Business Overview and History
FTI Consulting, Inc. (NYSE:FCN) is a global business advisory firm dedicated to helping organizations manage change, mitigate risk, and resolve disputes across a wide range of financial, legal, operational, political, regulatory, reputational, and transactional domains. With a history spanning over two decades, FTI Consulting has established itself as a leading expert in crisis management, transformation strategy, and dispute resolution, serving a diverse clientele that includes Fortune 500 corporations, FTSE 100 companies, global banks, major law firms, and government agencies worldwide.
FTI Consulting was founded in 1982, initially focusing on forensic and litigation consulting services. The company went public in 1992 and experienced steady growth throughout the 1990s, expanding its service offerings and geographical reach. A significant milestone during this period was the acquisition of Ringtail Solutions in 1998, which added e-discovery capabilities to the firm's Forensic and Litigation Consulting segment.
The 2000s marked a period of significant growth and diversification for FTI Consulting. The company expanded into new service areas such as corporate finance, economic consulting, and strategic communications. Notable transactions included the acquisition of Cambio Group in 2005, which strengthened the firm's presence in Europe, and the purchase of Compass Lexecon in 2008, which bolstered the company's economic consulting expertise.
Throughout its history, FTI Consulting has faced various challenges, including navigating economic downturns and adapting to changes in regulations and technology. The company has demonstrated resilience, leveraging its diverse service offerings and global footprint to navigate these challenges. FTI Consulting has also invested in developing new capabilities, such as in the areas of artificial intelligence and data analytics, to better serve its clients.
Today, FTI Consulting operates through five reportable segments: Corporate Finance & Restructuring, Forensic and Litigation Consulting (FLC), Economic Consulting, Technology, and Strategic Communications.
The Corporate Finance & Restructuring segment focuses on the strategic, operational, financial, transactional, and capital needs of clients, delivering services centered around Transactions, Transformation Strategy, and Turnaround & Restructuring. The FLC segment provides multidisciplinary and independent services across risk investigations and disputes, supported by data analytics and technology-enabled solutions, with a focus on highly regulated industries. The Economic Consulting segment, including Compass Lexecon, provides complex economic analyses and expert testimony for use in legal and regulatory proceedings, strategic decision-making, and public policy debates. The Technology segment offers a comprehensive portfolio of digital insights, risk management consulting, and data services to address the evolving legal, regulatory, and compliance needs of clients. Lastly, the Strategic Communications segment develops and executes communication strategies to help clients manage change and mitigate risk surrounding transformational and disruptive events.
FTI Consulting has a global footprint, with offices in 34 countries and territories across the Americas, Europe, the Middle East, Africa, and Asia Pacific. The company derives the majority of its revenues, approximately 64%, from the work of professionals assigned to locations outside the United States.
Financial Performance and Ratios
For the fiscal year ended December 31, 2024, FTI Consulting reported total revenues of $3.70 billion, a 6% increase compared to the prior year. Net income for the year was $280.09 million, up 1.9% year-over-year, with diluted earnings per share of $7.81. The company's adjusted earnings per share for 2024 was $7.99, compared to $7.71 in the prior year, representing 10 consecutive years of adjusted EPS growth. However, the 2024 results did not fully meet the company's expectations, as growth slowed in the second half of the year.
The company's financial ratios paint a picture of a well-capitalized and efficient organization. As of December 31, 2024, FTI Consulting had a current ratio of 1.95, indicating a strong ability to meet short-term obligations. The debt-to-equity ratio stood at 0.11, demonstrating a conservative capital structure. The company's return on assets and return on equity for the year were 7.8% and 12.9%, respectively, highlighting the efficient deployment of its asset base and capital.
FTI Consulting's cash flow generation is also noteworthy, with operating cash flow of $395.1 million and free cash flow of $360.2 million for the fiscal year 2024. This robust cash flow supports the company's ability to invest in growth initiatives, service its debt obligations, and return capital to shareholders through its share repurchase program.
