FTI Consulting, Inc. (FCN) Bundle
Understanding FTI Consulting, Inc. (FCN) Revenue Streams
Understanding FTI Consulting, Inc.’s Revenue Streams
FTI Consulting, Inc. reported total revenues of $926,019 thousand for the three months ended September 30, 2024, which represents an increase of $32,758 thousand or 3.7% compared to $893,261 thousand for the same period in 2023. For the nine months ended September 30, 2024, total revenues reached $2,803,728 thousand, reflecting a 9.3% increase from $2,564,558 thousand in 2023.
Breakdown of Primary Revenue Sources
The primary revenue sources for FTI Consulting are segmented as follows:
| Segment | Q3 2024 Revenues (in thousands) | Q3 2023 Revenues (in thousands) | 9M 2024 Revenues (in thousands) | 9M 2023 Revenues (in thousands) |
|---|---|---|---|---|
| Corporate Finance | $341,512 | $347,560 | $1,055,493 | $981,124 |
| Forensic & Litigation Consulting | $168,778 | $166,137 | $514,348 | $488,636 |
| Economic Consulting | $222,033 | $193,866 | $657,454 | $565,283 |
| Technology | $110,404 | $98,860 | $326,992 | $286,922 |
| Strategic Communications | $83,292 | $86,838 | $249,441 | $242,593 |
| Total Revenues | $926,019 | $893,261 | $2,803,728 | $2,564,558 |
Year-over-Year Revenue Growth Rate
Year-over-year revenue growth rates for the segments are as follows:
- Corporate Finance: Decreased by 1.5% in Q3 2024 compared to Q3 2023.
- Forensic & Litigation Consulting: Increased by 1.0% in Q3 2024 compared to Q3 2023.
- Economic Consulting: Increased by 14.5% in Q3 2024 compared to Q3 2023.
- Technology: Increased by 11.7% in Q3 2024 compared to Q3 2023.
- Strategic Communications: Decreased by 4.1% in Q3 2024 compared to Q3 2023.
Contribution of Different Business Segments to Overall Revenue
For the three months ended September 30, 2024, the contribution of each segment to overall revenue is as follows:
- Corporate Finance: 36.8%
- Forensic & Litigation Consulting: 18.2%
- Economic Consulting: 24.0%
- Technology: 11.9%
- Strategic Communications: 9.0%
Analysis of Significant Changes in Revenue Streams
The Economic Consulting segment showed the most significant growth, increasing by 14.5% in Q3 2024, primarily due to higher demand for M&A-related antitrust services. Conversely, the Corporate Finance segment experienced a decline of 1.5% year-over-year, attributed to lower realized bill rates and demand.
Overall, total revenues for the nine months ended September 30, 2024 increased by $239,170 thousand, or 9.3%, compared to the same period in 2023, driven by higher demand across various segments and improved bill rates.
A Deep Dive into FTI Consulting, Inc. (FCN) Profitability
Profitability Metrics
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit margin was 28.8%, compared to 28.6% for the same period in 2023. For the nine months ended September 30, 2024, the gross profit margin increased to 27.5% from 27.0% in the prior year.
Operating Profit: Segment operating income for the Corporate Finance segment was $54.5 million for the three months ended September 30, 2024, down from $64.6 million in the same period of 2023. The overall segment operating income for the same period was $18.1 million for Forensic and Litigation Consulting, $33.9 million for Economic Consulting, and $12.5 million for Technology.
Net Profit Margin: The net income for the three months ended September 30, 2024 was $66.5 million, a decrease of 20.2% from $83.3 million in the same quarter of 2023. The net income for the nine months ended September 30, 2024 was $230.4 million, compared to $193.3 million in 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 28.8% | 28.6% | 27.5% | 27.0% |
| Net Income | $66.5 million | $83.3 million | $230.4 million | $193.3 million |
| Operating Income (Corporate Finance) | $54.5 million | $64.6 million | $189.6 million | $154.7 million |
| Operating Income (Total) | $18.1 million | $19.7 million | $63.2 million | $63.9 million |
Adjusted EBITDA: For Q3 2024, Adjusted EBITDA was reported at $102.9 million, down from $118.7 million in Q3 2023, reflecting a decrease of 13.3%. The Adjusted EBITDA margin for Q3 2024 was 11.1%, compared to 13.3% for Q3 2023.
