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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 June 30, 2023
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 July 20, 2023
Common Stock, $0.01 par value34,029,357



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
 
 June 30,December 31,
 20232022
(Unaudited)
Assets 
Current assets  
Cash and cash equivalents$203,539 $491,688 
 Accounts receivable, net1,138,061 896,153 
Current portion of notes receivable30,629 27,292 
Prepaid expenses and other current assets108,054 95,469 
Total current assets1,480,283 1,510,602 
Property and equipment, net164,886 153,466 
Operating lease assets206,819 203,764 
Goodwill1,231,769 1,227,593 
Intangible assets, net20,741 25,514 
Notes receivable, net75,273 55,978 
Other assets66,540 64,490 
Total assets$3,246,311 $3,241,407 
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable, accrued expenses and other$172,288 $173,953 
Accrued compensation420,885 541,892 
Billings in excess of services provided51,528 53,646 
Total current liabilities644,701 769,491 
Long-term debt, net340,548 315,172 
Noncurrent operating lease liabilities223,403 221,604 
Deferred income taxes155,754 162,374 
Other liabilities86,753 91,045 
Total liabilities1,451,159 1,559,686 
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 34,034 (2023) and 34,026 (2022)
340 340 
Additional paid-in capital5,473  
Retained earnings1,949,815 1,858,103 
Accumulated other comprehensive loss(160,476)(176,722)
Total stockholders’ equity1,795,152 1,681,721 
Total liabilities and stockholders’ equity$3,246,311 $3,241,407 
 
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 June 30,Six Months Ended June 30,
 2023202220232022
Revenues$864,591 $754,992 $1,671,297 $1,478,612 
Operating expenses
Direct cost of revenues588,094 520,080 1,141,603 1,013,184 
Selling, general and administrative expenses186,371 167,940 370,584 316,911 
Amortization of intangible assets1,417 2,737 3,599 5,005 
 775,882 690,757 1,515,786 1,335,100 
Operating income88,709 64,235 155,511 143,512 
Other income (expense)    
Interest income and other(584)2,994 (1,926)2,647 
Interest expense(3,022)(2,448)(5,961)(5,090)
 (3,606)546 (7,887)(2,443)
Income before income tax provision85,103 64,781 147,624 141,069 
Income tax provision22,708 13,353 37,682 30,320 
Net income$62,395 $51,428 $109,942 $110,749 
Earnings per common share — basic$1.87 $1.52 $3.30 $3.29 
Earnings per common share — diluted$1.75 $1.43 $3.09 $3.10 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net of tax
expense of $0
$6,396 $(40,679)$16,246 $(46,870)
Total other comprehensive income (loss), net of tax6,396 (40,679)16,246 (46,870)
Comprehensive income$68,791 $10,749 $126,188 $63,879 
 
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, 202234,026 $340 $ $1,858,103 $(176,722)$1,681,721 
Net income— $— $— $47,547 $— $47,547 
Other comprehensive income:
Cumulative translation adjustment— — — — 9,850 9,850 
Issuance of common stock in connection with:
Exercise of options14 — 449 — — 449 
Restricted share grants, less net
             settled shares of 55
55 1 (9,514)— — (9,513)
Stock units issued under incentive
             compensation plan
— — 2,274 — — 2,274 
Purchase and retirement of common stock(112)(1)(17,798)— — (17,799)
 Conversion of convertible senior notes due 2023— — (6)— — (6)
Share-based compensation— — 6,365 — — 6,365 
 Reclassification of negative additional paid-in capital— — 18,230 (18,230)—  
Balance at March 31, 202333,983 $340 $ $1,887,420 $(166,872)$1,720,888 
Net income— $— $— $62,395 $— $62,395 
Other comprehensive income:
Cumulative translation adjustment— — — — 6,396 6,396 
Issuance of common stock in connection with:
Exercise of options21 — 718 — — 718 
Restricted share grants, less net
             settled shares of 13
30 — (2,408)— — (2,408)
Conversion of convertible senior notes due 2023— — (375)— — (375)
Share-based compensation— — 7,538 — — 7,538 
Balance at June 30, 202334,034 $340 $5,473 $1,949,815 $(160,476)$1,795,152 
 
5


Accumulated
Other
Comprehensive
Loss
 Common StockAdditional
Paid-in
Capital
Retained
Earnings
 
