Good day, everyone, and welcome to the FTI Consulting First Quarter of 2018 Earnings Conference Call. As a reminder, today’s call is being recorded. And now for opening remarks and introductions, I’ll turn the call over to Mollie Hawkes, Managing Director, Investor Relations at FTI Consulting. Please go ahead.

Good morning. Welcome to the FTI Consulting conference call to discuss the company’s first quarter of 2018 earnings results as reported this morning. Management will begin with formal remarks, after which we’ll 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 Section 27A of the Securities Act of 1933 and Section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues, future results and performance, expectations, plans or intentions related to financial performance, acquisitions, share repurchases, business trends and other information or other matters that are not historical, including statements regarding estimates of our future financial results and other matters. 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 heading of Risk Factors and Forward-Looking Information in our Form 10-K for the year ended December 31, 2017, and in our other filings filed with the SEC. 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. During the call, we will discuss certain non-GAAP financial measures such as total segment operating income, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per diluted share, adjusted net income, adjusted EBITDA margin and free cash flow. For a discussion of these and other non-GAAP financial measures as well as our reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the press release and the accompanying financial tables that we issued this morning, which include these reconciliations. Lastly, there are 2 items that have been posted to the Investor Relations section of our website this morning 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 first quarter of 2018 financial results. Of note, during today’s prepared remarks, management will not speak directly to the quarterly earnings presentation posted to the Investor Relations website. To ensure our disclosures are consistent, these slides provide the same details as they have historically and, as I said, are available on the Investor Relations section of our website. With these formalities out of the way, I am joined today by Steve Gunby, our President and Chief Executive Officer; and Ajay Sabherwal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gunby.

Thank you, Mollie. And good morning, and thank you all for joining us. I’m guessing many of you have had a chance to look at the results for the quarter this morning. If you haven’t, the word I use for them is spectacular. We delivered record revenues, with revenues increasing 11.5% year-over-year, with almost all of that growth being organic. That level of organic growth is the highest the company has seen recently by far and I think the highest growth we’ve ever seen in a quarter where we didn’t have a market room driving results. That revenue results, that revenue growth translated, not surprisingly into record EPS, both GAAP EPS and adjusted EPS, each of which totaled $1.04 per share in this quarter. To put that into context, that’s roughly triple our GAAP and adjusted EPS of the admittedly weak first quarter of a year ago. So the numbers this quarter are terrific, and I’m going to let Ajay spend a fair amount of time taking you through them in a little bit more detail. But before that, Ajay thought, and I agree, that it might be useful for me to share a few perspectives on what we take away from quarters like this beyond terrific results. So I’d like to spend a few minutes doing that and turn it over to Ajay and then, as usual, have plenty of time for questions. So the first point I’d like to make is the obvious one, one that we’ve talked about in some weak quarters but is also, I think, important to reiterate during a terrific quarter. And that is I am not sure you can take any quarter for this company and multiply it by 4. Importantly, I think the company’s results are much more predictable than at times…

Thank you, Steve. Good morning, everybody. I will begin by summarizing our quarterly results. Then I will review quarter-over-quarter and certain sequential quarter results at the segment level and key cash flow and balance sheet items. At a high level, as Steve said, we had another very strong quarter. Compared to the prior year quarter, we delivered double-digit revenue growth, led by strength in our Corporate Finance & Restructuring, Forensic and Litigation Consulting and in our Strategic Communications segments, which was only partially offset by declines in our Economic Consulting and Technology segments. In Corporate Finance & Restructuring and Strategic Communications, adjusted segment EBITDA more than doubled, and FLC delivered adjusted segment EBITDA growth of over 90% compared to the first quarter of 2017 as we benefited from revenue growth driving higher utilization. And as expected, although Economic Consulting revenue and adjusted segment EBITDA declined year-over-year, we saw a sequential pickup, delivering revenue and adjusted segment EBITDA growth of 10% and 34%, respectively, compared to the fourth quarter of 2017. We are delighted with these results, which exceeded our expectations. First quarter of 2018 revenues of $497.8 million were up $51.4 million or 11.5% compared to revenues of $446.3 million in the prior year quarter. GAAP EPS and adjusted EPS were $1.04 compared to GAAP EPS and adjusted EPS of $0.34 in the prior year quarter. Our fully diluted weighted average share count at the end of the first quarter of 2018 was down 3.6 million shares or 8.8% compared to Q1 of 2017, primarily driven by share buybacks. Of the $0.70 year-over-year increase in EPS, $0.51 were from operating performance, $0.10 were from lower effective tax rate and $0.09 were from having fewer shares outstanding. Net income of $38.9 million increased by almost $25 million, largely due to higher…

