Earnings call transcript: FTI Consulting Q3 2025 earnings beat forecasts

FTI Consulting’s Q3 2025 performance demonstrates strong financial health, driven by strategic investments and a focus on innovation. While challenges remain, the company’s revised guidance and market position suggest a positive outlook. For deeper insights into FTI Consulting’s valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 8 additional ProTips and detailed financial metrics in the Pro Research Report, helping investors make more informed decisions. For deeper insights into FTI Consulting’s valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 8 additional ProTips and detailed financial metrics in the Pro Research Report, helping investors make more informed decisions.

Key Takeaways

• FTI Consulting’s EPS of $2.60 exceeded forecasts by 30.65%.
• Revenue for Q3 2025 was $956.2 million, a 3.3% increase year-over-year.
• Pre-market stock price increased by 0.74% following the earnings release.
• Full-year EPS guidance revised upwards to $8.20-$8.70.
• Continued investment in AI tools and talent acquisition highlighted.

Company Performance

FTI Consulting’s Q3 2025 performance demonstrates strong financial health, driven by strategic investments and a focus on innovation. While challenges remain, the company’s revised guidance and market position suggest a positive outlook. For deeper insights into FTI Consulting’s valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 8 additional ProTips and detailed financial metrics in the Pro Research Report, helping investors make more informed decisions.

Financial Highlights

• Revenue: $956.2 million, up 3.3% year-over-year.
• Earnings per share: $2.60, up 41% year-over-year.
• Net Income: $82.8 million, a 25% increase year-over-year.
• Adjusted EBITDA: $130.6 million, up from $102.9 million in the prior year.

Earnings vs. Forecast

FTI Consulting’s actual EPS of $2.60 surpassed the forecasted $1.99, resulting in a 30.65% earnings surprise. Revenue also outperformed expectations, with a reported figure of $956.2 million against a forecast of $945.11 million. This marks a significant beat compared to previous quarters, highlighting the company’s strong financial performance.

Market Reaction

FTI Consulting’s Q3 2025 performance demonstrates strong financial health, driven by strategic investments and a focus on innovation. While challenges remain, the company’s revised guidance and market position suggest a positive outlook. For deeper insights into FTI Consulting’s valuation and growth prospects, InvestingPro subscribers can access comprehensive analysis, including 8 additional ProTips and detailed financial metrics in the Pro Research Report, helping investors make more informed decisions.

Outlook & Guidance

FTI Consulting has raised its full-year EPS guidance to a range of $8.20-$8.70, reflecting confidence in sustained growth. The company plans to continue investing in AI tools and expanding its talent base, anticipating a gradual return to revenue growth in its Economic Consulting segment.

Executive Commentary

CEO Steven H. Gunby emphasized the company’s ongoing journey, stating, "We are so much closer to the beginning of this journey than the end." Interim CFO Paul Linton highlighted the company’s resilience, noting, "We have a set of businesses that are uniquely diverse and resilient." These statements underline FTI’s strategic focus on innovation and diversity.

Risks and Challenges

• Economic Consulting segment challenges may impact future growth.
• Potential global transaction volume decline could affect revenue.
• Antitrust market weakness, particularly in EMEA, poses risks.
• Stress in commercial banks due to alleged fraud may influence operations.
• Seasonal business slowdown expected in Q4 could affect short-term performance.

FTI Consulting’s Q3 2025 performance demonstrates strong financial health, driven by strategic investments and a focus on innovation. While challenges remain, the company’s revised guidance and market position suggest a positive outlook.

Full transcript - FTI Consulting Inc (FCN) Q3 2025:

Conference Operator: Welcome to the FTI Consulting Third Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. 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.

Mollie Hawkes, Head of Investor Relations, FTI Consulting: 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, 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, 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.

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 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 am joined today by Steven H. 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, Steven H. Gunby.

Steven H. Gunby, CEO and Chairman, FTI Consulting: Thank you, Molly. 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 one-time factors that influence these numbers, and this quarter they overall did happen to cut positively. As we always say, during good quarters and in not so good quarters, one should never take one of our quarters and multiply it by four. Even normalizing for the one-time 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.

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 Corporate Finance & Restructuring and Forensic & Litigation Consulting and Strategic Communications and how those performances more than overcame these areas of shortfall. 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 to 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, about 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. A 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-stakes situations. Aspiring to be the best in times of crisis or urgency requires us to make sure we have the right leading expertise. 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 lines of major crises and opportunities and 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. There 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. 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 where they see they can find new adjacencies they can believe they could win in or where they find geographies they think they can seize. These principles, as we’ve 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 soaring, 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 Corporate Finance & Restructuring, Forensic & Litigation Consulting, or Strategic Communications, you can talk about the great things that happened in the quarter, the jobs won, the market conditions that helped. 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 and two, three, and four years ago in quarters where certain businesses were not soaring, but where the leaders and the individuals involved had conviction about the propositions we were driving and had confidence in the teams leading those efforts. Let me see if I can illustrate that first with Corporate Finance & Restructuring. Corporate Finance & Restructuring had another record quarter with multiple sub-businesses delivering double-digit organic revenue growth year over year. Those results obviously reflect some things that happened this year.

