FTI Consulting, Inc. FCN beat first-quarter 2015 earnings estimates by a huge margin, resuming its streak of beating earnings estimates after a significant miss in the last quarter. Adjusted earnings for the business advisory firm came in at 57 cents per share, exceeding the Zacks Consensus Estimate of 32 cents by a whopping 78.1% on the back of strong growth in its Corporate Finance segment, cost benefits and reduced corporate investment spending. Shares rose 2.9% in the trading session following the earnings release.
Adjusted earnings for the quarter also compare favorably with the prior-year figure of 41 cents, reflecting an increase of 39%. Adjusted net income came in at $23.7 million per share, up 41.3% year over year.
Revenues for the quarter increased 1.6% year over year to $432.3 million, and were in line with the Zacks Consensus Estimate. Corporate Finance segment showed impressive performance, which was somewhat offset by weakness in Strategic Communications and Technology segments. Top-line growth was also restricted by unfavorable impact of foreign exchange translation.
Adjusted EBITDA for the quarter came in at $58.7 million, up 14.6% from $51.2 million for the prior-year quarter.
Segment Details
Corporate Finance/Restructuring segment revenues showed significant improvement at $106.2 million, rising 13% year over year. Enhanced demand for the transaction advisory and tax practices in the Europe, Middle East and Africa ("EMEA") region and strength in the bankruptcy restructuring and non-distressed service offerings in North America buoyed revenues. However, the effect was partially offset by sustained weakness in the Australia restructuring practice. Adjusted EBITDA for the segment was $22.5 million, more than twice the year-ago quarter.
Economic Consulting revenues continued to show a weak performance, falling 0.7% year over year to $106.1 million. Weakness in demand for the segment's non-mergers and acquisitions ("M&A") related finance and antitrust services and negative impact of foreign currency translation contributed to the feeble performance of the segment. Adjusted EBITDA came in at $11.6 million versus $13 million in the prior-year quarter, dragged down by higher variable compensation in the EMEA antitrust practice, lower utilization in the finance practice and weaker margins on revenue from acquisitions.
Forensic and Litigation Consulting segment revenues grew 1.5% year over year to $123.3 million. The primary drivers of growth for the segment were higher demand in health solutions, global construction solutions and investigations practices. Weakness in the financial and enterprise data analytics practice somewhat restricted the segment’s performance. However, adjusted EBITDA for the segment declined 16.6% year over year to $22.1 million in the reported quarter, dragged down by lower utilization due to growth in staffing, as well as higher recruiting, travel and marketing expenses.
Technology segment revenues were down 9% year over year to $54.7 million. Declining services revenue from large-scale complex cross-border investigations and lower consulting revenues led to the negative revenue growth. Adjusted EBITDA came in at $10.1 million, down 41.6% over the prior-year period. Weaker price realization on consulting and services revenues, increased R&D expenses and higher investments in global services delivery, marketing and business development led to the significant year-over-year decline in adjusted EBITDA.
Strategic Communications segment revenues decreased 2.5% year over year to $42.1 million in the quarter, driven by the unfavorable foreign currency translation effect. Despite the negative revenue growth, superior mix of higher margin engagements and reduced headcount-related costs led to a whopping 114.8% year-over-year increase in adjusted EBITDA, which came in at $5.8 million for the quarter.
Other Financial Aspects
At quarter-end, FTI Consulting had cash and cash equivalents of $225.3 million versus $77 million on Mar 31, 2014. Long-term debt (net of current portion) stood unchanged from the prior-year period at $700 million. Net cash used by operating activities for the quarter amounted to $51.3 million, compared with $110.8 million in the prior year.
Guidance
FTI Consulting expects the momentum in its European tax and advisory business to continue going into 2015. However, maintaining the strong growth in its Corporate Finance revenues and sustained weakness in the Australian business would remain challenges for the company in the near term.
The company reiterated its guidance for 2015 and expects adjusted earnings per share to lie in a range of $1.95 to $2.20. The guidance incorporates significant investments that the company plans to make in the technology business in tune with its multi-year business plans.
FTI Consulting currently has a Zacks Rank #3 (Hold). Better-ranked stocks in the consulting industry include CoreLogic, Inc. CLGX, NV5 Holdings, Inc. NVEE and Stantec Inc. STN, each sporting a Zacks Rank #1 (Strong Buy).
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