 SharesAmountTotal
Balance at December 31, 202134,333 $343 $13,662 $1,698,156 $(128,840)$1,583,321 
Net income— $— $— $59,321 $— $59,321 
Other comprehensive loss:
Cumulative translation adjustment— — — — (6,191)(6,191)
Issuance of common stock in connection with:
Exercise of options26 — 923 — — 923 
Restricted share grants, less net
             settled shares of 54
134 2 (7,836)— — (7,834)
Stock units issued under incentive
             compensation plan
— — 1,664 — — 1,664 
Purchase and retirement of common stock(22)— (3,098)— — (3,098)
 Cumulative effect due to adoption of new accounting standard— — (34,131)22,078 — (12,053)
 Conversion of convertible senior notes due 2023— — (2)— — (2)
Share-based compensation— — 5,967 — — 5,967 
 Reclassification of negative additional paid-in capital— — 22,851 (22,851)—  
Balance at March 31, 202234,471 $345 $ $1,756,704 $(135,031)$1,622,018 
Net income— $— $— $51,428 $— $51,428 
Other comprehensive loss:
Cumulative translation adjustment— — — — (40,679)(40,679)
Issuance of common stock in connection
with:
Exercise of options22 — 687 — — 687 
Restricted share grants, less net
settled shares of 55
47 — (8,907)— — (8,907)
Conversion of convertible senior notes
   due 2023
— — (11)— — (11)
Share-based compensation— — 6,083 — — 6,083 
 Reclassification of negative additional paid-in capital— — 2,647 (2,647)—  
Balance at June 30, 202234,540 $345 $499 $1,805,485 $(175,710)$1,630,619 


See accompanying notes to condensed consolidated financial statements
6


FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
 Six Months Ended June 30,
20232022
Operating activities
Net income$109,942 $110,749 
Adjustments to reconcile net income to net cash used in operating activities:  
Depreciation and amortization19,547 18,095 
Amortization of intangible assets3,599 5,005 
Acquisition-related contingent consideration3,543 133 
Provision for expected credit losses11,188 8,752 
Share-based compensation13,903 12,050 
Amortization of debt issuance costs and other1,296 1,068 
Deferred income taxes(6,571)2,713 
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, billed and unbilled(245,999)(180,737)
Notes receivable(22,539)(1,985)
Prepaid expenses and other assets(6,718)(810)
Accounts payable, accrued expenses and other(159)13,854 
Income taxes(13,122)(14,834)
Accrued compensation(130,625)(147,209)
Billings in excess of services provided(2,485)4,425 
Net cash used in operating activities(265,200)(168,731)
Investing activities  
Payments for acquisition of businesses, net of cash received (6,698)
Purchases of property and equipment and other(29,027)(25,637)
Net cash used in investing activities(29,027)(32,335)
Financing activities  
Borrowings under revolving line of credit245,000 165,000 
Repayments under revolving line of credit(220,000)(165,000)
Purchase and retirement of common stock(20,982)(3,098)
Share-based compensation tax withholdings and other (10,755)(14,827)
Payments for business acquisition liabilities(2,660)(4,161)
Deposits and other454 4,887 
Net cash used in financing activities(8,943)(17,199)
Effect of exchange rate changes on cash and cash equivalents15,021 (20,490)
Net decrease in cash and cash equivalents(288,149)(238,755)
Cash and cash equivalents, beginning of period491,688 494,485 
Cash and cash equivalents, end of period$203,539 $255,730 
Supplemental cash flow disclosures
Cash paid for interest$4,144 $4,279 
Cash paid for income taxes, net of refunds$57,376 $42,440 
Non-cash investing and financing activities:
Issuance of stock units under incentive compensation plans$2,274 $1,664 
Business acquisition liabilities not yet paid$ $5,370 
Non-cash additions to property and equipment    $717 $3,695 
See accompanying notes to condensed consolidated financial statements
7


FTI Consulting, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(dollar and share amounts in tables in thousands, except per share data)
(Unaudited)
 
