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 ~~March 31,~~September 30, 2023


☐			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)


Maryland									52-1261113
(State or Other Jurisdiction of Incorporation or Organization)									(I.R.S. Employer Identification No.)

555 12th Street NW
Washington,
DC									20004
(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 class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.01 par value

FCN

New 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.


Class			Outstanding at ~~April 20,~~October 19, 2023
Common Stock, $0.01 par value			~~33,979,832~~35,509,721

FTI CONSULTING, INC. AND SUBSIDIARIES

INDEX


		Page
PART I—FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Condensed Consolidated Balance Sheets—~~March 31,~~September 30, 2023 and December 31, 2022	3

	Condensed Consolidated Statements of Comprehensive Income—Three and Nine Months Ended ~~March 31,~~September 30, 2023 and 2022	4

	Condensed Consolidated Statements of Stockholders’ Equity—Three and Nine Months Ended ~~March 31,~~Septem ber 30, 2023 and 2022	5

	Condensed Consolidated Statements of Cash Flows—~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023 and 2022	67

	Notes to Condensed Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3539

Item 4.	Controls and Procedures	3539

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	3640

Item 1A.	Risk Factors	3640

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3640

Item 3.	Defaults Upon Senior Securities	3741

Item 4.	Mine Safety Disclosures	3741

Item 5.	Other Information	3741

Item 6.	Exhibits	3842

SIGNATURES		3943

PART I—FINANCIAL INFORMATION

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except per share data)


Item 1.			Financial Statements


		March 31,		December 31,			September 30,		December 31,
		2023		2022			2023		2022
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	238,539	$	491,688	Cash and cash equivalents	$	201,148	$	491,688

Accounts receivable, net	Accounts receivable, net	988,144		896,153		Accounts receivable, net	1,207,016		896,153
Current portion of notes receivable	Current portion of notes receivable	27,989		27,292		Current portion of notes receivable	32,095		27,292
Prepaid expenses and other current assets	Prepaid expenses and other current assets	97,733		95,469		Prepaid expenses and other current assets	126,967		95,469
Total current assets	Total current assets	1,352,405		1,510,602		Total current assets	1,567,226		1,510,602
Property and equipment, net	Property and equipment, net	163,051		153,466		Property and equipment, net	164,922		153,466
Operating lease assets	Operating lease assets	208,894		203,764		Operating lease assets	202,505		203,764
Goodwill	Goodwill	1,230,067		1,227,593		Goodwill	1,226,356		1,227,593
Intangible assets, net	Intangible assets, net	22,158		25,514		Intangible assets, net	19,233		25,514
Notes receivable, net	Notes receivable, net	62,268		55,978		Notes receivable, net	73,673		55,978
Other assets	Other assets	62,140		64,490		Other assets	64,911		64,490
Total assets	Total assets	$	3,100,983	$	3,241,407	Total assets	$	3,318,826	$	3,241,407
Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current liabilities	Current liabilities					Current liabilities
Accounts payable, accrued expenses and other	Accounts payable, accrued expenses and other	$	177,223	$	173,953	Accounts payable, accrued expenses and other	$	170,518	$	173,953
Accrued compensation	Accrued compensation	308,762		541,892		Accrued compensation	481,007		541,892
Billings in excess of services provided	Billings in excess of services provided	52,467		53,646		Billings in excess of services provided	57,006		53,646

Total current liabilities	Total current liabilities	538,452		769,491		Total current liabilities	708,531		769,491
Long-term debt, net	Long-term debt, net	360,583		315,172		Long-term debt, net	285,000		315,172
Noncurrent operating lease liabilities	Noncurrent operating lease liabilities	227,066		221,604		Noncurrent operating lease liabilities	217,755		221,604
Deferred income taxes	Deferred income taxes	158,315		162,374		Deferred income taxes	157,724		162,374
Other liabilities	Other liabilities	95,679		91,045		Other liabilities	85,321		91,045
Total liabilities	Total liabilities	1,380,095		1,559,686		Total liabilities	1,454,331		1,559,686
Commitments and contingencies (Note 10)	Commitments and contingencies (Note 10)					Commitments and contingencies (Note 10)
Stockholders’ equity	Stockholders’ equity					Stockholders’ 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 33,983 (2023) and 34,026 (2022)		340		340
Common stock, $0.01 par value; shares authorized — 75,000; shares issued and outstanding 35,510 (2023) and 34,026 (2022)						Common stock, $0.01 par value; shares authorized — 75,000; shares issued and outstanding 35,510 (2023) and 34,026 (2022)	355		340
Additional paid-in capital	Additional paid-in capital	—		—		Additional paid-in capital	9,712		—
Retained earnings	Retained earnings	1,887,420		1,858,103		Retained earnings	2,033,132		1,858,103
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(166,872)		(176,722)		Accumulated other comprehensive loss	(178,704)		(176,722)
Total stockholders’ equity	Total stockholders’ equity	1,720,888		1,681,721		Total stockholders’ equity	1,864,495		1,681,721
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	3,100,983	$	3,241,407	Total liabilities and stockholders’ equity	$	3,318,826	$	3,241,407

See accompanying notes to condensed consolidated financial statements

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands, except per share data)

(Unaudited)


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022
Revenues	Revenues	$	806,706	$	723,620		Revenues	$	893,261	$	775,865	$	2,564,558	$	2,254,477
Operating expenses	Operating expenses						Operating expenses
Direct cost of revenues	Direct cost of revenues	553,509		493,104			Direct cost of revenues	598,804		526,654		1,740,407		1,539,838
Selling, general and administrative expenses	Selling, general and administrative expenses	184,213		148,971			Selling, general and administrative expenses	186,088		159,186		556,672		476,097

Amortization of intangible assets	Amortization of intangible assets	2,182		2,268			Amortization of intangible assets	1,340		2,315		4,939		7,320
		739,904		644,343				786,232		688,155		2,302,018		2,023,255
Operating income	Operating income	66,802		79,277			Operating income	107,029		87,710		262,540		231,222
Other income (expense)	Other income (expense)						Other income (expense)
Interest income and other	Interest income and other	(1,342)		(347)			Interest income and other	5,147		7,771		3,221		10,418
Interest expense	Interest expense	(2,939)		(2,642)			Interest expense	(4,474)		(2,378)		(10,435)		(7,468)

		(4,281)		(2,989)				673		5,393		(7,214)		2,950
Income before income tax provision	Income before income tax provision	62,521		76,288			Income before income tax provision	107,702		93,103		255,326		234,172
Income tax provision	Income tax provision	14,974		16,967			Income tax provision	24,385		15,836		62,067		46,156
Net income	Net income	$	47,547	$	59,321		Net income	$	83,317	$	77,267	$	193,259	$	188,016
Earnings per common share — basic	Earnings per common share — basic	$	1.43	$	1.76		Earnings per common share — basic	$	2.44	$	2.29	$	5.75	$	5.57
Earnings per common share — diluted	Earnings per common share — diluted	$	1.34	$	1.66		Earnings per common share — diluted	$	2.34	$	2.15	$	5.43	$	5.25
Other comprehensive income (loss), net of tax
Other comprehensive loss, net of tax							Other 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	$	9,850	$	(6,191)		Foreign currency translation adjustments, net of tax expense of $0	$	(18,228)	$	(48,475)	$	(1,982)	$	(95,345)
Total other comprehensive income (loss), net of tax		9,850		(6,191)
Total other comprehensive loss, net of tax							Total other comprehensive loss, net of tax	(18,228)		(48,475)		(1,982)		(95,345)
Comprehensive income	Comprehensive income	$	57,397	$	53,130		Comprehensive income	$	65,089	$	28,792	$	191,277	$	92,671

See accompanying notes to condensed consolidated financial statements

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(Unaudited)


													Accumulated Other Comprehensive Loss																					Accumulated Other Comprehensive Loss
		Common Stock			Additional Paid-in Capital				Retained Earnings									Common Stock								Additional Paid-in Capital			Retained Earnings
		Shares	Amount								Total				Accumulated Other Comprehensive Loss			Shares				Amount									Total		Accumulated Other Comprehensive Loss
Balance at December 31, 2022	Balance at December 31, 2022	34,026	$	340			$	—			$	1,858,103							$	(176,722)			Balance at December 31, 2022	34,026					$	340				$	—			$	1,858,103	$	(176,722)
Net income	Net income	—	$	—	$	—			$	47,547			$	—					Net income		—			$	—		$	—			$	47,547				$	—
Other comprehensive income:	Other comprehensive income:																		Other comprehensive income:
Cumulative translation adjustment	Cumulative translation adjustment	—	—		—				—				9,850			9,850			Cumulative translation adjustment		—			—			—				—			9,850				9,850
Issuance of common stock in connection with:	Issuance of common stock in connection with:																		Issuance of common stock in connection with:
Exercise of options	Exercise of options	14	—		449				—				—			449			Exercise of options		14			—			449				—			—				449
Restricted share grants, less net settled shares of 55	Restricted share grants, less net settled shares of 55	55	1		(9,514)				—				—			(9,513)			Restricted share grants, less net settled shares of 55		55			1			(9,514)				—			—				(9,513)
Stock units issued under incentive compensation plan	Stock units issued under incentive compensation plan	—	—		2,274				—				—			2,274			Stock units issued under incentive compensation plan		—			—			2,274				—			—				2,274
Purchase and retirement of common stock	Purchase and retirement of common stock	(112)	(1)		(17,798)				—				—			(17,799)			Purchase and retirement of common stock		(112)			(1)			(17,798)				—			—				(17,799)

Conversion of convertible senior notes due 2023	Conversion of convertible senior notes due 2023	—	—		(6)				—				—			(6)			Conversion of convertible senior notes due 2023		—			—			(6)				—			—				(6)
Share-based compensation	Share-based compensation	—	—		6,365				—				—			6,365			Share-based compensation		—			—			6,365				—			—				6,365
Reclassification of negative additional paid-in capital	Reclassification of negative additional paid-in capital	—	—		18,230				(18,230)				—			—			Reclassification of negative additional paid-in capital		—			—			18,230				(18,230)			—				—
Balance at March 31, 2023	Balance at March 31, 2023	33,983	$	340	$	—			$	1,887,420			$	(166,872)		$	1,720,888		Balance at March 31, 2023		33,983			$	340		$	—			$	1,887,420		$	(166,872)			$	1,720,888
Net income																			Net income		—			$	—		$	—			$	62,395		$	—			$	62,395
Other comprehensive income:																			Other comprehensive income:
Cumulative translation adjustment																			Cumulative translation adjustment		—			—			—				—			6,396				6,396
Issuance of common stock in connection with:																			Issuance of common stock in connection with:
Exercise of options																			Exercise of options		21			—			718				—			—				718
Restricted share grants, less net settled shares of 13																			Restricted share grants, less net settled shares of 13		30			—			(2,408)				—			—				(2,408)

Conversion of convertible senior notes due 2023																			Conversion of convertible senior notes due 2023		—			—			(375)				—			—				(375)
Share-based compensation																			Share-based compensation		—			—			7,538				—			—				7,538

Balance at June 30, 2023																			Balance at June 30, 2023		34,034			$	340		$	5,473			$	1,949,815		$	(160,476)			$	1,795,152
Net income																			Net income		—			$	—		$	—			$	83,317		$	—			$	83,317
Other comprehensive loss:																			Other comprehensive loss:
Cumulative translation adjustment																			Cumulative translation adjustment		—			—			—				—			(18,228)				(18,228)
Issuance of common stock in connection with:																			Issuance of common stock in connection with:
Exercise of options																			Exercise of options		1			—			42				—			—				42
Restricted share grants, less net settled shares of 17																			Restricted share grants, less net settled shares of 17		14			—			(3,291)				—			—				(3,291)

Settlement of conversion premium of convertible senior notes due 2023																			Settlement of conversion premium of convertible senior notes due 2023		1,461			15			(21)				—			—				(6)

Share-based compensation																			Share-based compensation		—			—			7,509				—			—				7,509

Balance at September 30, 2023																			Balance at September 30, 2023		35,510			$	355		$	9,712			$	2,033,132		$	(178,704)			$	1,864,495

Accumulated
Other
Comprehensive
Loss
Common Stock Additional
Paid-in
Capital Retained
Earnings
Shares Amount Total
Balance at December 31, 2021 34,333 $ 343 $ 13,662 $ 1,698,156 $ (128,840) $ 1,583,321
Net income — $ — $ — $ 59,321 $ — $ 59,321
Other comprehensive loss:
Cumulative translation adjustment — — — — (6,191) (6,191)
Issuance of common stock in connection with:
Exercise of options 26 — 923 — — 923
Restricted share grants, less net
settled shares of 54
134 2 (7,836) — — (7,834)
Stock units issued under incentive
compensation plan
— — 1,664 — — 1,664
Purchase and retirement of common stock (22) — (3,098) — — (3,098)
Cumulative effect due to adoption of new accounting standard — — (34,131) 22,078 — (12,053)
Conversion of convertible senior notes due 2023 — — (2) — — (2)
Share-based compensation — — 5,967 — — 5,967
Reclassification of negative additional paid-in capital — — 22,851 (22,851) — —
Balance at March 31, 2022 34,471 $ 345 $ — $ 1,756,704 $ (135,031) $ 1,622,018


								Accumulated Other Comprehensive Loss
	Common Stock			Additional Paid-in Capital		Retained Earnings
	Shares	Amount								Total
Balance at December 31, 2021	34,333	$	343	$	13,662	$	1,698,156	$	(128,840)	$	1,583,321
Net income	—	$	—	$	—	$	59,321	$	—	$	59,321
Other comprehensive loss:
Cumulative translation adjustment	—	—		—		—		(6,191)		(6,191)
Issuance of common stock in connection with:
Exercise of options	26	—		923		—		—		923
Restricted share grants, less net settled shares of 54	134	2		(7,836)		—		—		(7,834)
Stock units issued under incentive compensation plan	—	—		1,664		—		—		1,664
Purchase and retirement of common stock	(22)	—		(3,098)		—		—		(3,098)
Cumulative effect due to adoption of new accounting standard	—	—		(34,131)		22,078		—		(12,053)
Conversion of convertible senior notes due 2023	—	—		(2)		—		—		(2)
Share-based compensation	—	—		5,967		—		—		5,967
Reclassification of negative additional paid-in capital	—	—		22,851		(22,851)		—		—
Balance at March 31, 2022	34,471	$	345	$	—	$	1,756,704	$	(135,031)	$	1,622,018
Net income	—	$	—	$	—	$	51,428	$	—	$	51,428
Other comprehensive loss:
Cumulative translation adjustment	—	—		—		—		(40,679)		(40,679)
Issuance of common stock in connection with:
Exercise of options	22	—		687		—		—		687
Restricted share grants, less net settled shares of 55	47	—		(8,907)		—		—		(8,907)



