FTI CONSULTING, INC (FCN)

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our consolidated financial condition, results of operations and liquidity and capital resources for each of the two years in the period ended December 31, 2024 and significant factors that could affect our prospective financial condition and results of operations. This discussion should be read in conjunction with our consolidated financial statements and notes included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (the “Annual Report”). For a similar discussion and analysis of our results for the year ended December 31, 2023 compared to our results for the year ended December 31, 2022, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report for the year ended December 31, 2023, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 22, 2024. Historical results and any discussion of prospective results may not indicate our future performance.

Business Overview

FTI Consulting, Inc., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”) is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. Individually, each of our segments and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact. Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from proactive risk management to rapid response to unexpected events and dynamic environments.

We report financial results for the following five reportable segments:

Our Corporate Finance & Restructuring (“Corporate Finance”) segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, lenders, and other financing sources and creditor groups, as well as other parties-in-interest and governments. We deliver a wide range of services centered around three core offerings: Transactions, Transformation & Strategy and Turnaround & Restructuring.

Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, boards of directors, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services across risk & investigations and disputes, supported by our data & analytics technology-enabled solutions, with a focus on highly regulated industries. Our services are centered around five core offerings: Construction, Projects & Assets and Environmental Solutions, Data & Analytics, Disputes, Healthcare Risk Management & Advisory and Risk and Investigations.

Our Economic Consulting segment, including subsidiary Compass Lexecon LLC, provides law firms, companies, government entities and other interested parties with analyses of complex economic issues for use in international arbitration, legal and regulatory proceedings and strategic decision making and public policy debates around the world. We deliver a wide range of services centered around three core offerings: Antitrust & Competition Economics, Financial Economics and International Arbitration.

Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting and data services. Our professionals help organizations better address risk as the growing volume and variety of enterprise and emerging data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert and analytics-powered solutions driven by investigations, litigation, antitrust and competition, M&A, restructuring and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery and Analytics Services and Expertise, and Information Governance, Privacy & Security Services.

Our Strategic Communications segment develops and executes communications strategies to help management teams, boards of directors, law firms, governments and regulators manage change and mitigate risk surrounding transformational and disruptive events, including transactions, investigations, disputes, crises, regulation and legislation. We deliver a wide range of services centered around three core offerings: Corporate Reputation, Financial Communications and Public Affairs.

We derive substantially all of our revenues from providing professional services to both U.S. and international clients. Most of our services are rendered under time and expense contract arrangements, which require the client to pay us based on the number of hours worked at contractually agreed-upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs. Certain contracts are rendered under fixed-fee arrangements, which require the client to pay a fixed-fee in exchange for a predetermined set of professional services. Fixed-fee arrangements may require certain clients to pay us a recurring retainer.

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Our contract arrangements may also contain success fees or performance-based arrangements in which our fees are based on the attainment of contractually defined objectives with our client. This type of success fee may supplement a time and expense or fixed-fee arrangement. Success fees and other contractual terms may cause variations in our revenues and operating results due to the timing of when achieving the performance-based criteria becomes probable. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.

In our Technology segment, certain clients are billed based on the amount of data storage used or the volume of information processed. Unit-based revenues are defined as revenues billed on a per item, per page or another unit-based method and include revenues from data processing and hosting. Unit-based revenues include revenues associated with licensed software products made available to customers via a web browser (“on-demand”). On-demand revenues are charged on a unit or monthly basis and include, but are not limited to, processing and review related functions.

Our financial results are primarily driven by:

•the number, size and type of engagements we secure;

•the number of billable professionals;

•the utilization rates of the billable professionals we employ;

•the rate per hour or fixed charges we charge our clients for services;

•the timing of revenue recognition;

•the length of the billing and collection cycles; and

•the geographic locations of our clients or locations in which services are rendered.

We define acquisition growth as revenues of acquired companies in the first 12 months following the effective date of an acquisition. When significant, we identify the impact of acquisition-related revenue growth.

When significant, we identify the estimated impact of foreign currency (“FX”) driven by our businesses with functional currencies other than the U.S. dollar (“USD”). The estimated impact of FX on the period-to-period performance results is calculated as the difference between the prior period results multiplied by the average FX exchange rates to USD in the current period and the prior period results, multiplied by the average FX exchange rates to USD in the prior period.

Non-GAAP Financial Measures

In the accompanying analysis of financial information, we sometimes use information derived from consolidated and segment financial information that may not be presented in our financial statements or prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Certain of these financial measures are considered not in conformity with GAAP (“non-GAAP financial measures”) under the SEC rules. Specifically, we have referred to the following non-GAAP financial measures:

•Total Segment Operating Income

•Adjusted Segment EBITDA

•Total Adjusted Segment EBITDA

•Adjusted EBITDA

•Adjusted EBITDA Margin

•Adjusted Net Income

•Adjusted Earnings per Diluted Share

•Free Cash Flow

We have included the definition of Segment Operating Income, which is a GAAP financial measure, below in order to more fully define the components of certain non-GAAP financial measures in the accompanying analysis of financial information.

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We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA, which is a non-GAAP financial measure. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects core operating performance and provides an indicator of the segment’s ability to generate cash. We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses.

We define Adjusted EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, gain or loss on sale of a business and losses on early extinguishment of debt. We define Adjusted EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these non-GAAP financial measures, considered along with corresponding GAAP financial measures, provide management and investors with useful supplemental information.

We define Adjusted Net Income and Adjusted Earnings per Diluted Share (“Adjusted EPS”), which are non-GAAP financial measures, as net income and earnings per diluted share (“EPS”), respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, the gain or loss on sale of a business and losses on early extinguishment of debt. We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with useful supplemental information on our business operating results, including underlying trends.

We define Free Cash Flow, which is a non-GAAP financial measure, as net cash provided by operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with useful supplemental information on the Company’s ability to generate cash for ongoing business operations and capital deployment.

Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this report.

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Full Year 2024 Executive Highlights

Financial Highlights

(1)Excluded from non-GAAP financial measures

Revenues

Revenues for the year ended December 31, 2024 increased $209.4 million, or 6.0%, compared to the year ended December 31, 2023 due to increased revenues in all of our business segments.

Special Charges

During the year ended December 31, 2024, we recorded special charges of $8.2 million. The charges related to targeted headcount reductions in areas of each segment and region where we realigned our workforce with current business demand for our consulting services. A portion of the special charges was paid during the year ended December 31, 2024 and the remaining amounts will be paid in cash in the next 12 months.

The following table details the special charges by segment:

There were no special charges recorded during the year ended December 31, 2023.

Net income

Net income for the year ended December 31, 2024 increased $5.2 million, or 1.9%, compared to the year ended December 31, 2023. The increase in net income was primarily due to higher revenues, lower income taxes and an FX gain compared to an FX loss in the prior year. This increase was partially offset by higher direct compensation expenses, which includes the impact of a 4.5% increase in billable headcount, higher selling, general and administrative (“SG&A”) expenses, which includes the impact of a 6.2% increase in non-billable headcount, and an increase in bad debt and outside services expenses.

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Adjusted EBITDA

Adjusted EBITDA for the year ended December 31, 2024 decreased $21.1 million, or 5.0%, compared to the year ended December 31, 2023. Adjusted EBITDA Margin of 10.9% of revenues for the year ended December 31, 2024 compared to 12.2% of revenues for the year ended December 31, 2023. The decrease in Adjusted EBITDA was primarily due to an increase in direct compensation expenses, which includes the impact of a 4.5% increase in billable headcount, higher SG&A expenses, which includes the impact of a 6.2% increase in non-billable headcount, and an increase in bad debt and outside services expenses, which was partially offset by higher revenues. Adjusted EBITDA for the year ended December 31, 2024 excludes the $8.2 million special charge.

EPS and Adjusted EPS

EPS for the year ended December 31, 2024 increased $0.10 to $7.81 compared to $7.71 for the year ended December 31, 2023. The increase in EPS was primarily due to the higher net income described above.

Adjusted EPS for the year ended December 31, 2024 increased $0.28 to $7.99 compared to $7.71 for the year ended December 31, 2023. Adjusted EPS for the year ended December 31, 2024 excludes the $8.2 million special charge, which increased Adjusted EPS by $0.18.

Liquidity and Capital Allocation

Net cash provided by operating activities for the year ended December 31, 2024 increased $170.6 million to $395.1 million compared to $224.5 million for the year ended December 31, 2023. The increase in net cash provided by operating activities was primarily due to an increase in cash collections, which was partially offset by higher compensation, forgivable loan issuances, operating expenses and income tax payments as compared to the same period in the prior year. Days sales outstanding (“DSO”) was 97 days at December 31, 2024 and 100 days at December 31, 2023. The decrease in DSO was primarily due to cash collections that outpaced the increase in revenues.

Free Cash Flow was $360.2 million and $174.9 million for the years ended December 31, 2024 and 2023, respectively. The increase in Free Cash Flow for the year ended December 31, 2024 was primarily due to higher net cash provided by operating activities, as described above, and a decrease in net cash used for purchases of property and equipment.

A portion of net cash provided by operating activities was used to repurchase and retire 51,717 shares of our common stock under our Repurchase Program for an average price per share of $197.53, at a total cost of $10.2 million during the year ended December 31, 2024. We had $450.4 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2024.

Q1 2025 Special Charge

During the first quarter of 2025, we continued to implement targeted headcount reductions in areas of each segment and region where we need to realign our workforce with current business demands. The Company expects to record a special charge of approximately $17 million in the first quarter of 2025.

Headcount

The following table includes the net headcount additions by segment and in total for the year ended December 31, 2024. The net additions include targeted reductions in areas of each segment described in the “Special Charges” section above:

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RESULTS OF OPERATIONS

Segment and Consolidated Operating Results:

Reconciliation of Net Income to Adjusted EBITDA:

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Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS:

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow:

Year Ended December 31, 2024 Compared to December 31, 2023

Revenues and operating income

See “Segment Results” for an expanded discussion of revenues, gross profit and SG&A expenses.

Unallocated corporate expenses

Unallocated corporate expenses increased $22.2 million, or 17.7%, to $147.6 million compared to $125.4 million for the year ended December 31, 2023. The increase was primarily due to investments related to artificial intelligence (“AI”) capabilities, higher compensation expenses, largely related to headcount growth, and an increase in legal expenses.

Interest income and other

Interest income and other, which includes FX gains and losses, increased $15.2 million to a gain of $10.4 million for the year ended December 31, 2024, compared to a loss of $4.9 million for the year ended December 31, 2023. The increase was primarily due to a $0.5 million net FX gain for the year ended December 31, 2024 compared to a $9.3 million net FX loss for the year ended December 31, 2023 and a $3.3 million increase in interest income.

FX gains and losses, both realized and unrealized, relate to the remeasurement or settlement of monetary assets and liabilities that are denominated in a currency other than an entity’s functional currency. These monetary assets and liabilities include cash, as well as third-party and intercompany receivables and payables.

Interest expense

Interest expense decreased $7.4 million, or 51.5%, to $7.0 million in 2024 compared to $14.3 million for the year ended December 31, 2023. The decrease was primarily due to lower borrowings, which was partially offset by higher interest rates on our borrowings. Our borrowings in the prior year included amounts owed on our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”), which matured in August 2023, as well as borrowings on our senior secured bank revolving credit facility (“Credit Facility”).

