FTI Consulting, Inc. (FCN)

FCN 
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Industry: Consumer Services
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FTI Consulting (FCN)

Q4 2010 Earnings Call

February 24, 2011 9:00 am ET

Executives

Jack Dunn - Chief Executive Officer, President and Director

Roger Carlile - Chief Administrative Officer and Executive Vice President

David Bannister - Chief Financial Officer, Chief Development Officer and Executive Vice President

Dominic DiNapoli - Chief Operating Officer and Executive Vice President

Eric Boyriven - Investor Relations

Dennis Shaughnessy - Executive Chairman

Analysts

Frank Atkins - BMO Capital Market

Paul Ginocchio - Deutsche Bank AG

Jeffrey Rossetti

David Gold - Sidoti & Company, LLC

Scott Schneeberger - Oppenheimer & Co. Inc.

T. C. Robillard - Signal Hill Capital Group LLC

Arnold Ursaner - CJS Securities, Inc.

Kevin McVeigh - Macquarie Research

Timothy McHugh - William Blair & Company L.L.C.

Presentation

Operator

Good day, and welcome to the FTI Consulting Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] 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 2010 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 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 disclosures under the heading Risk Factors and Forward-Looking Information in our most recent Form 10-K and in our 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 a 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 press release we issued this morning.

With 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, and thanks to everyone for joining us this morning. With me on the call are Dennis Shaughnessy, our Chairman; David Bannister, our Chief Financial Officer; Dom DiNapoli, our Chief Operating Officer; and Roger Carlile, our Chief Administrative Officer. Our results were released first thing 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.

In the fourth quarter, we continued the momentum we began to see in the third quarter. Revenues were $356 million, up almost 4% from $342.9 million a year ago and up from $346 million in the prior quarter. In aggregate, four of our five segments reported average year-over-year revenue growth of almost 13%, which more than offset the decline in corporate finance restructuring from the prior year's historic levels. This complementary relationship continued to validate our business model, although it will still take time for our pro cyclical businesses, for the most part, to grow into the margins enjoyed by core restructuring at its height.

The investments we have made in growing our business in markets outside the United States continue to pay off. Non-U.S. revenues grew approximately 13% as compared to the prior year quarter, reflecting both organic growth and the contributions from the acquisitions we made during the year in Asia. Revenue outside the United States accounted for 21% of our total revenue compared to 19% in the same quarter last year.

Our markets in Asia-Pacific and Latin America showed outstanding growth. Asia Pacific revenue grew in the quarter by 63% relative to last year. Our recent acquisition of FS Asia Advisory is off to a strong start. Latin America was also robust, increasing 27% in the quarter year-over-year. As we have said before, we see very attractive opportunities to build our full platform in the global markets, and we expect our non-U.S. business to be a key driver of our future growth.

Our adjusted EBITDA in the quarter was $69.3 million or 19.5% of revenue. This was down from $80.8 million a year ago on a smaller contribution from Corporate Finance, but it was still a good performance, up from the margins of 18.8% in the second and third quarters of this year. Most of our segments recorded margins that were flat or up compared to a year ago and recent quarters, and Corporate Finance, even though down from the last year, was still one of our most profitable segments.

As we announced in January, we decided to unify substantially all of our operations under a consolidated FTI Consulting brand. We recorded approximately $22 million in net special charges in the quarter, most of which related to the write-off of trade names from certain acquired businesses and assets. I will discuss this initiative in more depth later on in the call.

We reported GAAP earnings per share in the quarter of $0.23, which included the special charge impacting EPS by $0.33. Excluding the special charge, adjusted earnings per share were $0.56 compared to $0.71 a year ago and up from $0.54 in the prior quarter. The share count in the quarter was 46.7 million, down 4.7 million shares or about 9% from a year ago due to the shares repurchased under our current authorization.

It was again a strong period for cash generation. Cash flow from operations was about $99 million in the quarter, the second best quarterly result in our history, and we exited the year with approximately $385 million in cash and equivalents, up from $331 million at the end of the third quarter. And as we speak today, we stand at over $425 million in cash and cash equivalents. We used about $14.5 million of our cash to repurchase 416,000 shares in the quarter under our $500 million repurchase authorization. We have about $209 million remaining under that authorization.

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