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FTI Consulting (FCN) Tops Q1 Earnings, Revenues Estimates

Zacks Equity Research

FTI Consulting, Inc. FCN delivered strong first-quarter 2019 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of $1.63 beat the Zacks Consensus Estimate by 63 cents and increased 56.7% on a year-over-year basis. The bottom line benefited from strong operating performance, lower interest expense and a lower effective tax rate.

Total revenues of $551.3 million beat the consensus mark by $48.6 million and increased 10.7% year over year. The increase was driven by higher demand across all business segments.

Shares of the company have gained 27.2% year to date, outperforming the 26.4% rally of the industry it belongs to.


Let’s check the numbers in detail.

Revenues by Segment

Corporate Finance & Restructuring segment revenues increased 12.6% year over year to $161 million. The upside was driven by higher demand for business transformation and transactions,restructuring services, and higher success fees. The segment contributed 29% to total revenues.

Forensic and Litigation Consulting segment revenues increased 8.6% year over year to $139 million. The improvement came on the back of higher demand for investigations and construction solutions services, partially offset by lower demand for health solutions services. The segment contributed 25% to total revenues.

Strategic Communications segment revenues increased 9.3% year over year to $57.7 million. The uptick was driven by increase in project-based revenues in North America and EMEA, primarily associated with corporate reputation services, and a $2.0 million increase in pass-through revenues. The segment contributed 11% to total revenues.

Economic Consulting segment revenues increased 6.9% year over year to $142.3 million. The increase was driven by higher demand forantitrust services in Europe and EMEA, partially offset by lower demand for financial economics services in North America. The segment contributed 26% to total revenues.

Technology segment revenues increased 25.5% year over year to $51.3 million. The increase was driven by higher demand for cross-border investigations and merger and acquisition-related “second request” services in North America and Asia Pacific, partially offset by a decline in licensing revenues resulting from the Ringtail divestiture. The segment contributed 9% to total revenues.

Operating Results

Adjusted EBITDA came in at $96.1 million, up 32.9% on a year-over-year basis. The increase was due to higher revenues, partially offset by an increase in compensation and benefits expenses, primarily associated with a 7.7% increase in billable headcount compared with the prior-year quarter. Adjusted EBITDA margin increased to 17.4% from 14.5% in the prior-year quarter.

Segment wise, adjusted EBITDA margin for Corporate Finance & Restructuring declined to 23.2% from 24.4% in the year-ago quarter. Forensic and Litigation Consulting adjusted EBITDA margin increased to 22.9% from 20.1% in the prior-year quarter.

Adjusted EBITDA for Strategic Communications was 20% compared with 18.7% in the year-ago quarter. Economic Consulting adjusted EBITDA margin fell to 16.9% from 19.1% in the prior-year quarter. Adjusted EBITDAfor Technology increased to 24.8% from 14% in the year-ago quarter.

Operating income came in at $87.2 million, up 40% from the prior-year quarter. Operating margin rose to 15.8% from 12.5% in the year-ago quarter.

Balance Sheet and Cash Flow

FTI Consulting exited the quarter with cash and cash equivalents of $179.2 million compared with $312.1 million in the prior quarter. Long-term debt was $268 million compared with $265.6 million at the end of the prior quarter.

The company used $102.1 million of net cash in operating activities and capex was $10.2 million in the quarter. It spent $21.9million to repurchase 327,978 shares in the quarter.

2019 Guidance

Management raised EPS and reiterated revenue guidance for the year. Adjusted EPS is now anticipated in the range of $3.38-$3.88 compared with the previous guidance of $3.33-$3.83. The revised guided range is lower than the Zacks Consensus Estimate of $4.24.

Management continues to expect revenues in the range of $2.00-$2.10 billion, which is lower than the Zacks Consensus Estimate of $2.12 billion.

Zacks Rank & Upcoming Releases

FTI Consulting currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Investors interested in the broader Zacks Business Services sector are awaiting first-quarter 2019 earnings of key players like FLEETCOR Technologies FLT, Gartner IT and Equifax EFX. While FLEETCOR and Gartner are slated to report on May 7, Equifax is scheduled to release results on May 10.

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