UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 20212022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from   to                    
Commission File Number: 001-14875
 
FTI CONSULTING, INC.
(Exact Name of Registrant as Specified in its Charter)
 
  
Maryland52-1261113
(State or Other Jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
Identification No.)
555 12th Street NW
Washington,
DC20004
(Address of Principal Executive Offices)(Zip Code)
(202) 312-9100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $0.01 par valueFCNNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer☒Accelerated filer☐
Non-accelerated filer☐Smaller reporting company☐
Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
ClassOutstanding at October 21, 202120, 2022
Common Stock, $0.01 par value34,288,46734,423,110


FTI CONSULTING, INC. AND SUBSIDIARIES
INDEX
 
  
Page 
   
3
  
 
3
  
 
Condensed Consolidated Statements of Comprehensive Income—Three and Nine Months Ended September 30, 20212022 and 20202021
4
  
 
Condensed Consolidated Statements of Stockholders’ Equity—Three and Nine Months Ended September 30, 20212022 and 20202021
5
  
 
7
  
 
8
  
2021
  
43
  
4443
 
  
4544
  
4544
  
4644
  
4645
  
4645
  
4645
  
4746
 
4847
2

PART I—FINANCIAL INFORMATION
FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except per share data)
Item 1.Financial Statements
 
September 30,December 31, September 30,December 31,
20212020 20222021
(Unaudited)(Unaudited)
AssetsAssets Assets 
Current assetsCurrent assets  Current assets  
Cash and cash equivalentsCash and cash equivalents$342,527 $294,953 Cash and cash equivalents$327,047 $494,485 
Accounts receivable, net Accounts receivable, net809,878 711,357  Accounts receivable, net947,993 754,120 
Current portion of notes receivableCurrent portion of notes receivable32,823 35,253 Current portion of notes receivable27,198 30,256 
Prepaid expenses and other current assetsPrepaid expenses and other current assets83,266 88,144 Prepaid expenses and other current assets91,187 91,166 
Total current assetsTotal current assets1,268,494 1,129,707 Total current assets1,393,425 1,370,027 
Property and equipment, netProperty and equipment, net132,857 101,642 Property and equipment, net144,713 142,163 
Operating lease assetsOperating lease assets224,961 156,645 Operating lease assets195,339 215,995 
GoodwillGoodwill1,234,023 1,234,879 Goodwill1,212,541 1,232,791 
Intangible assets, netIntangible assets, net34,504 41,550 Intangible assets, net25,673 31,990 
Notes receivable, netNotes receivable, net59,123 61,121 Notes receivable, net54,144 53,539 
Other assetsOther assets52,962 51,819 Other assets56,259 54,404 
Total assetsTotal assets$3,006,924 $2,777,363 Total assets$3,082,094 $3,100,909 
Liabilities and Stockholders' EquityLiabilities and Stockholders' EquityLiabilities and Stockholders' Equity
Current liabilitiesCurrent liabilitiesCurrent liabilities
Accounts payable, accrued expenses and otherAccounts payable, accrued expenses and other$157,794 $170,066 Accounts payable, accrued expenses and other$175,491 $165,025 
Accrued compensationAccrued compensation451,549 455,933 Accrued compensation422,985 507,556 
Billings in excess of services providedBillings in excess of services provided36,279 44,172 Billings in excess of services provided50,523 45,535 
Total current liabilitiesTotal current liabilities645,622 670,171 Total current liabilities648,999 718,116 
Long-term debt, netLong-term debt, net319,355 286,131 Long-term debt, net314,756 297,158 
Noncurrent operating lease liabilitiesNoncurrent operating lease liabilities232,390 161,677 Noncurrent operating lease liabilities213,449 236,026 
Deferred income taxesDeferred income taxes168,232 158,342 Deferred income taxes161,486 170,612 
Other liabilitiesOther liabilities97,022 100,861 Other liabilities98,821 95,676 
Total liabilitiesTotal liabilities1,462,621 1,377,182 Total liabilities1,437,511 1,517,588 
Commitments and contingencies (Note 11)00
Commitments and contingencies (Note 10)Commitments and contingencies (Note 10)
Stockholders' equityStockholders' equityStockholders' equity
Preferred stock, $0.01 par value; shares authorized — 5,000; none
outstanding
Preferred stock, $0.01 par value; shares authorized — 5,000; none
outstanding
— — 
Preferred stock, $0.01 par value; shares authorized — 5,000; none
outstanding
— — 
Common stock, $0.01 par value; shares authorized — 75,000; shares
issued and outstanding — 34,295 (2021) and 34,481 (2020)
343 345 
Common stock, $0.01 par value; shares authorized — 75,000; shares
issued and outstanding 34,422 (2022) and 34,333 (2021)
Common stock, $0.01 par value; shares authorized — 75,000; shares
issued and outstanding 34,422 (2022) and 34,333 (2021)
344 343 
Additional paid-in capitalAdditional paid-in capital8,490 — Additional paid-in capital— 13,662 
Retained earningsRetained earnings1,659,947 1,506,271 Retained earnings1,868,424 1,698,156 
Accumulated other comprehensive lossAccumulated other comprehensive loss(124,477)(106,435)Accumulated other comprehensive loss(224,185)(128,840)
Total stockholders' equityTotal stockholders' equity1,544,303 1,400,181 Total stockholders' equity1,644,583 1,583,321 
Total liabilities and stockholders' equityTotal liabilities and stockholders' equity$3,006,924 $2,777,363 Total liabilities and stockholders' equity$3,082,094 $3,100,909 
 
See accompanying notes to condensed consolidated financial statements
3

FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
RevenuesRevenues$702,228 $622,249 $2,099,991 $1,834,694 Revenues$775,865 $702,228 $2,254,477 $2,099,991 
Operating expensesOperating expensesOperating expenses
Direct cost of revenuesDirect cost of revenues472,235 417,179 1,431,381 1,232,437 Direct cost of revenues526,654 472,235 1,539,838 1,431,381 
Selling, general and administrative expensesSelling, general and administrative expenses138,600 122,102 399,076 375,989 Selling, general and administrative expenses159,186 138,600 476,097 399,076 
Special charges— 7,103 — 7,103 
Amortization of intangible assetsAmortization of intangible assets2,860 2,795 8,515 7,440 Amortization of intangible assets2,315 2,860 7,320 8,515 
613,695 549,179 1,838,972 1,622,969  688,155 613,695 2,023,255 1,838,972 
Operating incomeOperating income88,533 73,070 261,019 211,725 Operating income87,710 88,533 231,222 261,019 
Other income (expense)Other income (expense)    Other income (expense)    
Interest income and otherInterest income and other5,175 (3,340)5,297 3,879 Interest income and other7,771 5,175 10,418 5,297 
Interest expenseInterest expense(5,073)(5,151)(15,164)(15,169)Interest expense(2,378)(5,073)(7,468)(15,164)
102 (8,491)(9,867)(11,290) 5,393 102 2,950 (9,867)
Income before income tax provisionIncome before income tax provision88,635 64,579 251,152 200,435 Income before income tax provision93,103 88,635 234,172 251,152 
Income tax provisionIncome tax provision19,155 14,407 54,394 45,342 Income tax provision15,836 19,155 46,156 54,394 
Net incomeNet income$69,480 $50,172 $196,758 $155,093 Net income$77,267 $69,480 $188,016 $196,758 
Earnings per common share — basicEarnings per common share — basic$2.07 $1.41 $5.88 $4.30 Earnings per common share — basic$2.29 $2.07 $5.57 $5.88 
Earnings per common share — dilutedEarnings per common share — diluted$1.96 $1.35 $5.58 $4.11 Earnings per common share — diluted$2.15 $1.96 $5.25 $5.58 
Other comprehensive income (loss), net of tax
Other comprehensive loss, net of taxOther comprehensive loss, net of tax
Foreign currency translation adjustments, net of tax
expense of $0
Foreign currency translation adjustments, net of tax
expense of $0
$(18,607)$21,330 $(18,042)$(204)
Foreign currency translation adjustments, net of tax
expense of $0
$(48,475)$(18,607)$(95,345)$(18,042)
Total other comprehensive income (loss), net of tax(18,607)21,330 (18,042)(204)
Total other comprehensive loss, net of taxTotal other comprehensive loss, net of tax(48,475)(18,607)(95,345)(18,042)
Comprehensive incomeComprehensive income$50,873 $71,502 $178,716 $154,889 Comprehensive income$28,792 $50,873 $92,671 $178,716 
 
See accompanying notes to condensed consolidated financial statements
4

FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
 
Accumulated
Other
Comprehensive
Loss		Accumulated
Other
Comprehensive
Loss
Common StockAdditional
Paid-in
Capital		Retained
Earnings		  Common StockAdditional
Paid-in
Capital		Retained
Earnings		 
SharesAmountTotalAccumulated
Other
Comprehensive
Loss		 SharesAmountTotalAccumulated
Other
Comprehensive
Loss
Balance at December 31, 202034,481 $345 $— $1,506,271 $(106,435)
Balance at December 31, 2021Balance at December 31, 202134,333 $343 $13,662 $1,698,156 $(128,840)
Net incomeNet income— $— $— $64,496 $— $64,496 Net income— $— $— $59,321 $— $59,321 
Other comprehensive loss:Other comprehensive loss:Other comprehensive loss:
Cumulative translation adjustmentCumulative translation adjustment— — — — (5,242)(5,242)Cumulative translation adjustment— — — — (6,191)(6,191)
Issuance of common stock in connection with:Issuance of common stock in connection with:Issuance of common stock in connection with:
Exercise of optionsExercise of options12 — 434 — — 434 Exercise of options26 — 923 — — 923 
Restricted share grants, less net
settled shares of 63
157 1 (7,232)— — (7,231)
Restricted share grants, less net
settled shares of 54
Restricted share grants, less net
settled shares of 54
134 2 (7,836)— — (7,834)
Stock units issued under incentive
compensation plan
Stock units issued under incentive
compensation plan
— — 2,603 — — 2,603 
Stock units issued under incentive
compensation plan
— — 1,664 — — 1,664 
Purchase and retirement of common stockPurchase and retirement of common stock(422)(4)(3,047)(43,082)— (46,133)Purchase and retirement of common stock(22)— (3,098)— — (3,098)
Cumulative effect due to adoption of new accounting standard Cumulative effect due to adoption of new accounting standard— — (34,131)22,078 — (12,053)
Conversion of convertible senior notes due 2023 Conversion of convertible senior notes due 2023— — (2)— — (2)
Share-based compensationShare-based compensation— — 7,242 — — 7,242 Share-based compensation— — 5,967 — — 5,967 
Balance at March 31, 202134,228 $342 $— $1,527,685 $(111,677)$1,416,350 
Net income— $— $— $62,782 $— $62,782 
Other comprehensive income:
Cumulative translation adjustment— — — — 5,807 5,807 
Issuance of common stock in connection
with:
Exercise of options33 1 1,136 — — 1,137 
Restricted share grants, less net
settled shares of 13
21 — (1,814)— — (1,814)
Share-based compensation— — 4,948 — — 4,948 
Balance at June 30, 202134,282 $343 $4,270 $1,590,467 $(105,870)$1,489,210 
Reclassification of negative additional paid-in capital Reclassification of negative additional paid-in capital— — 22,851 (22,851)— — 
Balance at March 31, 2022Balance at March 31, 202234,471 $345 $— $1,756,704 $(135,031)$1,622,018 
Net incomeNet income— $— $— $69,480 $— $69,480 Net income— $— $— $51,428 $— $51,428 
Other comprehensive loss:Other comprehensive loss:Other comprehensive loss:
Cumulative translation adjustmentCumulative translation adjustment— — — — (18,607)(18,607)Cumulative translation adjustment— — — — (40,679)(40,679)
Issuance of common stock in connection
with:
Issuance of common stock in connection
with:
Issuance of common stock in connection
with:
Exercise of optionsExercise of options4 — 126 — — 126 Exercise of options22 — 687 — — 687 
Restricted share grants, less net
settled shares of 6
9 — (866)— — (866)
Restricted share grants, less net
settled shares of 55
Restricted share grants, less net
settled shares of 55
47 — (8,907)— — (8,907)
Conversion of convertible senior notes
due 2023		Conversion of convertible senior notes
due 2023		— — (11)— — (11)
Share-based compensationShare-based compensation— — 4,960 — — 4,960 Share-based compensation— — 6,083 — — 6,083 
Balance at September 30, 202134,295 $343 $8,490 $1,659,947 $(124,477)$1,544,303 
Reclassification of negative additional paid-in capital Reclassification of negative additional paid-in capital— — 2,647 (2,647)— — 
Balance at June 30, 2022Balance at June 30, 202234,540 $345 $499 $1,805,485 $(175,710)$1,630,619 
Net incomeNet income— $— $— $77,267 $— $77,267 
Other comprehensive loss:Other comprehensive loss:
Cumulative translation adjustmentCumulative translation adjustment— — — — (48,475)(48,475)
Issuance of common stock in connection
with:
Issuance of common stock in connection
with:
Restricted share grants, less net
settled shares of 5
Restricted share grants, less net
settled shares of 5
10 — (837)— — (837)
Purchase and retirement of common
stock		Purchase and retirement of common
stock		(128)(1)(20,431)— — (20,432)
Share-based compensationShare-based compensation— — 6,441 — — 6,441 
Reclassification of negative additional paid-in capital Reclassification of negative additional paid-in capital— — 14,328 (14,328)— — 
Balance at September 30, 2022Balance at September 30, 202234,422 $344 $— $1,868,424 $(224,185)$1,644,583 
5

Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss		Additional
Paid-in
Capital		Accumulated
Other
Comprehensive
Loss
Common StockRetained
Earnings		  Common StockRetained
Earnings		 
SharesAmountAccumulated
Other
Comprehensive
Loss		Total SharesAmountAccumulated
Other
Comprehensive
Loss		Total
Balance at December 31, 201937,390 $374 $216,162 $1,413,453 $(140,847)$1,489,142 
Balance at December 31, 2020Balance at December 31, 202034,481 $345 $— $1,506,271 $(106,435)$1,400,181 
Net incomeNet income— $— $— $56,747 $— $56,747 Net income— $— $— $64,496 $— $64,496 
Other comprehensive loss:Other comprehensive loss:Other comprehensive loss:
Cumulative translation adjustmentCumulative translation adjustment— — — — (31,102)(31,102)Cumulative translation adjustment— — — — (5,242)(5,242)
Issuance of common stock in connection with:Issuance of common stock in connection with:Issuance of common stock in connection with:
Exercise of optionsExercise of options34 1 1,206 — — 1,207 Exercise of options12 — 434 — — 434 
Restricted share grants, less net
settled shares of 58
136 1 (6,768)— — (6,767)
Restricted share grants, less net settled
shares of 63
Restricted share grants, less net settled
shares of 63
157 1 (7,232)— — (7,231)
Stock units issued under incentive
compensation plan
Stock units issued under incentive
compensation plan
— — 2,314 — — 2,314 Stock units issued under incentive
compensation plan		— — 2,603 — — 2,603 
Purchase and retirement of common stockPurchase and retirement of common stock(450)(5)(50,306)— — (50,311)Purchase and retirement of common stock(422)(4)(3,047)(43,082)— (46,133)
Share-based compensationShare-based compensation— — 7,454 — — 7,454 Share-based compensation— — 7,242 — — 7,242 
Balance at March 31, 202037,110 $371 $170,062 $1,470,200 $(171,949)$1,468,684 
Balance at March 31, 2021Balance at March 31, 202134,228 $342 $— $1,527,685 $(111,677)$1,416,350 
Net incomeNet income— $— $— $48,174 $— $48,174 Net income— $— $— $62,782 $— $62,782 
Other comprehensive income:Other comprehensive income:Other comprehensive income:
Cumulative translation adjustmentCumulative translation adjustment— — — — 9,568 9,568 Cumulative translation adjustment— — — — 5,807 5,807 
Issuance of common stock in connection
with:
Issuance of common stock in connection
with:
Issuance of common stock in connection
with:
Exercise of optionsExercise of options33 — 1,191 — — 1,191 Exercise of options33 1 1,136 — — 1,137 
Restricted share grants, less net
settled shares of 18
38 1 (2,155)— — (2,154)
Restricted share grants, less net
settled shares of 13
Restricted share grants, less net
settled shares of 13
21 — (1,814)— — (1,814)
Purchase and retirement of common stock(471)(5)(51,048)— — (51,053)
Share-based compensationShare-based compensation— — 4,693 — — 4,693 Share-based compensation— — 4,948 — — 4,948 
Balance at June 30, 202036,710 $367 $122,743 $1,518,374 $(162,381)$1,479,103 
Balance at June 30, 2021Balance at June 30, 202134,282 $343 $4,270 $1,590,467 $(105,870)$1,489,210 
Net incomeNet income— $— $— $50,172 $— $50,172 Net income— $— $— $69,480 $— $69,480 
Other comprehensive income:
Other comprehensive loss:Other comprehensive loss:
Cumulative translation adjustmentCumulative translation adjustment— — — — 21,330 21,330 Cumulative translation adjustment— — — — (18,607)(18,607)
Issuance of common stock in connection with:Issuance of common stock in connection with:Issuance of common stock in connection
with:
Exercise of optionsExercise of options43 — 1,536 — — 1,536 Exercise of options4 — 126 — — 126 
Restricted share grants, less net
settled shares of 2
24 — (207)— — (207)
Restricted share grants, less net
settled shares of 6
Restricted share grants, less net
settled shares of 6
9 — (866)— — (866)
Purchase and retirement of common stock(749)(7)(82,859)— — (82,866)
Share-based compensationShare-based compensation— — 5,429 — — 5,429 Share-based compensation— — 4,960 — — 4,960 
Balance at September 30, 202036,028 $360 $46,642 $1,568,546 $(141,051)$1,474,497 
Balance at September 30, 2021Balance at September 30, 202134,295 $343 $8,490 $1,659,947 $(124,477)$1,544,303 

See accompanying notes to condensed consolidated financial statements
6

FTI Consulting, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
Nine Months Ended September 30, Nine Months Ended September 30,
2021202020222021
Operating activitiesOperating activitiesOperating activities
Net incomeNet income$196,758 $155,093 Net income$188,016 $196,758 
Adjustments to reconcile net income to net cash provided by operating activities:  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortizationDepreciation and amortization25,631 23,655 Depreciation and amortization27,045 25,631 
Amortization and impairment of intangible assetsAmortization and impairment of intangible assets8,515 7,440 Amortization and impairment of intangible assets7,320 8,515 
Acquisition-related contingent considerationAcquisition-related contingent consideration(1,014)4,652 Acquisition-related contingent consideration863 (1,014)
Provision for expected credit lossesProvision for expected credit losses14,816 15,608 Provision for expected credit losses13,101 14,816 
Share-based compensationShare-based compensation17,150 17,576 Share-based compensation18,491 17,150 
Amortization of debt discount and issuance costs and otherAmortization of debt discount and issuance costs and other8,551 9,073 Amortization of debt discount and issuance costs and other1,588 8,551 
Deferred income taxesDeferred income taxes5,128 (1,658)Deferred income taxes(9,140)5,128 
Changes in operating assets and liabilities, net of effects from acquisitions:Changes in operating assets and liabilities, net of effects from acquisitions:Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable, billed and unbilledAccounts receivable, billed and unbilled(115,544)(86,491)Accounts receivable, billed and unbilled(251,280)(115,544)
Notes receivableNotes receivable4,392 3,346 Notes receivable838 4,392 
Prepaid expenses and other assetsPrepaid expenses and other assets1,145 8,294 Prepaid expenses and other assets(3,066)1,145 
Accounts payable, accrued expenses and otherAccounts payable, accrued expenses and other(22,745)7,713 Accounts payable, accrued expenses and other21,936 (22,745)
Income taxesIncome taxes18,025 (14,635)Income taxes3,940 18,025 
Accrued compensationAccrued compensation2,803 (18,985)Accrued compensation(67,763)2,803 
Billings in excess of services providedBillings in excess of services provided(7,691)10,296 Billings in excess of services provided7,672 (7,691)
Net cash provided by operating activities155,920 140,977 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities(40,439)155,920 
Investing activitiesInvesting activities  Investing activities  
Payments for acquisition of businesses, net of cash receivedPayments for acquisition of businesses, net of cash received(9,833)(25,271)Payments for acquisition of businesses, net of cash received(6,742)(9,833)
Purchases of property and equipment and otherPurchases of property and equipment and other(52,441)(25,105)Purchases of property and equipment and other(38,935)(52,441)
Net cash used in investing activitiesNet cash used in investing activities(62,274)(50,376)Net cash used in investing activities(45,677)(62,274)
Financing activitiesFinancing activities  Financing activities  
Borrowings under revolving line of creditBorrowings under revolving line of credit377,500 149,500 Borrowings under revolving line of credit165,000 377,500 
Repayments under revolving line of creditRepayments under revolving line of credit(352,500)(124,500)Repayments under revolving line of credit(165,000)(352,500)
Purchase and retirement of common stockPurchase and retirement of common stock(46,133)(175,832)Purchase and retirement of common stock(23,530)(46,133)
Share-based compensation tax withholdings and otherShare-based compensation tax withholdings and other(8,277)(5,195)Share-based compensation tax withholdings and other(15,663)(8,277)
Payments for business acquisition liabilitiesPayments for business acquisition liabilities(7,496)(3,948)Payments for business acquisition liabilities(4,848)(7,496)
Deposits1,928 4,561 
Deposits and otherDeposits and other7,092 1,928 
Net cash used in financing activitiesNet cash used in financing activities(34,978)(155,414)Net cash used in financing activities(36,949)(34,978)
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents(11,094)98 Effect of exchange rate changes on cash and cash equivalents(44,373)(11,094)
Net increase (decrease) in cash and cash equivalentsNet increase (decrease) in cash and cash equivalents47,574 (64,715)Net increase (decrease) in cash and cash equivalents(167,438)47,574 
Cash and cash equivalents, beginning of periodCash and cash equivalents, beginning of period294,953 369,373 Cash and cash equivalents, beginning of period494,485 294,953 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$342,527 $304,658 Cash and cash equivalents, end of period$327,047 $342,527 
Supplemental cash flow disclosuresSupplemental cash flow disclosuresSupplemental cash flow disclosures
Cash paid for interestCash paid for interest$8,756 $7,115 Cash paid for interest$8,012 $8,756 
Cash paid for income taxes, net of refundsCash paid for income taxes, net of refunds$31,240 $61,636 Cash paid for income taxes, net of refunds$51,353 $31,240 
Non-cash investing and financing activities:Non-cash investing and financing activities:Non-cash investing and financing activities:
Issuance of stock units under incentive compensation plansIssuance of stock units under incentive compensation plans$2,603 $2,314 Issuance of stock units under incentive compensation plans$1,664 $2,603 
Purchase and retirement of common stock not yet paid$— $8,540 
Business acquisition liabilities not yet paidBusiness acquisition liabilities not yet paid$— $3,460 Business acquisition liabilities not yet paid$5,593 $— 
Non-cash additions to property and equipment Non-cash additions to property and equipment $4,435 $1,203 Non-cash additions to property and equipment $4,970 $4,435 
See accompanying notes to condensed consolidated financial statements
7

