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| 8-K - 8-K - FTI CONSULTING, INC | d820153d8k.htm |
Exhibit 99.1
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FTI Consulting, Inc.
Exhibit 99.1
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Cautionary Note About Forward-Looking Statements
This presentation 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 2014 financial results, our medium-term growth targets or other future financial results. When used in this press release, words such as
“anticipates,” “aspirational,” “estimates,” “expects,” “goals,” “intends,” “believes,” “forecasts,” “targets,” “objectives” 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 2014 financial results, or other future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs, projections and growth targets 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, estimates or growth targets will be achieved, and the Company’s actual results may differ materially from our expectations, beliefs, estimates and growth targets. 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.
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FTI Consulting: A Leader Among Leaders
FCN $1.7 BLN 1982 4300+
NYSE listed Market capitalization(1) Year founded Employees worldwide
400+ 81 16 2 Nobel
Senior Managing Directors Offices in 81 cities around Experts in 16 industry Laureates
the globe specialties
10/10 95/100 55/100
Advisor to the world’s Advisor to 95 of the 55 of Fortune 100
top 10 bank holding world’s top 100 law corporations are clients
companies firms
(1)Total shares outstanding times the closing share price as of October 31st, 2014.
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Overview
FTI Consulting is a leading professional services company with strong people and strong positions –
corporations and law firms come to FTI Consulting when there is a critical need
New management team (CEO, CFO, CHRO, Chief Strategy, regional leaders) put in place over first nine
months of 2014 – focused on analysis, accountability and discipline
Shifting from a capital driven to an organic growth strategy – with an emphasis on profitable revenue
growth
Committed to building a profitable business with sustainable underlying growth, regardless of economic
conditions
Willingness to invest EBITDA in key growth areas where we have strong people and strong positions
Established medium-term financial target of Adjusted EPS of $2.50+ in 2016
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Balanced and Diversified Portfolio
Corporate Finance/Restructuring YTD 2014 Segment Revenues
Bankruptcy Support Services Performance Improvement
Interim Management Private Equity Advisory
Investment Banking Restructuring/Turnaround Services
Litigation Support Transaction Advisory Services
Office of the CFO Valuation & Financial Advisory Services 11%
22%
Forensic and Litigation Consulting
Business Insurance Claims Global Risk & Investigations Practice 14%
Compliance, Monitoring & Receivership Government Contracts
Construction & Environmental Solutions Health Solutions
Dispute Advisory Services Insurance
Financial Enterprise & Data Analytics Intellectual Property
Financial Services Trial Services 26% 27%
Forensic Accounting & Advisory Services
Economic Consulting
Antitrust & Competition Economics Labor & Employment
Business Valuation Public Policy
Intellectual Property Regulated Industries YTD 2014 Segment EBITDA
International Arbitration Securities Litigation & Risk Management
Technology
Computer Forensics & Investigations Discovery Consulting 6%
E-discovery Software & Services 20%
22%
Strategic Communications
Corporate Communications Litigation Communications
Creative Engagement & Digital M&A Communications
Communications Public Affairs
Crisis Communications 31%
Restructuring & Financial Issues
Employee Engagement & Change Shareholder Activism & Proxy Advisory 21%
Communications
Strategy Consulting & Research
Financial Communications
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Corporate Finance/Restructuring
Services
Bankruptcy Support Services Transaction Advisory Services
Interim Management Valuation & Financial Advisory Services
Investment Banking Clients
Litigation Support Corporations/C-Suite
Office of the CFO Boards of Directors
Performance Improvement Equity Sponsors
Private Equity Advisory Secured Lenders
Restructuring/Turnaround Services Unsecured Creditors
2010 2011 2012 2013 Q1 2014 Q2 2014 Q3 2014
Segment Revenue $396,216 $364,409 $394,718 $382,586 $93,982 $104,020 $100,041
Segment Gross Profit Margin 41.8% 37.4% 39.5% 35.9% 31.9% 35.1% 33.8%
Segment SG&A $59,629 $60,499 $61,027 $71,966 $19,786 $18,191 $19,047
Adjusted Segment EBITDA $ 108,152 $75,942 $95,916 $67,183 $10,951 $19,133 $15,534
Adjusted Segment EBITDA Margin 27.3% 20.8% 24.3% 17.6% 11.7% 18.4% 15.5%
Segment Billable Headcount 620 587 697 737 726 713 722
(in thousands, except percentages and headcount data) (unaudited)
See accompanying financial tables for a reconciliation of Adjusted Segment EBITDA, which is a non-GAAP measure, to the most directly comparable GAAP measure.
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Corporate Finance/Restructuring (continued)
Segment Offering
The Corporate Finance/Restructuring segment focuses on strategic, operational, financial and capital needs of businesses by addressing the full spectrum of financial and transactional challenges faced by companies, boards, private equity sponsors, creditor constituencies and other stakeholders.
