FTI Consulting, Inc. — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. This is an annual report; the supplied filing text does not provide a clear standalone fourth-quarter income statement or results summary. FTI Consulting is a global business advisory firm reporting five segments: Corporate Finance & Restructuring, Forensic and Litigation Consulting (FLC), Economic Consulting, Technology, and Strategic Communications.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $3.489 billion | $3.029 billion | +15.2% |
| Operating income | $377.6 million | $303.9 million | +24.2% |
| Net income | $274.9 million | $235.5 million | +16.7% |
| Diluted EPS | $7.71 | $6.58 | +17.2% |
| Adjusted EBITDA | $424.8 million | $357.6 million | +18.8% |
| Adjusted EBITDA margin | 12.2% | 11.8% | +0.4 percentage points |
| Operating cash flow | $224.5 million | $188.8 million | +18.9% |
| Free cash flow | $174.9 million | $135.7 million | Higher |
Consolidated operating margin was approximately 10.8%, compared with 10.0% in 2022. The effective tax rate increased to 23.3% from 20.9%. Interest expense rose to $14.3 million from $10.0 million, while interest income and other shifted to a $4.9 million expense, primarily reflecting $9.3 million of net foreign-exchange losses.
Operating cash flow benefited from higher collections associated with increased billings, partially offset by compensation and other expense growth and greater working-capital needs. Capital expenditures were $49.6 million. Days sales outstanding increased to 100 from 97.
Segment performance
| Segment | 2023 revenue | Revenue change | Adjusted Segment EBITDA | Margin |
|---|---|---|---|---|
| Corporate Finance & Restructuring | $1.347 billion | +17.4% | $230.8 million | 17.1% |
| FLC | $654.1 million | +12.8% | $88.1 million | 13.5% |
| Economic Consulting | $771.4 million | +11.0% | $115.8 million | 15.0% |
| Technology | $387.9 million | +21.2% | $62.7 million | 16.2% |
| Strategic Communications | $329.2 million | +14.8% | $50.9 million | 15.5% |
Adjusted Segment EBITDA is a company-defined performance measure; it excludes unallocated corporate expenses and should not be treated as a substitute for consolidated GAAP operating income. Segment comparisons reflect a 2023 realignment that moved part of the health solutions practice from FLC to Corporate Finance; prior-year segment data was recast.
Balance sheet, debt and capital allocation
- At year-end, cash and cash equivalents were $303.2 million and a short-term investment was $24.4 million. The company reported $899.9 million of available capacity on its $900 million revolving credit facility, with no borrowings and $0.1 million of letters of credit outstanding.
- Total assets were $3.326 billion and total liabilities were $1.344 billion. Current assets were $1.555 billion and current liabilities were $892.8 million.
- The $315.8 million principal of 2.0% convertible notes was repaid in cash at maturity in August 2023. Holders also received 1.46 million common shares for the conversion premium. No convertible notes remained outstanding at year-end.
- Cash used in financing activities was $354.7 million, mainly reflecting the note repayment. The company repurchased 112,139 shares for $17.8 million under its program and had $460.7 million of authorization remaining.
Changes, outlook and risks
- Management attributed annual revenue growth to increased demand across all segments. Technology had the fastest revenue growth; Strategic Communications revenue rose but its Adjusted Segment EBITDA was nearly flat, and its margin declined to 15.5% from 17.7%.
- Corporate Finance revenue growth reflected demand and realized rates in restructuring, business transformation and strategy; its Adjusted Segment EBITDA margin declined to 17.1% from 18.7%, with contractor costs among the factors weighing on gross margin. FLC and Technology margins improved.
- No special charges were recorded in 2023; 2022 included $8.3 million of employee severance and related costs. The company recorded a $35.1 million provision for expected credit losses in 2023, up from $19.7 million, and net accounts receivable rose to $1.102 billion from $896.2 million.
- Management expects 2024 capital expenditures of $35 million to $42 million and states that operating cash flows, supplemented by the revolver if needed, are expected to fund cash needs for at least the next 12 months. The filing text does not provide a clear earnings or revenue guidance range.
- Key risks include volatility in demand driven by economic and capital-market conditions, restructuring and M&A activity, utilization and staffing costs, client payment delays or fee reductions, competition and rapid technology adoption including AI, cybersecurity and data privacy, foreign-exchange exposure, and employee retention. In the bankruptcy and regulatory matters relevant to its services, fees may be reduced or subject to approval.
- The auditor identified estimation of potential fee reductions as a critical audit matter because assessing outcomes of court, regulatory or client fee adjustments involves significant judgment. Management reported no known asserted or unasserted legal proceedings expected to materially adversely affect results. No cybersecurity threat was known to have materially affected the company as of year-end.
- The company implemented its new ERP system in April 2023 and continued work to improve its use. Management and the auditor concluded internal control over financial reporting was effective as of December 31, 2023; the financial-statement audit opinion was unqualified.
Most important facts for investors to verify
- Review the next reporting periods for revenue collection and credit quality: DSO rose to 100 days, receivables increased, and the credit-loss provision grew substantially.
- Track whether segment demand and margins persist, particularly Corporate Finance margin pressure and Strategic Communications’ margin decline.
- Confirm cash generation after the convertible-note repayment and monitor working-capital requirements, capital expenditures, and any use of the revolving facility.
- Assess the share-count effect of the 1.46 million conversion-premium shares alongside future repurchases; year-end shares outstanding were approximately 35.5 million.
- Monitor exposure to foreign exchange, employee compensation and retention costs, client fee reductions, and cybersecurity or AI-related competitive and regulatory developments.