1. Basis of Presentation
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, 2022 filed with the SEC.
2. Significant Accounting Policies
Note 1 to the Consolidated Financial Statements included in Part II, Item 8, of our Annual Report on Form 10-K for the year ended December 31, 2022 describes the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
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 share-based awards (restricted share awards, restricted stock units and performance stock units), each using the treasury stock method.
We use the if-converted method for calculating the potential dilutive effect of the conversion feature of the principal amount of our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”) on earnings per common share. The conversion feature had a dilutive impact on earnings per common share for the three and six months ended June 30, 2023 and 2022, 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.
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Numerator — basic and diluted    
Net income$62,395 $51,428 $109,942 $110,749 
Denominator
Weighted average number of common shares outstanding — basic
33,359 33,790 33,331 33,705 
Effect of dilutive share-based awards550 586 562 639 
Effect of dilutive stock options297 331 301 334 
Effect of dilutive convertible notes1,444 1,202 1,372 1,100 
Weighted average number of common shares outstanding — diluted
35,650 35,909 35,566 35,778 
Earnings per common share — basic$1.87 $1.52 $3.30 $3.29 
Earnings per common share — diluted$1.75 $1.43 $3.09 $3.10 
Antidilutive stock options and share-based awards3 23 6 15 
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4. Revenues
We generate the majority of our revenues by providing consulting services to our clients. 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.
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 $7.8 million and $5.4 million for the three and six months ended June 30, 2023, respectively, and $11.6 million and $13.1 million for the three and six months ended June 30, 2022, respectively.
Unfulfilled performance obligations primarily consist of fees not yet recognized on certain fixed-fee arrangements and performance-based and contingent arrangements. As of June 30, 2023 and December 31, 2022, the aggregate amount of the remaining contract transaction price allocated to unfulfilled performance obligations was $6.5 million and $3.6 million, respectively. We expect to recognize the majority of the related revenues over the next 18 months. We elected to utilize the optional exemption to exclude from this disclosure fixed-fee and performance-based and contingent arrangements with an original expected duration of one year or less and to exclude our time and expense arrangements for which revenues are recognized using the right-to-invoice practical expedient.
Contract assets are defined as assets for which we have recorded revenues but are not yet entitled to receive our fees because certain events, such as completion of the measurement period or client approval, must occur. The contract asset balance was immaterial as of June 30, 2023 and December 31, 2022.
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 immaterial as of June 30, 2023 and December 31, 2022.
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:
June 30,
2023
December 31,
2022
Accounts receivable:
Billed receivables$705,316 $633,055 
Unbilled receivables483,711 308,873 
Allowance for expected credit losses(50,966)(45,775)
Accounts receivable, net$1,138,061 $896,153 
The following table summarizes the total provision for expected credit losses and write-offs:
 Three Months Ended June 30,Six Months Ended June 30,
2023202220232022
Provision for expected credit losses$4,176 $3,894 $11,188 $8,752 
Write-offs$1,665 $3,249 $9,553 $6,040 