Medium–Term Initiatives
Reinforce core positions e.g., TMT, retail, company-side, interim management
Drive organic growth in new/adjacent businesses where we have the right to win, e.g., Office of the CFO, carve out
Drive overseas bets to fruition e.g., EMEA transaction advisory services, EMEA Tax
Focus on profitability enhancements e.g., geographic rationalization, cost control, engagement profitability improvements
Q3 2014 Form 10–Q Management’s Discussion & Analysis
Revenues increased $6.1 million, or 6.4%, to $100.0 million for the quarter ended September 30, 2014 compared to $94.0 million for the same prior year period.
The increase in revenues was due to increased demand for non-distressed work in our North America businesses and growth in our European transaction advisory and tax practices; partially offset by declines in global bankruptcy and restructuring work.
Gross profit decreased $1.8 million, or 5.0%, to $33.8 million for the quarter ended September 30, 2014 compared to $35.6 million for the same prior year period. Gross profit margin decreased to 33.8% for the quarter ended September 30, 2014 compared to 37.8% for the same prior year period.
The decrease in gross profit margin was due to the overall decline on higher margin global bankruptcy and restructuring work and increased performance based compensation, partially offset by increased demand for non-distressed engagements.
Adjusted Segment EBITDA decreased $3.9 million, or 19.9%, to $15.5 million for the quarter ended September 30, 2014 compared to $19.4 million for the same prior year period.
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Forensic and Litigation Consulting
Services
Business Insurance Claims Insurance
Compliance, Monitoring & Receivership Intellectual Property
Construction & Environmental Solutions Trial Services
Dispute Advisory Services Clients
Financial Enterprise & Data Analytics (“FEDA”) Corporations
Financial Services Boards of Directors
Forensic Accounting & Advisory Services (“FAAS”) Governments
Global Risk & Investigations Practice (“GRIP”) Law Firms
Health Solutions
2010 2011 2012 2013 Q1 2014 Q2 2014 Q3 2014
Segment Revenue $379,780 $428,730 $407,586 $433,632 $121,429 $119,081 $121,732
Segment Gross Profit Margin 37.5% 36.5% 33.8% 35.9% 39.2% 36.7% 35.0%
Segment SG&A $69,712 $78,745 $80,842 $84,616 $22,121 $22,481 $21,409
Adjusted Segment EBITDA $76,402 $80,923 $60,566 $74,481 $26,494 $22,271 $22,260
Adjusted Segment EBITDA Margin 14.9% 18.9% 14.9% 17.2% 21.8% 18.7% 18.3%
Segment Billable Headcount 911 957 952 1,061 1,076 1,059 1,135
(in thousands, except percentages and headcount data) (unaudited)
See accompanying financial tables for a reconciliation of Adjusted Segment EBITDA, which is a non-GAAP measure, to the most directly comparable GAAP measure.
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Forensic and Litigation Consulting (continued)
Segment Offering
The Forensic and Litigation Consulting segment provides
a complete range of multidisciplinary, independent
dispute advisory, investigative, data acquisition/analysis
and forensic accounting services. Our professionals
combine end-to-end capabilities with unmatched
qualifications when clients face high stakes litigation,
arbitration and compliance investigations and regulatory
scrutiny.
Medium–Term Initiatives
Reinvest behind core areas of strength e.g., FAAS, FEDA
Grow key regions where we have a right to win e.g.,
construction & environmental solutions
Invest behind people to expand key businesses e.g.,
insurance, cyber security
Q3 2014 Form 10–Q Management’s Discussion & Analysis
Revenues increased $8.7 million, or 7.7%, to $121.7 million for the three months ended September 30, 2014 from $113.1 million for the same prior year period.
$3.3 million of this increase, or 2.9%, was due to acquisitions as compared to the same prior year period. Revenues increased organically $5.4 million, or 4.8%, due to higher demand in our North America investigations practice and global construction and disputes practices, partially offset by lower success fees and lower revenues in our heath solutions practice.
Gross profit declined $1.9 million, or 4.3%, to $42.7 million for the three months ended September 30, 2014 from $44.6 million for the same prior year period. Gross profit margin decreased 4.4 percentage points to 35.0% for the three months ended September 30, 2014 from 39.4% for the same prior year period.
The decrease in gross profit margin was due to lower success fees, weaker performance in our health solutions practice and increased performance-based compensation partially offset by higher utilization in our global disputes, investigations, construction solutions and data analytics practices.
Adjusted Segment EBITDA decreased by $3.1 million, or 12.2%, to $22.3 million for the three months ended September 30, 2014 from $25.4 million for the same prior year period.