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Income tax provision

Our income tax provision decreased $12.8 million, or 15.3%, to $70.7 million in 2024 compared to $83.5 million for the year ended December 31, 2023. Our effective tax rate of 20.2% for 2024 compared to 23.3% for 2023. The decrease in the income tax provision was primarily due to a more favorable tax benefit related to share-based compensation, as a larger number of non-qualified stock options were exercised during the year ended December 31, 2024 as compared to the prior year.

SEGMENT RESULTS

Adjusted Segment EBITDA

We evaluate the performance of each of our operating segments based on multiple measures of segment profit, including Adjusted Segment EBITDA, which is a non-GAAP financial measure. The following table reconciles Segment Operating Income to Adjusted Segment EBITDA for the years ended December 31, 2024 and 2023:

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Total Adjusted Segment EBITDA

We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. The following table reconciles net income to Total Segment Operating Income and Total Adjusted Segment EBITDA, for the years ended December 31, 2024 and 2023:

Other Segment Operating Data

(1)The number of billable professionals for the Technology segment excludes as-needed professionals, who we employ based on demand for the segment’s services. We employed an average of 776 and 670 as-needed employees during the years ended December 31, 2024 and 2023, respectively.

(2)We calculate the utilization rate for our billable professionals by dividing the number of hours that all of our billable professionals worked on client assignments during a period by the total available working hours for all of our billable professionals during the same period. Available hours are determined by the standard hours worked by each employee, adjusted for part-time hours, U.S. standard work weeks and local country holidays. Available working hours include vacation and professional training days, but exclude holidays. Utilization rates are presented for our segments that primarily bill clients on an hourly basis. We have not presented utilization rates for our Technology and Strategic Communications segments as most of the revenues of these segments are not generated on an hourly basis.

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(3)For engagements where revenues are based on number of hours worked by our billable professionals and fixed-fee arrangements, average billable rate per hour is calculated by dividing revenues (excluding revenues from success fees, pass-through revenues and outside consultants) for a period by the number of hours worked on client assignments during the same period. We have not presented average billable rates per hour for our Technology and Strategic Communications segments as most of the revenues of these segments are not based on billable hours.

CORPORATE FINANCE & RESTRUCTURING

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

Year Ended December 31, 2024 Compared to December 31, 2023

Revenues increased $44.5 million, or 3.3%, to $1,391.2 million for the year ended December 31, 2024. Pass-through revenues contributed $9.7 million, or 0.7% of the increase. Excluding the pass-through revenues, the $34.9 million, or 2.7%, increase in revenues was primarily due to higher realized bill rates for our restructuring and transactions services and higher demand for our transactions services, which was partially offset by lower demand for our transformation & strategy services.

Gross profit increased $21.8 million, or 5.0%, to $453.8 million for the year ended December 31, 2024. Gross profit margin increased 0.5 percentage points from 2023 to 2024. The increase in gross profit margin was primarily due to the impact of higher realized bill rates, which was partially offset by a 2 percentage point decline in utilization.

SG&A expenses increased $9.3 million, or 4.4%, to $219.6 million for the year ended December 31, 2024. SG&A expenses of 15.8% of revenues in 2024 compared to 15.6% in 2023. The increase in SG&A expenses was primarily due to higher infrastructure support and bad debt expenses.

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FORENSIC AND LITIGATION CONSULTING

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

Year Ended December 31, 2024 Compared to December 31, 2023

Revenues increased $36.1 million, or 5.5%, to $690.2 million for the year ended December 31, 2024. Acquisition-related revenues contributed $6.8 million, or 1.0% of the increase. Excluding the acquisition-related revenues, the $29.3 million, or 4.5%, increase in revenues was primarily due to higher realized bill rates and demand for our constructions solutions services, higher realized bill rates for our disputes services and an increase in success fees.

Gross profit increased $8.4 million, or 3.9%, to $225.2 million for the year ended December 31, 2024. Gross profit margin decreased 0.5 percentage points from 2023 to 2024. The decrease in gross profit margin was primarily due to higher compensation expenses as a percentage of revenues, which was largely offset by internal cost recovery related to an initiative to develop AI capabilities for the Company. The related costs are included in our unallocated corporate expenses.

SG&A expenses increased $10.4 million, or 7.7%, to $145.1 million for the year ended December 31, 2024. SG&A expenses of 21.0% of revenues in 2024 compared to 20.6% in 2023. The increase in SG&A expenses was primarily driven by higher bad debt, travel and entertainment, rent, and other general and administrative expenses.

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ECONOMIC CONSULTING

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

Year Ended December 31, 2024 Compared to December 31, 2023

Revenues increased $92.2 million, or 12.0%, to $863.6 million for the year ended December 31, 2024, primarily due to higher demand and realized bill rates for our M&A-related antitrust and financial economics services and higher realized bill rates for our non-M&A-related antitrust services, which was partially offset by lower demand for our non-M&A-related antitrust services.

Gross profit increased $16.5 million, or 7.5%, to $235.1 million for the year ended December 31, 2024. Gross profit margin decreased 1.1 percentage points from 2023 to 2024. The decrease in gross profit margin was primarily due to an increase in compensation and outside consultant expenses as a percentage of revenues, which was partially offset by the impact of higher realized bill rates.

SG&A expenses increased $22.2 million, or 20.4%, to $131.0 million for the year ended December 31, 2024. SG&A expenses of 15.2% of revenues in 2024 compared to 14.1% in 2023. The increase in SG&A expenses was primarily driven by higher bad debt, largely related to one engagement, compensation and infrastructure support expenses.

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TECHNOLOGY

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

(3)Includes personnel involved in direct client assistance and billable consultants and excludes professionals employed on an as-needed basis

Year Ended December 31, 2024 Compared to December 31, 2023

Revenues increased $29.8 million, or 7.7%, to $417.6 million for the year ended December 31, 2024, primarily due to higher demand for our M&A-related “second request” and information governance, privacy & security services, which was partially offset by lower demand for our investigations services.