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.
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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 at December 31, 2022$516,500 $234,872 $268,055 $96,727 $111,439 $1,227,593 
Foreign currency translation
adjustment and other
(282)1,332 262 63 2,801 4,176 
Balance at June 30, 2023$516,218 $236,204 $268,317 $96,790 $114,240 $1,231,769 
(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 June 30, 2023 and December 31, 2022.
(2)    Amounts for our Strategic Communications segment include gross carrying values of $308.3 million and $305.6 million as of June 30, 2023 and December 31, 2022, respectively, and accumulated impairment losses of $194.1 million as of June 30, 2023 and December 31, 2022.
Intangible Assets
Intangible assets were as follows:
 June 30, 2023December 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizing intangible assets      
Customer relationships$26,836 $14,939 $11,897 $78,223 $63,810 $14,413 
Trademarks9,584 6,240 3,344 10,950 5,554 5,396 
Acquired software and other856 456 400 846 241 605 
37,276 21,635 15,641 90,019 69,605 20,414 
Non-amortizing intangible assets
Trademarks 5,100 — 5,100 5,100 — 5,100 
Total$42,376 $21,635 $20,741 $95,119 $69,605 $25,514 
Intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of $1.4 million and $3.6 million during the three and six months ended June 30, 2023, respectively, and $2.7 million and $5.0 million for the three and six months ended June 30, 2022, respectively.
We estimate our future amortization expense for our intangible assets with finite lives to be as follows:
Year
As of
June 30, 2023 (1)
2023 (remaining)$2,563 
20243,788 
20252,968 
20261,742 
20271,670 
Thereafter2,910 
 $15,641 
(1)Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, impairments, changes in useful lives, or other relevant factors or changes.
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7. Financial Instruments
The following tables present the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of June 30, 2023 and December 31, 2022:
June 30, 2023
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities
Acquisition-related contingent consideration (1)
$12,983 $ $ $12,983 
2023 Convertible Notes (2)
315,548  596,402  
Total$328,531 $ $596,402 $12,983 
December 31, 2022
Hierarchy Level
(Fair Value)
Carrying
Amount
Level 1Level 2Level 3
Liabilities   
Acquisition-related contingent consideration (1)
$14,988 $ $ $14,988 
2023 Convertible Notes (2)
315,172  509,682  
Total$330,160 $ $509,682 $14,988 
(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 amount includes unamortized deferred debt issuance costs.
The fair values of financial instruments not included in the tables above are estimated to be equal to their carrying values as of June 30, 2023 and December 31, 2022.
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 pricing model. 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 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.
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The change in our liability for our Level 3 financial instruments is as follows:
Contingent Consideration
Balance at December 31, 2022$14,988 
Accretion expense (1)
$1,284 
Payments(3,430)
Foreign currency translation adjustment (2)
238 
Balance at March 31, 2023$13,080 
Accretion expense (1)
2,259 
Payments(2,423)
Foreign currency translation adjustment (2)
67 
Balance at June 30, 2023$12,983 
Contingent Consideration
Balance at December 31, 2021$15,110 
Additions$5,370 
Accretion expense (1)
(979)
Payments(4,430)
Foreign currency translation adjustment (2)
(115)
Balance at March 31, 2022$14,956 
Accretion expense (1)
1,112 
Payments(2,240)
Foreign currency translation adjustment (2)
(465)
Balance at June 30, 2022$13,363 
(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 income (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: 
June 30,
2023
December 31, 2022
2023 Convertible Notes
$315,757 $316,219 
Credit Facility25,000  
Total debt340,757 316,219 
Less: deferred debt issuance costs(209)(1,047)
Long-term debt, net (1)
$340,548 $315,172 
(1)There were no current portions of long-term debt as of June 30, 2023 and December 31, 2022. The 2023 Convertible Notes due on August 15, 2023 are classified as long-term debt as of June 30, 2023 because we have the ability and intent to refinance the outstanding principal amount of the 2023 Convertible Notes on a long-term basis utilizing borrowings under our Credit Facility, which matures on November 21, 2027.
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 15 and August 15 of each year. The 2023 Convertible Notes will mature on August 15, 2023, unless earlier converted or repurchased. The 2023 Convertible Notes are currently convertible through the close of business on August 14, 2023 at a conversion rate of
