in activity as compared with the first half of 2020 primarily resulting from government-backed stimulus packages and the availability of other financing sources. The extent to which the COVID-19 pandemic will continue to impact our business is difficult to predict.
Headcount
Our total headcount increased 13.5% from 5,567 as of December 31, 2019 to 6,321 as of December 31, 2020. The following table includes the net billable headcount additions (reductions) for the year ended December 31, 2020:
Billable Headcount
Corporate
Finance (1) (2)
FLC (1)
Economic ConsultingTechnologyStrategic
Communications
Total
December 31, 20191,1941,3517903617284,424
Additions (reductions), net461(8)1014742643
December 31, 20201,6551,3438914087705,067
Percentage change in headcount from December 31, 2019
38.6 %-0.6 %12.8 %13.0 %5.8 %14.5 %
(1)There were 66 revenue-generating professionals in Europe, Middle East and Africa (“EMEA”) who moved from FLC to Corporate Finance during the year ended December 31, 2020.
(2)There were 151 revenue-generating professionals added during the year ended December 31, 2020 related to the acquisition of a strategy consulting and investment banking business within the Corporate Finance segment.
36



RESULTS OF OPERATIONS
Segment and Consolidated Operating Results: 
 Year Ended December 31,
 20202019
 (in thousands, except per share data)
Revenues  
Corporate Finance $910,184 $723,721 
FLC500,275 577,780 
Economic Consulting599,088 592,542 
Technology223,016 215,584 
Strategic Communications228,712 243,090 
Total revenues$2,461,275 $2,352,717 
Segment operating income
Corporate Finance$205,029 $152,948 
FLC23,899 98,648 
Economic Consulting85,690 78,201 
Technology30,869 35,022 
Strategic Communications31,639 39,174 
Total segment operating income377,126 403,993 
Unallocated corporate expenses(94,463)(98,398)
Operating income282,663 305,595 
Other income (expense)
Interest income and other(412)2,061 
Interest expense(19,805)(19,206)
 (20,217)(17,145)
Income before income tax provision262,446 288,450 
Income tax provision51,764 71,724 
Net income$210,682 $216,726 
Earnings per common share — basic$5.92 $5.89 
Earnings per common share — diluted$5.67 $5.69 
Reconciliation of Net Income to Adjusted EBITDA:
 Year Ended December 31,
 20202019
 (in thousands)
Net income$210,682 $216,726 
Add back:
Income tax provision 51,764 71,724 
Interest income and other412 (2,061)
Interest expense19,805 19,206 
Depreciation and amortization32,118 30,153 
Amortization of intangible assets10,387 8,152 
Special charges7,103 — 
Adjusted EBITDA$332,271 $343,900 
37



Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS:
 Year Ended December 31,
 20202019
 (in thousands, except per share data)
Net income$210,682 $216,726 
Add back:
Special charges7,103 — 
Tax impact of special charges(1,847)— 
Non-cash interest expense on convertible notes
9,083 8,606 
Tax impact of non-cash interest expense on convertible notes (2,361)(2,237)
Tax impact of gain on sale of business (1)
— (2,097)
Adjusted Net Income$222,660 $220,998 
Earnings per common share — diluted$5.67 $5.69 
Add back:
Special charges0.19 — 
Tax impact of special charges(0.05)— 
Non-cash interest expense on convertible notes
0.24 0.23 
Tax impact of non-cash interest expense on convertible notes (0.06)(0.06)
Tax impact of gain on sale of business (1)
— (0.06)
Adjusted earnings per common share — diluted$5.99 $5.80 
Weighted average number of common shares outstanding — diluted37,149 38,111 
(1)In 2019, represents a discrete tax adjustment resulting from a change in estimate related to the accounting for the Ringtail Divestiture in 2018.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow:
Year Ended December 31,
 20202019
 (in thousands)
Net cash provided by operating activities$327,069 $217,886 
Purchases of property and equipment(34,866)(42,072)
Free Cash Flow$292,203 $175,814 
Year Ended December 31, 2020 Compared with December 31, 2019
Revenues and operating income
See “Segment Results” for an expanded discussion of revenues, gross profit and SG&A expenses.
Unallocated corporate expenses
Unallocated corporate expenses decreased $3.9 million, or 4.0%, to $94.5 million in 2020 from $98.4 million in 2019. The decrease was primarily due to lower travel and entertainment expenses due to restrictions imposed by governments to reduce the spread of COVID-19, and lower variable compensation for our executive and regional leadership.
Interest income and other
Interest income and other, which includes FX gains and losses, decreased $2.5 million to a $0.4 million loss for the year ended December 31, 2020, compared with $2.1 million of income for the year ended December 31, 2019. The decrease was primarily due to $1.0 million in lower interest income and a $1.0 million increase in net FX losses.
38