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Economic Consulting
Services
Antitrust & Competition Economics Regulated Industries
Business Valuation Securities Litigation & Risk Management
Center for Healthcare Economics & Policy Clients
Intellectual Property Corporations
International Arbitration Government Entities
Labor & Employment Law Firms
Public Policy
2010 2011 2012 2013 Q1 2014 Q2 2014 Q3 2014
Segment Revenue $255,660 $ 353,981 $391,622 $447,366 $106,851 $117,227 $120,494
Segment Gross Profit Margin 33.2% 31.4% 32.3% 32.9% 27.0% 27.6% 27.6%
Segment SG&A $37,879 $46,802 $51,912 $58,282 $16,880 $15,242 $ 15,683
Adjusted Segment EBITDA $49,481 $67,028 $77,461 $92,204 $13,030 $18,043 $18,426
Adjusted Segment EBITDA Margin 19.4% 18.9% 19.8% 20.6% 12.2% 15.4% 15.3%
Segment Billable Headcount 297 433 474 530 538 525 551
(in thousands, except percentages and headcount data) (unaudited)
See accompanying financial tables for a reconciliation of Adjusted Segment EBITDA, which is a non-GAAP measure, to the most directly comparable GAAP measure.
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Economic Consulting (continued)
Segment Offering
The Economic Consulting segment provides analysis of
complex economic issues. We help our clients with legal,
regulatory and international arbitration proceedings;
strategic decision making; and public policy debates in the
U.S. and around the world. We deliver sophisticated
economic analysis and modeling of issues arising in M&A
transactions, complex antitrust litigation, commercial
disputes, international arbitration, regulatory proceedings
and a wide range of securities litigation. Our statistical and
economic experts help clients analyze complex economic
issues, such as the economic impact of deregulation on a
particular industry or the amount of damages suffered by a
business as a result of particular events.
Medium–Term Initiatives
Continue driving Compass Lexecon
Expand international arbitration, energy and Center for
Healthcare Economics and Policy offerings
Continue to expand cross-segment collaboration
Q3 2014 Form 10–Q Management’s Discussion & Analysis
Revenues increased $7.4 million, or 6.6%, to $120.5 million for the three months ended September 30, 2014 compared to $113.1 million for the same prior year period.
Revenues increased organically $7.4 million, or 6.6%, including a 1.1% increase from the estimated positive impact from foreign currency translation. The remaining increase in revenue is due to higher demand for M&A related services and higher realized rates for our international arbitration services.
Gross profit decreased $3.8 million, or 10.3%, to $33.2 million for the three months ended September 30, 2014 compared to $37.1 million for the same prior year period. Gross profit margin decreased to 27.6% for the three months ended September 30, 2014 from 32.8% for the same prior year period.
The decrease in gross profit margin was the result of increased compensation expense related to employment contract extensions of certain key senior client-service professionals, partially offset by higher realized bill rates that were partially related to staff mix.
Adjusted Segment EBITDA decreased $4.8 million, or 20.7%, to $18.4 million for the three months ended September 30, 2014, compared to $23.2 million for the same prior year period.
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Technology
Software & Services Clients
Computer Forensics & Investigations Corporations
Discovery Consulting Government Agencies
E-discovery Software & Services Law Firms
2010 2011 2012 2013 Q1 2014 Q2 2014 Q3 2014
Segment Revenue $176,607 $218,738 $195,194 $202,663 $60,063 $60,720 $62,359
Segment Gross Profit Margin 62.7% 60.0% 54.9% 52.2% 48.9% 45.7% 49.7%
Segment SG&A $ 59,721 $65,322 $62,436 $59,890 $16,079 $16,648 $17,017
Adjusted Segment EBITDA $64,358 $77,011 $57,203 $60,655 $17,348 $15,104 $17,835
Adjusted Segment EBITDA Margin 36.4% 35.2% 29.3% 29.9% 28.9% 24.9% 28.6%
Segment Billable Headcount 257 290 277 306 321 328 335
(in thousands, except percentages and headcount data) (unaudited)
See accompanying financial tables for a reconciliation of Adjusted Segment EBITDA, which is a non-GAAP measure, to the most directly comparable GAAP measure.
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Technology (continued)
Segment Offering
The Technology segment is a leading provider of
software, services and consulting for e-discovery and
information management. We assist clients with internal,
regulatory and global investigations, early case
assessment, litigation and joint defense, antitrust and
competition investigations, including pre-merger
notification “Second Request”, and the secure
management, analysis and use of critical corporate
information. We provide a comprehensive suite of
software and services to help clients locate, review and
produce electronically stored information (“ESI”) including
e-mail, computer files, voicemail, instant messaging and
financial and transactional data. Our proprietary
Ringtail® software and Acuity® managed review are
used for e-discovery and document review in litigation
and secure information management.
Medium–Term Initiatives
Increased investment in sales and marketing
Ongoing investment in new products and services and
geographic expansion to stay leading edge with respect to the
most complicated, major corporate events
Q3 2014 Form 10–Q Management’s Discussion & Analysis
Revenue increased by $11.2 million, or 21.8%, to $62.4 million for the three months ended September 30, 2014 compared to $51.2 million for the same prior year period.