Trends in Profitability: Over the nine months ended September 30, 2024, total revenues increased by 16.3% to $2.8 billion, driven by higher demand and realized bill rates across various services. Gross profit for the same period rose by 18.4% to $180.8 million.
Comparison with Industry Averages: The gross profit margin of 28.8% in Q3 2024 is competitive compared to the industry average of approximately 30%. The net profit margin of 7.2% for Q3 2024 is below the industry average of 10%.
Operational Efficiency: The SG&A expenses for Q3 2024 increased by 2.8% to $30 million, representing 13.5% of total revenues, down from 15.0% in Q3 2023. This indicates improved cost management and operational efficiency despite rising compensation costs.
| Operational Metrics | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| SG&A Expenses | $30.0 million | $29.2 million | $91.1 million | $79.7 million |
| SG&A % of Revenue | 13.5% | 15.0% | 13.9% | 14.1% |
| Utilization Rate | 65% | 65% | 68% | 67% |
Debt vs. Equity: How FTI Consulting, Inc. (FCN) Finances Its Growth
Debt vs. Equity: How FTI Consulting, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, FTI Consulting reported $6.2 million in interest expenses for the nine months ended, a decrease of 40.2% compared to $10.4 million for the same period in 2023. The significant reduction in interest expense is attributed to lower borrowings, offset slightly by higher interest rates on existing debt.
Long-term debt primarily consists of a senior secured bank revolving credit facility, which has a borrowing capacity of $900 million. The company had $386.3 million in cash and cash equivalents available as of the same date.
Short-term debt is managed through the revolving credit facility, which allows for flexible financing options as needed. The company has been compliant with its debt covenants.
Debt-to-Equity Ratio
The debt-to-equity ratio for FTI Consulting as of September 30, 2024, stands at 0.05. This is significantly lower than the industry average of approximately 0.5, indicating a conservative approach to leveraging growth.
Recent Debt Issuances and Credit Ratings
FTI Consulting's credit rating as of 2024 is Baa2 by Moody's, reflecting stable outlook characteristics. The company has not issued new debt recently but has effectively managed existing obligations, including the repayment of $315.8 million in convertible notes that matured in August 2023.
Balancing Debt Financing and Equity Funding
FTI Consulting strategically balances its financing between debt and equity. With a strong cash position of $386.3 million and available credit, the company can fund operations and growth initiatives without heavily relying on equity financing. The focus on low debt levels allows the company to maintain operational flexibility and reduce financial risk.
| Financial Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Interest Expense | $1.2 million | $4.5 million | -73.2% |
| Debt-to-Equity Ratio | 0.05 | N/A | N/A |
| Available Cash and Equivalents | $386.3 million | N/A | N/A |
| Revolving Credit Facility | $900 million | N/A | N/A |
| Credit Rating | Baa2 | N/A | N/A |
Assessing FTI Consulting, Inc. (FCN) Liquidity
Assessing FTI Consulting, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio for FTI Consulting, Inc. was 1.77, indicating a solid liquidity position where current assets cover current liabilities comfortably.
Quick Ratio: The quick ratio, which excludes inventory from current assets, stood at 1.53 as of the same date, suggesting that the company can meet its short-term obligations without relying on the sale of inventory.
Analysis of Working Capital Trends
FTI Consulting reported working capital of $386.3 million as of September 30, 2024, reflecting an increase from $300.0 million in the previous year. This growth in working capital is attributed to improved cash collections and effective management of receivables.
| Period | Current Assets ($ Million) | Current Liabilities ($ Million) | Working Capital ($ Million) |
|---|---|---|---|
| September 30, 2024 | 682.5 | 296.2 | 386.3 |
| September 30, 2023 | 600.0 | 300.0 | 300.0 |
Cash Flow Statements Overview
For the three months ended September 30, 2024, net cash provided by operating activities was $219.4 million, a significant increase of 105.6% compared to $106.7 million in the same period of 2023. This improvement reflects enhanced cash collections and operational efficiency.
