FTI Consulting Inc.’s (FCN) second-quarter operating earnings of 52 cents per share were in line with the Zacks Consensus Estimate and below the year-ago performance of 69 cents. Operating net income fell 32.7% year-over-year to $25.1 million.
Adjusted EBITDA was $65.5 million or 18.8% of revenues, compared to $84.6 million or 23.5% of revenues in the prior-year quarter.
Adjusted EBITDA was $65.5 million or 18.8% of revenues, compared to $84.6 million or 23.5% of revenues in the prior-year quarter.
Results reflected uncertainty about the economic recovery as the financial market remains volatile, litigation-driven activities remain soft and visibility on future taxation and regulatory policies remains unclear. Moreover, softer trends in bankruptcy work and a slowdown in the Merger & Acquisition environment also dragged the results. Additionally, declining revenues from Corporate Finance and Technology segments hampered growth.
FTI Consulting’s total revenues declined 3.2% year-over-year to $349.0 million in line with the Zacks Consensus Estimate. Total revenue-generating headcount dropped to 2,548 from 2,572 in the year-ago period.
Segment Details
Corporate Finance/Restructuring revenues decreased 17.2% to $111.0 million from $134.0 million in the prior-year quarter due to the sluggishness in new restructuring opportunities in the U.S., which also led to lower volumes in new assignments. Although average billable rates witnessed growth, utilization rates continued to decline steadily.
Forensic and Litigation Consulting revenues increased 5.8% to $80.8 million, compared to $76.3 million in the prior-year period. While regulated industries and international investigations practices reflected growth, these were offset by declines in the unprecedented financial fraud cases that cropped up last year and continue to soften growth.
Forensic and Litigation Consulting revenues increased 5.8% to $80.8 million, compared to $76.3 million in the prior-year period. While regulated industries and international investigations practices reflected growth, these were offset by declines in the unprecedented financial fraud cases that cropped up last year and continue to soften growth.
Technology revenues declined 11.8% to $42.8 million, compared to $48.5 million in the prior-year quarter. The decline was primarily attributed to sluggish volume of M&A transactions and challenged pricing for certain aspects of the segment, partially offset by an increase in consulting revenue including higher litigation activity.
Economic Consulting revenues jumped 13.0% to a record $64.6 million from $57.1 million in the prior year period. The demand for financial economics increased and continued improving activity in strategic M&A and financial dispute matters drove consistent growth during the quarter.
Strategic Communications revenues improved 11.9% to $49.8 million, compared to $44.6 million in the prior-year quarter. The segment experienced growth in project-based work despite the continuing negative impact of the global recession on fees from retained clients.
Financials
At the end of June 30, 2010, FTI Consulting’s cash and equivalents totaled $123.3 million, compared to $118.9 million on Dec 31, 2009. Shareholder’s equity totaled $1,147.9 million as of June 30, 2010, compared to $1,104.2 million on Dec 31, 2009. Total diluted weighted shares outstanding decreased to 48.1 million compared to 53.8 million shares.
The performance of the Corporate Finance and Restructuring segment is in line with the projection of a decelerating trend through the remainder of 2010. Furthermore, any significant growth was restricted by declining revenues from the Technology segment. We believe there is a dearth of significant growth drivers in the near term.
Recently, FTI Consulting also announced that it has agreed to acquire FS Asia Advisory Limited, a leading provider of restructuring, corporate finance, advisory and recovery services in Asia. The financial terms of the deal were not disclosed. The deal is expected to be finalized in August. Management expects this agreement to expand the company’s presence in Asia.
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