FTI Consulting, Inc.

Welcome to the FTI Consulting second quarter 2026 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 one on your telephone keypad, and to withdraw your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Mollie Hawkes, Head of Investor Relations. Please go ahead.

Good morning. Welcome to the FDI Consulting Conference Call to discuss the company's second quarter 2026 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 whole year 2026 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 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 State 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 annual report on Form 10-K for the year ended December 31, 2025, our quarterly report on Form 10-Q, and other filings with the FDC. Investors are cautioned not to place undue reliance on any forward-looking statements which speak only as of the date of this earnings call and will not be updated. SGI 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 Correctly Comparable Gap Measures are included in the press release and the accompanying financial tables that we issued this morning and were also posted to the investor relations section of our website. Lastly, there are two additional 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 2026 results. With these formalities out of the way, I'm joined today by Steven Gunby, CEO and Chairman, Angela Nam, our Chief Financial Officer, and Paul Linton, our Chief Strategy and Transformation Officer. At this time, I will turn the call over to our CEO and Chairman, Steve Gunby.

Thank you, Molly. Good morning, everyone, and thank you all for joining us. As you may have seen, this morning we reported revenues for the second quarter that were, once again, a record. At the same time, our bottom line performance was somewhat below our expectations for reasons that I'd like to go into in a bit more detail. And specifically, we thought it might be useful if we highlight which of those reasons we believe are temporary in nature. and which may be more durable and therefore highlight what we think all of this might mean for the rest of the year. So with that, let me dive in. One major reason for the bottom line performance was that our SG&A ran higher than expected this quarter. Angela will talk about the SG&A in more detail. And important, she will talk about why we do not expect that to recur going forward. So let me leave that discussion to you, Angela. Let me spend a bit more time perhaps on the other reasons, which have to do with the fact that despite record revenues, we actually expected revenues to be even stronger, particularly in a number of the international markets where we've been able to add terrific senior talent and great numbers of that senior talent over the last while. and most notably, let me highlight that phenomenon in EMEA. As I will mention a couple times in this talk, EMEA did continue to grow and some businesses in EMEA, for example, our Spain and German businesses had terrific quarters. They exceeded our expectations. But we did have challenges in the quarter, both in the Middle East and in the UK. Challenges which appear to have different bases and therefore, Different potential durability. With respect to the UK, our sense is the issues here are short-term in nature. The normal sorts of zigs and zags that affect different businesses at different points in time. As I hope everyone on this call knows, we have great businesses in the UK, almost across the board. But as we all know, sometimes even with the greatest businesses we have, businesses like our restructuring business or our econ business in the UK, they can happen to have some cases end at a particular point in time and some delays and new major cases beginning. And when you have those sorts of gaps in those quarters, of course, it flows through to the bottom line. In this case, the timing of that gap between cases ending and starting was far from ideal because given the timing of client vacations in EMEA in the summer, it's typically hard to have a rebound start immediately in the middle of the summer over there. But important, I wanted to underscore, we do not believe the revenue shortfall in the U.K. versus expectations is more than a short-term issue. With respect to the Middle East, however, it's obviously a more complicated question, as I'm sure everyone on this call knows. The Middle East has serious geopolitical disruption, and I think the world as a whole is having trouble predicting just how long that geopolitical disruption is going to last. We do have a great team there, and typically over any extended period of time, my experience is the quality of the team that determines success, not market forces or even geopolitical disruptions. But in the Middle East, we clearly do not yet have any definitive sense of when that business will turn. Let me step back for a minute from specific markets. I did want to underscore that even with revenue below some of our aspirations in some of these markets, our overseas markets in general, and Anita in particular, are growing on the top line in Q2. They're just growing on the top line slower than our aspirations. Let me see if I can explain that a little bit more. As I hope many people on this call know, we have been the beneficiary of a terrific set of hires over the last while. Yes, in the U.S., but particularly overseas, as well as some terrific promotions there. And with those aspirations and with those additions has come conviction, belief, and associated aspiration for revenue growth that is considerably higher than mid-digit, single-digit. And important, we still have that conviction and those aspirations and those expectations. I am, we are powerfully excited about the people we've added and the people we are continuing to add and the people we're promoting. But unfortunately, when the revenue in a given quarter happens to not quite meet those aspirations and is up only mid to high single digits, the shortfall versus expectations ends up going through to the bottom line. Given that we continue to see strong underlying demand in many places and believe most of the Q2 pressures were timing-related, We are not changing our revenue guidance for the year, nor our internal forecast for the bottom line for the second half of the year. But as Angela will talk about, given the fact that the bottom line year-to-date is below our expectations, we are adjusting our EPS guidance. If I turn to look at the world by segment, the story is much the same as we've seen in many quarters, which is we've had some businesses and some sub-businesses that have performed terrifically well, and a few businesses that have either had more challenging markets or have had to run off some big jobs. In court bin, as I hope you will look at the data and see, the results overall are terrific, which I find once again powerful and heartening, given