Importantly, at its core, my belief is that Corporate Finance & Restructuring’s powerful results first primarily reflect major convictions and decisions made in quarters past, bold bets that the leaders bet behind in businesses that were not performing at that time or on adjacencies that at that point in time were unproven. There are so many examples of that in Corporate Finance & Restructuring. I cannot possibly do them all justice, but let me touch on a few. In the UK, we have always had a great creditor rights business, and we always support that business. The team there also had a set of people who believed they could add an adjacent business, a leader insolvency business, and they bet on that team, a set of bets 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, faced significant headwinds when the German government launched a 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 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 in the quality of the people on the ground and the vision they had, a vision that they saw a way to get us from a distant player in restructuring to the number one or two player in restructuring, but also that they saw that was a way to turn FTI Consulting 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 the 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 risk 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 healthcare 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 Corporate Finance & Restructuring, which is the key bets we’ve made in transactions, which were bets behind a terrific leadership team and a belief 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 four or five 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 were 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. They were made with discipline with a 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? Where we had those teams and the right proposition, our leadership had the courage 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. 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 zigzagging around a relatively flat line for a fair number of years. During those years, we often talked on calls like this about investments we were making, overseas in certain businesses and in the United States. 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 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 some of 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 in the market but is now also a key destination for leading people who want to join us, including 15 new SMBs and MBs 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 a right to win, such as a 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 courage of the investments that FLC has made, not just this year or last year, but in the last two, three, and four years. Turning to StratCom, StratCom, as some of you may remember, was the first business that we had to turn around a decade ago. The team, if you want to, if you don’t remember, turned it around almost immediately. It has been a great growth story since. Of course, just because it’s a great growth story doesn’t mean there haven’t been zigs and zags. Mark and the team will note we’ve had a lot of zigs and zags over these 10 years, including a slow period in 2024. 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 actions. StratCom took action in areas where it didn’t think it had all the ingredients to win. A huge amount of the growth has to do with the team’s multi-year commitment to increasing our power in the core areas it 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. The primary one has been to invest and add talent wherever it is found, 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 SMB headcount in StratCom today, two-thirds of the SMBs are new within the last five 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 two of the businesses that have faced challenges this year. As you know, Technology is having a tough year, and the Compass Lexecon business in Economic Consulting 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 face businesses like that are two. First, do we have confidence in the team?

Do we have confidence in the propositions that that team is driving? Then, depending on the first one, what do we do? You know, when Anders was struggling in Germany, we looked at it, and we ended up saying, "Wow, this is a great team. Yeah, okay, there’s a moratorium and bankruptcy." This is a great team. We moved to the second question, which is, "Okay, how do we support this great team and get it back on the growth trajectory that it deserves?" We had the same sort of discussions and questions when we looked at Australia and many of these other situations I talked about. 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 the last five 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 that they see us ever more as their go-to partner for the highest stakes, most complicated investigations, 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, "Yeah, we lost some rainmakers this year." You also say that Compass Lexecon is still by far the leading brand in the industry. I think just three weeks ago or four weeks ago, we had 66 Compass Lexecon professionals 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. When I talk with Dan Fischell and the European and American and Asian leadership 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 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 focused on. I think everyone in Compass Lexecon is extraordinarily excited about the talent we’ve been able to attract to the firm and its prospects. 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. 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.

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. This year, we’ve done those sorts of investments throughout 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. 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.

A move that, of course, is a very positive thing for the medium term, we also all know how that works out in the near term, which is the cost comes first and the revenue comes later, a set of results that you clearly see reflected in this quarter’s P&L. We make these sorts of investments in tech in Compass Lexecon and previously in Corporate Finance & Restructuring and Forensic & Litigation Consulting and Strategic Communications for multiple reasons. We have three core constituents we have to make sure we keep in our minds. 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. We have to continue to invest behind leading experts and leading-edge technologies. 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 where 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’s eager to do his first CFO report, so let me close in a minute here. 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 were 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. 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 lasting 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 than this company, 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’m pleased to take you all through a record quarterly performance during my first earnings call as Interim CFO. 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.

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 Corporate Finance & Restructuring and Forensic & Litigation Consulting, as well as solid revenue growth in Strategic Communications, which more than offset year-over-year declines in Economic Consulting and Technology. 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 Economic Consulting. This quarter, we delivered on that. We reported double-digit year-over-year organic revenue growth when you combine revenue across Corporate Finance & Restructuring, Forensic & Litigation Consulting, Technology, and Strategic Communications.