The increase in revenue is due to continued higher demand from complex global investigations and financial services industry investigations that more than offset lower services pricing.
Gross profit increased by $3.7 million to $31.0 million for the three months ended September 30, 2014 compared to the $27.3 million for the same prior year period. Gross profit margin decreased to 49.7% of revenue from 53.3% of revenue compared to the same prior year period.
The gross profit margin decline is due to an increased mix of lower margin services and investments in global data centers and operations support.
Adjusted Segment EBITDA increased by $2.5 million, or 16.0%, for the three months ended September 30, 2014, compared to $15.4 million for the same prior year period.
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Strategic Communications
Services
Corporate Communications Shareholder Activism and Proxy Advisory
Creative Engagement & Digital Communications Strategy Consulting & Research
Crisis Communications Clients
Employee Engagement & Change Communications CEOs
Financial Communications CFOs
Litigation Communications Chief Communications Officers
M&A Communications Investor Relations Officers
Public Affairs Boards of Directors
Restructuring & Financial Issues
2010 2011 2012 2013 Q1 2014 Q2 2014 Q3 2014
Segment Revenue $193,198 $200,910 $187,750 $186,245 $43,227 $53,276 $46,552
Segment Gross Profit Margin 37.4% 37.2% 36.9% 34.7% 35.6% 34.5% 37.1%
Segment SG&A $46,469 $50,919 $46,852 $47,874 $13,128 $13,084 $11,154
Adjusted Segment EBITDA $28,971 $26,801 $25,019 $18,737 $2,729 $5,834 $ 6,605
Adjusted Segment EBITDA Margin 15.0% 13.3% 13.3% 10.1% 6.3% 10.9% 14.2%
Segment Billable Headcount 583 582 593 590 584 566 549
(in thousands, except percentages and headcount data) (unaudited)
See accompanying financial tables for a reconciliation of Adjusted Segment EBITDA, which is a non-GAAP measure, to the most directly comparable GAAP measure.
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Strategic Communications (continued)
Segment Offering
The Strategic Communications segment provides advice
and consulting services relating to financial and
corporate communications and investor relations,
reputation management and brand communications,
public affairs, business consulting and digital design
and marketing.
Medium–Term Initiatives
Reinforce financial and corporate communications positions
Continued expansion of public affairs practice
Focus on EBIT improvement
Q3 2014 Form 10–Q Management’s Discussion & Analysis
Revenues increased $3.2 million, or 7.5%, to $46.6 million for the three months ended September 30, 2014 from $43.3 million for the same prior year period.
The increase in revenue included a 2.3% estimated positive impact from foreign currency translation, primarily due to the strengthening of the British pound relative to the U.S. dollar. The remaining revenue increase was primarily due to an increase in project revenues in North America and Asia Pacific.
Gross profit increased $2.3 million, or 15.1%, to $17.3 million for the three months ended September 30, 2014 from $15.0 million for the same prior year period. Gross profit margin increased to 37.1% for the three months ended September 30, 2014 from 34.6% for the same prior year period.
The gross profit margin increase was due to the mix of project engagements.
Adjusted Segment EBITDA increased $2.6 million, or 63.7%, to $6.6 million for the three months ended September 30, 2014, from $4.0 million for the same prior year period.
During the third quarter of 2013, we recorded an $83.8 million non-deductible goodwill impairment charge related to the Strategic Communications segment.
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Financial Overview
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Historical Revenues and Adjusted Earnings Per Share
$2,000 Revenues $1,755—$1,770
$1,800 $1,652
$1,567 $1,577
$1,600 $1,400 $1,401
$1,400
$1,200
Millions) $1,000
$ $800
(
$600
$400
$200
$0
2009 2010 2011 2012 2013 2014 Guidance
$3.00 Adjusted Earnings Per Share
$2.63
$2.50 $2.37 $2.50+
$2.13 $2.17 $2.09 $1.85 – $2.00
$2.00
$1.50
$1.00
$0.50
$0.00
2009 2010 2011 2012 2013 2014 Guidance 2016 Target
See accompanying reconciliations of Adjusted Earnings Per Share, which is a non-GAAP measure, to the most directly comparable GAAP measure, except for the year ended December 31, 2009 for which there were no adjustments from fully diluted EPS to Adjusted EPS.
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Financial Profile
All numbers in $000s except for DSOs
Q3 2014 Q2 2014 Q3 2013
Cash and cash equivalents $ 178,778 $ 94,412 $ 147,926
Accounts receivable, net $ 565,657 $ 579,737 $ 494,910
Days sales outstanding (“DSO”)1 107 108 102
Net cash provided by operating activities $ 97,583 $ 33,691 $ 84,437
Purchases of property and equipment $ 10,019 $ 6,599 $ 8,864
Payments for acquisition of businesses, net of cash $ 73—$ 254
received
Purchase and retirement of common stock — $ 20,011
Total debt $ 711,000 $ 717,000 $ 717,000
(1) DSO is a performance measure used to assess how quickly revenues are collected by the Company. We calculate DSO at the end of each reporting period by dividing net accounts receivable reduced by billings in excess of services provided, by revenue for the quarter, adjusted for changes in foreign exchange rates. We multiply the result by the number of days in the quarter.