Conversion of convertible senior notes due 2023	—	—		(11)		—		—		(11)
Share-based compensation	—	—		6,083		—		—		6,083
Reclassification of negative additional paid-in capital	—	—		2,647		(2,647)		—		—
Balance at June 30, 2022	34,540	$	345	$	499	$	1,805,485	$	(175,710)	$	1,630,619
Net income	—	$	—	$	—	$	77,267	$	—	$	77,267
Other comprehensive loss:
Cumulative translation adjustment	—	—		—		—		(48,475)		(48,475)
Issuance of common stock in connection with:

Restricted share grants, less net settled shares of 5	10	—		(837)		—		—		(837)

Purchase and retirement of common stock	(128)	(1)		(20,431)		—		—		(20,432)

Share-based compensation	—	—		6,441		—		—		6,441
Reclassification of negative additional paid-in capital	—	—		14,328		(14,328)		—		—
Balance at September 30, 2022	34,422	$	344	$	—	$	1,868,424	$	(224,185)	$	1,644,583

See accompanying notes to condensed consolidated financial statements

FTI Consulting, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2023		2022			2023		2022
Operating activities	Operating activities					Operating activities
Net income	Net income	$	47,547	$	59,321	Net income	$	193,259	$	188,016
Adjustments to reconcile net income to net cash used in operating activities:	Adjustments to reconcile net income to net cash used in operating activities:					Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	9,443		8,907		Depreciation and amortization	29,926		27,045
Amortization of intangible assets	Amortization of intangible assets	2,182		2,268		Amortization of intangible assets	4,939		7,320
Acquisition-related contingent consideration	Acquisition-related contingent consideration	1,284		(979)		Acquisition-related contingent consideration	4,263		863
Provision for expected credit losses	Provision for expected credit losses	7,012		4,859		Provision for expected credit losses	21,347		13,101
Share-based compensation	Share-based compensation	6,365		5,967		Share-based compensation	21,412		18,491
Amortization of debt issuance costs and other	Amortization of debt issuance costs and other	646		527		Amortization of debt issuance costs and other	1,722		1,588

Deferred income taxes	Deferred income taxes	(3,016)		2,379		Deferred income taxes	(4,602)		(9,140)

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 unbilled	Accounts receivable, billed and unbilled	(93,739)		(66,471)		Accounts receivable, billed and unbilled	(333,713)		(251,280)
Notes receivable	Notes receivable	(6,851)		1,345		Notes receivable	(22,600)		838
Prepaid expenses and other assets	Prepaid expenses and other assets	321		(3,829)		Prepaid expenses and other assets	(3,252)		(3,066)
Accounts payable, accrued expenses and other	Accounts payable, accrued expenses and other	1,315		3,096		Accounts payable, accrued expenses and other	(8,895)		21,936
Income taxes	Income taxes	5,658		1,116		Income taxes	(347)		3,940
Accrued compensation	Accrued compensation	(230,967)		(216,560)		Accrued compensation	(65,394)		(67,763)
Billings in excess of services provided	Billings in excess of services provided	(1,406)		(5,724)		Billings in excess of services provided	3,410		7,672
Net cash used in operating activities	Net cash used in operating activities	(254,206)		(203,778)		Net cash used in operating activities	(158,525)		(40,439)
Investing activities	Investing activities					Investing activities

Payments for acquisition of businesses, net of cash received	Payments for acquisition of businesses, net of cash received	—		(6,698)		Payments for acquisition of businesses, net of cash received	—		(6,742)
Purchases of property and equipment and other	Purchases of property and equipment and other	(18,012)		(12,607)		Purchases of property and equipment and other	(43,224)		(38,935)

Purchase of short-term investment						Purchase of short-term investment	(24,356)		—
Net cash used in investing activities	Net cash used in investing activities	(18,012)		(19,305)		Net cash used in investing activities	(67,580)		(45,677)
Financing activities	Financing activities					Financing activities
Borrowings under revolving line of credit	Borrowings under revolving line of credit	90,000		155,000		Borrowings under revolving line of credit	725,000		165,000

Repayments under revolving line of credit	Repayments under revolving line of credit	(45,000)		(140,000)		Repayments under revolving line of credit	(440,000)		(165,000)

Repayment of convertible notes						Repayment of convertible notes	(315,763)		—
Purchase and retirement of common stock	Purchase and retirement of common stock	(20,982)		(3,098)		Purchase and retirement of common stock	(20,982)		(23,530)
Share-based compensation tax withholdings and other	Share-based compensation tax withholdings and other	(9,064)		(6,916)		Share-based compensation tax withholdings and other	(14,003)		(15,663)
Payments for business acquisition liabilities	Payments for business acquisition liabilities	(847)		(2,680)		Payments for business acquisition liabilities	(3,651)		(4,848)
Deposits and other	Deposits and other	1,660		1,855		Deposits and other	2,319		7,092

Net cash provided by financing activities		15,767		4,161
Net cash used in financing activities						Net cash used in financing activities	(67,080)		(36,949)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	3,302		(4,420)		Effect of exchange rate changes on cash and cash equivalents	2,645		(44,373)
Net decrease in cash and cash equivalents	Net decrease in cash and cash equivalents	(253,149)		(223,342)		Net decrease in cash and cash equivalents	(290,540)		(167,438)
Cash and cash equivalents, beginning of period	Cash and cash equivalents, beginning of period	491,688		494,485		Cash and cash equivalents, beginning of period	491,688		494,485
Cash and cash equivalents, end of period	Cash and cash equivalents, end of period	$	238,539	$	271,143	Cash and cash equivalents, end of period	$	201,148	$	327,047
Supplemental cash flow disclosures	Supplemental cash flow disclosures					Supplemental cash flow disclosures
Cash paid for interest	Cash paid for interest	$	3,625	$	3,728	Cash paid for interest	$	10,160	$	8,012
Cash paid for income taxes, net of refunds	Cash paid for income taxes, net of refunds	$	12,331	$	13,471	Cash paid for income taxes, net of refunds	$	67,015	$	51,353
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 plans	Issuance of stock units under incentive compensation plans	$	2,274	$	1,664	Issuance of stock units under incentive compensation plans	$	2,274	$	1,664

Business acquisition liabilities not yet paid	Business acquisition liabilities not yet paid	$	—	$	5,370	Business acquisition liabilities not yet paid	$	—	$	5,593
Non-cash additions to property and equipment	Non-cash additions to property and equipment	$	213	$	4,497	Non-cash additions to property and equipment	$	1,972	$	4,970

See accompanying notes to condensed consolidated financial statements

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

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, 2022 filed with the SEC.

2. Significant Accounting Policies

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, 2022 describes the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

During the three months ended September 30, 2023, we purchased a short-term investment, which is included in the “Prepaid expenses and other current assets” financial statement line item on the Condensed Consolidated Balance Sheets. The short-term investment represents an investment in a certificate of deposit with an original maturity of less than one year. We classified the short-term investment as held-to-maturity in accordance with Accounting Standards Codification Topic 320, Investments - Debt and Equity Securities. Short-term investments classified as held-to-maturity are financial instruments the Company has the intent and ability to hold until maturity and are reported net of amortized cost. Any interest earned on the short-term investment is recorded in “Interest income and other” on the Condensed Consolidated Statements of Comprehensive Income.

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 share-based awards (restricted share awards, restricted stock units and performance stock units), each using the treasury stock method.

We use the if-converted method for calculating the potential dilutive effect of the conversion feature of the principal amount of our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”) on earnings per common share. The conversion feature had a dilutive impact on earnings per common share for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022, as the average market price per share of our common stock for the periods exceeded the conversion price of $101.38 per share. On August 17, 2023, we issued a total of 1,460,740 shares of our common stock to holders in connection with the conversion of their 2023 Convertible Notes at maturity. As of September 30, 2023, there were no 2023 Convertible Notes outstanding. See Note 8, “Debt” for additional information about the 2023 Convertible Notes.

Three Months Ended March 31,
2023 2022
Numerator — basic and diluted
Net income $ 47,547 $ 59,321
Denominator
Weighted average number of common shares outstanding — basic 33,301 33,619
Effect of dilutive share-based awards 576 691
Effect of dilutive stock options 305 338
Effect of dilutive convertible notes 1,300 998
Weighted average number of common shares outstanding — diluted 35,482 35,646
Earnings per common share — basic $ 1.43 $ 1.76
Earnings per common share — diluted $ 1.34 $ 1.66
Antidilutive stock options and share-based awards 8 6


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator — basic and diluted
Net income	$	83,317	$	77,267	$	193,259	$	188,016
Denominator
Weighted average number of common shares outstanding — basic	34,128		33,812		33,599		33,741
Effect of dilutive share-based awards	515		545		547		607
Effect of dilutive stock options	285		322		296		330
Effect of dilutive convertible notes	728		1,239		1,157		1,147
Weighted average number of common shares outstanding — diluted	35,656		35,918		35,599		35,825
Earnings per common share — basic	$	2.44	$	2.29	$	5.75	$	5.57
Earnings per common share — diluted	$	2.34	$	2.15	$	5.43	$	5.25
Antidilutive stock options and share-based awards	2		—		5		10

4. Revenues

We generate the majority of our revenues by providing consulting services to our clients. Revenues are recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer and in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate services that we provide to our customers. If, at the outset of an arrangement, we determine that a contract with enforceable rights and obligations does not exist, revenues are deferred until all criteria for an enforceable contract are met.

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 ~~$4.8~~$10.4 million and ~~$6.4~~$6.6 million for the three and nine months ended ~~March 31,~~September 30, 2023, respectively, and immaterial and $12.5 million for the three and nine months ended September 30, 2022, respectively.

Unfulfilled performance obligations primarily consist of fees not yet recognized on certain fixed-fee arrangements and performance-based and contingent arrangements. As of ~~March 31,~~September 30, 2023 and December 31, 2022, the aggregate amount of the remaining contract transaction price allocated to unfulfilled performance obligations was ~~$3.2~~$12.1 million and $3.6 million, respectively. We expect to recognize the majority of the related revenues over the next 1224 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 immaterial as of ~~March 31,~~September 30, 2023 and December 31, 2022.

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 as of ~~March 31,~~September 30, 2023 and December 31, 2022.

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:


		March 31, 2023		December 31, 2022			September 30, 2023		December 31, 2022
Accounts receivable:	Accounts receivable:					Accounts receivable:
Billed receivables	Billed receivables	$	728,847	$	633,055	Billed receivables	$	771,661	$	633,055
Unbilled receivables	Unbilled receivables	307,352		308,873		Unbilled receivables	495,270		308,873
Allowance for expected credit losses	Allowance for expected credit losses	(48,055)		(45,775)		Allowance for expected credit losses	(59,915)		(45,775)
Accounts receivable, net	Accounts receivable, net	$	988,144	$	896,153	Accounts receivable, net	$	1,207,016	$	896,153

The following table summarizes the total provision for expected credit losses and write-offs:

Three Months Ended March 31,
2023 2022
Provision for expected credit losses $ 7,012 $ 4,859
Write-offs $ 7,888 $ 2,791


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Provision for expected credit losses	$	10,159	$	4,348	$	21,347	$	13,101
Write-offs	$	1,974	$	3,877	$	11,527	$	9,917

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.

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)		Forensic and Litigation Consulting (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, 2022	Balance at December 31, 2022	$	516,500	$	234,872	$	268,055	$	96,727	$	111,439	$	1,227,593	Balance at December 31, 2022	$	516,500	$	234,872	$	268,055	$	96,727	$	111,439	$	1,227,593

Foreign currency translation adjustment and other	Foreign currency translation adjustment and other	147		713		194		—		1,420		2,474		Foreign currency translation adjustment and other	(2,523)		309		44		18		915		(1,237)
Balance at March 31, 2023		$	516,647	$	235,585	$	268,249	$	96,727	$	112,859	$	1,230,067
Intersegment transfers in/(out) (3)														Intersegment transfers in/(out) (3)	23,086		(23,086)		—		—		—		—
Balance at September 30, 2023														Balance at September 30, 2023	$	537,063	$	212,095	$	268,099	$	96,745	$	112,354	$	1,226,356

(1) There were no accumulated impairment losses for the Corporate Finance & Restructuring (“Corporate Finance”), Forensic and Litigation Consulting (“FLC”), Economic Consulting or Technology segments as of ~~March 31,~~September 30, 2023 and December 31, 2022.

(2) Amounts for our Strategic Communications segment include gross carrying values of ~~$307.0~~$306.5 million and $305.6 million as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively, and accumulated impairment losses of $194.1 million as of ~~March 31,~~September 30, 2023 and December 31, 2022.

(3) Includes the allocation of goodwill relating to the reclassification of the portion of the Company’s health solutions practice previously within our FLC segment, which focuses on business transformation services in the healthcare and life sciences sector, to our business transformation & strategy practice within our Corporate Finance segment. See Note 13, “Segment Reporting,” for information on this segment reclassification.

Intangible Assets

Intangible assets were as follows:


		March 31, 2023						December 31, 2022							September 30, 2023						December 31, 2022
		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 assets	Amortizing intangible assets													Amortizing intangible assets
Customer relationships	Customer relationships	$	26,827	$	14,006	$	12,821	$	78,223	$	63,810	$	14,413	Customer relationships	$	26,560	$	15,555	$	11,005	$	78,223	$	63,810	$	14,413
Trademarks	Trademarks	9,570		5,818		3,752		10,950		5,554		5,396		Trademarks	9,312		6,455		2,857		10,950		5,554		5,396
Acquired software and other	Acquired software and other	833		348		485		846		241		605		Acquired software and other	815		544		271		846		241		605
		37,230		20,172		17,058		90,019		69,605		20,414			36,687		22,554		14,133		90,019		69,605		20,414
Non-amortizing intangible assets	Non-amortizing intangible assets													Non-amortizing intangible assets
Trademarks	Trademarks	5,100		—		5,100		5,100		—		5,100		Trademarks	5,100		—		5,100		5,100		—		5,100
Total	Total	$	42,330	$	20,172	$	22,158	$	95,119	$	69,605	$	25,514	Total	$	41,787	$	22,554	$	19,233	$	95,119	$	69,605	$	25,514

Intangible assets with finite lives are amortized over their estimated useful lives. We recorded amortization expense of ~~$2.2~~$1.3 million and $4.9 million during the three and nine months ended September 30, 2023, respectively, and $2.3 million ~~during~~and $7.3 million for the three and nine months ended ~~March 31, 2023 and~~September 30, 2022, respectively.