that the restructuring market is not universally hot right now. and the broader M&A environment remain somewhat uneven. Our sense is that we continue to benefit from the strength of our platform and the fact that now for years, talented people have continued to join us across each of the three service lines. In FLC, our sense is that our experts continue to be called into the most complex, high-stakes matters in the market in areas like cybersecurity, international trade, sanctions issues, We believe we continue to gain share. Having said that, the amount of regulatory scrutiny going on globally is feeling less intense than in the past. So even though we are strong this year, we are not expecting to replicate the sort of the bottom line growth that we've seen so vividly over the last few years. In econ, the quarter actually came in above our expectations. Now, as we've talked about, it will take multiple years to get econ back to anywhere near historical levels of profitability. But as we've also discussed, we continue to have the leading experts, and they continue to be involved in some of the most important antitrust, international arbitration, securities, litigation matters. And one can see the results of those capabilities in the strong sequential improvement in econ this quarter. So though we have a long way to go, we do expect that in the second half of this year, the business will no longer be a year-on-year drag on revenue or on adjusted segment EBITDA. Tech and Stratcom both had solid quarters, particularly Stratcom when you look at the year-to-date. Both of these businesses face competitive environments, with Tech in particular facing a very intense environment. But both businesses continue to make good progress, and both see strong opportunities going forward. So what does that mean for us overall? Look, we always have, as we see progress, Thank you for joining us. Those things can happen in any given quarter. But our experience is that over any multi-quarter period, the relevancy, the power of one's offering is what tends to win out. In that connection, I would note that even in the face of what I've talked about today, year-to-date, we were up 7% on the top line. and up 10% if you normalize for the econ issues we're working through. Which may raise in your mind the question that we were talking about, which is how did we actually hit 10% growth, even with certain places not meeting the full breadth of our aspirations? Let me highlight two reasons, because they're important in themselves, but because both of them undergird why I, why we are so confident in this business going forward and over the medium term. One is that we continue to win in the traditional markets that we have won in for a long time. Markets that continue to show themselves powerfully relevant today. And the second is that, if anything, AI is further feeding that growth. So let me take a minute on each of those. In terms of our traditional markets, the world of bankruptcy hasn't gone away. Nor has the world of antitrust, of transactions. of investigations, of disputes, of litigation, of reputational issues. And what we are seeing evermore is when the stakes are high, clients want the best experts. A phenomenon that we believe has been benefiting us for seven or eight years now, and we believe will continue for a while. And our current view is that AI, if anything, is reinforcing those phenomena. On one level, we're finding that the company is involved in AI are facing and calling us for their own set of high stakes challenges, whether it's litigation, regulatory concerns, transactions, or disputes. More generally, AI itself is this type of disruptive force that tends to lead to the sorts of things that we are the lead experts at, whether it's bankruptcies, investigations, disputes, or crises. You can talk about that conceptually. You can see some of that in the headlines. You can also start to see that vividly in our client engagements. For example, Econ, as you may have seen, one of our new affiliates recently served as the lead expert in supporting in that high-profile OpenAI bus case, which, as you may know, was a victory for our client, OpenAI. More generally, we're being asked to advise on AI-related matters involving an intellectual property issue. or disputes around misinformation or antitrust claims involving major companies. And in tech, we're finding that the leadership position that they are creating in AI is allowing them to do types of work that I don't think even they could fathom doing a few months ago, let alone a few years ago. Sophie talks about a case recently where we had to look not at 45,000 emails in a day, or two days, but 45,000 images and videos and mobile data in an incredibly short period of time to help our client decide its litigation strategy. That wasn't possible just a few months or years ago, and the leadership position we have established in those sorts of work is helping us extend and reinforce our position as the leaders for the most complicated, expert-driven work. Those are just a couple of examples. So, would I have preferred that the bottom line this quarter fully meet my expectations? Of course I would. For the reasons that you all know, but also because I'm so excited about the talent we've added around the world. We believe in the best we're making and the power of that talent. And it's frustrating any time you have short-term factors that you feel are obscuring the success that those people are driving. And of course, more generally, I am concerned about the Middle East, not just for our business. For our people and, of course, for the world. Important, none of what we've talked about today leaves me any fundamentally less optimistic about the fabulous teams of experts we have assembled and are continuing to assemble. The leading positions we have created, the resulting ability we now have so many places to deliver the most critical work for our clients, The effect of that work on building our brands in the market, which in turn continues to augment our position in the virtuous group of professional services, where you deliver great work for your clients, and because great people are motivated to participate in that and do that, leads to you being able to attract and develop great people, which in turn reinforces and builds the business and shows over time there's a better platform for our people, makes a difference for our clients, and ultimately creates a business that is ever more powerful for you, our shareholders. With that, I want to turn this over to Angela, but before I actually let her talk, let me reiterate, Angela, just how happy I am that you are here. Let me tell all of you just how impressed I am how quickly she's gotten up to speed and how impressed I am in the credibility she's established so quickly within our leadership team. Angela, over to you.