FTI Consulting, Inc.

Good morning. Welcome to the FCI Consulting Conference Call to discuss the company's first quarter 2023 earnings results as reported this morning. Management will begin with formal remarks after which they will take your questions. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933. and Section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions relating to financial performance, acquisitions, share repurchases, business trends, ESG-related matters, and other information or other matters that are not historical, including statements regarding estimates of our future financial results and other matters. For discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the Safe Harbor Statement in the earnings press release issued this morning, a copy of which is available on our website at www.fticonsulting.com. as well as other disclosures under the headings of risk factors and forward-looking information in our quarterly report on Form 10-Q for the quarter ended March 31st, 2023, our annual report on Form 10-K for the year ended December 31st, 2022, and in our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements which speak only the date of this earnings call and will not be updated. During the call, we will discuss certain non-GAAP financial measures such as total segment operating income, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per diluted share, adjusted net income, adjusted EBITDA margin, and free cash flow. For discussion of these and other non-GAAP financial measures, as well as our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures, Investors should review the press release and the accompanying financial tables that we issued this morning, which include the reconciliation. Lastly, there are two items that have been posted to the investor relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical, financial, and operating data, which have been updated to include our first quarter 2023 results. Of note, during today's prepared remarks, management will not speak directly to the quarterly earnings presentation posted to the investor relations section of our website. To ensure our disclosures are consistent, these slides provide the same details as they have historically, and as I've said, are available on the investor relations section of our website. With those formalities out of the way, I'm joined today by Stephen Gumby, our President and Chief Executive Officer, and Ajay Savarwal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gumby.

Thank you, Molly. Welcome, everyone, and thank you all for joining us this morning. I am pleased to say that we reported record revenues yet again this quarter. And, in fact, we reported double-digit revenue growth year over year once again. As Ajay will talk about, that level of revenue growth was despite the fact that we had FX headwinds this quarter and we had some revenue deferrals. Disaggregating that revenue performance, each of our segments once again grew year over year. Stratcom's revenues grew mid-single digits despite some significant FX headwinds. Econ, for reasons I'll describe later, only reported modest revenue growth. But all of the rest of our segments' revenues grew at double-digit levels. And when you adjust for FX headwinds, strong double-digit levels. Below that sort of terrific revenue story, as you might imagine, are enormous numbers of success stories. I'm going to leave it to Ajay to share some of them. And if you'd like some further details or elaboration, we can go into more depth during the Q&A. But today I want to move from the revenue story to the bottom line story. Because notwithstanding that strong top line performance, our bottom line, in fact, underperformed our expectations this quarter and did so substantially. Ajay will discuss the reasons for those shortfalls in some depth, but I'd like to give you a few of the top level reasons. First, let me come back to econ. Our econ business, as I think everybody on this call knows, is an incredibly powerful business. that has for many years delivered strong results for our shareholders, and at least as importantly for our clients. We've averaged about 15% average annual adjusted EBITDA margins in that business for the last many, many years, at least 10. For a number of factors, including some slowness in parts of the business in the beginning of the year, some revenue deferrals, a few other things, we happen to deliver an 8% EBITDA, adjusted EBITDA margin this quarter. As we will discuss later, we do not expect adjusted EBITDA margins and ECON to remain at that level for the rest of the year. The second factor is one that we've talked about a lot in the past. In any given quarter, there are a lot of factors that can happen to cut one way or another. We have cell phones. You might be grabbing that and taking it out.

Thank you.

And lest anybody think that's somebody on my team's fault, that was my cell phone that went off. The second factor, as we've talked about a lot in the past, is one that we've talked about a lot in the past. In any given quarter, there are a lot of factors that can happen to cut one way or another, like FX transaction losses or the timing of marketing or client events or the amount of bad death in a quarter. This quarter, those items happened in total to cut more negatively than they often do. I want to spend some time though on the third reason, which is different. As high as our revenue growth was this quarter, we actually staffed ourselves up in terms of billable and non-billable headcount and the compensation associated with that for an even higher level of revenue growth than we delivered. That resulted in expense growth that actually exceeded those terrific revenue growth. So let me talk about that and how that happened, because it's not totally random. In a few places, that is a little random. It's the sort of thing that happens every quarter. You can't predict exactly how much revenue growth you'll have in any particular area around the world. In this quarter, we had revenue growth shortfalls in parts of STRATCOM, our health solutions business with an FLC, and some of our businesses in EMEA and Asia Pacific. But that is pretty typical. It happens every quarter someplace. You can't ever predict exactly where. We don't consider any of that part of a long-term trend, just normal quarter-to-quarter variations. More systemically, this quarter, our employee turnover was lower than in recent quarters. And even though we expected it to be lower, it was even a bit lower than we expected. On top of those factors, however, we also had something else important happen, which is that we continued to find terrific talent looking to join us. And we took advantage of that in multiple key markets. including the Middle East, Australia, Hong Kong, continental Europe, and elsewhere. And to support the businesses we're building in those jurisdictions and elsewhere, we continued to add non-billable headcount. So though we had record revenues, we actually staffed ourselves up for an even higher level of revenue growth than we delivered. As Ajay will discuss, we do expect that gap between expense growth and revenue growth to gradually normalize as the year goes on.