We estimate our future amortization expense for our intangible assets with finite lives to be as follows:


Year	Year	As of March 31, 2023 (1)		Year	As of September 30, 2023 (1)
2023 (remaining)	2023 (remaining)	$	3,966	2023 (remaining)	$	1,202
2024	2024	3,788		2024	3,517
2025	2025	2,955		2025	2,856
2026	2026	1,746		2026	1,734
2027	2027	1,676		2027	1,664
Thereafter	Thereafter	2,927		Thereafter	3,160
		$	17,058		$	14,133

(1)Actual amortization expense to be reported in future periods could differ from these estimates as a result of new intangible asset acquisitions, impairments, changes in useful lives, or other relevant factors or changes.

911

7. Financial Instruments

The following tables present the carrying amounts and estimated fair values of our financial instruments by hierarchy level as of ~~March 31,~~September 30, 2023 and December 31, 2022:


		March 31, 2023									September 30, 2023
				Hierarchy Level (Fair Value)									Hierarchy Level (Fair Value)
		Carrying Amount		Level 1		Level 2		Level 3			Carrying Amount		Level 1		Level 2		Level 3
Liabilities	Liabilities									Liabilities
Acquisition-related contingent consideration (1)	Acquisition-related contingent consideration (1)	$	13,080	$	—	$	—	$	13,080	Acquisition-related contingent consideration (1)	$	13,017	$	—	$	—	$	13,017
2023 Convertible Notes (2)		315,583		—		616,368		—

Total	Total	$	328,663	$	—	$	616,368	$	13,080	Total	$	13,017	$	—	$	—	$	13,017


	December 31, 2022
			Hierarchy Level (Fair Value)
	Carrying Amount		Level 1		Level 2		Level 3
Liabilities
Acquisition-related contingent consideration (1)	$	14,988	$	—	$	—	$	14,988
2023 Convertible Notes (2)	315,172		—		509,682		—
Total	$	330,160	$	—	$	509,682	$	14,988

(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)The carrying amount includes unamortized deferred debt issuance costs.

The fair values of financial instruments not included in the tables above are estimated to be equal to their carrying values as of ~~March 31,~~September 30, 2023 and December 31, 2022.

We ~~estimate~~estimated the fair value of our 2023 Convertible Notes based on their last actively traded prices. The fair value of our 2023 Convertible Notes iswas classified within Level 2 of the fair value hierarchy as of December 31, 2022 because it iswas traded in less active markets. As of September 30, 2023, no 2023 Convertible Notes remain outstanding.

We estimate the fair value of acquisition-related contingent consideration using either a probability-weighted discounted cash flow model or a Monte Carlo 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.

1012

The change in our liability for our Level 3 financial instruments is as follows:


	Contingent Consideration
Balance at December 31, 2022	$	14,988

Accretion expense (1)	$	1,284
Payments	(3,430)

Foreign currency translation adjustment (2)	238
Balance at March 31, 2023	$	13,080

Accretion expense (1)	2,259
Payments	(2,423)
Foreign currency translation adjustment (2)	67

Balance at June 30, 2023	$	12,983

Accretion expense (1)	720
Payments	(500)
Foreign currency translation adjustment (2)	(186)
Balance at September 30, 2023
$
13,017


	Contingent Consideration
Balance at December 31, 2021	$	15,110
Additions	$	5,370
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

(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.

8. Debt

The table below presents the components of the Company’s debt:


		March 31, 2023		December 31, 2022			September 30, 2023		December 31, 2022
2023 Convertible Notes	2023 Convertible Notes	$	316,211	$	316,219	2023 Convertible Notes	$	—	$	316,219
Credit Facility	Credit Facility	45,000		—		Credit Facility	285,000		—
Total debt	Total debt	361,211		316,219		Total debt	285,000		316,219

Less: deferred debt issuance costs	Less: deferred debt issuance costs	(628)		(1,047)		Less: deferred debt issuance costs	—		(1,047)
Long-term debt, net (1)	Long-term debt, net (1)	$	360,583	$	315,172	Long-term debt, net (1)	$	285,000	$	315,172

(1)There were no current portions of long-term debt as of ~~March 31,~~September 30, 2023 and December 31, 2022. The 2023 Convertible Notes due on August 15, 2023 are classified as long-term debt as of March 31, 2023 because we have the ability and intent to refinance them on a long-term basis under our Credit Facility, which matures on November 21, 2027.

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~~were convertible through the close of ~~2.0% per year, payable semiannually in arrears on February 15 and August 15 of each year. The 2023 Convertible Notes will mature~~business on August ~~15,~~14, 2023 unless earlier converted or repurchased. Effective January 1, 2022, pursuant to the terms of the Indenture, upon conversion, 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). ~~Holders may~~Certain holders of the 2023 Convertible Notes elected to convert their 2023 Convertible Notes ~~at any time prior to the close of business~~before they became unconditionally convertible on ~~the business day immediately preceding~~ May 15, 2023, ~~only under~~which resulted in 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~~settlement 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~~approximately $0.5 million aggregate principal amount 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 $1,0002023 Convertible Notes. The principal amount of the 2023 Convertible Notes ~~for each trading day~~ of ~~the Measurement Period~~$315.8 million was ~~less than 98% of the product of the last reported sale price of our common stock and the conversion rate~~settled in ~~effect~~cash at maturity 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 utilizing existing cash resources, including our senior secured bank revolving credit facility (“Credit Facility”). We also issued 1,460,740 shares of FTI Consulting common stock to holders ~~may convert~~in connection with the conversion of their 2023 Convertible Notes at ~~any time, regardless~~maturity, which represents the excess of the ~~foregoing circumstances.~~

conversion value over the principal amount of $280.3 million. The ~~2023 Convertible Notes were convertible in each of~~consideration related to the ~~quarters ended September 30, 2021 through March 31, 2023. The number of conversions in each quarter was immaterial. The circumstances required~~conversion premium issued to ~~allow~~ the holders who elected to convert their 2023 Convertible Notes ~~prior to maturity were met as~~before they became unconditionally convertible on May 15, 2023 was immaterial. As of ~~March 31,~~September 30, 2023, ~~and~~no 2023 Convertible Notes remain outstanding.

Interest on the 2023 Convertible Notes ~~will become convertible regardless~~was at a fixed rate of ~~such circumstances~~2.0% per year, payable semiannually in arrears on ~~or after May~~February 15 ~~2023; therefore, holders may convert their notes at any time beginning on April 1, 2023 through~~and August ~~14, 2023. Based on the Company’s stock price on March 31, 2023, the if-converted value~~15 of ~~the 2023 Convertible Notes exceeded the principal amount by~~ ~~$299.4 million~~.

We may not redeem the 2023 Convertible Notes prior 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).

each year. Contractual interest expense for the 2023 Convertible Notes was ~~$1.6~~$0.8 million and $4.0 million for the three and nine months ended ~~March 31,~~September 30, 2023, respectively, and ~~2022.~~$1.6 million and $4.7 million for the three and nine months ended September 30, 2022, respectively.

Credit Facility

In November 2022, we amended and restated our credit agreement for our ~~senior secured bank revolving credit facility (“~~Credit ~~Facility”),~~Facility to, among other things, (i) extend the maturity to November 21, 2027, (ii) increase the revolving line of credit limit from $550.0 million to $900.0 million, and (iii) increase the incremental facility from $150.0 million to a maximum of $300.0 million, subject to certain conditions, and incurred an additional $4.0 million of debt issuance costs. The Credit Facility is guaranteed by substantially all of our ~~wholly-owned~~wholly owned domestic subsidiaries and is secured by a first priority security interest in substantially all of the assets of FTI Consulting and such domestic subsidiaries.

Borrowings under the Credit Facility bear interest at a rate equal to, in the case of: (i) U.S. Dollars (“USD”), at our option, Adjusted Term Secured Overnight Financing Rate (“SOFR”) or Adjusted Daily Simple SOFR, (ii) euro, Euro Interbank Offered Rate, (iii) British pound, Sterling Overnight Index Average Reference Rate, (iv) Australian dollars, Bank Bill Swap Reference Bid Rate, (v) Canadian dollars, Canadian Dollar Offered Rate, (vi) Swiss franc, Swiss Average Rate Overnight, and (vii) Japanese yen, Tokyo Interbank Offered Rate, in each case, plus an applicable margin that will fluctuate between 1.25% per annum and 2.00% per annum based upon the Company’s Consolidated Total Net Leverage Ratio (as defined in the Credit Facility) at such time or, in the case of USD borrowings, an alternative base rate plus an applicable margin that will fluctuate between 0.25% per annum and 1.00% per annum based upon the Company’s Consolidated Total Net Leverage Ratio at such time. The alternative base rate is a fluctuating rate per annum equal to the highest of (1) the federal funds rate plus the sum of 50 basis points, (2) the rate of interest in effect for such day as the prime rate announced by Bank of America, and (3) the one-month Term SOFR plus 100 basis points.

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.

The Company classified the borrowings under the Credit Facility as long-term debt in the accompanying Condensed Consolidated Balance Sheets, as ~~amounts due under~~we have the intent and unilateral ability to refinance any borrowings on a continuous basis through the maturity of the Credit Facility ~~are not contractually required or expected to be liquidated for more than one year from the applicable balance sheet date.~~on November 21, 2027. As of ~~March 31,~~September 30, 2023, $~~0.4~~0.1 million o off the borrowing limit under the Credit Facility was utilized (and, therefore, unavailable) for letters of credit.

There were~~$4.1 million~~ $3.6 million and $4.3 million of unamortized debt issuance costs related to the Credit Facility as of ~~March 31,~~September 30, 2023 and December 31, 2022, respectively. These amounts are included in “Other assets” on our Condensed Consolidated Balance Sheets.

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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 Condensed Consolidated Balance Sheets and are expensed on a straight-line basis.~~ Most leases include one or more options to renew, with renewal terms that can extend the lease term up 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 table below summarizes the carrying amount of our operating lease assets and liabilities:


Leases	Leases	Classification	March 31, 2023		December 31, 2022		Leases	Classification	September 30, 2023		December 31, 2022
Assets	Assets						Assets
Operating lease assets	Operating lease assets	Operating lease assets	$	208,894	$	203,764	Operating lease assets	Operating lease assets	$	202,505	$	203,764
Total lease assets	Total lease assets		$	208,894	$	203,764	Total lease assets		$	202,505	$	203,764
Liabilities	Liabilities						Liabilities
Current	Current						Current
Operating lease liabilities	Operating lease liabilities	Accounts payable, accrued expenses and other	$	31,585	$	31,922	Operating lease liabilities	Accounts payable, accrued expenses and other	$	33,052	$	31,922
Noncurrent	Noncurrent						Noncurrent
Operating lease liabilities	Operating lease liabilities	Noncurrent operating lease liabilities	227,066		221,604		Operating lease liabilities	Noncurrent operating lease liabilities	217,755		221,604
Total lease liabilities	Total lease liabilities		$	258,651	$	253,526	Total lease liabilities		$	250,807	$	253,526

The table below summarizes total lease costs:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
Lease Cost	Lease Cost	2023		2022			Lease Cost	2023		2022		2023		2022
Operating lease costs	Operating lease costs	$	12,983	$	12,362		Operating lease costs	$	12,923	$	11,874	$	38,871	$	36,328
Short-term lease costs	Short-term lease costs	692		405			Short-term lease costs	756		441		2,156		1,573
Variable lease costs	Variable lease costs	3,111		3,228			Variable lease costs	3,468		3,456		9,884		9,434
Sublease income	Sublease income	(319)		(266)			Sublease income	(320)		(224)		(959)		(610)
Total lease cost, net	Total lease cost, net	$	16,467	$	15,729		Total lease cost, net	$	16,827	$	15,547	$	49,952	$	46,725

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 March 31, 2023			As of September 30, 2023
2023 (remaining)	2023 (remaining)	$	37,490	2023 (remaining)	$	11,313
2024	2024	49,438		2024	52,021
2025	2025	42,003		2025	43,709
2026	2026	36,907		2026	39,525
2027	2027	36,679		2027	39,207
Thereafter	Thereafter	127,551		Thereafter	131,863
Total future lease payments	Total future lease payments	330,068		Total future lease payments	317,638
Less: imputed interest	Less: imputed interest	(71,417)		Less: imputed interest	(66,831)
Total	Total	$	258,651	Total	$	250,807

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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:


		Three Months Ended March 31,								Nine Months Ended September 30,
			2023			2022					2023			2022
Cash paid for amounts included in the measurement of operating lease liabilities	Cash paid for amounts included in the measurement of operating lease liabilities		$	14,170		$	11,693		Cash paid for amounts included in the measurement of operating lease liabilities		$	41,793		$	38,297

Operating lease assets obtained in exchange for lease liabilities	Operating lease assets obtained in exchange for lease liabilities		$	13,105		$	411		Operating lease assets obtained in exchange for lease liabilities		$	26,488		$	16,644

Weighted average remaining lease term (years)	Weighted average remaining lease term (years)								Weighted average remaining lease term (years)
Operating leases	Operating leases		8.3			8.7			Operating leases		8.0			8.5

Weighted average discount rate	Weighted average discount rate								Weighted average discount rate
Operating leases	Operating leases		5.7		%	5.4		%	Operating leases		5.8		%	5.5		%

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 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.

11. Share-Based Compensation

During the ~~three~~nine months ended ~~March 31,~~September 30, 2023, we granted ~~22,976~~87,001 restricted share awards, ~~80,346~~99,922 restricted stock units and 79,682 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 ~~three~~nine months ended ~~March 31,~~September 30, 2023, no6,340 shares of restricted stock, 2,534 restricted stock units and no stock options were forfeited prior to the completion of the applicable vesting requirements. Additionally, ~~7,815~~13,021 performance stock units were forfeited during the ~~three~~nine months ended ~~March 31,~~September 30, 2023, ~~as the~~including award targets that were not achieved.