Gross profit decreased $3.4 million, or 2.3%, to $145.1 million for the year ended December 31, 2024. Gross profit margin decreased 3.5 percentage points from 2023 to 2024. The decrease in gross profit margin was primarily due to lower profitability of our consulting and hosting services.

SG&A expenses increased $2.3 million, or 2.3%, to $102.6 million for the year ended December 31, 2024. SG&A expenses of 24.6% of revenues in 2024 compared to 25.9% of revenues in 2023. The increase in SG&A expenses was primarily due to higher compensation, infrastructure support and travel and entertainment expenses, which was partially offset by lower bad debt expenses.

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STRATEGIC COMMUNICATIONS

(1)Revenues less direct cost of revenues

(2)Gross profit as a percentage of revenues

Year Ended December 31, 2024 Compared to December 31, 2023

Revenues increased $6.8 million, or 2.1%, to $336.0 million for the year ended December 31, 2024, primarily due to higher public affairs and financial communications revenues, which was partially offset by lower corporate reputation revenues.

Gross profit increased $3.7 million, or 3.1%, to $122.7 million for the year ended December 31, 2024. Gross profit margin increased 0.4 percentage points from 2023 to 2024. The increase in gross profit margin was primarily due to lower compensation expenses as a percentage of revenues.

SG&A expenses increased $4.8 million, or 6.7%, to $76.4 million for the year ended December 31, 2024. SG&A expenses of 22.7% of revenues in 2024 compared to 21.8% in 2023. The increase in SG&A expenses was primarily due to higher rent, compensation, marketing, and other general and administrative expenses.

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Our annual cash flows from operations generally exceed our cash needs for capital expenditures and debt service requirements. We typically finance our day-to-day operations, capital expenditures, acquisitions and share repurchases through cash flows from operations. We believe that our cash flows from operations, supplemented by borrowings under our Credit Facility, as necessary, will provide adequate cash to fund our cash needs for at least the next 12 months.

Our operating assets and liabilities consist primarily of billed and unbilled accounts receivable, notes receivable from employees, accounts payable, accrued expenses and accrued compensation expenses. The timing of billings and collections of receivables, as well as compensation and vendor payments, affects the changes in these balances.

Results of operations for our non-U.S. subsidiaries are translated from the designated functional currency to our reporting currency of USD. Revenues and expenses are translated at average exchange rates for each month, while assets and liabilities are translated at balance sheet date exchange rates. Resulting net translation adjustments are recorded as a component of stockholders’ equity in “Accumulated other comprehensive loss.”

Uncertainties and Trends Affecting Liquidity

Our conclusion that we will be able to fund our cash requirements for at least the next 12 months by using existing capital resources and cash generated from operations does not take into account events beyond our control that could result in a material adverse impact on our business, the impact of any future acquisitions or unexpected significant changes in the number of employees or other unanticipated uses of cash. The anticipated cash needs of our business could change significantly if we pursue and complete additional business acquisitions, if our business plans change, if events such as economic, political and workforce disruptions arise, including any impact of future public health crises, or economic, political or business conditions change from those currently prevailing or from those now anticipated, or if unexpected circumstances or other events beyond our control arise that may have a material adverse effect on the cash flow or profitability of our business, including material negative changes in the health and welfare of our employees or those of our clients, and the operating performance or financial results of our business. Any of these events or circumstances, including any new business opportunities, could involve significant additional funding and could require us to borrow under our Credit Facility or raise additional debt or equity funding to meet those needs. Our ability to borrow or raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:

•our future profitability;

•the quality of our accounts receivable;

•our relative levels of debt and equity;

•the volatility and overall condition of the capital markets; and

•the market prices of our securities.

Any new debt funding, if available, may be on terms less favorable to us than our Credit Facility. See information under the heading “Risk Factors” in Part I, Item 1A of this Annual Report.

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Cash Flows

(1)DSO is a performance measure used to assess how quickly revenues are collected by the Company. We calculate DSO at the end of each reporting period by dividing accounts receivable, net reduced by billings in excess of services provided, by revenues for the quarter, adjusted for changes in foreign exchange rates. We multiply the result by the number of days in the quarter.

Year Ended December 31, 2024 Compared to December 31, 2023

Net cash provided by operating activities increased $170.6 million, or 76.0%, to $395.1 million compared to $224.5 million for the year ended December 31, 2023. The increase was primarily due to an increase in cash collections, which was partially offset by higher compensation, forgivable loan issuances to retain key professionals, operating expenses and income tax payments as compared to the prior year. DSO was 97 days as of December 31, 2024 and 100 days as of December 31, 2023. The decrease in DSO was primarily due to cash collections that outpaced the increase in revenues.

Net cash used in investing activities decreased $63.7 million, or 86.2%, to $10.2 million compared to $73.8 million for the year ended December 31, 2023. The decrease was primarily due to a $24.4 million payment for a short-term investment during 2023 and the maturity of the short-term investment of $25.2 million during 2024. In addition, there was a $14.1 million decrease in capital expenditures primarily driven by lower spend on cloud computing costs and leasehold improvements as compared to the prior year.

Net cash used in financing activities decreased $339.3 million, or 95.7%, to $15.4 million compared to $354.7 million for the year ended December 31, 2023. The decrease was primarily due to the repayment of the $315.8 million principal amount of our 2023 Convertible Notes at maturity during 2023, a decrease of $10.8 million in payments for common stock repurchases under the Repurchase Program and an increase in proceeds on stock option exercises of $9.6 million as compared to the prior year.

The effect of exchange rate changes on cash and cash equivalents had an unfavorable impact of $12.3 million for 2024 compared to a favorable impact of $15.6 million for 2023.

For the year ended December 31, 2024, cash paid for income taxes and tax credits, net of refunds included $40.6 million of payments for the purchase of tax credits.