FX gains and losses, both realized and unrealized, relate to the remeasurement or settlement of monetary assets and liabilities that are denominated in a currency other than an entity’s functional currency. These monetary assets and liabilities include cash, as well as third-party and intercompany receivables and payables.
Interest expense
Interest expense increased $0.6 million, or 3.1%, to $19.8 million in 2020 from $19.2 million in 2019.
Income tax provision
Our income tax provision decreased $20.0 million, or 27.8%, to $51.8 million in 2020 from $71.7 million in 2019. Our effective tax rate was 19.7% for 2020 as compared with 24.9% for 2019. The lower effective tax rate in 2020 was primarily due to a combined $11.2 million tax benefit from the use of foreign tax credits and the deferred tax benefit of an intellectual property license agreement between subsidiaries, as well as a favorable discrete tax adjustment related to share-based compensation.
SEGMENT RESULTS
Total Adjusted Segment EBITDA
We evaluate the performance of each of our operating segments based on Adjusted Segment EBITDA, which is a GAAP financial measure. The following table reconciles net income to Total Adjusted Segment EBITDA, a non-GAAP financial measure, for the years ended December 31, 2020 and 2019:
 Year Ended December 31,
 20202019
 (in thousands)
Net income$210,682 $216,726 
Add back:
Income tax provision 51,764 71,724 
Interest income and other412 (2,061)
Interest expense19,805 19,206 
Unallocated corporate expenses (1)
94,463 98,398 
Total segment operating income377,126 403,993 
Add back:
Segment depreciation expense29,381 27,369 
Amortization of intangible assets10,387 8,152 
Segment special charges6,730 — 
Total Adjusted Segment EBITDA$423,624 $439,514 
(1)Includes a $0.4 million special charge.
39



Other Segment Operating Data
 Year Ended December 31,
 20202019
Number of revenue-generating professionals (at period end):  
Corporate Finance1,655 1,194 
FLC1,343 1,351 
Economic Consulting891 790 
Technology (1)
408 361 
Strategic Communications770 728 
Total revenue-generating professionals5,067 4,424 
Utilization rates of billable professionals: (2)
  
Corporate Finance63 %67 %
FLC51 %63 %
Economic Consulting68 %75 %
Average billable rate per hour: (3)
  
Corporate Finance$468 $452 
FLC$335 $337 
Economic Consulting$494 $500 
(1)The number of revenue-generating professionals for the Technology segment excludes as-needed professionals, who we employ based on demand for the segment’s services. We employed an average of 331 and 285 as-needed employees during the years ended December 31, 2020 and 2019, respectively.
(2)We calculate the utilization rate for our billable professionals by dividing the number of hours that all of our billable professionals worked on client assignments during a period by the total available working hours for all of our billable professionals during the same period. Available hours are determined by the standard hours worked by each employee, adjusted for part-time hours, U.S. standard work weeks and local country holidays. Available working hours include vacation and professional training days, but exclude holidays. Utilization rates are presented for our segments that primarily bill clients on an hourly basis. We have not presented utilization rates for our Technology and Strategic Communications segments as most of the revenues of these segments are not generated on an hourly basis.
(3)For engagements where revenues are based on number of hours worked by our billable professionals, average billable rate per hour is calculated by dividing revenues (excluding revenues from success fees, pass-through revenues and outside consultants) for a period by the number of hours worked on client assignments during the same period. We have not presented average billable rates per hour for our Technology and Strategic Communications segments as most of the revenues of these segments are not based on billable hours.
40



CORPORATE FINANCE & RESTRUCTURING
 Year Ended December 31,
 20202019
 (dollars in thousands, except rate per hour)
Revenues$910,184 $723,721 
Percentage change in revenues from prior year25.8 %
Operating expenses
Direct cost of revenues578,875 454,214 
Selling, general and administrative expenses118,964 112,630 
Special charges861 — 
Amortization of intangible assets6,455 3,929 
 705,155 570,773 
Segment operating income205,029 152,948 
Percentage change in segment operating income from prior year34.1 %
Add back:
Depreciation and amortization of intangible assets10,940 7,787 
Special charges861 — 
Adjusted Segment EBITDA$216,830 $160,735 
Gross profit (1)
$331,309 $269,507 
Percentage change in gross profit from prior year22.9 %
Gross profit margin (2)
36.4 %37.2 %
Adjusted Segment EBITDA as a percent of revenues23.8 %22.2 %
Number of revenue-generating professionals (at period end)1,655 1,194 
Percentage change in number of revenue-generating professionals from prior year38.6 %
Utilization rate of billable professionals63 %67 %
Average billable rate per hour$468 $452 
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
Year Ended December 31, 2020 Compared with December 31, 2019
Revenues increased $186.5 million, or 25.8%, from 2019 to 2020. Acquisition-related revenues contributed $40.7 million, or 5.6%, compared with 2019. Excluding the acquisition-related revenues, revenues increased $145.7 million, or 20.1%, primarily due to higher demand for our restructuring services, largely in North America and EMEA.
Gross profit increased $61.8 million, or 22.9%, from 2019 to 2020. Gross profit margin decreased 0.8 percentage points from 2019 to 2020. The decrease in gross profit margin was primarily due to increased compensation related to higher headcount and an increase in variable compensation as a percentage of revenues, combined with a 4 percentage point decline in utilization.
SG&A expenses increased $6.3 million, or 5.6%, from 2019 to 2020. SG&A expenses of 13.1% of revenues in 2020 compared with 15.6% in 2019. The increase in SG&A expenses was primarily due to acquisition-related expenses and higher infrastructure support costs, largely related to an increase in headcount, which was partially offset by a decrease in travel and entertainment and bad debt expenses.




