FTI Consulting Reports First Quarter 2014 Results

WASHINGTON, May 1, 2014 /PRNewswire/ -- FTI Consulting, Inc. (NYSE: FCN) (the "Company"), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, today released its financial results for the quarter ended March 31, 2014.

For the quarter, revenues increased 4.5 percent to $425.6 million compared to $407.2 million in the prior year quarter. Fully diluted earnings per share ("EPS") were $0.45 compared to $0.58 in the prior year quarter. EPS included a remeasurement gain related to the reduction in the fair value of estimated future contingent consideration payments for prior acquisitions, which increased first quarter EPS by $0.04. First quarter Adjusted EPS were $0.41 compared to $0.59 in the prior year quarter. First quarter Adjusted EBITDA was $51.2 million or 12.0 percent of revenues compared to $59.3 million or 14.6 percent of revenues in the prior year quarter.

Adjusted EPS, Adjusted EBITDA and Adjusted Segment EBITDA are non-GAAP measures defined elsewhere in this press release and are reconciled to GAAP measures in the financial tables that accompany this press release. Beginning with the quarter ended March 31, 2014, the definitions of each of these non-GAAP measures have been updated to exclude the impact of changes in the fair value of acquisition-related contingent consideration liabilities. All current and prior period information reflected herein has been reclassified to reflect this change.

Commenting on these results, Steven H. Gunby, President and Chief Executive Officer of FTI Consulting said, "The first quarter, in many ways, heralds a number of the themes that we will discuss at our June investor day. Our Adjusted EPS of $0.41 at one level shows the power of our company – the fact that, when the stakes are high and someone needs committed people with world-leading expertise, people turn to FTI. The major driver of quarterly results was Forensic and Litigation Consulting with a record quarter, fueled by a number of front-page newspaper assignments from across the globe relating to high-stakes client events ranging from FCPA investigations to mortgage-backed security litigations. Similarly, our Technology business continued to perform very well, driven by ongoing FCPA and financial services investigations as well as increased cross-border M&A related 'second request' activity."

Mr. Gunby added, "The first quarter also heralds the major set of work we have ahead. Notwithstanding the strong performance of Forensic and Litigation Consulting and Technology, our Adjusted EPS declined substantially year-over-year. Corporate Finance/Restructuring's profitability continued its downward trend, Strategic Communications had another down quarter and Economic Consulting had a disappointing start to the year, both in terms of revenue and profitability."

"Despite these challenges, I want be clear – since stepping into my role in late January I am more excited than ever to be here. The deeper I get into the business, the more impressed I am with the capabilities we have and with the talent, commitment and enthusiasm of our people. The quality of our client relationships is outstanding. And the potential is there. As we will discuss in June, I continue to think we will be able, in a relatively short period of time, to begin meeting the aspirations so many of us have for this company. At the same time I do want to underscore that 2014 will see no rapid turnaround in profitability. Though we see numerous opportunities to drive the performance of all of our segments and regions, most of these opportunities will benefit 2015 and 2016 much more than 2014. This year will be about laying that foundation and implementing actionable initiatives now that we believe will result in stronger market positions and enhanced stockholder returns in the future," Mr. Gunby concluded.

Cash and Capital Allocation

Net cash used by operating activities for the quarter was $110.8 million compared to $2.3 million in the prior year as we funded our annual bonus payments and retention payments to key client-service professionals. Short-term borrowings were $20.0 million at March 31, 2014, and cash and cash equivalents were $77.0 million. During the quarter, the Company used $15.6 million for acquisition related payments and expended $4.4 million to settle transactions to repurchase the Company's common stock that were made, but not settled in the fourth quarter of 2013. The Company did not repurchase any common stock during the first quarter of 2014.

First Quarter Segment Results

Corporate Finance/Restructuring
Revenues in the Corporate Finance/Restructuring segment decreased 5.1 percent to $94.0 million in the quarter compared to $99.1 million in the prior year quarter. Revenues declined organically by 9.6 percent due to lower demand in our bankruptcy and restructuring practices in North America, lower average realized bill rates due to mix of services in our telecom, media and technology ("TMT") practice, and lower success fees in North America. Adjusted Segment EBITDA was $11.0 million or 11.7 percent of segment revenues compared to $19.1 million or 19.3 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA margin was reduced by lower utilization in our bankruptcy and restructuring practices in North America, increased acquired overhead expenses, lower average realized bill rates due to mix of services in our TMT practice and continued investment in our Europe, Middle East and Africa ("EMEA") based transaction advisory services practice.

Economic Consulting
Revenues in the Economic Consulting segment decreased 7.2 percent to $106.9 million in the quarter compared to $115.2 million in the prior year quarter. Revenues declined organically by 8.8 percent due to lower demand for our financial economics practice in North America and lower demand and realization in our international arbitration, regulatory and valuation practices in EMEA, which was partially offset by higher demand for our antitrust litigation practice in EMEA. Adjusted Segment EBITDA was $13.0 million or 12.2 percent of segment revenues compared to $26.2 million or 22.7 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA margin was reduced by lower utilization in our financial economics practice in North America, the impact of employment contract extensions of key senior client-service professionals and lower utilization and realization in our international arbitration, regulatory and valuation practices in EMEA, which was partially offset by higher utilization in our antitrust litigation practice in EMEA.