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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). Upon conversion, the principal amount of the 2023 Convertible Notes being converted is required to be paid in cash. We have elected to settle the premium, if any, due upon conversion, in shares of FTI Consulting’s common stock. The 2023 Convertible Notes are senior unsecured obligations of the Company. Based on the Company’s stock price on June 30, 2023, the if-converted value of the 2023 Convertible Notes exceeded the principal amount by $276.7 million.
The 2023 Convertible Notes were convertible in each of the quarters ended September 30, 2021 through June 30, 2023. The number of conversions in each quarter was immaterial.
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).
Contractual interest expense for the 2023 Convertible Notes was $1.6 million and $3.2 million for the three and six months ended June 30, 2023 and 2022.
Credit Facility
In November 2022, we amended and restated our credit agreement for our senior secured bank revolving credit facility (“Credit Facility”), to, among other things, (i) extend the maturity to November 21, 2027, (ii) increase the revolving line of credit limit from $550.0 million to $900.0 million and (iii) increase the incremental facility from $150.0 million to a maximum of $300.0 million, subject to certain conditions, and incurred an additional $4.0 million of debt issuance costs. The Credit Facility is guaranteed by substantially all of our wholly owned domestic subsidiaries and is secured by a first priority security interest in substantially all of the assets of FTI Consulting and such domestic subsidiaries.
Borrowings under the Credit Facility bear interest at a rate equal to, in the case of: (i) U.S. Dollars (“USD”), at our option, Adjusted Term Secured Overnight Financing Rate (“SOFR”) or Adjusted Daily Simple SOFR, (ii) euro, Euro Interbank Offered Rate, (iii) British pound, Sterling Overnight Index Average Reference Rate, (iv) Australian dollars, Bank Bill Swap Reference Bid Rate, (v) Canadian dollars, Canadian Dollar Offered Rate, (vi) Swiss franc, Swiss Average Rate Overnight and (vii) Japanese yen, Tokyo Interbank Offered Rate, in each case, plus an applicable margin that will fluctuate between 1.25% per annum and 2.00% per annum based upon the Company’s Consolidated Total Net Leverage Ratio (as defined in the Credit Facility) at such time or, in the case of USD borrowings, an alternative base rate plus an applicable margin that will fluctuate between 0.25% per annum and 1.00% per annum based upon the Company’s Consolidated Total Net Leverage Ratio at such time. The alternative base rate is a fluctuating rate per annum equal to the highest of (1) the federal funds rate plus the sum of 50 basis points, (2) the rate of interest in effect for such day as the prime rate announced by Bank of America, and (3) the one-month Term SOFR plus 100 basis points.
Under the Credit Facility, we are required to pay a commitment fee rate that fluctuates between 0.20% and 0.35% per annum and a letter of credit fee rate that fluctuates between 1.25% and 2.00% per annum, in each case, based upon the Company’s Consolidated Total Net Leverage Ratio.
The Company classified the borrowings under the 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 June 30, 2023, $0.4 million of the borrowing limit under the Credit Facility was utilized (and, therefore, unavailable) for letters of credit.
There were $3.9 million and $4.3 million of unamortized debt issuance costs related to the Credit Facility as of June 30, 2023 and December 31, 2022, 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. Most leases include one or more options to renew, with renewal terms that can extend the lease term up to seven years. The exercise of lease renewal options is at our sole discretion. Certain of our lease agreements include rental payments that are
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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:
LeasesClassificationJune 30, 2023December 31, 2022
Assets
  Operating lease assetsOperating lease assets$206,819 $203,764 
Total lease assets$206,819 $203,764 
Liabilities
Current
  Operating lease liabilities
Accounts payable, accrued expenses and other$31,042 $31,922 
Noncurrent
  Operating lease liabilitiesNoncurrent operating lease liabilities223,403 221,604 
Total lease liabilities$254,445 $253,526 
The table below summarizes total lease costs:
Three Months Ended June 30,Six Months Ended June 30,
Lease Cost2023202220232022
Operating lease costs$12,965 $12,092 $25,948 $24,453 
Short-term lease costs708 727 1,400 1,132 
Variable lease costs3,305 2,749 6,416 5,977 
Sublease income(320)(196)(638)(386)
Total lease cost, net$16,658 $15,372 $33,126 $31,176 
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
June 30, 2023
2023 (remaining)
$24,491 
202451,048 
202542,832 
202638,566 
202738,205 
Thereafter128,717 