41



FORENSIC AND LITIGATION CONSULTING
 Year Ended December 31,
 20202019
 (dollars in thousands, except rate per hour)
Revenues$500,275 $577,780 
Percentage change in revenues from prior year-13.4 %
Operating expenses
Direct cost of revenues377,530 367,988 
Selling, general and administrative expenses94,562 109,992 
Special charges3,484 — 
Amortization of intangible assets800 1,152 
 476,376 479,132 
Segment operating income23,899 98,648 
Percentage change in segment operating income from prior year-75.8 %
Add back:
Depreciation and amortization of intangible assets5,991 5,787 
Special charges3,484 — 
Adjusted Segment EBITDA$33,374 $104,435 
Gross profit (1)
$122,745 $209,792 
Percentage change in gross profit from prior year-41.5 %
Gross profit margin (2)
24.5 %36.3 %
Adjusted Segment EBITDA as a percent of revenues6.7 %18.1 %
Number of revenue-generating professionals (at period end) 1,343 1,351 
Percentage change in number of revenue-generating professionals from prior year-0.6 %
Utilization rate of billable professionals51 %63 %
Average billable rate per hour$335 $337 
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
Year Ended December 31, 2020 Compared with December 31, 2019
Revenues decreased $77.5 million, or 13.4%, from 2019 to 2020. The decrease was primarily due to lower demand for all of our services, particularly for our disputes, investigations and health solutions services.
Gross profit decreased $87.0 million, or 41.5%, from 2019 to 2020. Gross profit margin decreased 11.8 percentage points from 2019 to 2020. The decrease in gross profit margin was largely related to a 12 percentage point decline in utilization.
SG&A expenses decreased $15.4 million, or 14.0%, from 2019 to 2020. SG&A expenses of 18.9% of revenues in 2020 compared with 19.0% in 2019. The decrease in SG&A expenses was primarily driven by lower travel and entertainment, bad debt, hiring and other general and administrative expenses.
42



ECONOMIC CONSULTING 
 Year Ended December 31,
 20202019
 (dollars in thousands, except rate per hour)
Revenues$599,088 $592,542 
Percentage change in revenues from prior year1.1 %
Operating expenses
Direct cost of revenues434,324 437,862 
Selling, general and administrative expenses78,714 76,302 
Special charges35 — 
Amortization of intangible assets325 177 
 513,398 514,341 
Segment operating income85,690 78,201 
Percentage change in segment operating income from prior year9.6 %
Add back:
Depreciation and amortization of intangible assets5,707 5,911 
Special charges35 — 
Adjusted Segment EBITDA$91,432 $84,112 
Gross profit (1)
$164,764 $154,680 
Percentage change in gross profit from prior year6.5 %
Gross profit margin (2)
27.5 %26.1 %
Adjusted Segment EBITDA as a percent of revenues15.3 %14.2 %
Number of revenue-generating professionals (at period end)891 790 
Percentage change in number of revenue-generating professionals from prior year12.8 %
Utilization rate of billable professionals68 %75 %
Average billable rate per hour$494 $500 
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
Year Ended December 31, 2020 Compared with December 31, 2019
Revenues increased $6.5 million, or 1.1%, from 2019 to 2020. The increase was primarily due to higher demand for our mergers and acquisitions ("M&A") related antitrust services, which was partially offset by lower demand for our financial economics services, along with lower realized bill rates due to the mix of client engagements and staffing for our non-M&A-related antitrust services.
Gross profit increased $10.1 million, or 6.5%, from 2019 to 2020. Gross profit margin increased 1.4 percentage points from 2019 to 2020. The increase in gross profit margin was primarily due to a higher proportion of junior professional staff, lower variable compensation as a percentage of revenues and a favorable mix of lower margin contractor revenues, which was partially offset by a 7 percentage point decline in utilization.
SG&A expenses increased $2.4 million, or 3.2%, from 2019 to 2020. SG&A expenses of 13.1% of revenues in 2020 compared with 12.9% in 2019. The increase in SG&A expenses was primarily driven by higher bad debt, which was partially offset by lower travel and entertainment expenses.
43



