FTI Consulting, Inc. Aktie

Welcome to the FTI Consulting First Quarter of 2026 Earnings Conference Call. [Operator Instructions] Please also note that this event is being recorded today.

I would now like to turn the conference over to Mollie Hawkes, Head of Investor Relations. Please go ahead.

Good morning. Welcome to the FTI Consulting conference call to discuss the company's first 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 full 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 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 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 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 of 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 2 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 first quarter 2026 results.

These formalities out of the way, I'm joined today by Steve Gunby, our CEO and Chairman; and Paul Linton, our Interim Chief Financial Officer and Chief Strategy and Transformation Officer.

At this time, I will turn the call over to our CEO and Chairman, Steve Gunpy.

Thank you, Mollie. Welcome, everybody, and thank you all for joining us today. As you may have seen this morning, we reported once again solid results for the quarter. I will talk to those results in a moment briefly. And then Paul, of course, will talk to them somewhat more extensively.

With your permission today, I'd like to start this discussion, however, in a somewhat different place. Typically, in these sessions, I start with some perspectives on the quarter or on the last few quarters and then try to zoom out from those to see if I can draw from them any lessons as to why we've been successful and then some lessons about the future, why typically, I at least continue to believe that, that experience suggests an extraordinarily bright future.

Today, let me reverse that order, drawing on some of what we just experienced at our all SMD meeting a couple of weeks ago to see if I can use that experience to perhaps share some perspective on this year and on this quarter. We finished that all SMD meeting just a few days ago. At every one of these meetings, so many people come up to me or others after the meeting and say, just how terrific a meeting they felt it was in terms of the work that got done, but I think for most people, even more powerfully in terms of the sense of pride, sense of excitement, the sense of conviction about the future of the company that people emerge from that meetings with. That's been true at prior meetings.

But after this one, my ex co-colleagues and I were struck by just how many people came up to us and shared those thoughts and just how deeply they seem to be feeling them. So I thought I might share a little bit about that, why that might be and why it is that after such a meeting like this, that so many people leave with the conviction about the magnitude of the opportunities yet in front of this company and the conviction that this company is still so much closer to the beginning of the powerful journey we're on in the end.

So why was this meeting so good? I think actually, part of the power of the meeting had nothing to do with the meeting itself. It had to do with just how pumped up so many people were coming into the meeting, pumped up particularly about what they had each individually and collectively accomplished over the prior 18 months. Paul and I today will talk about all the stuff we still have to do because there's always stuff to do.

We have a long way to go on Compass Lexecon. This quarter, we did also had some of the normal blips. For example, FLC didn't quite perform as we intended. Our tax rate was a little higher than we expected. We had some higher SG&A expenses and so forth. But if you go back 18 months, you might just recall just how many of our businesses were facing truly tough challenges exiting 2024 and heading into 2025. If you remember, Corp Fin has been down 2 quarters in a row. FLC was facing fundamental uncertainty because of tremendous new regulatory changes. Tech was facing a major second request headwind. And StratCom was coming off probably the most challenging 18 months that it faced in a while.

People coming into this meeting in Orlando knew that notwithstanding those multitudes of headwinds, in the end, they -- we have managed to deliver a record level of performance as a company in 2025 as a whole and in the bulk of our businesses. And we ended the year with tremendous momentum in most of our businesses. The fact that we have gotten through 2025 and turned every business, Compass Lexecon aside, but every other business back on to its long-term tremendously positive trajectory created, I believe, a powerful sense of pride, motivation and importantly, confidence that people brought into the meeting, even if they credited Mollie and others for creating it in the meeting. So that was one cause.

I do think those feelings were powerfully reinforced by some of the stories told in the meeting. The stories of the actions and activities in 2024 and 2025 that led to those results, but also some of the powerful multiyear success stories that were brought to life once again in the meeting. Those stories at an aggregate level were powerful, and they are powerful. I can't talk about all of them. But an example is Mike Eisenband talking about the fact that Corp FIS today is 3x the size it was 8 years ago or perhaps even more powerfully, he and others talking about how folks in the room made that happen.

The extension of our restructuring practice around the world, the doubling down of the restructuring practice in the U.S. and U.K., even though it had always been strong, the extension into new businesses and transactions and transformation. or analogous stories about the people in this room in other segments or geographies. For example, Sophie, talking about all the efforts tech -- that took tech from a struggling business that one to one that is in the face of very challenging market conditions is continuing to win and at least in my measure, is growing faster than any other competitor.

So I think people came in really motivated, but that motivation got tremendous reinforcement by plenary presentations, but also, I think at least as powerfully by sharing stories with colleagues about the actions that each person had taken, the actions that led to those overall results embedded in the plenary presentations. It suggested it wasn't magic wands that somebody waived. It wasn't markets that gave us those results. It was what people in that room individually and collectively have done that got us to where we are.

The third reason that people highlighted and actually, I think probably highlighted more than the first 2 as motivating was just the group of the people in the room. Somebody said to me, you look around and just the group we were proud to be associated with. group of people, some of whom I've known for a while and I've loved working with, but then you also see this terrific group of promotions and these people we have managed to attract.

At the end of the opening speech, we asked people to think back to the all-SMD meeting we had at the end of 2018 and ask everyone in the room who had been in that room in 2018 from a bunch of geographies to stand. So we asked anybody from Italy who was in the room today and had been there in 2018 to stand as well as the Nordics and Amsterdam and the Middle East. We started with that group. 0 people stood. Then we asked people from Germany to join them and a few folks stood. I did a few more when we went through the rest of the continent of Europe and the continent of Australia and Asia and Latin America.

But in the aggregate, in the room of 700 people, there are a few handfuls of people standing. And then we asked everybody from those markets today to stand and over 200 people got up. We did a similar exercise for the U.S. and U.K. And of course, we had powerful position in the U.S. and the U.K. in 2018. But when we had the entire group of SMBs in the U.S. and U.K. today, it was double the ones that had been there in 2018. We talked about that, the transformation of our capabilities represented by those changes in terms of geography, position in those geographies.

We also talked about the fact that we could do the same exercise by segment or practice and see the power of the growth of our capabilities in areas like cyber or transactions or aviation or financial crimes investigations. That standup exercise triggered tremendous terrific capability conversations. But I think actually even more powerful for most of us was at the end of 3 days when people have had working session with the folks who stood, working sessions with long-time colleagues, but also new colleagues, which allowed in a much more tangible sense, not just seeing people stand in the room, but in a tangible sense of just how much capability we have in this firm and how much capability we continue to add to this firm.

So my speculation is the reason we got that feedback at the end of the meeting is a combination of those. People brought in pride and conviction to the meeting because what they had accomplished over the prior 18 to 24 months. That pride was reinforced by the stories they heard, but also the stories they shared about the number of places around the world where our teams are building businesses, creating adjacencies, reinforcing core positions, turning around difficult positions. And that, in turn, was reinforced by the power that always comes from deep connection with long-time colleagues who respect people who have inspired confidence for extended periods of time as well as exposure to fabulous new colleagues who are bringing new expertise and new energy.

All of that energy ended up getting devoted into work sessions, not only celebrating where we're great today, but importantly, confidence and conviction as to where we can take this business further. I think not surprisingly, people came out of a meeting like that finding myriad opportunities in every practice and every geography, which I think left a lot of people in a position that I've been in for a while, which is the sense of the extraordinary opportunity yet in front of us and feeling incredibly strongly the company is much closer to the beginning of our journey than the end.

Let me turn back to the quarter. I think our performance this quarter, the forecast we have for this year are simply consistent with the story. It is a story of a firm that I believe has proven that our essential DNA is a simple one, to support great professionals to help them build businesses that they are passionate about to build and a firm that understands that if we do that, if we find those professionals, support them in their ambitions, though there will be zigs and zags. If we do that, we ultimately control our destiny. We grow market share. We support clients more fully, and we deliver for you, our shareholders.

This quarter is consistent with that story. Like all quarters, it doesn't mean we didn't have some zags. Our FLC business, which has been performing incredibly this last while, had a short-term zag this quarter. It doesn't mean that anybody in FLC is less bullish about its future or the capabilities we've built, the aspirations we have or the future we believe we can target. Our tax rate happened to be higher than we expected this quarter. We had some SG&A expenses that exceeded our expectations. These are things we have to look at and can address.

We do have one longer-term issue that we've been talking about and that we are still working through, which is Compass Lexecon. Compass Lexecon's performance was in line with where we thought it was going to be this quarter, but that certainly leaves us with multi quarters of work yet to do. But of course, that has also always been true for this company in prior -- in many prior years. We have not always had every business every year set up exactly to soar. This year, we have work to do in Compass Lexecon, and we are doing that work.

So we have headwinds, particularly in Econ, but in the face of those headwinds, I hope you saw we grew close to double-digit revenue this quarter. I hope you saw that StratCom delivered yet another record quarter. In corporate delivered double-digit revenue growth year-over-year in all 3 of its sub-businesses. And Tech came out of the other side of the headwinds it faced last year and the non-Compass Lexecon team in Econ is having another great quarter.

So Paul will go through the quarter in more detail. To me, what is more powerful than the fact that we delivered yet another solid quarter, and we believe we're on track for the year is that in the context of the last 8 years, 8 years in which we've had some solid quarters, some extraordinary quarters and some quarters that weren't so good, all of which added up, however, to an incredible run of growth in multiple geographies and multiple segments around the world, building a stronger, more capable group of people with a set of leaders with a conviction of where they can take us and putting us on a solidly, with zig zags, but solidly upward sloping set of lines.

My view is that if we continue to invest in the ways we know behind great people with ambition and the sort of conviction and drive and energy that was demonstrated at this meeting of people who take responsibility for turning that into results. This firm is and will be much closer to the beginning of this journey than the end.

With then, Paul, let me turn this over to you.

Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company-wide and segment results for the quarter. First quarter 2026 revenues of $983.3 million increased $85.1 million or 9.5% compared to the first quarter of 2025. The increase was primarily driven by revenue growth in our Corporate Finance, Strategic Communications and Technology segments that partially offset by a revenue decline in our Economic Consulting segment. Excluding an estimated positive impact of FX, revenues increased $60.8 million or 6.8% compared to the prior year quarter.

Net income was $57.6 million compared to $61.8 million in the prior year quarter. The decrease was primarily due to higher direct costs and SG&A expenses, which included legal settlement in the prior year quarter as well as an increase in interest expense and a higher effective tax rate compared to the prior year quarter, which more than offset the increase in revenues. Direct costs of $676.5 million compared to $608.9 million in the prior year quarter, primarily due to higher compensation expenses, which included an increase in variable compensation, salaries and forgivable loan amortization compared to Q1 2025.

SG&A of $222.3 million or 22.6% of revenues increased $38 million from $184.3 million or 20.5% of revenues in the prior year quarter. The increase was primarily due to higher legal expenses this quarter as compared to Q1 of 2025, which included the benefit from legal settlements that did not recur in Q1 of 2026 as well as higher compensation and T&E expenses. Excluding an estimated negative impact of FX, SG&A increased approximately $32.4 million compared to the prior year quarter.

First quarter 2026 adjusted EBITDA of $96.8 million or 9.8% of revenues compared to $115.2 million or 12.8% of revenues in the prior year quarter. Our first quarter 2026 effective tax rate of 26.6% compared to 23.3% in the prior year quarter, primarily due to a less favorable tax benefit related to share-based compensation as fewer shares vested as well as an increase in valuation allowance recorded against current period losses compared to the prior year quarter. While our tax rate this quarter of 26.6% was higher than expected, we continue to expect our full year tax rate to be between 22% and 24%.

Weighted average shares outstanding, or WASO, for Q1 of 30.3 million shares compared to 35.5 million shares in the prior year quarter. a 14.6% decrease. Earnings per share of $1.90 compared to $1.74 in the prior year quarter. As a reminder, in Q1 2025, our EPS included a $25.3 million special charge related to severance and other employee-related costs, which reduced GAAP EPS by $0.55. Excluding the $0.55 Q1 2025 special charge, adjusted EPS was $2.29 in Q1 2025. Billable headcount increased by 1.1% with growth in our CorpFin and FLC segments being partially offset by declines in StratCom, Econ and Tech. Non-billable headcount decreased by 0.4% compared to the prior year quarter.

Now turning to performance at the segment level. In Corporate Finance, revenues of $409.5 million increased 19.2%, primarily due to higher demand and realized bill rates in turnaround and restructuring, which grew 19%, transactions, which grew 18% and transformation, which grew 20% compared to the prior year quarter. Excluding an estimated positive impact of FX, revenues increased 16.7%. In turnaround and restructuring, revenue growth was driven by roles in some of the largest bankruptcies globally from Spirit Airlines to Saks in the U.S. to Prax Oil Refinery in the U.K. and Azul Airlines in Brazil. Notably, in transactions, our engagements have expanded in size and as we continue to bring more of our services to clients across the deal life cycle.

In addition to working for PE-backed clients, we are working on some of the largest mergers, integrations and carve-outs in the market, including Omnicom's merger with IPG, Skyworks Solutions merger with Qorvo and Lumen's sale of their fiber-to-the-home business to AT&T, among many other brand-building cases.

In transformation, our performance this quarter exceeded our expectations. In fact, the number of million-plus engagements nearly doubled compared to Q1 2025. We continue to win our share of end-to-end cost takeout, supply chain and operational efficiency mandates in key industries where our experts bring deep real-world expertise such as health care, industrial, communication services and financial services.

Segment operating income of $85.2 million compared to $41 million in the prior year quarter. Adjusted segment EBITDA of $88.7 million or 21.6% of segment revenues compared to $55.9 million or 16.3% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by higher compensation. Sequentially, Corporate Finance revenues decreased 3.2%, primarily due to lower success fees and lower pass-through revenues. Adjusted segment EBITDA increased $8.5 million, primarily due to lower compensation.

Turning to FLC. Revenues of $192.9 million increased 1.2% due to higher realized bill rates for risk investigation and construction solutions services, which was partially offset by lower demand for dispute advisory services. Excluding an estimated positive impact of FX, revenues decreased by 0.9%. Segment operating income of $23.1 million compared to $30.1 million in the prior year quarter.

Adjusted segment EBITDA of $25.3 million or 13.1% of segment revenues compared to $37.5 million or 19.7% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to higher compensation and SG&A expenses, which included an increase in hiring-related expenses and an increase in bad debt. Sequentially, FLC revenues were flat and adjusted segment EBITDA increased by $1.4 million, primarily due to lower compensation expenses, which was partially offset by an increase in hiring-related costs.

In general, disruption the world is facing increases the need for our expertise from national security and cyber threats to AI-related risk compliance to shifting geopolitical issues, among others. That, of course, does not play in our favor every quarter. And this quarter, FLC underperformed our expectations. Some of this underperformance is timing driven as there are always quarter-to-quarter volatility in our business. As we've discussed during the last several calls, our team is supporting complex headline and brand-building matters, but those engagements are often large and lumpy with starts and stops that are often driven by factors that are outside of our control.

In Economic Consulting, revenues of $175.6 million decreased 2.3%, primarily due to lower demand for antitrust services, which was partially offset by higher demand for financial economic services and higher realized bill rates. Excluding an estimated positive impact of FX, revenues decreased 5.7%. Segment operating loss of $7.3 million compared to segment operating income of $12.1 million in the prior year quarter. Adjusted segment EBITDA was a loss of $5.9 million compared to $14.4 million or 8% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to higher compensation, largely related to the increase in forgivable loan amortization and low.

Sequentially, Economic Consulting's revenues were essentially flat and adjusted segment EBITDA decreased $2.9 million, primarily due to higher compensation expenses, which was partially offset by lower bad debt. We have, as expected, made some good progress over the past months in Europe, in particular, and we expect that to begin to show up in the P&L as this year goes on. Although we've added terrific talent to our Compass Lexecon antitrust business in North America, we are just beginning to rebuild that revenue base.

Technology revenues of $102.3 million increased 5.3%, primarily due to higher demand for litigation and information governance, privacy and security services, which was partially offset by lower demand for investigations and M&A-related second request services. Excluding an estimated positive impact of FX, revenues increased 2.8%. Higher demand for litigation was largely driven by clients in the health care, media and technology industries and demand for information governance, privacy and security services was driven by a large privacy breach. So the complexity of data is compounding.

Our tech business combines domain experts, operators, attorneys and investigators with deep technical experts who have worked with artificial intelligence for over a decade to solve their clients' most complex high-stakes issues at the intersection of law and regulation. This combination of experience and expertise has long been a core differentiator for our tech business. And that's why the world's leading AI companies are turning to us for their most complex matters from IP and copyright to privacy, security and data monitoring to building custom depeensable tools for specific client uses and workflows based on our expertise collecting and analyzing massive scale AI system data from activity logs to RAG databases.