Total share-based compensation expense, net of forfeitures is detailed in the following table:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
Income Statement Classification	Income Statement Classification	2023		2022			Income Statement Classification	2023		2022		2023		2022
Direct cost of revenues	Direct cost of revenues	$	4,699	$	3,969		Direct cost of revenues	$	4,407	$	3,510	$	13,667	$	11,456
Selling, general and administrative expenses	Selling, general and administrative expenses	5,044		3,077			Selling, general and administrative expenses	3,581		2,227		12,488		9,450

Total share-based compensation expense	Total share-based compensation expense	$	9,743	$	7,046		Total share-based compensation expense	$	7,988	$	5,737	$	26,155	$	20,906

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. On each of July 28, 2020 and December 3, 2020, our Board of Directors authorized an additional $200.0 million. On December 1, 2022, our Board of Directors authorized an additional $400.0 million, increasing the Repurchase Program to an aggregate authorization of $1.3 billion. 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 ~~March 31,~~September 30, 2023, we had $460.7 million available under the Repurchase Program to repurchase additional shares.

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The following table details our stock repurchases under the Repurchase Program:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022
Shares of common stock repurchased and retired	Shares of common stock repurchased and retired	112		22			Shares of common stock repurchased and retired	—		128		112		149
Average price paid per share	Average price paid per share	$	158.70	$	143.36		Average price paid per share	$	—	$	159.87	$	158.70	$	157.48
Total cost	Total cost	$	17,797	$	3,098		Total cost	$	—	$	20,430	$	17,797	$	23,528

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.

Common stock outstanding was approximately 35.5 million shares and 34.0 million shares as of ~~March 31,~~September 30, 2023 and December 31, ~~2022.~~2022, respectively. Common stock outstanding includes unvested restricted stock awards, which are considered issued and outstanding under the terms of the restricted stock award agreements. The increase in common stock outstanding was primarily due to the issuance of a total of 1,460,740 shares of our common stock to holders in connection with the conversion of their 2023 Convertible Notes at maturity.

13. Segment Reporting

We manage our business in five 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, 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.

Our FLC segment provides law firms, companies, boards of directors, 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 technology-enabled solutions, 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 digital insights and risk management consulting services. Our professionals help organizations better address risk as the growing volume and variety of enterprise data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert solutions driven by investigations, litigation, mergers & acquisitions, antitrust and competition, and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and 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.

Effective July 1, 2023, we modified the composition of two of our reportable segments to reflect changes in how we operate our business. We transferred 127 billable professionals in our health solutions practice within our FLC segment who focus on business transformation services in the healthcare and life sciences sector to our business transformation & strategy practice within our Corporate Finance segment. This change aligns this group of professionals with the broader business transformation capabilities within the Corporate Finance segment. Eighty-three billable professionals who focus on advisory

and managed care services within the health solutions practice remained in the FLC segment. Prior period Corporate Finance and FLC segment information included in this Quarterly Report on Form 10-Q has been reclassified to conform to the current period presentation.

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 March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022
Revenues	Revenues						Revenues
Corporate Finance(1)	Corporate Finance(1)	$	299,987	$	253,329		Corporate Finance(1)	$	347,560	$	282,029	$	981,124	$	841,804
FLC(1)	FLC(1)	173,404		153,896			FLC(1)	166,137		143,289		488,636		432,054
Economic Consulting	Economic Consulting	169,595		165,977			Economic Consulting	193,866		193,183		565,283		523,201
Technology	Technology	90,618		80,484			Technology	98,860		84,915		286,922		243,181
Strategic Communications	Strategic Communications	73,102		69,934			Strategic Communications	86,838		72,449		242,593		214,237
Total revenues	Total revenues	$	806,706	$	723,620		Total revenues	$	893,261	$	775,865	$	2,564,558	$	2,254,477
Adjusted Segment EBITDA	Adjusted Segment EBITDA						Adjusted Segment EBITDA
Corporate Finance(1)	Corporate Finance(1)	$	55,020	$	53,539		Corporate Finance(1)	$	68,094	$	53,519	$	165,450	$	165,683
FLC(1)	FLC(1)	18,611		17,257			FLC(1)	21,480		16,175		68,861		46,464
Economic Consulting	Economic Consulting	14,193		21,195			Economic Consulting	27,756		32,913		77,472		75,754
Technology	Technology	15,366		13,363			Technology	14,873		13,213		50,326		34,940
Strategic Communications	Strategic Communications	9,556		15,713			Strategic Communications	13,454		12,947		35,273		40,133
Total Adjusted Segment EBITDA	Total Adjusted Segment EBITDA	$	112,746	$	121,067		Total Adjusted Segment EBITDA	$	145,657	$	128,767	$	397,382	$	362,974

(1)Effective July 1, 2023, Corporate Finance and FLC segment information for the prior periods has been recast in this Quarterly Report on Form 10-Q to include the reclassification of the portion of the Company’s health solutions practice in the FLC segment to our business transformation & strategy practice within our Corporate Finance segment.

The table below reconciles net income to Total Adjusted Segment EBITDA:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022
Net income	Net income	$	47,547	$	59,321		Net income	$	83,317	$	77,267	$	193,259	$	188,016
Add back:	Add back:						Add back:
Income tax provision	Income tax provision	14,974		16,967			Income tax provision	24,385		15,836		62,067		46,156
Interest income and other	Interest income and other	1,342		347			Interest income and other	(5,147)		(7,771)		(3,221)		(10,418)
Interest expense	Interest expense	2,939		2,642			Interest expense	4,474		2,378		10,435		7,468

Unallocated corporate expenses	Unallocated corporate expenses	34,735		31,338			Unallocated corporate expenses	27,589		30,470		101,349		99,524
Segment depreciation expense	Segment depreciation expense	9,027		8,184			Segment depreciation expense	9,699		8,273		28,554		24,909
Amortization of intangible assets	Amortization of intangible assets	2,182		2,268			Amortization of intangible assets	1,340		2,314		4,939		7,319

Total Adjusted Segment EBITDA	Total Adjusted Segment EBITDA	$	112,746	$	121,067		Total Adjusted Segment EBITDA	$	145,657	$	128,767	$	397,382	$	362,974

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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 ~~March 31,~~September 30, 2023 and 2022, 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, 2022 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., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”), 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, 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.

Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, boards of directors, 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 technology-enabled solutions, 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 Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting services. Our professionals help organizations better address risk as the growing volume and variety of enterprise data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert solutions driven by investigations, litigation, mergers & acquisitions (“M&A”), antitrust and competition, and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security services.

transformation capabilities within the Corporate Finance segment. Eighty-three billable professionals who focus on advisory and managed care services within the health solutions practice remained in the FLC segment. Prior period Corporate Finance and FLC segment information included in this Quarterly Report on Form 10-Q has been reclassified to conform to the current period presentation.

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, which require the client to pay us based on the number of hours worked at contractually agreed-upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs. Certain

contracts are rendered under fixed-fee arrangements, which require the client to pay a fixed fee in exchange for a predetermined set of professional services. Fixed-fee arrangements may require certain clients to pay us a recurring retainer. Our contract arrangements may also contain success fees or performance-based arrangements in which our fees are based on the attainment of contractually defined objectives with our client. This type of success fee may supplement a time and 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.

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”) 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 13, “Segment Reporting” in Part I, Item 1, of this 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.

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 ~~used in~~provided by (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.

1921

EXECUTIVE HIGHLIGHTS


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022

		(dollar amounts in thousands, except per share data)				(dollar amounts in thousands, except per share data)				(dollar amounts in thousands, except per share data)
Revenues	Revenues	$	806,706	$	723,620		Revenues	$	893,261	$	775,865	$	2,564,558	$	2,254,477

Net income	Net income	$	47,547	$	59,321		Net income	$	83,317	$	77,267	$	193,259	$	188,016
Adjusted EBITDA	Adjusted EBITDA	$	78,427	$	90,452		Adjusted EBITDA	$	118,748	$	98,974	$	297,405	$	265,587
Earnings per common share — diluted	Earnings per common share — diluted	$	1.34	$	1.66		Earnings per common share — diluted	$	2.34	$	2.15	$	5.43	$	5.25
Adjusted earnings per common share — diluted	Adjusted earnings per common share — diluted	$	1.34	$	1.66		Adjusted earnings per common share — diluted	$	2.34	$	2.15	$	5.43	$	5.25
Net cash used in operating activities		$	(254,206)	$	(203,778)
Net cash provided by (used in) operating activities							Net cash provided by (used in) operating activities	$	106,675	$	128,292	$	(158,525)	$	(40,439)
Total number of employees	Total number of employees	7,794		6,977			Total number of employees	8,089		7,518		8,089		7,518

~~First~~Third Quarter 2023 Executive Highlights

Revenues

Revenues for the three months ended ~~March 31,~~September 30, 2023 increased ~~$83.1~~$117.4 million, or ~~11.5%~~15.1%, to ~~$806.7~~$893.3 million, ~~as compared to the three months ended March 31, 2022~~, which included a ~~2.3%~~1.5% estimated ~~negative~~positive impact from FX. Excluding the estimated impact from FX, revenues increased ~~$99.7~~$105.4 million, or ~~13.8%~~13.6%, ~~across all of our segments,~~compared to the three months ended September 30, 2022, primarily due to higher demand in our Corporate Finance, FLC, Strategic Communications and Technology ~~segments compared to the same quarter in the prior year.~~segments.

Net income

Net income for the three months ended ~~March 31,~~September 30, 2023 ~~decreased $11.8~~increased $6.1 million, or ~~19.8%~~7.8%, to ~~$47.5~~$83.3 million, as compared to the three months ended ~~March 31,~~September 30, 2022. The ~~decrease~~increase in net income was primarily due to higher revenues, which was partially offset by an increase in direct compensation expenses, which included the impact of ~~an 11.0%~~a 7.8% increase in billable headcount, ~~and an increase in~~higher selling, general and administrative (“SG&A”) expenses, which included the impact of a ~~14.4%~~6.9% increase in non-billable headcount, a higher effective tax rate and a lower FX remeasurement ~~losses, which was partially offset by an increase in revenues~~gain compared to the same quarter in the prior year.

Adjusted EBITDA

Adjusted EBITDA for the three months ended ~~March 31,~~September 30, 2023 ~~decreased $12.0~~increased $19.8 million, or ~~13.3%~~20.0%, to ~~$78.4~~$118.7 million, as compared to the three months ended ~~March 31,~~September 30, 2022. Adjusted EBITDA Margin of ~~9.7%~~13.3% for the three months ended ~~March 31,~~September 30, 2023 compared to ~~12.5%~~12.8% for the three months ended ~~March 31,~~September 30, 2022. The ~~decrease~~increase in Adjusted EBITDA was due to higher revenues, which was partially offset by higher direct compensation expenses, which included the impact of ~~an 11.0%~~a 7.8% increase in billable headcount, and an increase in SG&A expenses, which included the impact of a ~~14.4%~~6.9% increase in non-billable headcount, ~~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 ~~March 31,~~September 30, 2023 ~~decreased $0.32~~increased $0.19 to ~~$1.34~~$2.34 compared to ~~$1.66~~$2.15 for the three months ended ~~March 31, 2022~~.September 30, 2022. The ~~decrease~~increase in EPS was primarily due to ~~lower~~higher net income as described above.

Adjusted EPS was equal to EPS for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively.

Liquidity and Capital Allocation

Net cash ~~used in~~provided by operating activities for the three months ended ~~March 31,~~September 30, 2023 ~~increased $50.4~~decreased $21.6 million to ~~$254.2~~$106.7 million, compared ~~with $203.8~~to $128.3 million for the three months ended ~~March 31,~~September 30, 2022. The ~~increase~~decrease in net cash ~~used in~~provided by operating activities was primarily due to ancash collections not keeping pace with the increase in revenues and not sufficiently offsetting the increase in salaries and other employee cash compensation, largely related to headcount growth, and higher operating ~~expenses and an increase in annual bonus payments, which was partially offset by an increase in cash collected resulting from higher revenues compared to the same quarter in the prior year. Days~~expenses. Days sales outstanding (“DSO”) ~~of 102~~was 114 days at ~~March 31,~~September 30, 2023 compared to 96106 days at ~~March 31,~~September 30, 2022. The increase in DSO was primarily due to cash collections that have not kept pace with higher revenues.

Free Cash Flow was an ~~outflow~~inflow of ~~$272.2~~$92.5 million and ~~$216.4~~$115.0 million for the three months ended ~~March 31,~~September 30, 2023 and 2022, respectively. The ~~increase~~decrease in Free Cash Flow for the three months ended ~~March 31,~~September 30, 2023 was primarily due to ~~higher~~lower net cash ~~used in~~provided by operating activities, as described ~~above, and an increase in net cash used for purchases of property and equipment.~~above.

2022

Headcount

The following table includes the net headcount additions (reductions) by segment and in total for the ~~three~~nine months ended ~~March 31,~~September 30, 2023.