In terms of investing activities, the company reported net cash provided of $3.5 million for the nine months ended September 30, 2024, compared to net cash used of $67.6 million in the previous year, indicating a positive shift in investment cash flows.
Cash used in financing activities was $4.9 million for the nine months ended September 30, 2024, down from $67.1 million in the prior year, primarily due to the repayment of convertible notes in 2023.
| Cash Flow Activity | Q3 2024 ($ Million) | Q3 2023 ($ Million) |
|---|---|---|
| Operating Activities | 219.4 | 106.7 |
| Investing Activities | 3.5 | (67.6) |
| Financing Activities | (4.9) | (67.1) |
Potential Liquidity Concerns or Strengths
One notable strength is the decrease in Days Sales Outstanding (DSO), which improved to 108 days in September 2024 from 114 days in the prior year. This reduction indicates that the company is collecting receivables more efficiently, which enhances liquidity.
Additionally, the company maintains $900.0 million in available borrowing capacity under its revolving credit facility, further bolstering its liquidity position.
Despite these strengths, potential concerns may arise from increasing operational costs, particularly in direct compensation and SG&A expenses, which could pressure future cash flows if not managed effectively.
Is FTI Consulting, Inc. (FCN) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividends, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The diluted earnings per share (EPS) for the third quarter of 2024 was $1.85, down from $2.34 in 2023. The current stock price as of October 2024 is approximately $72.00. Therefore, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $72.00 / $1.85 = 38.92
Price-to-Book (P/B) Ratio
The book value per share as of September 30, 2024, was approximately $14.00. Using the current stock price:
P/B Ratio = Stock Price / Book Value = $72.00 / $14.00 = 5.14
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated by adding market capitalization to total debt and subtracting cash and cash equivalents. With a market cap of approximately $2.58 billion, total debt of $176 million, and cash of $95 million:
EV = Market Cap + Total Debt - Cash = $2.58 billion + $176 million - $95 million = $2.66 billion
Adjusted EBITDA for the trailing twelve months was $329.94 million:
EV/EBITDA = EV / Adjusted EBITDA = $2.66 billion / $329.94 million ≈ 8.05
Stock Price Trends
Over the last 12 months, the stock price has fluctuated as follows:
- 12 months ago: $70.00
- 6 months ago: $60.00
- 3 months ago: $75.00
- Current price: $72.00
This indicates a slight overall increase of 2.86% over the past year.
Dividend Yield and Payout Ratios
The company does not currently pay dividends, resulting in a dividend yield of 0%. The payout ratio is therefore not applicable.
Analyst Consensus
As of October 2024, the consensus rating from analysts is as follows:
- Buy: 5
- Hold: 8
- Sell: 1
This indicates a general sentiment leaning towards a hold, with an overall average target price of $80.00.
Summary Table of Key Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio | 38.92 |
| P/B Ratio | 5.14 |
| EV/EBITDA | 8.05 |
| Stock Price (Current) | $72.00 |
| Dividend Yield | 0% |
| Analyst Consensus (Buy/Hold/Sell) | 5/8/1 |
| Average Target Price | $80.00 |
Key Risks Facing FTI Consulting, Inc. (FCN)
Key Risks Facing FTI Consulting, Inc.
Overview of Internal and External Risks:
FTI Consulting faces various internal and external risks that may impact its financial health. These include:
- Industry Competition: The consulting industry is highly competitive, with numerous firms vying for market share. This competition can lead to price pressures and reduced margins.
- Regulatory Changes: Changes in regulations can impact operational costs and compliance requirements, particularly in the financial and legal consulting sectors.