Principal Sources of Capital Resources

As of December 31, 2024, our capital resources included $660.5 million of cash and cash equivalents and available borrowing capacity of $900.0 million under the revolving line of credit under our Credit Facility. The $900.0 million revolving line of credit under our Credit Facility includes a $125.0 million sublimit for borrowings in currencies other than USD, including the euro, British pound, Australian dollar, Canadian dollar, Swiss franc and Japanese yen.

The availability of borrowings, as well as issuances and extensions of letters of credit under our Credit Facility, are subject to specified conditions. Subject to certain conditions, at any time prior to maturity, we will be able to invite existing and new lenders to increase the size of the facility up to a maximum of $1.2 billion. See Note 14, “Debt” in Part II, Item 8, of this Annual Report for a further discussion of variable interest rates and guarantees under the Credit Facility.

The second amended and restated credit agreement entered into on November 21, 2022 (the “Credit Agreement”) governing the Credit Facility and our other indebtedness outstanding from time to time contains covenants that, among other things, may limit our ability to: incur additional indebtedness; create liens; pay dividends on our capital stock, make distributions or repurchases of our capital stock or make specified other restricted payments; consolidate, merge or sell all or substantially all of our assets; guarantee obligations of other entities or our foreign subsidiaries; enter into hedging agreements;

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enter into transactions with affiliates or related persons; or engage in any business other than consulting-related businesses. In addition, the Credit Agreement includes a financial covenant that requires us not to exceed a maximum consolidated total net leverage ratio (the ratio of funded debt (less unrestricted cash up to $300.0 million) to Consolidated EBITDA, as defined in the Credit Agreement). As of December 31, 2024, we were in compliance with the covenants contained in the Credit Agreement. See Note 14, “Debt” in Part II, Item 8 of this Annual Report for a further discussion of the Credit Agreement.

Principal Uses of Capital Resources

Future Capital Requirements

We anticipate that our future capital requirements will principally consist of funds required for:

•operating and general corporate expenses;

•capital expenditures, primarily for information technology equipment and systems, office furniture and leasehold improvements;

•debt service requirements, including interest payments;

•compensation to designated executive management and senior managing directors under our various long-term incentive compensation programs, including forgivable loans;

•discretionary funding of the Repurchase Program;

•contingent obligations related to our acquisitions;

•potential acquisitions of businesses; and

•other known future contractual obligations.

Capital Expenditures

During 2024, we spent $34.9 million in capital expenditures to support our organization, including direct support for specific client engagements. During 2025, we currently expect to make capital expenditures to support our organization in an aggregate amount of between $70 million and $86 million, which includes costs related to leasehold improvements for our new office space in Chicago, Illinois, cloud computing costs and investments related to AI capabilities. Our estimate takes into consideration the needs of our existing businesses but does not include the impact of any purchases that we may be required to make as a result of future acquisitions or specific client engagements that are not completed or not currently contemplated. Our capital expenditure requirements may change if our staffing levels or technology needs change significantly from what we currently anticipate, if we are required to purchase additional equipment specifically to support new client engagements or if we pursue and complete acquisitions.

Share Repurchase Program

During the year ended December 31, 2024, we made $10.2 million in payments for common stock repurchases under the Repurchase Program. We had $450.4 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2024.

Future Contractual Obligations

We have no future contractual obligations as of December 31, 2024 related to outstanding borrowings under our Credit Facility. For more information on our Credit Facility, refer to Note 14, “Debt” in Part II, Item 8 of this Annual Report. Under our operating leases as described in Note 15, “Leases” in Part II, Item 8 of this Annual Report, we have current obligations of $34.1 million and non-current obligations of $208.0 million.

The above amounts reflect future unconditional payments and are based on the terms of the relevant agreements, appropriate classification of items under GAAP currently in effect and certain assumptions such as interest rates. Future events could cause actual payments to differ from these amounts.

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Off-Balance Sheet Arrangements

As of December 31, 2024 and 2023, the Company was contingently liable under bank guarantees issued by our banks in favor of third parties that totaled $10.9 million and $7.8 million, respectively. These bank guarantees primarily support bid and performance obligations and operating leases for office space. The amounts are guaranteed under guarantee facilities totaling $42.7 million and $36.2 million at December 31, 2024 and 2023, respectively. The Company had $31.8 million and $28.4 million available under the facilities at December 31, 2024 and 2023, respectively. These bank guarantees are issued separate from our Credit Facility and, as a result, do not affect available borrowings under our Credit Facility.

Critical Accounting Estimates

General. Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which we have prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. Refer to Note 1, “Description of Business and Summary of Significant Accounting Policies” in Part II, Item 8 of this Annual Report for further information on our significant accounting policies.

We evaluate our estimates, including those related to revenues, goodwill and intangible assets, income taxes and contingencies, on an ongoing basis. Our estimates are based on current facts and circumstances, historical experience and various other assumptions that we believe are reasonable, which form the basis for making judgments about the values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the following critical accounting estimates reflect our more significant judgments used in the preparation of our consolidated financial statements.

Revenue Recognition. We generate the majority of our revenues by providing consulting services to our clients. We recognize revenues primarily from three different types of arrangements: time and expense, fixed-fee and performance-based or contingent arrangements.

Certain fees in our time and expense arrangements may be subject to approval by a third-party, such as a bankruptcy court or other regulatory agency. In such cases, we record revenues based on the amount we estimate we will be entitled to receive in exchange for our services and only to the extent a significant reversal of revenues is not likely to occur when the uncertainty associated with the estimate is subsequently resolved.

In fixed-fee arrangements, we agree to a pre-established fee in exchange for a predetermined set of professional services. We estimate revenues using a proportional performance method, which is based on work completed to-date versus our estimates of the total services to be performed over the life of the contract.

In performance-based or contingent arrangements, fees are based on contractually defined objectives, such as completing a business transaction or assisting the client in achieving a specific business objective. Variable consideration to be included in the transaction price is typically estimated using the expected value method or the most likely amount method based on facts and circumstances. We recognize revenues earned in an amount that is probable not to reverse and by applying the proportional performance method when the criteria for over time revenue recognition are met.

