Sign in

You're signed outSign in or to get full access.

FC

FTI CONSULTING, INC (FCN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered revenue of $894.9M (down 3.2% YoY) and GAAP EPS of $1.38; Adjusted EPS was $1.56, with an $8.2M severance-related special charge reducing GAAP EPS by $0.18 .
  • Segment softness in Corporate Finance & Restructuring (CFR) and Technology drove the decline, partly offset by strength in Forensic & Litigation Consulting (FLC); Economic Consulting margins contracted on higher bad debt and compensation .
  • Management introduced FY2025 guidance: revenue $3.66–$3.81B, GAAP EPS $7.44–$8.24, and Adjusted EPS $7.80–$8.60; a further ~$17M Q1’25 special charge (part of ~4% headcount reduction) underpins a ~$0.36 per-share GAAP-to-Adjusted gap and ~$70M FY’25 cost savings plan .
  • Key 2025 overhang: departures in the U.S. competition sub-practice at Compass Lexecon (Econ Consulting) could have a “substantial” impact comparable in order of magnitude to a prior ~$35M segment EBITDA hit; management expects the business to remain best-in-class but near-term Econ revenue/margins to erode .

What Went Well and What Went Wrong

What Went Well

  • FLC revenue grew 6.3% YoY to $175.9M on higher demand and realized bill rates in data & analytics and construction solutions; CFR restructuring mix held steady (47%) and StratCom held revenues flat .
  • Cash generation and balance sheet strength: FY’24 operating cash flow $395.1M and year-end cash/short-term investments $660.5M with no debt outstanding; free cash flow reached $360.2M .
  • Management reaffirmed long-term growth philosophy with continued senior hiring and targeted cost discipline; FY’24 marked 10th consecutive year of adjusted EPS growth despite a weaker 2H .

What Went Wrong

  • Q4 revenue down 3.2% YoY (to $894.9M) and Adjusted EBITDA margin compressed to 8.2% (from 13.8%); softness tied to lower demand in CFR (transformation/transactions) and Technology (M&A “second requests”) and higher bad debt in Econ .
  • Elevated bad debt and SG&A: Q4 SG&A was 23.2% of revenue vs 21.0% PY; Econ incurred ~$12.8M Q4 bad debt on a completed matter, pushing FY’24 bad debt to 1.4% of revenue (vs ~0.8% five-year avg) .
  • 2025 headwinds: senior departures at Compass Lexecon (U.S. competition) expected to drive materially lower Econ revenue/margins; cycling a low FY’24 tax rate further tightens EPS comps .

Financial Results

Consolidated: sequential and YoY progression (oldest → newest)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($M)$949.2 $926.0 $894.9
GAAP EPS$2.34 $1.85 $1.38
Adjusted EPS$2.34 (no adj diff) $1.85 (no adj diff) $1.56
Adjusted EBITDA ($M)$115.9 $102.9 $73.7
Adjusted EBITDA Margin12.2% 11.1% 8.2%

Notes:

  • Q4 YoY revenue down 3.2%; Adj. EBITDA margin down to 8.2% from 13.8% .
  • Q4 special charge of $8.2M reduced GAAP EPS by $0.18; Adjusted EPS excludes this .

Segment breakdown: revenues and profitability (oldest → newest)

SegmentQ2 2024 Revenue ($M)Q2 2024 Adj. EBITDA ($M)Q3 2024 Revenue ($M)Q3 2024 Adj. EBITDA ($M)Q4 2024 Revenue ($M)Q4 2024 Adj. EBITDA ($M)
Corporate Finance & Restructuring348.0 66.5 341.5 57.9 335.7 44.7
Forensic & Litigation Consulting169.5 15.0 168.8 20.0 175.9 18.0
Economic Consulting230.9 44.3 222.0 35.2 206.1 15.8
Technology115.9 20.9 110.4 16.5 90.6 6.6
Strategic Communications84.9 11.6 83.3 12.1 86.6 13.8

Drivers:

  • CFR down on lower transformation & strategy and transactions; restructuring steady at 47% of CFR revenue in Q4 .
  • Econ Q4 flat revenue YoY but margin erosion from higher bad debt and compensation .
  • Technology declined on lower M&A “second request” demand in Q4; strong earlier in 2024 .
  • FLC grew on data & analytics and construction; margin lower on higher compensation .

KPIs (utilization/average billable rate; segments where meaningful) (oldest → newest)

KPIQ2 2024Q3 2024Q4 2024
CFR Utilization60% 57% 52%
CFR Avg. Billable Rate$496 $503 $527
FLC Utilization58% 55% 55%
FLC Avg. Billable Rate$390 $388 $392
Econ Utilization70% 65% 60%
Econ Avg. Billable Rate$599 $598 $610

Note: Utilization/average rate not meaningful for Technology/Strategic Communications (company disclosure) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY2024$3.70B–$3.79B (raised in Q2’24) $3.70B–$3.75B (updated in Q3’24) Narrowed/lowered top end
GAAP EPSFY2024$8.10–$8.60 (Q2’24) $7.90–$8.35 (Q3’24) Narrowed/lowered
RevenueFY2025N/A$3.66B–$3.81B Introduced
GAAP EPSFY2025N/A$7.44–$8.24 Introduced
Adjusted EPSFY2025N/A$7.80–$8.60 Introduced
Special Charges (assumption)Q1 2025N/A$17M ($0.36/sh) Introduced; ties to ~4% headcount actions & ~$70M FY’25 savings