TECHNOLOGY
 Year Ended December 31,
 20202019
 (dollars in thousands)
Revenues$223,016 $215,584 
Percentage change in revenues from prior year3.4 %
Operating expenses
Direct cost of revenues134,568 123,504 
Selling, general and administrative expenses57,303 57,058 
Special charges276 — 
 192,147 180,562 
Segment operating income30,869 35,022 
Percentage change in segment operating income from prior year-11.9 %
Add back:
Depreciation and amortization of intangible assets11,868 10,666 
Special charges276 — 
Adjusted Segment EBITDA$43,013 $45,688 
Gross profit (1)
$88,448 $92,080 
Percentage change in gross profit from prior year-3.9 %
Gross profit margin (2)
39.7 %42.7 %
Adjusted Segment EBITDA as a percent of revenues19.3 %21.2 %
Number of revenue-generating professionals (at period end) (3)
408 361 
Percentage change in number of revenue-generating professionals from prior year13.0 %
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
(3)Includes personnel involved in direct client assistance and revenue-generating consultants and excludes professionals employed on an as-needed basis
Year Ended December 31, 2020 Compared with December 31, 2019
Revenues increased $7.4 million, or 3.4%, from 2019 to 2020. The increase was primarily driven by higher demand and realized bill rates for our consulting services, largely due to M&A-related "second request" and litigation activities, which was partially offset by lower revenues related to the completion of a transitional services agreement, as well as lower realized rates for our managed review services.
Gross profit decreased $3.6 million, or 3.9%, from 2019 to 2020. Gross profit margin decreased 3.0 percentage points from 2019 to 2020. The decrease in gross profit margin was largely due to the completion of a transitional services agreement combined with lower profitability for our managed review and processing services, which was partially offset by higher profitability for our consulting services.
SG&A expenses increased $0.2 million, or 0.4%, from 2019 to 2020. SG&A expenses of 25.7% of revenues in 2020 compared with 26.5% in 2019.

44



STRATEGIC COMMUNICATIONS
 Year Ended December 31,
 20202019
 (dollars in thousands)
Revenues$228,712 $243,090 
Percentage change in revenues from prior year-5.9 %
Operating expenses
Direct cost of revenues147,414 151,319 
Selling, general and administrative expenses44,779 49,703 
Special charges2,074 — 
Amortization of intangible assets2,806 2,894 
 197,073 203,916 
Segment operating income31,639 39,174 
Percentage change in segment operating income from prior year-19.2 %
Add back:
Depreciation and amortization of intangible assets5,262 5,370 
Special charges2,074 — 
Adjusted Segment EBITDA$38,975 $44,544 
Gross profit (1)
$81,298 $91,771 
Percentage change in gross profit from prior year-11.4 %
Gross profit margin (2)
35.5 %37.8 %
Adjusted Segment EBITDA as a percent of revenues17.0 %18.3 %
Number of revenue-generating professionals (at period end)770 728 
Percentage change in number of revenue-generating professionals from prior year5.8 %
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
Year Ended December 31, 2020 Compared with December 31, 2019
Revenues decreased $14.4 million, or 5.9%, from 2019 to 2020. The decrease in revenues was due to an $8.6 million decline in pass-through revenues, and a reduction in retainer- and project-based revenues, primarily driven by lower demand for our corporate reputation services.
Gross profit decreased $10.5 million, or 11.4%, from 2019 to 2020. Gross profit margin decreased 2.3 percentage points from 2019 to 2020. The decrease in gross profit margin was primarily driven by higher costs due to increased headcount, which was partially offset by an increase in lower margin pass-through revenues and a decrease in variable compensation as a percentage of revenues.
SG&A expenses decreased $4.9 million, or 9.9%, from 2019 to 2020. SG&A expenses of 19.6% of revenues in 2020 compared with 20.4% in 2019. The decrease in SG&A expenses was primarily due to lower travel and entertainment expenses.
45



LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
 Year Ended December 31,
20202019
Cash Flows(dollars in thousands)
Net cash provided by operating activities$327,069 $217,886 
Net cash used in investing activities$(60,120)$(60,606)
Net cash used in financing activities$(360,053)$(103,311)
DSO95 97 
We generally finance our day-to-day operations, capital expenditures, acquisitions and share repurchases through cash flows from operations. During the first quarter of our fiscal year, our cash needs generally exceed our cash flows from operations due to the payment of annual incentive compensation. Our operating cash flows generally exceed our cash needs subsequent to the second quarter of each year.
Our operating assets and liabilities consist primarily of billed and unbilled accounts receivable, notes receivable from employees, accounts payable, accrued expenses and accrued compensation expenses. The timing of billings and collections of receivables, as well as compensation and vendor payments, affect the changes in these balances.
DSO is a performance measure used to assess how quickly revenues are collected by the Company. We calculate DSO at the end of each reporting period by dividing net accounts receivable reduced by billings in excess of services provided, by revenues for the quarter, adjusted for changes in foreign exchange rates. We multiply the result by the number of days in the quarter.
Year Ended December 31, 2020 Compared with December 31, 2019
Net cash provided by operating activities increased $109.2 million, or 50.1%, from 2019 to 2020. The increase in net cash provided by operating activities was primarily due to higher cash collections, combined with lower non-compensation-related operating costs, which were partially offset by higher compensation, primarily related to headcount growth, and an increase in income tax payments. DSO was 95 days as of December 31, 2020 and 97 days as of December 31, 2019.
Net cash used in investing activities decreased $0.5 million, or 0.8%, from 2019 to 2020. The decrease in net cash used in investing activities was primarily due to a decrease of $7.0 million in capital expenditures, partially offset by an increase of $6.5 million in payments for the acquisition of businesses, net of cash received.
Net cash used in financing activities increased $256.7 million, or 248.5%, from 2019 to 2020. The increase in net cash used in financing activities was primarily due to an increase of $247.8 million in payments for common stock repurchases under the Repurchase Program.
Capital Resources
As of December 31, 2020, our capital resources included $295.0 million of cash and cash equivalents and available borrowing capacity of $548.9 million under the $550.0 million revolving line of credit under our senior secured bank revolving credit facility (the "Credit Facility"). As of December 31, 2020, we had no outstanding borrowings under our Credit Facility and $1.1 million of outstanding letters of credit, which reduced the availability of borrowings under the Credit Facility. We use letters of credit primarily in lieu of security deposits for our leased office facilities. The $550.0 million revolving line of credit under the Credit Facility includes a $75.0 million sublimit for borrowings in currencies other than USD, including the euro, British pound, Australian dollar and Canadian dollar.
The availability of borrowings, as well as issuances and extensions of letters of credit, under our Credit Facility is subject to specified conditions. We may choose to repay outstanding borrowings under the Credit Facility at any time before maturity without premium or penalty. Borrowings under the Credit Facility in USD, euro and British pound bear interest at an annual rate equal to the London Interbank Offered Rate ("LIBOR"), plus an applicable margin or an alternative base rate plus an applicable margin. The alternative base rate means a fluctuating rate per annum equal to the highest of (1) the rate of interest in effect for such day as the prime rate announced by Bank of America, (2) the federal funds rate plus the sum of 50 basis points, and (3) the one-month LIBOR plus 100 basis points. Borrowings under the Credit Facility in Canadian dollars bear interest at an annual rate equal to the Canadian Dealer Offered Rate plus an applicable margin. Borrowings under the Credit Facility in Australian dollars bear interest at an annual rate equal to the Bank Bill Swap Reference Bid Rate plus an applicable margin. The
46



Credit Facility is guaranteed by substantially all of our domestic subsidiaries and is secured by a first priority security interest in substantially all of the assets of FTI Consulting and such domestic subsidiaries. Subject to certain conditions, at any time prior to maturity, we will be able to invite existing and new lenders to increase the size of the facility up to a maximum of $700.0 million.
Our Credit Agreement and other indebtedness outstanding from time to time contains or may contain covenants that, among other things, may limit our ability to: incur additional indebtedness; create liens; pay dividends on our capital stock, make distributions or repurchases of our capital stock or make specified other restricted payments; consolidate, merge or sell all or substantially all of our assets; guarantee obligations of other entities or our foreign subsidiaries; enter into hedging agreements; enter into transactions with affiliates or related persons; or engage in any business other than consulting-related businesses. In addition, the Credit Agreement includes a financial covenant that requires us not to exceed a maximum consolidated total net leverage ratio (the ratio of funded debt (less unrestricted cash up to $150.0 million) to Consolidated EBITDA, as defined in the Credit Agreement). As of December 31, 2020, we were in compliance with the covenants contained in the Credit Agreement and the indenture, dated as of August 20, 2018, between us and U.S. Bank National Association, as trustee (the "Indenture"), governing the 2023 Convertible Notes.
Future Capital Needs
We anticipate that our future capital needs will principally consist of funds required for:
operating and general corporate expenses relating to the operation of our businesses;
capital expenditures, primarily for information technology equipment, office furniture and leasehold improvements;
debt service requirements, including interest payments on our long-term debt;
compensation to designated executive management and senior managing directors under our various long-term incentive compensation programs;
discretionary funding of the Repurchase Program;
contingent obligations related to our acquisitions;
potential acquisitions of businesses; and
other known future contractual obligations.
During 2020, we spent $34.9 million in capital expenditures to support our organization, including direct support for specific client engagements. During 2021, we currently expect to make capital expenditures to support our organization in an aggregate amount between $70 million and $80 million, which includes costs related to leasehold improvements for our new principal office space in New York, New York. Our estimate takes into consideration the needs of our existing businesses but does not include the impact of any purchases that we may be required to make as a result of future acquisitions or specific client engagements that are not completed or not currently contemplated. Our capital expenditure requirements may change if our staffing levels or technology needs change significantly from what we currently anticipate, if we are required to purchase additional equipment specifically to support new client engagements or if we pursue and complete additional acquisitions.
2023 Convertible Notes
Our 2023 Convertible Notes were issued pursuant to the Indenture. The 2023 Convertible Notes bear interest at a fixed rate of 2.0% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2019. The 2023 Convertible Notes will mature on August 15, 2023, unless earlier converted or repurchased. Upon conversion, the 2023 Convertible Notes may be settled, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock.
Each $1,000 principal amount of the 2023 Convertible Notes will be convertible into 9.8643 shares of our common stock, which is equivalent to a conversion price of approximately $101.38 per share of common stock, at maturity, subject to adjustment upon the occurrence of specified events. Prior to the close of business on the business day immediately preceding May 15, 2023, the 2023 Convertible Notes may be converted only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2018 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any
47



