FTI Consulting (FCN)

Risks

• The COVID-19 pandemic has had, and could continue to have, a negative impact on our financial results and it could potentially have a material adverse impact on our business, financial condition and results of operations, the extent of which is not predictable.
• The COVID-19 pandemic has impacted, and could continue to impact, our segments and practices, the types of services they provide, and the regions in which we operate, differently.
• The COVID-19 pandemic could heighten risks related to, or otherwise negatively impact the effectiveness of, cybersecurity, information technology, financial reporting and other corporate functions that the Company relies upon to operate.
• The COVID-19 pandemic could adversely impact the health and welfare of our client-facing professionals, as well as our executive officers and other employees of our Company, which could have a material adverse effect on our ability to secure or perform client engagements and our results of operations.
• Our revenues, operating income and cash flows are likely to fluctuate.
• If we do not effectively manage the utilization of our professionals or billable rates, our financial results could decline.
• Our segments may face risks of fee non-payment, clients may seek to renegotiate existing fees and contract arrangements, and clients may not accept billable rate or price increases, which could result in loss of clients, fee write-offs, reduced revenues and less profitable business.
• Our Technology segment faces certain risks, including (i) industry consolidation and a highly competitive environment, (ii) downward pricing pressure, (iii) data breach, (iv) technology changes and obsolescence, and (v) failure to protect intellectual property ("IP") used by the segment, which individually or together could cause the financial results and prospects of this segment and the Company to decline.
• We face certain risks relating to cybersecurity, the failure to protect the confidentiality of client information against misuse or disclosure, and the use or misuse of social media.
• We may not manage our growth effectively, and our profitability may suffer.
• Our operations involve financial and business risks that differ among the jurisdictions in which we operate.
• Failure to comply with governmental, regulatory and legal requirements or with our company-wide Code of Ethics and Business Conduct, Anti-Corruption Policy, Policy on Inside Information and Insider Trading, and other policies could lead to governmental or legal proceedings that could expose us to significant liabilities and damage our reputation.
• We may be required to recognize goodwill impairment charges, which could materially affect our financial results.
• The compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely impact our financial results.
• Governmental focus on data privacy and security has increased, and could continue to increase, our costs of operations.
• Changes to corporate income tax rates, tax legislation, tax rules and regulations and tax treaties in the jurisdictions in which we conduct business may substantially negatively impact our effective tax rate and financial results of operations and increase our cash tax payment obligations.
• We are exposed to certain physical and regulatory risks related to climate change, which could adversely affect our business, financial condition and results of operations.
• Increasing scrutiny and changing expectations from governmental organizations, investors, clients and our colleagues with respect to our ESG-related practices and those of our clients may impose additional costs on us or expose us to new or additional risks.
• Our business depends on our ability to use and access information systems, and modernize or replace such systems from time to time, and failure to effectively maintain such systems or modernize or replace systems could materially adversely affect our business and operations and harm our reputation.
• Our failure to recruit and retain qualified professionals and manage headcount needs and utilization could negatively affect our financial results and our ability to staff client engagements, maintain relationships with clients and drive future growth.
• We incur substantial costs to hire and retain our professionals, and we expect these costs to continue and to grow.
• We rely heavily on our executive officers and the heads of our segments and industry and regional leaders for the success of our business, the loss of whom may negatively impact our business and operations.
• Professionals may leave our Company to form or join competitors, and we may not have, or may choose not to pursue, legal recourse against such professionals.
• Our failure to achieve and maintain a diverse and inclusive workforce may impair our ability to attract and retain qualified employees, win and maintain clients or attract investment, which could have a material adverse effect on our business and financial results, as well as reputational harm.
• If we are unable to accept or continue client engagements due to real or perceived relationship issues, our revenues, growth, client engagements and prospects may be negatively affected.
• Claims involving our services or adverse publicity could harm our overall professional reputation and our ability to compete and attract business or hire or retain qualified professionals.
• We may incur significant costs and may lose engagements as a result of claims by our clients regarding our services.
• Our clients may terminate our engagements with little or no notice and without penalty, which may result in unexpected declines in our utilization and revenues.
• We may not have, or may choose not to pursue, legal remedies against clients that terminate their engagements.
• Failure of our internal information technology systems controls may harm our overall professional reputation and disrupt our business operations.
• If we fail to compete effectively, we may miss business opportunities or lose existing clients, and our revenues and profitability may decline.
• We may face competition from parties who sell us their businesses and from professionals who cease working for us.
• We may have difficulty integrating acquisitions or convincing clients to allow assignment of their engagements to us, which can increase costs of, and reduce the benefits we receive from, acquisitions.
• We may have different systems of governance and management from a company we acquire or its parent, which could cause professionals who join us from an acquired company to leave us.
• Our leverage could adversely affect our financial condition or operating flexibility if the Company fails to comply with operating covenants under applicable debt instruments.
• We and our subsidiaries may incur significant additional indebtedness.
• We may not be able to generate sufficient cash to service our indebtedness, and we may be forced to take actions to satisfy our payment obligations under our indebtedness, which may not be successful.
• Our Credit Facility is guaranteed by substantially all of our domestic subsidiaries and will be required to be guaranteed by future domestic subsidiaries, including those that join us in connection with acquisitions.
• We may not have the ability to raise the funds necessary to settle conversions of the 2023 Convertible Notes, repurchase the 2023 Convertible Notes upon a fundamental change or repay the 2023 Convertible Notes at the August 15, 2023 maturity date, and the agreements governing our other indebtedness contain, and our future debt agreements may contain, limitations on our ability to pay cash upon conversion or repurchase of the 2023 Convertible Notes.
• The conditional conversion feature of the 2023 Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
• Our variable rate indebtedness will subject us to interest rate risk, which could cause our annual debt service obligations to increase significantly.