FTI Consulting, Inc. Stock

Welcome to the FTI Consulting Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded.

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

Good morning. Welcome to the FTI Consulting conference call to discuss the company's second quarter 2026 earnings results as reported this morning. Management will begin with formal remarks, after which they will take your questions. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including the company's outlook and expectations for the full year 2026 based on management's current beliefs and expectations.

These forward-looking statements involve many risks and uncertainties, assumptions and estimates and other factors that could cause actual results to differ materially from such statements. For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the safe harbor statement in the earnings press release issued this morning, a copy of which is available on our website at www.fticonsulting.com as well as other disclosures under the headings of Risk Factors and Forward-Looking Information in our annual report on Form 10-K for the year ended December 31, 2025, our quarterly report on Form 10-Q and other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call and will not be updated. FTI assumes no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

During the call, we will discuss certain non-GAAP financial measures. A discussion of any non-GAAP financial measures addressed on this call and reconciliations to the most directly comparable GAAP measures are included in the press release and the accompanying financial tables that we issued this morning and were also posted to the Investor Relations section of our website. Lastly, there are 2 additional items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical financial and operating data, which have been updated to include our second quarter 2026 results.

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

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

Thank you, Mollie. Good morning, everyone, and thank you all for joining us. As you may have seen this morning, we reported revenues for the second quarter that were once again a record. At the same time, our bottom line performance was somewhat below our expectations for reasons that I'd like to go into in a bit more detail. And specifically, we thought it might be useful if we highlight which of those reasons we believe are temporary in nature and which may be more durable and therefore, highlight what we think all of this might mean for the rest of the year. So with that, let me dive in. One major reason for the bottom line performance was that our SG&A ran higher than expected this quarter. Angela will talk about the SG&A in more detail.

And importantly, she will talk about why we do not expect that to recur going forward. So let me leave that discussion to you, Angela. Let me spend a bit more time perhaps on the other reasons, which have to do with the fact that despite record revenues, we actually expected revenues to be even stronger, particularly in a number of the international markets where we've been able to add terrific senior talent and great numbers of that senior talent over the last while. And most notably, let me highlight that phenomenon in EMEA. As I will mention a couple of times in this talk, EMEA did continue to grow. And some businesses in EMEA, for example, our Spain and German businesses had terrific quarters. They exceeded our expectations. But we did have challenges in the quarter, both in the Middle East and in the U.K., challenges which appear to have different bases and therefore, different potential durability.

With respect to the U.K., our sense is the issues here are short term in nature. The normal sorts of zigs and zags that affect different businesses at different points in time. As I hope everyone on this call knows, we have great businesses in the U.K., almost across the board. But as we all know, even sometimes even with the greatest businesses, we have businesses like our restructuring business or our e-com business in the U.K., they can happen to have some cases end at a particular point in time and some delays in new major cases beginning. And when you have those sorts of gaps in those quarters, of course, it flows through to the bottom line. In this case, the timing of that gap between cases ending and starting was far from ideal because given the timing of client vacations in EMEA in the summer, it's typically hard to have a rebound start immediately in the middle of the summer over there. But important, I wanted to underscore, we do not believe the revenue shortfall in the U.K. versus expectations is more than a short-term issue. With respect to the Middle East, however, it's obviously a more complicated question.

As I'm sure everyone on this call knows, the Middle East has serious geopolitical disruption. And I think the world as a whole is having trouble predicting just how long that geopolitical disruption is going to last. We do have a great team there. And typically, over any extended period of time, my experience is the quality of the team that determines success, not market forces or even geopolitical disruptions. But in the Middle East, we clearly do not yet have any definitive sense of when that business will turn. Let me step back from a minute from specific markets. I do want to underscore that even with revenue below some of our aspirations in some of these markets, our overseas markets in general and EMEA, in particular, are growing on the top line in Q2. They're just growing on the top line slower than our aspirations.

And let me see if I can explain that a little bit more. As I hope many people on this call know, we have been the beneficiary of a terrific set of hires over the last while. Yes, in the U.S., but particularly overseas as well as some terrific promotions there. And with those aspirations and with those additions has come conviction, belief and associated aspiration for revenue growth that is considerably higher than mid-digit single digit. And important, we still have that conviction in those aspirations and those expectations. I am, we are powerfully excited about the people we've added and the people we are continuing to add and the people we're promoting. But unfortunately, when the revenue in a given quarter happens to not quite meet those aspirations and is up only mid- to high single digits, the shortfall versus expectations ends up flowing through to the bottom line. Given that we continue to see strong underlying demand in many places and believe most of the Q2 pressures were timing related, we are not changing our revenue guidance for the year nor our internal forecast for the bottom line for the second half of the year. But as Angela will talk about, given the fact that the bottom line year-to-date is below our expectations, we are adjusting our EPS guidance.