five consecutive trading day period (the “Measurement Period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the 2023 Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate in effect on each such trading day; or (3) upon the occurrence of specified corporate events. On or after May 15, 2023, until the close of business on the business day immediately preceding the maturity date of August 15, 2023, holders may convert their 2023 Convertible Notes at any time, regardless of the foregoing circumstances.
We may not redeem the 2023 Convertible Notes prior to the maturity date.
If we undergo a fundamental change (as defined in the Indenture), subject to certain conditions, holders may require us to repurchase for cash all or part of their 2023 Convertible Notes in principal amounts of $1,000 or a multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the 2023 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, in certain circumstances, we may be required to increase the conversion rate for any 2023 Convertible Notes converted in connection with a make-whole fundamental change (as defined in the Indenture). See Note 1, "Description of Business and Summary of Significant Accounting Policies" and Note 14, "Debt" in Part II, Item 8 and "Risk Factors" in Part I, Item 1A of this Annual Report for a further discussion of the 2023 Convertible Notes.
Cash Flows
For the years ended December 31, 2020, 2019 and 2018 our cash flows from operations exceeded our cash needs for capital expenditures and debt service requirements. We believe that our cash flows from operations, supplemented by short-term borrowings under our Credit Facility, as necessary, will provide adequate cash to fund our long-term cash needs for the next 12 months or longer.
Our conclusion that we will be able to fund our cash requirements for the next 12 months by using existing capital resources and cash generated from operations does not take into account exacerbation of, or additional or prolonged disruptions caused by, the COVID-19 pandemic that could result in a material adverse impact on our business, which are events beyond our control, or the impact of any future acquisitions, unexpected significant changes in number of employees or other unanticipated uses of cash. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if events, including economic disruptions, arising from the COVID-19 pandemic worsen, or if other economic conditions change from those currently prevailing or from those now anticipated, or if other unexpected circumstances arise that may have a material effect on the cash flow or profitability of our business, including material negative changes in the health and welfare of our employees or those of our clients, and the operating performance or financial results of our business. Any of these events or circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified currently available sources and could require us to raise additional debt or equity funding to meet those needs. Our ability to raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:
our future profitability;
the quality of our accounts receivable;
our relative levels of debt and equity;
the volatility and overall condition of the capital markets; and
the market prices of our securities.
Any new debt funding, if available, may be on terms less favorable to us than our Credit Facility or the 2023 Convertible Notes. See “Forward-Looking Statements” under the heading “Risk Factors” in Part I, Item 1A, of this Annual Report.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements and we have not entered into any transactions involving unconsolidated subsidiaries or special purpose entities that would be expected to have a material impact on our financial condition or results of operations.
48



Future Contractual Obligations
The following table sets forth our estimates as to the amounts and timing of our future contractual obligations as of December 31, 2020. The information in the table reflects future unconditional payments and is based on the terms of the relevant agreements, appropriate classification of items under GAAP currently in effect and certain assumptions such as interest rates. Future events could cause actual payments to differ from these amounts.
Future contractual obligations related to our long-term debt assume that payments will be made based on the current payment schedule and that interest payments will be at their stated rates and exclude any additional revolving line of credit borrowings or repayments subsequent to December 31, 2020 and prior to the November 30, 2023 maturity date of our Credit Facility.
Payments Due by Period
Contractual ObligationsTotalLess than 1 Year1-3 Years3-5 YearsMore than 5 Years
 (in thousands)
Long-term debt (1)
$335,225 $6,325 $328,900 $— $— 
Operating leases243,486 49,666 75,489 54,388 63,943 
Total obligations$578,711 $55,991 $404,389 $54,388 $63,943 
(1)Includes principal and interest payments. Projected interest payments may differ in the future based on the balance outstanding on our Credit Facility, as well as changes in market interest rates.
On October 26, 2020, the Company entered into a material lease agreement, amending and restating the lease agreement entered into as of August 19, 2020 (the "Lease") for its new principal office space in New York, New York to consolidate existing office space into fewer locations and in anticipation of future office space needs in view of its current leases, which are scheduled to expire in November 2021. The Company expects to accept possession of the premises on or about April 1, 2021, subject to the satisfaction of certain conditions. The Lease shall continue for an initial fixed term of 15 years, subject to two renewal options of five years each. Fixed rental payments under the Lease are scheduled to commence in April 2022, payable in monthly installments, and will aggregate approximately $145 million, excluding lease-related incentives over the term of the Lease. During the lease term, the Company will be responsible for its percentage share of the leased square footage of the premises of increases in taxes over a base tax year of July 1, 2021-June 30, 2022 and operating expenses over a base operating year of calendar year 2021.
Effect of Inflation
Inflation is not generally a material factor affecting our business. General operating expenses such as salaries, employee benefits and lease costs are, however, subject to normal inflationary pressures.
Critical Accounting Policies
General. Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to revenues, goodwill and intangible assets, income taxes and contingencies, on an ongoing basis. Our estimates are based on current facts and circumstances, historical experience and various other assumptions that we believe are reasonable, which form the basis for making judgments about the values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We believe that the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition. Revenues are recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer and in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate services that we provide to our customers. If, at the outset of an arrangement, we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met.
We generate the majority of our revenues by providing consulting services to our clients. Most of our consulting service contracts are based on one of the following types of contract arrangements:
49



