FCN Q2 2025: Record 25% Restructuring Growth Offsets $25M Econ Hit
- Record restructuring performance: The company posted a record quarter in bankruptcy restructuring with 25% year-over-year growth driven by strong global demand in restructuring, signaling robust revenue diversification.
- Robust talent acquisition: Management highlighted hiring more senior professionals than ever in the first half, emphasizing the strength of their academic heritage and deep bench for future growth.
- Strong balance sheet and capital flexibility: With a gross debt-to-EBITDA ratio of 1.2x compared to peers’ ratios of 6–11x, the company possesses significant flexibility to deploy capital, bolstering its resilience.
- Regulatory headwinds: Shifting regulatory scrutiny—such as reduced activity in second request cases and changes in enforcement—are negatively impacting key segments like technology and FLC, which could continue to dampen revenue and margins.
- Economic consulting challenges: The economic consulting segment is experiencing declining revenues (down 17% year-over-year) and a widened EBITDA hit (now in the range of $25–$30 million compared to prior expectations), compounded by costs associated with forgivable loan amortization and delayed revenue realization from newly hired academic talent.
- Weak transformation and strategy performance: Transformation & strategy revenues are sequentially weak and facing headwinds particularly in international markets (e.g., the Middle East), which may continue to pressure margins and overall segment performance.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | -0.6% | Total Revenue in Q2 2025 remained nearly flat at $943.7 million compared to $949.2 million in Q2 2024, indicating that gains in some segments were offset by declines in others. This suggests that while certain business lines improved, downturns in key areas balanced overall performance. |
Corporate Finance | +9% | Corporate Finance revenue increased from $347.97 million in Q2 2024 to $379.2 million in Q2 2025. This growth is likely driven by higher demand for restructuring and transaction services along with improved bill rates, building on momentum from previous periods. |
Forensic and Litigation Consulting | +10% | Forensic and Litigation Consulting revenue grew by around 10% from $169.50 million to $186.5 million. The increase can be attributed to enhanced demand for risk, investigations, and data analytics services, along with strategic acquisition-related contributions noted in earlier quarters. |
Economic Consulting | -17% | Economic Consulting declined significantly, dropping from $230.87 million in Q2 2024 to $191.7 million in Q2 2025. This substantial decrease reflects lower demand for M&A-related antitrust services, departures within key practices, and market uncertainties that were already emerging in previous periods. |
Technology | -28% | Technology revenue fell sharply by almost 28%, from $115.88 million down to $83.6 million. The severe decline suggests a marked drop in demand for technology-related services and possibly a strategic shift or cost control initiative impacting this segment, contrasting with its stronger performance in the prior period. |
Strategic Communications | +21% | Strategic Communications rebounded robustly with a 21% increase from $84.94 million to $102.7 million. This strong recovery is driven by heightened demand for corporate reputation, public affairs, and crisis communications services, building on improvements seen after operational adjustments in past quarters. |
Geographic Breakdown | N/A (Q/Q changes: EMEA +9.8%, Asia Pacific +13.5%, North America +2.6%, Latin America -4.4% QoQ) | The overall revenue grew 5% QoQ from Q1 2025 ($898.3 million) to Q2 2025 ($943.7 million). Notably, EMEA and Asia Pacific experienced robust QoQ increases (+9.8% and +13.5%, respectively), suggesting strong regional recoveries, while North America remained relatively stable and Latin America faced challenges likely from currency impacts. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Guidance | FY 2025 | no prior guidance | $3,660,000,000 to $3,760,000,000 | no prior guidance |
EPS Guidance | FY 2025 | no prior guidance | $7.24 to $7.84 | no prior guidance |
Adjusted EPS Guidance | FY 2025 | no prior guidance | $7.80 to $8.40 (prior range: $7.80 to $8.60) | no prior guidance |
Effective Tax Rate Guidance | FY 2025 | 23% to 25% | 22% to 24% | lowered |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Restructuring performance and demand | In Q1 2025, restructuring was noted as a key driver with 46–47% of segment revenues and only modest sequential improvements amid market uncertainties. | Q2 2025 reported record performance with 25% YoY revenue growth, an 18% sequential increase, and its share rising to 49% of Corporate Finance & Restructuring revenues. | Improved sentiment with record growth and increased market share. |
Economic Consulting challenges | Q1 2025 and Q4 2024 highlighted significant departures and revenue headwinds (e.g., $35 million EBITDA impact, antitrust enforcement shifts) in the segment. | Q2 2025 continued to show challenges with a 17% YoY revenue decline, additional headcount reductions, and the negative impact of forgivable loan amortization and regulatory shifts. | Persistent and deepening challenges that could impact long-term profitability. |
