FTI Consulting, Inc.

Welcome to the FTI Consulting Second Quarter 2025 Earnings Conference Call. All participants will be in 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 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note, today's event is being recorded. I would now like to turn the conference over to Molly Hawks, founder of Investor Relations. Please go ahead.

Good morning. Welcome to the FTI Consulting Conference Call to discuss the company's Second Quarter 2025 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 the Private Securities Litigation Reform Act, including the company's outlook and expectations for the full year 2025 based on management's current beliefs and expectations. These forward-looking statements involve many risks and uncertainties, assumptions and estimates, and other factors that could cause actual results to differ materially from such statements. For a 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 .fticonsulting.com, as well as other disclosures under the headings of risk factors and forward-looking information In our annual report on Form 10-K for the year ended December 31, 2024, our quarterly reports on Form 10-Q and in our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as the date of this earnings call and will not be updated. FTI Consulting assumes no obligation to update these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. During the call, we will discuss certain non-GAAP financial measures. A discussion of any non-GAAP financial measures addressed on this call and reconciliations to the most directly comparable GAAP measures are included in the press release and the accompanying financial tables that we issued this morning. 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, an Excel and a PDF of our historical financial and operating data, which have been updated to include our second quarter 2025 results. With these formalities out of the way, I am joined today by Steve Gumby, our CEO and Chairman, and Ajay Sarvarwal, our Chief Financial Officer. At this time, I will turn the call over to our CEO and Chairman, Steve Gumby.