Our estimates are monitored continually throughout the life of each contract and are based on the nature of the engagement, client economics, historical experiences, available information and other appropriate factors. While we believe that our estimates and assumptions used for revenue recognition are reasonable, subsequent changes could materially impact our results of operations.

Goodwill and Intangible Assets. We evaluate our goodwill and indefinite-lived intangible assets for impairment annually as of the first day of the fourth quarter and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We assess our goodwill for impairment at the reporting unit level.

As part of the evaluation of goodwill and intangible assets for potential impairment, we exercise judgment to:

•Perform a qualitative assessment to determine whether it is “more likely than not” that the fair value of a reporting unit is less than it’s carrying value. Factors we consider when making the determination include assessing macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other relevant reporting unit specific events;

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•Decide whether to bypass the qualitative assessment and perform a quantitative assessment. Factors we consider when making this determination include changes in the Company or general economic conditions since the previous quantitative assessment was performed, the amount by which the fair value exceeded the carrying value at that time and the period of time that has passed since such quantitative assessment; and

•Perform a quantitative assessment by comparing the estimated fair value of the reporting unit with the carrying amount of that reporting unit. We estimate fair value using a combination of an income approach (based on discounted cash flows) and market approach, using appropriate weighting factors.

The cash flows employed in the income approach are based on our most recent forecasts, budgets and business plans, as well as various growth rate assumptions for years beyond the current business plan period, discounted using an estimated weighted average cost of capital, which reflects an assessment of the risk inherent in the future revenue streams and cash flows. In the market approach, we utilize market multiples derived from comparable guideline companies. These valuations are based on estimates and assumptions, including projected future cash flows, determination of appropriate comparable guideline companies and the determination of whether a premium or discount should be applied to such comparable guideline companies.

The process of evaluating the potential impairment of goodwill requires significant judgment and estimates. In 2024, we performed our annual impairment tests for each of our reporting units. The results of that test indicated that for each of our reporting units, no impairment existed. If market conditions significantly deteriorate from our current assumptions regarding forecasted cash flows, we may be required to record goodwill impairment charges in future periods. It is not possible at this time to determine if any future impairment charge would result or, if it does, whether such charge would be material.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans or changes in anticipated future cash flows. If an impairment indicator is present, we evaluate recoverability of assets to be held and used by a comparison of the carrying value of the assets with future undiscounted net cash flows expected to be generated by the assets. We group assets at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows generated by other asset groups. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset group, we estimate the fair value of the asset group to determine whether an impairment loss should be recognized. No impairment charges for intangible assets were recorded in 2024.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our consolidated financial condition, results of operations and liquidity and capital resources for each of the two years in the period ended December 31, 2023 and significant factors that could affect our prospective financial condition and results of operations. This discussion should be read in conjunction with our consolidated financial statements and notes included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K (the “Annual Report”). For a similar discussion and analysis of our results for the year ended December 31, 2022 compared with our results for the year ended December 31, 2021, refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report for the year ended December 31, 2022, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 23, 2023. Historical results and any discussion of prospective results may not indicate our future performance.

Business Overview

FTI Consulting, Inc., including its consolidated subsidiaries (collectively, the “Company,” “we,” “our” or “FTI Consulting”) is a global business advisory firm dedicated to helping organizations manage change, mitigate risk and resolve disputes: financial, legal, operational, political & regulatory, reputational and transactional. Individually, each of our segments and practices is staffed with experts recognized for the depth of their knowledge and a track record of making an impact. Collectively, FTI Consulting offers a comprehensive suite of services designed to assist clients across the business cycle, from proactive risk management to rapid response to unexpected events and dynamic environments.

We report financial results for the following five reportable segments:

Our Corporate Finance & Restructuring (“Corporate Finance”) segment focuses on the strategic, operational, financial, transactional and capital needs of our clients around the world. Our clients include companies, boards of directors, investors, private equity sponsors, lenders, governments and other financing sources and creditor groups, as well as other parties-in-interest. We deliver a wide range of services centered around four core offerings: Business Transformation, Strategy, Transactions and Turnaround & Restructuring.

Our Forensic and Litigation Consulting (“FLC”) segment provides law firms, companies, boards of directors, government entities, private equity firms and other interested parties with a multidisciplinary and independent range of services across risk and investigations and disputes, supported by our data & analytics technology-enabled solutions, with a focus on highly regulated industries. Our services are centered around five core offerings: Construction, Projects & Assets and Environmental Solutions, Data & Analytics, Disputes, Healthcare Risk Management & Advisory and Risk and Investigations.

Our Economic Consulting segment, including subsidiary Compass Lexecon LLC, provides law firms, companies, government entities and other interested parties with analyses of complex economic issues for use in international arbitration, legal and regulatory proceedings, and strategic decision making and public policy debates around the world. We deliver a wide range of services centered around three core offerings: Antitrust & Competition Economics, Financial Economics and International Arbitration.

Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting services. Our professionals help organizations better address risk as the growing volume and variety of enterprise and emerging data intersects with legal, regulatory and compliance needs. We deliver a wide range of expert and analytics-powered solutions driven by investigations, litigation, antitrust and competition, M&A, restructuring and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security Services.

Our Strategic Communications segment develops and executes communications strategies to help management teams, boards of directors, law firms, governments and regulators manage change and mitigate risk surrounding transformational and disruptive events, including transactions, investigations, disputes, crises, regulation and legislation. We deliver a wide range of services centered around three core offerings: Corporate Reputation, Financial Communications and Public Affairs.