If I turn to look at the world by segment, the story is much the same as we've seen in many quarters, which we've had some businesses and some businesses that have performed terrifically well and a few businesses that have either had more challenging markets or have had to run off of some big jobs. In Corp Fin, as I hope you will look at the data and see the results overall are terrific, which I find once again powerful and heartening given that the restructuring market is not universally hot right now. And the broader M&A environment remains somewhat uneven. Our sense is that we continue to benefit from the strength of our platform and the fact that now for years, talented people have continued to join us across each of the 3 service lines.

In FLC, our sense is that our experts continue to be called into the most complex high-stakes matters in the market in areas like cybersecurity, international trade sanctions issues or complex anti-money laundering investigations. We believe we continue to gain share. Having said that, the amount of regulatory scrutiny going on globally is feeling less intense than in the past. So even though we are strong this year, we are not expecting to replicate the sort of the bottom line growth that we've seen so vividly over the last few years.

In Econ, the quarter actually came in above our expectations. Now as we've talked about, it will take multiple years to get Econ back to anywhere near historical levels of profitability. But as we've also discussed, we continue to have the leading experts, and they continue to be involved in some of the most important antitrust, international arbitration, securities, litigation matters. And one can see the results of those capabilities in the strong sequential improvement in ECO this quarter. Although we have a long way to go, we do expect that in the second half of this year, the business will no longer be a year-on-year drag on revenue or on adjusted segment EBITDA. Tech and Stratcom both had solid quarters, particularly Stratcom when you look at the year-to-date. Both of these businesses face competitive environments with tech in particular, facing a very intense environment. But both businesses continue to make good progress and both see strong opportunities going forward.

So what does that mean for us overall? Look, we always have -- as we see frequently the chance for short-term air pockets like we've had the last few months in the U.K. And of course, the world is a complicated place. And so geopolitical issues do happen like they've happened in the Middle East. And so you can have high aspirations in a given quarter based on the addition of terrific talent, which don't quite get met in that quarter. And you can have results that are affected by SG&A that happens to hit in that quarter. Those things can happen in any given quarter. But our experience is that over any multi-quarter period, the relevancy, the power of one 's offering is what tends to win out. In that connection, I would note that even in the face of what I've talked about today, year-to-date, we were up 7% on the top line and up 10% if you normalize for the econ issues we're working through, which may raise in your mind the question that we were talking about, which is how did we actually hit 10% growth even with certain places not meeting the full breadth of our aspirations.

Let me highlight 2 reasons because they're important in themselves, but because both of them undergird why I -- why we are so confident in this business going forward and over the medium term. One is that we continue to win in the traditional markets that we have won in for a long time, markets that continue to show themselves powerfully relevant today. And the second is that, if anything, AI is further feeding that growth. So let me take a minute on each of those. In terms of our traditional markets, the world of bankruptcy hasn't gone away, nor is the world of antitrust of transactions, of investigations, of disputes, of litigation of reputational issues. And what we are seeing ever more is when the stakes are high, clients want the best experts, a phenomenon that we believe has been benefiting us for 7 or 8 years now, and we believe will continue for a while.

And our current view is that AI, if anything, is reinforcing those phenomena. At one level, we're finding that the companies involved in AI are facing and calling us for their own set of high stakes challenges, whether it's litigation, regulatory concerns, transactions or disputes. More generally, AI itself is this type of disruptive force that tends to lead to the sorts of things that we are the lead experts at, whether it's bankruptcies, investigations, disputes or crisis. You can talk about that conceptually. You can see some of that in headlines. You can also start to see that vividly in our client engagements. For example, in Econ, as you may have seen, one of our new affiliates recently served as the lead expert in supporting in that high-profile OpenAI bus case, which, as you may know, was a victory for our client, OpenAI. More generally, we're being asked to advise on AI-related matters involving intellectual property issues or disputes around misinformation or antitrust claims involving major companies.

And in tech, we're finding that the leadership position that they are creating in AI is allowing them to do types of work that I don't think even they could fathom doing a few months ago, let alone a few years ago. Sophie talks about a case recently where we had to look not at 45,000 e-mails in a day or 2 days, but 45,000 images and videos and mobile data in an incredibly short period of time to help our clients decide its litigation strategy. That wasn't possible just a few months or years ago. and the leadership position we have established in those sorts of work is helping us extend and reinforce our position as the leaders for the most complicated expert-driven work. Those are just a couple of examples. So would I have preferred that the bottom line this quarter fully meet my expectations? Of course, I would. for the reasons that you all know, but also because I'm so excited about the talent we've added around the world. We believe in the best we're making and the power of that talent. And it's frustrating anytime you have short-term factors that you feel are obscuring the success that those people are driving.

