FTI Consulting, Inc. (FCN)

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FTI Consulting (FCN)

Q1 2011 Earnings Call

May 04, 2011 9:00 am ET


Jack Dunn - Chief Executive Officer, President and Director

Eric Boyriven - Managing Director

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

Dennis Shaughnessy - Executive Chairman


Joseph Foresi - Janney Montgomery Scott LLC

Paul Ginocchio - Deutsche Bank AG

David Gold - Sidoti & Company, LLC

Tobey Sommer - SunTrust Robinson Humphrey, Inc.

Chitra Sundaram - Cardinal Capital

Scott Schneeberger - Oppenheimer & Co. Inc.

Arnold Ursaner - CJS Securities, Inc.

William Sutherland - Boenning and Scattergood, Inc.

Kevin McVeigh - Macquarie Research

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



Good day, and welcome to this FTI Consulting First Quarter 2011 Earnings Conference Call. As a reminder, today's call is being recorded. Now for opening remarks and introduction, I would like to turn the conference over to Mr. Eric Boyriven. Please go ahead, sir.

Eric Boyriven

Good morning, and welcome to the FTI Consulting conference call to discuss the company's 2011 first quarter results, which were reported 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 adjusted EBITDA, adjusted segment EBITDA and adjusted EPS. For a discussion of these non-GAAP financial measures as well as the reconciliations of these non-GAAP financial measures to the most recently comparable GAAP results -- 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. Good morning, and thanks, everyone, for joining us. With me on the call this morning are Dennis Shaughnessy, our Chairman; David Bannister, the Chairman of our North American region; and Roger Carlile, our Chief Financial 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.

The first quarter was a good start to what we hope will be a very, very good year for FTI Consulting. From an operational standpoint, we enjoyed a solid quarter, but in terms of the strategic development of our businesses, it was an outstanding one. We successfully completed a series of transactions with LECG Corporation that significantly furthered our development as a company and enhanced our competitive position in several key practices that are important to our future. In terms of the deployment of our capital into productive and value-generating initiatives for our shareholders, these transactions and the steps we have taken with our accelerated stock buyback we believe leave us with a more efficient capitalization while also preserving the flexibility to make further investments as opportunities present themselves.

From an operational standpoint, revenues in the quarter were an all-time record $362 million, up from $350 million a year. This eclipses the prior record of $360.5 million that we generated at the height of the recession in the second quarter of 2009 when our bankruptcy and restructuring activities were going full bore. We achieved this despite our restructuring and bankruptcy activities continuing to be faced by a challenging headwind. We achieved this because our activities that are key to an economic expansion continue to gain traction in their respective markets and to, again, more than make up for the decline in restructuring work.

In the first quarter, the pro-cyclical businesses grew 9.5% substantially, all of which was organic. Our practices outside of the U.S., again, were a key factor in our growth. Total revenues in Asia Pacific more than doubled year-over-year, with strong organic growth in Forensic and Litigation Consulting and Strategic Communications and another great performance by our acquired Corporate Finance and Restructuring business.

Latin America grew by 24%, and although our activities here are small relative to our overall business, it demonstrates the market dynamics and opportunity for us in the region. While our activities in North America and EMEA -- Europe, Middle East and Africa -- in total were flat year-over-year, declines in Corporate Finance and Restructuring marks some very interesting and promising growth in our other businesses.

Adjusted EBITDA on the quarter was $61.7 million or 17% of revenue. This was down from $75.9 million a year ago on a smaller contribution from Corporate Finance and Restructuring. Included in adjusted EBITDA for the quarter are expenses related to the LECG transactions of approximately $1.4 million, which were mostly legal fees; another $500,000 or so of one-time tax adjustments and also about $800,000 of essentially nonrecurring incentive payments related to an acquisition.

We reported adjusted earnings per share in the quarter of $0.48, which included the impacts from the above, including about $0.02 related to LECG. The tax item that I mentioned took our tax rate up to 38%, which is higher than the 37% we expect for the rest of the year. And the incentive payment cost us another $0.01, so that in terms of our underlying earnings power in the quarter, one could make a case for about $0.52.

The fully diluted share count of 45.6 million was down 2.5 million shares or about 5% from a year ago due to share repurchased under our current authorization. This share count does not reflect the full impact of our accelerated stock buyback that we announced in February and have since completed. During the quarter, we repurchased and retired about 4.4 million shares and expect to receive and retire approximately an additional 600,000 shares in May for a total cost of $209 million. Depending on the price, there could also be a few more shares down the road, but this essentially completes our $500 million stock repurchase authorization.

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