FTI Consulting, Inc. Reports 2010 First Quarter Results

WEST PALM BEACH, Fla., May 5 /PRNewswire-FirstCall/ -- FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, today reported its financial results for the first quarter ended March 31, 2010.

For the first quarter of 2010, revenues increased to $350.0 million from $347.8 million in the prior year period. Adjusted earnings per diluted share were $0.67 before $0.38 of special charges described below and EPS was $0.29 per diluted share. Adjusted EBITDA before $30.2 million of special charges, increased to $75.9 million, or 21.7% of revenues, compared with $74.0 million, or 21.3% of revenues, in the first quarter of 2009. Adjusted earnings per diluted share and Adjusted EBITDA are non-GAAP measures which are described below.

The Company recorded a special charge in the first quarter of $30.2 million.  This charge includes $19.3 million related to the termination of 144 employees; $7.8 million of lease termination charges in connection with the consolidation of four office locations and $3.1 million of other charges. Of the $30.2 million charge, approximately $21.8 million requires the use of cash and $8.4 million is a non-cash charge. These actions were taken to eliminate redundancies resulting from acquisitions completed over the last two years, to provide for appropriate levels of administrative support and to better align capacity with expected demand.

As of March 31, 2010, the Company had $80.9 million of cash and cash equivalents.

Commenting on these results, Jack Dunn, FTI’s president and chief executive officer said, “Our first quarter of 2009, with its record restructuring market and two of the largest financial fraud cases of all time, was a tough quarter to beat. It is a tribute to the great professionals at FTI and the diversified business platform that we have built, that we were able to do so. The first quarter 2010 results reflect the changing nature of the global economy. While activity is still far from robust, there appear to be signs of strength in many sectors. As anticipated, we experienced slowing results from our practices that serve companies undergoing economic challenge but the beginnings of growth from those practices that benefit in times of recovery.”

“The diversity of our business across many industries and activities, our global presence, with a record 20% of our revenue in the quarter coming from outside the U.S., and the array of intellectual capital represented by our great professionals place us in a good position to advise on the ample challenges brought on by the credit crisis and the recession as well as those associated with economic expansion. We continue to be a thought leader and a sought-after advisor providing critical thinking at the critical time.”

First Quarter Segment Results

Corporate Finance/Restructuring

Revenues in the Corporate Finance/Restructuring segment were $117.5 million, compared with $127.5 million in the first quarter of the prior year. Adjusted Segment EBITDA was $34.7 million, or 29.6% of segment revenues, compared with $40.7 million, or 31.9% of segment revenues, in the prior year quarter. The segment’s revenue declined from last year’s record levels and resulted from a slowing of new restructuring opportunities in the U.S. While robust high yield markets and improving corporate earnings slowed the volume of new cases, we expect to continue to assist clients for years to come in the aftermath of the largest economic dislocation since the Great Depression. The segment experienced strong growth in its communications/media/entertainment practice and international business. Adjusted Segment EBITDA margins declined from the 2009 level due to lower utilization. In light of the slowing demand the segment has taken steps to bring its headcount into line with current activity levels.

Forensic and Litigation Consulting

Revenues in the Forensic and Litigation Consulting segment were $78.7 million, compared with $78.4 million in the first quarter of the prior year. Adjusted Segment EBITDA was $19.8 million, or 25.1% of segment revenues, compared to $21.9 million, or 28.0% of segment revenues, in the prior year’s first quarter. The segment experienced sequential quarterly revenue growth of 12%. Compared to the prior year quarter, the construction solutions and international investigations practices grew and the domestic dispute and litigation practice largely replaced revenue declines in the unprecedented financial fraud cases that arose last year and continue, but at substantially reduced levels. Recent SEC enforcement actions are beginning to produce business and may portend long anticipated government activism. Adjusted Segment EBITDA margins declined year over year due to somewhat lower utilization levels compared to record first quarter margins in 2009.  

Economic Consulting

Revenues in the Economic Consulting segment increased 22.7% to a record $67.3 million from $54.8 million in the first quarter of the prior year, its fifth sequential quarterly record in revenues. Adjusted Segment EBITDA increased 31.0% to $13.5 million, or 20.1% of segment revenues, compared to $10.3 million, or 18.8% of segment revenues, in the prior year quarter. While the market for this segment has not returned to normal levels, we did open 25% more cases than in the prior year quarter, and the trend to more normal levels of demand for services appears to be continuing. We also expanded our capacity and market share with our new offices in London, New York and the West Coast. The segment was active in supporting financial disputes and experienced improving demand resulting from regulatory activity, particularly from the major government agencies. Adjusted Segment EBITDA margins improved due to higher utilization.

