FTI CONSULTING, INC (FCN)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered a clean beat vs consensus: revenue $943.7M vs $912.2M* and EPS $2.13 vs $1.90*, with Adjusted EBITDA $111.6M vs $96.5M*; sequential momentum improved across most segments despite Tech and Econ headwinds .
• Corporate Finance & Restructuring and Strategic Communications set record revenues and segment EBITDA, offsetting Tech’s second-request drought and Economic Consulting’s antitrust softness, especially in EMEA .
• FY25 guidance narrowed: revenue $3.66–$3.76B (lower upper end), EPS $7.24–$7.84 (lowered), Adjusted EPS $7.80–$8.40 (lower upper end); full-year effective tax rate now 22–24% .
• Capital allocation was aggressive: 2.192M shares repurchased for $354.9M; net debt moved to $317.2M from $8.9M in Q1, reflecting buybacks and forgivable loan issuances .

What Went Well and What Went Wrong

• What Went Well

  • Record segment performance in Corporate Finance & Restructuring: revenue $379.2M (+9% YoY) and Adjusted Segment EBITDA $81.7M (21.5% margin), driven by restructuring (+25% YoY) and broader transaction engagement breadth; sequential CFR revenue +10.4% .
  • Strategic Communications accelerated: revenue $102.7M (+20.8% YoY), Adjusted Segment EBITDA $18.5M (+59% seq), aided by corporate reputation, cybersecurity issues and pass-throughs .
  • FLC remained robust despite federal enforcement shifts: revenue +10% YoY, with strength in financial services AML and cybersecurity; management: “record first half” for FLC .
  • CEO tone of resilience: “powerful illustration…of just how strong this company actually is…weathering headwinds pretty damn well” .

• What Went Wrong

  • Technology revenue fell 27.9% YoY to $83.6M on paused/canceled second requests; margins compressed (Adj. EBITDA margin 6.3%), with management not expecting “great margins” for the rest of the year .
  • Economic Consulting revenue -17% YoY to $191.7M; EBITDA hit by forgivable loan amortization and EMEA antitrust softness; bottoming of segment EBITDA expected “over the next few months” .
  • Transformation & Strategy within CFR remained weak, particularly overseas and Middle East (oil price sensitivity, success-fee mix delaying revenue recognition); sequential decline continued .

Financial Results

Q2 vs Consensus (S&P Global)

Segment Revenues ($USD Millions)

Adjusted Segment EBITDA ($USD Millions)

KPIs by Segment

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• CEO: “This year…is a powerful illustration yet again of just how strong this company actually is…weathering…headwinds…pretty damn well.”
• CEO: Tech headwinds due to second requests; “not expecting great margins…this year,” but industry shakeout could benefit FTI .
• CEO/CFO: Compass Lexecon EBITDA hit larger than prior $35M indication, driven by strong hiring (forgivable loans) and EMEA market softness; “we do not see a permanent hit” .
• CFO: FLC strength amid regulatory change, with AML and cybersecurity leading growth; record first half noted .
• CFO: CFR mix shift toward restructuring (49% of segment revenue), transactions resilient; T&S down 13% YoY .

Q&A Highlights

• Restructuring drivers: tariffs raising COGS for over-levered firms; second-round bankruptcies from prior LME exercises; more company-side work lengthening matters and fees .
• Economics Consulting: EBITDA expected to reach a low point in Q3/Q4 as forgivable loan amortization moderates and revenue stabilizes .
• Technology margins: pricing pressure in slow year; management unwilling to concede core clients; margin recovery not expected in 2H25 .
• Transformation & Strategy: weakness broad-based, more overseas/Middle East; increased success-fee engagements delay revenue recognition; junior staff fungible across transactions/restructuring .
• Leverage capacity: gross debt/TTM EBITDA ~1.2x; competitors 6–11x; leverage viewed as outcome, not target; flexibility for buybacks and talent acquisition .

Estimates Context

• Q2 2025 outcomes vs consensus: Revenue beat by ~$31.5M, EPS beat by ~$0.23, Adjusted EBITDA beat by ~$15.2M, consistent with segment outperformance (CFR, StratComm) offsetting Tech/Econ headwinds .
• FY 2025 consensus vs guidance: Consensus revenue ~$3.72B* sits near the guidance midpoint ($3.71B); EPS consensus ~$8.51* above GAAP guidance range, reflecting expected normalization beyond Q1 special charge [GetEstimates].
• Target price consensus remains ~$166*, with 2 covering analysts [GetEstimates].

Values retrieved from S&P Global.*

Key Takeaways for Investors

• The quality of earnings was strong: broad-based segment resilience created a beat vs consensus; sequential momentum supports near-term estimate revisions higher for CFR/StratComm line items .
• Tech and Econ visibility remains constrained; management’s candid stance implies cautious 2H margin expectations and limited near-term relief in second-request volume and EMEA antitrust demand .
• Guidance tightening (lower upper ends) de-risks FY25 framework; watch Q3 execution in CFR restructuring and FLC AML/cyber to sustain company-level margin mix .
• Balance sheet flexibility and underlevered profile support continued opportunistic buybacks; Q2 repurchases signal commitment to capital return even amid investment cycle in Econ talent .
• Trading setup: near-term catalysts include sustained restructuring flow (tariff/LME dynamics), StratComm crisis/cyber demand, and signs of Econ EBITDA bottoming; risks center on Tech pricing/mix and T&S softness .
• Monitor KPIs: CFR utilization and rate momentum, FLC pricing, Econ headcount stabilization, Tech backlog formation; state-level regulatory scrutiny is a tailwind for FLC .
• Medium-term thesis: diversified model, global scale, and discipline in talent investment position FCN to capture cyclical upswings across transactions/restructuring and communications while weathering regulatory-driven volatility .