Forensic and Litigation Consulting
Revenues in the Forensic and Litigation Consulting segment increased 20.6 percent to $121.4 million in the quarter compared to $100.7 million in the prior year quarter. Revenues grew organically by 17.6 percent due to increased demand for the segment's global data analytics, disputes and insurance practices in North America, and the forensic accounting and global risk and investigations practices ("GRIP") in Asia Pacific. Adjusted Segment EBITDA was $26.5 million or 21.8 percent of segment revenues compared to $12.8 million or 12.7 percent of segment revenues in the prior year quarter. The increase in Adjusted Segment EBITDA margin was due to improved utilization and employee leverage in the aforementioned practices.

Technology
Revenues in the Technology segment increased 28.6 percent to $60.1 million in the quarter compared to $46.7 million in the prior year quarter. The increase in revenues was due to Foreign Corrupt Practices Act ("FCPA") and financial services industry investigations, increased merger and acquisition related "second request" activity and higher volume for services, which was partially offset by lower pricing for services. Adjusted Segment EBITDA was $17.3 million or 28.9 percent of segment revenues compared to $13.7 million or 29.4 percent of segment revenues in the prior year quarter. The decrease in Adjusted Segment EBITDA margin was due to the mix of lower margin services and increased investment in business development support.

Strategic Communications
Revenues in the Strategic Communications segment decreased 4.9 percent to $43.2 million in the quarter compared to $45.5 million in the prior year quarter. Revenues declined organically by 8.9 percent or $4.0 million due to reduced pass-through revenues. Adjusted Segment EBITDA was $2.7 million or 6.3 percent of segment revenues compared to $3.6 million or 7.8 percent of segment revenues in the prior year quarter. Adjusted Segment EBITDA margin was impacted by higher non-recurring facilities costs related to the transition to our new London office and increased acquired overhead costs, which were partially offset by reduced pass-through costs.

Second Quarter 2014 Guidance
The Company estimates that revenues for the second quarter of 2014 will be between $430.0 million and $445.0 million and Adjusted EPS will be between $0.32 and $0.42. Expectations for second quarter 2014 Adjusted EPS consider projected shifts in business mix and increased costs as compared to the first quarter of 2014, notwithstanding the non-recurrence of certain costs incurred in the first quarter of 2014. As discussed previously, full year 2014 revenues and Adjusted EPS guidance will be provided during the Company's investor day on June 16, 2014. 

First Quarter 2014 Conference Call
FTI Consulting will host a conference call for analysts and investors to discuss first quarter 2014 financial results at 9:00 a.m. Eastern Time on May 1, 2014. The call can be accessed live and will be available for replay over the Internet for 90 days by logging onto the Company's website at www.fticonsulting.com.

About FTI Consulting
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 4,200 employees located in 26 countries, FTI Consulting professionals work closely with clients to anticipate, illuminate and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management, strategic communications and restructuring. The company generated $1.65 billion in revenues during fiscal year 2013. More information can be found at www.fticonsulting.com.

Note: We define Segment Operating Income as a segment's share of consolidated operating income. We define Total Segment Operating Income 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 EBITDA 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 and losses on early extinguishment of debt. 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 as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We use Adjusted Segment EBITDA to internally evaluate the financial performance of our segments because we believe it is a useful supplemental measure which reflects current core operating performance and provides an indicator of the segment's ability to generate cash. We also believe that these measures, when considered together with our GAAP financial results, provide management and investors with a more complete understanding of our operating results, including underlying trends, by excluding the effects of remeasurement of acquisition-related contingent consideration, special charges, and goodwill impairment charges. 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 measures, considered along with corresponding GAAP measures, provide management and investors with additional information for comparison of our operating results to the operating results of other companies.

We define Adjusted Net Income and Adjusted Earnings per Diluted Share ("Adjusted EPS") as net income and earnings per diluted share, respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. 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 this measure, when considered together with our GAAP financial results, provides management and investors with a more complete understanding of our business operating results, including underlying trends, by excluding the effects of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt. Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Consolidated Statements of Comprehensive Income. Reconciliations of GAAP to non-GAAP financial measures are included elsewhere in this press release.

Safe Harbor Statement
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which involve uncertainties and risks. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to acquisitions and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results. When used in this press release, words such as "estimates," "expects," "anticipates," "projects," "plans," "intends," "believes," "forecasts" and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and estimates will be achieved, and the Company's actual results may differ materially from our expectations, beliefs and estimates. Further, preliminary results are subject to normal year-end adjustments. The Company has experienced fluctuating revenues, operating income and cash flow in prior periods and expects that this will occur from time to time in the future. Other factors that could cause such differences include declines in demand for, or changes in, the mix of services and products that we offer, the mix of the geographic locations where our clients are located or where services are performed, adverse financial, real estate or other market and general economic conditions, which could impact each of our segments differently, the pace and timing of the consummation and integration of past and future acquisitions, the Company's ability to realize cost savings and efficiencies, competitive and general economic conditions, retention of staff and clients and other risks described under the heading "Item 1A Risk Factors" in the Company's most recent Form 10-K filed with the SEC and in the Company's other filings with the SEC, including the risks set forth under "Risks Related to Our Reportable Segments" and "Risks Related to Our Operations". We are under no duty to update any of the forward looking statements to conform such statements to actual results or events and do not intend to do so.

Investor & Media Contact:
Mollie Hawkes
+1.617.747.1791
mollie.hawkes@fticonsulting.com

FINANCIAL TABLES FOLLOW

SOURCE FTI Consulting, Inc.