Let me talk to something important, a point that I find very important.

When I look at the bases for the bottom line shortfall this quarter, they do not give me pause in any way with respect to my confidence about the powerful future of this company or even my outlook for the year. FX issues cut against us some quarters, but typically not all. In some quarters, they go the other way. Revenue deferrals, we typically get recognized. If attrition continues to be lower, we can gently reduce our hiring. And, of course, we can moderate our non-billable headcount growth to match the billable headcount growth. The important point is, though, the bottom line is not what we wanted this quarter or what we'd ideally want in any quarter. The shortfall is not the result of us being unable to grow revenues or that the majority of the bets that we've been making suddenly stopped working. Rather, we had strong top-level growth and a series of things this quarter that happened to hit us negatively. coupled with a series of things we chose to do, because we believe they will allow us to continue to build a fundamentally more attractive enterprise over time. Before I close, let me focus a little bit more on that choice part of the prior sentence. Is it possible that we continue to have great talent looking to defect to us, and we decide to invest ahead of demand? That is always a possibility. But to me, that would be a great thing. If we took advantage of it, could it hurt quarters? Of course it could. But as those of you who have been following this company for years now know, it's been by making those sorts of bets that we've been able to get this company on the terrific multi-year trajectory we've been on now for almost a decade. We have hired some of the best people in this firm, people who have helped transform our businesses in quarters when the businesses they joined were slow. We've talked about some of those examples over time. I know a reasonable amount of the talent that has joined us this quarter. And for those I know, I must say I'm extraordinarily excited about them joining us. And I am excited about the professionals that I'm hearing right now want to join this company. Molly slipped in some data into my script. Apparently, during this first quarter, I knew we were hiring some great people. Apparently, we announced 44 senior hires this quarter.

44 combination of SMDs and MDs, which I think is unprecedented for our first quarter. Let me reiterate to me the most important point.

None of the issues this quarter give me pause about our multi-year trajectory or even this year. Quarterly results in this business and our company can always be volatile. And I don't ask management here to focus on reducing that volatility. I ask them to focus on building powerful, sustainable growth engines, not one that will never be impacted by short-term volatility, but one that can demonstrate over time that powerful multi-year trajectory. And to do that by having our teams focus on client needs, making bold bets where the needs are great and where we believe we have a right to win, and ensuring that every day we attract, develop, and promote great professionals who can deliver on those needs, and we support them

as they build those businesses.

I believe we have now shown that when we maintain that commitment and focus over any extended period of time, our business soars. Our people develop, and they soar. I so look forward to us continuing on that journey. With that, let me turn this over to Ajay for some details on the quarter. Ajay?

Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company-wide and segment results and discuss guidance for the full year. As Steve mentioned, today we reported yet another quarter of record revenues with all of our segments growing year over year. Of note, restructuring activity strengthened in the quarter, In fact, according to S&P Global, in the U.S. through March, monthly bankruptcies have increased sequentially for four consecutive months. Conversely, the pace of M&A-related services in several of our segments was slower than we anticipated. Bloomberg reported that global quarterly deal volume declined nearly 50% year-over-year in Q1 2023, making it the third lowest quarter for M&A in the last 10 years. Strong revenue growth did not sufficiently offset the increase in direct cost, SG&A, FX transaction losses, and a higher tax rate compared to the prior year quarter. As a result, EPS and adjusted EBITDA declined year over year. Overall, our first quarter results were below our expectations. Now, turning to the details for the quarter. First quarter of 2023 revenues of $806.7 million were up $83.1 million or 11.5% year over year. excluding the estimated negative impact of FX, revenues increased $99.7 million, or 13.8%. Earnings per share of $1.34 compared to $1.66 in the prior year quarter. Net income of $47.5 million compared to $59.3 million in the prior year quarter. The decrease in net income was primarily due to an increase in compensation, including the impact of an 11% increase in billable headcount, higher SG&A expenses, and FX remeasurement losses. SG&A of $184.2 million was 22.8% of revenues, and compares to SG&A of $149 million or 20.6% of revenues in the first quarter of 2022. The increase in SG&A was primarily due to higher compensation, which included a 14.4% increase in non-billable headcount, increased travel and entertainment expenses, and higher bad debt. First quarter 2023 adjusted EBITDA of $78.4 million decreased 13.3% compared to $90.5 million in the prior year quarter. Our first quarter 2023 effective tax rate of 24% compared to 22.2% in the prior year quarter. The higher tax rate this quarter was primarily due to an increase in foreign taxes and a lower discrete tax adjustment related to share-based compensation from fewer shares vesting. For the balance of 2023, we continue to expect our effective tax rate to be between 24 and 26 percent. Weighted average shares outstanding or WESO for Q1 of 35.5 million shares compared to 35.6 million shares in the prior year quarter. For the quarter, our convertible notes had a potential dilutive impact on EPS of approximately 1.3 million shares in WESO. As our share price on average of $173.80 this past quarter was above the $101.38 conversion threshold. Billable headcount increased by 614 professionals or 11% year-over-year. Sequentially, billable headcount increased by 123 professionals or 2%. Non-billable headcount increased by 14.4% year-over-year, we added non-billable employees to support a larger business, especially outside of North America, in areas such as recruiting, HR, finance, and marketing. Sequentially, non-billable headcount increased by 36 professionals, or 2.3%. Now, turning to our performance at the segment level. In corporate finance and restructuring, record revenues of $300 million increased 18.4% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for restructuring and business transformation services, which was partially offset by lower demand for transactions services. Business transformation and transactions represented 53% of segment revenues, while restructuring represented 47% of segment revenues in the quarter. This compares to a split of 59% for business transformation and transactions, and 41% for restructuring in the prior year quarter. Year over year, restructuring revenues grew 38% as we successfully helped clients in a variety of verticals, including retail, healthcare, financial institutions, and airlines. adjusted segment EBITDA of $55 million or 18.3% of segment revenues compared to $53.5 million or 21.1% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by higher compensation which includes the impact of a 13.9% increase in billable headcount and higher SG&A expenses, including increased business development activity. Turning to forensic and litigation consulting, or FLC, revenues of $173.4 million increased 12.7% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for data and analytics, investigations, and health solution services. Adjusted segment EBITDA of $18.6 million, or 10.7% of segment revenues, compared to $17.3 million, or 11.2% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in compensation, which includes the impact of a 4.2% increase in billable headcount, as well as an increase in as-needed outside contractors' expenses and higher SG&A expenses. In economic consulting, revenues of $169.6 million increased 2.2% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for M&A related antitrust services and higher realization for non-M&A related antitrust services, which was partially offset by lower demand for non-M&A related antitrust services. Adjusted segment EBITDA of $14.2 million, or 8.4% of segment revenues, compared to $21.2 million, or 12.8% of segment revenues, in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to higher compensation, which includes the impact of an 8.5% increase in billable headcount and higher SG&A expenses. We had expected higher revenues and adjusted segment EBITDA in economic consulting. This is in part due to revenue deferrals that have resulted in and may continue to result in variations in the timing of revenue recognized on work already performed. We believe that conditions to recognize these revenues will be met later this year. and could positively impact adjusted segment EBITDA by approximately $5 million. Technology's revenues of $90.6 million increased 12.6% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for investigations and litigation services, which was partially offset by lower demand for information governance, privacy, and security services. Adjusted segment EBITDA of $15.4 million or 17% of segment revenues compared to $13.4 million or 16.6% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by higher SG&A expenses and an increase in compensation, which includes the impact of a 17.1% increase in billable headcount. Strategic communications revenues of $73.1 million increased 4.5% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for corporate reputation services, particularly supporting crisis communications and cybersecurity-related engagements. Adjusted segment EBITDA of $9.6 million, or 13.1% of segment revenues, compared to $15.7 million, or 22.5% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower gross margin resulting from higher compensation, which includes the impact of a 16.2% increase in billable headcount. That and an increase in SG&A expenses more than offset the increase in revenues. Let me now discuss a few cash flow and balance sheet items. As is typical, we pay the bulk of our annual bonuses in the first quarter. Net cash used in operating activities of $254.2 million compared to $203.8 million in the prior year quarter. The year-over-year increase in net cash used in operating activities was primarily due to an increase in salaries, largely related to headcount growth, higher operating expenses, and an increase in annual bonus payments, which was partially offset by an increase in cash collections. During the quarter, we spent $17.8 million to repurchase 112,139 shares at an average price per share of $158.70. As of the end of the quarter, approximately $460.7 million remained available for stock repurchases under our current stock repurchase authorization. Total debt, net of cash, of $122.7 million at March 31, 2023, compared to $60.1 million at March 31, 2022, and negative $175.5 million at December 31, 2022. The sequential increase in total debt, net of cash, was primarily due to an increase in cash used in operating activities, which included annual bonus payments. Turning to guidance. As is typical, we will re-evaluate guidance once we have another quarter under our belt at the end of the second quarter to see if any changes are warranted. Despite the weaker than expected results in Q1, we are not changing our guidance. Our expectations for the year are shaped by several assumptions, including the following. First, Restructuring activity continues to strengthen, both in the United States and overseas, which was reflected in a 6% sequential increase in restructuring revenues compared to 4Q 2022. Second, while we expect M&A activity in 2023 to remain slower than in 2022, we expect a pickup from the near record low levels seen in Q1 over the coming quarters, which would positively impact our economic consulting and technology segments and our transactions business in corporate finance. Third, we expect to recognize certain revenue deferrals in economic consulting in the coming quarters. Fourth, We expect momentum to continue to build in our forensic and litigation consulting business. Finally, we expect SG&A expenses in each quarter for the balance of the year to remain at a level similar to SG&A in Q1. We expect non-billable headcount growth, which exceeded both billable headcount growth and revenue growth in Q1 to be lower in the second half of the year. Before I close, I want to reiterate three themes that I believe underscore the attractiveness of our business. First, we are focused on the duality of growing the business for the long term while also being mindful of utilization. Second, Our strong balance sheet allows us the flexibility to continue to boost shareholder value through organic headcount growth, share buybacks, and acquisitions when we see the right ones. And third, we have demonstrated our ability to generate strong revenue growth in any cycle. We believe we are the strongest provider of restructuring and antitrust services anywhere in the world. We continue to grow those businesses while also growing many other practices, including business transformation, ESG, cybersecurity, technology with key capabilities in digital assets and emerging data, and crisis communications globally. With that, let's open the call up for your questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Andrew Nicholas with William Blair.