[Operator Instructions] And we’ll take our first question from Tobey Sommer with SunTrust.

I was hoping you could speak to the sustainability of revenue, which is something you’ve certainly addressed on your, in your prepared remarks. I was hoping you could expand upon it, sort of comparing and contrasting the cyclical elements to your business that sometimes are a benefit or are negatively impacted by cycles within those end markets versus sort of the mix of new areas that you’ve entered that may have more sustainable tailwinds to them.

Yes, Tobey, it’s a complicated question to answer. Let me give it a crack, and then you can probe it further if useful. So I think the first point is these revenues are not driven by a particular market boom. And sometimes, in the past, this company has been very much a function of market booms, for example, in restructuring. We don’t see that there is a market boom going on right now in restructuring. We’re doing terrifically well in Corp Fin, but we’re not, we don’t believe we’re riding the wave unlike some other points in the history. And so that’s a pretty encouraging sign. And I think it’s something that we’ve tried to work on over the last few years, which is what can we do beyond riding the wave. And I think we made, the teams have made lots of investments, and a lot of things are working. Now having said that, I don’t think we’d take the revenue for this quarter and multiply it by 4 either. I mean, we have won some of the biggest jobs in a whole lot of our segments out there. And you’d like to say we permanently changed our share position. It’s a little early to use the word permanently on that. I mean, we’re doing a terrific job in the marketplace, and we won some huge assignments, powerful assignments. And they are good things that happen because if you do those assignments right, they further build your brand. And so in some sense, we have hopes of many of these things turning into sustained elements of our business. But right now, I think we are winning way too many of the big jobs for us to fail. That’s where we are today. And then on top of that, there’s a couple of other things in our results that you just have to normalize for. Sometimes we’ve had bad FX issues where we’ve had organic growth and I’ve had to try to plead to the market to understand we’re having organic growth, it’s just swamped by FX this quarter and went the other way. I think FX actually contributed considerably to organic growth. So I think we are feeling this is further validation of the fact that we, our teams, are doing the right things to drive sustained organic growth over time, but we are not taking this first quarter’s revenue and multiplying it by 4. Does that help, Tobey?

It does. It also prompts another question. Could you talk about the large projects and how would you characterize them versus history and that large project risk in the income statement currently?

I think we always have large project risk. I think the issue we have right now is we’ve got more of them, so our income is higher. It’s not like we have one job that is 25 times the size we ever had in the past. We just have more big jobs that we’re winning. I think I’ll let Ajay correct me if you think I’m wrong, but that’s my sense, is it’s not one big job. We just have more good ones, and therefore, the results are better, which doesn’t mean they all end at once, Tobey. And that’s what you have to think about. But that’s all we mean there. It’s not like we know there’s specific cliff coming. It’s not like we have one job that’s dominating our business. Does that answer your question?

It does. You do a good job. And then switching to the other kind of internal drivers of growth in margin. I was wondering if you could speak to utilization and where you see it as sort of optimal for growing business and what your plans are for billable headcount growth this year after the cost cuts and some slight decline year-over-year. I’m wondering how we should think about that as a driver in the model?