FTI Consulting, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(dollar and share amounts in tables in thousands, except per share data)
(Unaudited)
 
1. Basis of Presentation and Significant Accounting Policies
The unaudited condensed consolidated financial statements of FTI Consulting, Inc., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”), presented herein, have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and under the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Some of the information and footnote disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and regulations. Certain prior period amounts have been reclassified to conform to the current period presentation. In management’s opinion, the interim financial statements reflect all adjustments that are necessary for a fair presentation of the results for the interim periods presented. All adjustments made were normal recurring accruals. Results of operations for the interim periods presented herein are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the SEC. 
2. New Accounting Standards
Recently Adopted Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-06 ("ASU 2020-06"), Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and simplifies the diluted earnings per share calculation in certain events. On January 1, 2022, we adopted ASU 2020-06 using the modified retrospective method and recorded a cumulative-effect adjustment of approximately $22.1 million to the beginning balance of retained earnings at the date of adoption and a $16.4 million net increase to "Long-term debt, net" on the Condensed Consolidated Balance Sheets. As permitted by the guidance, prior comparative periods were not adjusted under this method.
Pursuant to ASU 2020-06, we are no longer permitted to separately account for the liability and equity components of convertible debt instruments. As such, the carrying amount of our 2.0% convertible senior notes due 2023 ("2023 Convertible Notes") is recognized as a liability as of September 30, 2022 on the Condensed Consolidated Balance Sheets. The amendmentsASU 2020-06 adoption also resulted in this the derecognition of the embedded conversion option, net of tax effects, of approximately $34.1 million, which is included in “Additional paid-in capital,” as well as the derecognition of the related deferred tax liabilities of approximately $4.3 million on the Condensed Consolidated Balance Sheets.
The net effect of the adoption in the current and future periods as compared to prior periods is to reduce non-cash interest expense, or increase net income, as there is no longer a discount from the separation of the conversion feature within equity. The discount from recognition of debt issuance costs will be amortized over the effective life of the 2023 Convertible Notes using the effective interest method.
ASU are2020-06 also no longer allows the use of the treasury stock method for convertible instruments for purposes of calculating diluted earnings per share and instead requires application of the if-converted method. Under that method, diluted earnings per share will generally be calculated assuming that all of the convertible debt instruments were converted solely into shares of common stock at the beginning of the reporting period unless the result would be anti-dilutive. Effective January 1, 2022, pursuant to the terms of the indenture, dated as of August 20, 2018, as amended by the first supplemental indenture, dated as of January 1, 2022 (the "First Supplemental Indenture"), between us and U.S. Bank National Association, as trustee (as so amended, the "Indenture"), the principal amount of the 2023 Convertible Notes being converted is required to be paid in cash and only the premium due upon conversion, if any, is permitted to be settled in shares, cash or a combination of shares and cash. Consequently, the if-converted method produces a similar result as the treasury stock method, which was used prior to the adoption of ASU 2020-06 for the 2023 Convertible Notes.
8

Accounting Standards Not Yet Adopted
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities about Government Assistance, which requires entities to provide disclosures on significant government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard is effective for annual and interim periods beginning after December 15, 2021 although early adoption is permitted.and impacts only annual financial statement footnote disclosures. The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements.
In November 2020, the SEC issued Rule 33-10890, “Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information” to modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K. The amendment enhances and clarifies the disclosure requirements for liquidity and capital resources, eliminates the requirement to present five years of Selected Financial Data, amends the requirement to present two years of tabular selected quarterly financial data so that registrants only need to disclose when there are material retrospective changes and eliminates the tabular disclosure of contractual obligations. The final rules were effective on February 10, 2021 and registrants are required to apply the amended rules for the first fiscal year ending on or after August 9, 2021. The Company is in the process of evaluating the impact of this amendment on its related disclosures.
3. Earnings per Common Share
Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per common share adjusts basic earnings per common share for the effects of potentially dilutive common shares. Potentially dilutive common shares include the dilutive effects of shares issuable under our equity compensation plans, including stock options and restricted sharesshare-based awards (restricted share awards, restricted stock units and performance stock units), each using the treasury stock method.
BecauseFor the three and nine months ended September 30, 2022, we expect to settleused the if-converted method for calculating the potential dilutive effect of the conversion feature of the principal amount of the outstanding 2.0% convertible senior notes due 2023 ("2023 Convertible Notes") in cash,Notes on earnings per common share, as required by the adoption of ASU 2020-06. Prior to the adoption of ASU 2020-06, we useused the treasury stock method for calculating the potential dilutive effect of the conversion feature of the principal amount of the 2023 Convertible Notes on earnings per common share if applicable.because we had the ability and intent to settle the principal amount of the outstanding 2023 Convertible Notes in cash. The conversion feature had a dilutive impact on earnings per common share for the three and nine months ended September 30, 20212022 and 2020,2021, as the average market price per share of our common stock for the periods exceeded the conversion price of $101.38 per share. See Note 9,8, "Debt" for additional information about the 2023 Convertible Notes.
8

Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
Numerator — basic and dilutedNumerator — basic and diluted    Numerator — basic and diluted    
Net incomeNet income$69,480 $50,172 $196,758 $155,093 Net income$77,267 $69,480 $188,016 $196,758 
DenominatorDenominatorDenominator
Weighted average number of common shares outstanding — basicWeighted average number of common shares outstanding — basic33,495 35,639 33,478 36,073 Weighted average number of common shares outstanding — basic33,812 33,495 33,741 33,478 
Effect of dilutive restricted shares662 708 697 774 
Effect of dilutive share-based awardsEffect of dilutive share-based awards545 662 607 697 
Effect of dilutive stock optionsEffect of dilutive stock options363 402 369 436 Effect of dilutive stock options322 363 330 369 
Effect of dilutive convertible notesEffect of dilutive convertible notes842 337 721 425 Effect of dilutive convertible notes1,239 842 1,147 721 
Weighted average number of common shares outstanding — dilutedWeighted average number of common shares outstanding — diluted35,362 37,086 35,265 37,708 Weighted average number of common shares outstanding — diluted35,918 35,362 35,825 35,265 
Earnings per common share — basicEarnings per common share — basic$2.07 $1.41 $5.88 $4.30 Earnings per common share — basic$2.29 $2.07 $5.57 $5.88 
Earnings per common share — dilutedEarnings per common share — diluted$1.96 $1.35 $5.58 $4.11 Earnings per common share — diluted$2.15 $1.96 $5.25 $5.58 
Antidilutive stock options and restricted shares2 83 5 50 
Antidilutive stock options and share-based awardsAntidilutive stock options and share-based awards— 2 10 5 
4. Special Charges
There were no special charges recorded during the three and nine months ended September 30, 2021.
During the three and nine months ended September 30, 2020, we recorded a special charge of $7.1 million, which consists of the following components:
•$4.7 million of lease abandonment and other relocation costs associated with the consolidation of office space in New York, New York; and
•$2.4 million of severance and other employee-related costs in our Forensic and Litigation Consulting ("FLC") segment.
The following table details the special charge by segment:
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Corporate Finance & Restructuring$— $861 $— $861 
FLC— 3,484 — 3,484 
Economic Consulting— 35 — 35 
Technology— 276 — 276 
Strategic Communication— 2,074 — 2,074 
Segment special charge— 6,730 — 6,730 
Unallocated Corporate— 373 — 373 
Total$— $7,103 $— $7,103 
9

5. Revenues
We generate the majority of our revenues by providing consulting services to our clients. Most of our consulting service contracts are based on one of the following types of contract arrangements:
•Time and expense arrangements require the client to pay us based on the number of hours worked at contractually agreed-upon rates. We recognize revenues for these contract arrangements based on hours incurred and contracted rates utilizing a right-to-invoice practical expedient because we have a right to consideration for services completed to date. When a time and expense arrangement has a not-to-exceed or "cap" amount and we expect to perform work in excess of the cap, we recognize revenues up to the cap amount specified by the client, based on the efforts or hours incurred as a percentage of total efforts or hours expected to be incurred (i.e., proportional performance method).
9

•Fixed-fee arrangements require the client to pay a fixed fee in exchange for a predetermined set of professional services. We recognize revenues earned to date by applying the proportional performance method. Generally, these arrangements have one performance obligation.
•Performance-based or contingent arrangements represent forms of variable consideration. In these arrangements, our fees are based on the attainment of contractually defined objectives with our client, such as completing a business transaction or assisting the client in achieving a specific business objective. We recognize revenues earned to date in an amount that is probable not to reverse and by applying the proportional performance method when the criteria for over time revenue recognition are met.
Certain fees in our time and materials arrangements may be subject to approval by a third-party,third party, such as a bankruptcy court andor other regulatory agency. In such cases, we record revenues based on the amount we estimate we will be entitled to in exchange for our services and only to the extent a significant reversal of revenuerevenues is not likely to occur when the uncertainty associated with the estimate is subsequently resolved. Potential fee reductions imposed by bankruptcy courts and other regulatory agencies or negotiated with specific clients are estimated on a specific identification basis. Our estimates may vary depending on the nature of the engagement, client economics, historical experience and other appropriate factors. When there are changes in our estimates of potential fee reductions, we record such changes to revenues with a corresponding offset to our billed and unbilled accounts receivable.
Revenues recognized during the current period may include revenues from performance obligations satisfied or partially satisfied in previous periods. This primarily occurs when the estimated transaction price has changed based on our current probability assessment over whether the agreed-upon outcome for our performance-based and contingent arrangements will be achieved. The aggregate amount of revenues recognized related to a change in the transaction price in the current period, which related to performance obligations satisfied or partially satisfied in a prior period, was immaterial for the three months ended September 30, 2022 and $12.5 million for the nine months ended September 30, 2022, and $11.5 million and $23.0 million for the three and nine months ended September 30, 2021, respectively, and $2.6 million and $15.1 million for the three and nine months ended September 30, 2020, respectively.
Unfulfilled performance obligations primarily consist of fees not yet recognized on certain fixed-fee arrangements and performance-based and contingent arrangements. As of September 30, 20212022 and December 31, 2020,2021, the aggregate amount of the remaining contract transaction price allocated to unfulfilled performance obligations was $4.1$2.5 million and $8.5$3.7 million, respectively. We expect to recognize the majority of the related revenues over the next 24 months. We elected to utilize the optional exemption to exclude from this disclosure fixed-fee and performance-based and contingent arrangements with an original expected duration of one year or less and to exclude our time and expense arrangements for which revenues are recognized using the right-to-invoice practical expedient.
Contract assets are defined as assets for which we have recorded revenues but are not yet entitled to receive our fees because certain events, such as completion of the measurement period or client approval, must occur. The contract asset balance was $1.3 millionimmaterial as of September 30, 20212022 and $2.6$3.8 million as of December 31, 2020.2021.
Contract liabilities are defined as liabilities incurred when we have received consideration but have not yet performed the agreed-upon services. This may occur when clients pay fees before work begins. The contract liability balance was immaterial$1.0 million as of September 30, 20212022 and immaterial as of December 31, 2020, respectively.
10
2021.

6.5. Accounts Receivable and Allowance for Expected Credit Losses
The following table summarizes the components of "Accounts receivable, net" as presented on the Condensed Consolidated Balance Sheets:
September 30,
2021		December 31, 2020September 30,
2022		December 31,
2021
Accounts receivable:Accounts receivable:Accounts receivable:
Billed receivablesBilled receivables$560,046 $513,459 Billed receivables$636,288 $542,056 
Unbilled receivablesUnbilled receivables290,352 236,285 Unbilled receivables352,711 248,681 
Allowance for expected credit lossesAllowance for expected credit losses(40,520)(38,387)Allowance for expected credit losses(41,006)(36,617)
Accounts receivable, netAccounts receivable, net$809,878 $711,357 Accounts receivable, net$947,993 $754,120 
10

We maintain an allowance for expected credit losses, which represents the estimated aggregate amount of credit risk arising from the inability or unwillingness of specific clients to pay our fees or disputes that may affect our ability to fully collect our billed accounts receivable. We record our estimate of lifetime expected credit losses concurrently with the initial recognition of the underlying receivable. Accounts receivable, net of the allowance for expected credit losses, represents the amount we expect to collect. At each reporting date, we adjust the allowance for expected credit losses to reflect our current estimate.
The following table summarizes the total provision for expected credit losses and write-offs:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
20212020202120202022202120222021
Provision for expected credit losses (1)
Provision for expected credit losses (1)
$6,580 $3,984 $14,816 $15,608 
Provision for expected credit losses (1)
$4,348 $6,580 $13,101 $14,816 
Write-offsWrite-offs$5,746 $6,182 $15,464 $19,707 Write-offs$3,877 $5,746 $9,917 $15,464 
(1)    Adjustments to the allowance for expected credit losses are recorded to selling, general & administrative ("SG&A") expenses on the Condensed Consolidated Statements of Comprehensive Income.
We estimate the current-period provision for expected credit losses on a specific identification basis. Our judgments regarding a specific client’s credit risk considers factors such as the counterparty’s creditworthiness, knowledge of the specific client’s circumstances and historical collection experience for similar clients. Other factors include, but are not limited to, current economic conditions and forward-looking estimates. Our actual experience may vary from our estimates. If the financial condition of our clients were to deteriorate, resulting in their inability or unwillingness to pay our fees, we may need to record additional provisions for expected credit losses in future periods. The risk of credit losses may be mitigated to the extent that we received a retainer from some of our clients prior to performing services. Our provision for expected credit losses includes recoveries, direct write-offs and charges to other accounts. Billed accounts receivables are written off when the potential for recovery is considered remote.
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7.6. Goodwill and Intangible Assets
Goodwill
The table below summarizes the changes in the carrying amount of goodwill by reportable segment:
Corporate
Finance &
  Restructuring (1)
FLC (1)
Economic
Consulting (1)
Technology (1)
Strategic
Communications (2)
Total
Corporate
Finance &
  Restructuring (1)
Forensic and Litigation Consulting (1)
Economic
Consulting (1)
Technology (1)
Strategic
Communications (2)
Total
Balance at December 31, 2020$506,072 $233,374 $269,087 $96,821 $129,525 $1,234,879 
Balance at December 31, 2021Balance at December 31, 2021$501,046 $237,929 $268,858 $96,811 $128,147 $1,232,791 
Acquisitions(3)Acquisitions(3)— 5,493 — — — 5,493 Acquisitions(3)11,332 — — — — 11,332 
Foreign currency translation
adjustment and other
Foreign currency translation
adjustment and other
(4,149)(680)(168)(11)(1,341)(6,349)
Foreign currency translation
adjustment and other
(2,026)(5,870)(1,612)(61)(22,013)(31,582)
Balance at September 30, 2021$501,923 $238,187 $268,919 $96,810 $128,184 $1,234,023 
Balance at September 30, 2022Balance at September 30, 2022$510,352 $232,059 $267,246 $96,750 $106,134 $1,212,541 
(1)    There were 0no accumulated impairment losses for the Corporate Finance & Restructuring ("Corporate Finance"), FLC,Forensic and Litigation Consulting ("FLC"), Economic Consulting or Technology segments as of September 30, 20212022 and December 31, 2020, respectively.2021.
(2)    Amounts for our Strategic Communications segment include gross carrying values of $322.3$300.3 million and $323.7$322.3 million as of September 30, 20212022 and December 31, 2020,2021, respectively, and accumulated impairment losses of $194.1 million as of September 30, 20212022 and December 31, 2020.2021.
(3)    During the nine months ended September 30, 2021,2022, we acquired certain assets of a business that werewas assigned to the FLCCorporate Finance segment. We recorded $5.5$11.3 million in goodwill based on a purchase price allocation as a result of the acquisition and weacquisition. We have included the results of the acquired business’s operations in the FLCCorporate Finance segment since its acquisition date.
11

Intangible Assets
Intangible assets were as follows:
September 30, 2021December 31, 2020 September 30, 2022December 31, 2021
Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount
Amortizing intangible assetsAmortizing intangible assets      Amortizing intangible assets      
Customer relationships (1)
Customer relationships (1)
$112,818 $91,069 $21,749 $111,556 $85,180 $26,376 
Customer relationships (1)
$79,347 $63,546 $15,801 $83,101 $63,124 $19,977 
Trademarks11,245 4,292 6,953 11,809 2,768 9,041 
Trademarks (1)
Trademarks (1)
8,886 4,648 4,238 10,965 4,732 6,233 
Acquired software and other(1)Acquired software and other(1)3,461 2,759 702 3,618 2,585 1,033 Acquired software and other(1)967 433 534 3,114 2,434 680 
127,524 98,120 29,404 126,983 90,533 36,450 89,200 68,627 20,573 97,180 70,290 26,890 
Non-amortizing intangible assetsNon-amortizing intangible assetsNon-amortizing intangible assets
TrademarksTrademarks5,100 — 5,100 5,100 — 5,100 Trademarks5,100 — 5,100 5,100 — 5,100 
TotalTotal$132,624 $98,120 $34,504 $132,083 $90,533 $41,550 Total$94,300 $68,627 $25,673 $102,280 $70,290 $31,990 
(1)During the nine months ended September 30, 2021,2022, we acquired certain assets of a business, and its related intangible assets were assigned to the FLCCorporate Finance segment.
Intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of $2.3 million and $7.3 million for the three and nine months ended September 30, 2022, respectively, and $2.9 million and $8.5 million for the three and nine months ended September 30, 2021, respectively, and $2.8 million and $7.4 million for the three and nine months ended September 30, 2020, respectively.
12

We estimate our future amortization expense for our intangible assets with finite lives to be as follows:
YearYear
As of
September 30, 2021 (1)
Year
As of
September 30, 2022 (1)
2021 (remaining)$2,325 
20228,824 
2022 (remaining)2022 (remaining)$2,277 
202320235,122 20235,844 
202420243,693 20243,692 
202520253,014 20253,047 
202620261,988 
ThereafterThereafter6,426 Thereafter3,725 
$29,404  $20,573 
(1)Actual amortization expense to be reported in future periods could differ from these estimates becauseas a result of new intangible asset acquisitions, impairments, changes in useful lives, or other relevant factors or changes.
Intercompany Intellectual Property Licensing Agreement
8.During the three months ended September 30, 2022, a U.S. subsidiary of the Company (the “Licensor”) entered into an intellectual property license agreement with certain foreign subsidiaries of the Company in consideration of royalty payments that have been partially prepaid (the "License Agreement"). The prepaid royalties remitted to the Licensor are taxable in the U.S. for the year ended December 31, 2022 and represent intangible assets in the foreign subsidiaries that are eliminated in consolidation. The impact on the U.S. current income tax provision was mainly offset by a deferred foreign income tax benefit related to the future tax deductions arising from amortization of intangible assets in the foreign subsidiaries. The License Agreement provides sufficient future taxable income in the U.S. to fully utilize the Company’s existing foreign tax credits in the U.S., which were previously subject to a valuation allowance. The impact on the tax rate for the three and nine months ended September 30, 2022 was a combined $8.3 million tax benefit.
12