Segment operating income was $7.7 million compared to $6.6 million in the prior year quarter. Adjusted segment EBITDA was $11.8 million or 11.6% of segment revenues compared to $11.6 million or 11.9% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in compensation. Sequentially, technology revenues increased 3.3%, primarily due to demand for information governance, privacy and security services, which was partially offset by lower demand for investigation services. Adjusted segment EBITDA decreased $3 million sequentially, primarily due to higher compensation, which more than offset the increase in revenues.

Strategic Communications record revenues of $103 million increased 18.4%, primarily due to higher demand for corporate reputation, public affairs and financial communications services. Excluding an estimated positive impact of FX, revenues increased 14.5%. Worth noting, StratCom's continued powerful results reflect the strength of our multiyear investments to build out our higher-margin event-driven offerings in areas such as crisis, cyber, transactions and activism as well as frequently teaming with the other segment to address complex client issues in our largest global cases.

Segment operating income of $20.8 million compared to $8.7 million in the prior year quarter. Record adjusted segment EBITDA of $21.9 million or 21.3% of segment revenues compared to $12.9 million or 14.8% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in compensation expenses largely related to variable compensation. Sequentially, Strategic Communications revenues were up 3.6%, primarily due to higher demand for financial communications and public affairs services. Adjusted segment EBITDA increased 15% sequentially, primarily due to higher revenue.

Let me now discuss a few cash flow and balance sheet items. As is typical, we paid the bulk of our annual bonuses in the first quarter. Net cash used in operating activities of $310 million compared to $455.2 million used in the prior year quarter. The year-over-year decrease in net cash used in operating activities was primarily due to a decline in forgivable loan issuances, higher cash collections and lower income tax payments, which was partially offset by an increase in compensation payments.

During the quarter, we repurchased 787,098 shares at an average price per share of $161.11 for a total cost of $126.8 million. As of March 31, 2026, approximately $354.9 million remained available for common stock repurchases under the company's stock repurchase program. Total debt net of cash of $556.7 million at March 31, 2026, compared to $8.9 million as of March 31, 2025, and $99.9 million at December 31, 2025. The sequential increase in total debt net of cash was primarily due to annual bonus payments and share repurchases.

Turning to our outlook. First, let me remind you of the guidance ranges for 2026 that we provided in February. Revenues of between $3.94 billion and $4.1 billion, EPS of between $8.90 and $9.60. Based on our solid Q1 performance, we are maintaining our guidance ranges, which incorporates the following considerations. First, in our Compass Lexecon business, though we believe our adjusted segment EBITDA in Economic Consulting has hit its low point this quarter, as Steve said, we have multiple quarters of work ahead to get the P&L back to the levels we are happy with.

Second, we're an event-driven business, and therefore, our results can be lumpy. As mentioned, we had several jobs in FLC that rolled off during the quarter or started later than expected. We have some large jobs rolling off in other segments where our work is event-driven. However, as mentioned previously, our ability to win the largest headline-making jobs in the market reflects the continued power of our platform and the relevance of our people.

Third, the M&A market has had a strong start to the year in terms of deal volume and mega deals. We saw solid demand for our businesses that support M&A-related activity in Corp Fin, Econ, Tech and StratComs. However, we can never be certain how activity will continue through the remainder of the year, particularly amid continued market uncertainties.

Fourth, we continue to invest in talent. In 2025, we announced 85 senior hires. In 2026, we plan to add more senior professionals where we see the right opportunities. We have announced 29 SMD and affiliate hires year-to-date in key geographies such as Australia and the Middle East, where we are benefiting from competitive disruptions as well as in key adjacencies such as transaction, transformation, public affairs, cybersecurity, data privacy and AI. We also intend to build teams around these leaders. And in the second half of the year, we expect to increase junior hiring in parts of the business that lagged in hiring in 2025.

Fifth, we now expect SG&A expenses for 2026 to be approximately $60 million higher than 2025. The increase is largely due to higher legal and compensation expenses. As a reminder, as Steve mentioned, we held our all SMD meeting in April. We expect Q2 2026 to be the high point for SG&A or approximately $5 million higher than Q1 2026.

Before I close, I want to reiterate 4 key themes that I believe continue to underscore the attractiveness of our business. First, in an increasingly uncertain and disruptive world, our powerful platform and unique set of offerings allow us to deliver impactful results for our clients as they navigate their most significant crises and transformations from bankruptcies and M&A transactions to investigations and cyber breaches regardless of business cycles.

Second, we continue to attract top talent when the right people are available regardless of short-term economic impacts, particularly in the backdrop when many competitors are facing major challenges from expensive debt and poor liquidity, the heightened client skepticism around the quality of their core offering.

Third, as we continue to hire, our management team remains focused on both growth and utilization. And fourth, our business generates excellent free cash flow, and we have a strong balance sheet that provides us the flexibility to boost shareholder value through organic growth, share buybacks and acquisitions when we see the right ones.

Before we open the call to your questions, I want to take one more opportunity to welcome our new Chief Financial Officer, Angela Nam, who will join us on May 1. We're looking forward to introducing Angela on our next earnings call in July.

With that, let's open up the call for your questions.

[Operator Instructions] And at this time, we will take our first question, which will come from Andrew Nicholas with William Blair.

The first one is just kind of on the macro environment. A lot of helpful color on the puts and takes at the segment level. But I just wanted to ask kind of at a big picture level, CFR, you saw really good growth on both the restructuring side and the transaction side. How feasible is it, whether it's over the course of this year or even multiple years for both of those businesses to grow at such strong rates simultaneously.

Typically, you'd expect a little bit of conflict between a restructuring environment or a strong restructuring environment and a strong M&A environment. Just kind of interested in whether or not you see those conflicting in the coming quarters and years.

Yes. Let me take a crack at that, Paul, you probably have views on that, too, if you want to add. Look, I would say there are a couple of different forces going on there. There's the market forces, which I think you're right, markets that tend to support lots of M&A will often not be markets that are big restructuring markets. And so you have some macroeconomic forces that have historically suggested that these don't all go aligned.

I think the other thing that goes on here is that we've actually -- our teams have done a fabulous job of adding talent and expanding the businesses. These are not just U.S. businesses today. They're global businesses where we have powerful positions overseas, and we continue to be attracting talent. So some of what you see here is the market forces come in coalescing in an unusual way and all supportive. I think some of it has to do with actually us gaining share, particularly in like transactions and transformation.

And look, that just depends on us doing the right things and the right talent come available and us being bold enough to jump on that talent when it's available. So I think one of them says they're inconsistent, they shouldn't all grow together. The other one says, if we do the right things, we can defy those market realities a bit. Does that help, Andrew?

Yes. No, that's helpful. I appreciate the color. And then for my follow-up on kind of segment margins. I think both FLC and StratCom kind of the first quarter results were a decent bit different than what we've seen over the past several quarters. So just kind of curious how we should think about those 2 segments margins. And with FLC more specifically, last year was a really good year for profitability. I understand that the top line is a little bit lumpy, but is there a margin profile that you think is "normal" for this business that we should kind of gear our models to?

Yes. So I don't think we're going to give any specific guidance on margins, but maybe I can help a little bit with FLC. I mean we have been adding talent in FLC and particularly over the last little while, a lot of the talent we've added has been at the top with -- in terms of SMD. So that investment in building out our expert model, which will allow us to continue to drive the revenue in some of these higher-margin services, we feel is kind of the right investment for the business.

There's also some onetime stuff that we talked about in the -- earlier in the call that drove some margin to be a little bit lower than our expectations. But I think in the long term, we feel pretty confident in the business.

And then StratCom, to the point, has had a fabulous quarter, and we never project people to take the best quarter and multiply it and extend it forever. But let me say this, I think -- so you never want to take a quarter where everything is on fire and just make that the normal quarter. I will say there's stuff underlying in StratCom that is powerful going on. There's been a move over now a number of years, but that starts to show up in the numbers towards much more of the highest value part of its business, crisis, transformation, cyber deals and so forth. And that is a -- it's a lumpier business, but it's, of course, a crisis business, which tends to be a higher-margin business for us.

The other thing is I think that's a business that has adjusted its leverage ratio and taking account AI. The high end of that business, the core advisory business is like the rest of our business where crisis is why people are hiring us. We used to need a lot of people to help summarize things like EU regulations. You need fewer of those. So some of the leverage ratios have changed.

So look, I think that business is headed in a great trajectory, but you never want to take the quarter where -- I mean, even Paul sounded rapturous about the numbers. We never want to take that and just say, oh, that's the new normal. Does that help, Andrew?

Yes, that's perfect.

And our next question will come from James Yaro with Goldman Sachs.

So maybe I just want to -- maybe just starting first on restructuring. I just want to touch a little bit more on that and dig in a little bit on some of the things you've already alluded to. But I'd love to just get your perspective on what the disruptions in private credit and software. And obviously, the 2 are related, but basically, the nexus of those 2 things means for the business.

I think a number of investment banks out there have talked about the liability management opportunity potentially over time. Obviously, that's not where your restructuring business is lies. And so I just love to get your perspective on whether private credit and software could have a positive impact or impulse on your restructuring business.

You want me to take that or you want to take that? Okay. So look, I think we have good relationships with private credit, our business is helping companies that have challenges and private credit in general tends to be companies that lend money to more risky, more venturesome activity. And so they're taking risk. And so when things get stressed, that's where we are the strongest, okay? I would say that has not been the major driver of our growth so far. We have very good relationships there.

And we have also relationships that are important, not just in, but in FLC and investigating -- some of these are very covenant-light loans and therefore, covenant-light loans on average have more susceptibility to the statement of frauds and so forth. And we have an FLC business that specializes in fraud investigation. So I would say that depending on how that market evolves, it could be a terrific source of revenue growth for us. I think our private equity clients are hoping it's not that the world is calm going forward. But we are well positioned if it is.

You're right, we don't do liability management exercises. But as you know, James, not every liability management exercise works out. And a number of the bankruptcies we're working on now were liability management exercises a couple of years ago. So look, we know these clients well. We think they're valuable clients. We stay close to them, and we stand ready to serve if and when they need us. And I think if they need us, we will get significant revenue from them. Does that help, James?

Super helpful, as always. Maybe just zooming out on a somewhat related topic, but Steve, I'd just love to get your perspective on what you think are the businesses that could be most impacted by the disruptions we're seeing, whether it's AI, software, private credit and the global conflict and perhaps in which ways?

You're talking about our end customers? Or are you talking about our businesses?

I guess your business yes, your business.

Let me think about that...

Sorry, Steve, let me just clarify the point. I just want to clarify the point, my apologies. That was imprecise with me. So just to clarify, how do you think those large items could impact your end customers and therefore, drive more business for you?

Yes. Look, it's -- I think it's true for all of our businesses. I mean our business -- maybe when we acquired all these businesses 15 years ago or 20 years ago now, they were somewhat different. I mean maybe our StratCom people wrote annual reports at that point in time. I mean at this point, so many of our businesses really are businesses that designed to serve companies at their biggest times of change and potential disruption in the marketplace or transformations they're in.

And to the extent the world is more disruptive or in response to anticipate disruption, people are transforming their businesses with greater rapidity and more frequently, it's a boon to the businesses. And it's hard for me to pick favorite children out of that because you can see that in StratCom right now. You can see that in restructuring right now. It leads -- all of those things lead to litigation, which we're expert witnesses and testifier. Sometimes people misrepresent things and that leads to fraud.

And so I'm pretty bullish about our position to help companies in -- as I think I said once, if the world were the kind of world that we tried to describe to our 2-year-olds, wonderful world, everybody gets along. You're trying to tell your 2-year-old back because he or she is beating up on the 4-year-old. But a peaceful world where everybody is getting along, there's no litigation, there's no crisis and the world isn't changing, that's not what we're set up to serve. To the extent the world has other aspects, it's a pretty big driver for us. Does that respond, James?

Yes. Yes. Extremely helpful. And last one just for you, both. Just as you think about hiring, you talked about accelerating hiring towards the back half of this year, you also highlighted a number of -- a substantial number of recent senior hires. I just would love to get your perspective on what gives you the confidence or the ability to accelerate the hiring so substantially? Is it greater disruption -- even greater disruptions among the firms from which you hire or just even more investment on your side or maybe a combination of both?

Yes. Let me distinguish between the junior hires and the senior hires. The junior hires we're forecasting for the second half of the year is to catch up because we have been so fortunate in the number of senior hires that we've been bringing on that our ratios in a number of our businesses are below where we've historically been, okay? So I think the junior hires in the second half of the year is not based on some forecast of disruption in the world.

It's -- we got senior hires. We have to bring in some people below them. The senior hires is really a supply side-driven thing. I think as we've had -- I'll give you an example of Australia. At one point in Australia, we had several good leaders down there, and they couldn't attract anybody. We were not #1 or #2 in any market position. Nobody believed the global network was worth anything. We had really good people trying to recruit people and nobody would come. And it just transformed itself.

I think today, we may have more SMDs per capita for GDP, whatever in Australia than any place else because what happened is there was a breakthrough, some of the number of leading restructuring people came over, and they founded a tremendous platform. We made the global network work. That went around the market. Now that led a few additions, but then you're right, competitors had real missteps.

And when competitors have real missteps, now we were the destination that everybody wanted to talk to. It didn't mean only us, but everybody wanted to talk to. And then they talked to us and they talk to the people and said, "Wow, these are people I want to join. And then when they join, that gets around the market as well. And so we've gone from a position where nobody would take our calls 10 years ago or 8 years ago, the phone is ringing off the hook.

And I don't know if we released the exact number of SMBs, Mollie, she's taking her head, but where it's ringing off the hook. And I think that's what we bet on because if we can get those people, maybe we get those people 3 quarters ahead of where they can bring in revenue or sometimes they have restrictions. And so it's 6 quarters before they can bring in a lot of revenue. But that, we think, is the single best fuel of long-term growth for us, what we bet on.

And then what we showed at -- what people were talking about in this all-SMD meeting is why we have driven this. So on the senior headcount, that's the reason, James. Does that respond?

Extremely helpful.

Maybe I'll just add to that just a little bit. Part of your question was why do we have the confidence. And I'd point you to StratCom and CorpFin. The growth that you saw in Q1 of 2026, those are investments that were made 3 years ago, 2 years ago, 1 year ago that enabled -- now some of it is pricing, but without the heads, that growth is not possible. So the confidence we're seeing -- the performance we're seeing in those businesses gives us confidence to continue to invest behind those businesses to drive not only restructuring but transactions and transformation and in StratCom, not just financial communications, but all those other event-driven services such as cyber. So we're going to continue to invest if we find the right people in the market because that's the way we delivered the growth you saw this quarter.

And our next question will come from Tobey Sommer with Truist.

We've heard from some other management at various consulting firms think that one of the impacts of AI could be a move towards some more fixed pricing structures as well as potentially changes in ratios of juniors to seniors. You made a couple of comments on the leverage ratio of juniors to seniors in different directions or hiring a little bit more in the back half to support some of your new senior hires. How do you see fixed price and changing ratios evolving over a little longer stretch of time?

Look, it's a good question, Tobey. I think it's one that I talk with the managing partners of a number of law firms. I talk with managing partners of other professional services firm. I mean everybody is thinking through what the pricing dynamics are in an AI environment. I would say nobody has a perfect answer for any of them, and there's lots of experiments going on.

In our tech business, where we're using -- we have a really leading set of offerings, AI related. They do require then really smart senior overview to make sure that you don't have the sort of AI hallucination legal issues that some people have. So that has reduced some of the junior most work, but it has required some of the more senior work, which is build out at higher rates. How that nets out, I don't know. Right now, I would say it's probably netting out with fewer hours but us gaining share because we're leading edge. And so there's all these dynamics that are going on.

We're clearly, in some places, looking at fixed price contracts because we're focused on trying to use AI to make sure we're delivering more value, which typically means fast the value faster, either broader with deeper sources or faster. And that has more value for your clients as well. But we're experimenting with multiple models in multiple places. Like on most things on AI, the -- it's moving so fast that you have to be ahead of it, but the immediate impact of those pricing decisions right now is muted. It's just that we're staying on top of it because it's pretty damn critical for going ahead. And so we're looking at lots of different versions. Does that help, Tobey?

Sure. Yes, it does. So with Economic Consulting, you kind of described a multi-quarter path to trying to grow that business and improve profitability. Could you dig into what the likely path is to improve profitability? Because last year, you handed out a bunch of forgivable loans, and that's going to weigh on things. And I'm just wondering as you placed some of those bets on people who weren't necessarily commercially proven, as they -- some of them do prove themselves and become successful, how do they not get sort of marked to market for that new improved condition?

Yes. So I don't think we're really too worried about the people getting commercial, that's not going to be a problem for us. We're worried about those who don't get commercial, Tobey. The -- what we did was we bet on some very proven rainmakers, and they've come in and generally been driving revenue, and that's pretty straightforward. We have bet on some very leading-edge academics. I think we've talked about the Meda case that came out and one of the academics from the University of Chicago was behavioral economist was cited by the judge multiple times in that case. Those people are incredible assets for the biggest states litigation, which is the place where we still win we're the leading player in that.

