FTI Consulting's CEO Discusses Q3 2011 Results - Earnings Call Transcript

FTI Consulting (FCN)

Q3 2011 Earnings Call

November 02, 2011 9:00 am ET

Executives

David G. Bannister - Executive Vice President and Chairman of the North American Region

Mollie Hawkes -

Jack B. Dunn - Chief Executive Officer, President and Director

Dennis J. Shaughnessy - Executive Chairman

Roger D. Carlile - Chief Financial Officer and Executive Vice President

Analysts

Joseph D. Foresi - Janney Montgomery Scott LLC, Research Division

Paul Ginocchio - Deutsche Bank AG, Research Division

Scott A. Schneeberger - Oppenheimer & Co. Inc., Research Division

David Gold - Sidoti & Company, LLC

Daniel R. Leben - Robert W. Baird & Co. Incorporated, Research Division

Tobey Sommer - SunTrust Robinson Humphrey, Inc., Research Division

Timothy McHugh - William Blair & Company L.L.C., Research Division

Arnold Ursaner - CJS Securities, Inc.

Presentation

Operator

Good day, and welcome to the FTI Consulting Third Quarter Earnings Conference Call. As a reminder, today's conference call is being recorded. Now for opening remarks and introductions, I would like to turn the conference over to Mollie Hawkes of FTI Consulting. Please go ahead, ma'am.

Mollie Hawkes

Good morning. Welcome to the FTI Consulting conference call to discuss the company's 2011 third-quarter results as reported this morning. Management will begin with formal remarks, after, which, we 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 21 of the Securities and Exchange Act of 1934, that involves uncertainties and risks.

Forward-looking statements including statements concerning our plans, objectives, goals, strategies, future events, future revenues, future results and performance expectations, plans or intentions relating to acquisitions or other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results.

For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by the forward-looking results, 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 heading Risk Factors and forward-looking information in our most recent form 10-K and our filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call.

During the call, we will discuss certain non-GAAP financial measures, such as adjusted EBITDA, adjusted segment EBITDA and adjusted earnings per share. For a discussion of these non-GAAP financial measures, as well as a reconciliation of these non-GAAP financial measures to the most recently comparable GAAP measures, investors should review the press release we issued this morning.

With these formalities out of the way, I would like to turn the call over to Jack Dunn, President and Chief Executive Officer. Jack, please go ahead.

Jack B. Dunn

Thank you very much, Mollie. Good morning to everyone and thank you for joining us. With me are Dennis Shaughnessy, our Chairman; Roger Carlile, our Chief Financial Officer; and David Bannister, the Chairman of our North American region. In response to your positive feedback in our last call, we like to follow the format of keeping the prepared remarks brief giving you a couple of takeaways that we feel might be potentially important to you and then leaving as much time as possible for questions and drilling down on the issues that are really important to you.

In the context of reviewing the results for the quarter, I would ask you, as always, to keep in mind that the goal of FTI is to be the number one firm that people turn to worldwide for solutions to the jugular issues that affect their wealth, their reputation and indeed their very lives. Our strategy, or if you will, really our value proposition is to attract, hire, acquire, develop and most importantly retain the best talent in the world to help clients identify those jugular issues, devise value-added solutions and then deliver them locally as one firm through the last mile of execution in a timely, effective, thorough, seamless and cost-efficient manner.

I think that this was a defining quarter in validating that strategy and achieving that goal and we'd like to give you a couple of things to think about in those terms. The first is that it was truly an excellent quarter. The company grew 20% as a whole with a robust 11% of that being organic. Second, our pro cyclical businesses again led the way with an aggregate 28% growth, all increased 3 delivered exceptional results and 2 of them delivered record performances. Third, our activities outside North America continued to again be very, very strong. Finally in the quarter, I believe many of the steps that we have taken over the last months, quarters and years and some of you have been there with us came together to demonstrate the power of the platform we have built and the intellectual capital that we have brought together.

With regard to the quarter, revenues rose 20% to a record $414 million, the highest quarterly revenue in the history of the company and our third consecutive quarterly record. Earnings per share for the quarter were $0.70, up 63% over earnings per share in the third quarter last year tying the all-time previous record for any quarter. Adjusted EBITDA was 18% of revenues, 150 point basis -- excuse me, 150 basis point improvement over the last sequential quarter, demonstrating the assimilation of our new LECG professionals and the con-commitment ramp-up expenses associated with them into profitable performance.

With regard to our pro cyclical businesses, as a whole, they grew 28% and new organic growth for these businesses was a robust 18%. The delta, again, represented mostly growth from the LECG transactions, which at over $25 million are certainly exceeding our expectations.

Highlights in the pro cyclical businesses were 61% revenue growth in Economic Consulting to new record levels, of which 30% was organic, 33% growth in technology, all of which was organic, maintaining its status in the exclusive 30-30 club of businesses that produce both 30% growth and 30% adjusted EBITDA margins and 18% growth in Forensic and Litigation Consulting also to new record levels of which 9% was organic.

Despite, again, herculean headwinds, strategic communications showed increased revenue at about 3% due to foreign exchange, but the real story here is that it remained number one in the league tables and it did so globally as an international firm as a whole in Europe where the competition is intense and in Asia where it has the luxury of being -- not luxury, but the hard-earned position as a dominant player.

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