And of course, more generally, I am concerned about the Middle East, not just for our business, but for our people and, of course, for the world. Important, none of what we've talked about today leaves me any fundamentally less optimistic about the fabulous teams of experts we have assembled and are continuing to assemble. The leading positions we have created, the resulting ability we now have so many places to deliver the most critical work for our clients. The effect of that work on building our brands in the market, which in turn continues to augment our position in the virtuous group of professional services, where you deliver great work for your clients and because great people are motivated to participate in that and do that, leads to you being able to attract and develop great people, which in turn reinforce and builds the business and show over time, build a better platform for our people, makes a difference for our clients and ultimately creates a business that is ever more powerful for you, our shareholders.

With that, I want to turn this over to Angela. But before I actually let her talk, let me reiterate Angela, just how happy I am that you are here. me tell to all of you just how impressed I am how quickly she's gotten up to speed and how impressed I am on the credibility she's established so quickly within our leadership team. Angela, over to you.

Thank you for the welcome, Steve. Good morning, everyone. I am pleased to be here. I want to thank the entire FTI team for the warm welcome and support I've experienced during my transition. Although I've only been with FTI for 3 months, I've had the opportunity to spend time getting to know our experts around the world. What has stood out the most to me is our collaborative culture, the exceptional quality of my colleagues and the impactful work they deliver for our clients. As a former client of FTI, I experienced the talent and expertise that our teams bring to clients firsthand, which was a big part of what attracted me to this company. It's been especially rewarding to see the business from a different perspective and gain a deeper appreciation for the value FTI delivers and just how broad and deep our platform is, which is what makes FTI so distinctive in the market.

And with that, I'll review our second quarter financial performance before discussing our balance sheet, cash flow and guidance. Turning to our results. We delivered record second quarter revenues, up 5.3% year-over-year, led by growth in our Corp Fin, Tech and SLC segments. Excluding pass-through revenues, revenues increased 6.5%. Notably, as Steve said, we also saw strong sequential improvement in e-com. Despite the revenue growth, adjusted EBITDA declined year-over-year because of higher direct costs and SG&A expenses. Higher direct costs primarily reflected investments in our Corp Fin, FLC and Stratcom businesses as we continue to add senior talent and build out teams behind them. SG&A of $230.7 million compared to $202.2 million in the prior year quarter. The increase in SG&A expenses reflects higher compensation, T&E and legal expenses. The increase in compensation was driven primarily by higher salaries and benefits, which included some onetime compensation expenses in the quarter that will not recur. The increase in T&E was primarily due to our all-SMD meeting held in April as we did not hold a meeting last year. Higher legal expenses were primarily driven by higher litigation costs. This increase included $6.6 million of extraordinary litigation-related expenses recorded in unallocated corporate SG&A. The second quarter marked an inflection point in the company's litigation against a former employee originally filed in 2023, which fundamentally changed the scope of the litigation.

In May, the court allowed a third amended complaint, which expanded the case to include additional defendants, including a competing firm and new claims. Because of the magnitude, complexity and expansion of this litigation, we believe our shareholders will benefit from visibility into the true underlying operating performance of our business and transparency into the costs associated with protecting the company. Adjusted EBITDA of $104.5 million or 10.5% of revenues compared to $111.6 million or 11.8% of revenues in the prior year quarter. Adjusted EBITDA, which excludes the extraordinary litigation-related expenses, declined year-over-year as the increase in revenues was more than offset by higher direct costs and SG&A expenses. Billable headcount increased 3.2% year-over-year.

As Steve mentioned, we continue to find and invest in great senior talent, reflecting billable headcount growth of 5% at the SMD and MD levels as our expert model is increasingly relevant in the market. Our Q2 effective tax rate of 20.8% compared to 22% in the prior year quarter. The decrease was primarily due to tax benefits related to a tax equity investment in renewable energy. This benefit was partially offset by an unfavorable tax adjustment for share-based compensation compared to the prior year quarter. Weighted average shares outstanding or WASO of 29 million shares compared to 33.6 million shares in the prior year quarter. Q2 GAAP EPS was $1.99 and adjusted EPS was $2.16. The variance between GAAP and adjusted EPS was due to the extraordinary litigation-related expenses, which reduced GAAP EPS by $0.17.

Now turning to the segment level performance. Corp Fin had another strong quarter, delivering 8.5% revenue growth year-over-year. Corpin's top line performance was driven by higher realized flow rates across the business and higher success fees. In the second quarter, turnaround and restructuring represented 44%, transactions represented 26% and transformation represented 30% of segment revenues. The transformation practice exceeded our expectations this quarter, growing 26% year-over-year as we support end-to-end cost takeout, supply chain and operational efficiency mandates.

