FTI Consulting reported first-quarter results that were in line with expectations. The company’s first-quarter revenue increased 3% year over year to $407 million. The company reported generally weak numbers across the board, except for its Economic Consulting practice. Given its mix of procyclical and countercyclical businesses, FTI used to report steady midto high single-digit growth in the past. However, with the economy just chugging along, the company is seeing muted demand across most of its businesses. Economic Consulting remains the lone bright spot for FTI. Driven by increased antitrust and merger and acquisition activities, Economic Consulting reported 15.1% growth in revenue during the quarter.
This practice now accounts for about 28% of the company’s total revenue, up from 25% at the end of the first quarter of last year. Given this segment’s pipeline of new cases, we expect growth to remain strong in the near term. The continued availability of cheaper credit (particularly in the U.S.) has made things harder for FTI’s restructuring practice (single-digit decline, excluding acquisitions). The company is able to partly offset this by diversifying into other areas such as post-merger integration, process improvement and in other geographies, including Asia- Pacific.
While these efforts should help the company in the long run, we expect results to remain choppy in the near term. On the litigation side, FTI’s weak results (2.8% decline) largely resembled the pattern that we have seen from other consultants, including Navigant NCI . Inconsistent demand continues to pose headwinds for FTI, and so far we haven’t seen any indicators that point to a change in the status quo.
FTI’s adjusted EBITDA margins increased 90 basis points to 14.6% during the quarter. Margin expansion was largely driven by its Economic Consulting practice, which benefited from higher utilization rates and billing rates. The company reported flat or lower margins in all the other practices and, given the company’s linear business model, this was along expected lines.
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