FTI Consulting Reports Mixed 2024 Earnings Outlook

FTI Consulting ((FCN)) has held its Q4 earnings call. Read on for the main highlights of the call.

FTI Consulting’s recent earnings call painted a mixed picture for stakeholders, highlighting both successes and challenges. The company experienced robust revenue and net income growth in the first half of 2024, but faced significant headwinds in the second half, particularly in the economic consulting segment due to senior departures. This has tempered the overall sentiment, suggesting a cautious outlook for 2025 amidst increased expenses.

Record Revenue Growth for 2024

FTI Consulting continued its trend of record-breaking revenue for the tenth consecutive year, reporting a 6% increase to $3.7 billion in 2024 compared to $3.49 billion in 2023. This achievement underscores the company’s consistent performance and growth strategy.

Strong First Half Performance

The first half of 2024 was particularly strong for the company, with revenues up by 12% and an impressive EPS growth of 48% compared to the same period in 2023. This performance was a significant contributor to the year’s overall positive financial outcomes.

Net Income Growth

Despite facing several challenges, FTI Consulting managed to increase its net income to $280.1 million from $274.9 million in 2023. This growth was supported by a lower tax rate and favorable FX remeasurement gains, highlighting effective financial management strategies.

Free Cash Flow Increase

The company’s free cash flow saw a remarkable increase in 2024, reaching $360.2 million compared to $174.9 million in 2023. This substantial improvement reflects FTI Consulting’s ability to generate cash, providing a solid foundation for future investments and growth.

Second Half Revenue Decline

Despite a strong start, the second half of 2024 saw a slowdown in revenue growth, with a 3.2% decline year-on-year in the fourth quarter. This decline is attributed to various market challenges and internal issues, indicating areas for strategic focus.

Economic Consulting Segment Challenges

The economic consulting segment faced significant challenges due to senior departures within the US competition part of Compass Lexicon. These departures impacted revenue and profitability, raising concerns for 2025.

Increased Bad Debt

FTI Consulting experienced an increase in bad debt, which accounted for 1.4% of revenues in 2024, up from an average of 0.8% over the past five years. This was driven by a substantial $12.8 million bad debt in the economic consulting segment.

Higher SG&A Expenses

SG&A expenses in the fourth quarter increased to 23.2% of revenues from 21% the previous year. This rise was primarily due to higher bad debt and outside services expenses, suggesting a need for cost management strategies.

Adjusted EBITDA Decline

Adjusted EBITDA decreased to $403.7 million, or 10.9% of revenues, from $424.8 million, or 12.2% of revenues, in 2023. This decline was attributed to higher direct costs and SG&A expenses, highlighting the financial pressures faced by the company.

Forward-Looking Guidance

Looking ahead, FTI Consulting provided guidance for 2025, projecting revenue in the range of $3.66 billion to $3.81 billion and GAAP EPS between $7.44 and $8.24. Adjusted EPS is expected to fall between $7.80 and $8.60. The company anticipates challenges such as senior departures in the Compass Lexicon subsidiary, a higher tax rate, and continued investment in talent, which may affect revenue and profitability. Despite these hurdles, FTI Consulting remains optimistic about its long-term growth prospects.

In summary, FTI Consulting’s earnings call revealed a complex landscape of achievements and challenges. While the company has demonstrated strong financial performance and growth, particularly in the first half of 2024, it faces significant hurdles moving forward. The cautious outlook for 2025 is tempered by internal and external challenges, yet the company remains hopeful about its future trajectory.