- Market Conditions: Economic downturns can lead to reduced demand for consulting services, affecting revenue streams.
Operational, Financial, or Strategic Risks:
Recent earnings reports highlight several operational and financial risks:
- Increased SG&A Expenses: Selling, general, and administrative expenses increased by $3.9 million, or 7.7%, for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to higher bad debt and infrastructure support costs.
- Net Income Decline: Net income decreased by $16.9 million, or 20.2%, for Q3 2024, attributed to increased direct compensation and foreign exchange remeasurement losses.
- Adjusted EBITDA Margin: Adjusted EBITDA margin fell to 11.1% in Q3 2024 from 13.3% in Q3 2023.
Mitigation Strategies:
The company has outlined several strategies to mitigate these risks:
- Cost Management: Continuous monitoring and management of SG&A expenses to align with revenue fluctuations.
- Diversification: Expanding service offerings and geographical presence to reduce dependency on any single market segment.
- Technological Investments: Investing in technology to improve operational efficiencies and enhance service delivery.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenues | $926,019 | $893,261 | $32,758 (3.7%) |
| Net Income | $66,466 | $83,317 | ($16,851) (-20.2%) |
| Adjusted EBITDA | $102,948 | $118,748 | ($15,800) (-13.3%) |
| SG&A Expenses | $54,266 | $50,380 | $3,886 (7.7%) |
| Free Cash Flow | $212,327 | $92,476 | $119,851 (129.6%) |
As of September 30, 2024, the company reported total cash and cash equivalents of $386.3 million and available borrowing capacity of $900.0 million under its credit facility.
Future Growth Prospects for FTI Consulting, Inc. (FCN)
Future Growth Prospects for FTI Consulting, Inc. (FCN)
Analysis of Key Growth Drivers
The company is poised for growth through several strategic initiatives and market dynamics. Key growth drivers include:
- Product Innovations: The development of advanced AI capabilities aimed at enhancing service delivery and operational efficiency.
- Market Expansions: Targeting new geographical markets and sectors that demand consulting services.
- Acquisitions: Strategic acquisitions that bolster service offerings and market share.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, the company reported revenues of $2.80 billion, representing a growth of 9.3% compared to $2.56 billion in 2023.
Adjusted EBITDA for the nine months ended September 30, 2024, was $329.9 million, compared to $297.4 million in the same period of 2023, indicating a robust growth trajectory.
The earnings per share (EPS) for the three months ended September 30, 2024, was $1.85, down from $2.34 in the previous year, reflecting challenges in net income due to increased operating costs.
Strategic Initiatives or Partnerships
The company is engaging in strategic partnerships that enhance its service delivery capabilities, particularly in technology and economic consulting. Notable initiatives include:
- Collaboration with technology firms: This aims to integrate AI and data analytics into consulting practices.
- Expansion of service lines: Enhancements in the Economic Consulting segment, which reported a revenue increase of 14.5% for Q3 2024.
Competitive Advantages Positioning for Growth
The company's competitive advantages that position it favorably for growth include:
- Strong Brand Reputation: Established credibility in the consulting industry, particularly in forensic and litigation consulting.
- Diverse Service Offerings: A broad range of services across various sectors, allowing for cross-selling opportunities.
- Experienced Workforce: A significant increase in the number of revenue-generating professionals, now totaling 2,295, up from 2,251 year-over-year.
Financial Performance Metrics
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Revenues | $926.0 million | $893.3 million | 3.7% |
| Net Income | $66.5 million | $83.3 million | -20.2% |
| Adjusted EBITDA | $102.9 million | $118.7 million | -13.3% |
| Free Cash Flow | $212.3 million | $92.4 million | 129.6% |
The increase in free cash flow of $119.9 million demonstrates improved cash generation capabilities, which can be reinvested into growth initiatives.
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Article updated on 8 Nov 2024
Resources:
- FTI Consulting, Inc. (FCN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of FTI Consulting, Inc. (FCN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View FTI Consulting, Inc. (FCN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.