FTI Consulting, Inc. (FCN)

FCN 
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FTI Consulting (FCN)

Q3 2012 Earnings Call

November 08, 2012 9:00 am ET

Executives

Mollie Hawkes - Assistant Vice President of Strategic Communications

Jack B. Dunn - Chief Executive Officer, President and Director

Roger D. Carlile - Chief Financial Officer and Executive Vice President

Dennis J. Shaughnessy - Executive Chairman

David G. Bannister - Executive Vice President and Chairman of the North American Region

Analysts

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

David Gold - Sidoti & Company, LLC

Paul Ginocchio - Deutsche Bank AG, Research Division

Jeffrey Rossetti - Janney Montgomery Scott LLC, Research Division

Timothy McHugh - William Blair & Company L.L.C., Research Division

Kevin D. McVeigh - Macquarie Research

Randle G. Reece - Avondale Partners, LLC, Research Division

Presentation

Operator

Good day, everyone, and welcome to the FTI Consulting Third Quarter 2012 Earnings Conference Call. As a reminder, today's call is being recorded. And now for opening remarks and introductions, I would like to turn the call over to Ms. Mollie Hawkes. Please go ahead, ma'am.

Mollie Hawkes

Good morning. Welcome to the FTI Consulting conference call to discuss the company's third quarter 2012 results as reported this morning. Management will begin with formal remarks, after which we'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 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues, future results and performance expectations, plans or intentions relating to financial performance, acquisitions, business trends and other information or other matters that are 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 issued this morning, a copy of which is available on our website at www.fticonsulting.com, as well as other disclosures under the heading of 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 and will not be updated.

During the call, we will discuss certain non-GAAP financial measures such as adjusted EBITDA, adjusted segment EBITDA and adjusted earnings per share. For a discussion of these non-GAAP financial measures, as well as our reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures, investors should review the press release we issued this morning.

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

Jack B. Dunn

Okay. Thank you, Mollie, and welcome and good morning to everyone, or good afternoon, depending on where you are. With me today on the call are Dennis Shaughnessy, our Chairman; Roger Carlile, our Chief Financial Officer; and David Bannister, our Chairman of North America.

As is our normal practice, I won't bother to recite the press release but will provide a brief overview of the quarter and a couple of key points as it occurs to us, and then turn it over to Roger for discussion of a couple of items in the quarter and on the radar screen, and then most importantly, turn it over to you for your questions.

First, however, on behalf of our almost 4,000 colleagues around the globe, I would like to express our hopes for a speedy recovery for those who have been impacted by Hurricane Sandy over the last week. Also, a sincere thank you to many of my colleagues across the world who have supported those on the East Coast during their time of need.

As you know, FTI Consulting has offices in Maryland, Massachusetts, New Jersey, New York and Washington DC, so many of our employees and their families, as well as numerous clients, have been directly impacted by the storm. We know it will take some time before life returns to normal, but we are glad that our employees are safe, and our thoughts are with those of you who are dealing with the cleanup process, and there'll be a little bit more on that later on.

As we stated in our press release, third quarter results were in line with our expectations and our recent guidance. As anticipated, the quarter proved to be a tough comparison to last year's record quarter of $414 million in revenues, 11% organic growth and the completion of a very -- the completion of the integration of a very, very successful acquisition.

At that time, like many, we were very optimistic and believed there were signs that the economy, not just here but globally, had changed and was on the mend, and we saw excellent results clearly across the board and around the world. Now 12 months later, it's interesting to note that certain can't-miss economies just a year ago, such as China and Brazil, are facing some different challenges than that of the year-ago runaway growth, while other parts of the global economy, particularly other parts of South America, are seeing much better prospects. When France enacted an income tax yesterday -- income tax cut yesterday, it seems that the only 2 certainties remaining in life now are death and unrest in Greece.

With regard to our performance for the quarter, revenues were $386 million. Adjusted EBITDA was $62.3 million or 16.1% of revenues. Adjusted earnings per share were $0.60. Net cash provided by operating activities in the quarter was a healthy $70.9 million compared to $59.7 million in the prior year quarter, and cash collections were strong at approximately $378 million.

In general, our results reflected what you might expect from around the globe as our diverse platform of service offerings pretty much reflected the markets in which they were provided. As seems to continue to be the case, our results were led by solid performance in Economic Consulting and Corporate Finance/Restructuring.

In Economic Consulting, results were driven by continued strong performance in our antitrust litigation, financial economics, international arbitration and regulatory consulting practices, particularly in energy and transportation, as our expertise, depth and global reach in these fields continued to draw the world's top economic and financial talent to our firm. While there was possibly some slowing in the rate of new case openings in M&A, our retentions in that area remain at record levels, which bodes very well for the future as those cases, hopefully, will turn into actions and would benefit our entire company.

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