Thank you, Molly. Welcome, everyone, and thank you all for joining us today. As I assume some of you have seen this morning already, we reported strong second quarter results today. In that regard, I thought it might be interesting to bring our mind back. You might remember that when we talked about the outlook for this year, we talked about 2025 being a challenging year. And if you remember, we cited a fair number of potential reasons. First, we were cycling a really strong first half of 2024. Second, and probably more important, we had slowed revenue momentum coming into 2025. Third, we were facing disruption in our Compass Lexicon business. Fourth, although at the end of last year, the market was forecasting an M&A boom in 2025, a boom that would, of course, benefit a number of our businesses, by the early part of the year, the market had suspended those expectations. Fifth, while FLC was soaring, it was facing uncertainty due to potentially changed regulatory environment. And sixth, the good thing, we were continuing to find great talent to invest in, which, of course, is a fabulous thing for the medium and long term, but typically is a drag on the P&L in the short term. So when we added all that up, it led us to give the weakest guidance that I think we've ever provided during my tenure. We're the 1% revenue growth at the midpoint of the guidance and the possibility, within the range that we forecasted, of a down year in adjusted earnings per share for the first time in many, many years. So given that backdrop, where are we halfway through the year? I find that question interesting. First, most of those negative things have come true. And actually, the negative impacts in econ and tech have been even larger than we expected. And yet, results we've been delivering have been solid, as are our best estimates for the prospects for the rest of the year. So how is that possible? And what does that mean? To me, that juxtaposition, the juxtaposition of the headwinds we have faced with the results we are able to deliver, to me is a powerful illustration yet again of just how strong this company actually is, just how resilient. We are a powerful enough company to actually be weathering as permittable a set of headwinds as I've ever seen for this company. Not weathering them perfectly, but weathering them pretty damn well. So let me say a few words on the various businesses, starting with the businesses that had the most financial challenges this year, and then moving on to some of the businesses that have had strong financial performances. I'm sure you noticed that tech has had some financial challenges this year. Let me bring your mind back. I think, as you know, our tech business has been soaring prior to this year, with I think the fastest organic growth of any of our major competitors for the past five or so years. That tech team is focused on the toughest, most complicated jobs. They work particularly with the leading law firm on jobs that require processing massive amounts of data, some of them very complicated emerging forms of data, and processing it fast, figuring out with the attorneys what it all means. As a consequence of those capabilities, tech has become a great business with a great team and has had a great run. This year, the market has been hit because of the shortage of major deals and because a number of major deals got waved through versus requiring second requests. Given our strength in second requests, which if you don't know, second request refers to the additional demand for information for merger clearance. Given our strength in second requests, that change in policy has hit us probably at least as hard as anyone else. And important, we don't expect those headwinds to go away immediately. So in addition to a not great first half of the year, we are not forecasting a great second half of the year for this business. Having said that, none of that challenges the underlying strength of this business. The ability to juggle intense situations, figure out how to deal with emerging data, leverage new technology, nor does it undermine the incredible capability of our people, nor the trust that the leading law firms and the leading corporations have in our people and our capabilities. My experience, in fact, is that in slow markets over any extended period of time, they tend to favor and benefit people like us, the most capable competitors. In my experience in markets like this, weaker competitors will be forced to cut corners, either cut corners with respect to their people or their work. And that creates real opportunity for the strongest competitor. So while this year is clearly a very tough year for them, it has in no way changed my conviction about the strength of this business, the strength of the team and where this business will get to over time. Let me switch to the other business that has economic challenges this year. Our Compass Lexicon business, Adjusted EBITDA, will be hit substantially this year. But it, of course, remains an enormously capable organization. It remains the leading group of economists in the world. And a strong leadership team at Compass Lexicon and its reputation has meant we've been able to attract terrific additional folks into this organization this year. Academics with unbelievable backgrounds and leading professionals. So we can't gainsay the financial hit that we will take this year. And I would not want to suggest that the rebound from that financial hit will be immediate. But the Compass Lexicon team and I see the people who are here, the terrific people in Chicago who I spent a lot of time with last week, people on the West Coast, on the East Coast, in EMEA, in Asia, together with the great folks who have joined recently as the foundation of the next generation of success for this great institution that has been a leader for a long time. The next generation of insightful work and the next generation of success for the best economic team in the business. So we do see a major hit to the economics of this business this year. We do not see a permanent hit. Let me turn to some of the businesses that have been major contributors to our financials this year. FLC, as you know, like in every business, we have had over the years a number of quarters where this business underperformed its potential. Just remember back to COVID. We're coming out of COVID. But we have always believed in the FLC team and the powerful group of capabilities within that team, even when it wasn't showing up in the P&L. And the team there has been creative and insightful in investing in places where we have conviction about where we can be the leaders on the most important client matters, whether it's in risk and investigation, cybersecurity, financial services, construction solutions, or in some of the underlying capabilities like data and analytics. The result of that commitment has shown up powerfully in the last few quarters with us winning some of the most major jobs in the market, even in the face of the headwinds. As a consequence, this year, even with the regulatory headwinds, we have had so far a record first half of the year by far for FLC. And though one can always speculate that the regulatory headwinds could intensify and therefore slower momentum a bit as the year goes on, I remain incredibly enthused by what I see as enormous potential for this terrific group of people going forward. CorpSpin is, of course, our largest and most multifaceted business and therefore the most difficult to summarize briefly. And the sub businesses have macro drivers that never cut all the way the same way for each of the sub businesses. But when you cut through it, what we have found that is we continue to support each of the sub businesses, independent of a given quarters current macro economic factors. We continue to track and develop great people, even if we're in a down cycle for those businesses. What it means is although those sub businesses can and are occasionally down for a period and they surely have zigzags, overall it adds up to an upward sloping line, a powerful, powerful upward sloping line. Let me give you just a couple of examples of the many actions we took in slow periods that are contributing to CorpSpin's success this year. Our transaction businesses, like all transaction businesses, have volatility and they can have bad quarters. But the team there noticed that we were gaining share even during those bad quarters. And they were gratified by the fact that the private equity market began to appreciate the quality of our offerings. And was starting to ask us if we could help in further areas, key adjacencies, not just financial due diligence, but adjacencies like merger integration, carve outs, tax structure, human capital, strategic due diligence, STRATCOM and more. And so the team continued to invest in those areas during the good quarters, but also during some of the quarters when the deal market was down. And those investments of course cost us money, but that commitment in turn helped us further develop and gain share in specific areas as well as develop deeper relationships with those core clients. As a consequence this year and a year when there aren't that many transactions in the market, from the ones we are helping, we are helping in a much broader way. So in a down market, we are up. Similarly, our team has not sat still with a market that many consider our most mature market, which is core restructuring. Not only have we dramatically grown our businesses overseas, but we have continued to invest and capabilities in the US and around the world. For example, from an industry perspective. Example, a few years ago we weren't winning any major work in the airlines industry. Today we have a tremendous share of the airlines work in the US and around the world. It is these sorts of moves in transactions and core restructuring, but also a whole lot of other places that have allowed our core business to shine. Not only this year, but over now many years. It of course has had its ups and downs, but its relentless focus on making the right bets has allowed it to more than triple the revenue and more than quadruple the adjusted EBITDA of 10 or so years ago. And in my view, the Corp. Finns Success Book has many, many chapters left. Finally, but not least, STRATCOM's willingness to invest in key areas like cybersecurity response, public affairs, crisis communications, even through the slow quarters that it's faced over the last couple of years, is why STRATCOM today is helping the company carry the company's financial load. While at the same time continuing to build its brand. I think it's up something like 14% in revenue and like over 30% in adjusted EBITDA this year. Stepping back, this year overall, of course, is not the sort of growth year that I aspire to. It is not the sort of growth year we've delivered many more times than not over the last while. But in the face of by far the most significant headwinds I have seen in the 11 years I've been here, we are nevertheless able to deliver a solid year. We are having a solid year not only while fighting off the headwinds, but while reinvesting in our terrific Compass Lexicon business, supporting our tech businesses, as well as investing in terrific opportunities in Corp. Finns, FLC, and by the way, our other econ businesses, which by the way are doing incredibly well this year. And investing in STRATCOM and in EMEA and in Asia and Australia and Latham and yes, also in the supposedly mature US. We have been able to do that because of the success of the previous generations of investments that are now allowing us to win the biggest airline jobs or cyber jobs or investigations or mergers or bankruptcy and doing so in many more parts of the globe than ever before. So yes, the growth we're seeing this year is obviously not what I aspire to or what we aspire to and not of course what we've delivered in recent years. But in some strange way, this year is turning out for me to be an incredible positive reinforcement of my conviction in the power of this company, the future of this company. If we can have this solid a year in the face of all the headwinds we face this year while at the same time reinvesting the businesses that we believe in, doesn't that speak to amazing strength of an institution, our relevance in the market, the quality of the group of professionals we have, the impact we're having with our clients, our overall incredible resilience. In a powerful way, probably more for me than if we had yet another year of double-duty growth. This year underscores the tremendous potential of this company going forward. I so look forward to working with each of you over the next while to deliver on that potential. With that, let me turn the call over to Ajay to take you through the details of the quarter. Okay. Thank