Year to date, we have delivered record top and bottom line performance in CorpFin, FLC, and StratCom. 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 one-time 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 WACO 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 decreased 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 increased 4%, 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, Corporate Finance & Restructuring revenue increased 6.8%, driven by double-digit top-line growth in transactions and transformation and 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%, as our long-term commitment to investing behind the best professionals has allowed us to extend our position as a global leader. We are winning major mandates in key geographies, including the U.S., UK, 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 investigations position in Forensic & Litigation Consulting mean that our experts get more than our fair share of calls for the largest, most complex mandates. Equally important, our transactions revenue is up 16% year to date, even though transaction volumes globally are down slightly.

Because of the investments we’ve made over the last five 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 Forensic & Litigation Consulting, 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 analytics, and construction solutions services, and the 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 problems. 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’s 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 lost $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 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 over payments this quarter, following $72 million and $162 million in forgivable loans to existing and new employees and affiliates net over payments in Q2 and Q1, respectively. The majority of these loans are in our econ segment. Forgivable loan amortization generally ranges from three to six years. As Steve said, our econ business has faced significant headwinds this year. Nine 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 cost 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. 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 requests 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. It is 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 three quarters of 2024 before we saw a sharp drop-off of activity in Q4 2024. Revenue in our Strategic Communications 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 in 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 variable 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 payments, 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 for a total cost of $234.1 million. After quarter end, we repurchased 469,610 shares at an average price per share of $160.23. 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, 2025, compared 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 $3.735 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. 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 Corporate Finance & Restructuring and Forensic & Litigation Consulting. Second, while we believe we have stabilized our Economic Consulting 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 SMB and affiliate hires, which compares to 33 and 39 announced hires in 2024 and 2023 over the same time period, respectively. Our assumptions define a midpoint and a 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 our results 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 Economic Consulting and Technology, our company as a whole delivered not just strong but record performance this quarter. Second, we believe that 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. 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. He’s been a key contributor in the 11 years since as this company has soared. I was so pleased that he volunteered to serve as Interim CFO, although he does claim I volunteered for him. Either way, Paul, thank you for taking on the role. Let me also take one moment to thank Ajay Sabherwal for nine years of real dedication here at FTI Consulting. He’s contributed a lot, and his commitment to this firm and that’s been helping it reach its potential was always evident. I’m looking forward to seeing him tonight and seeing him going forward. All of us wish him best in his next endeavors. With that, let me open the floor for questions.

Conference Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you’re using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today’s first question comes from Andrew Owen Nicholas with William Blair & Company. Please go ahead.

Andrew Owen Nicholas, Analyst, William Blair & Company: Hi, good morning. Thanks for taking my questions. I wanted to start on economic consulting, and I apologize, but a multi-partner 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? Lastly, any impact that you expect from the U.S. government shutdown?

Steven H. Gunby, CEO and Chairman, FTI Consulting: Okay. Let me just got the U.S. government shutdown, EBITDA bottoming. Remind me the first one there, Andrew. By the time I wrote it, I got my.

Andrew Owen Nicholas, Analyst, William Blair & Company: How much of the revenue decline would you attribute to just broader market conditions versus some of the talent transition going on this year?

Steven H. Gunby, CEO and Chairman, FTI Consulting: If I had to guess on the first one, it’d probably be, I’m guessing, two-thirds to the talent transition and a third towards market conditions. That’s a guess. If I’m way off, we’ll correct that. I think that’s close enough, close enough to a guess. You’re 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 if there’s an extended shutdown, you have to believe it starts to affect things. So far, we haven’t seen much effect, is what I would say. Has the EBITDA bottomed out? I think you correctly got a sense that the bulk of the costs are now reflected in this.

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. We’re finally starting an effort to make sure that the market knows all the talent is out there. The market has to know that the talent is with us now. You have to get the initial lead, and then there’s senior time, and eventually you get the big work with the junior time that you make a lot of money on.

That’s a multi-quarter type of thing to get the realization on all the new people. A lot of the legacy work has run off, but there’s still stuff to run off. 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. 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. 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 multi-year timeframe. What the first half of next year looks like and how fast it starts to turn around is still a question we’re working through.

Does that at least give you a sense, Andrew?

Andrew Owen Nicholas, Analyst, William Blair & Company: Yeah, no, that’s helpful. I appreciate you handling or responding to all the different pieces of my question. Next one is just on the transactions practice. Could you unpack that strength a bit further? How much is market-driven versus, you know, some of the operational or execution momentum that you described in your remarks? I think that’s one of the higher quarters in that practice that certainly we’ve seen. Any more color there would be great.