Time and expense arrangements require the client to pay us based on the number of hours worked at contractually agreed-upon rates. We recognize revenues for these contract arrangements based on hours incurred and contracted rates utilizing a right-to-invoice practical expedient because we have a right to consideration for services completed to date. When a time and expense arrangement has a not-to-exceed or "cap" amount and we expect to perform work in excess of the cap, we recognize revenues up to the cap amount specified by the client, or based on the efforts or hours incurred as a percentage of total efforts or hours expected to be incurred (i.e., "proportional performance method").
Fixed-fee arrangements require the client to pay a fixed fee in exchange for a predetermined set of professional services. We recognize revenues earned to date by applying the proportional performance method. Generally, these arrangements have one performance obligation.
Performance-based or contingent arrangements represent forms of variable consideration. In these arrangements, our fees are based on the attainment of contractually defined objectives with our client, such as completing a business transaction or assisting the client in achieving a specific business objective. We recognize revenues earned to date in an amount that is probable not to reverse and by applying the proportional performance method when the criteria for over time revenue recognition are met.
Certain fees in our time and materials arrangements may be subject to approval by a third party, such as a bankruptcy court or other regulatory agency. In such cases, we record revenues based on the amount we estimate we will be entitled to in exchange for our services and only to the extent a significant reversal of revenue is not likely to occur when the uncertainty associated with the estimate is subsequently resolved. Potential fee reductions imposed by bankruptcy courts and other regulatory agencies or negotiated with specific clients are estimated on a specific identification basis. Our estimates may vary depending on the nature of the engagement, client economics, historical experience and other appropriate factors. When there are changes in our estimates of potential fee reductions, we record such changes to revenues with a corresponding offset to our billed and unbilled accounts receivable.
In our Technology segment we generate unit-based revenues that are recognized at agreed-upon per unit rates for the amount of data stored or processed, the number of concurrent users accessing the information, or the number of pages or images processed for a client.
Reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs, are generally included in revenues, and an equivalent amount of reimbursable expenses is included in costs of services in the period in which the expense is incurred.
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 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.
Goodwill and Intangible Assets. Goodwill represents the purchase price of acquired businesses in excess of the fair market value of net assets acquired at the date of acquisition. Intangible assets may include customer relationships, trademarks and acquired software.
We test our goodwill and indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. On a quarterly basis, we monitor the key drivers of fair value to detect events or other changes that would warrant an interim impairment test. Important factors we consider that could trigger an interim impairment review include, but are not limited to, the following:
significant underperformance relative to expected historical or projected future operating results;
a significant change in the manner of our use of the acquired asset or the strategy for our overall business;
a significant market decline related to negative industry or economic trends; and/or
our market capitalization relative to net carrying value.
50