7. Financial Instruments
The table below presents the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of September 30, 20212022 and December 31, 2020:2021:
September 30, 2021September 30, 2022
Hierarchy Level
(Fair Value)		Hierarchy Level
(Fair Value)
Carrying
Amount		Level 1Level 2Level 3Carrying
Amount		Level 1Level 2Level 3
LiabilitiesLiabilitiesLiabilities
Acquisition-related contingent consideration, including
current portion (1)(2)
$14,568 $— $— $14,568 
Acquisition-related contingent consideration (1)(2)
Acquisition-related contingent consideration (1)(2)
$12,847 $— $— $12,847 
2023 Convertible Notes (3)
2023 Convertible Notes (3)
294,355 — 444,957 — 
2023 Convertible Notes (3)
314,756 — 519,300 — 
TotalTotal$308,923 $— $444,957 $14,568 Total$327,603 $— $519,300 $12,847 
December 31, 2020December 31, 2021
Hierarchy Level
(Fair Value)		Hierarchy Level
(Fair Value)
Carrying
Amount		Level 1Level 2Level 3Carrying
Amount		Level 1Level 2Level 3
LiabilitiesLiabilities   Liabilities   
Acquisition-related contingent consideration, including
current portion (1)(2)
$20,118 $— $— $20,118 
Acquisition-related contingent consideration (1)
Acquisition-related contingent consideration (1)
$15,110 $— $— $15,110 
2023 Convertible Notes (3)
2023 Convertible Notes (3)
286,131 — 396,982 — 
2023 Convertible Notes (3)
297,158 — 466,619 — 
TotalTotal$306,249 $— $396,982 $20,118 Total$312,268 $— $466,619 $15,110 
(1)The short-term portion is included in “Accounts payable, accrued expenses and other” and the long-term portion is included in “Other liabilities” on the Condensed Consolidated Balance Sheets.
(2)During the nine months ended September 30, 2021,2022, we acquired certain assets of a business that was assigned to our Corporate Finance segment and recorded an acquisition-related contingent consideration liability.
(3)The carrying values includevalue as of September 30, 2022 includes unamortized deferred debt issueissuance costs. The carrying value as of December 31, 2021 includes unamortized deferred debt issuance costs and debt discount.
The fair values of financial instruments not included in the tables above are estimated to be equal to their carrying values as of September 30, 20212022 and December 31, 2020.2021.
We estimate the fair value of our 2023 Convertible Notes based on their last actively traded prices. The fair value of our 2023 Convertible Notes is classified within Level 2 of the fair value hierarchy because it is traded in less active markets.
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We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted discounted cash flow model or a Monte Carlo simulation.pricing model. These fair value estimates represent Level 3 measurements as they are based on significant inputs not observed in the market and reflect our own assumptions. Significant increases (or decreases) in these unobservable inputs in isolation would result in significantly lower (or higher) fair values. We reassess the fair value of our acquisition-related contingent consideration at each reporting period based on additional information as it becomes available.
13

The table below presents the change in our liability for acquisition-related contingent consideration for our Level 3 financial instruments:instruments is as follows:
Contingent Consideration
Balance at December 31, 2021$15,110 
Additions5,370 
Accretion expense (1)
(979)
Payments(4,430)
Foreign currency translation adjustment (2)
(115)
Balance at March 31, 2022$14,956 
Accretion expense (1)
1,112 
Payments(2,240)
Foreign currency translation adjustment (2)
(465)
Balance at June 30, 2022$13,363 
Accretion expense (1)
730 
Payments(1,000)
Foreign currency translation adjustment and other (2)
(246)
Balance at September 30, 2022$12,847 
Contingent Consideration
Balance at December 31, 2020$20,118 
Accretion expense (1)
1,289 
Payments(1,000)
Foreign currency translation adjustment (2)
(612)
Balance at March 31, 2021$19,795 
Additions1,093 
Accretion expense (1)
676 
Payments(4,122)
Foreign currency translation adjustment (2)
264 
Remeasurement gain (3)
(3,095)
Balance at June 30, 2021$14,611 
Accretion expense (1)
116 
Foreign currency translation adjustment (2)
(159)
Balance at September 30, 2021$14,568 
Contingent Consideration
Balance at December 31, 2019$14,826 
Accretion expense (1)
506 
Foreign currency translation adjustment (2)
(148)
Balance at March 31, 2020$15,184 
Accretion expense (1)
614 
Payments(4,692)
Foreign currency translation adjustment (2)
88 
Balance at June 30, 2020$11,194 
Additions3,460 
Accretion expense (1)
3,532 
Foreign currency translation adjustment (2)
359 
Balance at September 30, 2020$18,545 
(1)Accretion expense is included in SG&A expenses on the Condensed Consolidated Statements of Comprehensive Income.
(2)Foreign currency translation adjustments are included in "Other comprehensive income (loss),loss, net of tax" on the Condensed Consolidated Statements of Comprehensive Income.
(3)Remeasurement gain or loss resulting from a change in the fair value of an acquisition's contingent consideration liability is recorded in SG&A expenses on the Condensed Consolidated Statements of Comprehensive Income.
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9.8. Debt
The table below presents the components of the Company’s debt: 
September 30,
2021		December 31, 2020September 30, 2022December 31, 2021
2023 Convertible Notes2023 Convertible Notes$316,250 $316,250 2023 Convertible Notes$316,222 $316,245 
Credit Facility25,000 — 
Total debtTotal debt341,250 316,250 Total debt316,222 316,245 
Less: deferred debt discount(1)Less: deferred debt discount(1)(19,169)(26,310)Less: deferred debt discount(1)— (16,724)
Less: deferred debt issue costs(2,726)(3,809)
Less: deferred debt issuance costsLess: deferred debt issuance costs(1,466)(2,363)
Long-term debt, net (1)(2)
Long-term debt, net (1)(2)
$319,355 $286,131 
Long-term debt, net (1)(2)
$314,756 $297,158 
Additional paid-in capitalAdditional paid-in capital$35,306 $35,306 Additional paid-in capital$— $35,304 
Discount attribution to equityDiscount attribution to equity(1,175)(1,175)Discount attribution to equity— (1,175)
Equity component, net(1)Equity component, net(1)$34,131 $34,131 Equity component, net(1)$— $34,129 
(1)Pursuant to the adoption of ASU 2020-06, we derecognized the conversion option of $34.1 million, net of tax, previously attributable to the equity component of the 2023 Convertible Notes. Similarly, the related debt discount is no longer amortized into income as interest expense over the life of the instrument; therefore, we recorded a $16.4 million increase to "Long-term debt, net" on the Condensed Consolidated Balance Sheet as of September 30, 2022.
(2)There were no current portions of long-term debt as of September 30, 20212022 and December 31, 2020.2021. The 2023 Convertible Notes due on August 15, 2023 are classified as long-term debt as of September 30, 2022 because we have the ability and intent to refinance them on a long-term basis under our $550.0 million Credit Facility, which matures on November 30, 2023.
2023 Convertible Notes
On August 20, 2018, we issued the 2023 Convertible Notes in an aggregate principal amount of $316.3 million. The 2023 Convertible Notes bear interest at a fixed rate of 2.0% per year, payable semiannually in arrears on February 15th15 and August 15th15 of each year andyear. The 2023 Convertible Notes will mature on August 15, 2023, unless earlier converted or repurchased. As of December 31, 2021, upon conversion, the 2023 Convertible Notes could be settled, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock. Effective January 1, 2022, pursuant to the terms of the Indenture, the principal amount of the 2023 Convertible Notes being converted is required to be paid in cash and only the premium due upon conversion, if any, is permitted to be settled at our election in shares, cash or a combination of shares and cash. The 2023 Convertible Notes are senior unsecured obligations of the Company.
The 2023 Convertible Notes are convertible at maturity at a conversion rate of 9.8643 shares of our common stock per $1,000 principal amount of the 2023 Convertible Notes (equivalent to a conversion price of approximately $101.38 per share of common stock). Subject to the conditions set forth in the indenture governing the 2023 Convertible Notes, holdersHolders may convert their 2023 Convertible Notes at any time prior to the close of business on the business day immediately preceding May 15, 2023. 2023 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on September 30, 2018 (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the 2023 Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate in effect on each such trading day; or (3) upon the occurrence of specified corporate events. On or after May 15, 2023, until the close of business on the business day immediately preceding the maturity date of August 15, 2023, holders may convert their 2023 Convertible Notes at any time, regardless of the foregoing circumstances.
The 2023 Convertible Notes were convertible duringin each of the three monthsquarters ended September 30, 2021 and thethrough September 30, 2022. The number of notes submitted forshares issued upon conversion of the 2023 Convertible Notes in each period was immaterial. The circumstances required to allow the holders to convert their 2023 Convertible Notes prior to maturity were met as of September 30, 2021,2022; therefore, holders may convert their notes at any time beginning on October 1, 20212022 and ending on December 31, 2021. 2022. Based on the Company's stock price on September 30, 2022, the if-converted value of the 2023 Convertible Notes exceeded the principal amount by $200.7 million.
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We continuemay not redeem the 2023 Convertible Notes prior to classify the net carryingmaturity date.
If we undergo a fundamental change (as defined in the Indenture), subject to certain conditions, holders may require us to repurchase for cash all or part of their 2023 Convertible Notes in principal amounts of $1,000 or a multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the 2023 Convertible Notes as long-termto be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, in certain circumstances, we may be required to increase the conversion rate for any 2023 Convertible Notes converted in connection with a make-whole fundamental change (as defined in the Indenture).
Prior to the adoption of ASU 2020-06, the Company separated the 2023 Convertible Notes into liability and equity components. The debt based on our intentdiscount and abilitydebt issuance costs attributable to refinance the principal portion of our debt on a long-term basis.
The excess of the principal amount of the liability over its carrying amount ("debt discount") iscomponent were amortized to interest expense over the term of the 2023 Convertible Notes using the effective interest rate method.
We incurred debt issue costs and allocated The Company adopted ASU 2020-06 on January 1, 2022 using the total amount to the liability and equity components ofmodified retrospective method, which resulted in accounting for the 2023 Convertible Notes based on their relative values. Theas a single liability and the debt issue costs attributable todiscount is no longer amortized into income as interest expense. See Note 2, “New Accounting Standards” for additional information about the liability component are amortized toadoption of ASU 2020-06.
Contractual interest expense over the term offor the 2023 Convertible Notes usingwas $1.6 million and $4.7 million for the effective interest rate method. Issuance costs attributable to the equity component were netted with the equity component in stockholders' equity.
The table below summarizes the amount of interest cost recognized by us for both the contractual interest expensethree and amortizationnine months ended September 30, 2022 and 2021, respectively. Amortization of the debt discount foron the 2023 Convertible Notes:
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
Contractual interest expense$1,581 $1,581 $4,744 $4,744 
Amortization of debt discount (1)
2,412 2,286 7,141 6,766 
Total$3,993 $3,867 $11,885 $11,510 
(1)The effective interest rateNotes prior to the adoption of ASU 2020-06 was $2.4 million and $7.1 million for the liability component is 5.45%.
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three and nine months ended September 30 2021, respectively.
Credit Facility
On June 26, 2015, we entered into a credit agreement, which provides for a $550.0 million senior secured bank revolving credit facility (“Original Credit Facility”) maturing on June 26, 2020. In November 2018, we amended and restated the credit agreement to the Original Credit Facility (the "Amended and Restated Credit Facility"), to, among other things, extend the maturity to November 30, 2023 and incurred an additional $1.7 million of debt issuance costs (the Originalcosts. On February 4, 2022, we entered into the first amendment to the Amended and Restated Credit Facility as amended(the "First Amendment to the Amended and restated,Restated Credit Facility," and together with the Amended and Restated Credit Facility, the “Credit Facility”).
The Company classified the borrowings underAt the Company’s Credit Facility as long-term debt in the accompanying Condensed Consolidated Balance Sheets, as amounts dueoption, borrowings under the Credit Facility are not contractually requiredin United States dollars ("USD"), euro ("EUR") and British pound ("GBP") will bear interest at either the one- or expected to be liquidated for more than one year fromthree-month London Interbank Offered Rate ("LIBOR") or, in the case of USD borrowings, an alternative base rate, in each case plus the applicable balance sheet date.margin. Due to the cessation by the ICE Benchmark Administration Limited of the publication on a representative basis of EUR LIBOR and GBP LIBOR as of December 31, 2021, EUR LIBOR is no longer available under our Credit Agreement and one-, three- and six-month GBP LIBOR is available under a "synthetic" methodology until December 31, 2022. The Credit Agreement permits the Company and Bank of America, N.A., as administrative agent thereunder, to agree to a new benchmark rate to replace EUR LIBOR and GBP LIBOR, subject to the negative consent of the Required Lenders (as defined therein). Prior to the incurrence of any borrowings under the Credit Facility in EUR or, after December 31, 2022, GBP, we will need to agree to a replacement benchmark rate for each applicable currency in accordance with the terms of the Credit Agreement. The alternative base rate means a fluctuating rate per annum equal to the highest of (1) the rate of interest in effect for such day as the prime rate announced by Bank of America, (2) the federal funds rate plus the sum of 50 basis points, and (3) the one-month USD LIBOR plus 100 basis points. Borrowings under the Credit Facility in Canadian dollars bear interest at an annual rate equal to the Canadian Dealer Offered Rate plus an applicable margin. Borrowings under the Credit Facility in Australian dollars bear interest at an annual rate equal to the Bank Bill Swap Reference Bid Rate plus an applicable margin. The applicable margin will fluctuate between 1.25% per annum and 2.00% per annum, in the case of LIBOR borrowings, or between 0.25% per annum and 1.00% per annum, in the case of base rate borrowings, in each case, based upon the Company’s Consolidated Total Net Leverage Ratio (as defined in the Credit Facility) at such time. The lenders under the Credit Facility have a security interest in substantially all of the assets of the Company and substantially all of its domestic subsidiaries.
Under the Credit Facility, we are required to pay a commitment fee rate that fluctuates between 0.20% and 0.35% per annum and a letter of credit fee rate that fluctuates between 1.25% and 2.00% per annum, in each case, based upon the Company’s Consolidated Total Net Leverage Ratio.
There were no borrowings outstanding under the Credit Facility as of September 30, 2022 and December 31, 2021. As of September 30, 2021, $1.12022, $0.4 million of the borrowing limit under the Credit Facility was utilized (and, therefore, unavailable) for letters of credit.
There were $1.0$0.5 million and $1.3$0.9 million of unamortized debt issueissuance costs related to the Credit Facility as of September 30, 20212022 and December 31, 2020,2021, respectively. These amounts are included in “Other assets” on our Condensed Consolidated Balance Sheets.
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10.Long-Term Debt Maturities
Our maturity analysis for our remaining future undiscounted cash flows for the principal portion of our long-term debt assumes that payments will be made based on the current payment schedule and excludes any additional revolving line of credit borrowings or repayments subsequent to September 30, 2022 and prior to the November 30, 2023 maturity date of our Credit Facility. We estimate future undiscounted cash flows for the principal portion of our long-term debt to be $316.2 million in 2023.
9. Leases
We lease office space and equipment under non-cancelable operating leases. We recognize operating lease expense on a straight-line basis over the lease term, which may include renewal or termination options that are reasonably certain of exercise. Leases with an initial term of 12 months or less are not recorded on the balance sheetCondensed Consolidated Balance Sheets and are expensed on a straight-line basis. Most leases include 1one or more options to renew, with renewal terms that can extend the lease term from one monthup to seven years. The exercise of lease renewal options is at our sole discretion. Certain of our lease agreements include rental payments that are adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The current period disclosures below include our new principal office space in New York, New York, as we accepted possession of the premises on April 1, 2021.
The table below summarizes the carrying amount of our operating lease assets and liabilities:
LeasesLeasesClassificationSeptember 30, 2021December 31, 2020LeasesClassificationSeptember 30, 2022December 31, 2021
AssetsAssetsAssets
Operating lease assets Operating lease assetsOperating lease assets$224,961 $156,645  Operating lease assetsOperating lease assets$195,339 $215,995 
Total lease assetsTotal lease assets$224,961 $156,645 Total lease assets$195,339 $215,995 
LiabilitiesLiabilitiesLiabilities
CurrentCurrentCurrent
Operating lease liabilities Operating lease liabilitiesAccounts payable, accrued expenses and other$32,924 $42,716  Operating lease liabilitiesAccounts payable, accrued expenses and other$33,340 $30,828 
NoncurrentNoncurrentNoncurrent
Operating lease liabilities Operating lease liabilitiesNoncurrent operating lease liabilities232,390 161,677  Operating lease liabilitiesNoncurrent operating lease liabilities213,449 236,026 
Total lease liabilitiesTotal lease liabilities$265,314 $204,393 Total lease liabilities$246,789 $266,854 
The table below summarizes total lease costs:
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended September 30,Nine Months Ended September 30,
Lease CostLease Cost2021202020212020Lease Cost2022202120222021
Operating lease costsOperating lease costs$14,476 $15,769 $40,965 $39,368 Operating lease costs$11,874 $14,476 $36,328 $40,965 
Short-term lease costsShort-term lease costs398 768 1,361 1,778 Short-term lease costs441 398 1,573 1,361 
Variable lease costsVariable lease costs3,368 3,730 9,579 9,563 Variable lease costs3,456 3,368 9,434 9,579 
Sublease incomeSublease income(1,048)(1,048)(3,143)(3,178)Sublease income(224)(1,048)(610)(3,143)
Total lease cost, netTotal lease cost, net$17,194 $19,219 $48,762 $47,531 Total lease cost, net$15,547 $17,194 $46,725 $48,762 
We sublease certain of our leased office spaces to third parties. Our sublease portfolio consists of leases of office space that we have vacated before the lease term expiration. Operating lease expense on vacated office space is reduced by sublease rental income, which is recorded to SG&A expenses on the Condensed Consolidated Statements of Comprehensive Income. Our sublease arrangements do not contain renewal options or restrictive covenants. We estimate future sublease rental income to be $0.8$0.3 million in the remainder of 2021, $0.8 million in 2022, $0.6$0.9 million in 2023, $0.6$0.8 million in 2024 and $0.3 million in 2025. There is no future sublease rental income estimated for the years beyond 2025.
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The maturity analysis below summarizes the remaining future undiscounted cash flows for our operating leases and includes a reconciliation to operating lease liabilities reported on the Condensed Consolidated Balance Sheets:
As of
September 30, 2021
2021 (remaining)$(969)
202251,093 
202348,335 
202443,196 
202536,176 
Thereafter167,613 
   Total future lease payments345,444 
   Less: imputed interest(80,130)
Total$265,314 