Effective July 1, 2023, we modified the composition of two of our reportable segments to reflect changes in how we operate our business. We transferred 127 billable professionals in our health solutions practice within our FLC segment who focus on business transformation services in the healthcare and life sciences sector to our realigned business transformation practice within our Corporate Finance segment. This change aligns this group of professionals with the broader business transformation capabilities within the Corporate Finance segment. Eighty-three billable professionals who focus on advisory and managed care services within the health solutions practice remained in the FLC segment. Prior period Corporate Finance

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and FLC segment information included in this Annual Report has been reclassified to conform to the current period presentation.

We derive substantially all of our revenues from providing professional services to both U.S. and international clients. Most of our services are rendered under time and expense contract arrangements, which require the client to pay us based on the number of hours worked at contractually agreed-upon rates. Under this arrangement, we typically bill our clients for reimbursable expenses, including those relating to travel, out-of-pocket expenses, outside consultants and other outside service costs. Certain contracts are rendered under fixed-fee arrangements, which require the client to pay a fixed-fee in exchange for a predetermined set of professional services. Fixed-fee arrangements may require certain clients to pay us a recurring retainer. Our contract arrangements may also contain success fees or performance-based arrangements in which our fees are based on the attainment of contractually defined objectives with our client. This type of success fee may supplement a time and expense or fixed-fee arrangement. Success fee revenues may cause variations in our revenues and operating results due to the timing of when achieving the performance-based criteria becomes probable. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.

In our Technology segment, certain clients are billed based on the amount of data storage used or the volume of information processed. Unit-based revenues are defined as revenues billed on a per item, per page or another unit-based method and include revenues from data processing and hosting. Unit-based revenues include revenues associated with licensed software products made available to customers via a web browser (“on-demand”). On-demand revenues are charged on a unit or monthly basis and include, but are not limited to, processing and review related functions.

Our financial results are primarily driven by:

•the number, size and type of engagements we secure;

•the rate per hour or fixed charges we charge our clients for services;

•the utilization rates of the revenue-generating professionals we employ;

•the timing of revenue recognition related to revenues subject to certain performance-based contingencies;

•the number of revenue-generating professionals;

•the types of assignments we are working on at different times;

•the length of the billing and collection cycles; and

•the geographic locations of our clients or locations in which services are rendered.

We define acquisition growth as revenues of acquired companies in the first 12 months following the effective date of an acquisition. When significant, we identify the impact of acquisition-related revenue growth.

When significant, we identify the estimated impact of foreign currency (“FX”) driven by our businesses with functional currencies other than the U.S. dollar (“USD”). The estimated impact of FX on the period-to-period performance results is calculated as the difference between the prior period results multiplied by the average FX exchange rates to USD in the current period and the prior period results, multiplied by the average FX exchange rates to USD in the prior period.

Non-GAAP Financial Measures

In the accompanying analysis of financial information, we sometimes use information derived from consolidated and segment financial information that may not be presented in our financial statements or prepared in accordance with generally accepted accounting principles in the U.S. (“GAAP”). Certain of these financial measures are considered not in conformity with GAAP (“non-GAAP financial measures”) under the SEC rules. Specifically, we have referred to the following non-GAAP financial measures:

•Total Segment Operating Income

•Adjusted EBITDA

•Total Adjusted Segment EBITDA

•Adjusted EBITDA Margin

•Adjusted Net Income

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•Adjusted Earnings per Diluted Share

•Free Cash Flow

We have included the definitions of Segment Operating Income and Adjusted Segment EBITDA, which are GAAP financial measures, below in order to more fully define the components of certain non-GAAP financial measures in the accompanying analysis of financial information. As described in Note 20, “Segment Reporting” in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report, we evaluate the performance of our operating segments based on Adjusted Segment EBITDA, and Segment Operating Income is a component of the definition of Adjusted Segment EBITDA.

We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.

We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, gain or loss on sale of a business and losses on early extinguishment of debt. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these non-GAAP financial measures, considered along with corresponding GAAP financial measures, provide management and investors with additional information for comparison of our operating results with the operating results of other companies. We define Adjusted EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues.

We define Adjusted Net Income and Adjusted Earnings per Diluted Share (“Adjusted EPS”), which are non-GAAP financial measures, as net income and earnings per diluted share (“EPS”), respectively, excluding the impact of remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, the gain or loss on sale of a business and losses on early extinguishment of debt. We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with an additional understanding of our business operating results, including underlying trends.

We define Free Cash Flow, which is a non-GAAP financial measure, as net cash provided by operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with an additional understanding of the Company’s ability to generate cash for ongoing business operations and other capital deployment.

Non-GAAP financial measures are not defined in the same manner by all companies and may not be comparable with other similarly titled measures of other companies. Non-GAAP financial measures should be considered in addition to, but not as a substitute for or superior to, the information contained in our Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this report.

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Full Year 2023 Executive Highlights

Financial Highlights

(1)Excluded from non-GAAP financial measures

Revenues

Revenues for the year ended December 31, 2023 increased $460.3 million, or 15.2%, as compared with the year ended December 31, 2022, primarily due to increased demand across all of our business segments.

Special Charges

There were no special charges recorded during the year ended December 31, 2023. For the year ended December 31, 2022, we recorded a special charge of $8.3 million, which consisted of employee severance and other employee-related costs associated with programmatic headcount reductions primarily in our FLC and Corporate Finance segments to realign our workforce with business demand.

Net income

Net income for the year ended December 31, 2023 increased $39.4 million, or 16.7%, as compared with the year ended December 31, 2022. Higher revenues were partially offset by an increase in billable compensation expenses resulting in higher gross profit. The increase in billable compensation expense includes the impact of an increase in billable headcount. The increase in gross profit was partially offset by higher selling, general and administrative (“SG&A”) expenses, primarily due to higher non-billable compensation expenses, which includes the impact of an increase in non-billable headcount, an increase in bad debt, outside services and other general and administrative expenses resulting in higher operating income. Operating income was partially offset by higher income taxes resulting in an increase in net income.