See accompanying reconciliations of Adjusted EBITDA and Adjusted Diluted Earnings Per Share, which are non-GAAP measures, to the most comparable GAAP measures.
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Appendix
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2014 Awards & Accolades
Most professionals by firm Named one of the Best
named in Global Arbitration Ranked as #1 Crisis Economics Firms in the
Review’s list of “The Management Firm by The Deal World by Global
International Who’s Who of Pipeline for seven consecutive Competition Review for nine
Commercial Arbitration” for years consecutive years
five consecutive years
Global Competition Ringtail E-discovery Software FTI Technology
Review’s Economist Named as Member of the Recognized by The
of the Year in 2014, “Leaders” Quadrant in National Law Journal for
2012 and 2011 Gartner’s “Magic Quadrant for “Best Predictive Coding
E-discovery Software” Report Solution”
Winner of the 2014
Association of Management Named 2014 Strategic
Consulting Firms Communications Firm of
Operational Performance the Year in Belgium by
Spotlight Award Corporate INTL magazine
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FTI Consulting Corporate Leadership Team
Eric B. Miller
Steven H. Gunby David M. Johnson Executive Vice
President & Chief Chief Financial President,
Executive Officer Officer General Counsel &
Chief Risk Officer
Paul Linton Holly Paul Adam S. Bendell
Chief Strategy & Chief Human Chief Innovation
Transformation Resources Officer Officer
Officer
Jeffrey S. Amling
Catherine Freeman Senior Managing
Senior Vice Director,
President,
Controller & Chief Business
Accounting Officer Development &
Marketing
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FTI Consulting Business Leadership Team
Robert Duffy
Neal Hochberg John Klick
Global Segment
Leader, Corporate Global Segment Global Segment
Finance/ Leader, Forensic & Leader, Economic
Litigation Consulting Consulting
Restructuring
Ken Barker Seth Rierson Ed Reilly
Global Practice Global Segment Global Segment
Leader, Health Leader, Leader, Strategic
Solutions Technology Communications
Carlyn Taylor Frank Holder Rod Sutton
Global Industries Latin America Asia Pacific
Leader Chairman Chariman
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Financial Tables
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YTD 2014 Results: Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands, except per share data)
Nine Months Ended September 30,
2014 (unaudited) 2013 (unaudited)
Revenues $1,331,054 $1,236,434
Operating expenses
Direct cost of revenues 863,068 773,160
Selling, general & administrative expense 317,880 287,485
Special charges 14,711 10,846
Acquisition-related contingent consideration(1,591)(6,091)
Amortization of other intangible assets 11,466 17,293
Goodwill impairment charge—83,752
1,205,534 1,166,445
Operating income 125,520 69,989
Other income (expense)
Interest income & other 3,465 1,702
Interest expense(38,197)(38,600)
(34,732)(36,898)
Income before income tax provision 90,788 33,091
Income tax provision 32,902 36,546
Net income (loss) $57,886($3,455)
Earnings (loss) per common share – basic $1.46($0.09)
Earnings (loss) per common share – diluted $1.43($0.09)
Weighted average common shares outstanding – basic 39,637 39,212
Weighted average common shares outstanding – diluted 40,608 39,212
Other Comprehensive income (loss), net of tax:($10,120)($10,108)
Foreign currency translation adjustments, net of tax $0
Total other comprehensive income (loss), net of tax(10,120)(10,108)
Comprehensive income (loss) $47,766($13,563)
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YTD 2014 Results: Operating Results by Business Segment
(in thousands, except headcount data and rate per hour) (unaudited)
Adjusted EBITDA Average Billable Revenue-Generating
Nine Months Ended September 30, 2014 Revenues Adjusted EBITDA (1) Utilization Headcount (at period
Margin Rate end)
Corporate Finance/Restructuring $298,043 $45,618 15.3% 71% $388 722
Forensic and Litigation Consulting 362,242 71,025 19.6% 71% $323 1,135
Economic Consulting 344,572 49,499 14.4% 77% $517 551
Technology (2) 183,142 50,287 27.5% N/M N/M 335
Strategic Communications (2) 143,055 15,168 10.6% N/M N/M 549
Total $1,331,054 $231,597 17.4% 3,292
Unallocated Corporate(57,103)
Adjusted EBITDA (1) $174,494 13.1%
Adjusted EBITDA Average Billable Revenue-Generating
Nine Months Ended September 30, 2013 Revenues Adjusted EBITDA (1) Utilization Headcount (at period
Margin Rate end)
Corporate Finance/Restructuring $289,775 $56,335 19.4% 66% $407 732
Forensic and Litigation Consulting 318,912 56,925 17.8% 68% $315 999
Economic Consulting 339,277 70,222 20.7% 84% $509 528
Technology (2) 149,101 45,985 30.8% N/M N/M 297
Strategic Communications (2) 139,369 12,809 9.2% N/M N/M 617
Total $1,236,434 $242,276 19.6% 3,173
Unallocated Corporate(44,394)
Adjusted EBITDA (1) $197,882 16.0%
(1) See accompanying reconciliations of Adjusted EBITDA and Adjusted Segment EBITDA, which are non-GAAP measures, to the most comparable GAAP measures.