		Billable Headcount										Billable Headcount
			Corporate Finance	FLC	Economic Consulting	Technology	Strategic Communications	Total	Non-Billable Headcount	Total Headcount			Corporate Finance (1)	FLC (1)	Economic Consulting	Technology	Strategic Communications	Total	Non-Billable Headcount	Total Headcount
December 31, 2022	December 31, 2022		1,946	1,584	1,007	556	970	6,063	1,572	7,635	December 31, 2022		2,100	1,430	1,007	556	970	6,063	1,572	7,635
Additions (reductions), net	Additions (reductions), net		56	(7)	24	25	25	123	36	159	Additions (reductions), net		52	(3)	24	25	25	123	36	159
March 31, 2023	March 31, 2023		2,002	1,577	1,031	581	995	6,186	1,608	7,794	March 31, 2023		2,152	1,427	1,031	581	995	6,186	1,608	7,794
Additions (reductions), net											Additions (reductions), net		18	14	8	8	(3)	45	14	59
June 30, 2023											June 30, 2023		2,170	1,441	1,039	589	992	6,231	1,622	7,853
Additions (reductions), net											Additions (reductions), net		81	62	46	40	18	247	(11)	236
September 30, 2023											September 30, 2023		2,251	1,503	1,085	629	1,010	6,478	1,611	8,089
Percentage change in headcount from December 31, 2022	Percentage change in headcount from December 31, 2022		2.9%	(0.4)%	2.4%	4.5%	2.6%	2.0%	2.3%	2.1%	Percentage change in headcount from December 31, 2022		7.2%	5.1%	7.7%	13.1%	4.1%	6.8%	2.5%	5.9%

CONSOLIDATED RESULTS OF OPERATIONS

Segment and Consolidated Operating Results:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022

		(in thousands, except per share data)				(in thousands, except per share data)				(in thousands, except per share data)
Revenues	Revenues						Revenues
Corporate Finance(1)	Corporate Finance(1)	$	299,987	$	253,329		Corporate Finance(1)	$	347,560	$	282,029	$	981,124	$	841,804
FLC(1)	FLC(1)	173,404		153,896			FLC(1)	166,137		143,289		488,636		432,054
Economic Consulting	Economic Consulting	169,595		165,977			Economic Consulting	193,866		193,183		565,283		523,201
Technology	Technology	90,618		80,484			Technology	98,860		84,915		286,922		243,181
Strategic Communications	Strategic Communications	73,102		69,934			Strategic Communications	86,838		72,449		242,593		214,237
Total revenues	Total revenues	$	806,706	$	723,620		Total revenues	$	893,261	$	775,865	$	2,564,558	$	2,254,477
Segment operating income	Segment operating income						Segment operating income
Corporate Finance(1)	Corporate Finance(1)	$	51,216	$	50,053		Corporate Finance(1)	$	64,633	$	49,865	$	154,724	$	154,416
FLC(1)	FLC(1)	17,048		15,542			FLC(1)	19,708		14,653		63,881		41,646
Economic Consulting	Economic Consulting	12,700		19,943			Economic Consulting	26,293		31,674		73,017		72,056
Technology	Technology	11,890		10,243			Technology	11,481		9,833		39,803		25,005
Strategic Communications	Strategic Communications	8,683		14,834			Strategic Communications	12,503		12,155		32,464		37,623
Total segment operating income	Total segment operating income	101,537		110,615			Total segment operating income	134,618		118,180		363,889		330,746
Unallocated corporate expenses	Unallocated corporate expenses	(34,735)		(31,338)			Unallocated corporate expenses	(27,589)		(30,470)		(101,349)		(99,524)
Operating income	Operating income	66,802		79,277			Operating income	107,029		87,710		262,540		231,222
Other income (expense)	Other income (expense)						Other income (expense)
Interest income and other	Interest income and other	(1,342)		(347)			Interest income and other	5,147		7,771		3,221		10,418
Interest expense	Interest expense	(2,939)		(2,642)			Interest expense	(4,474)		(2,378)		(10,435)		(7,468)

		(4,281)		(2,989)				673		5,393		(7,214)		2,950
Income before income tax provision	Income before income tax provision	62,521		76,288			Income before income tax provision	107,702		93,103		255,326		234,172
Income tax provision	Income tax provision	14,974		16,967			Income tax provision	24,385		15,836		62,067		46,156
Net income	Net income	$	47,547	$	59,321		Net income	$	83,317	$	77,267	$	193,259	$	188,016
Earnings per common share — basic	Earnings per common share — basic	$	1.43	$	1.76		Earnings per common share — basic	$	2.44	$	2.29	$	5.75	$	5.57
Earnings per common share — diluted	Earnings per common share — diluted	$	1.34	$	1.66		Earnings per common share — diluted	$	2.34	$	2.15	$	5.43	$	5.25

(1)

Effective July 1, 2023, Corporate Finance and FLC segment information for the prior periods has been recast in this Quarterly Report on Form 10-Q to include the reclassification of the portion of the Company’s health solutions practice in the FLC segment to our business transformation & strategy practice within our Corporate Finance segment.

Reconciliation of Net Income to Adjusted EBITDA:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022

		(in thousands)				(in thousands)				(in thousands)
Net income	Net income	$	47,547	$	59,321		Net income	$	83,317	$	77,267	$	193,259	$	188,016
Add back:	Add back:						Add back:
Income tax provision	Income tax provision	14,974		16,967			Income tax provision	24,385		15,836		62,067		46,156
Interest income and other	Interest income and other	1,342		347			Interest income and other	(5,147)		(7,771)		(3,221)		(10,418)
Interest expense	Interest expense	2,939		2,642			Interest expense	4,474		2,378		10,435		7,468

Depreciation and amortization	Depreciation and amortization	9,443		8,907			Depreciation and amortization	10,379		8,949		29,926		27,045
Amortization of intangible assets	Amortization of intangible assets	2,182		2,268			Amortization of intangible assets	1,340		2,315		4,939		7,320

Adjusted EBITDA	Adjusted EBITDA	$	78,427	$	90,452		Adjusted EBITDA	$	118,748	$	98,974	$	297,405	$	265,587

Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS:

Net Income and EPS were equal to Adjusted Net Income and Adjusted EPS, respectively, for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022.

Reconciliation of Net Cash ~~Used in~~Provided by (Used in) Operating Activities to Free Cash Flow:


		Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022				2023		2022		2023		2022

		(in thousands)				(in thousands)				(in thousands)
Net cash used in operating activities		$	(254,206)	$	(203,778)
Net cash provided by (used in) operating activities							Net cash provided by (used in) operating activities	$	106,675	$	128,292	$	(158,525)	$	(40,439)
Purchases of property and equipment	Purchases of property and equipment	(18,033)		(12,607)			Purchases of property and equipment	(14,199)		(13,316)		(43,284)		(38,951)
Free Cash Flow	Free Cash Flow	$	(272,239)	$	(216,385)		Free Cash Flow	$	92,476	$	114,976	$	(201,809)	$	(79,390)

Three Months Ended ~~March 31,~~September 30, 2023 Compared with Three Months Ended ~~March 31,~~September 30, 2022

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 ~~March 31,~~September 30, 2023 ~~increased $3.4~~decreased $2.9 million, or ~~10.8%~~9.5%, to ~~$34.7~~$27.6 million compared ~~with $31.3~~to $30.5 million for the three months ended ~~March 31,~~September 30, 2022. The ~~increase~~decrease was primarily due to ~~higher compensation~~lower expenses ~~which was partially offset by certain~~for corporate initiatives and higher infrastructure support expenses that were not previously allocated to the ~~segments.~~segments, which was partially offset by higher compensation expenses.

Interest income and other

Interest income and other, which includes FX gains and losses, decreased ~~$1.0~~$2.6 million, or 33.8%, to ~~a $1.3~~$5.1 million ~~loss~~ for the three months ended ~~March 31,~~September 30, 2023 compared ~~with a $0.3~~to $7.8 million ~~loss~~ for the three months ended ~~March 31,~~September 30, 2022. The decline was primarily due to a ~~$3.1~~$4.3 million ~~increase~~decrease in ~~net~~ FX ~~losses,~~gains, which was partially offset by a ~~$2.1~~$1.3 million increase in interest income.

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.

Interest expense

Interest expense ~~for the three months ended March 31, 2023~~ increased ~~$0.3~~$2.1 million, or 88.1%, to ~~$2.9 million compared to $2.6~~$4.5 million for the three months ended ~~March 31, 2022.~~ September 30, 2023 compared to $2.4 million for the three months ended September 30, 2022. The increase was primarily due to higher ~~commitment fees~~interest rates on increased borrowings under our senior secured bank revolving credit facility (“Credit Facility”) incurred in connection with the repayment at maturity of the principal amount of our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”).

Income tax provision

Our income tax provision ~~decreased $2.0~~increased $8.5 million, or ~~11.7%~~54.0%, to ~~$15.0~~$24.4 million for the three months ended ~~March 31,~~September 30, 2023 compared to ~~$17.0~~$15.8 million for the three months ended ~~March 31,~~September 30, 2022. Our effective tax rate of ~~24.0%~~22.6% for the three months ended ~~March 31,~~September 30, 2023 compared to ~~22.2%~~17.0% for the three months ended ~~March 31,~~September 30, 2022. The ~~decrease~~increase in the income tax provision was due to ~~a decrease~~an increase in income before income ~~tax provision, which was partially offset by an increase in the tax rate.~~tax. The tax rate for the three months ended ~~March 31, 2023~~September 30, 2022 was ~~unfavorably~~favorably impacted by ~~an increase in~~a combined $8.3 million tax benefit from the release of a U.S. foreign ~~taxes~~tax credit valuation allowance, utilization of current year foreign tax credits and a ~~less favorable~~deferred tax benefit ~~related~~arising from an intellectual property license agreement between a U.S. subsidiary of the Company and certain foreign subsidiaries of the Company.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

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 nine months ended September 30, 2023 increased $1.8 million, or 1.8%, to ~~share-based compensation as~~$101.3 million compared to $99.5 million for the ~~three~~nine months ended ~~March 31, 2022~~September 30, 2022. The increase was primarily due to ~~fewer shares vesting,~~higher compensation expenses, which was partially offset by higher infrastructure support expenses that were not previously allocated to the segments and lower expenses for corporate initiatives.

Interest income and other

Interest income and other, which includes FX gains and losses, decreased $7.2 million, or 69.1%, to $3.2 million for the nine months ended September 30, 2023 compared to $10.4 million for the nine months ended September 30, 2022. The decrease was primarily due to a $3.8 million FX loss for the nine months ended September 30, 2023 compared to a $7.9 million FX gain for the nine months ended September 30, 2022, which was partially offset by a $4.3 million increase in interest income.

Interest expense

Interest expense for the nine months ended September 30, 2023 increased $3.0 million, or 39.7%, to $10.4 million compared to $7.5 million for the nine months ended September 30, 2022. The increase was primarily due to higher interest rates on increased borrowings under our Credit Facility.

Income tax provision

Our income tax provision increased $15.9 million, or 34.5%, to $62.1 million for the nine months ended September 30, 2023 compared to $46.2 million for the nine months ended September 30, 2022. Our effective tax rate of 24.3% for the nine months ended September 30, 2023 compared to 19.7% for the nine months ended September 30, 2022. The increase in the income tax provision was due to an increase in income before income tax. The tax rate for the nine months ended September 30, 2022 was favorably impacted by a combined $8.3 million tax benefit from the release of a U.S. foreign tax credit ~~benefit.~~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.

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 ~~March 31,~~September 30, 2023 and 2022:

Three Months Ended March 31,
2023 2022
(in thousands)
Net income $ 47,547 $ 59,321
Add back:
Income tax provision 14,974 16,967
Interest income and other 1,342 347
Interest expense 2,939 2,642
Unallocated corporate expenses 34,735 31,338
Total segment operating income 101,537 110,615
Add back:
Segment depreciation expense 9,027 8,184
Amortization of intangible assets 2,182 2,628
Total Adjusted Segment EBITDA $ 112,746 $ 121,067


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

	(in thousands)				(in thousands)
Net income	$	83,317	$	77,267	$	193,259	$	188,016
Add back:
Income tax provision	24,385		15,836		62,067		46,156
Interest income and other	(5,147)		(7,771)		(3,221)		(10,418)
Interest expense	4,474		2,378		10,435		7,468

Unallocated corporate expenses	27,589		30,470		101,349		99,524
Total segment operating income	134,618		118,180		363,889		330,746
Add back:
Segment depreciation expense	9,699		8,273		28,554		24,909
Amortization of intangible assets	1,340		2,314		4,939		7,319


Total Adjusted Segment EBITDA	$	145,657	$	128,767	$	397,382	$	362,974

2326

Other Segment Operating Data


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
		2023			2022					2023			2022			2023			2022
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 Finance(4)	Corporate Finance(4)	2,002			1,757				Corporate Finance(4)	2,251			2,050			2,251			2,050
FLC(4)	FLC(4)	1,577			1,513				FLC(4)	1,503			1,464			1,503			1,464
Economic Consulting	Economic Consulting	1,031			950				Economic Consulting	1,085			998			1,085			998
Technology (1)	Technology (1)	581			496				Technology (1)	629			548			629			548
Strategic Communications	Strategic Communications	995			856				Strategic Communications	1,010			951			1,010			951
Total revenue-generating professionals	Total revenue-generating professionals	6,186			5,572				Total revenue-generating professionals	6,478			6,011			6,478			6,011
Utilization rates of billable professionals: (2)	Utilization rates of billable professionals: (2)								Utilization rates of billable professionals: (2)
Corporate Finance		62		%	63		%
FLC		55		%	55		%
Corporate Finance (4)									Corporate Finance (4)	60		%	61		%	59		%	62		%
FLC (4)									FLC (4)	57		%	53		%	58		%	55		%
Economic Consulting	Economic Consulting	68		%	72		%		Economic Consulting	65		%	67		%	67		%	70		%
Average billable rate per hour: (3)	Average billable rate per hour: (3)								Average billable rate per hour: (3)
Corporate Finance		$	460		$	450
FLC		$	376		$	357
Corporate Finance (4)									Corporate Finance (4)	$	514		$	445		$	492		$	448
FLC (4)									FLC (4)	$	388		$	360		$	384		$	355
Economic Consulting	Economic Consulting	$	458		$	484			Economic Consulting	$	559		$	579		$	533		$	506

(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 ~~499~~792 as-needed employees during the three months ended ~~March 31,~~September 30, 2023 compared with ~~600~~634 as-needed employees during the three months ended ~~March 31,~~September 30, 2022.

(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)For 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.

(4)Effective July 1, 2023, Corporate Finance and FLC segment information for the prior periods has been recast in this Quarterly Report on Form 10-Q to include the reclassification of the portion of the Company’s health solutions practice in the FLC segment to our business transformation & strategy practice within our Corporate Finance segment.