Please go ahead. Hi, good morning.

Good morning, Andrew.

I wanted to just start with the restructuring environment. Sounds like you're pleased with the sequential step up in revenue quarter over quarter. Seems like you're seeing some strength both in the U.S. and overseas. So I was hoping you could just spend a little bit more time talking about how that's developed and maybe how you're thinking about that business over the next several quarters or years relative to maybe how you were thinking about it a couple months back?

So, Andrew, no question, restructuring is picking up, both in the U.S. and overseas. In places like Australia, Germany, U.K., it is picking up. And we said explicitly that in our prepared remarks and guidance. What is difficult to project is exactly the slope of that line. And that's why there's a range when we talk about our guidance. But there is definitely a pickup. Understood.

And then I think, Steve, you mentioned in your prepared remarks that there's a combination of factors that cut negatively in the corridor. I know, Ajay, you called out the revenue deferral and economic consulting. Were there any other kind of timing items that were sizable that you'd call out that kind of make it a combination of factors, or was that the only one that we should be cognizant of as we think about potential reversals as we move through the rest of this year?

So in terms of reversals, I'll see if Ajay thinks of anything else. I mean, I don't know of reversals. I think the other factors that sometimes happen in any quarter is, you know, some factors cut one way or another any quarter, like FX, bad debt. I mean, you know, the amount of bad debt. And I think, you know, we had some quarters we have higher than we expect in bad debt. Some quarters we have lower. Some quarters the FX cuts in our favor. Sometimes quarters it cuts against us. It sometimes seems like whenever we're having a bad quarter for something else, all the factors, the short-term factors also cut negatively. I'm sure that's not the case. It just feels that way. But this quarter, we had some of those cut negative also. You can't be sure they're going to reverse. You can't be sure that FX is going to reverse as the year goes on. But we have never seen a correlation that says because it was bad in the first quarter, it's going to be bad in the second. Does that respond, Andrew?