(2) The majority of the Technology and Strategic Communications segments’ revenues are not generated based on billable hours. Accordingly, utilization and average billable rate metrics are not presented as they are not meaningful as a segment-wide metric.
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YTD 2014: Reconciliation of Non-GAAP Financial Measures
(in thousands, except per share data) (unaudited)
Nine Months Ended September 30,
2014 2013
Net income (loss) $57,886($3,455)
Add back:
Special charges, net of tax effect (1) 8,676 7,100
Goodwill impairment charges (2)—83,752
Remeasurement of acquisition-related contingent consideration, net of tax effect (3)(1,514)(8,216)
Less:
Interim period impact of including goodwill impairment charges in the annual effective tax rate, net of tax -(10,805)
Adjusted Net Income (5) $65,048 $68,376
Earnings (loss) per common share – diluted $1.43($0.09)
Add back:
Special charges, net of tax effect (1) 0.21 0.18
Goodwill impairment charges (2)—2.14
Remeasurement of acquisition-related contingent consideration, net of tax effect (3)(0.04)(0.21)
Less:
Interim period impact of including goodwill impairment charges in the annual effective tax rate, net of tax -(0.28)
Impact of denominator for diluted EPS (4) -(0.05)
Adjusted EPS – diluted (5) $1.60 $1.69
Weighted average number of common shares outstanding – diluted 40,608 40,385
(1) The tax effect takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). As a result, the effective tax rate for the adjustments related to special charges for the
nine months ended September 30, 2014 was 41.0%. The tax expense related to the adjustment for special charges for the nine months ended September 30, 2014 was $6.0 million, or a $0.15 impact on diluted earnings per
share. The effective tax rates for the adjustments related to special charges for the nine months ended September 30, 2013 was 34.5%. The tax expense related to the adjustment for special charges for the nine months ended
September 30, 2013 was $3.7 million, or $0.10 impact on diluted earnings per share.
(2) The goodwill impairment charge was non-deductible for income tax purposes and resulted in no tax benefit for the year ended December 31, 2013.
(3) The tax effect takes into account the tax treatment and related tax rate(s) that apply to each adjustment in the applicable tax jurisdiction(s). As a result, the effective tax rates for the adjustments related to the remeasurement of
acquisition-related contingent consideration for the nine months ended September 30, 2014 was 36.5%. The tax expense related to the remeasurement of acquisition-related contingent consideration for the nine months ended
September 30, 2014 was $0.9 million, or a $0.02 impact on diluted earnings per share. The adjustment related to remeasurement of acquisition-related contingent consideration for the nine months ended September 30, 2013
was not taxable.
(4) For the nine months ended September 30, 2013, the Company reported a net loss. For that period, the number of basic weighted average common shares outstanding equals the number of diluted weighted average common
shares outstanding for purposes of calculating GAAP earnings per share because potentially dilutive securities would be antidilutive. For non-GAAP purposes, the total per share and share amounts presented herein reflect the
impact of the inclusion of share-based awards that are considered dilutive based on the impact of the add backs included in Adjusted Net Income above.
(5) See End Notes for definitions of Adjusted Net Income (Loss) and Adjusted EPS.
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YTD 2014: Reconciliation of Net Income (Loss) and Operating Income (Loss) to Adjusted EBITDA
(in thousands) (unaudited)
Corporate Forensic and Economic Strategic Unallocated
Nine Months Ended September 30, 2014 Finance/ Litigation Technology Total
Restructuring Consulting Consulting Communications Corporate
Net income $57,886
Interest income and other(3,465)
Interest expense 38,197
Income tax provision 32,902
Operating income (loss) (1) $39,081 $66,517 $46,515 $37,712 $9,910($74,215) $125,520
Depreciation and amortization 2,514 3,057 2,996 11,902 1,884 2,827 25,180
Amortization of other intangible assets 4,601 2,077 763 654 3,371—11,466
Special Charges 84 308 12 19 3 14,285 14,711
Remeasurement of acquisition-related
contingent consideration(662)(934)(787) — -(2,383)
Adjusted EBITDA (1) $45,618 $71,025 $49,499 $50,287 $15,168($57,103) $174,494
Corporate Forensic and Economic Strategic Unallocated
Nine Months Ended September 30, 2013 Finance/ Litigation Technology Total
Restructuring Consulting Consulting Communications Corporate
Net income (loss)($3,455)
Interest Income and other(1,702)
Interest expense 38,600
Income tax provision 36,546
Operating income (loss) (1) $48,725 $52,194 $66,233 $29,129($76,369)($49,923) $69,989
Depreciation and amortization 2,541 2,958 2,647 10,888 1,898 3,286 24,218
Amortization of other intangible assets 4,945 1,603 1,331 5,952 3,462—17,293
Special charges 6,399 2,111 11 16 66 2,243 10,846
Goodwill — — 83,752—83,752
Remeasurement of acquisition-related
contingent consideration(6,275)(1,941) — —(8,216)
Adjusted EBITDA (1) $56,335 $56,925 $70,222 $45,985 $12,809($44,394) $197,882
(1) See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA.