And that's -- but those people are not necessarily automatically economic for us because you sign them up and then over time, behavioral economics gets accepted in the courts and then behavioral economics gets used more. We have structures for each of those people as they get used more, they will get paid more, but their forgivable loan doesn't go up. So the economics of them getting used more are positive for us, not worse for us.

And we made a lot of those bets, and some of them will take quarters to start to prove out, and some of them will take years to start to prove out. They were very intelligent bets. These are bets on people who -- some of our people are the leading academic journals in economics. and they have insight into people who are really leading edge in the way -- which is the foundation of Compass Lexecon. But many of those bets are not near-term payback. And therefore, we're saying it's a multi-quarter journey for us. Does that help a little bit, Tobey?

It does. If I could ask one follow-up. Is there a path or strategy for you to regain your position in competition consulting domestically?

Yes. Let me just separate out a few things. So as we might imagine, there's like 3 or 4 different parts of our business. Our Europe business was not particularly hard hit by the competitive disruption. Last year, it happened to have a tough year, partly because of distraction by some of this. I think they're on their way back to the position, and they are still the leaders, to my knowledge, of -- we are the leaders in global antitrust based on a terrific team over there. And that's starting to show up as this year goes on, I believe.

In the U.S., we've always been the leader, I believe, in the finance practice. And I think our revenue year-on-year has been up in the finance practice. And we still win the largest cases, and I don't think we lost anybody of significance in the competitive disruption. The hit we had was to the U.S. antitrust business. But even there, it's nuanced. The biggest cases in the U.S., when it goes to litigation, people want the depth of expertise we have. And I don't think -- and we have people like Dennis Carlton. We have the people like I just mentioned these affiliates like John List, who were on the Medicase. We have added to that some tremendous people like Doug Bernheim. So we, I think, are still the go-to person for the leading litigation-related cases in antitrust in the U.S. And I think you can check that out with different sources on that.

Where we've gotten hit is surprisingly is on the more routine standard merger clearance cases, where we lost some people. And the people we have, we still have some very good people, but they tend to be pretty academics and shy, and they don't -- they're not out there marketing, and we've lost a lot of share on that in the U.S. And that's rebuildable. It's not a unique characteristic, but it does require us going out and meeting the attorneys and so forth, and we've got a ways to go on that. So I think that's doable.

But even that, when people have entrenched relationships, it takes a while to get a crack and then approve yourself. And so we've got a ways to go in the more routine -- particularly in the more routine merger agency-related clearances in the United States. Does that help, Tobey?

Thank you.

I want to say thank you to everyone for attendance. And I think since I won't say thank you to Paul for being the CFO yet because we'll wait until Angela is here, and she can thank you, but also because you are not going any place, right? You're going to come back and still be our Chief Transformation Officer. But thank you, everybody, for your time and your support, and I hope this meeting was helpful. Have a great week.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.

Welcome to the FTI Consulting Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this 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 FTI Consulting conference call to discuss the company's fourth quarter and full year 2025 earnings 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 the Private Securities Litigation Reform Act, including the company's outlook and expectations for full 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 a discussion of risk factors 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 Investor Relations website at www.fticonsulting.com as well as other disclosures under the heading of Risk Factors and forward-looking Information in our annual report on Form 10-K for the year ended December 31, 2025, 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 of the date of this earnings call and will not be updated. FCI 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 discussed on this call and reconciliations to the most directly comparable GAAP measures are issued in the press release and the accompanying financial tables that we issued this morning.

Lastly, there are 2 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 fourth quarter and full year 2025 results.

With these formalities out of the way, I'm joined today by Steve Gunby, our CEO and Chairman; and Paul Linton, our Interim Chief Financial Officer and Chief Strategy and Transformation Officer.

At this time, I would like to turn the call over to our CEO and Chairman, Steve.

Thank you, Molly. Welcome, everyone. Thank you all for joining us today. As I guess some of you have seen already this morning, we reported once again record fourth quarter revenues and record results for this year. I'm hoping that many people on this call know by now that those sorts of record results are not unusual for us. But in this case, given the challenges we faced when we started the year, I'd like to pause on those results a bit more than I typically do and reflect a bit on just how we got here.

If you remember, at the beginning of 2025, we talked about the fact that in 2025, we were probably facing more headwinds than I think perhaps we've ever faced during my time here. We talked about the fact in the second half of the year, most of our businesses were slow. In fact, we thought some of the markets we were in were slow, and we are bringing that slowness into 2025. We talked about the fact that though we have a terrifically competitive tech business. It was facing dramatic declines in second request activity. We talked about the fact that FLC, which was showing the strength we always thought that business could command, was now facing uncertainty regarding demand due to the potential regulatory enforcement changes in the United States. And perhaps most important, on top of all that, we talked about the major challenges we were facing within our Compass Lexecon business, Econ. It's a great business, with the world's leading professionals but a business that was facing truly substantial disruption heading into 2025.

If you remember that discussion, those discussions of the headwinds from the beginning of the year -- the fact that in the face of all those challenges, our teams delivered the 11th year in a row of adjusted EPS growth and another record year of revenue to me, at least, and I hope some of you is incredibly powerful, may be more powerful and more noteworthy than is simply another record year and maybe more -- even more powerful than our results in the years where everything seemed to go right. The ability to deliver those sorts of results in the face of those challenges. To me, it's about as convincing an argument for the resilience of this company as I could imagine.

And to me, it underscores something that I will come back to, which is not just the powerful trajectory of this company over the last while because powerful trajectories by looking backwards with the incredibly bright future that, that sort of performance portends for this company. So let me take a moment to go back through that year in a little bit more detail. In terms of the negative headwinds we talked about at the beginning of the year, unfortunately -- to them turned out to be real. The intact the slowdown in second activity request, the second activity levels actually did happen and in fact, it worsened in the first half of the year. And CorpFin had an even slower first quarter than we expected. And Compass Lexecon, though we were able during the course of the year to attract some terrific talent, the adjusted EBITDA impact we faced in 2025 was actually substantially worse than we anticipated at the beginning of the year.

So how in the face of all that, did we end up with this record year? As Paul will talk about, we did have some onetime things that helped us this year, but those are not the primary story. The primary reason we delivered those sorts of powerful results is because we have such a set of multifaceted powerful businesses, not one great business, but multiple great businesses. with people in those businesses who take responsibility, who take responsibility for making the core investments that drive the business. Who take responsibility for standing by those investors, working them so they can come to fruition. The sorts of actions that we have driven in those businesses in a lot of places around the world, in prior years and in '25 were the actions that allowed us to overcome the headwinds we faced.

Let me give a little bit more detail. And let me start with a difficult story, the tech story this year, at least for parts of the year. Tech business did have a slow year overall. Important, what we always do when we face a business that's slow is evaluate, is it because of the competitive position? Or is it because of transient market factor. If it's -- our position is strong, we continue to support that business, continue to invest in that business. And if you remember, we have, over the last few years, talked about just how powerful our tech business is, how it strengthened itself competitively and how much share it has gained as a result. When we looked at tech performance this year, we did not find that those truths have changed. We found the market was slow. Second requests were slow.

So we supported that business, the great teams we have in that business, we invested, we attracted talent. And so when the market started to turn later in the year, we were the beneficiaries. So even though tech business did have a down year overall. You can see in that down here, you can see the resilience that competitiveness and that strength and it began to show up once again in tech's fourth quarter results.

In econ, the situation is a bit different. There, the economics did not improve as the year went on. If you remember, the Compass Lexecon disruption really only started to hit us somewhere in the middle of the second quarter. Had an intensified as the legacy revenue from the professionals who departed slowed down as the year went on. And though we were able to add some terrific talent, talent that we believe over the long term will be terrific assets for this business. Those investments in 2025 as usual at the outset hurt the P&L. So unlike tech, Compass Lexecon did not do a u-turn in terms of quarterly results in 2025. Actually, the year got worse as it went on. And overall, the impact was worse than we anticipated at the beginning of the year.

As I alluded to above, what happened is that those results in Compass Lexecon and tech were overcome by truly terrific performances in the rest of our businesses, businesses in Corp Fin and FLC and in Stratcom. I can't do possibly do justice to all the efforts by all the people to make that come to fruition. In Corp Fin, for example, there are so many things that made a difference. The results there are attributable to both things we did within the year with really terrific nimble management but also the result of powerful multiyear investments that teams have made in different practices and different geographies. Investments that, for example, have allowed us to transform over the last few years, our restructuring business from what at 1 point was primarily a U.S. credit or right restructuring business to be a global leader in restructuring, playing and leading in many places on both creditor and company side, which in turn, I believe, makes us right now the #1 or 2 position in restructuring in more markets around the world than any other player.

Those sorts of moves individually look small, but collectively, they have allowed us to move from a position 15 years ago when we were not the prime player to win, say, the bulk of the global Lehman Brothers bankruptcy to today where we are top of mind team, the top of my team, I believe, to help with the massive global engagement, whether it's [ Hertz ] or Steinhoff a couple of years ago or this year with [ Sunova Energy, Spirit Airlines, Wolfspeed ] or others. And that is just talking to the transformation of our restructuring position equally or perhaps even more powerfully are the result of our investments that teams have made in building multiple businesses beyond restructuring.

Our set of transaction businesses, which delivered record results this year even in slow markets and our transformation set of services, which despite having some extraordinary slow market delivered a terrific second half of the year. And our teams did all that while continuing to recruit record levels of senior talent and promoting our next generation of experts, which, of course, bodes extremely well for our future. In FLC, the progress we have seen reflects the great positions we have built now over multiple years, combined with enhanced leadership and enhanced communication, of those capabilities to the market.

Entering the year, however, even with that strength, we had concerns about headwinds from policy ships like the slowdown in FCPA and other changes in regulations. In the face of those headwinds, our performance in FLC this year have to be honest, actually [ astoundedly ]. I think there were a couple of different factors that particularly drove it. First of all, in slow markets, it is often the case that the strongest players tend to take share, and I believe the actions and investments that leadership have taken, particularly in the U.S. but not limited to the U.S. over the last few years has positioned us to win some of the biggest jobs in the market. If you win the biggest jobs in the market, even if there aren't that many big jobs, you can be up when the market is down. And I think that was part of the reason we were successful this year.

The other reason, I think, was the nimbleness of this team in multiple places around the world. Our leaders believe in the proposition that we have built, but they also understand there are multiple potential markets for those propositions. And so understand that the federal government is enforcing certain regulations, but the state governments are, we need to go talk to the people who are working with the state ADs. Our folks did that sort of pivoting activity this year. And that nimbleness allowed us to grow and extend our relevance with clients even though certain places, which have been a big source of revenue in prior years were slow in the face of the regulatory changes.

Let me turn to Stratcom. Stratcom, as you know, after close to 10 years of growth, a bit of slowness over the past couple of years. And so early in 2025, the leadership team did reevaluate some of the bets and they took some corrective action. But at least as important, that team also had the confidence to continue to make investments in many parts of the world and in many parts of the business where we've been succeeding and have conviction. Those sorts of investments in areas like corporate reputation, public affairs, M&A, activism, crisis, together with some terrific promotions and hires in prior years, drove a powerful return to growth for Stratcom this year.

If you add this all up, the headwinds certainly were there in 2025. The combination of tech and econ added up to almost $100 million of adjusted EBITDA headwind last year. Those headwinds were partially overcome by some onetime benefits like positive litigation settlement. But the primary factor driving this outperformance was $135 million of adjusted EBITDA growth in the other 3 segments.

Let me leave 2025 behind. And if I may share a few thoughts about where I believe that leaves us going into 2026 and beyond. Entering '26, we still have some substantial headwinds, particularly early in the year. The most substantial one involves Compass Lexecon, which Paul will talk about where we have the full cost impact in our P&L, but still haven't yet started to see anywhere near the full benefit of the people we've added. And critically, in the first couple of quarters, we are cycling the part of the year last year before the disruption really started to impact us. So for the first half of '26, the year-on-year comparisons will be quite difficult for econ consulting.

The second headwind relates to onetime benefit even though they weren't the primary reason we outperformed in 2025, there were some significant benefits in last year's first quarter, mainly again the positive legal settlement amendment. So again, early in the year, we have the issue of cycling those. The third headwind is different, more fundamental and more related to the business and something we've seen from time to time in the past. As you've seen, we continue to add senior head count last year. And given our low leverage expert model, we will continue to add senior head count when the right people become available. And as you know, that investment is a negative hit to P&L initially.

Although we are a senior-led model and even with AI create efficiencies, we do need also superb junior people to support those senior people. And because of caution coming into last year, we didn't do quite as good a job as we could have been adding the terrific to junior people to support the senior people. And so we are looking to add junior talent, particularly in the second half of the year. So because of those near-term headwinds, so we are targeting are clearly targeting stronger revenue growth and targeting solid growth in adjusted EPS again next year. We are not yet back to forecasting the sort of double-digit growth in EPS that we have averaged since 2017, not yet back to that.

Let me try to put '24, '25 in our outlook for '26 into a broader perspective. If you look over the last 24 or 30 months, many competitors have faced some of the slowest markets they've seen in many years. And some like us have had their own idiosyncratic disruption of significant, ours obviously being the disruption in Compass Lexecon business. And we've been affected by those. Of course, we have, all companies are, and all companies face those sorts of things over time. If in the face of that, we achieved the midpoint of our guidance in 2026. Notwithstanding all that, we will deliver adjusted EPS growth for the 12th year in a row.

And we will do that while continuing to invest in great senior talent and junior talent. We will have the largest, most powerful group of senior and junior professionals that we've ever had, we will be working on the most powerful set of assignments, brand building assignment, supporting our clients on their most critical issues and opportunities, which in turn will further enhance our brand. To me, that shows once again, yes, there are lots of idiosyncratic effects that can affect you and they can affect you substantially for a bit. They are a short-term transient market force that can be a headwind.

In my 40 years of professional services say that if we focus on the things you can control, the things you believe in, making sure you have great value propositions in areas of real importance for clients and you focus relentlessly on being the best in those over any intermediate period. The factors you control, trump the idiosyncratic factors and you persevere, you succeed no matter what the markets are. I think the last 2 years as well as the last 5 and 10 have shown that. They show the immense power of having great teams of committed leading experts, particularly in today's increasingly disrupted world. All of that leaves me notwithstanding any headwinds we faced in '25 or facing '26 or beyond enormously confident about the power and future trajectory of this company.

With that, let me turn this over to you, Paul.

Thank you, Steve, and good morning, everybody. But as Steve said, we delivered another record year. So I'm pleased to take you through our full year and quarterly performance and provide our guidance for 2026.

Beginning with our full year 2025 results. Record revenues of $3.79 billion increased 2.4% compared to 2024, which reflects record performance in our Corp Fin, FLC and Stratcom segments as each of those businesses delivered double-digit organic growth in 2025. This robust growth more than offset declines in our Economic Consulting and Tech segment, which, as Steve discussed, faced headwinds this year. Important, even with those headwinds, which were worse than we anticipated at the beginning of 2025, the breadth and depth of our offerings allowed us once again to deliver record revenues as well as record adjusted EBITDA of $463.6 million and record GAAP and adjusted EPS of $8.24 and $8.83, respectively.

Now turning to the details of the fourth quarter. Revenues of $990.7 million increased 10.7% compared to the prior year quarter. As discussed in our Q3 earnings call, we expected the fourth quarter seasonal slowdown across the business. Instead, revenues increased 3.6% sequentially with every business, except FLC delivering sequential growth. Fourth quarter net income of $54.5 million increased 9.7% compared to the prior year quarter. The increase in net income was partially offset by an $11.8 million valuation allowance expense again certain prior year foreign deferred tax assets. GAAP EPS of $1.78 increased 29% compared to the prior year quarter. Adjusted EPS of $1.78 increased 14.1% compared to the prior year quarter.

As a reminder, Q4 '24 adjusted EPS excluded an $0.18 special charge related to severance. Both GAAP and adjusted EPS included the valuation allowance expense which reduced EPS by $0.38. SG&A of $213.6 million compared to $208.1 million in Q4 of 2024. The increase was primarily due to higher variable compensation, legal and business development expenses, which were partially offset by lower bad debt and travel and entertainment expenses. Adjusted EBITDA of $106.2 million or 10.7% of revenues compared to $73.7 million or 8.2% of revenues in the prior year quarter. Our fourth quarter effective tax rate of 37.1% compared to 16.9% in Q4 of 2024. Absent the valuation expense, our effective tax rate would have been 23.6%. Billable head count decreased 3.2% and nonbillable head count decreased 2.5% compared to the prior year quarter.

Now turning to our performance at the segment level for the fourth quarter. Corp Fin record revenues of $423.2 million increased 26.1% compared to the prior year quarter. The increase was primarily due to higher demand and realized bill rates in turnaround and restructuring, which grew 25%, transactions, which grew 46% and transformation, which grew 13% as well as higher success fees. Notably, in transactions, our strength is more than just market driven. For example, our top 20 engagements in Q4 2025 more than doubled in size compared to Q4 2024. Our engagements have expanded in size and scope as we bring more of our services to our clients across the deal life cycle.

