FTI Consulting, Inc.

Good day, and welcome to the FTI Consulting second quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. And to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ms. Molly Hawk, HIDM Investor Relations. Please go ahead, ma'am.

Good morning. Welcome to the FTI Consulting Conference Call to discuss the company's second quarter 2024 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 and Section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. Forward-looking statements include statements concerning plans, initiatives, projections, prospects, policies, processes and practices, objectives, goals, commitments, strategies, future events, future revenues, future results and performance, future capital allocations and expenditures, expectations, plans or intentions relating to acquisitions, share repurchases and other matters, business trends, ESG-related matters, climate change-related matters, new or changes to laws and regulations, scientific or technological developments, 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, where the quarter ended June 30th, 2024, our annual report on Form 10-K for the year ended December 31st, 2023, and in our other filings with the SEC. Investors are cautioned not to place any reliance on any forward-looking statements which speak only as of 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 these reconciliations. 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 second quarter 2024 results. Of note, during today's prepared remarks, management will not speak directly to the quarterly earnings presentation posted to the website. To ensure our disclosures are consistent, these slides provide the similar details they have historically, and as I've said, are available on the investor relations section of our website. With these formalities out of the way, I'm joined today by Stephen Gumby, our President and Chief Executive Officer, and Ajay Sabharwal, 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. As I'm sure many of you saw in our press release this morning, we once again delivered terrific results this quarter. As usual, certain sub-businesses and geographies either outperformed or underperformed their specific expectations. But overall, it was a terrific quarter. And combined with a strong first quarter, delivered an exceptional first half of the year. As Ajay will talk about in a moment, we had some one-time factors that this quarter positively affected the results, most notably a lower than expected tax rate. But even normalizing for those one-time factors, it was a great first half of the year. Our revenue in aggregate grew 12%, almost all of which was organic growth. And our adjusted EBITDA was up 27% compared to the first half of the year. So we feel pretty good about the first half of the year, and importantly, the strength of our businesses. With respect to the second half of the year, let me share a couple of points. First, Ajay always points out at this time of year that the second half of the year, and particularly the fourth quarter, includes the holidays, which is a time when many of our professionals and our clients take time off. The December effect does not actually happen every year because there's so many variations in our business. You can have transactions pick up. You can have little booms in December and so forth. For example, last year we were surprised by how strong December was and therefore our fourth quarter. But a December slowdown does happen more times than not, and it can have a considerable effect on our results. So we build that into our forecast. That's a general point. More unique to this year is something about the comparisons with last year that I want to underscore. So far this year, we've been cycling a very weak prior year, the first half of the year. For the rest of this year, though we're forecasting our business will continue to be strong, we are cycling a much stronger set of comparables from last year. That does not mean we expect the business to be weak in the second half. It does mean, however, that as the year unfolds, we expect the growth year on year will look different than what we've delivered so far. The third point is, to me, the more contentful point, which is that so far this year, for a variety of reasons, we have not shown the level of headcount growth that I aspire to, that we typically have had over these many last few years, and that is required to meet my and our multi-year growth aspirations and the level of growth that we have been delivering. And so we have clear plans to correct those shortfalls in the second half of the year. As always, the bulk of our campus hires will join us, as they typically do in the third quarter. But as I will come back to in a moment, we also continue to find and invest behind senior talent.