Forensic and Litigation Consulting performance | Q1 2025 reported record revenues and strong growth, while Q3 and Q4 2024 noted robust performance despite margin pressures. | Q2 2025 drove a 10% YoY revenue increase with improved adjusted EBITDA, though there was a slight sequential revenue dip in some areas. | Generally strong performance with slight short-term volatility. |
Talent acquisition, retention and departures | Q1 2025 and Q4 2024 detailed significant departures (especially in Economic Consulting) alongside aggressive talent replenishment, with Q3 2024 highlighting notable hiring achievements. | Q2 2025 emphasized global talent acquisition, balancing headcount reductions with new hires and highlighted forgivable loan investments to support retention. | Consistent focus with ongoing investment despite headcount challenges, indicating a strategic long-term commitment. |
Regulatory uncertainty and tariff risks | Q1 2025 discussed regulatory shifts affecting areas like FCPA and detailed tariff risk impacts, while Q4 2024 mentioned regulatory changes more generally. | Q2 2025 highlighted regulatory headwinds impacting FLC, technology, and Economic Consulting segments and reiterated tariff-driven pressures in restructuring. | Persistent concerns with a refined and multi-segment focus on regulatory changes and tariff risks. |
International market dynamics and geopolitical factors | Q1 2025 referenced tariffs and trade policies; Q4 2024 and Q3 2024 mentioned global economic pressures and geopolitical events (e.g., challenges in Asia and Europe). | Q2 2025 did not specifically mention international market dynamics or geopolitical factors [N/A]. | Reduced emphasis in the current period compared to prior mentions. |
Investment in AI and technological innovation | Q1 2025 and Q3 2024 emphasized investments in AI, digital assets, and technological innovation while Q4 2024 noted initiatives to upgrade HR systems and AI capabilities. | Q2 2025 did not mention investments in AI or technology innovation [N/A]. | Decreased emphasis in the current call despite previous focus, suggesting a temporary deprioritization. |
Capital structure and debt flexibility | Q3 2024 provided details on a strong balance sheet with net negative debt and substantial stock repurchase capacity; Q4 2024 also noted balance sheet flexibility. | Q2 2025 reiterated a 1.2× gross debt-to-EBITDA ratio and essentially negligible net debt following significant share buybacks, emphasizing further flexibility. | Consistently strong, with an even stronger emphasis on low leverage and capital flexibility in the current period. |
M&A activity and deal flow concerns | Q1 2025 described subdued and uncertain M&A volume; Q4 2024 noted a slowdown in large deals while Q3 2024 reported robust M&A-driven revenues with slight sequential dips. | Q2 2025 underscored decreased M&A demand in the Technology and Economic Consulting segments, with lowered engagement in second request services and revised outlooks. | Continued volatility with cautious sentiment, reflecting ongoing market uncertainty. |
Evolving growth expectations and guidance | Q1 2025 acknowledged uncertainty and pending updates; Q4 2024 and Q3 2024 provided moderate to downward guidance adjustments amid mixed segment performance. | Q2 2025 narrowed revenue and EPS guidance ranges slightly, with modestly reduced upside and noted seasonal adjustments impacting Q4 expectations. | A cautious, evolving outlook with incremental downward adjustments but maintaining long-term resilience. |
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Leverage Capacity
Q: What is FCN's available debt capacity?
A: Management explained that FCN stands at a 1.2x gross debt-to-EBITDA ratio, which—unlike competitors with much higher leverage—affords significant financial flexibility to deploy capital and opportunistically repurchase shares. -
Tech Margin Outlook
Q: What is the outlook for tech EBITDA margins?
A: Management noted that the tech segment continues to face slow M&A demand, leading to lower EBITDA margins this year, though the firm’s complex capabilities remain a strong competitive asset. -
Econ Consulting EBITDA Hit
Q: Is the EBITDA hit on economic consulting on track?
A: Management indicated that the negative impact has grown, now roughly between $25–$30 million lower than last year, driven by increased talent investment costs and softer market performance in EMEA. -
US Regulatory Impact
Q: Are US regulatory changes net positive or negative?
A: While certain regulatory shifts have pressured segments like tech and FLC, management sees mixed effects overall—with some macro tailwinds partly offsetting the negatives. -
Economic vs Tech Divergence
Q: Why is economic consulting outperforming tech?
A: The divergence is primarily due to robust non-M&A activity in economic consulting, as opposed to tech’s reliance on deal-driven second request services. -
Academic Hiring Timeline
Q: When will new academics show commercial impact?
A: Management expects that the true commercial capabilities of the newly hired, academically oriented professionals will become clearer in about one year. -
Senior Hiring Pace
Q: Will senior professional hiring continue at pace?
A: Management highlighted record first-half senior hires and stressed that recruiting top talent will continue as great people become available in a market of disrupted competitors.
Research analysts covering FTI CONSULTING.