In turnaround restructuring, our record quarterly revenues were driven by rules in some of the largest bankruptcies around the world from Spirit Airlines in the U.S. to [ Fax ] oil refinery in the U.K. and Azul Airlines in Brazil. In the fourth quarter, turnaround and restructuring represented 47%, transformation represented 28%, and transactions represented 25% of segment revenues. Adjusted segment EBITDA of $80.1 million or 18.9% of segment revenues compared to $44.7 million or 13.3% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues, which was partially offset by an increase in compensation particularly variable compensation and higher SG&A and pass-through expenses. Sequentially, corpfin revenues increased 4.5%, primarily due to a 10% increase in transformation a 6% increase in turnaround and restructuring services -- or revenues, which was partially offset by a 4% decrease in transactions.

Turning to FLC. In FLC, revenues of $192.9 million increased 9.7% compared to Q4 2024. The increase was primarily due to higher realized bill rates for risk and investigation services. Notably, financial services has been a key driver of growth throughout 2025, as this industry is facing a convergence of regulatory and technological fits. For example, we have been hired by many leading financial services companies to evaluate whether the use of AI models by our clients and their partners are in compliance with regulatory standards. The assessment requires expertise in data analysis and understanding of applicable laws and regulations as well as experience and credibility with the regulatory agencies.

Adjusted segment EBITDA of $23.8 million or 12.3% of segment revenues compared to $18 million or 10.2% of segment revenues in the prior year quarter. The increase was primarily due to higher revenues which was partially offset by an increase in variable compensation. As I mentioned earlier, FLC was the only business that saw a sequential revenue decline. However, the decline was only 1% compared to an extraordinary Q3, which had record quarterly revenues. FLC's fantastic performance this year showcases how much deep expertise matters. When the clients are facing their most high [ face ] challenges. And important, our ability to shift our focus as clients' needs change. This is reflected not only in the headline cases or expert supported but also in our revenue per billable professional, which has increased 22% over the last 3 years.

Economic Consulting revenues of $176.2 million decreased 14.5% compared to Q4 of 2024. The decrease was primarily due to lower demand for non-M&A and M&A-related antitrust services which was partially offset by higher demand for financial economic services and higher realized bill rates for international arbitration services. Adjusted segment EBITDA of $1 million or 0.6% of segment revenues compared to $15.8 million or 7.7% of segment revenues in the prior year quarter. The decrease was primarily due to lower revenues and an increase in forgivable loan amortization, which was partially offset by lower compensation and bad debt. As you may recall, in Q4 of 2024, Economic Consulting had higher than usual bad debt related to one completed matter. Sequentially, Econ revenues increased 1.8% primarily due to higher national arbitration service revenue.

In Technology, revenues of $99 million increased 9.3% compared to Q4 of 2024. This increase was primarily due to higher demand for litigation and M&A-related second request services. Adjusted segment EBITDA of $14.8 million or 14.9% of segment revenues compared to $6.6 million or 7.2% of segment revenues in the prior year quarter. This increase was primarily due to higher revenues. Sequentially, technology revenues increased 5.3% primarily due to higher information governance and litigation services. Important, our technology revenues increased 7% and adjusted segment EBITDA increased 69% in the second half of 2025 compared to the first half of 2025 due to higher second request and litigation revenues.

Stratcom's revenue of $99.4 million increased 14.8% compared to Q4 of 2024. That increase was primarily due to higher demand for corporate reputation services and an increase in pass-through revenues. Adjusted segment EBITDA of $19 million or 19.2% of segment revenues compared to $13.8 million or 15.9% of segment revenues in the prior year quarter. This increase was primarily due to higher revenues, which was partially offset by higher pass-through expenses and variable compensation. Sequentially, Stratcom's revenues increased 11.2% and primarily due to a $3.4 million increase in pass-through revenues and higher-than-expected demand for corporate reputation and financial communications services. Stratcom's fantastic Q4 and record 2025 performance underscore the relevance of our expert-driven model when clients are facing bet the company issues and the value of that expertise is reflected in our higher revenue per billable professional.

Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $152.1 million for the year ended December 31, 2025, compared to $395.1 million for the year ended December 31, 2024. The largest driver of the year-over-year decline was higher forgivable loan issuances. In Q4, we issued $3 million in forgivable loans net of repayment following $18 million, $72 million and $162 million of forgivable loans to existing and new employees and affiliates net of repayments in Q3, Q2 and Q1, respectively for total issuances of $255 million in 2025. During the quarter, we repurchased 519,944 shares at an average per share price of $160.58 for a total cost of $83.5 million.

During full year 2025, we repurchased 5.3 million shares or 15% of our shares outstanding at an average price of $163.07 for a total cost of $858.6 million. As of December 31, 2025, approximately $491.8 million remained available under our stock repurchase authorization. Base sales outstanding of 88 days at December 31, 2025, compared to 97 days at December 31, 2024.

Now turning to our 2026 guidance. We are, as usual, providing guidance for revenues and EPS. We estimate that revenue will range between $3.94 billion and $4.1 billion. We estimate GAAP EPS will range between $8.90 and $9.50. We do not expect there to be a variance between GAAP and adjusted EPS. Our 2026 guidance reflects several key factors that take our outlook. First, I want to address an issue that is a major focus in the marketplace, AI. Embedded in our guidance is our experience that the proliferation and broad adoption of AI will continue to be a significant positive for FTI. Important that we are not a software developer or reliant on commodity services. FTI is a low leverage, expertise-driven firm. We leverage technology in many places, which is in support of highly expert-driven work and crisis situations and in times of transformation.

Our competitive advantage is we have senior people, we're able to operate in high-stakes matters where clients need accountability and judgment and people who can quickly help them navigate those situations for the right results. Our history has shown that FTI has benefited in periods of disruption. When risk is elevated and when markets are facing discontinuous change, regulatory shifts or heightened litigation or businesses need to be rebuilt or restructured. We are already finding that AI is generating entirely new categories of work. For example, we are supporting clients in a new set of high-profile disputes which involve AI companies and how users are interacting with AI, from ownership of AI generated content, the harm caused by AI misinformation and bias, the unauthorized use of data and privacy concerns. We believe the rapid pace of AI innovation, experimentation and adoption will be one of the most disruptive events in our lifetime. And that disruption is and will drive demand for our experts.

Second, the midpoint of our revenue guidance reflects a 6.1% year-over-year growth. To achieve the midpoint of our range, we expect aggregate revenue growth across Corp Fin, FLC, tech and Stratcom's to exceed that midpoint. Corp Fin, FLC and Stratcom's are coming off record performances in 2025 and enter 2026 with solid momentum. This is particularly true in transactions and restructuring, risk and investigations, construction solutions and data and analytics and corporate reputation. As is typical for our business, this momentum is supported by several large engagements. As those matters conclude, they may not be immediately replaced, which we have reflected in our guidance. Tech rebounded in the second half of 2025 and enter 2026 on a much strengthened trajectory.

Third, our guidance assumes a multiyear rebuild in our Compass Lexecon business. We are excited about the talent we have retained and attracted and we believe this business has one of the strongest benches of academic economists globally. While we have stabilized our cost base, we continue to face headwinds as we cycle a first half 2025 that was not fully impacted by the revenue -- by revenue disruption or increased cost of retaining and attracting talent. As a result of these tough comparisons on certain compensation costs in Q1 we expect Economic Consulting adjusted segment EBITDA to reach its lowest point in Q1 2026. We expect the business to no longer be a drag on year-over-year EBITDA growth in the second half of 2026.

Fourth, we continue to invest in talent. In 2025, we announced 85 senior hires. And in 2026, we plan to build teams around these leaders while selectively adding -- sorry, adding senior professionals, where we see the right opportunities. We also expect more junior hiring in parts of the business were hiring lagged in 2025.

Fifth, while we remain committed to disciplined cost control, we expect SG&A expenses for the full year to be approximately $45 million higher than in 2025. In particular, Q1 2026 SG&A is expected to be approximately $30 million higher than Q1 2025, primarily due to legal settlement gains in Q1 2025 that will not recur. We will also hold our all Senior Manager -- Senior Managing Directors meeting in April of 2026, resulting in higher event-related expenses primarily in Q2.

And lastly, we expect an effective tax rate of 22% to 24%, which compares with 27% in 2025. Overall, our guidance reflects our best judgment at the midpoint and recognizes that our largely fixed cost structure can lead to outsized earnings impact from modest changes in revenue.

Before I close, I want to emphasize a few key themes that I believe underscore the attractiveness of our company. First, our diverse portfolio of services allows us to support our clients regardless of economic cycles. From turnaround restructuring to M&A to cybersecurity investigations to crisis communications. Second, as discussed, we are a top destination for great talent. Third, our management team is focused on both growth and utilization. Fourth, our business generates excellent free cash flow, and we have a strong balance sheet that provides us the flexibility to boost shareholder value through organic growth, share buybacks and acquisitions when we see the right ones.

These factors combined are powerful and they have been consistent across quarters and years. That consistency has allowed us to deliver 8 years in a row of record revenues and in 11 years in a row of adjusted EPS growth. Importantly, we delivered this performance not only in the areas where market factors were on our side, but also in areas where we face headwinds, such as 2025. We are tremendously confident in the power of this company and its potential.

With that, let's open up the call for your questions.

[Operator Instructions] Our first question today comes from Andrew Nicholas with William Blair.

I wanted to start with one that's pretty similar to the one I started with last quarter, which is just on Economic Consulting. Specifically, how would you -- how much of the kind of stabilization quarter-over-quarter or even the improvement in terms of year-over-year declines would you attribute to the market environment versus improved productivity from some of your recent hires? And on the latter point, just a broader update on how you're feeling about the ramp in productivity of the academic focused hires in particular as you look ahead to '26?

Thank you, Andrew. Look, I think, as Paul indicated, I think we are not yet at the bottom of the economics of our econ practice, primarily driven by the Compass Lexecon situation. And of course, the year-on-year in the first half of this year will continue to be a drag given the fact that the impacts really didn't hit us until somewhere in the middle of the second quarter. And I think that's because we've added costs, both to retain people and we've added these great people. And as of yet, we have not yet seen material revenue gains. We've seen some individuals who brought revenue. Some of the people who came who can bring revenue are still required by their contracts to be doing revenue with the prior employers. And then some of the people we hire are more early-stage academics who have longer-term futures.

So it is a slow ramp on the revenue side, particularly in the U.S., is really what I'm talking about. I think -- and particularly in the U.S. antitrust business, there's really 3 different businesses here. The U.S. finance business was hit on the comp line to help retain people, well, we didn't really lose anybody, and the revenue was actually up in '25, and we feel like that's in pretty good shape. The European business was down even though we didn't lose much talent. And that might have been market conditions. It might have been us being a little distracted by the fight to keep our people. But we are expecting that to get back to solidity by the second half of the year. And we have early signs that it is -- the revenues are coming back there. The real issue is the U.S. antitrust business, where we invested a lot to add that talent and it's slow progress.

I think it's an amazingly good group of economists. It is not an aggressive group of business developers. And so you got to get out there and let the lawyers know that you have these great talent. And I think it's taken a while for us to do that. I think we're now finally doing it in a bigger way, and we're getting receptivity as you might imagine. And I think if you look recently for example, the Medi case, which was a major, major case a few weeks ago, judge cited our testifiers, [ Dennis Carlton, John List ], these are the leading academics that we're talking about. But I don't think most lawyers knew that John was with us until then, and we're changing that. But I think it's a work in progress, but it's a worthwhile endeavor, but I can't tell you it's a median rebound there. Does that help?

Yes, absolutely. No, that's super helpful. And then I guess my follow-up question. Paul, you talked about AI and the defensibility of the model. in this kind of new AI paradigm. But I'm curious maybe addressing or talking about it from a different perspective, which is on the restructuring front. To the extent that AI in a disruptor as we expect it to be. Do you expect that to positively impact demand for restructuring or business transformation? And if that's the case, how do you feel you're kind of situated from a staffing or capacity perspective to capture that upside and drive growth in that business in that type of scenario?

Maybe I'll start and then Steve can chime in. We -- I think we believe we've built the #1 or #2 global restructuring practice. So from that standpoint, we benefit from disruption in markets as businesses have to go through financial difficulties, whether we're helping on the creditor side or on the company side. So from that standpoint, I think we feel well positioned to benefit. Now the timing of disruption from AI or from other factors, I think that's anyone's guess how quickly that will unfold. Surely, there will be winners and losers as AI disrupts business, various businesses in various industries, whether that hits in '26 or '27 or '28 I think that's less certain. Regardless, I think we're well positioned once it starts to happen and once it starts to unfold.

Maybe I could just broaden that point here. I think that the key thing is our company exists because there is disruption in the world. If the world were calm, no bankruptcies, no crisis, no litigation, no difficulties, no M&A, no stress I don't think my company would exist. We exist because the world is complicated, changes fast. It has disruptive elements. It has -- there's litigation, somebody does you wrong, you so -- and it takes real expertise to navigate those and to win the litigation and to dive in to figure out what happened on the cyber, [ can ] and so forth.

So our company exists because in times of crisis and disruption, you need the leading experts. You don't need technology. You need leading experts who know how to use the latest technology, and that's what we are, which is why we are finding that AI so far -- and we believe going forward will be a positive for our company. So I hope that's helpful, Andrew.

[Operator Instructions] The next question comes from James Yaro with Goldman Sachs.

[indiscernible] here on behalf of James. I know you touched upon this aspect in the prepared remarks, but could you update us on the impact of AI on the business? What are the impacts you are seeing thus far. You've talked about this being a positive for the business in 2026. Could you elaborate around -- more around that aspect where you will see any benefits? And whether there are any more negative impacts, which you can foresee?

Yes. Look, I think risk a little redundancy. I think the main places where we're seeing the benefit is more on the revenue side. Do we have some efficiency gains, of course. Will we need as many people summarizing EU regulations in Brussels at the lowest level, the summarization function, you don't need as many. But do you still need people who understand what EU regulations are going to do. The impact on the company? Or are they going to actually enforce it the advice, the value-added, you need that. You need that. And by the way, as the world gets more disruptive and there's EU regulations on AI, you need people who could do that and understand AI and so forth. And so -- we think our Brussels business is a growth business. Do you tweak the leverage a little bit? Yes, you tweak the leverage.

But mostly, so far, we're not finding it on efficiency. And we haven't yet torn apart all our cost structures and then are claiming big dollar gains on that. Where it is, is this disrupted world is triggering demand. And the last question said, will it trigger more bankruptcies and so forth? We suspect it will at some point. I don't think that's where it is. But I think as Paul referred to, in our FLC practice, where the regulatory changes, you have AI companies that are -- what do you call fintech companies that are using AI models that somebody has to go into that fintech company and figure out, is it violating regulatory standards. And that requires somebody who understands regulation, who understands the regulators and is credible with the regulators who could testify in court if they needed to and understands how to tear apart in AI algorithm.

How many people do you know that can do that. And so we get work from this. And we think that the more disruption happens from AI, the more of those sorts of things are going to happen, whether it's crisis, communications around those sorts of things or it's bankruptcies around those sorts of things or it's investigations around those sorts of things. So that's why we're feeling like over the next years, this is a positive force for a firm that is like ours, a low leverage, expert-driven firm positioned against disruption. Does that help?

Yes, that is super helpful. As a follow-up, there appears to be some market disruptions that are impacting the capital market, which could impact a few of your businesses. Could you speak to whether you're seeing any impact thus far? And could there be some if this AI disruption continues?

Yes. No, of course, I don't know which ones there seems to be less disruption in the market. But for example, I think we were involved in one way or another in a couple of the private credit perturbations that happened a while ago. And obviously, we have capability to help in any sort of credit thing there, whether it's investigations, fraud investigations or its bankruptcy or it's advising creditors on those sorts of things.

To the extent that I think [ Jamie Dimon ] said when you see a cockroach, you rarely see just 1 to the extent he's right. We're positioned on that market to be of help to people. But I think in general, when there's economic dislocation something pops out, whether it's bankruptcy or it turns out that somebody who's committing fraud or somebody just needs to advice or there's M&A opportunities, and we are positioned against all of those. Does that help?

Yes. Again, that's helpful. One last question from our end. You reduced debt by $145 million Q-o-Q and repurchased less debt and at least what we thought. Could you help us think through the capital deployment priorities from here and view on the ability to add leverage from here?

I didn't understand the point about us reducing debt less than you expected. Is that the question? Or you're saying going forward? What's your question?

No. So debt reduced by $145 million Q-o-Q in 4Q '25 and the repurchases were less than what we had at least thought about heading into the earnings. So just wanted to get some clarity around the capital deployment priorities heading from here.