Key industries supported in the quarter included telecommunications, technology and health care. In transactions, revenues grew 10% year-over-year as we supported marquee deals such as Skyworks acquisition of Qorvo and Hogan Mobile's merger with CadWuditer. Of note, the turnaround and restructuring saw a 2% revenue decline year-over-year. We continue to support some of the largest bankruptcies globally, including DISH Network, Spirit Airlines, First Brands and Marelli in the U.S., Pratt Lindsay Oil Refinery in the U.K.; Hazen, the largest out-of-court restructuring in Brazilian history.

And in Asia, we're supporting the lenders in the restructuring of a number of well-known Chinese property developers. Importantly, we continue to make investments in Corp Fin. In fact, almost 50% of our year-over-year headcount growth can be tied back to investments, such as building out our transactions and transformation businesses in EMEA and our health care and mining businesses in Australia as we've added junior headcount to support investments we've made over the last 2 years.

In FLC, our North America business continues to perform well, primarily driven by our financial services and cybersecurity businesses, where demand is being driven by shifting regulations and a more complex threat environment. As Steve said, AI is the type of disruptive force that tends to lead to demand for expert services. Our clients turn to us when AI gets complicated, risky or broken. In financial services, clients are being challenged with how to deploy AI responsibly and are questioning whether AI tools are being used appropriately or if AI processes are creating regulatory, legal or operational risk.

In cybersecurity, the adoption of AI introduces new risks, including exposing their data and AI-generated content or automation contributing to fraud or misconduct among other challenges. Clients are equally concerned about the AI risk introduced by third parties and the ability of AI to enable cyber attacks. While demand for our expertise is being driven in part by AI in these areas, the business overall saw lower volume due to continued pullback in regulatory enforcement. Nonetheless, our ability to meet the firm our clients call on for the most complex cases means our higher realized bill rates allowed us to deliver year-over-year top line growth. Our market positioning is strongest where clients need independent judgment, credibility and deep expertise.

And in the Spain, we also continue to make investments in senior headcount in FLC with more than 40% of our year-over-year headcount growth being at the SMB and M&D levels. As Steve mentioned, this quarter's e-com performance exceeded our expectations. E-com revenues increased $13.2 million and adjusted EBITDA increased $14.7 million sequentially due to strength in Compass Lexicon in both EMEA and North America. In EMEA, growth was led by our M&A-related antitrust business, supported by mergers such as Anglo American sale of its Brazilian nickel assets to Hong Kong-listed MMG and Amadeus' plan to acquire French biometrics company, ADMA Public Security, among others.

In North America, growth was driven by Compassexicon's financial economics and antitrust businesses, supported by headline cases such as the Open AI engagement Steve mentioned. The sequential increase in adjusted segment EBITDA was due to higher revenues and lower compensation as we had some 1Q compensation items that did not recur. Tech's 18.4% revenue growth year-over-year was driven by increased demand for M&A-related second request services. As you might remember, Q2 of 2025 was an unusually slow quarter for M&A-related second request with a number of paused or canceled engagements resulting from the change in the U.S. administration. Stratcom also delivered a solid quarter. Excluding pass-through revenues, Stratcom's revenues increased 5.4%, primarily due to higher demand for corporate reputation services. Worth noting, Stratcom's results reflect the strength of our multiyear investments to build out our higher-margin event-driven offering such areas as prices, cyber, M&A and activism, including working with Corp Fin on restructurings for Wolfspeed and Spirit Airlines and the mega mergers of McCormick and Unilever and Skyworks and Qorvo as well as high-profile activism work such as Lululemon.

Now turning to key cash flow and balance sheet items. Net cash provided by operating activities of $152.3 million compared to $55.7 million in Q2 of 2025. The increase was primarily due to higher cash collections and lower forgivable loan issuances and income tax payments, which was partially offset by higher operating expenses and compensation payments. During the quarter, we repurchased 2.6 million shares at an average price per share of $150.84 for a total cost of $390.9 million. We made those purchases based on our assessment of long-term value and available balance sheet capacity while continuing to fund investments in talent. As of June 30, 2026, approximately $344 million remained available for share repurchases under our share repurchases program.

