FTI Consulting, Inc. (FCN)

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FTI Consulting, Inc. (FCN)

Q4 2009 Earnings Call Transcript

February 26, 2010 9:00 am ET

Executives

Eric Boyriven – IR, FD

Jack Dunn – President and CEO

Dennis Shaughnessy – Chairman

Dom DiNapoli – EVP and COO

Jorge Celaya – EVP and CFO

Dave Bannister – EVP, Chief Administrative Officer and Chief Development Officer

Analysts

Tim McHugh – William Blair & Company

Tobey Sommer – SunTrust Robinson Humphrey

Paul Ginocchio – Deutsche Bank

David Gold – Sidoti & Company

Joseph Foresi – Janney Montgomery Scott

Jim Janesky – Stifel Nicolaus

Scott Schneeberger – Oppenheimer

Mig Dobre – Robert W. Baird

Andrew Fones – UBS

John Massey – SunAmerica

Aaron Watts – Deutsche Bank

Kevane Wong – JMP Securities

Presentation

Operator

Good day, everyone and welcome to the FTI Consulting fourth quarter 2009 conference call. As a reminder, today's call is being recorded and now for opening remarks and introductions, I would like to turn the conference over to Mr. Eric Boyriven of FD. Please go ahead, sir.

Eric Boyriven

Good morning and welcome to the FTI Consulting conference call to discuss the company's 2009 fourth quarter results, which were reported earlier this morning. Management will begin with formal remarks after which we will 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 21 of the Securities and 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, business trends and other information that is not historical, including statements regarding estimates of our future financial results.

For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the Safe Harbor statement in the earnings press release we issued this morning, a copy of which is available on our website at www.fticonsulting.com as well as the disclosures under the headings, risk factors and forward-looking information in our most recent form 10-K and in our other 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.

During the call, we will discuss certain non-GAAP financial measures such as EBITDA. For discussion of these non-GAAP financial measures as well as reconciliations of these non-GAAP financial measures to the most nearly comparable GAAP measures, investors should review the earnings press release we issued this morning. These formalities out of the way, I'd like to turn the call over to Jack Dunn, President and Chief Executive Officer. Jack, please go ahead.

Jack Dunn

Thank you, Eric. Good morning and thanks to everyone for joining us to discuss our fourth quarter and full year 2009. These results were released this morning 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 morning on the call are Dennis Shaughnessy, our Chairman, Dom DiNapoli, our Chief Operating Officer, Jorge Celaya, our Chief Financial Officer and David Bannister, our Chief Administrative Officer. The recurring theme to 2009 has been the transition of the world from the paralysis and negativism that was so pervasive in late 2008 to one where the capital markets are more open.

Credit has become more available. Companies are more willing to invest in their businesses and confidence has begun to return. At FTI, we are seeing this transition in the drivers of our business. Moving from activities that prevailed in the downturn between late 2007 through most of last year, like bankruptcy and restructuring, to those that are more aligned with economic expansion such as capital markets, M&A, brand building and more normalized levels of litigation.

As we have done through the entire credit crisis and recession, in the fourth quarter, we continued to grow and our consolidated revenues, EBITDA and EPS exceeded many results for our fourth quarter in our history. Our revenues in the quarter increased 6.2% from $322.9 million a year ago to $342.9 million this year.

EBITDA increased 14.5% from $70.6 million to $80.8 million. And EBITDA margins increased 170 basis points over the fourth quarter last year and were the highest for any quarter in 2009. Finally, earnings per share increased from $0.56 last year to $0.71 in this year's fourth quarter, an increase of 27%.

For the full year 2009, we reported revenues of $1.4 billion, up more than 8% over last year EBITDA of $317 million -- excuse me, EBITDA of 317 million was up 13.5% year-over-year and was 22.7% of revenues compared to 21.6% a year ago.

Earnings per share were $2.70, an increase of 19.5%, over $2.26 in 2008. Given all the challenges the world faced in 2009, it was a very solid performance. Of course, we would not have achieved this without the exceptional people at FTI who stand with their clients throughout all cycles of the economy. I would like to recognize them for their outstanding commitment to our success.

We continued to manage our business not only for profitability but also to ensure that we convert our profits into cash. At $88 million, operating cash flow in the quarter was solid due to strong receivables collections. Managing our receivables remains a focus for us and our average DSOs in December were 68 days, down from 74 days in the same month last year.

For the full 2009, we generated $251 million in operating cash flow, where 175% of our net income of $143 million for the year, an increase of 27% over the previous year. Free cash flow after capital expenditures was $222 million for the year.

This strong free cash flow enabled us to fund our recently completed $250 million accelerated stock buy-back program and still have $134 million of cash, cash equivalents and short-term investments at year end.

We are comfortable that our current liquidity, including our unused $175 million credit line and access to the public debt markets give us the resources we need to pursue our strategy and fund our growth.

Now I'll talk about the segments. Corporate finance restructuring had what could only be described as a fantastic year in 2009. The best year of a lifetime for most of our practitioners.

Revenues in the quarter grew 16.5% over last year, which is even more impressive, given the extremely strong performance in the comparable quarter last year. Our focus on industry-specific expertise is paying off, as our health care and media and telecom practices both had excellent growth in the quarter.

Other key industries where we saw growth were financial services, real estate, insurance, entertainment and energy. EBITDA and corporate finance increased approximately 18% over last year to $43.8 million and EBITDA margin at 35.1% was higher than the 34.7% we reported a year ago.

In fact, apart from the exceptional performance in the second quarter of this year, it was the highest margin in the last five years. The slow environment for litigation and regulatory activity has been well documented by law firms and accounting firms and other publicly held companies.

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