As of
September 30, 2022
2022 (remaining)$11,394 
202349,710 
202444,015 
202536,540 
202631,820 
Thereafter140,794 
   Total future lease payments314,273 
   Less: imputed interest(67,484)
Total$246,789 
The table below includes cash paid for our operating lease liabilities, other non-cash information, our weighted average remaining lease term and weighted average discount rate:
Nine Months Ended September 30,Nine Months Ended September 30,
20212020 20222021
Cash paid for amounts included in the measurement of operating lease liabilitiesCash paid for amounts included in the measurement of operating lease liabilities$45,754$41,078Cash paid for amounts included in the measurement of operating lease liabilities$38,297$45,754
Operating lease assets obtained in exchange for lease liabilitiesOperating lease assets obtained in exchange for lease liabilities$98,472$23,653Operating lease assets obtained in exchange for lease liabilities$16,644$98,472
Weighted average remaining lease term (years)Weighted average remaining lease term (years)Weighted average remaining lease term (years)
Operating leases Operating leases8.76.8 Operating leases8.58.7
Weighted average discount rateWeighted average discount rateWeighted average discount rate
Operating leases
Operating leases
5.4 %5.5 %
Operating leases
5.5 %5.4 %
11.10. Commitments and Contingencies
We are subject to legal actions arising in the ordinary course of business. In management’s opinion, we believe we have adequate legal defenses and/or insurance coverage with respect to the eventuality of such actions. We doare not aware of any asserted or unasserted legal proceedings or claims that we believe any settlement or judgment relating to any pending legal action would materially affecthave a material adverse effect on our financial positioncondition or results of our operations.
12.11. Share-Based Compensation
During the nine months ended September 30, 2021,2022, we granted 106,560182,564 restricted share awards, 38,16949,949 restricted stock units and 103,220102,543 performance stock units under the FTI Consulting, Inc. 2017 Omnibus Incentive Compensation Plan, our employee equity compensation plan. Our performance stock units are presented at the maximum potential payout percentage of 150% of target shares granted. These awards are recorded as equity on the Condensed Consolidated Balance Sheets. During the nine months ended September 30, 2021, 11,2422022, 17,025 shares of restricted stock and no stock options were forfeited prior to the completion of the applicable vesting requirements. Additionally, 27,22112,198 performance stock units were forfeited during the nine months ended September 30, 2021.2022 as the award targets were not achieved.
Total share-based compensation expense, net of forfeitures is detailed in the following table:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
Income Statement ClassificationIncome Statement Classification2021202020212020Income Statement Classification2022202120222021
Direct cost of revenuesDirect cost of revenues$2,441 $2,404 $10,172 $10,268 Direct cost of revenues$3,510 $2,441 $11,456 $10,172 
Selling, general and administrative expensesSelling, general and administrative expenses2,830 2,837 9,762 8,773 Selling, general and administrative expenses2,227 2,830 9,450 9,762 
Total share-based compensation expenseTotal share-based compensation expense$5,271 $5,241 $19,934 $19,041 Total share-based compensation expense$5,737 $5,271 $20,906 $19,934 
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13.12. Stockholders’ Equity
On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the “Repurchase Program”). On each of May 18, 2017, December 1, 2017, February 21, 2019 and February 20, 2020, our Board of Directors authorized an additional $100.0 million, respectively.million. On each of July 28, 2020 and December 3, 2020, our Board of Directors authorized an additional $200.0 million, respectively, increasing the Repurchase Program to an aggregate authorization of $900.0 million. No time limit has been established for the completion of the Repurchase Program, and the Repurchase Program may be suspended, discontinued or replaced by the Board of Directors at any time without prior notice. As of September 30, 2021,2022, we have $167.1had $143.5 million available under the Repurchase Program to repurchase additional shares.
The following table details our stock repurchases under the Repurchase Program:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
Shares of common stock repurchased and retiredShares of common stock repurchased and retired— 749 422 1,670 Shares of common stock repurchased and retired128 — 149 422 
Average price paid per shareAverage price paid per share$— $110.57 $109.37 $110.27 Average price paid per share$159.87 $— $157.48 $109.37 
Total costTotal cost$— $82,852 $46,124 $184,196 Total cost$20,430 $— $23,528 $46,124 
As we repurchase our common shares, we reduce stated capital on our Condensed Consolidated Balance Sheets for the $0.01 of par value of the shares repurchased, with the excess purchase price over par value recorded as a reduction to additional paid-in capital. If additional paid-in capital is reduced to zero, we record the remainder of the excess purchase price over par value as a reduction of retained earnings. During the nine months ended September 30, 2021, due to the volume of repurchases, we recorded a reduction to stated capital for the par value of the shares repurchased, with a portion of the excess purchase price over par value recorded as a reduction to additional paid-in capital of $3.0 million and the remainder of the excess purchase price over par value of $43.1 million recorded as a reduction of retained earnings.
Common stock outstanding was 34.334.4 million shares and 34.534.3 million shares as of September 30, 20212022 and December 31, 2020,2021, respectively. Common stock outstanding includes unvested restricted stock awards, which are considered issued and outstanding under the terms of the restricted stock award agreements.
14.13. Segment Reporting
We manage our business in 5five reportable segments: Corporate Finance, FLC, Economic Consulting, Technology and Strategic Communications.
Our Corporate Finance segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, banks, lenders, and other financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of services centered around 3three core offerings: business transformation & strategy, transactions and turnaround restructuring and bankruptcy.& restructuring.
Our FLC segment provides law firms, companies, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services in risk and investigations and disputes, including cybersecurity, and a focus on highly regulated industries such as our construction & environmental solutions and health solutions services. These services are supported by our data & analytics servicessolutions, which help our clients analyze large, disparate sets of data related to their business operations and support our clients during regulatory inquiries and commercial disputes. We deliver a wide range of services centered around 5five core offerings: construction & environmental solutions, data & analytics, disputes, health solutions and risk and investigations.
Our Economic Consulting segment, including subsidiary Compass Lexecon LLC, provides law firms, companies, government entities and other interested parties with analyses of complex economic issues for use in international arbitration, legal and regulatory proceedings, and strategic decision making and public policy debates around the world. We deliver a wide range of services centered around 3three core offerings: antitrust & competition economics, financial economics and international arbitration.
Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of consulting and services to address legal and regulatory risk, including e-discovery, information governance, privacy and security and corporate legal operations solutions. We deliver a full spectrum of services including data collection, data processing, document review, hosting, advanced analyticscentered around three core offerings: corporate legal operations, e-discovery services and consulting to help clients secure, govern, analyzeexpertise, and understand their data in the context of compliance and risk.information governance, privacy & security services.
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Our Strategic Communications segment develops and executes communications strategies to help management teams, boards of directors, law firms, governments and regulators manage change and mitigate risk surrounding transformational and disruptive events, including transactions, investigations, disputes, crises, regulation and legislation. We deliver a wide range of services centered around 3three core offerings: corporate reputation, financial communications and public affairs.
We evaluate the performance of our operating segments based on Adjusted Segment EBITDA, a GAAP financial measure. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.
The table below presents revenues and Adjusted Segment EBITDA for our reportable segments:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
RevenuesRevenues    Revenues    
Corporate FinanceCorporate Finance$250,321 $236,615 $707,495 $690,375 Corporate Finance$265,370 $250,321 $795,766 $707,495 
FLCFLC145,264 119,104 446,831 373,082 FLC159,948 145,264 478,092 446,831 
Economic ConsultingEconomic Consulting172,543 154,978 525,122 438,609 Economic Consulting193,183 172,543 523,201 525,122 
TechnologyTechnology64,657 58,585 222,762 164,392 Technology84,915 64,657 243,181 222,762 
Strategic CommunicationsStrategic Communications69,443 52,967 197,781 168,236 Strategic Communications72,449 69,443 214,237 197,781 
Total revenuesTotal revenues$702,228 $622,249 $2,099,991 $1,834,694 Total revenues$775,865 $702,228 $2,254,477 $2,099,991 
Adjusted Segment EBITDAAdjusted Segment EBITDA    Adjusted Segment EBITDA    
Corporate FinanceCorporate Finance$55,635 $56,215 $133,248 $181,425 Corporate Finance$51,532 $55,635 $160,021 $133,248 
FLCFLC16,620 13,591 64,054 25,752 FLC18,162 16,620 52,126 64,054 
Economic ConsultingEconomic Consulting29,917 25,720 87,195 60,124 Economic Consulting32,913 29,917 75,754 87,195 
TechnologyTechnology7,835 11,939 47,951 32,858 Technology13,213 7,835 34,940 47,951 
Strategic CommunicationsStrategic Communications15,489 8,427 39,388 27,237 Strategic Communications12,947 15,489 40,133 39,388 
Total Adjusted Segment EBITDATotal Adjusted Segment EBITDA$125,496 $115,892 $371,836 $327,396 Total Adjusted Segment EBITDA$128,767 $125,496 $362,974 $371,836 
The table below reconciles net income to Total Adjusted Segment EBITDA:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
Net incomeNet income$69,480 $50,172 $196,758 $155,093 Net income$77,267 $69,480 $188,016 $196,758 
Add back:Add back:  Add back:  
Income tax provisionIncome tax provision19,155 14,407 54,394 45,342 Income tax provision15,836 19,155 46,156 54,394 
Interest income and otherInterest income and other(5,175)3,340 (5,297)(3,879)Interest income and other(7,771)(5,175)(10,418)(5,297)
Interest expenseInterest expense5,073 5,151 15,164 15,169 Interest expense2,378 5,073 7,468 15,164 
Unallocated corporate expensesUnallocated corporate expenses25,974 26,061 82,041 79,928 Unallocated corporate expenses30,470 25,974 99,524 82,041 
Segment depreciation expenseSegment depreciation expense8,130 7,236 23,394 21,573 Segment depreciation expense8,273 8,130 24,909 23,394 
Amortization of intangible assetsAmortization of intangible assets2,859 2,795 8,512 7,440 Amortization of intangible assets2,314 2,859 7,319 8,512 
Segment special charges— 6,730 — 6,730 
Remeasurement of acquisition-related contingent considerationRemeasurement of acquisition-related contingent consideration— — (3,130)— Remeasurement of acquisition-related contingent consideration— — — (3,130)
Total Adjusted Segment EBITDATotal Adjusted Segment EBITDA$125,496 $115,892 $371,836 $327,396 Total Adjusted Segment EBITDA$128,767 $125,496 $362,974 $371,836 
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Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion and analysis of our consolidated financial condition, results of operations, and liquidity and capital resources for the three and nine months ended September 30, 20212022 and 20202021, and significant factors that could affect our prospective financial condition and results of operations. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes and with our Annual Report on Form 10-K for the year ended December 31, 20202021 filed with the United States ("U.S.") Securities and Exchange Commission (“SEC”). In addition to historical information, the following discussion includes forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations and intentions. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, these expectations or any of the forward-looking statements could prove to be incorrect, and actual results could differ materially from those projected or assumed in the forward-looking statements.
BUSINESS OVERVIEW
FTI Consulting, Inc. ("FTI Consulting," "we," "us" or the "Company") is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. Individually, each of our segments and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact. Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from proactive risk management to rapid response to unexpected events and dynamic environments.
We report financial results for the following five reportable segments:
Our Corporate Finance & Restructuring (“Corporate Finance”) segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, banks, lenders, and other financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of services centered around three core offerings: business transformation & strategy, transactions and turnaround restructuring and bankruptcy.& restructuring.
Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services in risk and investigations and disputes, including cybersecurity, and a focus on highly regulated industries such as our construction & environmental solutions and health solutions services. These services are supported by our data & analytics servicessolutions, which help our clients analyze large, disparate sets of data related to their business operations and support our clients during regulatory inquiries and commercial disputes. We deliver a wide range of services centered around five core offerings: construction & environmental solutions, data & analytics, disputes, health solutions and risk and investigations.
Our Economic Consulting segment, including subsidiary Compass Lexecon LLC, provides law firms, companies, government entities and other interested parties with analyses of complex economic issues for use in international arbitration, legal and regulatory proceedings, and strategic decision making and public policy debates around the world. We deliver a wide range of services centered around three core offerings: antitrust & competition economics, financial economics and international arbitration.
Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of consulting and services to address legal and regulatory risk, including e-discovery, information governance, privacy and security and corporate legal operations solutions. We deliver a full spectrum of services including data collection, data processing, document review, hosting, advanced analyticscentered around three core offerings: corporate legal operations, e-discovery services and consulting to help clients secure, govern, analyzeexpertise, and understand their data in the context of compliance and risk.information governance, privacy & security services.
Our Strategic Communications segment develops and executes communications strategies to help management teams, boards of directors, law firms, governments and regulators manage change and mitigate risk surrounding transformational and disruptive events, including transactions, investigations, disputes, crises, regulation and legislation. We deliver a wide range of services centered around three core offerings: corporate reputation, financial communications and public affairs.
We derive substantially all of our revenues from providing professional services to both U.S. and global clients. Most of our services are rendered under time and expense contract arrangements, that obligatewhich require the client to pay us a fee forbased on the number of hours that we incurworked at contractually agreed-upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, which may include the cost of producing our work productincluding those relating to travel, out-of-pocket expenses, outside consultants and other direct expenses that we incur on behalf ofoutside service costs. Certain contracts are rendered under fixed-fee arrangements, which require the client such as travel costs. We also render servicesto pay a fixed fee in exchange for whicha predetermined set of professional services. Fixed-fee arrangements may require certain clients may be required to pay us a fixed-fee or recurring retainer. These Our contract
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arrangements are generally cancelable at any time. Some of our engagementsmay also contain success fees or performance-based arrangements in which we earn a contingent or success fee when and if certain predefined outcomes occur.our fees are based on the attainment of contractually defined objectives with our client. This type of success fee may supplement a time and
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expense or fixed-fee arrangement. Success fee revenues may cause variations in our revenues and operating results due to the timing of when achieving the performance-based criteria becomes probable. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.
In our Technology segment, certain clients are billed based on the amount of data storage used or the volume of information processed. Unit-based revenues are defined as revenues billed on a per item, per page or another unit-based method and include revenues from data processing and hosting. Unit-based revenues include revenues associated with the software products that are made available to customers via a web browser (“on-demand”). On-demand revenues are charged on a unit or monthly basis and include, but are not limited to, processing and review related functions.
Our financial results are primarily driven by:
•the number, size and type of engagements we secure;
•the rate per hour or fixed charges we charge our clients for services;
•the utilization rates of the revenue-generating professionals we employ;
•the timing of revenue recognition related to revenues subject to certain performance-based contingencies;
•the number of revenue-generating professionals;
•the types of assignments we are working on at different times;
•the length of the billing and collection cycles; and
•the geographic locations of our clients or locations in which services are rendered.
We define acquisition growth as revenues of acquired companies in the first 12 months following the effective date of an acquisition. When significant, we identify the impact of acquisition-related revenue growth. Our definition of organic growth is the change in revenues, excluding the impact of all such acquisitions.
When significant, we identify the estimated impact of foreign currency (“FX”) driven by our businesses with functional currencies other than the U.S. dollar (“USD”). The estimated impact of FX on the period-to-period performance results is calculated as the difference between the prior period results, multiplied by the average FX exchange rates to USD in the current period and the prior period results, multiplied by the average FX exchange rates to USD in the prior period.
Non-GAAP Financial Measures
In the accompanying analysis of financial information, we sometimes use information derived from consolidated and segment financial information that may not be presented in our financial statements or prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP"). Certain of these financial measures are considered not in conformity with GAAP ("non-GAAP financial measures”measures") under the SEC rules. Specifically, we have referred to the following non-GAAP financial measures:
•Total Segment Operating Income
•Adjusted EBITDA
•Total Adjusted Segment EBITDA
•Adjusted EBITDA Margin
•Adjusted Net Income
•Adjusted Earnings per Diluted Share
•Free Cash Flow
We have included the definitions of Segment Operating Income and Adjusted Segment EBITDA, which are GAAP financial measures, below in order to more fully define the components of certain non-GAAP financial measures in the accompanying analysis of financial information. As described in Note 14,13, “Segment Reporting” in Part I, Item 1, of this
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Quarterly Report on Form 10-Q, we evaluate the performance of our operating segments based on Adjusted Segment EBITDA, and Segment Operating Income is a component of the definition of Adjusted Segment EBITDA.
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We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.
We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, gain or loss on sale of a business and losses on early extinguishment of debt. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these non-GAAP financial measures, considered along with corresponding GAAP financial measures, provide management and investors with additional information for comparison of our operating results with the operating results of other companies. We define Adjusted EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues.
We define Adjusted Net Income and Adjusted Earnings per Diluted Share (“Adjusted EPS”), which are non-GAAP financial measures, as net income and earnings per diluted share ("EPS"), respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, losses on early extinguishment of debt, non-cash interest expense on convertible notes and the gain or loss on sale of a business. We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with an additional understanding of our business operating results, including underlying trends.
We define Free Cash Flow, which is a non-GAAP financial measure, as net cash provided by operating(used in) operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with an additional understanding of the Company’s ability to generate cash for ongoing business operations and other capital deployment.
Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Condensed Consolidated Statements of Comprehensive Income and Condensed Consolidated Statements of Cash Flows. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this report.
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EXECUTIVE HIGHLIGHTS
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 (dollar amounts in thousands,
except per share data)		(dollar amounts in thousands, except per share data)
Revenues$702,228 $622,249 $2,099,991 $1,834,694 
Special charges (1)
$— $7,103 $— $7,103 
Net income$69,480 $50,172 $196,758 $155,093 
Adjusted EBITDA$100,260 $90,917 $292,035 $249,924 
Earnings per common share — diluted$1.96 $1.35 $5.58 $4.11 
Adjusted earnings per common share — diluted$2.02 $1.54 $5.64 $4.39 
Net cash provided by operating activities$196,946 $111,563 $155,920 $140,977 
Total number of employees6,690 6,264 6,690 6,264 
(1)    Excluded from non-GAAP financial measures.
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
 (dollar amounts in thousands,
except per share data)		(dollar amounts in thousands,
 except per share data)
Revenues$775,865 $702,228 $2,254,477 $2,099,991 
Net income$77,267 $69,480 $188,016 $196,758 
Adjusted EBITDA$98,974 $100,260 $265,587 $292,035 
Earnings per common share — diluted$2.15 $1.96 $5.25 $5.58 
Adjusted earnings per common share — diluted$2.15 $2.02 $5.25 $5.64 
Net cash provided by (used in) operating activities$128,292 $196,946 $(40,439)$155,920 
Total number of employees7,518 6,690 7,518 6,690 
Third Quarter 20212022 Executive Highlights
Revenues
Revenues for the three months ended September 30, 20212022 increased $80.0$73.6 million, or 12.9%10.5%, to $702.2$775.9 million, as compared to the three months ended September 30, 2020,2021, which included a 1.6%4.3% estimated positivenegative impact from FX. Acquisition-related revenues contributed $3.7 million compared to the same quarter in the prior year. Excluding the estimated impact from FX, and the acquisition-related revenues, revenues increased $66.4$103.7 million, or 10.7%14.8%, primarily due to increasedhigher realization, which includes the recognition of revenues previously deferred, and higher demand foracross all of our segments compared to the same quarter in the prior year.business segments.
Special Charges
There were no special charges recorded during the three months ended September 30, 2021.
During the three months ended September 30, 2020, we recorded a special charge of $7.1 million, which consists of the following components:
•$4.7 million of lease abandonment and other relocation costs associated with the consolidation of office space in New York, New York; and
•$2.4 million of severance and other employee-related costs in our FLC segment.
The following table details the special charge by segment:
Three Months Ended September 30,
20212020
Corporate Finance$— $861 
FLC— 3,484 
Economic Consulting— 35 
Technology— 276 
Strategic Communication— 2,074 
Segment special charge— 6,730 
Unallocated Corporate— 373 
Total$— $7,103 
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Net income
Net income for the three months ended September 30, 20212022 increased $19.3$7.8 million, or 38.5%11.2%, to $69.5$77.3 million, as compared to the three months ended September 30, 2020.2021. The increase in net income was primarily due to higher revenues, a lower effective tax rate, an increase in revenues and FX remeasurement gains and lower interest expense, which was partially offset by an increase in compensation, expenses, including the impact of a 6.9%12.4% increase in billabletotal headcount, and higher variable compensation, as well as higher selling, general and administrative ("SG&A") expenses compared to the same quarter in the prior year.
Adjusted EBITDA
Adjusted EBITDA for the three months ended September 30, 2021 increased $9.32022 decreased $1.3 million, or 10.3%1.3%, to $100.3$99.0 million, as compared to the three months ended September 30, 2020.2021. Adjusted EBITDA Margin of 12.8% for the three months ended September 30, 2022 compared to 14.3% for the three months ended September 30, 2021 compared with 14.6% for the three months ended September 30, 2020.2021. The increasedecrease in Adjusted EBITDA was primarily due to an increase in revenues, which was partially offset by an increase in compensation expenses, including the impact of a 6.9%12.4% increase in billabletotal headcount, and higher variable compensation, as well as higher SG&A expenses, which was partially offset by an increase in revenues compared to the same quarter in the prior year.
EPS and Adjusted EPS
EPS for the three months ended September 30, 2022 increased $0.19 to $2.15 compared to $1.96 for the three months ended September 30, 2021. The increase in EPS was primarily due to higher net income as described above.
Adjusted EPS increased $0.13 to $2.15 for the three months ended September 30, 2022 compared to $2.02 for the three months ended September 30, 2021. Adjusted EPS for the three months ended September 30, 2021 increased $0.61 to $1.96 compared to $1.35 for the three months ended September 30, 2020. The increase in EPS was primarily due to the higher net income described above and a decline in diluted weighted average shares outstanding.
Adjusted EPS increased $0.48 to $2.02 for the three months ended September 30, 2021 compared to $1.54 for the three months ended September 30, 2020. Adjusted EPS for the three months ended September 30, 2021 excludes $2.4excluded $2.4 million of non-cash interest expense related to the 2.0% convertible senior notes due 2023 (the "2023 Convertible Notes"), which increased Adjusted EPS by $0.06$0.06.
The Company adopted Accounting Standards Update ("ASU") 2020-06 ("ASU 2020-06") and no longer recognizes non-cash interest expense on the 2023 Convertible Notes, effective January 1, 2022. As a result, there was no adjustment between EPS and Adjusted EPS for non-cash interest expense on the 2023 Convertible Notes for the three months ended September 30, 2020 excluded $7.1 million2022. See Note 2, “New Accounting Standards” for additional information about the adoption of special charges and $2.3 million of non-cash interest expense related to the 2023 Convertible Notes, which increased Adjusted EPS by $0.14 and $0.05, respectively.ASU 2020-06.
Liquidity and Capital Allocation
Net cash provided by operating activities for the three months ended September 30, 2021 increased $85.42022 decreased $68.7 million to $196.9$128.3 million compared with $111.6$196.9 million for the three months ended September 30, 2020.2021. The increasedecrease in net cash provided by operating activities was primarilylargely due to increased cash collections, which was partially offset by an increase in salariescompensation, primarily related to headcount growth, as well as delays in billings and other operating expenses.a decrease in cash collections compared to the same quarter in the prior year. Days sales outstanding
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(“DSO”) ofwas 106 days at September 30, 2022 and 100 days at September 30, 2021 compared to 104 days at September 30, 2020.2021. Our cash balances were unfavorably impacted by FX translation.
Free Cash Flow was an inflow of $172.2$115.0 million and $99.8$172.2 million for the three months ended September 30, 20212022 and 2020,2021, respectively. The increasedecrease for the three months ended September 30, 20212022 was primarily due to higherlower net cash provided by operating activities, as described above, partially offset by an increasea decrease in net cash used for purchases of property and equipment.
Coronavirus Disease 2019 ("COVID-19") Pandemic
The COVID-19 pandemic created global volatility, economic uncertainty and general market disruption, and it has impacted each of our segments, practices and regions differently. Duringdid not materially adversely impact the Company as a whole for the three months ended September 30, 2021, 2022the COVID-19 pandemic continued to impact our ability to deliver certain services due to travel restrictions, court closures, backlogs at courts and government moratoriums on restructuring, which is varied in each region. Although we have not been materially adversely impacted by illness in our employee population, the COVID-19 pandemic could negatively impact employee retention or headcount growth, which differs by segment, position and geography and is difficult to quantify. Evolving business practices as well as fiscal and monetary policies have mitigated the negative economic impact of the pandemic in certain key geographies, such as in North America. The COVID-19 pandemic and its. Nevertheless, COVID-19’s impact on our business and the health and welfare of our employees and clients varied across our segments, practices and regions and continues to be difficult to predict and quantify, especially due to uncertainty arising from the continuing evolution of COVID-19 variants, the efficacy of vaccinations against new variants, regional variances in the availability of vaccines and the roll-out of vaccination programs, aroundregional differences in vaccine hesitancy, requirements that our clients may impose relating to the world, includingvaccination status of our employees and contractors who serve such clients, and possible future vaccine mandates that may be imposed by governments that could apply to us, and our employees and requirements imposed by ourclients. We expect that adverse impacts from COVID-19 could continue to arise. Adverse impacts from COVID-19 could include, but are not limited to, delays associated with entering into or performing client engagements, postponements of litigation and investigations assignments due to court suspensions or closures or other delays, terminations of engagements, failure to attract new or retain existing clients, relating to the vaccination statusdelays of in-person back-to-work efforts for our employees who serve such clients.or clients, increased employee turnover or a reduction in the pool of qualified employee candidates available to staff engagements or hire, and adverse health outcomes for our employee population
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.
Headcount
Our total headcount increased 5.8%10.9% from 6,3216,780 as of December 31, 20202021 to 6,6907,518 as of September 30, 2021.2022. The following table includes the net billable headcount additions (reductions) for the nine months ended September 30, 2021:2022:
Billable HeadcountCorporate
Finance		FLCEconomic ConsultingTechnologyStrategic
Communications		Total
December 31, 20201,655 1,343 891 408 770 5,067 
Additions (reductions), net29 24 (1)15 8 75 
March 31, 20211,684 1,367 890 423 778 5,142 
Additions (reductions), net(52)32 (6)6 (7)(27)
June 30, 20211,632 1,399 884 429 771 5,115 
Additions, net72 77 41 14 46 250 
September 30, 20211,704 1,476 925 443 817 5,365 
Percentage change in headcount from
December 31, 2020
3.0 %9.9 %3.8 %8.6 %6.1 %5.9 %
Billable HeadcountCorporate
Finance		FLCEconomic ConsultingTechnologyStrategic
Communications		Total
December 31, 20211,702 1,496 921 468 814 5,401 
Additions, net55 17 29 28 42 171 
March 31, 20221,757 1,513 950 496 856 5,572 
Additions (reductions), net12 (4)(15)11 21 25 
June 30, 20221,769 1,509 935 507 877 5,597 
Additions, net131 105 63 41 74 414 
September 30, 20221,900 1,614 998 548 951 6,011 
Percentage change in headcount from
December 31, 2021
11.6 %7.9 %8.4 %17.1 %16.8 %11.3 %