In terms of segment performance, the Corporate Finance & Restructuring segment generated revenues of $1.39 billion in 2024, an increase of 3.3% from the prior year. The Forensic and Litigation Consulting (FLC) segment reported revenues of $690.2 million, up 5.5% year-over-year. The Economic Consulting segment saw significant growth, with revenues of $863.6 million, a 12.0% increase compared to the prior year. The Technology segment reported revenues of $417.6 million, up 7.7%, while the Strategic Communications segment generated revenues of $336.0 million, a 2.1% increase.
Navigating Headwinds and Positioning for the Future
While FTI Consulting's financial performance in 2024 was commendable, the company is facing several headwinds in 2025 that could impact its near-term results. The company has reported a slowdown in revenue growth, citing a combination of market forces, such as a decline in M&A activity, and some idiosyncratic factors, including the loss of several senior professionals in its Compass Lexecon subsidiary's U.S. competition practice.
The departure of these senior experts, and the potential for further attrition of less tenured professionals, is expected to create a substantial headwind for the Economic Consulting segment in 2025. FTI Consulting estimates that the impact could be in the order of magnitude of a $35 million decline in adjusted EBITDA for that segment, based on a similar dislocation the company experienced over a decade ago.
Despite these near-term challenges, FTI Consulting remains well-positioned for long-term success. The company's diversified service offerings, global reach, and reputation for excellence continue to attract top talent and clients across a wide range of industries and geographies. FTI Consulting's management team has a proven track record of navigating market cycles and idiosyncratic events, and the firm's strong balance sheet and robust cash flow generation provide the flexibility to invest in growth initiatives and weather short-term headwinds.
The company's guidance for 2025 reflects the expected impact of the Compass Lexecon situation and other headwinds. FTI Consulting is providing revenue guidance of $3.66 billion to $3.81 billion for 2025, with GAAP EPS guidance of $7.44 to $8.24 and adjusted EPS guidance of $7.80 to $8.60. The midpoint of the revenue and adjusted EPS guidance reflects growth of 1% and 2.6% year-over-year, respectively. This more muted guidance compared to recent years is due to several factors, including the revenue slowdown carried over from 2024, the disruption in the Economic Consulting segment, cycling a particularly low tax rate in 2024, and continued investments in attracting and retaining top talent.
Human Capital and Operational Strengths
As of December 31, 2024, FTI Consulting employed 8,370 employees, of which 6,630 were billable professionals. The company also engages independent contractors to supplement its professionals on client engagements as needed. FTI Consulting's success is largely driven by its ability to attract and retain highly qualified professionals. The company focuses on providing competitive compensation opportunities and fostering an inclusive and high-performing culture to enable its professionals to grow their careers and achieve their full potential.
FTI Consulting's global presence is a key strength, with 36% of its revenues coming from work performed by professionals assigned to locations outside the U.S. This geographic diversification allows the company to serve clients across various markets and leverage different economic cycles.
The company's five reportable segments provide a wide range of specialized services, allowing FTI Consulting to address complex client needs across various industries and situations. This diversification has helped the company navigate different market conditions and regulatory environments, contributing to its consistent growth over the years.
Conclusion
FTI Consulting's track record of consistent growth and its position as a leading global expert firm for crisis management and transformation make it a compelling investment opportunity, despite the near-term headwinds it faces. The company's diversified service offerings, global reach, and exceptional talent pool position it well to navigate the current challenges and continue delivering value to its clients and shareholders over the long term.
While the guidance for 2025 reflects a more challenging environment, particularly in the Economic Consulting segment, FTI Consulting's management remains confident in the company's ability to weather these headwinds and return to stronger growth in the future. The company's focus on investing in its human capital, expanding its service offerings, and maintaining a strong financial position should help it emerge from this period of slower growth well-positioned for future success.
Investors should closely monitor FTI Consulting's performance throughout 2025, particularly in the Economic Consulting segment, to assess how well the company is managing the current challenges and positioning itself for long-term growth. Despite the near-term headwinds, FTI Consulting's strong market position, diverse service offerings, and global footprint continue to make it an attractive option for investors looking for exposure to the business advisory and consulting sector.