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Q1 2014: Reconciliation of Net Income And Operating Income to Adjusted EBITDA
Corporate Forensic and Economic Strategic
Three Months Ended March 31, 2014 Finance/ Litigation Technology Corporate Total
Restructuring Consulting Consulting Communications
Net income $18,117
Interest income and other($1,003)
Interest expense $12,655
Income tax provision $10,348
Operating income1 $8,607 $25,402 $12,430 $13,066 $ 1,005($20,393) $40,117
Depreciation and amortization of intangible $3,006 $1,765 $1,387 $4,282 $ 1,724 $1,037 $13,201
assets
Remeasurement of acquisition-related($662)($673)($787) — -($2,122)
contingent consideration
Adjusted EBITDA1 $10,951 $26,494 $13,030 $17,348 $ 2,729($19,356) $51,196
(in thousands, except per share data) (unaudited)
(1) See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA.
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Q2 2014: Reconciliation of Net Income And Operating Income to Adjusted EBITDA
Corporate Forensic and Economic Strategic
Three Months Ended June 30, 2014 Finance/ Litigation Technology Corporate Total
Restructuring Consulting Consulting Communications
Net Income $17,247
Interest income and other($1,448)
Interest expense $12,908
Income tax provision $10,225
Operating income1 $17,068 $20,839 $16,840 $10,905 $ 4,030($30,750) $38,932
Depreciation and amortization of
intangible assets $2,065 $1,693 $1,203 $4,199 $ 1,804 $904 $11,868
Special charges — ——$9,364 $9,364
Remeasurement of acquisition-related -($261) — —($261)
contingent consideration
Adjusted EBITDA1 $19,133 $22,271 $18,043 $15,104 $ 5,834($20,482) $59,903
(in thousands, except per share data) (unaudited)
(1) See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA.
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Q3 2014: Reconciliation of Net Income And Operating Income to Adjusted EBITDA
Corporate Forensic and Economic Strategic
Three Months Ended September 30, 2014 Finance/ Litigation Technology Corporate Total
Restructuring Consulting Consulting Communications
Net income $22,522
Interest income and other($1,014)
Interest expense $12,634
Income tax provision $12,329
Operating income1 $13,406 $20,276 $17,245 $13,741 $4,875($23,072) $46,471
Depreciation and amortization of intangible $2,044 $1,676 $1,169 $4,075 $1,727 $886 $11,577
assets
Special charges $84 $308 $12 $19 $3 $4,921 $5,347
Adjusted EBITDA1 $15,534 $22,260 $18,426 $17,835 $6,605($17,265) $63,395
(in thousands, except per share data) (unaudited)
(1) See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA.
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2010 – 2013 Reconciliation of Net Income to Adjusted EPS and Adjusted EBITDA
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2010 – 2013 Reconciliation of Earnings Per Share to Adjusted Earnings Per Share
2013 2012 2011 2010
Adjusted EPS:
Net income (loss)($10,594)($36,986) $103,903 $65,984
Add back:
Special charges, net of tax $23,267 $19,115 $9,285 $32,733
Goodwill impairment charge $83,752 $110,387 —
Loss on early extinguishment of debt, net of tax—$2,910—$3,019
Remeasurement of acquisition-related contingent consideration, net of taxes($12,054)($5,228)($9,953) -
Adjusted Net Income1 $84,371 $90,198 $103,235 $101,736
Earnings (loss) per common share – diluted($0.27)($0.92) $2.39 $1.38
Add back:
Special charges, net of tax 0.59 0.47 0.21 0.69
Goodwill impairment charge 2.14 2.74 —
Loss on early extinguishment of debt, net of tax—0.07—0.06
Remeasurement of acquisition-related contingent consideration, net of taxes(0.30)(0.13)(0.23) -
Impact of denominator for diluted adjusted earnings per common share(0.07)(0.06) —
Adjusted earnings per common share – diluted1 $2.09 $2.17 $2.37 $2.13
Weighted average number of common shares outstanding – diluted 40,421 41,578 43,473 47,664
(in thousands, except per share data) (unaudited)
(1) See End Notes for definition of Adjusted Net Income and Adjusted EPS.
