FTI Consulting: Strategic Investments Fueling Enduring Strength Amidst Market Shifts (NYSE:FCN) - FCN Stock Research Report

## Executive Summary / Key Takeaways * FTI Consulting delivered record third-quarter 2025 results, with EPS and adjusted EPS up over 40% year-over-year, showcasing robust performance despite significant headwinds in its Economic Consulting and Technology segments. [cite: Q3 2025 Earnings Call Transcript] * The company's long-term strategy of organic growth, focused talent investment, and expanding high-value services across diverse geographies is proving resilient, driving strong performance in Corporate Finance, Forensic and Litigation Consulting (FLC), and Strategic Communications. [cite: Q3 2025 Earnings Call Transcript] * Strategic investments in advanced technologies like AI, coupled with a deep bench of experts, are enhancing FTI's competitive moat in complex investigations and advisory services, positioning it for future growth. [cite: Q3 2025 Earnings Call Transcript] * While Economic Consulting and Technology face near-term challenges from market shifts and talent transitions, management expresses confidence in a gradual recovery, underpinned by aggressive talent acquisition and cost stabilization. [cite: Q3 2025 Earnings Call Transcript] * Updated 2025 guidance projects the company will achieve its 11th consecutive year of adjusted EPS growth, supported by a strong balance sheet and continued capital deployment flexibility for shareholder value. [cite: Q3 2025 Earnings Call Transcript] ## The Resilient Core: FTI Consulting's Strategic Foundation FTI Consulting, Inc., established in 1982, has evolved into a global business advisory powerhouse, specializing in guiding organizations through periods of change, mitigating complex risks, and resolving high-stakes disputes across financial, legal, operational, political, regulatory, reputational, and transactional domains. The company's overarching strategy, particularly refined over the last decade under CEO Steven Gunby, centers on organic growth, relentless investment in leading expertise, and a commitment to attracting and developing top-tier talent. This foundational approach has shaped FTI's current market position and its ability to respond strategically to dynamic industry landscapes. [cite: Q3 2025 Earnings Call Transcript] The company's historical journey underscores this commitment. For instance, the Strategic Communications segment underwent a significant turnaround a decade ago and has since become a consistent growth driver. Similarly, the Corporate Finance & Restructuring segment has seen "bold bets" in adjacent businesses and new geographies, such as expanding into leader insolvency in the U.K. and strengthening its presence in Germany and Australia, which have transformed its competitive standing. [cite: Q3 2025 Earnings Call Transcript] These strategic moves, often involving initial costs, have consistently aimed at building a stronger, more capable business. ### Technological Edge and Innovation A critical differentiator for FTI Consulting is its proactive embrace and integration of advanced technology, particularly in data analytics and artificial intelligence (AI). The company's Technology segment has consistently been an early adopter of advanced technologies, including machine learning and AI, which are deemed critical for future success. [cite: Q3 2025 Earnings Call Transcript] This focus is not merely on internal efficiencies but profoundly impacts client service delivery. FTI has developed proprietary tools like Ariadne and IQ.AI, which are instrumental in enhancing its position in large-scale investigations. These tools enable the firm to process massive and complex datasets rapidly, providing superior insights in critical client matters. [cite: Q3 2025 Earnings Call Transcript] Furthermore, FTI is actively engaged in new, significant work involving the investigation of AI algorithms used by major institutions for potential regulatory violations, showcasing its leading-edge capabilities in this emerging field. [cite: Q3 2025 Earnings Call Transcript] The firm also consults on AI strategies and early-stage assessments for businesses, demonstrating its role in demystifying AI and identifying real-world applications. [cite: Q3 2025 Earnings Call Transcript] A recent technology alliance with BigID further enhances FTI's capabilities in data security, compliance, privacy, and AI-driven data management, aiming to improve client data management and risk processes. [cite: Recent Filtered News Articles] These technological advancements contribute directly to FTI's competitive moat, enabling higher-value service offerings, potentially better margins, and a reinforced market position as a go-to partner for complex, data-intensive challenges. ### Competitive Landscape and Market Positioning FTI Consulting operates in a competitive professional services market alongside firms like Huron Consulting Group (TICKER:HURN), CRA International (TICKER:CRAI), and Exponent (TICKER:EXPO). FTI's global footprint and integrated service model across its five segments provide a distinct advantage, allowing it to offer holistic solutions that many specialized competitors cannot match. Its ability to handle multifaceted engagements, combining economic consulting with strategic communications or technology services with financial expertise, gives FTI a qualitative edge in end-to-end client solutions. [cite: Competitive Landscape Analysis] In shared markets, FTI's deep expertise and established network, particularly in litigation support and cross-border projects, position it favorably against competitors. For instance, while CRA International excels in pure economic modeling, FTI's broader technology and forensic consulting offerings provide greater depth in data-driven solutions, enhancing efficiency in complex investigations. [cite: Competitive Landscape Analysis] Similarly, against Huron Consulting Group, FTI's global reach and comprehensive risk management approach offer versatility in international disputes, even as HURN may lead in niche operational consulting within specific sectors like healthcare. [cite: Competitive Landscape Analysis] The company's diversified revenue streams also provide greater resilience and cash flow stability during economic fluctuations compared to more specialized or highly leveraged competitors. [cite: Q2 2025 Earnings Call Transcript] ### Financial Performance and Operational Strength FTI Consulting reported a strong third quarter for 2025, demonstrating its resilience amidst a challenging market. Revenues for the three months ended September 30, 2025, increased 3.3% year-over-year to $956.2 million, including a positive FX impact of $1.1 million. Excluding FX, revenues grew 2.1% to $94.1 million. [cite: 10-Q, p. 4, 20] Net income rose significantly by 24.6% to $82.8 million, driven by higher revenues, reduced selling, general and administrative (SGA) expenses, and an FX remeasurement gain. [cite: 10-Q, p. 4, 20]