Turning to our full year 2026 guidance. Year-to-date, our revenues are up 7% year-over-year or 10% if you exclude e-com. As such, we are reaffirming our guidance for revenues of between $3.94 billion and $4.1 billion. While we're maintaining our revenue guidance, we are lowering our GAAP EPS guidance to between $8.70 and $9.30, which compares to the prior range of between $8.90 and $9.60. We expect adjusted EPS to be between $9.10 and $9.70. While the first quarter also included litigation-related expenses, the $0.40 difference between GAAP and adjusted EPS reflects our second quarter extraordinary litigation-related expenses of $0.17 and our current estimate for these expenses in the second half of the year.

Our updated guidance incorporates the following key assumptions. First, e-com exceeded our expectations in Q2. The sequential improvement demonstrated by our Compass Lexicon business was meaningful and broad-based. As discussed last quarter, the cost structure is already in the P&L. And while we don't expect another sequential step-up, we do expect year-over-year growth in revenue and adjusted segment EBITDA in the second half of 2026. Second, we are an event-driven business, and therefore, our results can be lumpy due to factors such as jobs rolling off and new jobs rolling on, which can be exacerbated by seasonality as well as market activity in key areas such as restructuring, M&A and regulatory activity. Although there are geographical differences around the world, the restructuring market has been softer year-to-date.

Despite the weaker market backdrop, our global restructuring revenues increased 8% compared to the first half of 2025 as we continue to increase our market share, especially in large company side matters. This is once again evidenced by our leading positions in league tables as we remain well positioned to win the most complex matters globally. For M&A, the current U.S. administration's more deal-friendly posture has boosted mega deal volume, driving higher demand for our second request services and tech and M&A-related antitrust services and e-com. However, faster clearances, more negotiated remedies and fewer litigated challenges may reduce the duration and intensity of our engagement.

In Corp Fin and Straton, we believe we are taking share as we continue to bring more of our services to our clients across the deal life cycle. For FLC, which also benefits from high levels of regulatory scrutiny, we have seen slower markets under the current U.S. administration. However, we have won our share of engagements or more on the largest, most complex cases, and our teams have been quick to pivot to support areas of evolving client needs. Third, we're differentiated by our low leverage expert-based model, and we continue to see strong opportunities to invest in great talent. We've announced 45 SMB and affiliate hires year-to-date in key businesses such as transactions, transformation, corporate reputation, disputes, cybersecurity and risk and investigations. Additionally, we're poised to welcome more than 270 graduates in the third quarter as part of our annual class of hires. Fourth, we expect SG&A expenses for 2026 to be approximately $70 million higher than 2025, which compares to our previous expectation of $60 million higher. The increase is primarily due to an expectation for higher legal expenses, which include extraordinary litigation-related expenses. Sequentially, we expect SG&A in Q3 to be approximately $12 million lower than Q2.

Lastly, we now expect our full year effective tax rate to be between 21% and 23%, which compares to the prior range of between 22% and 24%. Our record revenues this quarter reflect the powerful platform, the unique set of offerings that we have as well as how relevant our people are in an increasingly complex evolving landscape. While this business experiences its share volatility or zigs and zags as Steve said, I am energized by the strong fundamentals supporting our long-term growth trajectory. That confidence is reinforced by a very strong balance sheet, a differentiator that's uncommon in our industry. I am excited about our opportunities ahead with the continued focus on transparent engagement with our shareholders and creating sustainable value over time.

And with that, we'll open the call up for your questions.

[Operator Instructions] And today's first question comes from James Yaro at Goldman Sachs.

Steve, I was hoping you might be able to expand a bit more on your comments around the Middle East impacts on the business. And specifically, what I think would be helpful might just be a little bit more granularity on how the geopolitical disruptions are weighing on the business in the region. And then I guess, as we look ahead, could that at some point flip to a tailwind for your businesses and why?

Yes. Look, it's a good question. Look, eventually, could it be a tailwind in our business? Of course. We believe our business is currently functioning well below the capacity of the team we have there, and it's a terrific team. The real question is when the heck does that happen? And I think it's really, really difficult to foresee. I mean, first of all, and the manifestations of the geopolitical conflicts are different, right? For some period of time, you have people exiting for fear of safety, then they came back. You have -- sometimes some of the buyers are suspending purchases at this point in time, and then they authorize the purchases, but then they suspend the start of assignments. And this thing -- you get reports that change weekly on a weekly basis.

And of course, we get reports from our political leaders that suggest that different weekly forecasts of the end of a geopolitical conflict. So I think it's incredibly hard to forecast this. And it's not that we don't believe that there would be a long-term tailwind. My general experience over 1 million years now in professional services over an extended period of time, if you have the best team, you win because there is a need in those markets. But forecasting when is hard. And so I think we are being very cautious about saying we don't see a turn anytime near term. I hope we're wrong, James, for the world, not just for...