Earnings Call Themes & Trends

TopicQ2 2024 (prior-2)Q3 2024 (prior-1)Q4 2024 (current)Trend
AI/Technology initiativesEmphasized investments; SG&A elevated partly by AI capabilities build-out Continued AI investment; discussed internal tools and client risk frameworks Maintain investment; FY’25 SG&A includes HR/AI enhancements; Tech launched IQ.AI in Q4 Sustained investment; commercialization growing
M&A/Antitrust demandStrong M&A-related antitrust & Tech “second requests” in Q2; caution on Q4 seasonality YoY growth in Econ/Tech tied to M&A; sequential softening Q4 slowdown as large matters wound down; expecting pickup later in 2025 Strong 1H → softer 2H; cautious recovery
Restructuring cycleRobust but mixed (liability mgmt vs filings); modeled steady Q2 levels near-term Restructuring steady; mix shift within CFR Restructuring steady QoQ; 47% of CFR revenue Stable to firm
Regional/macroGlobal uncertainty; hiring to support growth U.K./EMEA softness; Asia challenges; consulting backdrop weaker vs macro Persisting 2H’24 headwinds; M&A pause in U.S. Q4 Macro headwinds into early 2025
Compass Lexecon (Econ)Strong results; some deferred revenue dynamics Solid YoY growth; revenue deferral reversals aided margins Senior departures in U.S. competition; substantial 2025 headwind signaled Negative near-term for Econ
Bad debt/creditElevated bad debt in FLC/Econ noted YTD Higher bad debt and SG&A pressure ~$12.8M Econ bad debt in Q4; FY bad debt 1.4% of rev Rising in Q4 then expected below 1% FY’25
Tax rateFY’24 ETR guided 20–22% Q3 ETR 25.1%; FY guide 20–22% FY’24 ETR 20.2%; FY’25 ETR guide 23–25% FY’25 tougher comp

Management Commentary

  • CEO framing on 2025 headwinds and long-term stance: “We are probably facing as serious headwinds as we have had in a while… [but] I remain incredibly bullish about the multiyear trajectory” .
  • On Compass Lexecon departures: potential impact could be “in the order of” a prior ~$35M segment EBITDA hit; still “the single most powerful… economic consulting firm” post-departures .
  • CFO on cost actions and 2025: ~4% headcount reduction across Q4’24–Q1’25 with ~$70M FY’25 savings; FY’25 ETR 23–25% .
  • Cash/capital allocation: year-end cash/short-term investments $660.5M, no debt; $450.4M remaining buyback authorization; repurchased ~51.7K shares in Q4 at $197.53 .
  • Philosophy: fixed-cost-heavy model makes revenue trajectory critical; continued selective investment in senior talent even amid near-term pressure .

Notable quotes

  • “This quarter, we were actually down year-on-year and down sequentially.”
  • “We expect these actions to result in cost savings of approximately $70 million… in 2025.”
  • “We do not expect the effect [from Compass Lexecon departures] to be trivial.”
  • “Our business is not about keeping every quarter go straight line up… the mechanism is to build a vital growth engine that has great people.”

Q&A Highlights

  • Econ outlook and magnitude: Management used a historical ~$35M EBITDA decline as an order-of-magnitude analog for 2025 Econ headwinds; timing into early 2026 depends on departure cadence and matter run-off .
  • Headcount growth: Despite reductions (~360 roles across Q4–Q1), management still expects “reasonable headcount growth” in 2025, with many senior hires offsetting losses .
  • M&A environment: Expectation for improvement through 2025; already seeing some green shoots; Q4 slowdown reflected jobs rolling off .
  • Restructuring: Robust activity, with sequential stability in Q4 and steady demand expected .
  • Cash deployment: Opportunistic, prioritizing organic growth, selective M&A, and buybacks when highly accretive; no debt outstanding .

Estimates Context

  • We attempted to retrieve S&P Global consensus for revenue and EPS (Q2–Q4 2024 and FY 2024–2025) but were unable to obtain data due to an S&P Global API rate-limit error at the time of query. As a result, we cannot present vs-consensus comparisons for this recap. If needed, we can refresh and update comparisons once access is restored. [Values would be retrieved from S&P Global]*

Key Takeaways for Investors

  • Q4 capped a record FY’24 revenue/EPS year but exposed 2H softness and margin compression; near-term narrative hinges on M&A reacceleration and CFR/Tech rebound versus Econ headwinds from Compass Lexecon departures .
  • FY’25 guide is muted (midpoint: +1% revenue, +2.6% adj. EPS), tempered by Econ disruption and a higher tax rate; visibility should improve as the competitive reshuffle stabilizes .
  • Cost actions (4% workforce) are meaningful ($70M savings) and should cushion margins against revenue variability, while ongoing senior hiring sustains the multiyear growth engine .
  • Balance sheet is a strategic asset (net cash, no debt) enabling opportunistic buybacks and selective M&A; $450M+ buyback capacity offers downside support .
  • Watchlist catalysts: (1) evidence of M&A-driven activity recovery in Tech/Econ, (2) CFR transaction pipeline reacceleration, (3) Econ talent rebuild and client retention, (4) bad debt normalization (<1% FY’25), and (5) AI/IQ.AI monetization within Tech and cross-segment data/analytics services .
  • Execution priority: defend/reshape Econ, sustain CFR/FLC growth vectors, and maintain pricing/utilization; in a fixed-cost model, revenue trajectory and mix will dominate EPS outcomes .

Additional Q4 2024 Relevant Press Releases

  • Technology segment launched IQ.AI by FTI Technology to apply AI to investigations, antitrust compliance monitoring, and data breach response—supporting the firm’s AI-related client offerings .

Footnote: *Values would be retrieved from S&P Global.