Yeah, no, absolutely. And then if I could just kind of squeeze one more question in just to clarify on your, Ajay, your comments on SG&A. Should we expect SG&A to be at a similar level to Q1 in absolute dollar terms or is that in terms of revenue percentage?

Absolute dollar terms.

Great. Thank you very much.

The next question is from James Yarrow with Goldman Sachs. Please go ahead.

Just start with corporate finance and restructuring and specifically in terms of the business transformation and transactions sub-segment. In that sub-segment, despite the weaker macro backdrop, it was still up very slightly quarter on quarter, which is obviously a positive. I'm just trying to understand within that sub-segment, the two businesses, how they would perform in a potential recession scenario. And I guess the two questions are, how do we think about transactions performance in a weaker M&A backdrop? And then on the business transformation side, should that be adversely impacted by a pullback in spending by corporates and sponsors if we do enter a recession? And then do you think you could outgrow any adverse effects through headcount growth over time?

So here's the facts. You know, combined business transformation and transactions grew 5.5% year over year. In that, transactions was actually down 8% year over year. Business transformation, even in this cycle, grew for us. We're small relative to the business transformation market out there or the whole industry out there. I think there's enormous scope for us to continue to grow business transformation despite cycles. The transaction side is cyclical and we experience the same.

Okay, that's very clear. Maybe you could just speak to the crypto revenue opportunity you see across your business and then within which segments do you see the opportunity and where are you investing in that?

Look, I mean, it's obviously a dynamic space. And we have, in fact, a number of our segments have opportunities in that. I mean, obviously, there's been bankruptcies in crypto. There's litigation in crypto. And litigation can make a difference for multiple of our segments. Technology can get involved in e-discovery. You can end up with investigations. If there's litigation, you can end up with disputes and expert witnesses. So it's obviously an area that we have focused on. And I don't think we specifically talk about individual cases, but we're making serious progress. Does that respond?

Absolutely. Thank you so much. I just had one other one, which is just on the hiring opportunity. You've obviously... continue to conduct robust hiring, especially outside of the U.S., as you alluded to before. Maybe you could just speak to why the opportunity has remained so robust and why you're seeing such high-quality talent shaking loose and whether what's happening with the big four consulting firms has anything to do with that.

I think some of it has to do with us and then some of it has to do with the rest of the world. I think one of the things that has changed in the last seven, eight years is we now are being seen as a winning player multiple places around the globe. I would say that although we had good people in Australia, we were not seen as the winning player. You could say that's true for many places in continental Europe. We had a good strong practice in London. but we weren't seen as a real player in many places in Europe. That has changed. That has changed. And that just, you know, people like to be part of a winning team. And then as you globalize, as you globalize some U.S. businesses, you can now win the most important global assignments, which the best practitioners want to be part of. I mean, 15 years ago, I think one of the big four won the bulk of Lehman Brothers work. You know, we won two, I don't guess we don't name names, even though those are public. you know, two of the biggest global bankruptcy cases in the last five years, you know, and, and that people like working on the main cases and so forth. So we've changed our position in multiple places around the world. The second issue is there's, there are dislocations in competitors, you know, and around the world. And, you know, often it's very hard to get the best people to leave their firms. But when there's a disruption, people look around and, think ten years ago when there was disruptions many place around they weren't looking at us and today a lot of people are looking at us and then the other thing I would say that's happened is some of the people who come to us from boutique firms from little firms from some of the larger firms that you referred to I've said it's been a great experience it's been a great experience that not that we're perfect but we actually deliver on supporting people growing their businesses and that's attractive for best people and that word gets around so it's a it's a It's a virtuous loop that I work every day to keep us in because it is the key to us being able to grow through cycles. And so far, we're not perfect, but it's going pretty well. Did that respond?

Absolutely. Really appreciate the color. Thanks for taking my questions.

The next question is from Toby Summer with Troost Securities.

Please go ahead.

Thank you. Just to start out on, while intrinsically unpredictable, has there been a change in conditions for the company and or opportunity for the company to do some sort of larger, maybe group hire laterally from a competitor? Anything there that we should think about and keep in mind in terms of variability of headcount growth this year?