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CONSOLIDATED RESULTS OF OPERATIONS
Segment and Consolidated Operating Results: 
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 (in thousands, except per share data)(in thousands, except per share data)
Revenues    
Corporate Finance$250,321 $236,615 $707,495 $690,375 
FLC145,264 119,104 446,831 373,082 
Economic Consulting172,543 154,978 525,122 438,609 
Technology64,657 58,585 222,762 164,392 
Strategic Communications69,443 52,967 197,781 168,236 
Total revenues$702,228 $622,249 $2,099,991 $1,834,694 
Segment operating income    
Corporate Finance$52,316 $52,372 $126,718 $172,847 
FLC15,101 8,729 59,599 17,853 
Economic Consulting28,455 24,304 82,891 55,916 
Technology4,416 8,621 38,315 23,642 
Strategic Communications14,219 5,105 35,537 21,395 
Total segment operating income114,507 99,131 343,060 291,653 
Unallocated corporate expenses(25,974)(26,061)(82,041)(79,928)
Operating income88,533 73,070 261,019 211,725 
Other income (expense)   
Interest income and other5,175 (3,340)5,297 3,879 
Interest expense(5,073)(5,151)(15,164)(15,169)
 102 (8,491)(9,867)(11,290)
Income before income tax provision88,635 64,579 251,152 200,435 
Income tax provision19,155 14,407 54,394 45,342 
Net income$69,480 $50,172 $196,758 $155,093 
Earnings per common share — basic$2.07 $1.41 $5.88 $4.30 
Earnings per common share — diluted$1.96 $1.35 $5.58 $4.11 
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 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
 (in thousands, except per share data)(in thousands, except per share data)
Revenues    
Corporate Finance$265,370 $250,321 $795,766 $707,495 
FLC159,948 145,264 478,092 446,831 
Economic Consulting193,183 172,543 523,201 525,122 
Technology84,915 64,657 243,181 222,762 
Strategic Communications72,449 69,443 214,237 197,781 
Total revenues$775,865 $702,228 $2,254,477 $2,099,991 
Segment operating income    
Corporate Finance$47,948 $52,316 $148,936 $126,718 
FLC16,570 15,101 47,126 59,599 
Economic Consulting31,674 28,455 72,056 82,891 
Technology9,833 4,416 25,005 38,315 
Strategic Communications12,155 14,219 37,623 35,537 
Total segment operating income118,180 114,507 330,746 343,060 
Unallocated corporate expenses(30,470)(25,974)(99,524)(82,041)
Operating income87,710 88,533 231,222 261,019 
Other income (expense)   
Interest income and other7,771 5,175 10,418 5,297 
Interest expense(2,378)(5,073)(7,468)(15,164)
 5,393 102 2,950 (9,867)
Income before income tax provision93,103 88,635 234,172 251,152 
Income tax provision15,836 19,155 46,156 54,394 
Net income$77,267 $69,480 $188,016 $196,758 
Earnings per common share — basic$2.29 $2.07 $5.57 $5.88 
Earnings per common share — diluted$2.15 $1.96 $5.25 $5.58 
Reconciliation of Net Income to Adjusted EBITDA: 
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(in thousands)(in thousands) (in thousands)(in thousands)
Net incomeNet income$69,480 $50,172 $196,758 $155,093 Net income$77,267 $69,480 $188,016 $196,758 
Add back:Add back:Add back:
Income tax provisionIncome tax provision19,155 14,407 54,394 45,342 Income tax provision15,836 19,155 46,156 54,394 
Interest income and otherInterest income and other(5,175)3,340 (5,297)(3,879)Interest income and other(7,771)(5,175)(10,418)(5,297)
Interest expenseInterest expense5,073 5,151 15,164 15,169 Interest expense2,378 5,073 7,468 15,164 
Depreciation and amortizationDepreciation and amortization8,867 7,949 25,631 23,656 Depreciation and amortization8,949 8,867 27,045 25,631 
Amortization of intangible assetsAmortization of intangible assets2,860 2,795 8,515 7,440 Amortization of intangible assets2,315 2,860 7,320 8,515 
Special charges— 7,103 — 7,103 
Remeasurement of acquisition-related contingent considerationRemeasurement of acquisition-related contingent consideration— — (3,130)— Remeasurement of acquisition-related contingent consideration— — — (3,130)
Adjusted EBITDAAdjusted EBITDA$100,260 $90,917 $292,035 $249,924 Adjusted EBITDA$98,974 $100,260 $265,587 $292,035 
 
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Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS: 
 Three Months Ended September 30,Nine Months Ended September 30,
 2021202020212020
 (in thousands, except per share data)(in thousands, except per share data)
Net income$69,480 $50,172 $196,758 $155,093 
Add back:
Remeasurement of acquisition-related contingent consideration— — (3,130)— 
Special charges— 7,103 — 7,103 
Tax impact of special charges— (1,847)— (1,847)
Non-cash interest expense on convertible notes2,412 2,286 7,141 6,766 
Tax impact of non-cash interest expense on convertible
notes
(627)(595)(1,857)(1,760)
Adjusted Net Income$71,265 $57,119 $198,912 $165,355 
Earnings per common share — diluted$1.96 $1.35 $5.58 $4.11 
Add back:    
Remeasurement of acquisition-related contingent consideration— — (0.09)— 
Special charges— 0.19 — 0.19 
Tax impact of special charges— (0.05)— (0.05)
Non-cash interest expense on convertible notes0.08 0.06 0.20 0.18 
Tax impact of non-cash interest expense on convertible
notes
(0.02)(0.01)(0.05)(0.04)
Adjusted earnings per common share — diluted$2.02 $1.54 $5.64 $4.39 
Weighted average number of common shares
outstanding — diluted
35,362 37,086 35,265 37,708 
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 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
 (in thousands, except per share data)(in thousands, except per share data)
Net income$77,267 $69,480 $188,016 $196,758 
Add back:
Remeasurement of acquisition-related contingent consideration— — — (3,130)
Non-cash interest expense on convertible notes— 2,412 — 7,141 
Tax impact of non-cash interest expense on
    convertible notes
— (627)— (1,857)
Adjusted Net Income$77,267 $71,265 $188,016 $198,912 
Earnings per common share — diluted$2.15 $1.96 $5.25 $5.58 
Add back:    
Remeasurement of acquisition-related contingent consideration— — — (0.09)
Non-cash interest expense on convertible notes— 0.08 — 0.20 
Tax impact of non-cash interest expense on
    convertible notes
— (0.02)— (0.05)
Adjusted earnings per common share — diluted$2.15 $2.02 $5.25 $5.64 
Weighted average number of common shares
      outstanding — diluted		35,918 35,362 35,825 35,265 
Reconciliation of Net Cash Provided by (Used in) Operating Activities to Free Cash Flow:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(in thousands)(in thousands) (in thousands)(in thousands)
Net cash provided by operating activities$196,946 $111,563 $155,920 $140,977 
Net cash provided by (used in) operating activitiesNet cash provided by (used in) operating activities$128,292 $196,946 $(40,439)$155,920 
Purchases of property and equipmentPurchases of property and equipment(24,745)(11,764)(52,470)(25,663)Purchases of property and equipment(13,316)(24,745)(38,951)(52,470)
Free Cash FlowFree Cash Flow$172,201 $99,799 $103,450 $115,314 Free Cash Flow$114,976 $172,201 $(79,390)$103,450 
Three Months Ended September 30, 20212022 Compared with Three Months Ended September 30, 20202021
Revenues and operating income
See “Segment Results” for an expanded discussion of revenues, gross profit and SG&A expenses.
Unallocated corporate expenses
Unallocated corporate expenses for the three months ended September 30, 2021 decreased $0.12022 increased $4.5 million, or 0.3%17.3%, to $26.0$30.5 million compared with $26.1$26.0 million for the three months ended September 30, 2020.Excluding the impact of special charges recorded in 2020, unallocated corporate expenses increased by $0.3 million, or 1.1%.2021. The increase was primarily due to higher consulting expenses for corporate compensation costs due to headcount growth.initiatives, such as system implementations, partially offset by a decrease in legal expenses.
Interest income and other
Interest income and other, which includes FX gains and losses, increased $8.5$2.6 million to $7.8 million for the three months ended September 30, 2022 compared with $5.2 million for the three months ended September 30, 2021 compared with2021. The increase was primarily due to a $3.3$7.1 million lossnet FX gain for the three months ended September 30, 2020. The increase was primarily due2022 compared to a $7.6$4.1 million increase in net FX gains.gain for the three months ended September 30, 2021.
FX gains and losses, both realized and unrealized, relate to the remeasurement or settlement of monetary assets and liabilities that are denominated in a currency other than an entity’s functional currency. These monetary assets and liabilities include cash, as well as third-party and intercompany receivables and payables.
27

Interest expense
Interest expense for the three months ended September 30, 20212022 decreased $0.1$2.7 million to $5.1$2.4 million compared with $5.2to $5.1 million for the three months ended September 30, 2020.2021. The decrease was primarily due to the adoption of ASU 2020-06 as described above.
Income tax provision
Our income tax provision increased $4.7decreased $3.3 million, or 33.0%17.3%, to $15.8 million for the three months ended September 30, 2022 from $19.2 million for the three months ended September 30, 2021 from $14.4 million2021. Our effective tax rate of 17.0% for the three months ended September 30, 2020. Our effective tax rate of2022 compared with 21.6% for the three months ended September 30, 2021 compared with 22.3%2021. The tax rate for the three months ended September 30, 2020.2022 was favorably impacted by a combined $8.3 million tax benefit from the release of the U.S. foreign tax credit valuation allowance, utilization of current year foreign tax credits, and a deferred tax benefit arising from an intellectual property license agreement between a U.S. subsidiary of the Company and certain foreign subsidiaries of the Company. The tax rate for the three months ended September 30, 2021 was favorably impacted by a one-time discrete tax adjustment related to the release of the valuation allowance on our deferred tax assets in Australia because of sustained profitability. Additionally, the tax rate for the three months ended September 30, 2021 and 2020 was favorably impacted by a discrete tax adjustment related to share-based compensation.
Nine Months Ended September 30, 20212022 Compared with Nine Months Ended September 30, 20202021
Revenues and operating income
See “Segment Results”Results” for an expanded discussion of revenues, gross profit and SG&A expenses.
Unallocated corporate expenses
Unallocated corporate expenses for the nine months ended September 30, 20212022 increased $2.1$17.5 million, or 2.6%21.3%, to $82.0$99.5 million compared with $79.9$82.0 million for the nine months ended September 30, 2020. Excluding the impact of special charges recorded in 2020, unallocated corporate expenses increased by $2.5 million, or 3.1%.2021. The increase was primarily due to higher consulting expenses for corporate compensation costs due to headcount growth,initiatives, such as system implementations, as well as higher infrastructure support costs to support growthan increase in the business.
27

travel and entertainment and legal expenses.
Interest income and other
Interest income and other, which includes FX gains and losses, increased $1.4$5.1 million to $10.4 million for the nine months ended September 30, 2022 compared with $5.3 million for the nine months ended September 30, 2021 compared with $3.92021. The increase was primarily due to a $7.9 million net FX gain for the nine months ended September 30, 2020. The increase was primarily due2022 compared to a $1.9$3.1 million increase in net FX gains.gain for the nine months ended September 30, 2021.
Interest expense
Interest expense wasfor the nine months ended September 30, 2022 decreased $7.7 million to $7.5 million compared to $15.2 million for the nine months ended September 30, 2021 and 2020.2021. The decrease was primarily due to the adoption of ASU 2020-06 as described above.
Income tax provision
Our income tax provision increased $9.1decreased $8.2 million, or 20.0%15.1%, to $46.2 million for the nine months ended September 30, 2022 from $54.4 million for the nine months ended September 30, 2021 from $45.3 million2021. Our effective tax rate of 19.7% for the nine months ended September 30, 2020. Our effective tax rate of2022 compared to 21.7% for the nine months ended September 30, 2021 compared with 22.6%2021. The tax rate for the nine months ended September 30, 2020.2022 and 2021 was impacted by a favorable discrete tax adjustment related to share-based compensation, which had a more favorable benefit in 2022 due to more shares vesting at a higher share price of our common stock. The tax rate for the nine months ended September 30, 2022 was also favorably impacted by a combined $8.3 million tax benefit from the release of the U.S. foreign tax credit valuation allowance, utilization of current year foreign tax credits, and a deferred tax benefit arising from an intellectual property license agreement between a U.S. subsidiary of the Company and certain foreign subsidiaries of the Company. The tax rate for the nine months ended September 30, 2021 was favorably impacted by aone-time discrete tax adjustmentadjustments related to the future change in the United Kingdom ("U.K.") tax rate and the release of the valuation allowance on our deferred tax assets in Australia because of sustained profitability. In June 2021, the U.K. government approved the U.K. tax rate increase from 19.0% to 25.0% effective in April 2023, which required us to remeasure our deferred tax asset related to an intellectual property license between our U.S. and U.K. subsidiaries. Additionally, the tax rate for the nine months ended September 30, 2021 and 2020 was favorably impacted by a discrete tax adjustment related to share-based compensation.
28

SEGMENT RESULTS
Total Adjusted Segment EBITDA
We evaluate the performance of each of our operating segments based on Adjusted Segment EBITDA, which is a GAAP financial measure. The following table reconciles net income to Total Adjusted Segment EBITDA, a non-GAAP financial measure, for the three and nine months ended September 30, 20212022 and 2020:2021:
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(in thousands)(in thousands) (in thousands)(in thousands)
Net incomeNet income$69,480 $50,172 $196,758 $155,093 Net income$77,267 $69,480 $188,016 $196,758 
Add back:Add back:Add back:
Income tax provisionIncome tax provision19,155 14,407 54,394 45,342 Income tax provision15,836 19,155 46,156 54,394 
Interest income and otherInterest income and other(5,175)3,340 (5,297)(3,879)Interest income and other(7,771)(5,175)(10,418)(5,297)
Interest expenseInterest expense5,073 5,151 15,164 15,169 Interest expense2,378 5,073 7,468 15,164 
Unallocated corporate expensesUnallocated corporate expenses25,974 26,061 82,041 79,928 Unallocated corporate expenses30,470 25,974 99,524 82,041 
Total segment operating incomeTotal segment operating income114,507 99,131 343,060 291,653 Total segment operating income118,180 114,507 330,746 343,060 
Add back:Add back:Add back:
Segment depreciation expenseSegment depreciation expense8,130 7,236 23,394 21,573 Segment depreciation expense8,273 8,130 24,909 23,394 
Amortization of intangible assetsAmortization of intangible assets2,859 2,795 8,512 7,440 Amortization of intangible assets2,314 2,859 7,319 8,512 
Segment special charges— 6,730 — 6,730 
Remeasurement of acquisition-related contingent considerationRemeasurement of acquisition-related contingent consideration— — (3,130)— Remeasurement of acquisition-related contingent consideration— — — (3,130)
Total Adjusted Segment EBITDATotal Adjusted Segment EBITDA$125,496 $115,892 $371,836 $327,396 Total Adjusted Segment EBITDA$128,767 $125,496 $362,974 $371,836 





29

Other Segment Operating Data
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
Number of revenue-generating professionals (at period
end):
Number of revenue-generating professionals (at period
end):
    Number of revenue-generating professionals (at
period end):		    
Corporate FinanceCorporate Finance1,704 1,608 1,704 1,608 Corporate Finance1,900 1,704 1,900 1,704 
FLCFLC1,476 1,371 1,476 1,371 FLC1,614 1,476 1,614 1,476 
Economic ConsultingEconomic Consulting925 880 925 880 Economic Consulting998 925 998 925 
Technology (1)
Technology (1)
443 394 443 394 
Technology (1)
548 443 548 443 
Strategic CommunicationsStrategic Communications817 766 817 766 Strategic Communications951 817 951 817 
Total revenue-generating professionalsTotal revenue-generating professionals5,365 5,019 5,365 5,019 Total revenue-generating professionals6,011 5,365 6,011 5,365 
Utilization rates of billable professionals: (2)
Utilization rates of billable professionals: (2)
    
Utilization rates of billable professionals: (2)
    
Corporate FinanceCorporate Finance62 %64 %60 %68 %Corporate Finance61 %62 %62 %60 %
FLCFLC54 %48 %58 %50 %FLC53 %54 %55 %58 %
Economic ConsultingEconomic Consulting68 %66 %73 %68 %Economic Consulting67 %68 %70 %73 %
Average billable rate per hour: (3)
Average billable rate per hour: (3)
    
Average billable rate per hour: (3)
    
Corporate FinanceCorporate Finance$465 $460 $457 $468 Corporate Finance$455 $465 $455 $457 
FLCFLC$355 $337 $350 $333 FLC$368 $355 $360 $350 
Economic ConsultingEconomic Consulting$539 $502 $510 $482 Economic Consulting$579 $539 $506 $510 
(1)The number of revenue-generating professionals for the Technology segment excludes as-needed professionals, who we employ based on demand for the segment’s services. We employed an average of 634 as-needed employees during the three months ended September 30, 2022 compared with 440 as-needed employees during the three months ended September 30, 2021 compared with 380 as-needed employees during the three months ended September 30, 2020.2021.
(2)We calculate the utilization rate for our billable professionals by dividing the number of hours that all of our billable professionals worked on client assignments during a period by the total available working hours for all of our billable professionals during the same period. Available hours are determined by the standard hours worked by each employee, adjusted for part-time hours, U.S. standard work weeks and local country holidays. Available working hours include vacation and professional training days, but exclude holidays. Utilization rates are presented for our segments that primarily bill clients on an hourly basis. We have not presented utilization rates for our Technology and Strategic Communications segments as most of the revenues of these segments are not generated on an hourly basis.
(3)AverageFor engagements where revenues are based on number of hours worked by our billable professionals and fixed-fee arrangements, average billable rate per hour is calculated by dividing revenues (excluding revenues from success fees, pass-through revenues and outside consultants) for a period by the number of hours worked on client assignments during the same period. We have not presented average billable rates per hour for our Technology and Strategic Communications segments as most of the revenues of these segments are not based on billable hours.
30