CORPORATE FINANCE & RESTRUCTURING


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
		2023			2022					2023			2022 (3)			2023			2022 (3)

		(dollars in thousands, except rate per hour)						(dollars in thousands, except rate per hour)					(dollars in thousands, except rate per hour)
Revenues	Revenues	$	299,987		$	253,329			Revenues	$	347,560		$	282,029		$	981,124		$	841,804
Percentage change in revenues from prior year	Percentage change in revenues from prior year	18.4		%	12.0		%		Percentage change in revenues from prior year	23.2		%	9.0		%	16.6		%	14.3		%
Operating expenses	Operating expenses								Operating expenses
Direct cost of revenues	Direct cost of revenues	197,828			166,247				Direct cost of revenues	231,500			188,841			667,498			557,801
Selling, general and administrative expenses	Selling, general and administrative expenses	49,031			35,209				Selling, general and administrative expenses	50,380			41,414			154,833			123,551

Amortization of intangible assets	Amortization of intangible assets	1,912			1,820				Amortization of intangible assets	1,047			1,909			4,069			6,036
		248,771			203,276					282,927			232,164			826,400			687,388
Segment operating income	Segment operating income	51,216			50,053				Segment operating income	64,633			49,865			154,724			154,416
Percentage change in segment operating income from prior year	Percentage change in segment operating income from prior year	2.3		%	45.9		%		Percentage change in segment operating income from prior year	29.6		%	-2.2		%	0.2		%	21.0		%
Add back:	Add back:								Add back:
Depreciation and amortization of intangible assets	Depreciation and amortization of intangible assets	3,804			3,486				Depreciation and amortization of intangible assets	3,461			3,654			10,726			11,267

Adjusted Segment EBITDA	Adjusted Segment EBITDA	$	55,020		$	53,539			Adjusted Segment EBITDA	$	68,094		$	53,519		$	165,450		$	165,683
Gross profit (1)	Gross profit (1)	$	102,159		$	87,082			Gross profit (1)	$	116,060		$	93,188		$	313,626		$	284,003
Percentage change in gross profit from prior year	Percentage change in gross profit from prior year	17.3		%	29.8		%		Percentage change in gross profit from prior year	24.5		%	4.9		%	10.4		%	21.8		%
Gross profit margin (2)	Gross profit margin (2)	34.1		%	34.4		%		Gross profit margin (2)	33.4		%	33.0		%	32.0		%	33.7		%
Adjusted Segment EBITDA as a percentage of revenues	Adjusted Segment EBITDA as a percentage of revenues	18.3		%	21.1		%		Adjusted Segment EBITDA as a percentage of revenues	19.6		%	19.0		%	16.9		%	19.7		%
Number of revenue-generating professionals (at period end)	Number of revenue-generating professionals (at period end)	2,002			1,757				Number of revenue-generating professionals (at period end)	2,251			2,050			2,251			2,050
Percentage change in number of revenue-generating professionals from prior year	Percentage change in number of revenue-generating professionals from prior year	13.9		%	4.3		%		Percentage change in number of revenue-generating professionals from prior year	9.8		%	13.0		%	9.8		%	13.0		%
Utilization rate of billable professionals	Utilization rate of billable professionals	62		%	63		%		Utilization rate of billable professionals	60		%	61		%	59		%	62		%
Average billable rate per hour	Average billable rate per hour	$	460		$	450			Average billable rate per hour	$	514		$	445		$	492		$	448

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

(3)Effective July 1, 2023, Corporate Finance and FLC segment information for the prior periods has been recast in this Quarterly Report on Form 10-Q to include the reclassification of the portion of the Company’s health solutions practice in the FLC segment to our business transformation & strategy practice within our Corporate Finance segment.

Three Months Ended ~~March 31,~~September 30, 2023 Compared with Three Months Ended ~~March 31,~~September 30, 2022

Revenues increased ~~$46.7~~$65.5 million, or ~~18.4%~~23.2%, to ~~$300.0~~$347.6 million for the three months ended ~~March 31,~~September 30, 2023, which included a ~~1.9%~~1.1% estimated ~~negative~~positive impact from FX. Excluding the estimated impact from FX, revenues increased ~~$51.4~~$62.5 million, or ~~20.3%~~22.2%, primarily due to ~~increased~~higher realized bill rates and demand ~~and realization across~~for our restructuring and business transformation & strategy services, as well as an increase in success fees.

Gross profit increased $22.9 million, or 24.5%, to $116.1 million for the three months ended September 30, 2023. Gross profit margin increased 0.4 percentage points for the three months ended September 30, 2023. The increase in gross profit margin was primarily due to higher success fees.

SG&A expenses increased $9.0 million, or 21.6%, to $50.4 million for the three months ended September 30, 2023, which included a 1.1% estimated negative impact from FX. SG&A expenses of 14.5% of revenues for the three months ended September 30, 2023 compared with 14.7% of revenues for the three months ended September 30, 2022. The increase in SG&A expenses was primarily due to higher infrastructure support, bad debt, and travel and entertainment expenses.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Revenues increased $139.3 million, or 16.6%, to $981.1 million for the nine months ended September 30, 2023, primarily due to higher realized bill rates and demand for our restructuring and business transformation & strategy services and an increase in success fees, which was partially offset by lower demand for our transaction services.

Gross profit increased ~~$15.1~~$29.6 million, or ~~17.3%~~10.4%, to ~~$102.2~~$313.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023. Gross profit margin decreased ~~0.3~~1.8 percentage points for the ~~three~~nine months ended ~~March 31,~~September 30, 2023. The decrease in gross profit margin was ~~largely~~primarily due to a 3 percentage point decline in utilization and higher ~~pass-through revenues,~~contractor costs, which was partially offset by ~~lower compensation expenses as a percentage of revenues.~~higher success fees.

SG&A expenses increased ~~$13.8~~$31.3 million, or ~~39.3%~~25.3%, to ~~$49.0~~$154.8 million for the ~~three~~nine months ended ~~March 31, 2023, which included a 1.8% estimated positive impact from FX.~~September 30, 2023. SG&A expenses of ~~16.3%~~15.8% of revenues for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared with ~~13.9%~~14.7% of revenues for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The increase in SG&A expenses was primarily due to higher infrastructure support, business development, ~~infrastructure support, and~~bad debt, compensation, travel and entertainment, ~~expenses, as well as higher acquisition-related contingent consideration~~and other general and administrative expenses.

FORENSIC AND LITIGATION CONSULTING


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
		2023			2022					2023			2022 (3)			2023			2022 (3)

		(dollars in thousands, except rate per hour)						(dollars in thousands, except rate per hour)					(dollars in thousands, except rate per hour)
Revenues	Revenues	$	173,404		$	153,896			Revenues	$	166,137		$	143,289		$	488,636		$	432,054
Percentage change in revenues from prior year	Percentage change in revenues from prior year	12.7		%	2.0		%		Percentage change in revenues from prior year	15.9		%	4.8		%	13.1		%	3.3		%
Operating expenses	Operating expenses								Operating expenses
Direct cost of revenues	Direct cost of revenues	122,061			110,478				Direct cost of revenues	110,920			98,302			326,992			304,839
Selling, general and administrative expenses	Selling, general and administrative expenses	34,111			27,628				Selling, general and administrative expenses	35,285			30,092			97,132			84,834

Amortization of intangible assets	Amortization of intangible assets	184			248				Amortization of intangible assets	224			242			631			735
		156,356			138,354					146,429			128,636			424,755			390,408
Segment operating income	Segment operating income	17,048			15,542				Segment operating income	19,708			14,653			63,881			41,646
Percentage change in segment operating income from prior year	Percentage change in segment operating income from prior year	9.7		%	-44.5		%		Percentage change in segment operating income from prior year	34.5		%	-10.8		%	53.4		%	-29.1		%
Add back:	Add back:								Add back:
Depreciation and amortization of intangible assets	Depreciation and amortization of intangible assets	1,563			1,715				Depreciation and amortization of intangible assets	1,772			1,522			4,980			4,818

Adjusted Segment EBITDA	Adjusted Segment EBITDA	$	18,611		$	17,257			Adjusted Segment EBITDA	$	21,480		$	16,175		$	68,861		$	46,464
Gross profit (1)	Gross profit (1)	$	51,343		$	43,418			Gross profit (1)	$	55,217		$	44,987		$	161,644		$	127,215
Percentage change in gross profit from prior year	Percentage change in gross profit from prior year	18.3		%	-15.7		%		Percentage change in gross profit from prior year	22.7		%	9.2		%	27.1		%	-2.2		%
Gross profit margin (2)	Gross profit margin (2)	29.6		%	28.2		%		Gross profit margin (2)	33.2		%	31.4		%	33.1		%	29.4		%
Adjusted Segment EBITDA as a percentage of revenues	Adjusted Segment EBITDA as a percentage of revenues	10.7		%	11.2		%		Adjusted Segment EBITDA as a percentage of revenues	12.9		%	11.3		%	14.1		%	10.8		%
Number of revenue-generating professionals (at period end)	Number of revenue-generating professionals (at period end)	1,577			1,513				Number of revenue-generating professionals (at period end)	1,503			1,464			1,503			1,464
Percentage change in number of revenue-generating professionals from prior year	Percentage change in number of revenue-generating professionals from prior year	4.2		%	10.7		%		Percentage change in number of revenue-generating professionals from prior year	2.7		%	7.2		%	2.7		%	7.2		%
Utilization rate of billable professionals	Utilization rate of billable professionals	55		%	55		%		Utilization rate of billable professionals	57		%	53		%	58		%	55		%
Average billable rate per hour	Average billable rate per hour	$	376		$	357			Average billable rate per hour	$	388		$	360		$	384		$	355

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

Three Months Ended ~~March 31,~~September 30, 2023 Compared with Three Months Ended ~~March 31,~~September 30, 2022

Revenues increased ~~$19.5~~$22.8 million, or ~~12.7%~~15.9%, to ~~$173.4~~$166.1 million for the three months ended ~~March 31,~~September 30, 2023, ~~which included a 1.6% estimated negative impact from FX. Excluding the estimated impact from FX, revenues increased $22.0 million, or 14.3%,~~ primarily due to higher demand for our investigations, data & analytics, ~~investigations~~ and ~~heath~~construction solutions ~~services, as well as higher realization across all services due to the mix of client engagements.~~services.

Gross profit increased ~~$7.9~~$10.2 million, or ~~18.3%~~22.7%, to ~~$51.3~~$55.2 million for the three months ended ~~March 31,~~September 30, 2023. Gross profit margin ~~of 29.6%~~ increased ~~1.4~~1.8 percentage points for the three months ended ~~March 31,~~September 30, 2023. The increase in gross profit margin was primarily due to ~~lower compensation expenses as~~ a 4 percentage ~~of revenues, which was partially offset by higher as-needed contractor costs on several health solutions services engagements.~~point increase in utilization.

SG&A expenses increased ~~$6.5~~$5.2 million, or ~~23.5%~~17.3%, to ~~$34.1~~$35.3 million for the three months ended ~~March 31, 2023, which included a 1.6% estimated positive impact from FX.~~September 30, 2023. SG&A expenses of ~~19.7%~~21.2% of revenues for the three months ended ~~March 31,~~September 30, 2023 compared with ~~18.0%~~21.0% of revenues for the three months ended ~~March 31,~~September 30, 2022. The increase in SG&A expenses was primarily driven by higher infrastructure support, compensation and bad debt expenses.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Revenues increased $56.6 million, or 13.1%, to $488.6 million for the nine months ended September 30, 2023, primarily due to higher demand and realized bill rates for our investigations and data & analytics services.

Gross profit increased $34.4 million, or 27.1%, to $161.6 million for the nine months ended September 30, 2023. Gross profit margin increased 3.6 percentage points for the nine months ended September 30, 2023. The increase in gross profit margin was primarily due to a 3 percentage point increase in utilization.

SG&A expenses increased $12.3 million, or 14.5%, to $97.1 million for the nine months ended September 30, 2023. SG&A expenses of 19.9% of revenues for the nine months ended September 30, 2023 compared with 19.6% of revenues for the nine months ended September 30, 2022. The increase in SG&A expenses was primarily driven by higher infrastructure support, compensation, and travel and entertainment expenses.

ECONOMIC CONSULTING


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
		2023			2022					2023			2022			2023			2022

		(dollars in thousands, except rate per hour)						(dollars in thousands, except rate per hour)					(dollars in thousands, except rate per hour)
Revenues	Revenues	$	169,595		$	165,977			Revenues	$	193,866		$	193,183		$	565,283		$	523,201
Percentage change in revenues from prior year	Percentage change in revenues from prior year	2.2		%	-1.9		%		Percentage change in revenues from prior year	0.4		%	12.0		%	8.0		%	-0.4		%
Operating expenses	Operating expenses								Operating expenses
Direct cost of revenues	Direct cost of revenues	131,846			124,470				Direct cost of revenues	138,423			140,781			412,547			387,257
Selling, general and administrative expenses	Selling, general and administrative expenses	25,049			21,564				Selling, general and administrative expenses	29,150			20,728			79,719			63,888

		156,895			146,034					167,573			161,509			492,266			451,145
Segment operating income	Segment operating income	12,700			19,943				Segment operating income	26,293			31,674			73,017			72,056
Percentage change in segment operating income from prior year	Percentage change in segment operating income from prior year	-36.3		%	-21.0		%		Percentage change in segment operating income from prior year	-17.0		%	11.3		%	1.3		%	-13.1		%
Add back:	Add back:								Add back:
Depreciation and amortization	Depreciation and amortization	1,493			1,252				Depreciation and amortization	1,463			1,239			4,455			3,698

Adjusted Segment EBITDA	Adjusted Segment EBITDA	$	14,193		$	21,195			Adjusted Segment EBITDA	$	27,756		$	32,913		$	77,472		$	75,754
Gross profit (1)	Gross profit (1)	$	37,749		$	41,507			Gross profit (1)	$	55,443		$	52,402		$	152,736		$	135,944
Percentage change in gross profit from prior year	Percentage change in gross profit from prior year	-9.1		%	-5.9		%		Percentage change in gross profit from prior year	5.8		%	5.9		%	12.4		%	-3.8		%
Gross profit margin (2)	Gross profit margin (2)	22.3		%	25.0		%		Gross profit margin (2)	28.6		%	27.1		%	27.0		%	26.0		%
Adjusted Segment EBITDA as a percentage of revenues	Adjusted Segment EBITDA as a percentage of revenues	8.4		%	12.8		%		Adjusted Segment EBITDA as a percentage of revenues	14.3		%	17.0		%	13.7		%	14.5		%
Number of revenue-generating professionals (at period end)	Number of revenue-generating professionals (at period end)	1,031			950				Number of revenue-generating professionals (at period end)	1,085			998			1,085			998
Percentage change in number of revenue-generating professionals from prior year	Percentage change in number of revenue-generating professionals from prior year	8.5		%	6.7		%		Percentage change in number of revenue-generating professionals from prior year	8.7		%	7.9		%	8.7		%	7.9		%
Utilization rate of billable professionals	Utilization rate of billable professionals	68		%	72		%		Utilization rate of billable professionals	65		%	67		%	67		%	70		%
Average billable rate per hour	Average billable rate per hour	$	458		$	484			Average billable rate per hour	$	559		$	579		$	533		$	506

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

Three Months Ended ~~March 31,~~September 30, 2023 Compared with Three Months Ended ~~March 31,~~September 30, 2022

Revenues increased ~~$3.6~~$0.7 million, or ~~2.2%~~0.4%, to ~~$169.6~~$193.9 million for the three months ended ~~March 31,~~September 30, 2023, which included a 2.2% estimated positive impact from FX. Excluding the estimated impact from FX, revenues decreased $3.5 million, or 1.8%. The decrease in revenues was primarily due to lower realized bill rates for our non-M&A-related antitrust services compared to the three months ended September 30, 2022, which included $21.4 million of revenues recognized that were previously deferred on one large client, which was partially offset by increased demand for our non-M&A-related antitrust and international arbitration services, and higher realized bill rates for our M&A-related antitrust services.