You know, look, I don't know that there's been some precipitous dramatic change. I think, as you know, we've been doing pretty well at attracting people laterally for the last while. We've been also promoting at a record rate. But without both of those, we couldn't have met the growth we've shown over the last while. So we are actively monitoring this. You know, the question always is, you know, is there a disruptive event in a competitor. That means instead of onesies and twosies, you have a mass group of people who want to leave, the equivalent of Anderson Consulting or a smart version of that. We constantly monitor that and we try to make sure that we don't precipitate this. We're very supportive of a lot of other fine firms and we wish them all well, but we want to make sure that the world knows that if those things happen, then we are looking to add talent. If it hurts a quarter We're willing to do it because that's how you grow a business. But it's not like there are six people lining outside my door right here today, which we're going to sign a deal on tomorrow, if that was the question. Does that respond?

Sure. What's the outlook for boosting what has kind of been persistent and stubbornly low utilization in FLC? And maybe in the context of answering that, you could give us your perspective for the market for large projects in that space and in that segment?

Yeah, look, I think we have made quite a bit of progress, actually, in FLC over the last while. Some of it's masked by some other things that are going on in that segment. But the management team recognized that last year. We slowed some hiring, but more importantly, we got pretty aggressive commercially and made sure we were in front of certain potential assignments. So look, we've had very substantial revenue growth there. I think actually, to your point, it's still not at the utilization overall that we would like or they would like, but it's not because we're not growing. It's just that actually their expectations was for even faster growth, like many other parts of our business. So I think we're going to get we're going to get the utilization to the levels we want. We may just, either all the revenue that people are hoping comes in, or you can taper the growth of headcount. I mean, it's not like we're shrinking and you have to cut heads. What you have to do is, if you're growing a little less fast than you think you are, you may have to taper your hiring. And I think we're in much better shape on that business than we were six and 12 months ago. Does that respond to your question? Thank you.

Steve, was there any change you could perceive in demand in your various segments and lines of business when SVB occurred and the current sort of banking crisis emerged? Just wondering if there was any opportunity or diminishment in demand in various pockets.

So let me maybe talk to that at two levels. Obviously, I can't talk to specific clients, but if there are disruptive events like banks going bankrupt and so forth, those sorts of things often can either lead to sorts of demand for services that multiple R segments can provide. And so there's that specific the more general point you're making is, okay, so the second and third order consequences for that for some parts of our business. I mean, that's now getting into the, the, the, the sort of macroeconomic forecast that, you know, I read, I don't know how many of them you read a day, uh, right about, you know, okay. So is that equivalent to a 0.5% increase by the fed? So will the fed now only raise it a quarter a point? Will they do less? And will that actually affect the housing market more? I mean, you know, you can drive yourself nuts on that. Um, You know, I think my experience is what we need to focus on is making sure we have the right propositions and we're commercially aggressive enough and out in front. And then, you know, take stock periodically on our exuberance on headcount growth. And if we're a little over exuberant, you taper your hiring. And it's too hard to figure out the second order or sixth order effect of the macro effects and adjust things. So, But if you know and you can give me a call and let me know, I'd take the call. Does that at least respond to me? Right, right, sure.

Last year, G&A growth, infrastructure growth, sapped some of the ability for margins to expand. Could you talk about the risks and opportunities of that? of that not occurring this year or the risk of it recurring this year?

So, you know, when we do interesting things, it also results in higher costs. If you're entering new markets, new countries, new locations, new adjacencies, and you want to give your practitioners the best experience and you want to put the best, you know, resentment for your clients as well. It does require that. So we have, for example, to hire as many people as we have hired, you do need recruiters. Otherwise, you'd end up paying outside companies a lot of money. To provide a good experience for people in a different country, you need dedicated people in that country to service those people. Now, we are explicitly, and that was a big part of the growth in non-billable headcounts. We are in a later innings. I'm not sure which one, but we are in the later innings in that. And so that should taper off in the second half of the year. A nice phrase for a guy who barely knows baseball. Hanging around you.

Thank you.

This concludes our Q&A session.

Well, thank you all for taking the time. I mean, let me just reiterate, you know, We are feeling very good about the company and the revenue of this quarter really demonstrates that. And obviously the bottom line wasn't exactly what we wanted, but leaves us still with enormous confidence about where this company is moving over time. Looking forward to continue to engage with you all. Thank you very much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.