CORPORATE FINANCE & RESTRUCTURING
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(dollars in thousands,
except rate per hour)		(dollars in thousands,
except rate per hour)		 (dollars in thousands,
except rate per hour)		(dollars in thousands,
 except rate per hour)
RevenuesRevenues$250,321 $236,615 $707,495 $690,375 Revenues$265,370 $250,321 $795,766 $707,495 
Percentage change in revenues from prior yearPercentage change in revenues from prior year5.8 %23.4 %2.5 %27.2 %Percentage change in revenues from prior year6.0 %5.8 %12.5 %2.5 %
Operating expensesOperating expensesOperating expenses
Direct cost of revenuesDirect cost of revenues161,638 150,219 479,311 422,088 Direct cost of revenues176,311 161,638 523,779 479,311 
Selling, general and administrative expensesSelling, general and administrative expenses34,494 31,290 95,822 89,988 Selling, general and administrative expenses39,202 34,494 117,015 95,822 
Special charges— 861 — 861 
Amortization of intangible assetsAmortization of intangible assets1,873 1,873 5,644 4,591 Amortization of intangible assets1,909 1,873 6,036 5,644 
198,005 184,243 580,777 517,528  217,422 198,005 646,830 580,777 
Segment operating incomeSegment operating income52,316 52,372 126,718 172,847 Segment operating income47,948 52,316 148,936 126,718 
Percentage change in segment operating income
from prior year
Percentage change in segment operating income
from prior year
-0.1 %13.8 %-26.7 %32.5 %Percentage change in segment operating
income from prior year
-8.3 %-0.1 %17.5 %-26.7 %
Add back:Add back:Add back:
Depreciation and amortization of intangible assetsDepreciation and amortization of intangible assets3,319 2,982 9,660 7,717 Depreciation and amortization of intangible assets3,584 3,319 11,085 9,660 
Special charges— 861 — 861 
Fair value remeasurement of contingent considerationFair value remeasurement of contingent consideration— — (3,130)— Fair value remeasurement of contingent consideration— — — (3,130)
Adjusted Segment EBITDAAdjusted Segment EBITDA$55,635 $56,215 $133,248 $181,425 Adjusted Segment EBITDA$51,532 $55,635 $160,021 $133,248 
Gross profit (1)
Gross profit (1)
$88,683 $86,396 $228,184 $268,287 
Gross profit (1)
$89,059 $88,683 $271,987 $228,184 
Percentage change in gross profit from prior yearPercentage change in gross profit from prior year2.6 %13.2 %-14.9 %24.7 %Percentage change in gross profit from prior year0.4 %2.6 %19.2 %-14.9 %
Gross profit margin (2)
Gross profit margin (2)
35.4 %36.5 %32.3 %38.9 %
Gross profit margin (2)
33.6 %35.4 %34.2 %32.3 %
Adjusted Segment EBITDA as a percentage of revenuesAdjusted Segment EBITDA as a percentage of revenues22.2 %23.8 %18.8 %26.3 %Adjusted Segment EBITDA as a percentage of revenues19.4 %22.2 %20.1 %18.8 %
Number of revenue-generating professionals (at period end)Number of revenue-generating professionals (at period end)1,704 1,608 1,704 1,608 Number of revenue-generating professionals (at period end)1,900 1,704 1,900 1,704 
Percentage change in number of revenue-generating
professionals from prior year
Percentage change in number of revenue-generating
professionals from prior year
6.0 %36.6 %6.0 %36.6 %Percentage change in number of revenue-generating
professionals from prior year
11.5 %6.0 %11.5 %6.0 %
Utilization rate of billable professionalsUtilization rate of billable professionals62 %64 %60 %68 %Utilization rate of billable professionals61 %62 %62 %60 %
Average billable rate per hourAverage billable rate per hour$465 $460 $457 $468 Average billable rate per hour$455 $465 $455 $457 
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
Three Months Ended September 30, 20212022 Compared with Three Months Ended September 30, 20202021
Revenues increased $13.7$15.0 million, or 5.8%6.0%, to $250.3$265.4 million for the three months ended September 30, 2021,2022, which included a 1.5%3.6% estimated positivenegative impact from FX. Acquisition-related revenues contributed $3.1 million, or 1.2% of the increase, compared to the same quarter in the prior year. Excluding the estimated impact from FX and acquisition-related revenues, revenues increased $10.1$21.0 million, or 4.3%8.4%, primarily due to increasedhigher demand and higher realization acrossfor our transactionsrestructuring and business transformation & strategy services, as well as recognition of deferred revenues,largely in North America, which was partially offset by lowera decline in demand for our restructuring services.transaction services and lower success fees.
Gross profit increased $2.3$0.4 million, or 2.6%0.4%, to $88.7$89.1 million for the three months ended September 30, 2021.2022. Gross profit margin decreased 1.11.9 percentage points for the three months ended September 30, 2021.2022. The decrease in gross profit margin was primarily due to a 21 percentage point decline in utilization.utilization with an 11.5% increase in billable headcount, and lower success fees.
SG&A expenses increased $3.2$4.7 million, or 10.2%13.6%, to $34.5$39.2 million for the three months ended September 30, 2021,2022, which included a 1.1%3.5% estimated negativepositive impact from FX. SG&A expenses of 14.8% of revenues for the three months ended September 30, 2022 compared with 13.8% of revenues for the three months ended September 30, 2021 compared with 13.2% of revenues for the three months ended September 30, 2020.2021. The increase in SG&A expenses was primarily due to higher bad debt,travel and entertainment, infrastructure support, rent and occupancybusiness development, and other general and administrative costs,expenses, which was partially offset by a decline in acquisition-related expenses.lower bad debt.
31

Nine Months Ended September 30, 20212022 Compared with Nine Months Ended September 30, 20202021
Revenues increased $17.1$88.3 million, or 2.5%12.5%, to $707.5$795.8 million for the nine months ended September 30, 2021,2022, which included a 2.5% estimated positivenegative impact from FX. Acquisition-related revenues contributed $22.0$8.9 million, or 3.2%1.3% of the increase, forcompared to the nine months ended September 30, 2021.same period in the prior year. Excluding the estimated impact from FX and acquisition-related revenues, revenues decreased $22.4increased $97.3 million, or 3.2%13.8%, primarily due to lowerincreased demand for our business transformation & strategy, transactions and restructuring services, as well as a $6.8 million decline in pass-through revenues, which was partially offset by increased demand across our transactions and business transformation serviceslargely in North America, and Europe, the Middle East and Africa.higher pass-through revenues.
Gross profit decreased $40.1increased $43.8 million, or 14.9%19.2%, to $228.2$272.0 million for the nine months ended September 30, 2021.2022. Gross profit margin decreased 6.6increased 1.9 percentage points for the nine months ended September 30, 2021.2022. The decreaseincrease in gross profit margin was largelyprimarily due to an 8a 2 percentage point declineincrease in utilization, primarily for our restructuring services.utilization.
SG&A expenses increased $5.8$21.2 million, or 6.5%22.1%, to $95.8$117.0 million for the nine months ended September 30, 2021,2022, which included a 2.6%2.4% estimated negativepositive impact from FX. SG&A expenses of 14.7% of revenues for the nine months ended September 30, 2022 compared with 13.5% of revenues for the nine months ended September 30, 2021 compared with 13.0% of revenues for the nine months ended September 30, 2020.2021. The increase in SG&A expenses was primarily due to higher renttravel and occupancy,entertainment, outside services, infrastructure support, and compensationother general and administrative expenses, which was partially offset by lower acquisition-related expenses.

bad debt.
FORENSIC AND LITIGATION CONSULTING
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(dollars in thousands,
except rate per hour)		(dollars in thousands,
except rate per hour)		 (dollars in thousands,
except rate per hour)		(dollars in thousands,
except rate per hour)
RevenuesRevenues$145,264 $119,104 $446,831 $373,082 Revenues$159,948 $145,264 $478,092 $446,831 
Percentage change in revenues from prior yearPercentage change in revenues from prior year22.0 %-16.5 %19.8 %-12.7 %Percentage change in revenues from prior year10.1 %22.0 %7.0 %19.8 %
Operating expensesOperating expensesOperating expenses
Direct cost of revenuesDirect cost of revenues103,870 86,335 311,772 280,167 Direct cost of revenues110,832 103,870 338,861 311,772 
Selling, general and administrative expensesSelling, general and administrative expenses26,044 20,385 74,813 70,951 Selling, general and administrative expenses32,304 26,044 91,370 74,813 
Special charges— 3,484 — 3,484 
Amortization of intangible assetsAmortization of intangible assets249 171 647 627 Amortization of intangible assets242 249 735 647 
130,163 110,375 387,232 355,229  143,378 130,163 430,966 387,232 
Segment operating incomeSegment operating income15,101 8,729 59,599 17,853 Segment operating income16,570 15,101 47,126 59,599 
Percentage change in segment operating income
from prior year
Percentage change in segment operating income
from prior year
73.0 %-65.8 %233.8 %-78.4 %Percentage change in segment operating income
from prior year
9.7 %73.0 %-20.9 %233.8 %
Add back:Add back:Add back:
Depreciation and amortization of intangible assetsDepreciation and amortization of intangible assets1,519 1,378 4,455 4,415 Depreciation and amortization of intangible assets1,592 1,519 5,000 4,455 
Special charges— 3,484 — 3,484 
Adjusted Segment EBITDAAdjusted Segment EBITDA$16,620 $13,591 $64,054 $25,752 Adjusted Segment EBITDA$18,162 $16,620 $52,126 $64,054 
Gross profit (1)
Gross profit (1)
$41,394 $32,769 $135,059 $92,915 
Gross profit (1)
$49,116 $41,394 $139,231 $135,059 
Percentage change in gross profit from prior yearPercentage change in gross profit from prior year26.3 %-36.3 %45.4 %-42.7 %Percentage change in gross profit from prior year18.7 %26.3 %3.1 %45.4 %
Gross profit margin (2)
Gross profit margin (2)
28.5 %27.5 %30.2 %24.9 %
Gross profit margin (2)
30.7 %28.5 %29.1 %30.2 %
Adjusted Segment EBITDA as a percentage of revenuesAdjusted Segment EBITDA as a percentage of revenues11.4 %11.4 %14.3 %6.9 %Adjusted Segment EBITDA as a percentage of revenues11.4 %11.4 %10.9 %14.3 %
Number of revenue-generating professionals (at period end)Number of revenue-generating professionals (at period end)1,476 1,371 1,476 1,371 Number of revenue-generating professionals (at period end)1,614 1,476 1,614 1,476 
Percentage change in number of revenue-generating
professionals from prior year
Percentage change in number of revenue-generating
professionals from prior year
7.7 %3.4 %7.7 %3.4 %Percentage change in number of revenue-generating
professionals from prior year
9.3 %7.7 %9.3 %7.7 %
Utilization rate of billable professionalsUtilization rate of billable professionals54 %48 %58 %50 %Utilization rate of billable professionals53 %54 %55 %58 %
Average billable rate per hourAverage billable rate per hour$355 $337 $350 $333 Average billable rate per hour$368 $355 $360 $350 
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues



32

Three Months Ended September 30, 20212022 Compared with Three Months Ended September 30, 20202021
Revenues increased $26.2$14.7 million, or 22.0%10.1%, to $145.3$159.9 million for the three months ended September 30, 2021,2022, which included a 1.1%2.6% estimated positivenegative impact from FX. Acquisition-related revenues contributed $3.7 million, or 3.1% of the increase, compared to the same quarter in the prior year. Excluding the estimated impact from FX, and acquisition-related revenues, revenues increased $21.3$18.4 million, or 17.8%12.7%, primarily due to higher demand for our investigations, disputes and health solutions and investigations services, and higher realization due to the mix of client engagements, which was partially offset by lower demand for our disputes services.
Gross profit increased $8.6$7.7 million, or 26.3%18.7%, to $41.4$49.1 million for the three months ended September 30, 2021.2022. Gross profit margin increased 1.02.2 percentage pointpoints for the three months ended September 30, 2021.2022. The increase in gross profit margin was largely relatedprimarily due to a 6 percentage pointan increase in utilization primarily infor our investigationshealth solutions services and disputes services, which was partially offset by higher variable compensation as a percentagerealization due to the mix of revenues.client engagements.
SG&A expenses increased $5.7$6.3 million, or 27.8%24.0%, to $26.0$32.3 million for the three months ended September 30, 2021,2022, which included a 1.2%2.4% estimated negativepositive impact from FX. SG&A expenses of 17.9%were 20.2% of revenues for the three months ended September 30, 20212022 compared with 17.1%17.9% of revenues for the three months ended September 30, 2020. The increase in SG&A expenses was primarily driven by higher rent and occupancy, bad debt, travel and entertainment and outside services expenses.
Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Revenues increased $73.7 million, or 19.8%, to $446.8 million for the nine months ended September 30, 2021, which included a 1.9% estimated positive impact from FX. Acquisition-related revenues contributed $5.7 million, or 1.5% of the increase, compared to the same period in the prior year. Excluding the estimated impact from FX and acquisition-related revenues, revenues increased $60.9 million, or 16.3%, primarily due to higher demand for our investigations, disputes and health solutions services.
Gross profit increased $42.1 million, or 45.4%, to $135.1 million for the nine months ended September 30, 2021. Gross profit margin increased 5.3 percentage points for the nine months ended September 30, 2021. The increase in gross profit margin was largely related to an 8 percentage point increase in utilization, primarily in our disputes, investigations and health solutions services, which was partially offset by higher variable compensation as a percentage of revenues.
SG&A expenses increased $3.9 million, or 5.4%, to $74.8 million for the nine months ended September 30, 2021, which included a 1.9% estimated negative impact from FX. SG&A expenses of 16.7% of revenues for the nine months ended September 30, 2021 compared with 19.0% of revenues for the nine months ended September 30, 2020. The increase in SG&A expenses was primarily driven by higher infrastructure support, renttravel and occupancy,entertainment, compensation, bad debt, and other general and administrative expenses,expenses.
Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Revenues increased $31.3 million, or 7.0%, to $478.1 million for the nine months ended September 30, 2022, which included a 1.7% estimated negative impact from FX. Excluding the estimated impact from FX, revenues increased $38.9 million, or 8.7%, primarily due to higher demand for our health solutions and investigations services, and higher realization due to the mix of client engagements, which was partially offset by lower demand for our disputes and data & analytics services.
Gross profit increased $4.2 million, or 3.1%, to $139.2 million for the nine months ended September 30, 2022. Gross profit margin decreased 1.1 percentage points for the nine months ended September 30, 2022. The decrease in gross profit margin was largely related to a decline in utilization for our disputes services, which was partially offset by higher utilization in our health solutions practice.
SG&A expenses increased $16.6 million, or 22.1%, to $91.4 million for the nine months ended September 30, 2022, which included a 1.8% estimated positive impact from FX. SG&A expenses of 19.1% of revenues for the nine months ended September 30, 2022 compared with 16.7% of revenues for the nine months ended September 30, 2021. The increase in SG&A expenses was primarily driven by higher travel and entertainment, infrastructure support, compensation, bad debt, and travelother general and entertainmentadministrative expenses.
33

ECONOMIC CONSULTING
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(dollars in thousands,
except rate per hour)		(dollars in thousands,
except rate per hour)		 (dollars in thousands,
except rate per hour)		(dollars in thousands,
except rate per hour)
RevenuesRevenues$172,543 $154,978 $525,122 $438,609 Revenues$193,183 $172,543 $523,201 $525,122 
Percentage change in revenues from prior yearPercentage change in revenues from prior year11.3 %9.4 %19.7 %-0.2 %Percentage change in revenues from prior year12.0 %11.3 %-0.4 %19.7 %
Operating expensesOperating expensesOperating expenses
Direct cost of revenuesDirect cost of revenues123,079 110,716 383,799 322,002 Direct cost of revenues140,781 123,079 387,257 383,799 
Selling, general and administrative expensesSelling, general and administrative expenses21,009 19,879 58,432 60,523 Selling, general and administrative expenses20,728 21,009 63,888 58,432 
Special charges— 35 — 35 
Amortization of intangible assets— 44 — 133 
144,088 130,674 442,231 382,693  161,509 144,088 451,145 442,231 
Segment operating incomeSegment operating income28,455 24,304 82,891 55,916 Segment operating income31,674 28,455 72,056 82,891 
Percentage change in segment operating income
from prior year
Percentage change in segment operating income
from prior year
17.1 %35.5 %48.2 %-10.1 %Percentage change in segment operating income
from prior year
11.3 %17.1 %-13.1 %48.2 %
Add back:Add back:Add back:
Depreciation and amortization of intangible assets1,462 1,381 4,304 4,173 
Special charges— 35 — 35 
Depreciation and amortizationDepreciation and amortization1,239 1,462 3,698 4,304 
Adjusted Segment EBITDAAdjusted Segment EBITDA$29,917 $25,720 $87,195 $60,124 Adjusted Segment EBITDA$32,913 $29,917 $75,754 $87,195 
Gross profit (1)
Gross profit (1)
$49,464 $44,262 $141,323 $116,607 
Gross profit (1)
$52,402 $49,464 $135,944 $141,323 
Percentage change in gross profit from prior yearPercentage change in gross profit from prior year11.8 %20.3 %21.2 %-0.3 %Percentage change in gross profit from prior year5.9 %11.8 %-3.8 %21.2 %
Gross profit margin (2)
Gross profit margin (2)
28.7 %28.6 %26.9 %26.6 %
Gross profit margin (2)
27.1 %28.7 %26.0 %26.9 %
Adjusted Segment EBITDA as a percentage of revenuesAdjusted Segment EBITDA as a percentage of revenues17.3 %16.6 %16.6 %13.7 %Adjusted Segment EBITDA as a percentage of revenues17.0 %17.3 %14.5 %16.6 %
Number of revenue-generating professionals (at period end)Number of revenue-generating professionals (at period end)925 880 925 880 Number of revenue-generating professionals (at period end)998 925 998 925 
Percentage change in number of revenue-generating
professionals from prior year
Percentage change in number of revenue-generating
professionals from prior year
5.1 %15.2 %5.1 %15.2 %Percentage change in number of revenue-generating
professionals from prior year
7.9 %5.1 %7.9 %5.1 %
Utilization rate of billable professionalsUtilization rate of billable professionals68 %66 %73 %68 %Utilization rate of billable professionals67 %68 %70 %73 %
Average billable rate per hourAverage billable rate per hour$539 $502 $510 $482 Average billable rate per hour$579 $539 $506 $510 
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
Three Months Ended September 30, 20212022 Compared with Three Months Ended September 30, 20202021
Revenues increased $17.6$20.6 million, or 11.3%12.0%, to $172.5$193.2 million for the three months ended September 30, 2021,2022, which included a 1.7%5.5% estimated positivenegative impact from FX. Excluding the estimated impact offrom FX, revenues increased $14.9$30.1 million, or 9.6%17.4%, primarily due to higher realization, primarily related to $21.4 million of revenues recognized that were previously deferred on one large client, and higher demand for our non-M&A-related antitrust and financial economics services, which was partially offset by lower demand for our M&A-related antitrust services.
Gross profit increased $5.2$2.9 million, or 11.8%5.9%, to $49.5$52.4 million for the three months ended September 30, 2021.2022. Gross profit margin increased 0.1decreased 1.5 percentage points for the three months ended September 30, 2021.2022. The increasedecrease in gross profit margin was primarily due to higher compensation as a 2 percentage point increase in utilization,of revenues, which was partially offset by higher variable compensation as a percentage of revenues.realization.
SG&A expenses increased $1.1decreased $0.3 million, or 5.7%1.3%, to $21.0$20.7 million for the three months ended September 30, 2021,2022, which included a 1.1%6.1% estimated negativepositive impact from FX. SG&A expenses of 10.7% of revenues for the three months ended September 30, 2022 compared with 12.2% of revenues for the three months ended September 30, 2021 compared with 12.8% of revenues for the three months ended September 30, 2020. The increase in SG&A expenses was primarily driven by higher infrastructure support and other general and administrative expenses.
34

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Revenues increased $86.5 million, or 19.7%, to $525.1 million for the nine months ended September 30, 2021, which included a 2.9% estimated positive impact from FX. Excluding the estimated impact of FX, revenues increased $73.7 million, or 16.8%, primarily due to higher demand for our non-M&A-related antitrust services, along with higher demand and realized bill rates for financial economics and international arbitration services, which was partially offset by lower realized bill rates for M&A-related antitrust services.
Gross profit increased $24.7 million, or 21.2%, to $141.3 million for the nine months ended September 30, 2021. Gross profit margin increased 0.3 percentage points for the nine months ended September 30, 2021. The increase in gross profit margin was primarily due to a 5 percentage point improvement in utilization, which was partially offset by higher variable compensation and contractor expenses as a percentage of revenues.
SG&A expenses decreased $2.1 million, or 3.5%, to $58.4 million for the nine months ended September 30, 2021, which included a 3.3% estimated negative impact from FX. SG&A expenses of 11.1% of revenues for the nine months ended September 30, 2021 compared with 13.8% of revenues for the nine months ended September 30, 2020. The decrease in SG&A expenses was primarily driven by lower bad debt and travel and entertainment expenses, which was partially offset by higher travel and entertainment, and other general and administrative expenses.
Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Revenues decreased $1.9 million, or 0.4%, to $523.2 million for the nine months ended September 30, 2022, which included a 3.7% estimated negative impact from FX. Excluding the estimated impact from FX, revenues increased $17.7 million, or 3.4%, primarily due to higher demand for our non-M&A-related antitrust services and higher realization for our M&A-related antitrust services, which was partially offset by lower demand for our M&A-related antitrust services.
34

Gross profit decreased $5.4 million, or 3.8%, to $135.9 million for the nine months ended September 30, 2022. Gross profit margin decreased 0.9 percentage points for the nine months ended September 30, 2022. The decrease in gross profit margin was primarily due to a 3 percentage point decrease in utilization and a 7.9% increase in billable headcount.
SG&A expenses increased $5.5 million, or 9.3%, to $63.9 million for the nine months ended September 30, 2022, which included a 4.1% estimated positive impact from FX. SG&A expenses of 12.2% of revenues for the nine months ended September 30, 2022 compared with 11.1% of revenues for the nine months ended September 30, 2021. The increase in SG&A expenses was primarily driven by higher compensation, travel and entertainment, infrastructure support, costs.

and other general and administrative expenses.
TECHNOLOGY
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(dollars in thousands)(dollars in thousands) (dollars in thousands)(dollars in thousands)
RevenuesRevenues$64,657 $58,585 $222,762 $164,392 Revenues$84,915 $64,657 $243,181 $222,762 
Percentage change in revenues from prior yearPercentage change in revenues from prior year10.4 %2.6 %35.5 %0.2 %Percentage change in revenues from prior year31.3 %10.4 %9.2 %35.5 %
Operating expensesOperating expensesOperating expenses
Direct cost of revenuesDirect cost of revenues42,637 35,369 133,860 99,077 Direct cost of revenues54,027 42,637 158,498 133,860 
Selling, general and administrative expensesSelling, general and administrative expenses17,604 14,319 50,587 41,397 Selling, general and administrative expenses21,055 17,604 59,678 50,587 
Special charges— 276 — 276 
60,241 49,964 184,447 140,750  75,082 60,241 218,176 184,447 
Segment operating incomeSegment operating income4,416 8,621 38,315 23,642 Segment operating income9,833 4,416 25,005 38,315 
Percentage change in segment operating income
from prior year
Percentage change in segment operating income
from prior year
-48.8 %-5.2 %62.1 %-21.4 %Percentage change in segment operating income
from prior year
122.7 %-48.8 %-34.7 %62.1 %
Add back:Add back:Add back:
Depreciation and amortization of intangible assets3,419 3,042 9,636 8,940 
Special charges— 276 — 276 
Depreciation and amortizationDepreciation and amortization3,380 3,419 9,935 9,636 
Adjusted Segment EBITDAAdjusted Segment EBITDA$7,835 $11,939 $47,951 $32,858 Adjusted Segment EBITDA$13,213 $7,835 $34,940 $47,951 
Gross profit (1)
Gross profit (1)
$22,020 $23,216 $88,902 $65,315 
Gross profit (1)
$30,888 $22,020 $84,683 $88,902 
Percentage change in gross profit from prior yearPercentage change in gross profit from prior year-5.2 %-2.4 %36.1 %-7.7 %Percentage change in gross profit from prior year40.3 %-5.2 %-4.7 %36.1 %
Gross profit margin (2)
Gross profit margin (2)
34.1 %39.6 %39.9 %39.7 %
Gross profit margin (2)
36.4 %34.1 %34.8 %39.9 %
Adjusted Segment EBITDA as a percentage of revenuesAdjusted Segment EBITDA as a percentage of revenues12.1 %20.4 %21.5 %20.0 %Adjusted Segment EBITDA as a percentage of revenues15.6 %12.1 %14.4 %21.5 %
Number of revenue-generating professionals (at period end) (3)
443 394 443 394 
Number of revenue-generating professionals (at period end) (3)
Number of revenue-generating professionals (at period end) (3)
548 443 548 443 
Percentage change in number of revenue-generating
professionals from prior year
Percentage change in number of revenue-generating
professionals from prior year
12.4 %13.2 %12.4 %13.2 %Percentage change in number of revenue-generating
professionals from prior year
23.7 %12.4 %23.7 %12.4 %
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues
(3)Includes personnel involved in direct client assistance and revenue-generating consultants and excludes professionals employed on an as-needed basis.
35

Three Months Ended September 30, 20212022 Compared with Three Months Ended September 30, 20202021
Revenues increased $6.1$20.3 million, or 10.4%31.3%, to $64.7$84.9 million for the three months ended September 30, 2021,2022, which included a 1.7%3.6% estimated positivenegative impact from FX. Excluding the estimated impact from FX, revenues increased $5.1$22.6 million, or 8.6%,34.9%. The increase in revenues was primarily due to increaseddriven by higher demand for our hosting,managed review, consulting and managed reviewhosting services, largely related to litigation, cross-borderprimarily associated with M&A-related “second request,” investigations and information governance, engagements, which was partially offset by a decline in M&A-related “second request” engagements.privacy and security services.
Gross profit decreased $1.2increased $8.9 million, or 5.2%40.3%, to $22.0$30.9 million for the three months ended September 30, 2021.2022. Gross profit margin decreased 5.6increased 2.3 percentage points for the three months ended September 30, 2022. The increase in gross profit margin was primarily due to improved mix and profitability of our managed review and processing services, which was partially offset by a lower mix of our higher-margin hosting services.
SG&A expenses increased $3.5 million, or 19.6%, to $21.1 million for the three months ended September 30, 2022, which included a 3.9% estimated positive impact from FX. SG&A expenses of 24.8% of revenues for the three months ended September 30, 2022 compared with 27.2% of revenues for the three months ended September 30, 2021. The increase in SG&A expenses was primarily driven by higher compensation, travel and entertainment, bad debt, and other general and administrative expenses.
35

Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Revenues increased $20.4 million, or 9.2%, to $243.2 million for the nine months ended September 30, 2022, which included a 2.2% estimated negative impact from FX. Excluding the estimated impact from FX, revenues increased $25.2 million, or 11.3%. The increase in revenues was primarily driven by higher demand for information governance, privacy and security and investigations services.
Gross profit decreased $4.2 million, or 4.7%, to $84.7 million for the nine months ended September 30, 2022. Gross profit margin decreased 5.1 percentage points for the nine months ended September 30, 2022. The decrease in gross profit margin was primarily due to an increase in compensation as a percentage of revenues, includingwhich included the impact of a 12.4%23.7% increase in billable headcount, which was partially offset by a favorable mix of higher margin hosting services.headcount.
SG&A expenses increased $3.3$9.1 million, or 22.9%18.0%, to $17.6 million for the three months ended September 30, 2021, which included a 1.3% estimated negative impact from FX. SG&A expenses of 27.2% of revenues for the three months ended September 30, 2021 compared with 24.4% of revenues for the three months ended September 30, 2020. The increase in SG&A expenses was primarily driven by higher compensation and other general and administrative expenses.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Revenues increased $58.4 million, or 35.5%, to $222.8$59.7 million for the nine months ended September 30, 2021,2022, which included a 2.7%2.5% estimated positive impact from FX. Excluding the estimated impact from FX,SG&A expenses of 24.5% of revenues increased $54.0 million, or 32.8%, primarily due to increased demand for our managed review and hosting services, largely related to litigation, M&A-related “second request” and cross-border investigation engagements.
Gross profit increased $23.6 million, or 36.1%, to $88.9 million for the nine months ended September 30, 2021. Gross profit margin increased 0.2 percentage points2022 compared with 22.7% of revenues for the nine months ended September 30, 2021. The increase in gross profit marginSG&A expenses was primarily due to a favorable mix of higher margin managed review services, which was partially offset by higher compensation, as a percentage of revenues, including the impact of a 12.4% increase in billable headcount.
SG&A expenses increased $9.2 million, or 22.2%, to $50.6 million for the nine months ended September 30, 2021, which included a 2.1% estimated negative impact from FX. SG&A expenses of 22.7% of revenues for the nine months ended September 30, 2021 compared with 25.2% of revenues for the nine months ended September 30, 2020. The increase in SG&A expenses was primarily driven by higher compensation, bad debttravel and entertainment, infrastructure support, and other general and administrative expenses.
36

STRATEGIC COMMUNICATIONS
Three Months Ended September 30,Nine Months Ended September 30, Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020 2022202120222021
(dollars in thousands)(dollars in thousands) (dollars in thousands)(dollars in thousands)
RevenuesRevenues$69,443 $52,967 $197,781 $168,236 Revenues$72,449 $69,443 $214,237 $197,781 
Percentage change in revenues from prior yearPercentage change in revenues from prior year31.1 %-11.7 %17.6 %-4.8 %Percentage change in revenues from prior year4.3 %31.1 %8.3 %17.6 %
Operating expensesOperating expensesOperating expenses
Direct cost of revenuesDirect cost of revenues41,010 34,540 122,638 109,103 Direct cost of revenues44,681 41,010 131,421 122,638 
Selling, general and administrative expensesSelling, general and administrative expenses13,477 10,542 37,385 33,576 Selling, general and administrative expenses15,450 13,477 44,645 37,385 
Special charges— 2,074 — 2,074 
Amortization of intangible assetsAmortization of intangible assets737 706 2,221 2,088 Amortization of intangible assets163 737 548 2,221 
55,224 47,862 162,244 146,841  60,294 55,224 176,614 162,244 
Segment operating incomeSegment operating income14,219 5,105 35,537 21,395 Segment operating income12,155 14,219 37,623 35,537 
Percentage change in segment operating income
from prior year
Percentage change in segment operating income
from prior year
178.5 %-55.0 %66.1 %-30.3 %Percentage change in segment operating income
from prior year
-14.5 %178.5 %5.9 %66.1 %
Add back:Add back:Add back:
Depreciation and amortization of intangible assetsDepreciation and amortization of intangible assets1,270 1,248 3,851 3,768 Depreciation and amortization of intangible assets792 1,270 2,510 3,851 
Special charges— 2,074 — 2,074 
Adjusted Segment EBITDAAdjusted Segment EBITDA$15,489 $8,427 $39,388 $27,237 Adjusted Segment EBITDA$12,947 $15,489 $40,133 $39,388 
Gross profit (1)
Gross profit (1)
$28,433 $18,427 $75,143 $59,133 
Gross profit (1)
$27,768 $28,433 $82,816 $75,143 
Percentage change in gross profit from prior yearPercentage change in gross profit from prior year54.3 %-23.0 %27.1 %-14.5 %Percentage change in gross profit from prior year-2.3 %54.3 %10.2 %27.1 %
Gross profit margin (2)
Gross profit margin (2)
40.9 %34.8 %38.0 %35.1 %
Gross profit margin (2)
38.3 %40.9 %38.7 %38.0 %
Adjusted Segment EBITDA as a percentage of revenuesAdjusted Segment EBITDA as a percentage of revenues22.3 %15.9 %19.9 %16.2 %Adjusted Segment EBITDA as a percentage of revenues17.9 %22.3 %18.7 %19.9 %
Number of revenue-generating professionals (at period end)Number of revenue-generating professionals (at period end)817 766 817 766 Number of revenue-generating professionals (at period end)951 817 951 817 
Percentage change in number of revenue-generating
professionals from prior year
Percentage change in number of revenue-generating
professionals from prior year
6.7 %6.5 %6.7 %6.5 %Percentage change in number of revenue-generating
professionals from prior year
16.4 %6.7 %16.4 %6.7 %
(1)Revenues less direct cost of revenues
(2)Gross profit as a percentage of revenues

Three Months Ended September 30, 20212022 Compared with Three Months Ended September 30, 20202021
Revenues increased $16.5$3.0 million, or 31.1%4.3%, to $69.4$72.4 million for the three months ended September 30, 2021,2022, which included a 2.6%7.9% estimated positivenegative impact from FX. Excluding the estimated impact offrom FX, revenues increased $15.1$8.5 million, or 28.5%12.2%, primarily due to growth in project- and retainer-based revenues, mainly driven by higher demand for our corporate reputation and public affairs services.services, which was largely driven by our crisis & issues management offerings.
Gross profit increased $10.0decreased $0.7 million, or 54.3%2.3%, to $28.4$27.8 million for the three months ended September 30, 2021.2022. Gross profit margin increased 6.2decreased 2.6 percentage points for the three months ended September 30, 2022. The decrease in gross profit margin was driven by higher compensation as a percentage of revenues, largely due to the impact of a 16.4% increase in billable headcount.
36

SG&A expenses increased $2.0 million, or 14.6%, to $15.5 million for the three months ended September 30, 2022, which included a 6.3% estimated positive impact from FX. SG&A expenses of 21.3% of revenues for the three months ended September 30, 2022 compared with 19.4% of revenues for the three months ended September 30, 2021. The increase in SG&A expenses was primarily due to higher travel and entertainment, infrastructure support, and other general and administrative expenses, which was partially offset by lower outside services expenses.
Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Revenues increased $16.5 million, or 8.3%, to $214.2 million for the nine months ended September 30, 2022, which included a 5.5% estimated negative impact from FX. Excluding the estimated impact from FX, revenues increased $27.4 million, or 13.9%,primarily due to higher demand for our corporate reputation services.
Gross profit increased $7.7 million, or 10.2%, to $82.8 million for the nine months ended September 30, 2022. Gross profit margin increased 0.7 percentage points for the nine months ended September 30, 2022. The increase in gross profit margin was driven by lower compensation as a percentage of revenues.
SG&A expenses increased $2.9$7.3 million, or 27.8%19.4%, to $13.5$44.6 million for the threenine months ended September 30, 2021,2022, which included a 2.2%4.7% estimated negativepositive impact from FX. SG&A expenses of 19.4%20.8% of revenues for the threenine months ended September 30, 20212022 compared with 19.9%18.9% of revenues for the threenine months ended September 30, 2020.2021. The increase in SG&A expenses was primarily due to higher outside services, infrastructure support, travel and entertainment, and other general and administrative expenses.
Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020
Revenues increased $29.5 million, or 17.6%, to $197.8 million for the nine months ended September 30, 2021,expenses, which included a 4.4% estimated positive impact from FX. Excluding the estimated impact of FX, revenues increased $22.1 million, or 13.1%, primarily due to growth in project- and retainer-based revenues, driven by higher demand for our corporate reputation and public affairs services.
37

Gross profit increased $16.0 million, or 27.1%, to $75.1 million for the nine months ended September 30, 2021. Gross profit margin increased 2.8 percentage points for the nine months ended September 30, 2021. The increase in gross profit margin was drivenpartially offset by lower compensation as a percentage of revenues as well as a smaller proportion of lower margin pass-through revenues.
SG&A expenses increased $3.8 million, or 11.3%, to $37.4 million for the nine months ended September 30, 2021, which included a 4.1% estimated negative impact from FX. SG&A expenses of 18.9% of revenues for the nine months ended September 30, 2021 compared with 20.0% of revenues for the nine months ended September 30, 2020. The increase in SG&A expenses was primarily driven by higher outside services and infrastructure support costs.expenses.
CRITICAL ACCOUNTING POLICIESESTIMATES
Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which we have prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Note 1 to the Consolidated Financial Statements included in Part II, Item 8, of our Annual Report on Form 10-K for the year ended December 31, 20202021 describes the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial Statements.Statements in this Quarterly Report on Form 10-Q. We evaluate our estimates, including those related to revenues, goodwill and intangible assets, income taxes and contingencies, on an ongoing basis. Our estimates are based on current facts and circumstances, historical experience and various other assumptions that we believe are reasonable, which form the basis for making judgments about the values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policiesestimates that reflect our more significant estimates, judgments, and assumptions, and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results, include the following:
•Revenue Recognition
•Goodwill and Intangible Assets
There were no material changes to our critical accounting policies and estimates from the information provided in “Critical Accounting Policies”Estimates” in the Management's Discussion and Analysis of Financial Condition and Results of Operations, in Part II, Item 7, of our Annual Report on Form 10-K for the year ended December 31, 2020.2021, or from the information provided in Part II, Item 8, of our Annual Report on Form 10-K for the year ended December 31, 2021.
SIGNIFICANT NEW ACCOUNTING PRONOUNCEMENTS
See Note 2, “New Accounting Standards” in Part I, Item 1, of this Quarterly Report on Form 10-Q.
37

LIQUIDITY AND CAPITAL RESOURCES
Cash FlowsLiquidity
 Nine Months Ended September 30,
20212020
Cash Flows(dollars in thousands)
Net cash provided by operating activities$155,920 $140,977 
Net cash used in investing activities$(62,274)$(50,376)
Net cash used in financing activities$(34,978)$(155,414)
DSO100 104 
Our annual cash flows from operations generally exceed our cash needs for capital expenditures and debt service requirements. We generallytypically finance our day-to-day operations, capital expenditures, acquisitions and share repurchases through cash flows from operations. During the first quarter of our fiscal year, our cash needs generally exceed our cash flows from operations due to the payment of annual incentive compensation. Our operating cash flows generally exceed our cash needs subsequent to the second quarter of each year. We believe that our cash flows from operations, supplemented by short-term borrowings under our senior secured bank revolving credit facility ("Credit Facility"), as necessary, will provide adequate cash to fund our long-term cash needs for at least the next 12 months, including the maturity of our 2023 Convertible Notes.
Our operating assets and liabilities consist primarily of billed and unbilled accounts receivable, notes receivable from employees, accounts payable, accrued expenses and accrued compensation expenses. The timing of billings and collections of receivables, as well as compensation and vendor payments, affectaffects the changes in these balances.
Results of operations for our non-U.S. subsidiaries are translated from the designated functional currency to our reporting currency of the USD. Revenues and expenses are translated at average exchange rates for each month, while assets and liabilities are translated at balance sheet date exchange rates. Resulting net translation adjustments are recorded as a component of stockholders’ equity in “Accumulated other comprehensive loss.”
Uncertainties and Trends Affecting Liquidity
Our conclusion that we will be able to fund our cash requirements for at least the next 12 months by using existing capital resources and cash generated from operations does not take into account exacerbation of, or additional or prolonged disruptions caused by, COVID-19 that could result in a material adverse impact on our business, other events beyond our control, the impact of any future acquisitions or unexpected significant changes in the number of employees or other unanticipated uses of cash. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if events, including economic and workforce disruptions arising from COVID-19, or economic or business conditions change from those currently prevailing or from those now anticipated, or if unexpected circumstances or other events beyond our control arise that may have a material effect on the cash flow or profitability of our business, including material negative changes in the health and welfare of our employees or those of our clients, and the operating performance or financial results of our business. Any of these events or circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified currently available sources and could require us to borrow under our Credit Facility or raise additional debt or equity funding to meet those needs. Our ability to borrow or raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:
•our future profitability;
•the quality of our accounts receivable;
•our relative levels of debt and equity;
•the volatility and overall condition of the capital markets; and
•the market prices of our securities.
Any new debt funding, if available, may be on terms less favorable to us than our Credit Facility or the 2023 Convertible Notes. See “Forward-Looking Statements” in Part I, Item 2, of this Quarterly Report on Form 10-Q, and the information contained under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2021. 
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Cash Flows
 Nine Months Ended September 30,
20222021
Cash Flows(dollars in thousands)
Net cash provided by (used in) operating activities$(40,439)$155,920 
Net cash used in investing activities$(45,677)$(62,274)
Net cash used in financing activities$(36,949)$(34,978)
Effect of exchange rate changes on cash and cash equivalents$(44,373)$(11,094)
DSO (1)
106 100 
(1)DSO is a performance measure used to assess how quickly revenues are collected by the Company collects accounts receivable.Company. We calculate DSO at the end of each reporting period by dividing net accounts receivable reduced by billings in excess of services provided, by revenues for the quarter, adjusted for changes in foreign exchange rates. We multiply the result by the number of days in the quarter.

Nine Months Ended September 30, 20212022 Compared with Nine Months Ended September 30, 20202021
Net cash used in operating activities of $40.4 million for the nine months ended September 30, 2022 compared with net cash provided by operating activities wasof $155.9 million for the nine months ended September 30, 2021. The increase of $196.4 million, or 125.9%, in net cash used in operating activities was primarily due to an increase in salaries related to headcount growth, higher operating expenses and higher annual bonus payments, which was partially offset by an increase in cash collected resulting from higher revenues compared to the same period in the prior year. DSO was 106 and 100 days as of September 30, 2022 and 2021, compared with $141.0respectively.
Net cash used in investing activities of $45.7 million for the nine months ended September 30, 2020. The increase in net cash provided by operating activities was primarily due to higher cash collections, which was partially offset by an increase in salaries, primarily related to headcount growth and higher annual bonus payments, as well as other operating expenses. DSO was 100 days as of September 30, 2021 and 104 days as of September 30, 2020.
Net cash used in investing activities was2022 compared with $62.3 million for the nine months ended September 30, 2021 compared with $50.4 million for the nine months ended September 30, 2020.. The increasedecrease of $11.9$16.6 million, or 23.6%26.7%, in net cash used in investing activities was primarily due to an increase of $26.8a $13.5 million decline in capital expenditures mainly related to leasehold improvement costs for our new principal office spaceand a $3.1 million decrease in New York, New York. Additionally, we paid $9.8 millionpayments for the acquisition of a businessbusinesses as compared with $25.3 million spent onto the acquisition of a businesssame period in the prior year.
Net cash used in financing activities was $35.0 million for the nine months ended September 30, 2021 compared with $155.4of $36.9 million for the nine months ended September 30, 2020.2022 compared with $35.0 million for the nine months ended September 30, 2021. The decreaseincrease of $2.0 million, or 5.6%, in net cash used in financing activities for the nine months ended September 30, 2021 was primarily due to a decline in net borrowings under our Credit Facility of $25.0 million, which was partially offset by a decrease of $129.7$22.6 million in payments for common stock repurchases under the Repurchase Program as compared withto the same period in the prior year.

The unfavorable effect of exchange rate changes on cash and cash equivalents increased $33.3 million for the nine months ended September 30, 2022 to $44.4 million compared to $11.1 million for the nine months ended September 30, 2021.
Principal Sources of Capital Resources
As of September 30, 2021,2022, our capital resources included $342.5$327.0 million of cash and cash equivalents and available borrowing capacity of $523.9$549.6 million under the $550.0 million revolving line of credit under our Credit Facility. As of September 30, 2021,2022, we had $25.0 million ofno outstanding borrowings under our Credit Facility and $1.1$0.4 million of outstanding letters of credit, which reduced the availability of borrowings under the Credit Facility. We use letters of credit primarily in lieu of security deposits for our leased office facilities. The $550.0 million revolving line of credit under our Credit Facility includes a $75.0 million sublimit for borrowings in currencies other than USD, including the euro ("EUR"), British pound ("GBP"), Australian dollar and Canadian dollar.
The availability of borrowings, as well as issuances and extensions of letters of credit, under our Credit Facility is subject to specified conditions. We may choose to repay outstanding borrowings under the Credit Facility at any time before maturity without premium or penalty. Borrowings under the Credit Facility in USD, euroEUR and British poundGBP bear interest at an annual rate equal to the London Interbank Offered Rate ("LIBOR"), plus an applicable margin or, in the case of USD borrowings, an alternative base rate plus an applicable margin. The alternative base rate means a fluctuating rate per annum equalDue to the highestcessation by the ICE Benchmark Administration Limited of (1) the ratepublication on a representative basis of interest in effect for such dayEUR LIBOR and GBP LIBOR as the prime rate announced byof December 31, 2021, EUR LIBOR is no longer available under our Credit Agreement and one-, three- and six-month GBP LIBOR is available under a "synthetic" methodology until December 31, 2022. The Credit Agreement permits FTI Consulting and Bank of America, (2)N.A., as administrative agent thereunder, to agree to a new benchmark rate to replace EUR LIBOR and GBP LIBOR, subject to the federal funds rate plusnegative consent of the sumRequired Lenders (as defined therein). Prior to the incurrence of 50 basis points, and (3) the one-month LIBOR plus 100 basis points. Borrowingsany borrowings under the Credit Facility in Canadian dollars bear interest at an annualEUR or, after December 31, 2022, in
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GBP, we will need to agree to a replacement benchmark rate equal tofor each applicable currency in accordance with the Canadian Dealer Offered Rate plus an applicable margin. Borrowings underterms of the Credit Facility in Australian dollars bear interest at an annual rate equal to the Bank Bill Swap Reference Bid Rate plus an applicable margin.Agreement. The Credit Facility is guaranteed by substantially all of our domestic subsidiaries and is secured by a first priority security interest in substantially all of the assets of FTI Consulting and such domestic subsidiaries. Subject to certain conditions, at any time prior to maturity, we will be able to invite existing and new lenders to increase the size of the facility up to a maximum of $700.0 million.
In July 2017,The amended and restated credit agreement entered into in November 2018, as further amended by the Financial Conduct Authorityfirst amendment to the amended and restated credit agreement dated as of February 4, 2022 (as amended by the United Kingdom (“FCA”first amendment, the "Credit Agreement"), which regulates LIBOR, announced that it intends to stop compelling banks to submit rates forgoverning the calculation of LIBOR after 2021. On March 5, 2021, however, the ICE Benchmark Administration Limited (“IBA”), which is the administrator that publishes LIBOR, and the FCA made public statements regarding the future cessation of LIBOR and that IBA will permanently cease publication of all settings of non-U.S. dollar LIBOR and only the one-week and two-month settings of U.S. dollar LIBOR on December 31, 2021, with the publication of the remaining U.S. dollar LIBOR settings ceasing on June 30, 2023. Our Credit Facility is indexed to LIBOR and provides for multiple LIBOR currency and tenor options. Our Credit Facility also provides for alternative reference rates, although such alternative reference rates and the consequences of the phase out of LIBOR cannot be entirely predicted at this time.
Our Credit Agreement andour other indebtedness outstanding from time to time contains or may contain covenants that, among other things, may limit our ability to: incur additional indebtedness; create liens; pay dividends on our capital stock;stock, make distributions or repurchases of our capital stock or make specified other restricted payments; consolidate, merge or sell all
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or substantially all of our assets; guarantee obligations of other entities or our foreign subsidiaries; enter into hedging agreements; enter into transactions with affiliates or related persons; or engage in any business other than consulting-related businesses. In addition, the Credit Agreement includes a financial covenant that requires us not to exceed a maximum consolidated total net leverage ratio (the ratio of funded debt (less unrestricted cash up to $150.0 million) to Consolidated EBITDA, as defined in the Credit Agreement)Agreement). As ofof September 30, 2021,2022, we were in compliance with the covenants contained in the Credit Agreement and the indenture, dated as of August 20, 2018, as amended by the first supplemental indenture, dated as of January 1, 2022, between us and U.S. Bank National Association, as trustee, (the "Indenture"), governing the 2023 Convertible Notes. See Note 8, "Debt" in Part I, Item 1, of this Quarterly Report on Form 10-Q for a further discussion of the 2023 Convertible Notes.
Principal Uses of Capital Resources
Future Capital NeedsRequirements
We anticipate that our future capital needsrequirements will principally consist of funds required for:
•operating and general corporate expenses relating to the operation of our businesses;
•capital expenditures, primarily for information technology equipment and information or financial systems, office furniture and leasehold improvements;
•debt service requirements, including interest payments on our long-term debt;debt and repayment of the 2023 Convertible Notes principal and conversion premium;
•compensation to designated executive management and senior managing directors under our various long-term incentive compensation programs;
•discretionary funding of the Repurchase Program;
•contingent obligations related to our acquisitions;
•potential acquisitions of businesses; and
•other known future contractual obligations.
Capital Expenditures
During the nine months ended September 30, 2021,2022, we spent $52.5$39.0 million in capital expenditures to support our organization, including direct support for specific client engagements. WeFor the remainder of 2022, we currently expect to make additional capital expenditures to support our organization in an aggregate amount between $20.0of between $13 million and $25.0 million, which includes costs related to leasehold improvements for our new principal office space in New York, New York, for the remainder of 2021.$16 million. Our estimate takes into consideration the needs of our existing businesses but does not include the impact of any purchases that we may be required to make as a result of future acquisitions or specific client engagements that are not completed or not currently contemplated. Our capital expenditure requirements may change if our staffing levels or technology needs change significantly from what we currently anticipate, if we are required to purchase additional equipment specifically to support new client engagements or if we pursue and complete additional acquisitions.
Share Repurchase Program
During the nine months ended September 30, 2022, we made $23.5 million in payments for common stock repurchases under the Repurchase Program. We had $143.5 million remaining under the Repurchase Program to repurchase additional shares as of September 30, 2022.
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2023 Convertible Notes
Payments for Acquisition of Businesses
During the nine months ended September 30, 2022, we acquired a business that was assigned to the Corporate Finance segment for an aggregate of $6.7 million, net of cash received. We also recorded a liability of $5.6 million for acquisition-related contingent consideration.
Future Contractual Obligations
Our future contractual obligations as of September 30, 2022 include both current and non-current obligations. We have short-term obligations related to the 2023 Convertible Notes, were issued pursuant to the Indenture. The 2023 Convertible Notes bear interest at a fixed rate of 2.0% per year, payable semiannually in arrears on February 15 and August 15 of each year, beginning on February 15, 2019. The 2023 Convertible Noteswhich will mature on August 15, 2023, unless earlier converted or repurchased. Upon conversion,repurchased. Accrued interest of $6.6 million is classified as a current liability and the 2023 Convertible Notes may be settled, at our election, in cash, shares of our common stock or a combination of cash and shares of our common stock.
Each $1,000 principal amountportion of the 2023 Convertible Notes will be convertible into 9.8643 shares of our common stock, which$316.2 million is equivalent toclassified as a conversion price of approximately $101.38 per share of common stock, at maturity, subject to adjustment upon the occurrence of specified events. Prior to the close of businessnon-current liability on the business day immediately preceding May 15, 2023, theCondensed Consolidated Balance Sheets. The 2023 Convertible Notes may be converted only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ended onare classified as long-term debt as of September 30, 2018 (and only during such calendar quarter), if2022 because we have the last reported sale priceability and intent to refinance them on a long-term basis under our $550.0 million Credit Facility, which matures on November 30, 2023. As of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day; (2) during the five business day period after any five consecutive trading day period (the “Measurement Period”) in which the trading price (as defined in the Indenture) per $1,000 principal amount of the 2023 Convertible Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate in effect on each such trading day; or (3) upon the occurrence of specified corporate events. On or after May 15, 2023, until the close of business on the business day immediately preceding the maturity date of August 15, 2023, holders may convert their 2023 Convertible Notes at any time, regardless of the foregoing circumstances. During the quarter ended September 30, 2021, the closing price of2022, there were no outstanding borrowings under our common stock exceeded 130% of the conversion price ofCredit Facility. For more information on our 2023 Convertible Notes for at least 20 trading days (whether or not
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consecutive) during a period of 30 consecutive trading days ending on and including, the last trading day of the immediately preceding quarter. As a result, holders may convert their 2023 Convertible Notes at any time beginning on October 1, 2021 and ending on December 31, 2021.
We may not redeem the 2023 Convertible Notes priorCredit Facility, refer to the maturity date.
If we undergo a fundamental change (as defined in the Indenture), subject to certain conditions, holders may require us to repurchase for cash all or part of their 2023 Convertible Notes in principal amounts of $1,000 or a multiple thereof. The fundamental change repurchase price will be equal to 100% of the principal amount of the 2023 Convertible Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. In addition, in certain circumstances, we may be required to increase the conversion rate for any 2023 Convertible Notes converted in connection with a make-whole fundamental change (as defined in the Indenture). See Note 9,8, "Debt" in Part I, Item 11. Future contractual obligations related to our debt assume that payments will be made based on the current payment schedule and that interest payments will be at their stated rates and exclude any additional revolving line of this Quarterly Report on Form 10-Q for a further discussioncredit borrowings or repayments subsequent to September 30, 2022 and prior to the November 30, 2023 maturity date of the 2023 Convertible Notes.
Cash Flows
For the last several years, our cash flows from operations exceeded our cash needs for capital expenditures and debt service requirements. We believe that our cash flows from operations, supplemented by short-term borrowings under our Credit Facility,Facility. Under our operating leases as necessary, will provide adequate cash to fund our long-term cash needs for the next 12 months or longer.
Our conclusion that we will be able to fund our cash requirements for the next 12 months by using existing capital resources and cash generated from operations does not take into account exacerbation of, or additional or prolonged disruptions caused by or arising out of, the COVID-19 pandemic or general economic and other events that could resultdescribed in a material adverse impact on our business, which are events beyond our control, or the impact of any future acquisitions, unexpected significant changes in number of employees or other unanticipated uses of cash. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if events, including economic disruptions, arising from the COVID-19 pandemic worsen, or if other economic conditions change from those currently prevailing or from those now anticipated or if other unexpected circumstances arise that may have a material adverse effect on the cash flow or profitability of our business, including material negative changes in the health and welfare of our employees or those of our clients, turnover or attrition of employees and the operating performance or financial results of our business. Any of these events or circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified currently available sources and could require us to increase borrowings or raise additional debt or equity funding to meet those needs. Our ability to raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:
•our future profitability;
•the quality of our accounts receivable;
•our relative levels of debt and equity;
•the volatility and overall condition of the capital markets;
•general economic factors; and
•the market prices of our securities.
Any new debt funding, if available, may be on terms less favorable to us than our Credit Facility or the 2023 Convertible Notes. See “Forward-Looking Statements”Note 9, “Leases” in Part I, Item 2 of this Quarterly Report on Form 10-Q, and the information contained under the heading “Risk Factors” in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2020. 
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements and1, we have not entered into any transactions involving unconsolidated subsidiaries or special purpose entities that would be expectedcurrent obligations of $33.3 million and non-current obligations of $213.4 million.
These amounts reflect future unconditional payments and are based on the terms of the relevant agreements, appropriate classification of items under GAAP currently in effect and certain assumptions such as interest rates. Future events could cause actual payments to have a material impact on our financial condition or results of operations.
Future Contractual Obligations
There have been no material changes in our future contractual obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
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differ from these amounts.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve uncertainties and risks. Forward-looking statements include statements concerning our plans, initiatives, projections, prospects, policies and practices, objectives, goals, commitments, strategies, future events, future revenues, future results and performance, future capital allocations and expenditures, expectations, plans or intentions relating to acquisitions, share repurchases and other matters, business trends, new, or changes to, laws and regulations, including U.S. and foreign tax laws, environmental, social and governance ("ESG")-related issues, climate change-related matters, scientific or technological developments, and other information that is not historical. Forward-looking statements often contain words such as “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” "commits," “aspires,” “forecasts”“forecasts,” "future," "goal," "seeks" and variations of such words or similar expressions. All forward-looking statements, including, without limitation, management’s financial guidance and examination of operating trends, are based upon our historical performance and our current plans, estimates, intentions and expectations at the time we make them, and various assumptions. There can be no assurance that management’s plans, expectations, intentions, aspirations, beliefs, goals, estimates, forecasts and projections will result or be achieved. Our actual financial results, performance or achievements and outcomes could differ materially from those expressed in, or implied by, any forward-looking statements. Any references to standards of measurement and performance made regarding our climate change-, ESG- or other sustainability-related plans, goals, commitments, intentions, aspirations, forecasts or projections, or expectations are developing and based on assumptions, and no assurance can be given that any such plan, goal, commitment, intention, aspiration, forecast or projection, or expectation can or will be achieved. The inclusion of any forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates, forecasts, intentions, aspirations, beliefs or expectations contemplated by us will be achieved. Given these risks, uncertainties and other factors, you should not place undue reliance on any forward-looking statements.
There are a number of risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements contained in, or implied by, this Quarterly Report on Form 10-Q. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q include those set forth under the heading “Risk Factors” in Part II, Item 1A, of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 and Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2020,2021, as well as in other information that we file with the SEC from time to time. Important factors that could cause our actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q include, but are not limited to, the following:
•impact of the COVID-19 pandemic and related events that are beyond our control, including possible effects on our business, financial condition and results of operations, clients and vendors, employees and contractors, and employee attrition and headcount growth, which could affect our segments and practices, the type of services they provide and the
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geographic regions in which we conduct business, differently and adversely, as well as heighten risks related to or otherwise negatively impact the effectiveness of cybersecurity, information technology, financial reporting and our other corporate functions;
•changes in demand for our services;
•our ability to recruit and retain qualified professionals and senior management, including segment, industry and regional leaders;
•conflicts resulting in our inability to represent certain clients;
•our former employees joining or forming competing businesses;
•our ability to manage our headcount needs and our professionals’ utilization and billing rates and maintain or increase the pricing of our services and products;
•our ability to identify suitable acquisition candidates, negotiate favorable terms, take advantage of opportunistic acquisition situations and integrate the operations of acquisitions, as well as the costs of integration;
•our ability to adapt to and manage the risks associated with operating in non-U.S. markets;
•our ability to replace key personnel, including former executives, officers, senior managers and practice and regional leaders who have highly specialized skills and experience;
•our ability to protect the confidentiality of internal and client data and proprietary and confidential information, including from cyberattacks, systems failures or other similar events, or the use or misuse of social media;
•legislation or judicial rulings, including legislation or rulings regarding data privacy and the discovery process;
•periodic fluctuations in revenues, operating income and cash flows;
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•damage to our reputation as a result of claims involving the quality of our services, failures of our internal information technology systems controls or adverse publicity relating to certain clients or engagements;
•fee discounting or renegotiation, lower pricing, less advantageous contract terms and unexpected termination of client engagements;
•competition for clients and key personnel;
•general economic factors, industry trends, restructuring and bankruptcy rates, legal or regulatory requirements, capital market conditions, merger and acquisition activity, major litigation activity and other events outside of our control;
•our ability to manage growth;
•risk of non-payment of receivables;
•the amount and terms of our outstanding indebtedness;
•uncertainty from the expected discontinuance of LIBOR and transition to any other interest rate benchmark;
•risks relating to the obsolescence, ofreplacement or the protection of our information and financial systems and software, proprietary software products, intellectual property rights and trade secrets;secrets, which could adversely affect our ability to retain or win clients, conduct business, preserve or enhance our reputation, maintain business continuity or report financial results;
•foreign currency disruptions and currency fluctuations between the U.S. dollar and foreign currencies;
•risks related to the implementation and operation of new financial management or other systems;
•U.S. and foreign tax law changes, including the enactment of proposed U.S. tax legislation into law, which could increase our effective tax rate and cash tax expenditures;
•physical risks related to climate change, including rising temperatures, severe storms, energy disruptions and rising sea levels, among others, which could adversely impact our ability to conduct business or maintain business
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continuity, including by affecting our access to our leased office space in affected geographies and the integrity of our information technology systems;
•our climate change and ESG-related initiatives and goals, including our policies and practices relating to the environment and climate change, sustainability, and diversity and inclusion, if they do not meet or keep pace with evolving governmental, investor or other stakeholder expectations and standards or rules and regulations enacted by regulators;regulations; and
•fluctuations in the mix of our services and the geographic locations in which our clients are located or our services are rendered.
There may be other factors that may cause our actual results to differ materially from our forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf apply only as of the date of this Quarterly Report on Form 10-Q and are expressly qualified in their entirety by the cautionary statements included herein. We undertake no obligation to publicly update or revise any forward-looking statements to reflect subsequent events or circumstances and do not intend to do so.
Item 3.Quantitative and Qualitative Disclosures About Market Risk
For information regarding our exposure to certain market risks, see “Quantitative and Qualitative Disclosures About Market Risk” in Part II, Item 7A, of our Annual Report on Form 10-K for the year ended December 31, 2020.2021. There have been no material changes in our market risk exposure during the period covered by this Quarterly Report on Form 10-Q.
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Item 4.Controls and Procedures
Evaluation of Disclosure Controls and Procedures. An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this Quarterly Report on Form 10-Q, was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) were effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported and (b) included, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting. There have not been any changes in our internal control over financial reporting that occurred during the three months ended September 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1.Legal Proceedings
From time to time in the ordinary course of business, we are subject to claims, asserted or unasserted, or named as a party to lawsuits or investigations. Litigation, in general, and intellectual property and securities litigation in particular, can be expensive and disruptive to normal business operations. Moreover, the results of legal proceedings cannot be predicted with any certainty and in the case of more complex legal proceedings such as intellectual property and securities litigation, the results are difficult to predict at all. We are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect on our financial condition or results of our operations.
Item 1A.Risk Factors
The followingThere have been no material changes in any risk factors arepreviously disclosed in addition to the risk factors set forth inPart I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2020,2021 filed with the United States Securities and Exchange Commission (the "SEC"("SEC") on February 25, 2021.24, 2022. We may disclose changes to risk factors or disclose additional factors from time to time in our future filings with the SEC. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks Related to Our 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 tax cash payment obligations.
Changes to corporate income tax laws and rules and regulations and tax treaties in jurisdictions where we pay taxes that increase rates, eliminate or reduce deductions or affect the utility or value of deferred tax assets or liabilities could negatively affect our reported financial results and increase our cash tax payment obligations. The U.S. Congress is currently considering broad tax legislation that includes higher corporate income tax rates on both domestic and foreign earnings, the application of global intangible low-taxed income on a country-by-country basis and limits on various deductions, including the deductibility of compensation paid to certain highly-compensated employees. Limits on the deductibility of employee compensation could have a significant impact on professional services firms such as FTI and other companies that require the services of in-demand professionals who are often highly compensated for their substantive expertise and their ability to attract business. The content and timing of income tax legislation in the U.S., including whether any such legislation becomes law, remains uncertain. In addition, if any legislation is adopted, implementing regulations could significantly affect the impact of any tax legislation, both in terms of substance and timing.
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.
Due to the global nature of our business, we are exposed to a variety of physical risks related to climate change, including rising temperatures, severe storms, energy disruptions and rising sea levels, among others.These risks could impact our ability to maintain business continuity, including by affecting our access to our leased office space in affected geographies and the integrity of our information technology systems.In addition, existing or future legislation and regulations applicable to our business and operations related to greenhouse gas emissions and climate change by federal, state, local and foreign legislatures and governmental agencies could cause us to incur additional compliance and operational costs or actions if we fail to comply.
Increasing scrutiny and changing expectations from investors, clients and our colleagues with respect to our environmental, social and governance (“ESG”) practices and those of our clients may impose additional costs on us or expose us to new or additional risks.
There is increased focus, including from governmental organizations, investors, clients and employees on ESG issues such as environmental stewardship, climate change, diversity and inclusion, racial justice and workplace culture conduct.We have expended and may further expend resources to monitor, report and adopt policies and practices that we believe will improve compliance with our evolving ESG goals and plans, as well as third party imposed ESG related standards and expectations. If our ESG practices, including our goals for sustainability and diversity and inclusion, do not meet evolving rules and regulations or investor or other stakeholder expectations and standards (or if we are viewed in a negative light based on positions we do or do not take or work we do or do not perform for certain clients or industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals, and our ability to attract new engagements and clients could be negatively impacted, as could our attractiveness as an investment, service provider, business partner or acquiror.
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Similarly, our failure or perceived failure to pursue or fulfill our current or future goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts.
In addition, organizations that provide information to investors on corporate governance and related matters have developed ratings processes for evaluating companies on their approach to ESG matters, and unfavorable ratings of our Company may lead to negative investor sentiment, stock price fluctuations and the diversion of investment to other companies.
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
Unregistered sales of equity securities.
None.
Repurchases of our common stock.
The following table provides information with respect to purchases we made of our common stock during the three months ended September 30, 2021:2022: 
 Total
Number of
Shares
Purchased		 Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program (1)
 Approximate
Dollar Value
That May Yet Be
Purchased
Under the
Program
 (in thousands, except per share data)
July 1 through July 31, 20216 (2)$137.22 — $167,058 
August 1 through August 31, 2021— $— — $167,058 
September 1 through September 30, 20211 (3)$134.67 — $167,058 
7   —   
 Total
Number of
Shares
Purchased		 Average
Price
Paid per
Share
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Program (1)
 Approximate
Dollar Value
That May Yet Be
Purchased
Under the
Program
 (in thousands, except per share data)
July 1 through July 31, 20221 (2)$184.99 — $163,960 
August 1 through August 31, 202270 $160.95 70 (4)$152,708 
September 1 through September 30, 202262 (3)$158.52 58 (5)$143,528 
133   128   
(1)On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the “Repurchase Program”). On each of May 18, 2017, December 1, 2017, February 21, 2019 and February 20, 2020, our Board of Directors authorized an additional $100.0 million, respectively.million. On each of July 28, 2020 and December 3, 2020, our Board of Directors authorized an additional $200.0 million, respectively, increasing the Repurchase Program to an aggregate authorization of $900.0 million. No time limit has been established for the completion of the Repurchase Program, and the Repurchase Program may be suspended, discontinued or replaced by the Board of Directors at any time without prior notice. There were no repurchasesDuring the quarter ended September 30, 2022, we repurchased an aggregate of 127,791 shares of our common stock pursuant tounder the Repurchase Program during the quarter ended September 30, 2021.at an average price of $159.87 per share for a total cost of approximately $20.4 million.
(2)Includes 5,6071,249 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.
(3)Includes 7123,835 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.
(4)During the month ended August 31, 2022, we repurchased and retired 69,900 shares of common stock, at an average price per share of $160.95, for an aggregate cost of $11.3 million.
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(5)During the month ended September 30, 2022, we repurchased and retired 57,891 shares of common stock, at an average price per share of $158.55, for an aggregate cost of $9.2 million.
Item 3.Defaults Upon Senior Securities
None.
Item 4.Mine Safety Disclosures
Not applicable.
Item 5.Other Information
None.
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Item 6.Exhibits
Exhibit
Number		Description
  
3.1
  
3.2
  
3.3
  
3.4
  
3.5
31.1†
31.2†
  
32.1†**
32.2†**
101The following financial information from the Quarterly Report on Form 10-Q of FTI Consulting, Inc., included herewith, and formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets as of September 30, 20212022 and December 31, 2020;2021; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20212022 and 2020;2021; (iii) Condensed Consolidated StatementStatements of Stockholders’ Equity for the three and nine months ended September 30, 20212022 and 2020;2021; (iv) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 20212022 and 2020;2021; and (v) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.
104The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021,2022, formatted in Inline XBRL (included as Exhibit 101).
†Filed herewith.
**This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: October 28, 202127, 2022
 
FTI CONSULTING, INC.
   
By: /s/ Brendan Keating
  Brendan Keating
  Chief Accounting Officer and
Controller
  (principal accounting officer)
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