Gross profit increased $3.0 million, or 5.8%, to $55.4 million for the three months ended September 30, 2023. Gross profit margin increased 1.5 percentage points for the three months ended September 30, 2023. The increase in gross profit margin was primarily due to lower variable compensation expenses as a percentage of revenues, which was partially offset by a 2 percentage point decline in utilization.

SG&A expenses increased $8.4 million, or 40.6%, to $29.2 million for the three months ended September 30, 2023, which included a 3.0% estimated negative impact from FX. ~~Excluding~~SG&A expenses of 15.0% of revenues for the ~~estimated impact from FX,~~three months ended September 30, 2023 compared with 10.7% of revenues for the three months ended September 30, 2022. The increase in SG&A expenses was primarily driven by higher bad debt, infrastructure support, compensation, and other general and administrative expenses.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Revenues increased ~~$8.6~~$42.1 million, or ~~5.2%~~8.0%, to $565.3 million for the nine months ended September 30, 2023, primarily due to ~~higher~~increased demand for our international arbitration, M&A-related antitrust ~~services~~ and ~~higher realization for our non-M&A-related antitrust services, which was partially offset by lower demand for our~~ non-M&A-related antitrust services.

Gross profit ~~decreased $3.8~~increased $16.8 million, or ~~9.1%~~12.4%, to ~~$37.7~~$152.7 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023. Gross profit margin ~~decreased 2.7~~increased 1.0 percentage ~~points~~point for the ~~three~~nine months ended ~~March 31,~~September 30, 2023. The ~~decrease~~increase in gross profit margin was primarily due to ~~a 4 percentage point decline in utilization,~~ lower ~~realization and higher~~variable compensation expenses as a percentage of revenues, which ~~included the impact of an 8.5% increase~~was partially offset by a 3 percentage point decline in ~~billable headcount.~~utilization.

SG&A expenses increased ~~$3.5~~$15.8 million, or ~~16.2%~~24.8%, to ~~$25.0~~$79.7 million for the ~~three~~nine months ended ~~March 31, 2023, which included a 4.1% estimated positive impact from FX.~~September 30, 2023. SG&A expenses of ~~14.8%~~14.1% of revenues for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared with ~~13.0%~~12.2% of revenues for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The increase in SG&A expenses was primarily driven by higher infrastructure support, ~~travel and entertainment, and~~bad debt, compensation, outside services, and other general and administrative expenses.

2731

TECHNOLOGY


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
		2023			2022					2023			2022			2023			2022

		(dollars in thousands)						(dollars in thousands)					(dollars in thousands)
Revenues	Revenues	$	90,618		$	80,484			Revenues	$	98,860		$	84,915		$	286,922		$	243,181
Percentage change in revenues from prior year	Percentage change in revenues from prior year	12.6		%	1.3		%		Percentage change in revenues from prior year	16.4		%	31.3		%	18.0		%	9.2		%
Operating expenses	Operating expenses								Operating expenses
Direct cost of revenues	Direct cost of revenues	53,978			50,915				Direct cost of revenues	61,538			54,027			176,066			158,498
Selling, general and administrative expenses	Selling, general and administrative expenses	24,750			19,326				Selling, general and administrative expenses	25,841			21,055			71,053			59,678

		78,728			70,241					87,379			75,082			247,119			218,176
Segment operating income	Segment operating income	11,890			10,243				Segment operating income	11,481			9,833			39,803			25,005
Percentage change in segment operating income from prior year	Percentage change in segment operating income from prior year	16.1		%	-44.8		%		Percentage change in segment operating income from prior year	16.8		%	122.7		%	59.2		%	-34.7		%
Add back:	Add back:								Add back:
Depreciation and amortization	Depreciation and amortization	3,476			3,120				Depreciation and amortization	3,392			3,380			10,523			9,935

Adjusted Segment EBITDA	Adjusted Segment EBITDA	$	15,366		$	13,363			Adjusted Segment EBITDA	$	14,873		$	13,213		$	50,326		$	34,940
Gross profit (1)	Gross profit (1)	$	36,640		$	29,569			Gross profit (1)	$	37,322		$	30,888		$	110,856		$	84,683
Percentage change in gross profit from prior year	Percentage change in gross profit from prior year	23.9		%	-12.8		%		Percentage change in gross profit from prior year	20.8		%	40.3		%	30.9		%	-4.7		%
Gross profit margin (2)	Gross profit margin (2)	40.4		%	36.7		%		Gross profit margin (2)	37.8		%	36.4		%	38.6		%	34.8		%
Adjusted Segment EBITDA as a percentage of revenues	Adjusted Segment EBITDA as a percentage of revenues	17.0		%	16.6		%		Adjusted Segment EBITDA as a percentage of revenues	15.0		%	15.6		%	17.5		%	14.4		%
Number of revenue-generating professionals (at period end) (3)	Number of revenue-generating professionals (at period end) (3)	581			496				Number of revenue-generating professionals (at period end) (3)	629			548			629			548
Percentage change in number of revenue-generating professionals from prior year	Percentage change in number of revenue-generating professionals from prior year	17.1		%	17.3		%		Percentage change in number of revenue-generating professionals from prior year	14.8		%	23.7		%	14.8		%	23.7		%

(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.

Three Months Ended ~~March 31,~~September 30, 2023 Compared with Three Months Ended ~~March 31,~~September 30, 2022

Revenues increased ~~$10.1~~$13.9 million, or ~~12.6%~~16.4%, to ~~$90.6~~$98.9 million for the three months ended ~~March 31,~~September 30, 2023, ~~compared to $80.5 million for the three months ended March 31, 2022,~~ which included a ~~2.0%~~1.8% estimated ~~negative~~positive impact from FX. Excluding the estimated impact from FX, revenues increased ~~$11.8~~$12.5 million, or ~~14.6%~~14.7%, primarily due to higher demand for investigations and litigation services, which was partially offset by lower demand for ~~information governance, privacy & security~~M&A-related “second request” services.

Gross profit increased ~~$7.1~~$6.4 million, or ~~23.9%~~20.8%, to ~~$36.6~~$37.3 million for the three months ended ~~March 31,~~September 30, 2023. Gross profit margin increased ~~3.7~~ 1.4 percentage points for the three months ended ~~March 31,~~September 30, 2023. The increase in gross profit margin was primarily due to higher profitability in our consulting services and an increased mix of our higher margin hosting services, which was partially offset by lower profitability in our managed review services.

SG&A expenses increased $4.8 million, or 22.7%, to $25.8 million for the three months ended September 30, 2023, which included a 1.6% estimated negative impact from FX. SG&A expenses of 26.1% of revenues for the three months ended September 30, 2023 compared with 24.8% of revenues for the three months ended September 30, 2022. The increase in SG&A expenses was primarily due to higher compensation, infrastructure support and bad debt expenses.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Revenues increased $43.7 million, or 18.0%, to $286.9 million for the nine months ended September 30, 2023. The increase in revenues was primarily due to increased demand for investigations and litigation services, which was partially offset by lower demand for M&A-related “second request” services.

Gross profit increased $26.2 million, or 30.9%, to $110.9 million for the nine months ended September 30, 2023. Gross profit margin increased 3.8 percentage points for the nine months ended September 30, 2023. The increase in gross profit margin was primarily due to ~~a more favorable~~an increased mix of our ~~processing~~higher margin hosting services and ~~hosting~~increased profitability in our consulting services.

SG&A expenses increased ~~$5.4~~$11.4 million, or ~~28.1%~~19.1%, to ~~$24.8~~$71.1 million for the ~~three~~nine months ended ~~March 31, 2023, which included a 2.3% estimated positive impact from FX.~~September 30, 2023. SG&A expenses of ~~27.3%~~24.8% of revenues for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared with ~~24.0%~~24.5% of revenues for the ~~three~~nine months ended ~~March 31,~~September 30, 2022. The increase in SG&A expenses was primarily due to higher infrastructure support, compensation, bad debt, ~~compensation, infrastructure support,~~ and travel and entertainment expenses.

STRATEGIC COMMUNICATIONS


		Three Months Ended March 31,						Three Months Ended September 30,					Nine Months Ended September 30,
		2023			2022					2023			2022			2023			2022

		(dollars in thousands)						(dollars in thousands)					(dollars in thousands)
Revenues	Revenues	$	73,102		$	69,934			Revenues	$	86,838		$	72,449		$	242,593		$	214,237
Percentage change in revenues from prior year	Percentage change in revenues from prior year	4.5		%	15.6		%		Percentage change in revenues from prior year	19.9		%	4.3		%	13.2		%	8.3		%
Operating expenses	Operating expenses								Operating expenses
Direct cost of revenues	Direct cost of revenues	47,804			40,994				Direct cost of revenues	56,422			44,681			157,304			131,421
Selling, general and administrative expenses	Selling, general and administrative expenses	16,529			13,906				Selling, general and administrative expenses	17,844			15,450			52,586			44,645

Amortization of intangible assets	Amortization of intangible assets	86			200				Amortization of intangible assets	69			163			239			548
		64,419			55,100					74,335			60,294			210,129			176,614
Segment operating income	Segment operating income	8,683			14,834				Segment operating income	12,503			12,155			32,464			37,623
Percentage change in segment operating income from prior year	Percentage change in segment operating income from prior year	-41.5		%	62.7		%		Percentage change in segment operating income from prior year	2.9		%	-14.5		%	-13.7		%	5.9		%
Add back:	Add back:								Add back:
Depreciation and amortization of intangible assets	Depreciation and amortization of intangible assets	873			879				Depreciation and amortization of intangible assets	951			792			2,809			2,510

Adjusted Segment EBITDA	Adjusted Segment EBITDA	$	9,556		$	15,713			Adjusted Segment EBITDA	$	13,454		$	12,947		$	35,273		$	40,133
Gross profit (1)	Gross profit (1)	$	25,298		$	28,940			Gross profit (1)	$	30,416		$	27,768		$	85,289		$	82,816
Percentage change in gross profit from prior year	Percentage change in gross profit from prior year	-12.6		%	36.5		%		Percentage change in gross profit from prior year	9.5		%	-2.3		%	3.0		%	10.2		%
Gross profit margin (2)	Gross profit margin (2)	34.6		%	41.4		%		Gross profit margin (2)	35.0		%	38.3		%	35.2		%	38.7		%
Adjusted Segment EBITDA as a percentage of revenues	Adjusted Segment EBITDA as a percentage of revenues	13.1		%	22.5		%		Adjusted Segment EBITDA as a percentage of revenues	15.5		%	17.9		%	14.5		%	18.7		%
Number of revenue-generating professionals (at period end)	Number of revenue-generating professionals (at period end)	995			856				Number of revenue-generating professionals (at period end)	1,010			951			1,010			951
Percentage change in number of revenue-generating professionals from prior year	Percentage change in number of revenue-generating professionals from prior year	16.2		%	10.0		%		Percentage change in number of revenue-generating professionals from prior year	6.2		%	16.4		%	6.2		%	16.4		%

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

Three Months Ended ~~March 31,~~September 30, 2023 Compared with Three Months Ended ~~March 31,~~September 30, 2022

Revenues increased ~~$3.2~~$14.4 million, or ~~4.5%~~19.9%, to ~~$73.1~~$86.8 million for the three months ended ~~March 31,~~September 30, 2023, which included a ~~4.1%~~3.2% estimated ~~negative~~positive impact from FX. Excluding the estimated impact from FX, revenues increased ~~$6.0~~$12.1 million, or ~~8.6%~~16.7%, primarily driven by higher demand for our corporate reputation and public affairs services.

Gross profit ~~decreased $3.6~~increased $2.6 million, or ~~12.6%~~9.5%, to ~~$25.3~~$30.4 million for the three months ended ~~March 31,~~September 30, 2023. Gross profit margin decreased ~~6.8~~3.3 percentage points for the three months ended ~~March 31,~~September 30, 2023. The decrease in gross profit margin was primarily driven by higher compensation expenses as a percentage of revenues, which included the impact of a ~~16.2%~~6.2% increase in billable headcount.

SG&A expenses increased ~~$2.6~~$2.4 million, or ~~18.9%~~15.5%, to ~~$16.5~~$17.8 million for the three months ended ~~March 31,~~September 30, 2023, which included a ~~3.7%~~ 2.9% estimated ~~positive~~negative impact from FX. SG&A expenses of ~~22.6%~~20.5% of revenues for the three months ended ~~March 31,~~September 30, 2023 compared with ~~19.9%~~21.3% of revenues for the three months ended ~~March 31,~~September 30, 2022. The increase in SG&A expenses was primarily driven by higher infrastructure support and ~~travel~~compensation expenses.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Revenues increased $28.4 million, or 13.2%, to $242.6 million for the nine months ended September 30, 2023, primarily driven by higher demand for our public affairs and ~~entertainment expenses.~~corporate reputation services.

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Gross profit increased $2.5 million, or 3.0%, to $85.3 million for the nine months ended September 30, 2023. Gross profit margin decreased 3.5 percentage points for the nine months ended September 30, 2023. The decrease in gross profit margin was primarily driven by higher compensation expenses as a percentage of revenues, which included the impact of a 6.2% increase in billable headcount.

SG&A expenses increased $7.9 million, or 17.8%, to $52.6 million for the nine months ended September 30, 2023. SG&A expenses of 21.7% of revenues for the nine months ended September 30, 2023 compared with 20.8% of revenues for the nine months ended September 30, 2022. The increase in SG&A expenses was primarily driven by higher infrastructure support, travel and entertainment and compensation expenses.