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Reconciliation of 2013 Net Loss And Operating Income (Loss) to Adjusted EBITDA
Corporate Forensic and Economic Strategic
Year Ended December 31, 2013 Finance/ Litigation Technology Corporate Total
Restructuring Consulting Consulting Communications
Net loss($10,594)
Interest income and other($1,748)
Interest expense $51,376
Income tax provision $42,405
Operating income (loss)1 $58,594 $68,211 $86,714 $38,038($72,129)($97,989) $81,439
Depreciation and amortization of intangible $9,929 $6,100 $5,479 $22,601 $7,048 $4,338 $55,495
assets
Special charges $10,274 $2,111 $11 $16 $66 $25,936 $38,414
Goodwill impairment charge — — $83,752—$83,752
Remeasurement of acquisition-related($11,614)($1,941) — —($13,555)
contingent consideration
Adjusted EBITDA1 $67,183 $74,481 $92,204 $60,655 $18,737($67,715) $245,545
(in thousands, except per share data) (unaudited)
| (1) |
|
See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA. |
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Reconciliation of 2012 Net Loss And Operating Income (Loss) to Adjusted EBITDA
Corporate Forensic and Economic Strategic
Year Ended December 31, 2012 Finance/ Litigation Technology Corporate Total
Restructuring Consulting Consulting Communications
Net loss($36,986)
Interest income and other($5,659)
Interest expense $56,731
Income tax provision $40,100
Loss on early extinguishment of debt $4,850
Operating income (loss)1 $80,970 $45,809 $71,992 $33,642($97,298)($76,079) $59,036
Depreciation and amortization of $8,835 $6,487 $4,478 $20,447 $7,218 $4,546 $52,011
intangible assets
Special charges $11,332 $8,276 $991 $3,114 $4,712 $1,132 $29,557
Goodwill impairment charge — — $110,387—$110,387
Remeasurement of acquisition-related($5,222)($6) — —($5,228)
contingent consideration
Adjusted EBITDA1 $95,915 $60,566 $77,461 $57,203 $25,019($70,401) $245,763
(in thousands, except per share data) (unaudited)
(1) See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA.
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Reconciliation of 2011 Net Loss And Operating Income (Loss) to Adjusted EBITDA
Forensic and
Corporate Finance/ Economic Strategic
Year Ended December 31, 2011 Litigation Technology Corporate Total
Restructuring Consulting Communications
Consulting
Net income $103,903
Interest income and other($6,304)
Interest expense $58,624
Income tax provision $49,224
Operating income (loss)1 $66,591 $74,831 $60,890 $ 57,917 $19,066($73,848) $205,447
Depreciation and amortization of intangible $8,902 $6,215 $4,045 $ 19,094 $7,735 $4,962 $50,953
assets
Special charges $9,440 $839 $2,093 — $2,840 $15,212
Remeasurement of acquisition-related($8,991)($962) — —($9,953)
contingent consideration
Adjusted EBITDA1 $75,942 $80,923 $67,028 $ 77,011 $26,801($66,046) $261,659
(in thousands, except per share data) (unaudited)
(1) See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA.
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Reconciliation of 2010 Net Loss And Operating Income (Loss) to Adjusted EBITDA
Corporate Forensic and Economic Strategic
Year Ended December 31, 2010 Finance/ Litigation Technology Corporate Total
Restructuring Consulting Consulting Communications
Net income $65,984
Interest income and other($4,423)
Interest expense $50,263
Income tax provision $41,407
Loss on early extinguishment of debt $5,161
Operating income (loss)1 $89,861 $62,759 $39,180 $ 27,569 $11,602($72,579) $158,392
Depreciation and amortization of $9,730 $7,447 $3,634 $ 20,876 $8,325 $5,232 $55,244
intangible assets
Special charges $8,561 $6,196 $6,667 $ 15,913 $9,044 $4,750 $51,131
Adjusted EBITDA1 $108,152 $76,402 $49,481 $ 64,358 $28,971($62,597) $264,767
(in thousands, except per share data) (unaudited)
(1) See End Notes for definitions of Segment Operating Income (Loss) and Adjusted EBITDA.
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End Notes: FTI Consulting Non-GAAP Data Reconciliations
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. Prior period amounts included herein have been reclassified to conform to the current period’s
presentation.
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 the remeasurement of acquisition-related contingent
consideration, special charges, goodwill impairment charges and losses on early extinguishment of debt.
We define Segment Operating Income (Loss) as a segment’s share of consolidated operating income. We define Total Segment Operating Income (Loss) as the total of
Segment Operating Income (Loss) for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income (Loss) for the purpose of
calculating Adjusted Segment EBITDA. We define Adjusted EBITDA as consolidated net income (loss) 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 Segment EBITDA Margin as Adjusted Segment EBITDA divided by the respective Segment Revenues.
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 (Loss).
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