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Adjusted EBITDA saw a substantial 26.8% increase to $130.6 million, with the Adjusted EBITDA Margin expanding to 13.7% from 11.1% in the prior-year quarter. [cite: 10-Q, p. 20] This robust consolidated performance was largely propelled by record top and bottom-line results in Corporate Finance & Restructuring, Forensic and Litigation Consulting (FLC), and Strategic Communications. [cite: Q3 2025 Earnings Call Transcript]

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* Corporate Finance & Restructuring achieved a record quarter with revenues of $404.9 million, an 18.6% increase year-over-year. This growth was broad-based, with restructuring up 18%, transactions up 30%, and transformation and strategy up 10%. The segment's gross profit margin expanded by 5.4 percentage points to 37.4%, primarily due to a 6 percentage point increase in utilization and higher realized bill rates. [cite: 10-Q, p. 27, 28] * Forensic and Litigation Consulting (FLC) also delivered a record quarter, with revenues climbing 15.4% to $194.7 million. This was driven by higher realized bill rates across risk and investigations, data and analytics, and construction solutions, alongside increased demand for risk and investigation services, particularly in EMEA. The gross profit margin improved by 5.5 percentage points to 38.2%. [cite: 10-Q, p. 29] * Strategic Communications saw revenues increase 7.4% to $89.4 million, primarily due to higher demand for corporate reputation services, including crisis, people and transformation, and cyber services. Its gross profit margin rose 1.6 percentage points to 38.2%. [cite: 10-Q, p. 33]

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Conversely, two segments faced significant headwinds: * Economic Consulting experienced a 22% decline in revenues to $173.1 million, largely due to lower demand for antitrust services (both M&A-related and non-M&A-related). The segment reported an Adjusted Segment EBITDA loss of $4.6 million, a notable shift from a profit in the prior year, impacted by lower revenue and increased forgivable loan amortization. [cite: 10-Q, p. 30] * Technology revenues decreased 14.8% to $94.1 million, primarily due to reduced demand for M&A-related second request and information governance, privacy, and security services. [cite: 10-Q, p. 32] The company's liquidity remains robust. Net cash provided by operating activities for Q3 2025 was $201.9 million. Days sales outstanding (DSO) improved to 102 days from 108 days in the prior year. [cite: 10-Q, p. 20, 36] Free Cash Flow for the quarter was $187 million. [cite: 10-Q, p. 23]