That's really helpful. Just turning quickly to restructuring, obviously, robust in the quarter again. We are seeing a growing list of macro and geopolitical considerations that I would expect could impact restructuring, whether it's private credit, the global conflict as well as software issues. Could you just give us the mark-to-market on what that means for the restructuring outlook from here and whether this has started to improve?

Yes. Look, let me -- I'm going to let -- since my crystal ball always fails, I'm going to let Angela try out her crystal ball. But let me just agree with your more macro points. We believe the macro forces out there are incredibly favorable towards this business over the next while. We believe that there are the macro forces out there have been favorable to this business for the last while, and there's been a lot of liability management exercises that have postponed potential restructurings, but not always solved the problem. So we believe the position we've created is obviously generating good results, but there's real upside. The question of when is where the crystal ball comes in, and I've never been that good. is your crystal ball better as well?

I hope that we'll see. I mean, to echo what Steve is saying, while we wouldn't characterize the environment as a broad-based restructuring boom currently, we are seeing deep pockets of activity, and we're encouraged by the quality and the size of opportunities in the market. As we've covered, even though the overall restructuring activity remains uneven and it's a little softer year-to-date, our global restructuring revenues grew 8% in the first year versus the prior year, and we do continue to win some of the largest and the most complex matters. So that gives us confidence in our market position to continue to win those larger cases.

That's very clear. Just one last one for me. Just wanted to touch a little bit on the repurchase activity. You once again had strong repurchase activity in the quarter. Could you just update us on your capital deployment priorities from here if the stock price stays at this level, let's say? And maybe you could weigh that up against your appetite to add leverage from here?

Yes, sure. As we've been in the past, we've always been opportunistic with our share buybacks, and we don't have a specific purchase target short term or long term. In 2025 and the first quarter -- second quarter of this year, we saw opportunities to purchase -- and as we've said in the past, when we believe the market has misunderstood or misunderstanding or mispricing the potential of our business, we'll invest pretty heavily. So as we've seen with our buybacks in 2017 and in 2020, we've had a pretty good outcome so far. Asking about our capital allocation strategy, I think it has not changed. We'll continue -- we are committed to our current disciplined capital allocation strategy, which goes in the order of cash to fund operations and investments for organic growth and then looking at M&A opportunities when available. We'll continue to repurchase shares on an opportunistic basis or we always have the option of paying down our debt. From a leverage perspective, we did upsize our revolver this quarter, as you've seen from $900 million to $1.5 billion. We view that as a position of strength, and it wasn't a necessity. Just to remind you, our revolver was due to become current later this year. And when I joined, it was a priority for me to get that refinanced. So when we had an opportunity to extend the maturity by 5 years, increase the size, all at improved economics, we thought it was a positive outcome to improve our financial position and increase flexibility. And given that we generate substantial EBITDA and free cash flow, we see that as prudent financial management as we can control the timing of our debt repayment as well.

And our next question today comes from Andrew Nicholas with William Blair.

I wanted to first touch on some of the prepared remarks around kind of legislative changes within merger reviews. I think the DOJ recently announced some changes there to accelerate the reviews and potentially reduce information requests. So I'm wondering if you could speak a little bit more to the puts and takes on that development to economic consulting and maybe any additional color you could provide on what impact you've seen from that to date?

Yes. Look, as of now, we haven't seen any major impact of that on our business to date. And we'll be monitoring this as we always monitor legislative changes. These sorts of changes happen with some frequency, and there are lots of other phenomenon going on as well that can affect the business. But as of now, we're not seeing any major impact.

Understood. And then for my follow-up, just on guidance. I think in past years, when you've made adjustments after the second quarter, you've narrowed the revenue range a little bit. It doesn't -- obviously, with reaffirming the outlook this quarter, you're not doing that in '26. So can you just kind of speak to why it's a little bit wider range of second half outcomes than is typical. I suspect some of that's Middle East. And Steve, you talked about just the fact that it's an event-driven business having some variability. But wondering if there's any anything else you could add there or make any comments on kind of segment level variability or where maybe the range of outcomes is especially wide at that level?

Yes. I think you've hit the nail on the head, Andrew. Look, if you think about -- look, I'd like to even think about like the U.K. and the Middle East, right? The Middle East, we have in there, not a huge revenue recovery in the second half of the year. Hopefully, the world turns out to be better, and that's a possibility. With the U.K., which we talked about, we have confidence in the business. It's hard to turn around -- I hope my European colleagues will beat me, but it's hard to get immediate rebounds in Europe when all your clients are on vacation. And that's an exaggeration. All your clients aren't on vacation, but there's a lot of vacations in July and August. And that means if you start the summer slow, it's hard to get an immediate rebound.