CRITICAL ACCOUNTING ESTIMATES

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, 2022 describes the significant accounting policies and methods used in preparation of the Condensed Consolidated Financial 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 estimates that reflect our more significant judgments, 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 estimates from the information provided in “Critical Accounting 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, 2022, or from the information provided in Part II, Item 8, of our Annual Report on Form 10-K for the year ended December 31, 2022.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our annual cash flows from operations generally exceed our cash needs for capital expenditures and debt service requirements. We typically finance our day-to-day operations, capital expenditures, acquisitions and share repurchases through cash flows from operations. During the first quarter of each 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 fiscal year.~~ We believe that our cash flows from operations, supplemented by borrowings under our Credit Facility, as necessary, will provide adequate cash to fund our cash needs for at least the next 12 ~~months, including the repayment of our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”) at maturity on August 15, 2023, unless earlier converted or repurchased.~~months.

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, affects 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 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.”

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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 events beyond our control that could result in a material adverse impact on our business, 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 such as economic and workforce disruptions arise, including ~~related to~~any future impact of pandemics such as COVID-19 or ~~any~~other future public health ~~crisis,~~crises, 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 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.~~Facility. 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, 2022.

Cash Flows


		Three Months Ended March 31,					Nine Months Ended September 30,
		2023		2022			2023		2022

Cash Flows	Cash Flows	(dollars in thousands)				Cash Flows	(dollars in thousands)
Net cash used in operating activities	Net cash used in operating activities	$	(254,206)	$	(203,778)	Net cash used in operating activities	$	(158,525)	$	(40,439)
Net cash used in investing activities	Net cash used in investing activities	$	(18,012)	$	(19,305)	Net cash used in investing activities	$	(67,580)	$	(45,677)
Net cash provided by financing activities		$	15,767	$	4,161
Net cash used in financing activities						Net cash used in financing activities	$	(67,080)	$	(36,949)
Effect of exchange rate changes on cash and cash equivalents	Effect of exchange rate changes on cash and cash equivalents	$	3,302	$	(4,420)	Effect of exchange rate changes on cash and cash equivalents	$	2,645	$	(44,373)
DSO (1)	DSO (1)	102		96		DSO (1)	114		106

(1)DSO is a performance measure used to assess how quickly revenues are collected by the 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.

~~Three~~Nine Months Ended ~~March 31,~~September 30, 2023 Compared with ~~Three~~Nine Months Ended ~~March 31,~~September 30, 2022

Net cash used in operating activities of ~~$254.2~~$158.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared ~~with $203.8~~to $40.4 million for the ~~three~~nine months ended ~~March 31, 2022~~.September 30, 2022. The increase of ~~$50.4~~$118.1 million, or ~~24.7%~~292.0%, in net cash used in operating activities was primarily due to ancash collections not keeping pace with the increase in revenues and not sufficiently offsetting the increase in salaries and other employee cash compensation, largely related to headcount growth, and higher operating expenses and ~~an increase in annual bonus~~income tax payments ~~which was partially offset by an increase in cash collected resulting from higher revenues compared to the prior year.~~. DSO was ~~102~~114 and 96106 days as of ~~March 31,~~September 30, 2023 and 2022, respectively. The increase in DSO was primarily due to cash collections that have not kept pace with higher revenues.

Net cash used in investing activities of ~~$18.0~~$67.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared ~~with $19.3~~to $45.7 million for the ~~three~~nine months ended ~~March 31, 2022.~~September 30, 2022. The ~~decrease~~increase of ~~$1.3~~$21.9 million, or ~~6.7%~~48.0%, in net cash used in investing activities was primarily due to a $24.4 million payment for a short-term investment during the nine months ended September 30, 2023, as there were no payments for short-term investments during the nine months ended September 30, 2022, and a $4.3

million increase in capital expenditures. These increases were partially offset by a $6.7 million decrease in payments for the acquisition of businesses, as there were no

acquisitions of businesses during the ~~three~~nine months ended ~~March 31,~~September 30, 2023.

Net cash used in financing activities of $67.1 million for the nine months ended September 30, 2023 compared to $36.9 million for the nine months ended September 30, 2022. The increase of $30.1 million, or 81.5%, in net cash used in financing activities was primarily due to the repayment of the $315.8 million principal amount of our 2023 Convertible Notes at maturity, which was partially offset by an increase ~~of $5.4 million in capital expenditures.~~

~~Net~~ cash provided by financing activities of $15.8 million for the three months ended March 31, 2023 compared with $4.2 million for the three months ended March 31, 2022. The increase of $11.6 million, or 278.9%, in net cash provided by financing activities was primarily due to an increase in net borrowings of ~~$30.0~~$285.0 million under our Credit ~~Facility, which was partially offset by an increase of $17.9 million in payments for common stock repurchases under the Repurchase Program as compared to the prior year.~~Facility.

The effect of exchange rate changes on cash and cash equivalents had a favorable impact of ~~$3.3~~$2.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 compared to an unfavorable impact of ~~$4.4~~$44.4 million for the ~~three~~nine months ended ~~March 31, 2022~~.September 30, 2022.

Principal Sources of Capital Resources

As of ~~March 31,~~September 30, 2023, our capital resources included ~~$238.5~~$201.1 million of cash and cash equivalents, a $24.4 million short-term investment and available borrowing capacity of ~~$854.6~~$614.9 million under the $900.0 million revolving line of credit under our Credit Facility. As of ~~March 31,~~September 30, 2023, we had ~~$45.0~~$285.0 million of outstanding borrowings under our Credit Facility and ~~$0.4~~$0.1 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 $900.0 million revolving line of credit under our Credit Facility includes a $125.0 million sublimit for borrowings in currencies other than USD, including the euro, British pound, Australian dollar, Canadian dollar, Swiss franc and Japanese yen.

The availability of borrowings, as well as issuances and extensions of letters of credit under our Credit Facility, are subject to specified conditions. 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 $1.2 billion. See Note 8, “Debt” in Part I, Item 1, of this Quarterly Report on Form 10-Q for a further discussion of borrowing rates and guarantees under the Credit Facility.

The second amended and restated credit agreement entered into on November 21, 2022 (the “Credit Agreement”) governing the Credit Facility and our other indebtedness outstanding from time to time contains covenants that, among other things, may limit our ability to: incur additional indebtedness; create liens; pay dividends on our capital stock, make distributions or repurchases of our capital stock or make specified other restricted payments; consolidate, merge or sell all 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 $300.0 million) to Consolidated EBITDA, as defined in the Credit Agreement). As of ~~March 31,~~September 30, 2023, 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, governing the 2023 Convertible Notes.Agreement. 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.~~Credit Agreement.

Principal Uses of Capital Resources

Future Capital Requirements

We anticipate that our future capital requirements 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 and payment of the 2023 Convertible Notes principal and any conversion premium at maturity or upon earlier conversion or repurchase;~~debt;

•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 ~~three~~nine months ended ~~March 31,~~September 30, 2023, we spent ~~$18.0~~$43.3 million in capital expenditures to support our organization, including direct support for specific client engagements. For the remainder of 2023, we currently expect additional capital expenditures to support our organization in an aggregate amount of between ~~$36~~$6 million and ~~$45~~$8 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 ~~three~~nine months ended ~~March 31,~~September 30, 2023, we made $21.0 million in payments for common stock repurchases under the Repurchase Program. We had $460.7 million remaining under the Repurchase Program to repurchase additional shares as of ~~March 31,~~September 30, 2023.

Future Contractual Obligations

Our future contractual obligations as of ~~March 31,~~September 30, 2023 include ~~both current and non-current obligations. We have short-term~~long-term obligations of $285.0 million related to ~~the 2023 Convertible Notes, which will mature on August 15, 2023, unless earlier converted or repurchased. We have remaining interest payments associated with the 2023 Convertible Notes of~~ $3.2 million, of which $0.8 million is accrued as of March 31, 2023 and classified as a current liability on the Condensed Consolidated Balance Sheets. The principal portion of the 2023 Convertible Notes of $316.2 million is classified as a non-current liability on the Condensed Consolidated Balance Sheets. The 2023 Convertible Notes are classified as long-term debt as of March 31, 2023 because we have the ability and intent to refinance them on a long-term basis under our Credit Facility, which matures on November 21, 2027. As of March 31, 2023, ~~there were~~ ~~$45.0 million in~~outstanding borrowings under our Credit Facility. For more information on our ~~2023 Convertible Notes and~~ Credit Facility, refer to Note 8, “Debt” in Part I, Item 1. Future contractual obligations related to our debt assume that payments will be made based on the current payment schedule and that interest ~~payments~~payments will be at their stated rates and exclude any additional revolving line of credit borrowings or repayments subsequent to ~~March 31,~~September 30, 2023 and prior to the November 21, 2027 maturity date of our Credit Facility. Under our operating leases as described in Note 9, “Leases” in Part I, Item 1, we have current obligations of ~~$31.6~~$33.1 million and non-current obligations of ~~$227.1~~$217.8 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 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,” “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. 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. There can be no assurance that management’s plans, performance, expectations, intentions, aspirations, beliefs, goals, estimates, forecasts and projections, including any that are ESG- or other sustainability-related, will result or be achieved, and 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 I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2022, 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:

•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;

•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, replacement, protection, implementation or ~~the protection~~operation of our information technology systems, including our enterprise resource planning (“ERP”) and other financial systems, and software, proprietary software products, intellectual property rights and trade 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, proposed from time-to-time, 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 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;

•fluctuations in the mix of our services and the geographic locations in which our clients are located or our services are rendered; and

•the ~~continued evolution~~future impact of any pandemics such as COVID-19 or ~~new~~other future public health crises ~~that may arise in the future,~~ could have adverse and disparate impacts on the Company, our employees, clients and geographic regions in which we conduct business.

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, 2022. There have been no material changes in our market risk exposure during the period covered by this Quarterly Report on Form 10-Q.


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.~~ Reporting~~There~~. During the three months ended June 30, 2023, the Company implemented a new ERP system. As part of the implementation, we designed new internal controls and modified and/or enhanced existing internal controls in order to align with the new system and business processes. The Company does not believe this implementation has had or will have in the future a material adverse effect on the Company's internal control over financial reporting. Except as disclosed above, there have not been any additional changes in our internal control over financial reporting ~~that occurred~~ during the three months ended ~~March 31,~~September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting.~~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

There have been no material changes in any risk factors previously disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the United States Securities and Exchange Commission (“SEC”) ~~on February 23, 2023.~~. 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.


Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered sales of equity securities.

~~None.~~On August 17, 2023, we issued a total of 1,460,740 shares of our common stock to holders in connection with the conversion of their 2023 Convertible Notes at maturity, which represents the excess of the conversion value over the principal amount of $280.3 million. The shares were issued pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act.

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 ~~March 31,~~September 30, 2023:

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)
January 1 through January 31, 2023 99 (2) $ 158.56 93 (5) $ 463,668
February 1 through February 28, 2023 47 (3) $ 162.28 19 (6) $ 460,653
March 1 through March 31, 2023 21 (4) $ 184.62 — $ 460,653
167 112


	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, 2023	14	(2)	$	190.20	—	$	460,653
August 1 through August 31, 2023	1	(3)	$	187.34	—	$	460,653
September 1 through September 30, 2023	2	(4)	$	178.42	—	$	460,653
	17				—

(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. On each of July 28, 2020 and December 3, 2020, our Board of Directors authorized an additional $200.0 million. On December 1, 2022, our Board of Directors authorized an additional $400.0 million, increasing the Repurchase Program to an aggregate authorization of $1.3 billion. 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. ~~During the quarter ended March 31, 2023, we repurchased an aggregate~~There were no repurchases of ~~112,139~~ shares of our common stock ~~under~~pursuant to the Repurchase Program ~~at an average price of $158.70 per share for a total cost of approximately $17.8 million.~~during the quarter ended September 30, 2023.

(2)Includes ~~5,930~~14,315 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.

(3)Includes ~~28,287 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.~~

~~(4)Includes 21,279~~903 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.

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~~(5)~~(4)~~During the month ended January 31, 2023, we repurchased and retired 93,239~~Includes 2,233 shares of common stock ~~at an average price per share~~withheld to cover payroll tax withholdings related to the lapse of ~~$158.54, for an aggregate cost of $14.8 million.~~

~~(6)During the month ended February 28, 2023, we repurchased and retired 18,900 shares of common stock, at an average price per share of $159.51, for an aggregate cost of $3.0 million.~~restrictions on restricted stock.


Item 3.			Defaults Upon Senior Securities

None.


Item 4.			Mine Safety Disclosures

Not applicable.


Item 5.			Other Information

~~None.~~(c) Trading plans

During the quarter ended September 30, 2023, no director or Section 16 officer of the Company adopted or terminated any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements (in each case, as defined in Item 408(a) of Regulation S-K).

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Item 6.			Exhibits


Exhibit Number						Description

3.1						Articles of Incorporation of FTI Consulting, Inc., as amended and restated. (Filed with the Securities and Exchange Commission on May 23, 2003 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated May 21, 2003 and incorporated herein by reference.)

3.2						Articles of Amendment of FTI Consulting, Inc. (Filed with the Securities and Exchange Commission on June 2, 2011 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated June 1, 2011 and incorporated herein by reference.)

3.3						Bylaws of FTI Consulting, Inc., as Amended and Restated Adopted February 20, 2023. (Filed with the Securities and Exchange Commission on February 21, 2023 as an exhibit to FTI Consulting, Inc.’s Current Report on Form 8-K dated February 20, 2023 and incorporated herein by reference.)

~~19.1†~~						~~Policy on Inside Information and Insider Trading [Amended and Restated Effective February 27, 2023]~~

31.1†						Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended (Section 302 of the Sarbanes-Oxley Act of 2002.)

31.2†						Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended (Section 302 of the Sarbanes-Oxley Act of 2002.)

32.1†**						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002.)

32.2†**						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002.)

101						The 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 ~~March 31,~~September 30, 2023 and December 31, 2022; (ii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022; (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended ~~March 31,~~September 30, 2023 and 2022; (iv) Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2023 and 2022; and (v) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text.

104						The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~March 31,~~September 30, 2023, 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: ~~April 27,~~October 26, 2023


FTI CONSULTING, INC.

By:						/s/ Brendan Keating
						Brendan Keating
						Chief Accounting Officer and Controller
						(principal accounting officer)

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