Yes. Look, I think our capital strategy has been the same since I've gotten here, which is part of the thing that makes our company -- the 2 things that create value for our shareholders are organic growth and the ability to sustain organic growth. And then given that it's organic growth primarily, and it's not acquisitions, we can grow organically and have very positive cash flow. And so therefore, the other issue is for us to use our cash wisely. And our definition of why is use of cash is dependent on circumstances. A-plus acquisitions that come along, they don't come along that often, and they don't come along with the right culture of people that often and they don't come along with the right culture and cheap and reasonable price. But when they do, when we have them, we do them.

Historically, that's not been the primary use of cash. When we had high expense debt, we got rid of some of the high expense debt. And then on share buybacks, we have been very opportunistic. Our experience is that -- our company is a sustained growth engine and sometimes the market believes and then at least 3 times in my 10 years here, the market has fallen out of belief. One in 2017 when -- even though we were forecasting reaffirmed guidance, the stock dropped back into the 30s, one at the end of 2020 when we said the restructuring boom from COVID was over and yet, it didn't mean demise for our company because our testifiers were now able to go back in court and the stock dropped from 154 to I think, 96. And then the third, candidly, this year, where we clearly expressed the view of headwinds.

But we also expressed the view that those were temporary headwinds that we thought we could overcome. And we don't believe the market fully understood. And so we don't buy shares back every quarter, but when we believe the market has fundamentally overgeneralized a short-term hit, and we think we can create value for our shareholders by going in. And so I think all 3 of those times, we bought well north of 5% of our company back. And so that's what we monitor. And if we find the right opportunities, we're not afraid to jump on it. And as you've mentioned, whatever you say about our debt situation is tiny, right? I mean I think our net debt in the fourth quarter might have been $100 million, which puts us like 1/4 of EBITDA. So I think we have plenty of opportunity to do whatever seems to make sense going forward. Does that help?

As there are no analysts left in our queue, this concludes our question-and-answer session.

Let me just say thank you all for your attention and your support. It was an interesting year with a fair amount of challenges. I have to say I'm so excited about our team's ability to weather those challenges and important different than when I got here 10 years ago, how many people in our company have now the confidence to if they have a slow quarter to continue to invest behind great businesses and great people. We have now proved time and time again that, that works for the multiyear trajectory. And it builds a firm that people want to join and be part of. It's a fun journey, we look forward to continuing it with you. Thanks for your time.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Welcome to the FTI Consulting Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 FTI Consulting conference call to discuss the company's third 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 should 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 heading 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 SEC filings.

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. 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.

On 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 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 and an Excel and PDF of our historical financial and operating data, which have been updated to include our third quarter 2025 results.

With these formalities out of the way, I'm joined today by Steve Gunby, our CEO and Chairman; and Paul Linton, our Interim Financial Officer and Chief Strategy and Transformation Officer.

At this time, I'll turn the call over to our CEO and Chairman, Steve Gunby.

Thank you, Mollie. Welcome, everyone, and thank you all for joining us today. As I hope you've seen this morning, this morning, we reported once again, record results with EPS and adjusted EPS of $2.60 per share, which is up over 40% over a year ago. As always, there are onetime factors that influence these numbers, and this quarter, they overall did happen to cut positively. So as we always say during the quarters and in not so good quarters, we should never take 1 of our quarters and multiply it by 4.

But even normalizing for the onetime factors, this was a record quarter, a quarter I would call spectacular and a set of results that to me was particularly gratifying given that we delivered these results in the face of major headwinds in two of our businesses and while continuing to invest in all of our businesses. So there are different ways that one can tell the story of this quarter. One is to go business by business to talk about the terrific performances we had in Corp Fin and FLC and StratCom and how those performances more than overcame these areas of shortfall, and Paul will review the business in that way.

With your permission, I'd like to see if I can put a higher level lens on the quarter, a bit of a more holistic, integrated lens and try to tie the results of this quarter, some of the topics that we have talked about over the years, some of the underlying philosophies, the set of strategies that our teams have been driving not only business by business but as a whole, and not only quarter-by-quarter but now for close to a decade.

Over the years, you've heard us talk a lot about organic growth while focusing on high-valued areas where we believe we have a right to win. The problem with those words is that they could just be slogans. What we have tried to do in this company is to turn them into much more than slogans. What we've tried to do is to turn them into core philosophies into approaches and approaches that have teeth, teeth that require actions in times that are sometimes comfortable but also operate in times when adhering to those values might not be so comfortable, for example, when adhering to those values might hurt earnings for a particular business in a particular quarter.

This goal of ours for organic growth reflects several core beliefs that we are committed to, that are tied to what we believe is necessary to deliver for all three of the critical stakeholders, the stakeholders that matter in our business. One is making a fundamental difference for our clients and second is building a place where great people want to be at where great people can build great fulfilling careers, and doing both of those while, at the same time, delivering real value for you, our shareholders.

There are a number of tenets underlying them. Let me summarize the key one. The first one is the easy one. It's the most obvious one. We are a client service business, which means at our core, we have to target being the best at helping our clients. That's a general statement for professional services. In our case, it means helping clients in key matters in high-stake situations. Aspiring to be the best in times of crisis or urgency requires us to make sure we have the right leading expertise. And it's important to define leading expertise right. It's not only defined as people who intellectually know what could be done or intellectually know what needs to be done, but people who have been on the front line of major crises and opportunities have actually been able to help clients deliver in those situations.

The third point is maybe less obvious, but it's a consequence of those first two points, which is the core determinant of our growth and our experience is rarely whether there's a market out there. They almost always is. The challenge almost always is much more around eliminating supply side constraints which, in turn, means continually committing, continually in good quarters and bad quarters, committing to enhancing our team, supporting the growth and promotion of core committed professionals and making ourselves over time increasingly the most attractive place for terrific folks outside the firm.

And of course, it requires not only getting the folks in or promoting the folks, but making sure when you do that, they feel supported, investing behind them as they have conviction about where they can double down on our core business or when they see they can find new adjacencies they can believe they can win in or where they find geographies they think they can seize.

These principles, as we discussed, are far from rocket science and they are easy to mouth. They're also easy to commit to when businesses are soaring. The rubber hits the road is what you do when the businesses are not storing, when a business is down in a quarter or struggling. Let me take those principles and see if I can give some insight into what I think drove the quarter, first, for the businesses that soared this quarter and then for the two businesses that had some challenges.

When you look at the results this quarter for CorpFin, FLC or StratCom, you can talk about the great things that happened in the quarter, the jobs won, the market conditions that helped and, of course, there are those. What that sort of short-term lens misses is just how much the current quarter reflects the activities and, I believe, the courage that was shown by key leaders in those segments and sub-segments, not only this quarter or this year but last year in 2, 3 and 4 years ago in quarters where certain businesses weren't soaring, but where the leaders and the individuals involved had conviction about the propositions we are driving and had confidence and the teams leading those efforts.

Let me see if I can illustrate that first with CorpFin. CorpFin had another record quarter with multiple sub-businesses delivering double-digit growth year-over-year, and those results obviously reflect some things that happened this year. But importantly, at its core, my belief is that CorpFin's powerful results, first, primarily reflect major convictions and did decisions made in quarters past, bold bets that the leaders that behind in businesses that weren't performing at that time or on adjacent businesses that, at that point in time, we're unproven. There are so many examples of that CorpFin I can't possibly do them all justice, but let me touch on a few.

In the U.K., we've always had a great creditor rights business. and we always support that business. But the team there also had a set of people there who believed they could add an adjacent business, a leader insolvency business. And they bet on that team, a set of bids that has turned out to be a great growth engine for us this quarter and, we believe, going forward.

In Germany, it was around committing to and supporting and building on a terrific team in Anders which, as you may remember, shortly after they came, they significant headwinds when the German government launched the moratorium on bankruptcy during COVID. That confidence is being rewarded right now, yes, in terms of the terrific restructuring results in the quarter, but also with Germany now becoming a platform for a broader set of businesses that we can grow behind.

We've talked about Australia a number of times, the transformation that happened there because we had confidence on the quality of the people on the ground and the vision they had, a vision that saw a way to get us from a distant player in restructuring to the #1 or 2 player in restructuring, but also that they saw that was a way to turn FTI as a whole into a destination of choice across segments for great professionals, a vision that I believe is fully underway to being fulfilled.

These bets are in adjacencies and businesses that were struggling, the quarter's results also reflect bets we've made in the last several years to continue to invest in businesses where we've always been strong. The teams have avoided the mist of being complacent or sitting on their laurels. They've doubled down in core businesses like restructuring, adding talent in verticals where we thought we could even be stronger like health care or airlines, all of which has led us to winning some of the biggest jobs in both of those industries over the last few years.

There are so many other examples I could go to, but let me just pick one last one for CorpFin, which is the key best we've made in transactions, which were bets behind a terrific leadership team. And I believe that the quality of that team would allow us to gain significant market share in a market where we weren't as well known as we thought we should be. As a result, that business has not only grown significantly over the last 4 or 5 years, it even grew in the first half of this year when transaction volumes generally in the markets were down.

A point I think is important. None of those businesses decisions in those businesses was automatically profitable in the quarter they were made. Most of those decisions actually cost us money initially. They were, of course, not decisions made lightly. We have disciplined teams that were made with discipline with focus on questions like, do we have the right proposition? Do we actually have the right team that will take accountability and be able to deliver on those propositions? But where we had those teams and the right proposition, our leadership has encouraged to bet and support those bets, yes, in good quarters, but also in the quarters that were not so good.

The results we are showing this quarter reflect those commitments. And in my mind, they celebrate the commitments that these folks made.

Let me talk about some analogous moves that the FLC leadership team has made. Some of you will remember that FLC's adjusted EBITDA was essentially flat for a while or, rather, it was zigzagging around a relatively flat line for a fair number of years. And during those years, we often talked on calls like this about investments we are making, overseas in certain businesses and in the United States. And during many of those years, it was hard to see the effect of those investments on bottom line performance.

The reality was that within those investments were some investments that didn't work, and we had to take corrective action. What I think it was harder to see, however, was that within those investments were also powerful investments that were working, that were building on the historical strengths of FLC and helping liberate and make more visible to the market, so the underlying power of what we have always had in FLC, for example, the buildup of a much more prominent and much more well-known financial services practice, which today is not only winning some of the biggest jobs to the market but is now also a key destination for leading people who want to join us, including 15 new SMBs and this year.

We're continuing to build on our cybersecurity practice, not only in the U.S., but now also overseas and to broaden it into adjacencies where we believe we have the right to win such as the national security practice. We're building our risk and investigations practice more generally, not only by investing in great promotions and terrific lateral hires to enhance our capabilities, but also by figuring out ever better ways to link our deep R&I experts with our experts in financial services and other regulated industries and leverage one of our most critical assets, our core data and analytics team that has always been on the leading edge for core data and analytics services and increasingly is on the leading edge with respect to AI.

Year-to-date, FLC's revenues are up double digit and adjusted segment EBITDA is up more than 60%. Some of that is due to great things that happened in the quarter. Most of it, to me, is due to the vision, the power and the coverage of the investments that FLC has made not just this year or last year but in the last 2, 3 and 4 years.

Turning to StratCom. StratCom, as some of you may remember, was the first business that we had to turn around a decade ago. And the team, if you don't remember, turned it around almost immediately. And it has been a great growth story since. But of course, just because it's a great growth story doesn't mean there haven't been zigs and zags. And Mark and the team will note we've got a lot of zigs and zags over these 10 years, including a slow period in '24. This year, StratCom's revenue is up also double digit and its segment EBITDA is up 34%. Some of this year's results have to do with disciplined action StratCom took in areas where it didn't think it had all the ingredients to win. But a huge amount of the growth has to do with the team's multiyear commitment to increasing our power in the core areas that aspires to win at high stakes areas like public affairs or corporate reputation, places like crisis communications or cyber communications.

StratCom has had multiple ways it's invested behind that vision over the last few years. But the primary one has been to add talent wherever it is founded, a bit from the outside but actually a lot inside committing to promote that talent when the talent was ready, even if that happened to be in a quarter that was slow. If you look at the SMD headcount in StratCom today, 2/3 of the SMDs are new within the last 5 years, promoted during good times but also with conviction during slow periods. It is that sort of conviction that has allowed us through the various flat periods and the zags to always return this business to its powerful growth trajectory and why we have so much conviction in it going forward.

Let me try to take the same principles and apply them to to the businesses that have faced challenges this year. As you know, Tech is having a tough year in the Compass Lexecon business and ECon has been hit substantially this year on the top line but even more on the bottom line. The questions we look at always when we have base businesses like that or two. First, do we have confidence in the team? Do we have confidence in the propositions that, that team is driving? And then second, depending on the first one, what do we do?

And when Anders was struggling in Germany, we looked at it. And we ended up saying, Wow, this is a great team. Okay, there's moratoria in bankruptcy. This is a great team. So we move to second question which is, okay, how do we support this great team and get it back on the growth trajectory that it deserves? And we have the same sort of discussions and questions when we looked at Australia and many of these other situations I talked about. So we applied those lenses to these businesses.

When you look at the Tech business and you apply that lens, you say, wow, we've had the fastest organic growth in the industry in the last 5 years. You find a team that for a long time has been an early adopter of the most advanced technologies, machine learning and AI technologies, topics that are critical for the future. When you talk to our clients, particularly our most prominent clients, you hear people and they see us ever more as their go-to partner for the highest stakes, most complicated litigation M&A-related second requests. I walk away from those thoughts and those conversations with the sense that this is a business that even if a quarter is slow, we should be not only investing in but be excited to invest in.

When you look at Compass Lexecon, you see, yes, we look lots of rainmakers this year. But you also say that Compass Lexecon still by far the leading brand in the industry. I think just 3 weeks ago or 4 weeks ago, we had 66 Compass Lexecon professionals as named to Lexology's 2025 competition guide, of course, once again, by far the most of any firm. You see that no firm has the global scale that we have, not only in the U.S. and Europe but in Latin America and China. And when I talk with [ Dan ] in the European and American and Asian leisure teams, people acknowledge, yes, we've lost some rainmakers. I think collectively, the belief is that today, we have the best set of experts that this firm has ever had. We believe we do, by the way, need to get out there and introduce some of these experts to the market, something Compass Lexecon has never been that focus on. But I think everyone in Compass Lexecon is extraordinarily excited about the talent we've been able to attract to the firm and its prospects.

And so when we looked at these two businesses, we come to the conclusion, these are businesses, these are teams of propositions that are worth investing in. And so then you have to figure out what those investments look like. In the Tech business, it's meant first that we continue to go after talent. A number of our competitors in this industry are stressed and that always creates a good opportunity to go after talent and use that talent to support geographical expansion or further movements into AI topics or other relevant business expansions. But in this case, at this point in time, it is clearly also meant continuing to make sure we are investing in Tech's leadership position in AI. And so this year, we've done those sorts of investments around the course of the year, and we will continue to do so.

In Compass Lexecon, the most important initial investment was in retaining our staff in the face of competitive pressures. More recently, what we found is a lot of terrific people wanted to join us. And so in addition to retaining the bulk of our staff, we've announced 28 new senior hires in Compass Lexecon this year, by far a record for Compass Lexecon.and a move that, of course, is a very positive thing for the medium term, but we also all know how that works out in the near term, which is the cost comes first and the revenue comes later, the set of results that you clearly see reflected in this quarter's P&L.

We make these sorts of investments in Tech and Compass Lexecon and previously in CorpFin and FLC and StratCom for multiple reasons. We have three core constituents we have to make sure we'll keep in our minds. And so we make these investments for all three. First of all, it's important for our clients. Our brand position is to be the leaders serving our clients. So we have to continue to invest behind leading experts in leading-edge technologies. So we make our investments for clients. We also do it because it's important that our best professionals who are killing themselves in the market know that we're willing to support them not only when the quarters are good, but during quarters that are challenging. We also do it with a view towards our shareholders, where we believe we have fabulous businesses or sub-businesses were making these sorts of investments will allow them over time to resume what they've been in the past, great businesses who do have zigs and zags, but have zigs and zags around fundamentally upward sloping lines.

Paul is eager to do his first CFO report so let me close in a minute here. And let me close by coming back to the quarter if I can. $2.60 of EPS. $2.60 in the face of all the investments we are making and all those headwinds I talked about. Guidance for the year that suggests notwithstanding all those investments, notwithstanding all those headwinds, unless something goes unexpectedly wrong in the fourth quarter, this team will deliver the 11th year in a row of adjusted EPS growth. It's, of course, great to have a great quarter and it's nice to have another up year as nice as those results are. And they're nice in and of themselves, of course, right?

To me, what's far more significant is when you think about what we just discussed, the mechanisms that allowed us to get here because the power of those mechanisms that we've now seen across all of those segments, and not just this year but across all of those years and across multiple geographies, to me, suggests more than a good quarter or a year. They suggest resilience. They suggest underlying power and they suggest blasting power and extendability.