Adjusted EBITDA

Adjusted EBITDA for the year ended December 31, 2023 increased $67.2 million, or 18.8%, as compared with the year ended December 31, 2022. Adjusted EBITDA Margin of 12.2% of revenues for the year ended December 31, 2023 compared with 11.8% of revenues for the year ended December 31, 2022. Higher revenues were partially offset by an increase in billable compensation expenses resulting in higher gross profit. The increase in billable compensation expense includes the impact of an increase in billable headcount. The increase in gross profit was partially offset by higher SG&A expenses, primarily due to higher non-billable compensation expenses, which includes the impact of an increase in non-billable headcount, an increase in bad debt, outside services and other general and administrative expenses resulting in higher Adjusted EBITDA.

EPS and Adjusted EPS

EPS for the year ended December 31, 2023 increased $1.13 to $7.71 compared with $6.58 for the year ended December 31, 2022. The increase in EPS was primarily due to the higher net income described above.

Adjusted EPS for the year ended December 31, 2023 increased $0.94 to $7.71 compared with $6.77 for the year ended December 31, 2022. Adjusted EPS for the year ended December 31, 2022 excluded the $8.3 million special charge, which increased Adjusted EPS by $0.19.

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Liquidity and Capital Allocation

Net cash provided by operating activities for the year ended December 31, 2023 increased $35.7 million to $224.5 million compared with $188.8 million for the year ended December 31, 2022. The increase in net cash provided by operating activities was primarily due to higher cash collections resulting from increased billings. The increase was partially offset by higher compensation expenses primarily related to headcount growth, an increase in other operating expenses and higher use of working capital required for growth. Days sales outstanding (“DSO”) was 100 days at December 31, 2023 and 97 days at December 31, 2022.

Free Cash Flow was an inflow of $174.9 million and $135.7 million for the years ended December 31, 2023 and 2022, respectively. The increase in Free Cash Flow for the year ended December 31, 2023 was primarily due to higher net cash provided by operating activities, as described above.

Net cash provided by operating activities and existing cash resources, including our senior secured bank revolving credit facility (“Credit Facility”) were used to repay the $315.8 million principal amount of our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”) at maturity. Additionally, a portion of net cash provided by operating activities was used to purchase a $24.4 million short-term investment and to repurchase and retire 112,139 shares of our common stock under our Repurchase Program for an average price per share of $158.70, at a total cost of $17.8 million during the year ended December 31, 2023. We had $460.7 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2023.

Headcount

The following table includes the net headcount additions by segment and in total for the year ended December 31, 2023.

(1)Effective July 1, 2023, prior period segment information for the Corporate Finance and FLC segments has been recast in this Annual Report to include the reclassification of the portion of the Company’s health solutions practice in the FLC segment to our realigned business transformation practice within our Corporate Finance segment.

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RESULTS OF OPERATIONS

Segment and Consolidated Operating Results:

(1)Effective July 1, 2023, prior period segment information for the Corporate Finance and FLC segments has been recast in this Annual Report to include the reclassification of the portion of the Company’s health solutions practice in the FLC segment to our realigned business transformation practice within our Corporate Finance segment.

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Reconciliation of Net Income to Adjusted EBITDA:

Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS:

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow:

Year Ended December 31, 2023 Compared with December 31, 2022

Revenues and operating income

See “Segment Results” for an expanded discussion of revenues, gross profit and SG&A expenses.

Unallocated corporate expenses

Unallocated corporate expenses increased $0.6 million, or 0.5%, to $125.4 million compared with $124.8 million for the year end of December 31, 2022. Excluding the impact of special charges recorded in 2022, unallocated corporate expenses increased by $1.4 million, or 1.1%. The increase was primarily due to higher compensation expenses, which was partially offset by higher allocation of infrastructure support spend.

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Interest income and other

Interest income and other, which includes FX gains and losses, decreased $8.8 million to a $4.9 million loss for the year ended December 31, 2023, compared with a $3.9 million gain for the year ended December 31, 2022. The decrease was primarily due to $9.3 million in net FX losses for the year ended December 31, 2023 compared to $0.1 million in net FX gains for the year ended December 31, 2022.

FX gains and losses, both realized and unrealized, relate to the remeasurement or settlement of monetary assets and liabilities that are denominated in a currency other than an entity’s functional currency. These monetary assets and liabilities include cash, as well as third-party and intercompany receivables and payables.

Interest expense

Interest expense increased $4.3 million, or 42.6%, to $14.3 million in 2023 compared with $10.0 million in 2022. The increase was primarily due to higher interest rates on borrowings under our Credit Facility incurred in connection with the repayment at maturity of the principal amount of our 2023 Convertible Notes.

Income tax provision

Our income tax provision increased $21.2 million, or 34.1%, to $83.5 million in 2023 from $62.2 million in 2022. Our effective tax rate of 23.3% for 2023 compared to 20.9% for 2022. The increase in the income tax provision was due to an increase in income before income tax. The higher effective tax rate in 2023 was primarily due an increase in foreign taxes and a less favorable tax benefit related to share-based compensation as compared to 2022 due to fewer shares vesting, which was partially offset by a foreign tax credit benefit.

A portion of the increase of the 2023 effective tax rate was related to the 2022 $9.6 million tax benefit related to the release of a U.S. foreign tax credit valuation allowance which did not recur in 2023, utilization of current year foreign tax credits and a deferred tax benefit arising from an intellectual property license agreement between a U.S. subsidiary of the Company and certain foreign subsidiaries of the Company.

SEGMENT RESULTS

Total Adjusted Segment EBITDA

We evaluate the performance of each of our operating segments based on Adjusted Segment EBITDA, which is a GAAP financial measure. The following table reconciles net income to Total Adjusted Segment EBITDA, a non-GAAP financial measure, for the years ended December 31, 2023 and 2022: