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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to                    
Commission File Number: 001-14875
 
FTI CONSULTING, INC.
(Exact Name of Registrant as Specified in its Charter)
 
  
Maryland52-1261113
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
555 12th Street NW
Washington,
DC20004
(Address of Principal Executive Offices)(Zip Code)
(202) 312-9100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par valueFCNNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
ClassOutstanding at April 22, 2021
Common Stock, $0.01 par value34,221,273



FTI CONSULTING, INC. AND SUBSIDIARIES
INDEX
 
  
Page 
   
  
 
  
 
  
 
  
 
  
 
  
  
  
 
  
  
  
  
  
  
  
 
2


PART I—FINANCIAL INFORMATION
FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
Item 1.Financial Statements
 
 March 31,December 31,
 20212020
(Unaudited)
Assets 
Current assets  
Cash and cash equivalents$233,421 $294,953 
 Accounts receivable, net798,516 711,357 
Current portion of notes receivable35,540 35,253 
Prepaid expenses and other current assets83,672 88,144 
Total current assets1,151,149 1,129,707 
Property and equipment, net100,686 101,642 
Operating lease assets148,322 156,645 
Goodwill1,233,292 1,234,879 
Intangible assets, net38,172 41,550 
Notes receivable, net59,049 61,121 
Other assets47,530 51,819 
Total assets$2,778,200 $2,777,363 
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable, accrued expenses and other$167,818 $170,066 
Accrued compensation285,528 455,933 
Billings in excess of services provided42,432 44,172 
Total current liabilities495,778 670,171 
Long-term debt, net458,840 286,131 
Noncurrent operating lease liabilities153,376 161,677 
Deferred income taxes157,861 158,342 
Other liabilities95,995 100,861 
Total liabilities1,361,850 1,377,182 
Commitments and contingencies (Note 10)
Stockholders' equity
Preferred stock, $0.01 par value; shares authorized — 5,000; none
outstanding
  
Common stock, $0.01 par value; shares authorized — 75,000; shares
issued and outstanding — 34,228 (2021) and 34,481 (2020)
342 345 
Additional paid-in capital  
Retained earnings1,527,685 1,506,271 
Accumulated other comprehensive loss(111,677)(106,435)
Total stockholders' equity1,416,350 1,400,181 
Total liabilities and stockholders' equity$2,778,200 $2,777,363 
 
See accompanying notes to condensed consolidated financial statements
3


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in thousands, except per share data)
(Unaudited)
 
 Three Months Ended March 31,
 20212020
Revenues$686,277 $604,593 
Operating expenses
Direct cost of revenues468,424 402,247 
Selling, general and administrative expenses126,546 126,959 
Amortization of intangible assets2,801 2,331 
 597,771 531,537 
Operating income88,506 73,056 
Other income (expense)  
Interest income and other1,034 5,017 
Interest expense(4,797)(4,861)
 (3,763)156 
Income before income tax provision84,743 73,212 
Income tax provision20,247 16,465 
Net income$64,496 $56,747 
Earnings per common share — basic$1.93 $1.56 
Earnings per common share — diluted$1.84 $1.49 
Other comprehensive loss, net of tax
Foreign currency translation adjustments, net of tax expense of $0
$(5,242)$(31,102)
Total other comprehensive loss, net of tax(5,242)(31,102)
Comprehensive income$59,254 $25,645 
 
See accompanying notes to condensed consolidated financial statements
4


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
 
Accumulated
Other
Comprehensive
Loss
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
 
 SharesAmountTotal
Balance at December 31, 202034,481 $345 $ $1,506,271 $(106,435)$1,400,181 
Net income— $— $— $64,496 $— $64,496 
Other comprehensive loss:
Cumulative translation adjustment— — — — (5,242)(5,242)
Issuance of common stock in connection with:
Exercise of options12 — 434 — — 434 
           Restricted share grants, less net
             settled shares of 63
157 1 (7,232)— — (7,231)
           Stock units issued under incentive
             compensation plan
— — 2,603 — — 2,603 
Purchase and retirement of common stock(422)(4)(3,047)(43,082)— (46,133)
Share-based compensation— — 7,242 — — 7,242 
Balance at March 31, 202134,228 $342 $ $1,527,685 $(111,677)$1,416,350 
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
 Common StockRetained
Earnings
 
 SharesAmountTotal
Balance at December 31, 201937,390 $374 $216,162 $1,413,453 $(140,847)$1,489,142 
Net income— $— $— $56,747 $— $56,747 
Other comprehensive loss:
Cumulative translation adjustment— — — — (31,102)(31,102)
Issuance of common stock in connection with:
Exercise of options34 1 1,206 — — 1,207 
 Restricted share grants, less net
   settled shares of 58
136 1 (6,768)— — (6,767)
 Stock units issued under incentive
  compensation plan
— — 2,314 — — 2,314 
Purchase and retirement of common stock(450)(5)(50,306)— — (50,311)
Share-based compensation— — 7,454 — — 7,454 
Balance at March 31, 202037,110 $371 $170,062 $1,470,200 $(171,949)$1,468,684 

See accompanying notes to condensed consolidated financial statements
5


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
 Three Months Ended March 31,
20212020
Operating activities
Net income$64,496 $56,747 
Adjustments to reconcile net income to net cash used in operating activities:  
Depreciation and amortization8,161 7,823 
Amortization and impairment of intangible assets2,801 2,331 
Acquisition-related contingent consideration1,289 506 
Provision for expected credit losses4,832 3,872 
Share-based compensation7,242 7,454 
Amortization of debt discount and issuance costs and other2,815 2,978 
Deferred income taxes3,612 545 
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, billed and unbilled(93,396)(60,963)
Notes receivable1,899 7,051 
Prepaid expenses and other assets1,900 9,442 
Accounts payable, accrued expenses and other(7,803)11,136 
Income taxes9,355 (667)
Accrued compensation(172,042)(176,070)
Billings in excess of services provided(1,745)4,253 
Net cash used in operating activities(166,584)(123,562)
Investing activities  
Purchases of property and equipment and other(7,976)(8,228)
Net cash used in investing activities(7,976)(8,228)
Financing activities  
Borrowings under revolving line of credit197,500 55,000 
Repayments under revolving line of credit(27,500)(5,000)
Purchase and retirement of common stock(46,133)(49,135)
Share-based compensation tax withholdings and other (6,798)(5,583)
Payments for business acquisition liabilities(3,374) 
Deposits and other2,721 3,870 
Net cash provided by (used in) financing activities116,416 (848)
Effect of exchange rate changes on cash and cash equivalents(3,388)(13,672)
Net decrease in cash and cash equivalents(61,532)(146,310)
Cash and cash equivalents, beginning of period294,953 369,373 
Cash and cash equivalents, end of period$233,421 $223,063 
Supplemental cash flow disclosures
Cash paid for interest$3,854 $3,136 
Cash paid for income taxes, net of refunds$7,283 $16,588 
Non-cash investing and financing activities:
Issuance of stock units under incentive compensation plans$2,603 $2,314 
 
See accompanying notes to condensed consolidated financial statements
6


FTI Consulting, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(dollar and share amounts in tables in thousands, except per share data)
(Unaudited)
 
1. Basis of Presentation and Significant Accounting Policies
The unaudited condensed consolidated financial statements of FTI Consulting, Inc., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”), presented herein, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and under the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Some of the information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. Certain prior period amounts have been reclassified to conform to the current period presentation. In management’s opinion, the interim financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods presented. All adjustments made were normal recurring accruals. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC. 
2. New Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2021, although early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.
3. Earnings per Common Share
Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under our equity compensation plans, including stock options and restricted shares (restricted share awards, restricted stock units and performance stock units), each using the treasury stock method.
Because we expect to settle the principal amount of the outstanding 2.0% convertible senior notes due 2023 ("2023 Convertible Notes") in cash, we use the treasury stock method for calculating the potential dilutive effect of the conversion feature on earnings per common share, if applicable. The conversion feature had a dilutive impact on earnings per common share for the three months ended March 31, 2021 and 2020, as the average market price per share of our common stock for the periods exceeded the conversion price of $101.38 per share. See Note 8, "Debt" for additional information about the 2023 Convertible Notes.
7


 Three Months Ended March 31,
 20212020
Numerator — basic and diluted  
Net income$64,496 $56,747 
Denominator
Weighted average number of common shares outstanding — basic
33,483 36,415 
Effect of dilutive restricted shares760 881 
Effect of dilutive stock options370 461 
Effect of dilutive convertible notes450 433 
Weighted average number of common shares outstanding — diluted
35,063 38,190 
Earnings per common share — basic$1.93 $1.56 
Earnings per common share — diluted$1.84 $1.49 
Antidilutive stock options and restricted shares8 12 
4. Revenues
We generate the majority of our revenues by providing consulting services to our clients. Most of our consulting service contracts are based on one of the following types of contract arrangements:
Time and expense arrangements require the client to pay us based on the number of hours worked at contractually agreed-upon rates. We recognize revenues for these contract arrangements based on hours incurred and contracted rates utilizing a right-to-invoice practical expedient because we have a right to consideration for services completed to date. When a time and expense arrangement has a not-to-exceed or "cap" amount and we expect to perform work in excess of the cap, we recognize revenues up to the cap amount specified by the client, based on the efforts or hours incurred as a percentage of total efforts or hours expected to be incurred (i.e., proportional performance method).
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 and 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.
Revenues recognized during the current period may include revenues from performance obligations satisfied or partially satisfied in previous periods. This primarily occurs when the estimated transaction price has changed based on our current probability assessment over whether the agreed-upon outcome for our performance-based and contingent arrangements will be achieved. The aggregate amount of revenues recognized related to a change in the transaction price in the current period, which related to performance obligations satisfied or partially satisfied in a prior period, was $3.9 million and $8.3 million for the three months ended March 31, 2021 and 2020, respectively.
Unfulfilled performance obligations primarily consist of fees not yet recognized on certain fixed-fee arrangements and performance-based and contingent arrangements. As of March 31, 2021 and December 31, 2020, the aggregate amount of the remaining contract transaction price allocated to unfulfilled performance obligations was $7.9 million and $8.5 million, respectively. We expect to recognize the majority of the related revenues over the next 24 months. We elected to utilize the optional exemption to exclude from this disclosure fixed-fee and performance-based and contingent arrangements with an
8


original expected duration of one year or less and to exclude our time and expense arrangements for which revenues are recognized using the right-to-invoice practical expedient.
Contract assets are defined as assets for which we have recorded revenue but are not yet entitled to receive our fees because certain events, such as completion of the measurement period or client approval, must occur. The contract asset balance was $1.8 million as of March 31, 2021 and $2.6 million as of December 31, 2020.
Contract liabilities are defined as liabilities incurred when we have received consideration but have not yet performed the agreed-upon services. This may occur when clients pay fees before work begins. The contract liability balance was $1.0 million as of March 31, 2021 and immaterial as of December 31, 2020.
5. Accounts Receivable and Allowance for Expected Credit Losses
The following table summarizes the components of "Accounts receivable, net" as presented on the Condensed Consolidated Balance Sheets:
March 31, 2021December 31, 2020
Accounts receivable:
Billed receivables$542,247 $513,459 
Unbilled receivables294,194 236,285 
Allowance for expected credit losses(37,925)(38,387)
Accounts receivable, net$798,516 $711,357 
We maintain an allowance for expected credit losses, which represents the estimated aggregate amount of credit risk arising from the inability or unwillingness of specific clients to pay our fees or disputes that may affect our ability to fully collect our billed accounts receivable. We record our estimate of lifetime expected credit losses concurrently with the initial recognition of the underlying receivable. Accounts receivable, net of the allowance for expected credit losses, represents the amount we expect to collect. At each reporting date, we adjust the allowance for expected credit losses to reflect our current estimate.
The following table summarizes the total provision for expected credit losses and write-offs:
 Three Months Ended March 31,
20212020
Provision for expected credit losses (1)
$4,832 $3,872 
Write-offs$6,916 $6,066 
(1)    Adjustments to the allowance for expected credit losses are recorded to selling, general & administrative ("SG&A") expenses on the Condensed Consolidated Statements of Comprehensive Income.
We estimate the current-period provision for expected credit losses on a specific identification basis. Our judgments regarding a specific client’s credit risk considers factors such as the counterparty’s creditworthiness, knowledge of the specific client’s circumstances and historical collection experience for similar clients. Other factors include, but are not limited to, current economic conditions and forward-looking estimates. Our actual experience may vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional provisions for expected credit losses in future periods. The risk of credit losses may be mitigated to the extent that we received a retainer from some of our clients prior to performing services. Our provision for expected credit losses includes recoveries, direct write-offs and charges to other accounts. Billed accounts receivables are written off when the potential for recovery is considered remote.
9


6. Goodwill and Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill by reportable segment:
Corporate
Finance &
  Restructuring (1)
Forensic and Litigation Consulting (1)
Economic
Consulting (1)
Technology (1)
Strategic
Communications (2)
Total
Balance as of December 31, 2020$506,072 $233,374 $269,087 $96,821 $129,525 $1,234,879 
Foreign currency translation
  adjustment and other
(1,853)(192)(38)19 477 (1,587)
Balance as of March 31, 2021$504,219 $233,182 $269,049 $96,840 $130,002 $1,233,292 
(1)    There were no accumulated impairment losses for the Corporate Finance & Restructuring ("Corporate Finance"), Forensic and Litigation Consulting ("FLC"), Economic Consulting or Technology segments as of March 31, 2021 and December 31, 2020, respectively.
(2)    Amounts for our Strategic Communications segment include gross carrying values of $324.1 million and $323.7 million as of March 31, 2021 and December 31, 2020, respectively, and accumulated impairment losses of $194.1 million as of March 31, 2021 and December 31, 2020.
The purchase price allocation for the 2020 acquisition assigned to the Corporate Finance segment is preliminary.
Intangible Assets
Intangible assets were as follows:
 March 31, 2021December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizing intangible assets      
Customer relationships$111,426 $87,356 $24,070 $111,556 $85,180 $26,376 
Trademarks11,329 3,212 8,117 11,809 2,768 9,041 
Acquired software and other 3,458 2,573 885 3,618 2,585 1,033 
126,213 93,141 33,072 126,983 90,533 36,450 
Non-amortizing intangible assets
Trademarks 5,100 — 5,100 5,100 — 5,100 
Total$131,313 $93,141 $38,172 $132,083 $90,533 $41,550 
Intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of $2.8 million and $2.3 million for the three months ended March 31, 2021 and 2020, respectively.
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We estimate our future amortization expense for our intangible assets with finite lives to be as follows:
Year
As of
March 31, 2021 (1)
2021 (remaining)$7,801 
20228,536 
20234,850 
20243,414 
20252,729 
Thereafter5,742 
 $33,072 
(1)Actual amortization expense to be reported in future periods could differ from these estimates because of new intangible asset acquisitions, impairments, changes in useful lives, or other relevant factors or changes.
7. Financial Instruments
The table below presents the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of March 31, 2021 and December 31, 2020:
March 31, 2021
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities
Acquisition-related contingent consideration, including
current portion (1)
$19,795 $ $ $19,795 
2023 Convertible Notes (2)
288,840  463,237  
Total$308,635 $ $463,237 $19,795 
December 31, 2020
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities   
Acquisition-related contingent consideration, including
current portion (1)
$20,118 $ $ $20,118 
2023 Convertible Notes (2)
286,131  396,982  
Total$306,249 $ $396,982 $20,118 
(1)The short-term portion is included in “Accounts payable, accrued expenses and other” and the long-term portion is included in “Other liabilities” on the Condensed Consolidated Balance Sheets.
(2)The carrying values include unamortized deferred debt issue costs and debt discount.
The fair values of financial instruments not included in the tables above are estimated to be equal to their carrying values as of March 31, 2021 and December 31, 2020.
We estimate the fair value of our 2023 Convertible Notes based on their last actively traded prices. The fair value of our 2023 Convertible Notes is classified within Level 2 of the fair value hierarchy because it is traded in less active markets.
We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted discounted cash flow model or a Monte Carlo simulation. These fair value estimates represent Level 3 measurements as they are based on significant inputs not observed in the market and reflect our own assumptions. Significant increases (or decreases) in these
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unobservable inputs in isolation would result in significantly lower (or higher) fair values. We reassess the fair value of our acquisition-related contingent consideration at each reporting period based on additional information as it becomes available.
The table below presents the change in our liability for acquisition-related contingent consideration for our Level 3 financial instruments:
Contingent Consideration
Balance at December 31, 2020$20,118 
Accretion expense (1)
1,289 
Payments(1,000)
Foreign currency translation adjustment (2)
(612)
Balance at March 31, 2021$19,795 
Contingent Consideration
Balance at December 31, 2019$14,826 
Accretion expense (1)
506 
Foreign currency translation adjustment (2)
(148)
Balance at March 31, 2020$15,184 
(1)Accretion expense is included in SG&A expenses on the Condensed Consolidated Statements of Comprehensive Income.
(2)Foreign currency translation adjustments are included in "Other comprehensive loss, net of tax" on the Condensed Consolidated Statements of Comprehensive Income.
8. Debt
The table below presents the components of the Company’s debt: 
March 31, 2021December 31, 2020
2023 Convertible Notes$316,250 $316,250 
Credit Facility170,000  
Total debt486,250 316,250 
Less: deferred debt discount(23,962)(26,310)
Less: deferred debt issue costs(3,448)(3,809)
Long-term debt, net (1)
$458,840 $286,131 
Additional paid-in capital$35,306 $35,306 
Discount attribution to equity(1,175)(1,175)
Equity component, net$34,131 $34,131 
(1)There were no current portions of long-term debt as of March 31, 2021 and December 31, 2020.
2023 Convertible Notes
On August 20, 2018, we issued the 2023 Convertible Notes in an aggregate principal amount of $316.3 million. The 2023 Convertible Notes bear interest at a fixed rate of 2.0% per year, payable semiannually in arrears on February 15th and August 15th of each year and will mature on August 15, 2023, unless earlier converted or repurchased. The 2023 Convertible Notes are senior unsecured obligations of the Company.
The 2023 Convertible Notes are convertible at maturity at a conversion rate of 9.8643 shares of our common stock per $1,000 principal amount of the 2023 Convertible Notes (equivalent to a conversion price of approximately $101.38 per share of common stock). Subject to the conditions set forth in the indenture governing the 2023 Convertible Notes, holders may convert their 2023 Convertible Notes at any time prior to the close of business on the business day immediately preceding May 15, 2023. The circumstances required to allow the holders to convert their 2023 Convertible Notes prior to maturity were not met as of March 31, 2021.
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The excess of the principal amount of the liability over its carrying amount ("debt discount") is amortized to interest expense over the term of the 2023 Convertible Notes using the effective interest rate method.
We incurred debt issue costs and allocated the total amount to the liability and equity components of the 2023 Convertible Notes based on their relative values. The debt issue costs attributable to the liability component are amortized to interest expense over the term of the 2023 Convertible Notes using the effective interest rate method. Issuance costs attributable to the equity component were netted with the equity component in stockholders' equity.
The table below summarizes the amount of interest cost recognized by us for both the contractual interest expense and amortization of the debt discount for the 2023 Convertible Notes:
 Three Months Ended March 31,
 20212020
Contractual interest expense$1,581 $1,581 
Amortization of debt discount (1)
2,348 2,225 
Total $3,929 $3,806 
(1)The effective interest rate of the liability component is 5.45%.
Credit Facility
On June 26, 2015, we entered into a credit agreement, which provides for a $550.0 million senior secured bank revolving credit facility (“Original Credit Facility”) maturing on June 26, 2020. In November 2018, we amended and restated the credit agreement to the Original Credit Facility, to, among other things, extend the maturity to November 30, 2023 and incurred an additional $1.7 million of debt issuance costs (the Original Credit Facility as amended and restated, the “Credit Facility”).
The Company classified the borrowings under the Company’s Credit Facility as long-term debt in the accompanying Condensed Consolidated Balance Sheets, as amounts due under the Credit Facility are not contractually required or expected to be liquidated for more than one year from the applicable balance sheet date. As of March 31, 2021, $1.1 million of the borrowing limit under the Credit Facility was utilized (and, therefore, unavailable) for letters of credit.
There were $1.2 million and $1.3 million of unamortized debt issue costs related to the Credit Facility as of March 31, 2021 and December 31, 2020, respectively. These amounts are included in “Other assets” on our Condensed Consolidated Balance Sheets.
9. Leases
We lease office space and equipment under non-cancelable operating leases. We recognize operating lease expense on a straight-line basis over the lease term, which may include renewal or termination options that are reasonably certain of exercise. Leases with an initial term of 12 months or less are not recorded on the balance sheet and are expensed on a straight-line basis. Most leases include one or more options to renew, with renewal terms that can extend the lease term from six months to seven years. The exercise of lease renewal options is at our sole discretion. Certain of our lease agreements include rental payments that are adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The table below summarizes the carrying amount of our operating lease assets and liabilities:
LeasesClassificationMarch 31, 2021December 31, 2020
Assets
  Operating lease assetsOperating lease assets$148,322 $156,645 
Total lease assets$148,322 $156,645 
Liabilities
Current
  Operating lease liabilities
Accounts payable, accrued expenses and other$38,494 $42,716 
Noncurrent
  Operating lease liabilitiesNoncurrent operating lease liabilities153,376 161,677 
Total lease liabilities$191,870 $204,393 
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The table below summarizes total lease costs:
Three Months Ended March 31,
Lease Cost20212020
Operating lease costs$12,082 $11,900 
Short-term lease costs489 522 
Variable lease costs3,463 2,987 
Sublease income(1,048)(1,090)
Total lease cost, net$14,986 $14,319 
We sublease certain of our leased office spaces to third parties. Our sublease portfolio consists of leases of office space that we have vacated before the lease term expiration. Operating lease expense on vacated office space is reduced by sublease rental income, which is recorded to SG&A expenses on the Condensed Consolidated Statements of Comprehensive Income. Our sublease arrangements do not contain renewal options or restrictive covenants. We estimate future sublease rental income to be $3.4 million in the remainder of 2021, $0.8 million in 2022, $0.6 million in 2023, $0.6 million in 2024 and $0.3 million in 2025. There is no future sublease rental income estimated for the years beyond 2025.
The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases and includes a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheets:
 As of
March 31, 2021
2021 (remaining)$34,460 
202241,041 
202334,700 
202429,684 
202524,681 
Thereafter63,809 
   Total future lease payments228,375 
   Less: imputed interest(36,505)
Total$191,870 

The table below includes cash paid for our operating lease liabilities, other non-cash information, our weighted average remaining lease term and weighted average discount rate:
Three Months Ended March 31,
 20212020
Cash paid for amounts included in the measurement of operating lease liabilities$15,345$13,431
Operating lease assets obtained in exchange for lease liabilities$680$1,455
Weighted average remaining lease term (years)
   Operating leases6.16.5
Weighted average discount rate
   Operating leases
5.4 %5.6 %
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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. The Company accepted possession of the premises on April 1, 2021. 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. The Lease is not included in operating lease assets and operating lease liabilities on the Condensed Consolidated Balance Sheets as of March 31, 2021 as the Company did not yet have the right to use the premises.
10. Commitments and Contingencies
The Company entered into a material lease agreement for its new principal office space in New York, New York during the year ended December 31, 2020. See Note 9, "Leases" for additional information about the terms of the Lease.
We are subject to legal actions arising in the ordinary course of business. In management’s opinion, we believe we have adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions. We do not believe any settlement or judgment relating to any pending legal action would materially affect our financial position or results of operations.
11. Share-Based Compensation
During the three months ended March 31, 2021, we granted 56,083 restricted share awards, 26,356 restricted stock units and 103,220 performance stock units under the FTI Consulting, Inc. 2017 Omnibus Incentive Compensation Plan, our employee equity compensation plan. Our performance stock units are presented at the maximum potential payout percentage of 150% of target shares granted. These awards are recorded as equity on the Condensed Consolidated Balance Sheets. During the three months ended March 31, 2021, 5,711 shares of restricted stock and no stock options were forfeited prior to the completion of the applicable vesting requirements. Additionally, 15,400 performance stock units were forfeited during the three months ended March 31, 2021 as the award targets were not achieved.
Total share-based compensation expense, net of forfeitures is detailed in the following table:
 Three Months Ended March 31,
Income Statement Classification20212020
Direct cost of revenues$5,065 $5,723 
Selling, general and administrative expenses4,523 3,211 
Total share-based compensation expense$9,588 $8,934 
12. Stockholders’ Equity
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. As of March 31, 2021, we have $167.1 million available under the Repurchase Program to repurchase additional shares.
The following table details our stock repurchases under the Repurchase Program:
 Three Months Ended March 31,
 20212020
Shares of common stock repurchased and retired422 450 
Average price paid per share$109.37 $111.73 
Total cost$46,124 $50,301 
As we repurchase our common shares, we reduce stated capital on our Condensed Consolidated Balance Sheets for the $0.01 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction to additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings. During the three months ended March 31, 2021, due to the volume of repurchases, we
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recorded a reduction to stated capital for the par value of the shares repurchased, with a portion of the excess purchase price over par value recorded as a reduction to additional paid-in capital of $3.0 million, which reduced additional paid-in capital to zero, and the remainder of the excess purchase price over par value of $43.1 million recorded as a reduction of retained earnings.
Common stock outstanding was 34.2 million shares and 34.5 million shares as of March 31, 2021 and December 31, 2020, respectively. Common stock outstanding includes unvested restricted stock awards, which are considered issued and outstanding under the terms of the restricted stock award agreements.
13. Segment Reporting
We manage our business in five reportable segments: Corporate Finance, FLC, Economic Consulting, Technology and Strategic Communications.
Our 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 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 to help clients secure, govern, analyze and understand their data in the context of compliance and risk.
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 evaluate the performance of our operating segments based on Adjusted Segment EBITDA, a GAAP financial measure. 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 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 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.
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The table below presents revenues and Adjusted Segment EBITDA for our reportable segments:
 Three Months Ended March 31,
 20212020
Revenues  
Corporate Finance$226,203 $207,749 
FLC150,821 147,597 
Economic Consulting169,273 132,138 
Technology79,459 58,723 
Strategic Communications60,521 58,386 
Total revenues$686,277 $604,593 
Adjusted Segment EBITDA  
Corporate Finance$37,439 $48,946 
FLC29,432 21,208 
Economic Consulting26,579 12,710 
Technology21,598 14,484 
Strategic Communications10,398 8,776 
Total Adjusted Segment EBITDA$125,446 $106,124 
The table below reconciles net income to Total Adjusted Segment EBITDA:
 Three Months Ended March 31,
 20212020
Net income$64,496 $56,747 
Add back:  
Income tax provision20,247 16,465 
Interest income and other(1,034)(5,017)
Interest expense4,797 4,861 
Unallocated corporate expenses26,710 23,591 
Segment depreciation expense7,430 7,146 
Amortization of intangible assets2,800 2,331 
Total Adjusted Segment EBITDA$125,446 $106,124 
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Item 2.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 the three months ended March 31, 2021 and 2020 and significant factors that could affect our prospective financial condition and results of operations. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the United States ("U.S.") Securities and Exchange Commission (“SEC”). In addition to historical information, the following discussion includes forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations and intentions. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements.
BUSINESS OVERVIEW
FTI Consulting, Inc. ("FTI Consulting," "we," "us" or the "Company") 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 to help clients secure, govern, analyze and understand their data in the context of compliance and risk.
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
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expense or fixed-fee arrangement. Success fee revenues may cause variations in our revenues and operating results due to the 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 another 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 13, “Segment Reporting” in Part I, Item 1, of this Quarterly Report on Form 10-Q, 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.
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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 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 EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues.
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 used in 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 Condensed Consolidated Statements of Comprehensive Income and Condensed 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.
EXECUTIVE HIGHLIGHTS
 Three Months Ended March 31,
 20212020
 (dollar amounts in thousands, except per share data)
Revenues$686,277 $604,593 
Net income$64,496 $56,747 
Adjusted EBITDA$99,468 $83,210 
Earnings per common share — diluted$1.84 $1.49 
Adjusted earnings per common share — diluted$1.89 $1.53 
Net cash used in operating activities$(166,584)$(123,562)
Total number of employees6,417 5,743 
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First Quarter 2021 Executive Highlights
Revenues
Revenues for the three months ended March 31, 2021 increased $81.7 million, or 13.5%, to $686.3 million, as compared to the three months ended March 31, 2020, which included a 2.4% estimated positive impact from FX. Acquisition-related revenues contributed $16.0 million compared to the same quarter in the prior year. Excluding the estimated impact from FX and the acquisition-related revenues, revenues increased $51.0 million, or 8.4%, primarily due to increased demand, particularly in our Economic Consulting and Technology segments, which was partially offset by a $17.5 million decrease in pass-through revenues, which includes billable travel and entertainment expenses and media buys, compared to the same quarter in the prior year.
Net income
Net income for the three months ended March 31, 2021 increased $7.7 million, or 13.7%, to $64.5 million, as compared to the three months ended March 31, 2020. The increase in net income was due to an increase in revenues, which was partially offset by higher compensation expenses, primarily related to a 12.3% increase in billable headcount and higher variable compensation expenses, a higher effective tax rate and a decrease in FX remeasurement gains compared to the same quarter in the prior year.