To me, they leave me ever more convinced, and probably I didn't need that much convincing, but ever more convinced about the incredible potential of this enterprise going forward. It leaves me, and I hope, you believing that we are so much closer to the beginning of this journey that the company can be on than we are to the end.

With that, let me turn this over to Paul. Paul?

Thank you, Steve. Good morning, everybody. I am pleased to take you all through a record quarterly performance during my first earnings call as interim CFO. But before I do that, before I turn to our results and updated guidance, I want to take a moment to thank my talented colleagues across the globe for their tremendous efforts that contributed to the quarter. And I also want to thank our strong finance team for their support and for making my transition quite smooth.

As Steve said, we delivered spectacular results, record results on the top and bottom line at the company level with record performance in CorpFin and FLC and solid as well as solid revenue growth in StratCom, which more than offset year-over-year declines in ECon and Tech. You may recall in February when we shared our initial revenue guidance, we said that to meet the midpoint of our range, we would need to have strong revenue growth in each of our four other business segments because of the headwinds we expected in ECon.

This quarter, we delivered on that. We reported double-digit year-over-year organic revenue growth when you combine revenue across CorpFin, FLC, Tech and StratCom. Year-to-date, we have delivered record top and bottom line performance in CorpFin, FLC and StratCom. And despite the headwinds Steve described in ECon and Tech, our adjusted EPS and adjusted EBITDA are up 9% and 8.3%, respectively, year-to-date, demonstrating the breadth and resiliency of our platform.

Turning to our third quarter results in more detail. Revenue of $956.2 million increased 3.3% compared to the prior year quarter. Earnings per share of $2.60 increased 41% compared to the prior year quarter. Net income of $82.8 million increased 25% compared to the prior year quarter. SG&A of $199.5 million compared to SG&A of $206 million in Q3 of 2024, the decrease was primarily due to lower compensation and the gain related to a legal settlement, which was partially offset by higher bad debt. Year-to-date, our SG&A has fluctuated quarter-to-quarter due to some onetime benefits, particularly in the first quarter of 2025 and, to a lesser extent, this quarter. We currently expect our Q4 SG&A to be more in line with Q2 2025 level.

Third quarter 2025 adjusted EBITDA of $130.6 million or 13.7% of revenue compared to $102.9 million or 11.1% of revenue in the prior year quarter. Our third quarter effective tax rate of 25.9% compared to 25.1% in Q3 of 2024. For the full year, we expect our effective tax rate to be between 22% and 24%. Weighted average shares outstanding, or WASO, for the third quarter ended September 30, 2025 of 31.8 million shares compared to 35.9 million shares in the prior year quarter. Billable headcount decreased 3% and non-billable headcount increased 0.8% compared to the prior year quarter reflecting, in part, headcount actions we took in the fourth quarter of 2024 and the first quarter of this year. Sequentially, billable headcount was 84%, which included 331 new joiners from university campuses, our largest class ever.

Now I'll share some insights at the segment level. In CorpFin, revenue of $404.9 million increased 18.6% compared to the prior year quarter. The increase was primarily due to higher demand for restructuring and transaction services and higher realized bill rates for our transformation and strategy services. We delivered double-digit revenue growth across all three of CorpFin's core businesses with restructuring up 18%, transactions up 30% and transformation strategy up 10% compared to Q3 2024.

Adjusted segment EBITDA of $96.4 million or 23.8% of segment revenue compared to $57.9 million or 17% of segment revenue in the prior year quarter. This increase was primarily due to higher revenue, which was partially offset by an increase in variable compensation and SG&A expenses. In the third quarter, restructuring represented 46%, transformation strategy represented 27% and transactions represented 27% of segment revenue. This compares to 47% for restructuring, 28% for transformation and strategy and 25% for transactions in Q3 of 2024.

Sequentially, CorpFin revenue increased 6.8% driven by double-digit top line growth in transactions and transformation strategy, while restructuring revenue was up 1%. Adjusted segment EBITDA increased by 18.1%, primarily due to higher revenue, which was partially offset by an increase in variable compensation and SG&A. Notably, year-to-date, our restructuring revenue is up 11% and as our long-term commitment to investing behind the best professionals has allowed us to expand our position as a global leader. We are winning major mandates in key geographies, including the U.S., U.K., Germany, Spain, France and Australia, among others.

We're also seeing increased activity with commercial banks and other types of lenders as some recent alleged fraud has created pockets of stress. These are situations where our strong restructuring relationships and leading investigation position in FLC mean that our experts get more than our fair share calls for the largest, most complex mandates. Equally important, our transactions revenue was up 16% year-to-date even though transaction volumes globally are down slightly. And because of the investments we've made over the last 5 years, we have broadened our services, and we are seeing, on average, much larger engagements than we had even a couple of years ago.

Turning to FLC. Revenue of $194.7 million increased 15.4% compared to the prior year quarter. This increase was primarily due to higher realized bill rates for risk and investigations, data and analytics and construction solutions services and a higher demand for risk and investigation services, which includes particularly strong growth in our EMEA region. Adjusted segment EBITDA of $42.6 million or 21.9% of segment revenue compared to $20 million or 11.8% of segment revenue in the prior year quarter. The increase was due to higher revenue primarily driven by higher realized bill rates and lower SG&A expenses, which was partially offset by an increase in variable compensation.

Sequentially, revenue increased 4.4% primarily due to an increase in risk and investigation revenue. Adjusted segment EBITDA increased 36.6%, primarily due to higher revenue and lower SG&A. Year-to-date, FLC revenue is up 11% and adjusted EBITDA is up 62%. This improvement has been driven by leadership team efforts to bring a broader set of product offerings, including our ability to analyze complex data sets for our clients' most pressing problem. This is a leadership team that is committed to investing behind the best people, a team with an incentive structure, which you may recall we introduced last year, that's closely aligned with driving profitability and, most important, a team that is partnering side-by-side with their clients as they navigate major disruptions that are often found on the front page.

Our ECon segment revenue of $173.1 million decreased 22% compared to the prior year quarter. The decrease was primarily due to lower demand for non-M&A related antitrust and M&A-related antitrust services. which was partially offset by higher realized bill rates for non-M&A-related antitrust services and higher demand for financial economic services. Adjusted segment EBITDA loss of $4.6 million compared to an adjusted segment EBITDA of $35.2 million or 15.9% of segment revenue in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower revenue and an increase in forgivable loan amortization, which was partially offset by lower variable compensation salaries, which includes an 8.2% decline in billable headcount.

Sequentially, revenue decreased 9.7% primarily due to lower M&A related to antitrust, international arbitration and non-M&A-related antitrust revenue. Adjusted segment EBITDA decreased $18.7 million, primarily due to lower revenue. We issued $18 million in forgivable loans net of repayments this quarter following $72 million and $162 million in forgivable loans to existing and new employees and affiliates net of repayments in Q2 and Q1, respectively. The majority of these loans are in the ECon segment. Forgivable loan amortization generally ranges from 3 to 6 years.

As Steve said, our ECon business has faced significant headwinds this year. In 9 months into the year, the headwinds have been even more challenging than we expected at the start of the year for several reasons. First, the comps to retain professionals was even more competitive than we anticipated. Second, we attracted even more great professionals, which had a larger cost impact than we expected. Third, the antitrust market has been weaker than we expected this year, particularly in EMEA, where we have had some large jobs continue to wind down, but we have not been impacted by competitive pressures. And fourth, we have legacy revenue that continues to ramp down at a time when revenue from new professionals is ramping up more slowly.

From a cost perspective, we believe we have stabilized the business as the cost of retaining and attracting new professionals is now reflected in our P&L.

In Tech, revenue of $94.1 million decreased 14.8% compared to the prior year quarter. The decrease was primarily due to lower demand for M&A-related second request and information governance, privacy and security services. Adjusted segment EBITDA of $13.6 million or 14.5% of segment revenue compared to $16.5 million or 14.9% of segment revenue in the prior year quarter. The decrease was primarily due to lower revenue, which was partially offset by a decrease in compensation, which includes lower as-needed consultant costs as well as lower SG&A expenses.

Sequentially, revenue increased 12.5% as we saw an uptick in demand for M&A-related second request services. Adjusted segment EBITDA increased $8.4 million, primarily due to higher revenue and lower SG&A expenses, which was partially offset by an increase in compensation. Worth noting, nearly all of the revenue decline year-to-date in our Tech segment has been driven by lower demand for M&A-related second request services. As a reminder, we delivered record second request services in the first 3 quarters of 2024 before we saw a sharp drop off of activity in Q4 2024.

Revenue in our StratCom segment of $89.4 million increased 7.4% compared to the prior year quarter. The increase was primarily due to higher demand for corporate reputation services with particular strength in our crisis, people and transformation and cyber services, reflecting increased demand for our expertise during these times of disruption and pain. Adjusted segment EBITDA of $16.9 million or 18.9% of segment revenue compared to $12.1 million or 14.6% of segment revenue in the prior year quarter. The increase was primarily due to higher revenue and lower SG&A expenses, which was partially offset by an increase in [ viral ] compensation.

Sequentially, revenue in StratCom decreased 12.9%, primarily due to an $8.3 million decline in pass-through revenue and lower financial communications and public affairs revenue. Notably, adjusted segment EBITDA only declined $1.6 million as the decline in revenue was largely driven by lower margin pass-through revenue. This was partially offset by lower compensation and SG&A expenses. Year-to-date, StratCom has delivered record revenue and adjusted EBITDA.

Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $201.9 million for the quarter compared to $219.4 million for the prior year quarter. The year-over-year decrease in net cash provided by operating activities was primarily due to lower cash collections and an increase in income tax payment, which was partially offset by lower operating cost expenses. During the quarter, we repurchased 1.426 million shares at an average price per share of $164.18 or a total cost of $234.1 million. After quarter end, we repurchased 459,610 shares at an average price per share of $15.23. As you may have seen in our earnings press release, our Board of Directors authorized an additional $500 million for share repurchases.

Cash and cash equivalents of $146 million at September 30, 2020 compares to $386.3 million at September 30, 2024 and $152.8 million at June 30, 2025. Total debt net of cash of $364 million at September 30, 2025 compared to $317.2 million at June 30, 2025. The sequential increase in total debt net of cash was primarily due to share repurchases.

Now turning to our guidance. Given the stronger-than-expected performance in the third quarter, we're updating our full year 2025 guidance for revenue and EPS as follows. We now estimate revenue will range between $3.685 billion and $3.75 billion, which compares to our previous range between $3.66 billion and $3.76 billion. We now estimate EPS will range between $7.62 and $8.12. And we now expect adjusted EPS will range between $8.20 and $8.70, which compares to our previous range of $7.80 to $8.40. The variance between EPS and adjusted EPS is related to the special charge in the first quarter of 2025.

Our guidance is shaped by several key considerations. Fourth quarter is typically a weaker quarter for us because of a seasonal business slowdown as our clients and professionals may take time off during the holidays, especially after such a busy year in many of our segments, particularly CorpFin and FLC. Second, while we believe we have stabilized our ECon business from a cost perspective and we expect a gradual return to revenue growth over the next several quarters, the timing of this improvement is not yet certain.

Third, we continue to welcome top notch senior professionals, and we expect to build teams behind them. Year-to-date, we have announced 79 SMD affiliate hires, which compares to 33 and 39 announced hires in 2024 and 2023 over the same time period, respectively. And finally, our assumptions define a midpoint and the range of guidance around that midpoint. We recognize that actual results can be beyond that range.

Before I close, I want to reiterate four key themes that I believe continue to underscore the strength of our company. First, as the result this quarter demonstrate, we have a set of businesses that are uniquely diverse and resilient. Despite the major headwinds we've had this year in ECon and Tech, our company as a whole delivered not just strong but record performance this quarter.

Second, we believe that the deep expertise of our professionals is what sets us apart. The expertise of our people allows them to be ever more in demand by our clients as they navigate complex and ever-increasing dislocation globally.

Third, we remain committed to attracting the best people when they are available, irrespective of short-term headwinds. These key senior hires span across the company including antitrust, transactions, financial services, cybersecurity, risk and investigations and corporate reputation.

And fourth, our balance sheet remains strong. We have the ability to boost shareholder value, first and foremost, through organic growth, as we have shown through acquisitions when we find the right fit and, of course, by repurchasing shares as we have done this year.

With that, let me turn it back over to Steve.

Thank you, Paul. Before we go to the questions, just in case some folks on the call don't know Paul. Paul has been here for 11 years. He's been a key member of the Executive Committee, one of my right hand folks. We hired him in 11 years ago shortly after I joined, I guess, as the Head of Strategy. And he's been a key contributor in 11 years as this company has soared.

I was so pleased that he volunteered to serve as Interim CFO, although he does claim I voluntold him. But either way, Paul thank you for taking on the role. Let me also take one moment to thank Ajay Sabherwal for 9 years of real dedication here at FTI. He has contributed a lot and his commitment to this firm in helping it reaches potential was always evident. I'm looking forward to seeing him tonight and seeing him going forward, and all of us wish him best in his next endeavors.

With that, let me open the floor for questions.

[Operator Instructions] Today's first question comes from Andrew Nicholas with William Blair.

I wanted to start on Economic Consulting, and I apologize, a multi-parter here. I guess trying to understand if you could unpack how much of the top line performance in the quarter was maybe market driven versus some of the talent dynamics that you mentioned. Also with costs having now stabilized, is there still conviction in EBITDA for that segment bottoming in the second half of this year? And then lastly, any impact that you expect from the U.S. government shutdown?

Okay. Let me just -- the U.S. government shutdown, EBITDA bottoming. Remind me the first one there, Andrew. By the time I wrote it...

Yes. How much of the revenue kind of decline you'd attribute to just broader market conditions versus some of the talent transition going on this year?

Yes. If I had to guess on the first one, it'd probably be, I'm guessing, 2/3 to the talent transition and 1/3 towards market conditions. That's a guess. If I'm way off, we'll correct that, but I think that's close enough to a guess in a [ different place ], Paul. U.S. government, very hard to say. We are getting in our businesses still leads for things. I think whether that is because people believe the government will not be shut down long or whether -- so if there's an extended shutdown, you have to believe it starts to affect things. But so far, we haven't seen much effect is what I would say.

Has EBITDA bottomed out? I think you correctly got a sense that the bulk of the costs are now reflected in this. I think what we have is a war going on between the runoff of the legacy work and how fast we can generate new work and how fast the markets that were slow come back. I would say I'm cautious about that. I don't think we can commit to this having been a bottoming out yet. I think we've done a great job of adding talent. It turns out that Compass Lexecon has never really marketed itself before. And so we're finally starting an effort to make sure that the market knows all the talent is out there. And then the market has to know that the talent is with us now and then you have to get the initial lead and then there's senior time, and then eventually you get the big work with the junior time that you make a lot of money on.

And so that's a multi-quarter type of thing to get the realization on all the new people. I would say a lot of the legacy work is runoff, but there's still stuff to run off. And so the war between those two, I'm not quite sure. It could be trumped by whether the markets come back faster or slower than us. So I think you don't want to count on an immediate turnaround in EBITDA, although there's always fourth quarter effects also in Compass Lexecon because the law firms collect at the end of the year and we get collections and so forth. So there's a lot of noise in the fourth quarter. The way I'm thinking about this business is I am fundamentally really positive over it in the multiyear time frame.

Now what the first half of next year looks like and how fast it starts to turn around is still a question where we're working through. Does that at least give you a sense, Andrew?

Yes. No, that's helpful. I appreciate you handling or responding to all the different pieces of my question. Next one is just on on the transactions practice. Could you unpack that strength a bit further? How much is market driven versus some of the operational or execution momentum that you described in your remarks? Because I think that's one of the higher quarters in that practice certainly that we've seen. So any more color there would be great.

Yes. That one, and maybe Paul has better data than I do. My sense qualitatively is the bulk of that is our b***** team. I got to tell you, it's really fun to see. And certainly, the bulk of it over the last few years, when the markets weren't growing and we were is because of really good leadership and just leadership throughout the ranks of the team, not just -- the guy running it was terrific, but also throughout the ranks. Just it's a great team that has conviction in their propositions. They've been out in the market. And where we've gotten trial with people, people want to buy more.

And then as I think Paul mentioned, what we have done is, as we first -- years ago, we had no credibility in this space. And then you build credibility. And as you have credibility, it gives you the opportunity to introduce other services. And so that's what's happened this year. I mean, not sure whether the jobs are up as much as the size of the jobs because we're now credible with people, and we introduce other services. And people say, Wow, you're good at that too. Look, there's going to be zig zags in that business because it's driven by market, but I am fundamentally bullish about that over the next years.

Great. And then maybe last one for me. Just on FLC, another really good quarter despite what I think are maybe some more challenging end market conditions as I understand that some of that is incentive driven and some of the changes that you made internally, also price realization. On the price piece specifically, is that something that you think can continue into next year or even multiple years from here? Or should we think about that kind of rate increase dynamic being more kind of specific to '25?

