FTI Consulting, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021; comparisons are primarily with FY2020. FTI Consulting is a global business advisory firm operating through Corporate Finance & Restructuring, Forensic and Litigation Consulting (FLC), Economic Consulting, Technology, and Strategic Communications.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $2,776.2 million | $2,461.3 million | +12.8% |
| Operating income | $312.0 million | $282.7 million | +10.4% |
| Net income | $235.0 million | $210.7 million | +11.5% |
| Diluted EPS | $6.65 | $5.67 | +17.3% |
| Adjusted EBITDA (non-GAAP) | $354.0 million | $332.3 million | +6.5% |
| Adjusted EBITDA margin (non-GAAP) | 12.8% | 13.5% | Down 0.7 percentage points |
| Operating cash flow | $355.5 million | $327.1 million | +8.7% |
| Free cash flow (non-GAAP) | $286.9 million | $292.2 million | Down $5.3 million |
Revenue growth excluding estimated foreign-exchange impact and acquisition-related revenue was 10.3%. Management attributed growth primarily to increased demand, particularly in Economic Consulting, FLC, and Technology. The effective tax rate rose to 21.1% from 19.7%; FY2020 benefited from a subsidiary intellectual-property license tax benefit.
Segment revenue increased across all five segments: Corporate Finance +3.2%, FLC +16.9%, Economic Consulting +16.4%, Technology +28.9%, and Strategic Communications +17.0%. Corporate Finance Adjusted Segment EBITDA fell to $155.5 million from $216.8 million, with margin declining to 16.6% from 23.8%; management cited weaker restructuring demand, lower utilization, lower realized rates, and mix. FLC, Economic Consulting, Technology, and Strategic Communications all reported higher Adjusted Segment EBITDA.
At year-end, cash and cash equivalents were $494.5 million; current assets were $1.37 billion and current liabilities were $718.1 million. Long-term debt, net, was $297.2 million, representing $316.2 million principal of 2.0% convertible notes due August 15, 2023. The $550 million revolving credit facility was undrawn, with $549.6 million available after letters of credit; the Company reported compliance with debt covenants. Cash flow from operations exceeded capital expenditure and debt-service needs in each of the last three years. DSO improved to 94 days from 95.
Material changes and unusual items
- FY2021 net income included no special charges; FY2020 included $7.1 million of office relocation and employee-related charges.
- Corporate Finance’s weaker segment results contrasted with strong growth in the other four segments. Company-wide Adjusted EBITDA rose more slowly than revenue, reflecting higher compensation and SG&A costs.
- Capital expenditures increased to $68.6 million from $34.9 million, mainly due to New York office improvements; free cash flow consequently declined despite higher operating cash flow.
- The Company repurchased approximately 422,000 shares for $46.1 million in FY2021; $167.1 million remained authorized at year-end.
- After year-end, the Company completed its acquisition of BOLD, a Netherlands-based advisory firm, in the first quarter of 2022. It also amended the convertible-note indenture effective January 1, 2022: note principal converted must be settled in cash.
Outlook, management commentary, and risks
Management expects FY2022 capital expenditures of $44 million to $54 million. It stated that operating cash flow and available facility borrowings should fund long-term cash needs for at least the next 12 months, subject to uncertainty. The filing provides no clear full-year revenue or earnings guidance.
Management described continuing COVID-19 uncertainty, including effects from travel restrictions, court and government delays, restructuring moratoriums, remote work, and vaccination requirements. Key risks include demand volatility across segments, talent recruitment and retention, utilization and fee pressure, client payment and engagement termination risks, cybersecurity and data privacy, and competition. The Company also noted the 2023 convertible-note maturity and potential cash requirements on conversion, as well as benchmark-rate transition risks for future facility borrowings. Legal proceedings in the ordinary course were disclosed; management said it knew of none expected to materially adversely affect financial condition or results.
Auditors issued unqualified opinions on the financial statements and internal control over financial reporting. The critical audit matter concerned estimates of potential fee reductions, including amounts subject to bankruptcy-court, regulatory, or client approval.
Investor verification priorities
- Assess whether Corporate Finance utilization, realized rates, and profitability recover, and whether growth in the other segments is sustained.
- Track compensation and hiring costs against revenue growth, and monitor company and segment margins.
- Review cash conversion, receivables and fee-reduction estimates, DSO, and the effect of elevated capital spending.
- Verify funding and settlement plans for the $316.2 million convertible-note principal due in 2023, including cash-conversion exposure and covenant capacity.
- Monitor integration and performance of the BOLD acquisition, and the realization of expected benefits from planned capital spending.
- Compare actual results with management’s stated liquidity outlook and FY2022 capital expenditure range; the filing does not provide clear earnings guidance.