Technology

Revenues in the Technology segment were $43.4 million, compared to $44.3 million in the first quarter of the prior year. Adjusted Segment EBITDA increased 31.8% to $17.3 million, or 39.8% of segment revenues, compared to $13.1 million, or 29.6% of segment revenues, in the prior year quarter. The Technology segment continues to be a preferred provider in large and complex situations, and had a solid performance driven by several large litigation, bankruptcy and product liability cases as well as excellent operational execution. In addition, we successfully launched Acuity, our integrated e-discovery and automated document review offering that positions FTI for the first time directly in the review space – the largest cost component of the discovery process. An increase in unit volumes in the hosting and processing business more than offset continuing price pressure as the Segment’s pricing strategy and cost control measures gained traction. Adjusted Segment EBITDA margins improved due to the contribution from several significant engagements and cost control measures in selling, general and administrative expense. The segment continued to invest in research and development, with $5.4 million of cost in the quarter, unchanged from the prior year quarter.

Strategic Communications

Revenues in the Strategic Communications segment were $43.2 million, compared to $42.8 million in the first quarter of the prior year. Adjusted Segment EBITDA was $5.7 million, or 13.3% of segment revenues, compared to $5.8 million, or 13.6% of revenues, in the prior year quarter. Within an overall slow environment for discretionary corporate spending, M&A and capital markets activity, the segment is experiencing a gradual improvement in business trends as evidenced by the second consecutive quarter of net annualized retainer wins, reversing a decline that began in the fourth quarter of 2008. IPO filings have increased significantly compared to last year’s first quarter and improving levels of M&A activity provide some evidence of a trend toward more normal levels of opportunity for the segment.

Segment Reclassification and Other

Effective January 1, 2010, we implemented a change in our organizational structure. The Company’s Financial and Enterprise Data Analytics (FEDA) sub-practice has been moved from the Technology segment to the Forensic and Litigation Consulting segment. All discussion and presentation of results have been adjusted to set forth this change for all periods presented. Adjusted Segment EBITDA, a non-GAAP measure, excludes the impact of special charges as discussed above.

First Quarter Conference Call

FTI will hold a conference call for analysts and investors to discuss first quarter financial results at 9:00 AM Eastern Time on Wednesday, May 5, 2010. 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, 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 3,400 employees located in most major business centers in the world, we work closely with clients every day to anticipate, illuminate, and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. More information can be found at www.fticonsulting.com.  

Use of Non-GAAP Measure

Note: We define Adjusted EBITDA as consolidated operating income before depreciation, amortization of intangible assets and special charges plus non-operating litigation settlements. We defined Adjusted Segment EBITDA as the segment’s share of consolidated operating income before depreciation, amortization of intangible assets and special charges plus non-operating litigation settlements. Although Adjusted EBITDA, and Adjusted Segment EBITDA are not measures of financial condition or performance determined in accordance with generally accepted accounting principles (“GAAP”), we believe that these measures can be a useful operating performance measure for evaluating our results of operations as compared from period to period and as compared to our competitors. EBITDA is a common alternative measure of operating performance used by investors, financial analysts and rating agencies to value and compare the financial performance of companies in our industry. We use Adjusted EBITDA and Adjusted Segment EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee incentive compensation. We define Adjusted earnings per diluted share (Adjusted EPS) as earnings per diluted share minus the per share impact of the special charges.

Adjusted EBITDA, Adjusted Segment EBITDA and Adjusted EPS are not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. These non-GAAP measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our statements of income. Reconciliations of operating profit to Adjusted EBITDA, segment operating profit to Adjusted Segment EBITDA and EPS to Adjusted EPS are included in the accompanying tables to today’s press release.

Safe Harbor Statement

This press release includes "forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, that 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 projections will result or be achieved or that actual results will not differ from expectations.  The Company has experienced fluctuating revenues, operating income and cash flow in some prior periods and expects this will occur from time to time in the future.  The Company’s actual results may differ from our expectations.  Further, preliminary results are subject to normal year-end adjustments. Other factors that could cause such differences include the current global financial crisis and economic conditions, the crisis in and deterioration of the financial and real estate markets, 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 and in the Company's other filings with the Securities and Exchange Commission. 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.

FINANCIAL TABLES FOLLOW

SOURCE FTI Consulting, Inc.