And then it actually -- and then you say the rebound happens in the fall, well, when in the fall? Does it happen in the end of August or September? Does it happen in September or October? So there's a lot of uncertainty in general, and then there's more now. So we just decided it was not worth narrowing that range. I mean we feel really well positioned. And for example, as Angela was saying, we feel really well positioned against some potential very big jobs in Corp Fin. But when do they start, do they settle? All those sorts of things are still out there. And so we just didn't think it was prudent to narrow that range at this point, Andrew. But I think that's just reaffirming what you were surmising, yes.

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

I wanted to ask a question about the guidance from a back half perspective in EBITDA and for the year for EBITDA. EBITDA is down, but of course, you're growing EPS mostly from share repurchase and I understand the litigation expense. What's the -- what does it imply for EBITDA in the back half? And maybe what are the biggest levers for you to start growing that as we aim into next year and beyond?

I'll give you a quick start on that and then see if Angela wants to grab. Look, obviously, in EPS, we are benefited from WASO in the second half of the year, although net interest, of course, is higher, and there are some other corporate things like tax rate differences. But also some of it has to do with the fact that we had a lot of SG&A in the first half of the year that we don't recur -- expect to recur in the second half. And the SG&A obviously shows up in EBITDA. And then some of it has to do with certain businesses doing better in the second half than the first half. So it's not all WASO type stuff. But Angela, I don't know how much you want to elaborate beyond that.

Yes. I think as Steve said, we did have some SG&A expenses in the first half of the year that we don't expect to incur in the second half, which included higher T&E in our all SMB meeting in April. We had some lower workday implementation spend and some onetime compensation items. We also noted lower legal expenses compared to the first half of the year. As we noted, we did have legal expenses also in Q1, but we'll start beginning to disclose our extraordinary litigation expenses in Q2, and we expect those costs to be lower in the second half of the year. That also is supplemented by -- we expect second half business performance improvement, primarily driven by e-com and tech. So those, along with the share repurchases, the will impact and our lower effective tax rate for the full year, we do believe we'll have a strong pickup in earnings in the second half.

Does that help, Tobey?

It sounds on the mechanical side in terms of EPS, but I was really trying to get to the EBITDA. But shifting gears, what is the -- what's your expectation for MD headcount growth? And you can pick your time frame over the next year or 2, I'm wondering what the trajectory would be either sequentially or year-over-year as we use that as an input to inform our models.

Yes. Look, so let me just come back to the EBITDA thing. Look, one thing I think you got to remember here, Tobey, is we've been working through these -- the impact of Econ on our EBITDA. So our EBITDA has -- look, right, between 2017 and 2024, we were growth real growth company on not only on top line, but also on EBITDA, on EPS. I mean, with all the zig-Zags and all that sort of stuff, but we were a powerful double-digit growth on everything. The last couple of years, we're making -- some of it work and grow, but we're working through a major impact on our EBITDA from the Econ issues, right? And I think what we've been trying to do is to get to a place where we can think that the drag from it is behind us. And that's where we think we are. The drag is behind us.

But if you're going to look at why isn't EBITDA growing and all these other stuff, I think you just got to normalize for what impact, what kick in the peak we've had in the Econ business, which is the basis for the litigation. And then what we've done now to try to get beyond the year-on-year drag, okay? So I think that's a helpful thing. I think your question on senior headcount growth is a great one for going forward. I think even year-to-date, I think our SMB growth year-on-year is north of 6%. It's between 6% and 7%, which is more overseas than it is in the U.S. And I think our MD is probably comparable to that. I mean our junior headcount is growing a little bit less quickly, but we are growing that. And so we are still believing -- we're still finding lots of people wanting to join us. We're finding powerful brand propositions, and we're finding good price realization when we need it. So we're expecting that to kind of show up not just in the -- it's starting to show up in the top line growth, as you saw this quarter, but we expect that eventually, once you get through the drag that we've been working through for the last couple of years to start to show up any given quarter can be funky, but go up in any medium term in our EBITDA lines as well as our EPS lines. Does that help, Tobey?

Yes. It does. And then last question for me. I'd love to get your perspective on nominal bill rate increases and expectations for that as well as net realized bill rate increases. And if you could, as part of your answer, beyond just the whole firm, comment on economic consulting, that would be great.

Yes. I don't know if we give out the specifics. If we do, I'll let Angela do that. What I would say is that we have been a conscious focus that for a couple of years, we didn't maintain our grow our rates as much as we should have in an inflationary environment, and we need to recapture that, and we have the ability to recapture that because of the size and importance of our jobs. And that is a message that the executive team embraces and we have been working on. And you see a particular success over a couple of years in FLC in a number of places, but everybody is focused on that. So I'm not sure we give out specific numbers on that, but it's something we are committed to, and we believe we will continue to have progress on.