   Total future lease payments323,859 
   Less: imputed interest(69,414)
Total$254,445 
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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:
Six Months Ended June 30,
 20232022
Cash paid for amounts included in the measurement of operating lease liabilities$28,039$24,831
Operating lease assets obtained in exchange for lease liabilities$19,671$5,756
Weighted average remaining lease term (years)
   Operating leases8.18.9
Weighted average discount rate
   Operating leases
5.7 %5.4 %
10. Commitments and Contingencies
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 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.
11. Share-Based Compensation
During the six months ended June 30, 2023, we granted 63,741 restricted share awards, 91,434 restricted stock units and 79,682 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 six months ended June 30, 2023, 830 shares of restricted stock, 1,609 restricted stock units and no stock options were forfeited prior to the completion of the applicable vesting requirements. Additionally, 7,815 performance stock units were forfeited during the six months ended June 30, 2023 as the award targets were not achieved.
Total share-based compensation expense, net of forfeitures is detailed in the following table:
 Three Months Ended June 30,Six Months Ended June 30,
Income Statement Classification2023202220232022
Direct cost of revenues$4,562 $3,977 $9,261 $7,946 
Selling, general and administrative expenses3,863 4,146 8,907 7,223 
Total share-based compensation expense$8,425 $8,123 $18,168 $15,169 
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. On each of July 28, 2020 and December 3, 2020, our Board of Directors authorized an additional $200.0 million. On December 1, 2022, our Board of Directors authorized an additional $400.0 million, increasing the Repurchase Program to an aggregate authorization of $1.3 billion. 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 June 30, 2023, we had $460.7 million available under the Repurchase Program to repurchase additional shares.
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The following table details our stock repurchases under the Repurchase Program:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Shares of common stock repurchased and retired  112 22 
Average price paid per share$ $ $158.70 $143.36 
Total cost$ $ $17,797 $3,098 
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.
Common stock outstanding was approximately 34.0 million shares as of June 30, 2023 and December 31, 2022, 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, 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 & Strategy, Transactions and Turnaround & Restructuring.
Our FLC segment provides law firms, companies, boards of directors, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services in risk and investigations and disputes, including cybersecurity, and a focus on highly regulated industries such as our Construction & Environmental Solutions and Health Solutions services. These services are supported by our data & analytics technology-enabled solutions, 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, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting services. Our professionals help organizations better address risk as the growing volume and variety of enterprise data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert solutions driven by investigations, litigation, mergers & acquisitions, antitrust and competition, and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security services.
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 June 30,Six Months Ended June 30,
 2023202220232022
Revenues    
Corporate Finance$300,449 $277,067 $600,436 $530,396 
FLC182,223 164,248 355,627 318,144 
Economic Consulting201,822 164,041 371,417 330,018 
Technology97,444 77,782 188,062 158,266 
Strategic Communications82,653 71,854 155,755 141,788 
Total revenues$864,591 $754,992 $1,671,297 $1,478,612 
Adjusted Segment EBITDA    
Corporate Finance$50,028 $54,950 $105,048 $108,490 
FLC21,080 16,707 39,691 33,964 
Economic Consulting35,523 21,646 49,716 42,841 
Technology20,087 8,365 35,453 21,728 
Strategic Communications12,263 11,472 21,819 27,185 
Total Adjusted Segment EBITDA$138,981 $113,140 $251,727 $234,208 
The table below reconciles net income to Total Adjusted Segment EBITDA:
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
Net income$62,395 $51,428 $109,942 $110,749 
Add back:  
Income tax provision22,708 13,353 37,682 30,320 
Interest income and other584 (2,994)1,926 (2,647)
Interest expense3,022 2,448 5,961 5,090 
Unallocated corporate expenses39,026 37,716 73,761 69,055 
Segment depreciation expense9,829 8,452 18,856 16,636 
Amortization of intangible assets1,417 2,737 3,599 5,005 
Total Adjusted Segment EBITDA$138,981 $113,140 $251,727 $234,208 
    