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FTI Consulting continues to actively manage its capital, repurchasing $234.2 million in common stock during Q3 2025, with an additional $500 million authorized by the Board. Total net debt stood at $364 million as of September 30, 2025, reflecting these share repurchases. [cite: 10-Q, p. 20, 36] The company maintains substantial borrowing capacity under its $900 million revolving credit facility and remains in compliance with all covenants. [cite: 10-Q, p. 37] ### Outlook and Guidance: A Path to Sustained Growth FTI Consulting has updated its full-year 2025 guidance, reflecting stronger-than-expected Q3 performance while acknowledging ongoing challenges. The company now estimates revenues will range between $3.685 billion and $3.735 billion, and adjusted EPS between $8.20 and $8.70. [cite: Q3 2025 Earnings Call Transcript] This guidance, if achieved at the midpoint, would mark the 11th consecutive year of adjusted EPS growth. [cite: Q3 2025 Earnings Call Transcript] Management's outlook is shaped by several key considerations. A seasonal slowdown is anticipated in Q4 due to holidays. While the Economic Consulting business's costs are believed to have stabilized, the timing of a gradual return to revenue growth remains uncertain. [cite: Q3 2025 Earnings Call Transcript] The company continues to aggressively attract top-tier senior professionals, with 79 Senior Managing Director (SMD) and affiliate hires year-to-date, a record compared to previous years. These investments, while positive for the long term, typically incur a near-term financial impact due to forgivable loans and the lag between cost and revenue generation. [cite: Q3 2025 Earnings Call Transcript] The effective tax rate for the full year is projected to be between 22% and 24%. [cite: Q3 2025 Earnings Call Transcript] Additional capital expenditures of $13 million to $15 million are expected for the remainder of 2025. [cite: 10-Q, p. 37] ### Risks and Challenges Despite FTI's robust performance, several risks warrant investor attention. The Economic Consulting segment faces "significant headwinds," including competitive costs to retain professionals, the financial impact of attracting new talent, a weaker antitrust market (particularly in EMEA), and the slower ramp-up of new professional revenue compared to legacy work winding down. [cite: Q3 2025 Earnings Call Transcript] The adjusted EBITDA for this segment experienced a loss in Q3 2025, and while costs are stabilizing, the immediate rebound is not certain. [cite: Q3 2025 Earnings Call Transcript] The Technology segment continues to be impacted by lower demand for M&A-related second request services, a trend that began in Q4 2024 and is expected to persist, leading to tougher pricing and potentially lower margins in the near term. [cite: Q3 2025 Earnings Call Transcript] Furthermore, FLC, despite its record performance, could face "considerable effect" from potential shifts in U.S. regulatory posture, impacting demand for services in areas like anti-consumer fraud, anti-money laundering, and FCPA. [cite: Q1 2025 Earnings Call Transcript] Broader macroeconomic uncertainties, including M&A market fluctuations, geopolitical disruptions, and the impact of tariffs, also present ongoing challenges that could affect demand across various segments. [cite: Q1 2025 Earnings Call Transcript] ## Conclusion FTI Consulting's third-quarter 2025 results underscore the company's remarkable resilience and the efficacy of its long-term strategic investments in talent and diversified, high-value advisory services. Despite significant headwinds impacting its Economic Consulting and Technology segments, FTI's Corporate Finance, FLC, and Strategic Communications segments delivered record performance, demonstrating the inherent strength of its multi-segment platform. The company's commitment to attracting leading experts, leveraging advanced technologies like AI, and expanding its global footprint continues to fortify its competitive position and drive client relevance in an increasingly complex world. While near-term challenges persist, particularly in Economic Consulting's path to recovery and the Technology segment's exposure to M&A market dynamics, FTI's proactive management of costs, aggressive talent acquisition, and robust capital allocation strategy provide a solid foundation. The updated 2025 guidance, projecting an 11th consecutive year of adjusted EPS growth, reflects management's conviction in the company's enduring potential. For discerning investors, FTI Consulting represents a compelling opportunity, characterized by a proven ability to generate sustained value through strategic growth, operational agility, and a deep bench of expertise that thrives amidst global disruption.