FTI Consulting, Inc. (FCN)

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FTI Consulting, Inc. (FCN)

Q3 2009 Earnings Call

November 4, 2009; 05:00 pm ET


Jack Dunn - President & Chief Executive Officer

Dennis Shaughnessy - Chairman

David Bannister - Chief Administrative Officer

Jorge Celaya - Chief Financial Officer

Dom DiNapoli - Chief Operating Officer

Eric Boyriven - Investor Relations


Paul Ginocchio - Deutsche Bank

Tobey Sommer - Suntrust Robinson Humphrey

Arnie Ursaner - CJS Securities

Tim McHugh - William Blair

David Gold - Sidoti

Andrew Fones - UBS

Bill Sutherland - Boenning & Scattergood

Jim Janesky - Stifel Nicolaus

Joseph Foresi - Janney Montgomery Scott

Dan Leben - Robert W. Baird

Scott Schneeberger - Oppenheimer

Kevane Wong - JMP Securities

Sean Jackson - Avondale Partners



Good day and welcome to the FTI Consulting 2009 third quarter conference call. As a reminder, today’s call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Eric Boyriven of FD; please go ahead sir.

Eric Boyriven

Good afternoon and welcome to the FTI Consulting conference call to discuss the company’s 2009 third quarter results which were reported after close of trading today. Management will begin with formal remarks after which they’ll take your questions.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 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.

A word 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 revenue, operating income and cash flow in some prior periods and expects this will occur from time-to-time in the future.

Further, preliminary results are subject to normal year end adjustments. Other factors that could cause such differences include the current global financial crisis and continuing deterioration of global economic conditions a crisis aimed in deterioration of the financial and real estate markets the pace and the timing an 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 Risk Factors in the most recent Form 10-K and in the company’s filings with the Securities and Exchange Commission.

Investors are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of this earnings call. We are under no duty to update any of the forward-looking statements to confirm such statements to actual results. We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements.

We use EBITDA in evaluating financial performance. Although EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, we believe that can be a useful operating performance measure for evaluating our results of operation 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 the companies in our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses.

We also use EBITDA to value the businesses we acquire or anticipate acquiring. EBITDA is 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. This non-GAAP measure 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 EBITDA to net income and segment EBITDA to segment operating income are included in the tables that accompany today’s press release available at www.fticonsulting.com.

With these formalities out of the way, I would like to turn the call over to Jack Dunn, President and Chief Executive Officer; Jack, please go ahead.

Jack Dunn

Thank you, Eric. Good afternoon and thank you for joining us to discuss our third quarter 2009 results. These were released this afternoon right after the market closed and I hope you’ve had a chance to review them. If you have not, they are available on our website at www.fticonsulting.com.

With me this afternoon on the call are Dennis Shaughnessy, our Chairman; Jorge Celaya, our Chief Financial Officer; David Bannister, our Chief Administrative Officer; and Dom DiNapoli, our Chief Operating Officer.

This afternoon I’ll begin with an overview of some of the investments we’ve made in our company since we last spoke, review the quarter and then talk about the share repurchase program authorized by our board today. Finally as always we’ll be happy to take your questions.

Before I begin, however, I know many of my fellow employees join us on these calls. So before I’d anything else, I would like to thank them for their great work both this year and this quarter. While the economy is a mess and by anybody’s measure has not caught up with the stock market and the average S&P 500 companies has seen revenues fall almost 13% this year, we’ve grown almost 19%.

This following a year, when the S&P revenues grew 5.3% and we grew at 29%. As I said, this is attributed to our people, and they’re intellectual capital their stature in the marketplace and to our gain plan to provide a balance portfolio of products and services that has built not only to last, but it’s built for all seasons.

Within the context of this tough economic environment and the anticipated third quarter seasonality that increasingly affects our company and our seasonal results. We produced record third quarter results. While the world is trying to find a bottom we’ve continued to grow and revenues, EBITDA and EPS exceeded any results for our third quarter in our history.

Our revenues in the quarter increased 7.1% from $325.5 million a year ago, to $348.6 million. EBITDA increased 19.4% from $65.2 million, to $77.9 million and EBITDA margins, even in light of our continuing investments in talent and brand building, increased 230 basis points over the third quarter last year. EPS increased from $0.48 last year to $0.70 in the recent quarter including the onetime effect of the buyout of a German joint venture and strategic communications and certain tax benefits.

In the quarter, once again as in recent quarters, the restructuring environment remains robust driving the results in our corporate financing restructure segment. Just as important however, we also began to see stability in growing momentum in some of the more pro-cyclical businesses.

In particular, economic consulting has started to grow into its investment with financial economic in antitrust activity and looks forward to a good fourth quarter. We’ve seen the beginning of some green shoots in our capital markets driven businesses such as transaction advisory and strategic communications, and while general commercial litigation activity continues to be slow, FLC has done a good job of managing through the slack environment, and has won the best assignments at least there are to be had.

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