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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 and six months ended June 30, 2023 and 2022, 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, 2022 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., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “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, 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 & Strategy, Transactions and Turnaround & Restructuring.
Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, boards of directors, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services in risk and investigations and disputes, including cybersecurity, and a focus on highly regulated industries such as our Construction & Environmental Solutions and Health Solutions services. These services are supported by our data & analytics technology-enabled solutions, 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, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting services. Our professionals help organizations better address risk as the growing volume and variety of enterprise data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert solutions driven by investigations, litigation, mergers & acquisitions (“M&A”), antitrust and competition, and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security services.
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 contract arrangements, which require the client to pay us based on the number of hours worked at contractually agreed-upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs. Certain
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contracts are rendered under fixed-fee arrangements, which require the client to pay a fixed fee in exchange for a predetermined set of professional services. Fixed-fee arrangements may require certain clients to pay us a recurring retainer. Our contract arrangements may also contain success fees or performance-based arrangements in which our fees are based on the attainment of contractually defined objectives with our client. 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 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. When significant, we identify the impact of acquisition-related revenue growth.
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
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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.
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 provided by (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.
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EXECUTIVE HIGHLIGHTS
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
 (dollar amounts in thousands, except per share data)(dollar amounts in thousands,
 except per share data)
Revenues$864,591 $754,992 $1,671,297 $1,478,612 
Net income$62,395 $51,428 $109,942 $110,749 
Adjusted EBITDA$100,230 $76,160 $178,657 $166,612 
Earnings per common share — diluted$1.75 $1.43 $3.09 $3.10 
Adjusted earnings per common share — diluted$1.75 $1.43 $3.09 $3.10 
Net cash provided by (used in) operating activities$(10,994)$35,047 $(265,200)$(168,731)
Total number of employees7,853 7,048 7,853 7,048 
Second Quarter 2023 Executive Highlights
Revenues
Revenues for the three months ended June 30, 2023 increased $109.6 million, or 14.5%, to $864.6 million, compared to the three months ended June 30, 2022, primarily due to higher demand across all our business segments.
Net income
Net income for the three months ended June 30, 2023 increased $11.0 million, or 21.3%, to $62.4 million, compared to the three months ended June 30, 2022. The increase in net income was primarily due to higher revenues, which was partially offset by increased direct compensation expenses, which included the impact of an 11.3% increase in billable headcount, and higher selling, general and administrative (“SG&A”) expenses, which included the impact of an 11.8% increase in non-billable headcount, a higher effective tax rate and an FX remeasurement loss compared to a gain in the same quarter in the prior year.
Adjusted EBITDA
Adjusted EBITDA for the three months ended June 30, 2023 increased $24.1 million, or 31.6%, to $100.2 million, compared to the three months ended June 30, 2022. Adjusted EBITDA Margin of 11.6% for the three months ended June 30, 2023 compared to 10.1% for the three months ended June 30, 2022. The increase in Adjusted EBITDA was due to higher revenues, which was partially offset by higher direct compensation expenses, which included the impact of an 11.3% increase in billable headcount, and an increase in SG&A expenses, which included the impact of an 11.8% increase in non-billable headcount, compared to the same quarter in the prior year.
EPS and Adjusted EPS
EPS for the three months ended June 30, 2023 increased $0.32 to $1.75 compared to $1.43 for the three months ended June 30, 2022. The increase in EPS was primarily due to higher net income as described above.
Adjusted EPS was equal to EPS for the three months ended June 30, 2023 and 2022, respectively.
Liquidity and Capital Allocation
Net cash used in operating activities for the three months ended June 30, 2023 increased $46.0 million to $11.0 million, compared to net cash provided by operating activities of $35.0 million for the three months ended June 30, 2022. The increase in net cash used in operating activities was primarily due to an increase in salaries largely related to headcount growth, higher operating expenses and income tax payments, which was partially offset by an increase in cash collected resulting from higher revenues compared to the same quarter in the prior year. Days sales outstanding (“DSO”) was 111 days at June 30, 2023 compared to 102 days at June 30, 2022. The increase in DSO was primarily due to cash collections that have not kept pace with higher revenues, as well as the transition of billing activities to our new enterprise resource planning (“ERP”) system.
Free Cash Flow was an outflow of $22.0 million and inflow of $22.0 million for the three months ended June 30, 2023 and 2022, respectively. The decrease in Free Cash Flow for the three months ended June 30, 2023 was primarily due to higher net cash used in operating activities, as described above.
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Headcount
The following table includes the net headcount additions (reductions) by segment and in total for the six months ended June 30, 2023.
Billable Headcount
Corporate
Finance
FLCEconomic ConsultingTechnologyStrategic
Communications
TotalNon-Billable HeadcountTotal Headcount
December 31, 20221,9461,5841,0075569706,0631,5727,635
Additions (reductions), net56(7)24252512336159
March 31, 20232,0021,5771,0315819956,1861,6087,794
Additions (reductions), net41(9)88(3)451459
June 30, 20232,0431,5681,0395899926,2311,6227,853
Percentage change in headcount from December 31, 20225.0%(1.0)%3.2%5.9%2.3%2.8%3.2%2.9%
CONSOLIDATED RESULTS OF OPERATIONS
Segment and Consolidated Operating Results: 
 Three Months Ended June 30,Six Months Ended June 30,
 2023202220232022
 (in thousands, except per share data)(in thousands, except per share data)
Revenues    
Corporate Finance$300,449 $277,067 $600,436 $530,396 
FLC182,223 164,248 355,627 318,144 
Economic Consulting201,822 164,041 371,417 330,018 
Technology97,444 77,782 188,062 158,266 
Strategic Communications82,653 71,854 155,755 141,788 
Total revenues$864,591 $754,992 $1,671,297 $1,478,612 
Segment operating income    
Corporate Finance$46,727 $50,935 $97,943 $100,989 
FLC19,274 15,014 36,322 30,556 
Economic Consulting34,024 20,439 46,724 40,382 
Technology16,432 4,930 28,322 15,173 
Strategic Communications11,278 10,633 19,961 25,467 
Total segment operating income127,735 101,951 229,272 212,567 
Unallocated corporate expenses(39,026)(37,716)(73,761)(69,055)
Operating income88,709 64,235 155,511 143,512 
Other income (expense)   
Interest income and other(584)2,994 (1,926)2,647 
Interest expense(3,022)(2,448)(5,961)(5,090)
 (3,606)546 (7,887)(2,443)
Income before income tax provision85,103 64,781 147,624 141,069 
Income tax provision22,708 13,353 37,682 30,320 
Net income$62,395