We assess our goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or a business one level below that operating segment if discrete financial information is available and regularly reviewed by the chief operating decision makers.
Our annual goodwill impairment test may be conducted using a qualitative assessment or a quantitative assessment. Under GAAP, we have an unconditional option to bypass the qualitative assessment and perform a quantitative impairment test. We determine whether to perform a qualitative assessment first or to bypass the qualitative assessment and proceed with the quantitative goodwill impairment test for each of our reporting units based on the excess of fair value over carrying value from the most recent quantitative tests and other events or changes in circumstances that could impact the fair value of the reporting units.
In the qualitative assessment, we consider various factors, events or circumstances, including macroeconomic conditions, industry and market considerations, cost factors, overall financial performance and other relevant reporting unit specific events. If, based on the qualitative assessment, we determine that it is not “more likely than not” that the fair value of a reporting unit is less than its carrying value, we do not prepare a quantitative impairment test. If we determine otherwise, we will prepare a quantitative assessment for potential goodwill impairment.
In the quantitative assessment, we compare the estimated fair value of the reporting unit with the carrying amount of that reporting unit. We estimate fair value using a combination of an income approach (based on discounted cash flows) and market approaches, using appropriate weighting factors. If the fair value exceeds the carrying amount, goodwill is not impaired. However, if the carrying value exceeds the fair value of the reporting unit, an impairment loss shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
The cash flows employed in the income approach are based on our most recent forecasts, budgets and business plans, as well as various growth rate assumptions for years beyond the current business plan period, discounted using an estimated weighted average cost of capital (“WACC”), which reflects an assessment of the risk inherent in the future revenue streams and cash flows. The WACC consists of (1) a risk-free rate of return, (2) an equity risk premium that is based on the historical rate of return for equity securities of publicly traded companies, (3) the current after-tax market rate of return on debt of companies with business characteristics similar to our reporting units and (4) a company-specific risk premium. We weight the cost of equity and debt by the relative market value percentages of our equity and debt. In the market approach, we utilize market multiples derived from comparable guideline companies and comparable market transactions to the extent available. These valuations are based on estimates and assumptions, including projected future cash flows, determination of appropriate comparable guideline companies and the determination of whether a premium or discount should be applied to such comparable guideline companies.
The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment and estimates. There can be no assurance that the estimates and assumptions used in our goodwill impairment testing will prove to be accurate predictions of the future. If our assumptions regarding forecasted cash flows are not achieved or market conditions significantly deteriorate, we may be required to record goodwill impairment charges in future periods, whether in connection with our next annual impairment test or prior to that, if a triggering event occurs outside of the quarter during which the annual goodwill impairment test is performed. It is not possible at this time to determine if any future impairment charge would result or, if it does, whether such charge would be material.
Intangible assets with finite lives are amortized over their estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans or changes in anticipated future cash flows. If an impairment indicator is present, we evaluate recoverability of assets to be held and used by a comparison of the carrying value of the assets with future undiscounted net cash flows expected to be generated by the assets. We group assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows generated by other asset groups. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset group, we estimate the fair value of the asset group to determine whether an impairment loss should be recognized.
Significant New Accounting Pronouncements
See Note 2, “New Accounting Standards” in Part II, Item 8 of this Annual Report.
51




ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates, changes in the price of our common stock and changes in foreign exchange rates.
Interest Rate Risk and Market Risk
We are exposed to interest rate risk related to debt obligations outstanding. Interest rate changes expose our fixed rate long-term borrowings to changes in fair value and expose our variable rate borrowings to changes in our interest expense. As of December 31, 2020, there were no variable rate debt instruments outstanding as there were no outstanding borrowings under our Credit Facility. Future interest rate risk may be affected by revolving line of credit borrowings subsequent to December 31, 2020 and prior to the November 30, 2023 maturity date of our Credit Facility.
From time to time, we may use derivative instruments to manage our interest rate risk and market risk exposure. All of our derivative transactions are entered into for non-trading purposes.
The following table presents principal cash flows and related interest rates by year of maturity for our 2023 Convertible Notes and the fair value of the debt as of December 31, 2020 and 2019. Our stock price affects the fair value of our 2023 Convertible Notes, which is determined based on the last actively traded prices in an over-the-counter market for our 2023 Convertible Notes. The last actively traded prices for our 2023 Convertible Notes per $1,000 principal amount were $1,255.28 and $1,258.55 as of December 31, 2020 and 2019, respectively.
      December 31, 2020December 31, 2019
2021202220232024ThereafterTotalFair
Value
TotalFair
Value
Long-Term Debt(dollars in thousands)
Fixed rate$— $— $316,250$— $— $316,250$396,982 $316,250$398,016 
Average interest rate— — 5.4 %— — 5.4 %— 5.4 %— 
Foreign Currency Exchange Rate Risk
Exchange Rate Risk
Our FX exposure primarily relates to intercompany receivables and payables and third-party receivables and payables that are denominated in currencies other than the functional currency of our legal entities. Our largest FX exposure is unsettled intercompany payables and receivables, which are reviewed on a regular basis. In cases where settlement of intercompany balances is not practical, we may use cash to create offsetting currency positions to reduce exposure. Gains and losses from FX transactions are included in interest income and other on our Consolidated Statements of Comprehensive Income. See Note 8, “Interest Income and Other” in Part II, Item 8 of this Annual Report for information.
52



Translation of Financial Results
Most of our foreign subsidiaries operate in a currency other than USD; therefore, increases or decreases in the value of USD against other major currencies will affect our operating results and the value of our balance sheet items denominated in foreign currencies. Our most significant exposures to translation risk relate to functional currency assets and liabilities that are denominated in the British pound, euro, Australian dollar and Canadian dollar. The following table details the unrealized changes in the net investments of foreign subsidiaries whose currencies are denominated in currencies other than USD for the years ended December 31, 2020, 2019 and 2018. These translation adjustments are reflected in “Other comprehensive income (loss)” on our Consolidated Statements of Comprehensive Income.
 Year Ended December 31,
Changes in Net Investment of Foreign Subsidiaries202020192018