Steven H. Gunby, CEO and Chairman, FTI Consulting: Yeah, that one, and maybe Paul has better data than I do. My sense qualitatively is the bulk of that is our bloody team. I got to tell you, it’s really fun to see. 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, who’s terrific, but also throughout the ranks. It’s a great team that has conviction in their propositions. They’ve been out in the market. Where we’ve gotten trial with people, people want to buy more. As I think Paul mentioned, what we have done is as we first, years ago, we had no credibility in this space. Then you build credibility. As you have credibility, it gives you the opportunity to introduce other services.

That’s what’s happened this year. I’m 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 zigzags in that business because it’s driven by market, but I am fundamentally bullish about that over the next years.

Andrew Owen Nicholas, Analyst, William Blair & Company: Great. Thank you. 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 it, 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 2025? Thank you.

Steven H. Gunby, CEO and Chairman, FTI Consulting: Let me answer that two ways. I think, look, we have rate potential across our business, across every segment still there. If you look at the major law firms that we have been working with, they, over the last five years, have raised their rates way more than we have. We are engaging in catch-up. Having said that, I would say the FLC team this past year made a major catch-up. 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 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?

Andrew Owen Nicholas, Analyst, William Blair & Company: Yes, thank you very much.

Conference Operator: Thank you. Our next question today comes from James Edwin Yaro at Goldman Sachs Group. Please go ahead.

James Edwin Yaro, Analyst, Goldman Sachs Group: Good morning, and thanks for taking the questions. 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.

Steven H. Gunby, CEO and Chairman, FTI Consulting: Yeah. Look, can I maybe frame that a little bit at a higher level and then come back to your question? Look, I, you know, I’ve gotten into AI as any CEO has. One of the most interesting quotations I ever saw was by Bill Gates about all new technologies. What Bill said 30 years ago was that every new technology, fundamental new 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 two weeks. Then the delusion sets in 18 or 24 months later. 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 revolutions begin.

You saw that on 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. I think this is what’s happening with AI now. This is a delusion that’s setting in. It’s obviously been transformative from 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 investment 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. 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 IQAI. That’s just really part and parcel of us being able 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 of it’s 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. I think we are leading edge in our ability to do that sort of work. We’ve had some pretty big assignments in that. 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. I think it is the prelude for transformative going forward. We’re pretty excited about our position in 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. I think that’s where we’re trying to take it. Does that help, James?

James Edwin Yaro, Analyst, Goldman Sachs Group: That’s really helpful. Maybe one clarifying question there, as this is a question that I do receive a lot. 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. 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?

Steven H. Gunby, CEO and Chairman, FTI Consulting: I think you would expect, of course. I think back in the day, and this is before your time, but also before mine, James, you know when accountants were totally up spreadsheets and then you know Excel was created, you know the number of accountants needed to total down the column and across went away. Any new technology changes the work required and changes some of the commodity held into the work. You are constantly monitoring that across our business. I will say that I would feel more worried about that if I had 25 to 1 leverage businesses with primarily junior people. Our business is experts in court testifying or experts doing like, you know the Red Adair stuff, flying on a doil. I think of it as analogous to Red Adair, 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. I think we’re going to be positioned really well. 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?

James Edwin Yaro, Analyst, Goldman Sachs Group: That’s really helpful. Thank you. Just one last one for me, maybe just on the restructuring side of things. I think if I calculated 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. You know bankruptcies have continued to tick up modestly off of admittedly a low base, and your business continues to grow.

Steven H. Gunby, CEO and Chairman, FTI Consulting: I think I’ll take that one. Quarter over quarter, we’re up about 1%. 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. I think we think the market will continue to benefit us as we continue to maintain or grow share there.

James Edwin Yaro, Analyst, Goldman Sachs Group: Okay, thanks a lot.

Steven H. Gunby, CEO and Chairman, FTI Consulting: Thank you, James.

Conference Operator: Thank you. Our next question today comes from Tobey O’Brien Sommer with Truist Securities. Please go ahead.

Hi, this is Tyler Barrison 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?

Steven H. Gunby, CEO and Chairman, FTI Consulting: We should think about it hard. This is what I would say, Tyler. Look, there are 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 multi-year 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. I wouldn’t get overly bullish, but I wouldn’t be overly cautious about the multi-year trajectory for that business either. Does that at least help a little bit, Tyler?

It does. Thank you. 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 into 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 the same strategy, but different years, different things happen. If you remember here in the fourth quarter and the first quarter, we stressed some certain underperforming positions and so forth. 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 think if you heard my, I hope you heard my opening, and I hope you communicated a sense of conviction and bullishness about the future of this company. We have to grow heads. How we differentiate that among segments and sub-segments, you know, by geography depends a lot on individual circumstances and whether we’re long in some headcount or short in some headcount. I probably can’t go into the individual sub-point.

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. Thank you. Those are all my questions for now. Thank you.

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.

Conference Operator: 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.

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