If I could just follow up on that. If you feel like you hadn't been raising rates enough, is it fair to say that over the medium term here, you might have an opportunity to grow bill rates more quickly than over the last little bit?

Yes. I think we've been starting to try to recapture that. I think that during the inflationary periods of like '19 to '24, we just were slow to raise our rates at the rate we should have. In the last couple of years, we started to make progress, but we continue to expect to continue to make progress is the way I would say it, Tobey. Does that help? Any other questions?

We have no further questions at this time, sir.

Well, thank you very much for your time and attention, and we hope everybody is having a great summer, and we look forward to being back with you in a few months, and welcome again, Angela. Thank you all.

Thanks, everyone. That does conclude today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.

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

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

Good morning. Welcome to the FTI Consulting conference call to discuss the company's first quarter 2026 earnings results as reported this morning. Management will begin with formal remarks, after which they will take your questions.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including the company's outlook and expectations for the full year 2026 based on management's current beliefs and expectations. These forward-looking statements involve many risks and uncertainties, assumptions and estimates and other factors that could cause actual results to differ materially from such statements.

For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the safe harbor statement in the earnings press release issued this morning, a copy of which is available on our website at www.fticonsulting.com as well as other disclosures under the headings of Risk Factors and forward-looking information in our annual report on Form 10-K for the year ended December 31, 2025, our quarterly reports on Form 10-Q and in our other filings with the SEC.

Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call and will not be updated. FTI Consulting assumes no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

During the call, we will discuss certain non-GAAP financial measures. A discussion of any non-GAAP financial measures addressed on this call and reconciliations to the most directly comparable GAAP measures are included in the press release and the accompanying financial tables that we issued this morning.

Lastly, there are 2 items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical financial and operating data, which have been updated to include our first quarter 2026 results.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes, that's perfect.

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

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

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

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

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

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

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

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

I guess your business yes, your business.

Let me think about that...

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

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

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

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

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

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

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

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

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

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

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

Extremely helpful.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thank you.

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

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

Welcome to the FTI Consulting Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mollie Hawkes, Head of Investor Relations. Please go ahead.

Good morning. Welcome to the FTI Consulting conference call to discuss the company's fourth quarter and full year 2025 earnings results as reported this morning. Management will begin with formal remarks, after which, we will take your questions.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including the company's outlook and expectations for full year 2026 based on management's current beliefs and expectations. These forward-looking statements involve many risks and uncertainties, assumptions and estimates and other factors that could cause actual results to differ materially from such statements.

For a discussion of risk factors and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the safe harbor statement in the earnings press release issued this morning. A copy of which is available on our Investor Relations website at www.fticonsulting.com as well as other disclosures under the heading of Risk Factors and forward-looking Information in our annual report on Form 10-K for the year ended December 31, 2025, our quarterly reports on Form 10-Q and in our other filings with the SEC.

Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call and will not be updated. FCI assumes no obligation to update these forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

During the call, we will discuss certain non-GAAP financial measures. A discussion of any non-GAAP financial measures discussed on this call and reconciliations to the most directly comparable GAAP measures are issued in the press release and the accompanying financial tables that we issued this morning.

Lastly, there are 2 items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical, financial and operating data, which have been updated to include our fourth quarter and full year 2025 results.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Welcome to the FTI Consulting Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded.

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

Good morning. Welcome to the FTI Consulting conference call to discuss the company's third quarter 2025 earnings results as reported this morning. Management will begin with formal remarks, after which they will take your questions.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act, including the company's outlook and expectations for the full year 2025 based on management's current beliefs and expectations. These forward-looking statements involve many risks and uncertainties, assumptions and estimates and other factors that could cause actual results to differ materially from such statements.

For a discussion of risks and other factors that may cause actual results or events should differ from those contemplated by forward-looking statements, investors should review the safe harbor statement in the earnings press release issued this morning, a copy of which is available on our website at www.fticonsulting.com as well as other disclosures under the heading of Risk Factors and forward-looking Information in our annual report on Form 10-K for the year ended December 31, 2024, our quarterly reports on Form 10-Q and in our other SEC filings.

Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call and will not be updated. FTI Consulting assumes no obligation to update these forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

On the call, we will discuss certain non-GAAP financial measures A discussion of any non-GAAP financial measures addressed on this call and reconciliations to the most directly comparable GAAP measures are included in the press release and accompanying financial tables that we issued this morning.

Lastly, there are two items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical financial and operating data, which have been updated to include our third quarter 2025 results.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

With that, let me open the floor for questions.

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

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

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

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

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

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

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

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

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

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

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

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

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

Yes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

It does.

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

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