Let me answer that two ways. I think, look, we have rate potential across our business across every segment still there. I mean, if you look at the major law firms that we have been working with, they over the last 5 years have raised their rates way more than we have. And so we are engaging and catch up. Having said that, I would say the FLC team this past year made a major catch-up. So I wouldn't want people to say, oh, that sort of catch-up is something that we can do every year. What we can do is to continue to build on it, but it would be more likely in a more modest way than it's shown up in the numbers this year. Does that help?

Yes.

And our next question today comes from James Yaro at Goldman Sachs.

Steve, I wanted to touch a little bit on the impact of AI on your business. Perhaps you could just touch on which businesses are impacted. And then if you could possibly maybe differentiate between positive and negative impacts when you discuss the various businesses.

Yes. Look, can I maybe frame that a little bit at a higher level and then come back to your question? Look, I've gotten into AI as any CEO has. And one of the most interesting quotations I ever saw was by Bill Gates about all new technologies. And what Bill said 3 years ago was that every new fundamental technology has followed the same pattern. It's ignored for a while, then there's immense hype. The hype is overhyped for a lot of people. It's going to change your life, James, and how you raise your children in the next 2 weeks. And then the delusion sets in 18 or 24 months later.

And I think we're seeing that pattern with AI. Now the other point that he made is, and it's when the delusion sets in that the real revolution begin. And you saw that in the Internet when the initial Google and Facebook and Uber, these were not things in the first few years. These were things for people who persisted and rethought and rethought and rethought that created the world. It's a big -- I think this is what's happening with AI now. The solution is setting in. It's obviously been transformative for NVIDIA. But I think the standard statistic is for 80% of companies out there right now, they're not seeing any impact, positive or negative from their investments in AI.

We are seeing impact and we're seeing positive impact. We haven't found much tremendous impact yet on our internal operations and cost out, that sort of stuff that people search. Where we're finding it is in our client work. And it's different types of things. We've developed some tools that are powerful tools that help enhance our position in large-scale investigations. These are tools that we call [ Ariadne ] and IQ.AI, and that's just really part and parcel of us being to deliver on what we've historically been able to deliver and just do it in superior ways.

We have started to get some major new work, some it small, but some of it is major new work, where we have been called on to help investigate where AI algorithms have potentially been used by major institutions in ways that violate regulatory stature. And I think we are leading edge in our ability to do that sort of work. And we've had some pretty big assignments in that. And then we are being called more smaller early-stage things to help do like either communications around AI strategies or early-stage assessments of what AI could do to the strategies of various businesses.

It's not yet, I would say, cumulatively across the whole enterprise. It's not transformative as a part of these economics, but I think it is the prelude for transformative going forward. And we're pretty excited about our position by making sure we're staying attached to it, but also as our tech team has done really well of trying to position ourselves as the people who can demystify it and find the real applications, the real use cases that make a difference and avoid the pitfalls. And I think that's where we're trying to take it. Does that help, James?

That's really helpful. Just maybe one clarifying question there as this is a question that I do receive a lot. So I think you walked through a lot of the positives that AI could potentially generate for the business over time. I just want to make sure that I understand and get your thoughts. So you're not seeing today or expect in the future much in the way of any sort of negative impact on billable hours across the business.

Look, I think you would expect, of course -- look, I think back in the day, and this is before your time but also before mine, James, when accountants were totaling up spreadsheets and then Excel was created, the number of accountants needed to total down column and across went away. Any new technology changes the work required and changes some of the commodity held into the work. And we are constantly monitoring that across our business. I will say that I feel more worried about that if I had 25:1 leverage businesses with primarily junior people.

Our business is experts in court testifying or experts doing like the ready dare stuff, flying on -- I think it was analogous to ready dare, the guy who flew on oil derricks when they're on fire and put out the fire. That's not a commodity while maybe building an oil derrick is. And so I think we're going to be positioned really well. But of course, we're always looking for ways to substitute technology for hours and create efficiencies and figuring out ways to price those things for our clients. Does that address that part of the question, James?

That's really helpful. Just one last one for me. Maybe just on the restructuring side of things. I think if I calculate it correctly, you reached another all-time high this quarter, which is obviously very positive. Maybe you could just help us think about the outlook for this business going forward. Bankruptcies have continued to tick up modestly off admittedly a low base and your business continues to grow.

Yes, I think in I'll take that one. So yes, quarter-over-quarter, we were up about 1%. So the business continues to be quite strong and we continue to see, as I said, strength in multiple geographies, which we think will continue to position us for some of the larger mandates, both creditor side as well as company side. So I think we think the market will continue to benefit us as we continue to maintain or grow share there.

And our next question today comes from Tobey Sommer with Truist.

This is Tyler Barishaw on for Tobey. I want to go back to Economic Consulting. How should we be thinking about the margin level for next year in that business?

We should think about it hard is what I would say, Tyler. Look, there's so many dynamics in that business. I can't give a prediction next year. I mean, I don't think we typically give predictions at the segment level and certainly not now for next year. I think it's so much the right question. I think what I would say is I have a lot of confidence in the multiyear trajectory of that business. We wouldn't have been making all these investments this year. How quickly we turn it around is a real question. And I wouldn't get overly bullish. But I wouldn't be overly cautious about the multiyear trajectory for that business either. Does that at least help a little bit, Tyler?

It does. What about headcount growth? Should we expect similar levels of headcount growth across the whole business for next year as well? Or maybe some trends you're seeing in the fourth quarter would be helpful.

Look, I think this year, the headcount growth year-over-year is lower than we have historically done. I mean, we have had the same strategy, but different years, different things happen. And if you remember here in the fourth quarter and the first quarter, we've stressed some certain underperforming positions and so forth. And so I think our headcount growth year-over-year here is among the lowest since I've been here.

We haven't changed our fundamental headcount growth story. I hope you heard my opening and I hope you communicated a sense of conviction and bullishness about the future of this company. So we have to grow heads. Now how we differentiate that among segments and subsegments by geography depends a lot on individual circumstances and whether we're long in some headcount or short in some headcount. So I probably can't go into the individual subpoints. But if you wanted to go back to our longer-term history to project headcount growth for the majority of the world, that's probably a better prediction than using the last 12 months. Does that help, Tyler?

It does.

Let me say thank you all. I think we went over a couple of minutes. Thank you all for your continued attention, and we look forward to taking this company forward. Thank you.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

Welcome to the FTI Consulting Second Quarter 2025 Earnings Conference Call. [Operator Instructions] 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 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 and 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 www.fticonsulting.com as well as other disclosures under the heading 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 of 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 2 items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and Excel and 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'm joined today by Steve Gunby, our CEO and Chairman; and Ajay Sabherwal, our Chief Financial Officer.

At this time, I will turn the call over to our CEO and Chairman, Steve Gunby.

Thank you, Mollie. 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 Lexecon business. Fourth, although at the end of last year, the market was forecasting an M&A boom in 2025, a boom of that would, of course, benefit in a number of our businesses. the early part of the year, the market has 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 as 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 with a 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's 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 just how strong this company actually is, just how resilient. We are a powerful enough company actually be weathering as formidable 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 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 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 5 or so years. That tech team is focused on the toughest, most complicated jobs. They work particularly as 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 that, 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 way through versus requiring second requests.

And when are we -- strength and second requests, which if you don't know, a 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 far 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 difference. 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 kind of vapor 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, 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 Lexecon business's 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 of Compass Lexecon 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 came and say the financial that we will take this year. And I would not want to suggest that the rebound from that financial hit will be immediate.

Let the Compass Lexecon 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 and 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 believe in the FLC's team, 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 and 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 enthusiastic by what I see is enormous potential for this terrific group of people going forward.

Corp Fin 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 as we continue to support each of the sub businesses independent of a given quarter's current economic factors. We continue to attract and develop great people even if we're in a down cycle for those businesses. What it means is, although those some businesses 10 and are occasionally down for a period and they surely have zigzags. Overall, it adds up to an upward sloping line, a 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 Corp Fin's success this year. Our transaction businesses like all transaction businesses have volatility, and they can have bad quarters. But the team there noticed there 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 diligent but adjacencies like merger integrated, carve-outs, tax structure, human capital, strategic due diligence, Strat Com 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. With 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, and 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, to add capabilities in the U.S. and around the world, for example, from an industry perspective. An 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 U.S. 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 Corp Fin businesses shine. Not only this year but over now many years. It, of course, has had its up and downs, but its relentless focus on making the right bets has allowed it to more than triple the revenue and more than quadrupled the adjusted EBITDA of 10 or so years ago. And in my view, the Corp Fin successful had many, many debtors left.

Finally, but not least, Strat Com's willingness to invest in key areas like cybersecurity, response, public affairs, crisis communications even through the slow quarters that has faced over the last couple of years, is why Strat Com 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 here 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 Lexecon business, supporting our tech businesses as well as investing in terrific opportunities in Corp Fin and FLC and by the way, our other e-com businesses, which by the way, are doing incredibly well this year. And investing in Strat Com and in EMEA and in Asia and Australia and LatAm and yes, also in the supposedly mature U.S.

We have been able to do that because of the success of the previous generation 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 and 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 faced this year, while at the same time, reinvesting in 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-digit 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. Ajay?

Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company-wide and segment results and discuss guidance for the full year. Beginning with the second quarter results. We reported strong overall performance driven by our diverse business segments and the depth of our expertise. Despite headwinds in our Technology and Economic Consulting segments, we reported nearly similar revenue and adjusted EBITDA compared to the prior year quarter.

Sorry, would you might recollect -- all right, that was not, Ajay. That was Steve spilling coffee all over the table.

We reported nearly similar revenue and adjusted EBITDA compared to the prior year quarter, which you might recollect was an all-time record quarter for revenue and adjusted EBITDA. Notably, in Corporate Finance & Restructuring and Strategic Communication, we set new records for revenues and adjusted EBITDA this quarter, and in Forensic and Litigation Consulting, or FLC, we continue to perform remarkably well despite the regulatory changes and related uncertainties.

Turning to our second quarter 2025 results in more detail. Revenues of $943.7 million compared to $949.2 million in the prior year quarter. Sequentially, revenues increased $45.4 million or 5.1% compared to $898.3 million in Q1 of 2025. Earnings per share of $2.13 compared to $2.34 in the prior year quarter and $1.74 in Q1 of 2025. EPS increased sequentially primarily because we had a $0.55 special charge related to employee reduction actions in Q1. Net income of $71.7 million compared to $83.9 million in the prior year quarter.

The decrease in net income was primarily due to lower revenue, an increase in direct costs, which includes higher forgivable loan amortization and FX remeasurement loss compared to a gain in the prior year quarter and a higher effective tax rate, which was partially offset by lower SG&A. SG&A expenses of $202.2 million or 21.4% of revenues compared to SG&A of $206.2 million or 21.7% of revenues in the prior year quarter.

The decrease in SG&A was primarily due to lower bad debt. Notably, in Q2, SG&A was up $17.9 million compared to Q1 because, as expected, legal settlements we had in Q1 did not recur. Adjusted EBITDA of $111.6 million or 11.8% of revenue compared to $115.9 million or 12.2% of revenues in the prior year quarter. Our second quarter effective tax rate of 22% compared to 18.2% in the prior year quarter. The prior quarter tax rate was lower because of large option exercises in Q2 of last year and the resulting discrete tax adjustment.

For the full year of 2025, we now expect our effective tax rate to be between 22% and 24%. Weighted average shares outstanding are way so for Q2 of 33.6 million shares compared to 35.8 million shares in the prior year quarter driven primarily by the repurchase of 3.3 million shares in the first half of the year. Billable headcount decreased by 126 professionals or 2% compared to the prior year quarter, driven by approximately 8% declines in each of our Economic Consulting and Strategic Communications segment partially offset by growth in Forensic and Litigation Consulting or FLC, and Corporate Finance & Restructuring. Sequentially, billable headcount decreased by 187 professional or 2.9%, with declines across all segments. For us, voluntary typically higher in Q2. Additionally, some of the impacted employees from our previously discussed in one head count actions departed during Q2. Of note, in the second half of the year, we expect to welcome approximately 320 graduates from university.

Now I will share some insights at the segment level. In Corporate Finance & Restructuring, record revenue of $379.2 million increased 9%. The increase in revenues was primarily due to increased demand for restructuring and transaction services and higher realized bill rate which was partially offset by lower demand for transformation and strategy services. Record adjusted segment EBITDA of $81.7 million or 21.5% of segment revenue compared to $66.5 million or 19.1% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenue, which was partially offset by an increase in compensation.

In the second quarter, restructuring represented 49%. Transformation and strategy represented 26% and transactions represented 25% of segment revenues. This compares to a split of 43% for restructuring, 32% for transformation and strategy and 25% for transactions in the prior year quarter. Year-over-year restructuring revenues grew 25% and transactions revenues grew 10%, while transformation and strategy revenues declined 13%. Sequentially, Corporate Finance & Restructuring revenues increased $35.6 million or 10.4% and primarily due to an 18% increase in restructuring revenues and a 12% increase in transactions revenue, which was partially offset by a 3% decline in transformation and strategy level. Adjusted segment EBITDA increased $25.7 million sequentially, primarily due to higher revenues and lower SG&A, which was partially offset by an increase in compensation.

Turning to FLC. Revenues of $186.5 million increased 10%. The increase in revenues was primarily due to higher realized bill rate for risk and investigation, data and analytics and construction solutions. Of the increase in revenues and risk and investigation, we saw particularly strong growth in our financial services and cybersecurity practices. Adjusted segment EBITDA of $31.2 million or 16.7% of segment revenues compared to $15 million or 8.8% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenue. Sequentially, FLC revenues decreased $4.1 million or 2.1% primarily due to lower risk and investigations revenues, which was partially offset by an increase in construction solutions revenue. Adjusted segment EBITDA decreased sequentially, primarily due to lower revenues and higher compensation.

Of note, we have seen a slowdown in Foreign Corrupt Practices Act or FCPA basis and monitorship as a result of the changing regulatory posture at the DOJ and the SEC in the United States. Despite the reduced enforcement at the federal level, we are continuing to see strong performance in our financial services vertical driven by continuing anti-money laundering related work and a pickup in regulatory scrutiny at the state level. Moreover, we continue to work with our clients who remain focused on internal controls and compliance regardless of changes in regulatory oversight.

Our Economic Consulting segment's revenues of $191.7 million decreased 17%. Excluding FX, revenues decreased 19%. The decrease in revenues was primarily due to lower demand for M&A-related antitrust and non-M&A-related antitrust services, which was partially offset by higher realized bill rates for M&A-related antitrust services and higher demand for financial economic services. Adjusted segment EBITDA of $14.2 million or 7.4% of segment revenues compared to $44.3 million or 19.2% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower revenues and an increase in forgivable loan amortization, which was partially offset by a decrease in compensation, which included a 7.9% decline in billable head count.

As you may recollect, our segment EBITDA in Q2 of last year was outsized due in part to the reversal of deferred revenue from a large client which benefited adjusted segment EBITDA by approximately $8.5 million in Q2 of 2024. Sequentially, Economic Consulting revenues increased $11.8 million or 6.6%, primarily due to higher realized bill rates as well as higher demand for financial economic services, which was partially offset by lower demand for non-M&A related antitrust services. Adjusted segment EBITDA was flat as the increase in revenues was offset by higher compensation including higher forgivable loan amortization. We issued $162 million in forgivable loans to existing and new employees and affiliates net of repayments in Q1 of this year and $72 million in Q2 of this year, mostly in our Economic Consulting segment. Forgivable loan amortization generally ranges from 3 to 6 years.

In Technology, revenues of $83.6 million decreased by 27.9%. Excluding FX, revenues decreased 28.9%. The decrease in revenues was due to lower demand for M&A-related second request services. Adjusted segment EBITDA of $5.3 million or 6.3% of segment revenues compared to $20.9 million or 18.1% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower revenues, which was partially offset by a decrease in compensation, which included lower as needed consultant costs largely related to the decline in second request volume as well as lower SG&A. Sequentially, technology revenues decreased $13.6 million or 14% due to lower demand for M&A-related second request services. Adjusted segment EBITDA decreased by $6.3 million, primarily due to lower revenues which was partially offset by lower compensation and SG&A. As Steve discussed, we have had numerous second-request engagement paused or canceled altogether given the shifts in regulatory posture.

In Strategic Communications, record revenues of $102.7 million increased 20.8%. Excluding FX, revenues increased 18.6%, primarily due to an $8.4 million increase in pass-through revenues and higher demand for corporate reputation and financial communication services. In corporate reputation, we are supporting our clients with critical crisis communications and cyber security issue. Record adjusted segment EBITDA of $18.5 million or 18% of segment revenue compared to $11.6 million or 13.7% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by higher pass-through expenses and an increase in compensation. Sequentially, Strategic Communications revenues increased $15.6 million or 18% which includes a $5.7 million increase in pass-through revenues and higher corporate reputation and public affairs revenue. Adjusted segment EBITDA increased by $5.6 million primarily due to higher revenues, which was partially offset by higher pass-through expenses and an increase in compensation and SG&A.

Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $55.7 million compared to $135.2 million for the second quarter of 2024. The year-over-year decrease in net cash provided by operating activities was primarily due to an increase in forgivable loan issuances, compensation and income tax payments, which was partially offset by an increase in cash collection. During the quarter, we repurchased 2.192 million shares at an average price per share of $161.88 for a total cost of $354.9 million. In the first half of 2025, we repurchased 3.319 million shares at an average price per share of $162.99 for a total cost of $541 million. As of June 30, 2025, approximately $309.3 million remained available under our stock repurchase authorization.

Free cash flow of $38.3 million in the quarter compared to $125.2 million for the prior year quarter. The decrease is primarily due to lower net cash provided by operating activities and an increase in cash used for purchases of property and equipment. Total debt, net of cash of $317.2 million on June 30, 2025, compared to negative $166.4 million on June 30, 2024 and $8.9 million at March 31, 2025. The sequential increase in total debt net of cash was primarily due to share repurchases and forgivable loan issuances.

Turning to guidance. Given that we now have 2 quarters under our belt, we are narrowing our guidance by modestly reducing the upper end of our revenue and adjusted EPS ranges for the year. We now estimate revenues will range between $3.66 billion and $3.76 billion, which compares to the prior range of between $3.66 billion and $3.81 billion. We now estimate EPS will range between $7.24 and $7.84. And adjusted EPS will range between $7.80 and $8.40 which compares to the prior range of $7.80 and $8.60. The variance between EPS and adjusted EPS guidance is related to the first quarter of 2025 special charge.

Our guidance is based on several key assumptions, including: first, our technology segment has been more negatively impacted by the slowdown in M&A and perhaps more so by the change in regulatory scrutiny than we expected, particularly compared to the record M&A-related revenues and large jobs we had in 2024. For the balance of the year, we expect a gradual improvement in demand for M&A-related services in technology and we are seeing activity supporting this expectation with a number of new engagements but we do not expect to see near the level of volume or size of cases we benefited from in 2024.

Second, in Economic Consulting, we have also been more negatively impacted by shifts in antitrust enforcement, especially in EMEA. In addition, we have been successful in attracting even more academic affiliate and senior professionals than we anticipated, which negatively impacts the P&L in the short term. Our guidance assumes that our adjusted segment EBITDA in Economic Consulting will reach a low point over the next few months.

Third, we are entering the second half of the year with good momentum we had in Q2 in many practices, including restructuring in Corporate Finance, financial services and cybersecurity in FLC and in Strategic Communication. Offsetting this somewhat is continuing weakness in transformation and strategy in Corporate Finance.

Fourth, we expect Q4 adjusted EPS to be lower than each of Q2 and Q3 adjusted EPS, primarily because we expect our practitioners and clients to take vacation. There is variability in this, and there have been years where Q4 adjusted EPS has exceeded Q2 and even on occasion Q3. Even including these exceptions when Q4 has exceeded Q2 or Q3, over the last 7 years, on average, our Q4 adjusted EPS was 13% below Q2 and 22% below Q3 adjusted EPS.

Finally, I must point out that our assumptions define a midpoint and a range of guidance around such midpoint, which I characterize as our current best judgment. Often, we find actual results are beyond such range because ours is largely a fixed cost business in the short term and small variations in revenue may have an outsized impact on income.

Before I close, I want to emphasize a few key themes that I believe underscore the attractiveness of our company. First, our diverse portfolio of businesses is uniquely resilient which can allow us to grow not only regardless of business cycle, but also when anyone of our businesses is facing unique headwind such as we have experienced in Economic Consulting and Technology this year. Second, we are under-levered and have deep flexibility to deploy capital to boost shareholder value as we have done this year. Third, we are seeing more investment opportunities now than ever before globally. As Steve said, we are determined to continue to invest in great talent. Fourth, our management team is focused on both growth and profitability. As demonstrated by the cost actions we took earlier in the year, along with a relentless focus on hiring strong talent when it is available, while boosting utilization and rates.

With that, let's open the call up for your questions.

[Operator Instructions] Today's first question comes from Andrew Nicholas with William Blair.

Maybe I'll start with Economic Consulting and the divergence that we're seeing relative to the Technology segment. Could you flush that out a little bit? I mean, it looks like sequentially, Economic Consulting was actually quite strong I think the tax, you mentioned some paused or canceled second request. So is that just non-M&A-driven strength? Or are there some onetime items in revenue and Economic Consulting in the second quarter that you don't expect to persist through the back half of the year? Just some additional color there would be great.

You answered the question in your question, it is non-M&A related activity.

And maybe just sticking with Economic Consulting. You talked a lot about recruiting and your success bringing in new professionals. For professionals that are maybe more academically oriented historically. Can you talk a little bit about when you'd have a better sense for their commercial capability? Is that something that you already have a ton of confidence in? Or what the time line would be for kind of getting a sense of those new professionals in terms of replacing some of the departures?

Yes, it's a good question, Andrew. This is Steve. Look, let's be clear, right, this is something we've done for a long time. Like the origins of this company are academics, right? I mean the origins of this company is as academics come up with new insights into markets, they wrote that in academic journals and then what the court has found it was persuasive. And so then the lawyers ask those academics to come testify because the court found them pretty persuasive. And so this is the origins of our Compass Lexecon business. The head of our Compass Lexecon business is the former Dean of the University of Chicago Law School. So this is the origins of our company. And we've always had academic affiliates the major contributors to the business. So occasionally, they have been so busy that they decided to give up their academic career and come in full time for us. But basically, that's the origins of our business.

When you end up as a mixture of people who have been testifying for a while and who are actively trying to juggle their teaching loads and their research and immense amounts of testifying experience. And then you have new people who are like some people we just hired, I think Dan would say our potential future Nobel Prize winners who haven't testified very much. And Dennis Carlton, who's the leading IO person in the world remembers when he was junior and Richard Posner, put his arm around him and said, "Yes, you can't -- that's way too complicated for a jury to understand," and put his arm around him and said, "Your points are important, but you have to figure out how to communicate that in a different way and coach them."

So it's a range. In the 20 or so people we hired in the first half of this year, I think Dan would say we have a range from really experienced testifiers and people who have currently big books of business, a few people, not too many of those to people who have some experience testifying who are probably going to grow their book of business to people who are much more in the early stages. To your question of how long I suspect a year from now, we'll have a better sense of how this is all unfolding, but it doesn't -- not in the next month or 2. But does that help a little bit, Andrew?

No, that's great. Really good color and helps me better understand it, I appreciate that. And then if I could transition just maybe one more question on the restructuring environment. I think you said 25% growth year-over-year. I think that's a record quarter for the bankruptcy restructuring practice. So could you just kind of talk about what's driving that? Is there any big engagements that are making that especially strong or if it is maybe like some of the high-level data we've seen also a function of tailwinds from the macro?

So Andrew, we are delighted by that performance. And you read that phrase exactly right. And it comes more than anything else, that comes from the best restructuring professionals in the world not just in the United States, but in the U.K. and Germany, in Hong Kong, in Australia, I mean we are the leading technology restructuring practice.

Latin America as well.

Latin America. So that's the main point. I'm going to give you some details, but I don't want you to lose that. In terms of the details, look, last time, I remember I talked about tariffs, right? So there's been some matters from tariffs. If you have 60% of your cost of goods sold coming from overseas and you get 10%, 20% rise in the cost and you're over levered to begin with, you're in trouble. So there's some of that. The other much bigger element is LME cases. Remember the old liability management exercises, well, a whole bunch of them have come back for a second round of bankruptcy. And that is even though spreads are tight, and you would argue that well, why is restructuring strong? There is a huge amount of LME and even prior to LME liquidity that was in the market and not all of those companies are going to turn around with the time that they were given with the LME exercises.

So we are even seeing matters that had LME happen in the fourth quarter of 2024. So that's the second piece. And the third piece is we are -- we have built a lot of vertical lines of expertise, which is giving us a lot more of company-side work. That proportion has gone up a lot. And those matters start earlier and usually have longer -- that take longer and have larger fees. We're absolutely delighted.

And our next question today comes from Tobey Sommer with Truist.

I was wondering if you could comment on your hiring of senior professionals year-to-date and maybe, I don't know, the forecast, but would you expect to continue the same pace of senior consultant hiring and growth through the end of the year?

Tobey, thanks for asking. Look, I think our -- the numbers say that we hired more senior professionals this -- so far this year than we have ever hired in the first half of the year. Now I always find that a little funny because I always think of some of the people we say we hired this year, I think of us hiring middle of -- end of last year. So some of this is when we -- they show up because if they go on -- we hire them in the middle end of the next year, but they are on garden leave for 6 months, we don't actually show them and announce them until they're here, okay?

So I think last year, I was telling you about how the phone was reading off the hook, and we're having all those conversations. Not all those people showed up last year. They show up this year and they show up in the first half of the year. But it's a terrific thing. And look, I would say you never know. What we are is hiring when great people are available. And if great people -- if you don't know, like remember last year, PwC had all sorts of trouble in Australia. And all of a sudden, we got I don't know what it is, 7 or 9 partners and probably be 60 or 70 staff by it's all told. That wasn't foretold. But when you find that the quality of the people that are available and you think they really fit in with the culture, you jump on those opportunities. And Australia is having another set of opportunities. Now because of disruptions for competitors. So if there is further disruption in competitors, we will hire at least as fast as this is. There's not -- it will slow down, but it's really more supply-side driven. Does that make sense?

It does. From an overall U.S. regulatory perspective, what -- is it a net positive or net negative, but I understand there are a lot of discrete elements, whether FCPA, second request but then you mentioned state stepping in where -- how do you think that net up?

I -- we have lots of debates about that. I mean we have clarity on sub practices, which way it cuts. How it all cuts overall is very hard to say, I don't have a good answer for that. I mean, clearly, regulatory headwinds are potentially affecting negatively our FLC business. But -- and they clearly are affecting our tech and e-com businesses, right, in a negative way. But some macro factors are and some regulatory changes like tariffs and so forth that helped generate revenue for our Corp Fin business. The guess, I would assume more headwinds overall this year than it is, is what I would guess. But it's hard to be precise on it. Do you agree with that, Ajay?

I don't know exactly for the reasons you mentioned. But our practitioners, I mean, FLC is remarkable. The abundance would have guessed -- we guessed in our forecast that if monitorships go away, then their business would go away. But performance is the opposite. And that is us -- that's not the...

The market is not given us.

Our guys or folks are getting that, right?

Yes, that color is helpful. I mentioned the low point of economics may happen in the next [indiscernible], is that a total revenue funnel EBITDA, EBITDA margin or only above?

Tobey, there's some background noise. Can you just say that again? I couldn't understand the question.

Yes. Sorry, for the e-com business, you said it would bottom in the next few months. Is that revenue EBITDA or EBITDA margin coming?

So the comment was on EBITDA. So let me explain it. So there is -- simply put there's cost and there's revenue, right? So on the cost side, we -- I told you how much we gave in forgivable loans in Q1, how much we gave in forgivable loans in Q2. We talked to the amortization. In Q2, our direct costs went up a lot because of that forgivable loan amortization, which is laid out in clarity in our 10-Q. So if the volume of such forgivable loan starts falling, which it has, is lower than Q1, I expect Q3 to be much, much lower than Q2, then such amortization will go up a little bit, but not as much as it went up from Q2 to Q1. So I see the cost, as I said, low point, that means it's not low point in Q2. There's a further low point in Q3 or Q4 at some point. So there -- but that will be the low point. And beyond that, the cost should even up. On the revenue side, we've taken quite a hit by the people who have left and what have you but we see it flattening out. We already see that in some of that in Q2, and I see that further in Q3 and Q4. Net of the 2 is EBITDA, I expect the low point and then gradual recovery.

And our final question today comes from James Yaro at Goldman Sachs.

So the continued weakness in transformation strategy was I think was interesting to me. Could you just dig in perhaps a little bit more on the drivers as you look at right now and as you look ahead? And then perhaps your views on what would cause this to turn around?

Thank you, James. Good question. So first, several things to think about. First, look, we are comparing with a prior year first half, that was huge. So the year-over-year comparison is what we are fighting up against. But I just want to just to be fair to that group. That's what we're -- success has sometimes its pitfalls. So that year-over-year comparison is one. But you're right, it's sequentially weak as well. And the weakness is across the board geographically, but more so overseas, especially more so in the Middle East, where perhaps with the oil price decline, folks have gotten a little bit more focused on consulting spend, that's not just unique to us. It's for the entire space.

And then going further, we're doing more matters, which are the cost takeout matters, where there's a success fee at the end. So our folks are actually doing great work in that area where not all of the revenue shows up because you're going to get a success fee. And that's becoming a larger portion of our business. And then the final point I'd make there is a lot of our transformation people at the junior levels are somewhat fungible. They also help in transactions and restructuring and what have you. So it's a great team and we're getting lots of opportunities to add to it.

Very clear. So I think you added something like $310 million of debt this quarter, and you alluded to substantial capacity to potentially add more leverage. Could you just perhaps provide some color on the way you think about that capacity? And is there a maximum level? Is there a ratio we should be thinking about for measuring that -- the amount of leverage that you could theoretically take on?

Sure. So on a gross debt-to-EBITDA trailing 12 months we're 1.2x. On a net debt we're on rounding error. And that's after buying back $0.5 billion of stock, issuing forgivable loans, paying bonuses in March and April. Remember at the end of the year is when we get our big cash collections. So that's point number one. Our competitors are anywhere between 6 and 11x levered just by the way. So our relative capacity is enormous, right? That's number one. Number two, leverage is an outcome. It is not a target. If we -- if the share price is like you saw, we got to have -- I'm not going to telegraph what we're going to do next. But opportunistically, we can buy back a lot. Leverage is an outcome. If there's acquisitions that we can buy at the kind of filter we have if there's hiring that we continue to do of talented people, leverages an outcome, not a target. I'm not going to give a number.

Great. Very helpful. Just one more on tech, which is the tech EBITDA margin came in a bit lower and you talked about the trends in that business. But I guess, how should we think about the margin trajectory there given the weaker operating backdrop for that segment?

I mean, look, strategically, this is clearly a tough year. And what happens is when there's a slow year is everybody has capacity and the pricing in an industry that's always tough on pricing just gets tougher. And so not all though our jobs are totally price sensitive, but we're not going to allow our core clients to get forced to a competitor if we need to match comp. And so I suspect, and I don't know how specific Ajay wants to get I am not expecting great margins out of this business anytime in the rest of this year. Having said that, I just want to be clear again, if you look at the industry structure, we are in the most complicated jobs. We have to -- Ajay's prior point about some of the competitors. Most of our competitors are private equity owned and have -- a lot of them have 1.5x sales of debt.

To the last point, if we had 1.5x sales of debt, we would have $5.5 billion of debt, not 1/10 of that, which is what Ajay said, at the peak of the year, 1/10 of that. I think we're under a lot less pressure than our competitors. So I think this is a -- if this situation were to continue for a while, I think there'll be a shakeout and we benefit from it. And if it doesn't -- but either way, the margins will come back but I'm just not expecting it. And I'm not putting pressure on that group to make them come back this year. Does that help?

That's super helpful. Last one for me. Just -- I know there's been a lot of discussion around the Econ Consulting business. But I think you previously talked about a $35 million plus hit to EBITDA. Is that still the right number? Or is this something larger or smaller?

So it's larger. And I think even last call, hinted that it was already larger than that. Look, there's been 2 things that have made that number larger. One is a good thing and one was not a good thing. The good thing is when we first gave you that number, we did not have any idea about the ability to attract the talent that we've had. And that talent, of course, is a good thing, but as Ajay has indicated, a lot of forgivable loans. And as a prior question, not everybody in that with us forgivable loans can bring business immediately. And so there's a lag on the returns on that, all right? So that's the good thing, but that added, of course, to the cost this year.

The other surprise is -- which is unrelated to anything we knew at the time is just our the market -- there's been a market phenomenon, particularly in EMEA. We have the best business by far in EMEA of any competitor. And that has not been particularly affected by competitive disruptions. But our revenue is much lower than we expected it to be. It's just some market stuff in EMEA. And so that's flowed through the bottom line. So those 2 things have had an impact. Look, I don't know, Ajay, probably won't let me give you specific numbers. But I would say, I think we're down I don't know, between $25 million and $30 million versus last year. And I suspect if you annualize that delta, you probably wouldn't be far off from the right number? I guess, am I allowed to say that?

That would be within the range.

Okay. All right. Does that help, James? No, look, thank you to all of you for your time and support. I just want to come back to the theme I want to be clear. We are having a solid year in the face of some unbelievable set of headwinds, which to me is I like having wonderful years as opposed to solid years. We're not down in a remarkably huge amount. We are having a solid year. To me, it just shows you the power of this institution and I think we will continue to surprise people on where we take it over the next few years. Thank you for your support.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.