Adjusted EBITDA
Adjusted EBITDA for the three months ended March 31, 2021 increased $16.3 million, or 19.5%, to $99.5 million, as compared to the three months ended March 31, 2020. Adjusted EBITDA Margin of 14.5% for the three months ended March 31, 2021 compared with 13.8% for the three months ended March 31, 2020. The increase in Adjusted EBITDA was due to an increase in revenues, which was partially offset by higher compensation expenses, primarily related to a 12.3% increase in billable headcount and higher variable compensation expenses compared to the same quarter in the prior year.
EPS and Adjusted EPS
EPS for the three months ended March 31, 2021 increased $0.35 to $1.84 compared to $1.49 for the three months ended March 31, 2020. The increase in EPS was primarily due to the higher operating results described above and a decline in diluted weighted average shares outstanding, which was partially offset by lower FX remeasurement gains.
Adjusted EPS increased $0.36 to $1.89 for the three months ended March 31, 2021 compared to $1.53 for the three months ended March 31, 2020. 2021 Adjusted EPS excludes $2.3 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 $0.05. 2020 Adjusted EPS excluded $2.2 million of non-cash interest expense related to the 2023 Convertible Notes, which increased Adjusted EPS by $0.04.
Liquidity and Capital Allocation
Net cash used in operating activities for the three months ended March 31, 2021 increased $43.0 million to $166.6 million compared with $123.6 million for the three months ended March 31, 2020. The increase in net cash used in operating activities was primarily due to an increase in salaries related to headcount growth and higher annual bonus payments, which was partially offset by increased cash collections resulting from higher revenues compared to the same quarter in the prior year. Days sales outstanding (“DSO”) of 97 days at March 31, 2021 compared to 104 days at March 31, 2020. The decrease in DSO was primarily due to an increase in cash collections.
Free Cash Flow was an outflow of $174.6 million and $131.8 million for the three months ended March 31, 2021 and 2020, respectively. The increase for the three months ended March 31, 2021 was primarily due to higher net cash used in operating activities, as described above.
Other strategic activities
During the three months ended March 31, 2021, we entered into a definitive agreement to acquire certain assets of The Rhodes Group, a leading construction consulting firm with offices in Pittsburgh, Pennsylvania and Houston, Texas. The acquisition is expected to close during the second quarter of 2021.
Coronavirus Disease 2019 ("COVID-19") Pandemic
The COVID-19 pandemic has created global volatility, economic uncertainty and general market disruption, and it has impacted each of our segments, practices and regions differently. During the three months ended March 31, 2021, the
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COVID-19 pandemic continued to impact our ability to deliver certain services as a result of social distancing and quarantine measures put in place to control the spread of COVID-19, such as travel restrictions, court closures and government moratoriums on restructuring, which is varied in each region. Evolving business practices as well as fiscal and monetary policies have mitigated the negative economic impact of the pandemic in certain key geographies, such as in North America. The success of vaccination programs around the globe and the extent to which the COVID-19 pandemic will continue to impact our business and the health and welfare of our employees is difficult to predict.
Headcount
Our total headcount increased 1.5% from 6,321 as of December 31, 2020 to 6,417 as of March 31, 2021. The following table includes the net billable headcount additions (reductions) for the three months ended March 31, 2021:
Billable HeadcountCorporate
Finance
FLC Economic ConsultingTechnologyStrategic
Communications
Total
December 31, 20201,655 1,343 891 408 770 5,067 
Additions (reductions), net29 24 (1)15 75 
March 31, 20211,684 1,367 890 423 778 5,142 
Percentage change in headcount from
December 31, 2020
1.8 %1.8 %-0.1 %3.7 %1.0 %1.5 %
CONSOLIDATED RESULTS OF OPERATIONS
Segment and Consolidated Operating Results: 
 Three Months Ended March 31,
 20212020
 (in thousands, except per share data)
Revenues  
Corporate Finance$226,203 $207,749 
FLC150,821 147,597 
Economic Consulting169,273 132,138 
Technology79,459 58,723 
Strategic Communications60,521 58,386 
Total revenues$686,277 $604,593 
Segment operating income  
Corporate Finance$34,299 $46,664