Yes. So look, on utilization, what I would like to have is a situation where I know exactly where all the businesses are going to be over the next three years, and therefore, have exactly the right number of people there. Their vacations come at exactly the right amount of time. And therefore, you can run utilization at fabulous rates on a sustained basis. And that’s just not the reality that I’ve ever faced in professional services. You have a number of utilization whatever you see out there. Buried under that is a set of decisions and bets you made a while ago about where you thought the business was going to grow and where you didn’t and decisions you’ve made. I feel like most of the decisions we’ve made about where we were kitting ourselves were right, and most of the decisions we’ve made about where we’re betting headcount were right. This quarter says, we probably under-bet on some of the best places and we’ve been betting on construction solutions now for several years. But some places around the world, we’re burning our staff out right now in construction solutions. I mean, utilization is not just a fabulous thing because there are humans on the other side of that. And you don’t want great people that you’ve been training to say, Gosh, I just love this job, but I can’t do this job anymore because I just never see my family. And so -- and it’s a complicated thing because you have sub-practices with distinct expertise in different parts of the world. Sometimes you can fly people from one place to the other, but there are language barriers and so forth. So look, obviously, we thought the utilization level we had 12 months ago was not the level we…

It does. Thanks. I’ll get back in the queue.

[Operator Instructions] And we’ll go next to Tim McHugh with William Blair.

Just want to follow up in the comments, and I apologize I joined somewhat late. So if you said this, my fault. But can you elaborate on why you feel like you’re winning some of the bigger jobs? I know there’s kind of investing in longer-term kind of positioning and that sort. But is there anything about the nature of the jobs that are coming in the sense of they’re in a particular vertical or area where that lines up well with what you have? Any conclusions, I guess, you can draw from why you seem to be winning more now than you did, as you said, in prior periods.

Yes. No, thanks, Tim. Look, I would say, again, Ajay, if you have a different view, chime in. But I would say it’s not because the market that lines up with our historic capabilities just happens to line up. I think there’s 2 things going on. One, it could be just some luck, right? I mean, we swung and missed 12 months ago on some big jobs, and then later in the year, we swung and hit, and now we’re hitting again, right? I mean, Bryce Harper hits lots of home runs, but he sometimes misses the ball, too. And so some of it could be luck. But I think what is the case, and I sometimes feel like, this sounds like mom and apple pie but it’s not, is what we have been doing when we’ve been taking business by business, disaggregating them, attracting and investing in talent in the right parts and then pruning other ones is we’ve just made this company fundamentally stronger, and stronger in more areas. So our Corp Fin business at one point was terrific accreditor of rights. We’re winning lots of big companies’ side jobs at this point. We’re winning, we’ve grown in transaction advisory services. At one point, we were a U.S. business. We have leading positions in markets abroad right now. It positions us to win some of the biggest global deals. Is that big retail deal, global deal public? The biggest, yes. Steinhoff, the biggest global deal. I mean, it’s a South African company with operations in Germany, UK, the US. I mean, we have capability in every one of those geographies at this point. So I think this daily work our people are doing on figuring out where we’re kitting ourselves but also where we are -- have a right to win is working, and when it works, we also are having in many places the phone ring off the hook for people who want to join us. And so the capability is broader. Now what I would like to know and you would like to know is how much of it is luck versus how much of it is what we’re doing. And you never know in any given quarter. Possibly, it’s all you and that history would say that’s a little arrogant to believe. But it’s not -- I don’t think it’s because all of the sudden, the market lined up against where we’re good. Does that help, Tim?

Sure. And if the business is being driven by bigger jobs, I guess do you have a little bit more visibility into those in terms of the continuation at this point? So, I guess, shouldn’t -- if you have more bigger jobs, shouldn’t you have some line of sight to whether or not, at least for the next couple of quarters, what -- the revenue contribution from those will stay at an elevated pace?

Actually, I think the data would suggest the opposite that the number of small jobs we have in our company just stays relatively constant over time. The swing factor is the big job. Now you’re right, we have a team running, and we have some of those on a job x. And we have visibility that says, it’s expected to go for a while. The issue you never know is, does it settle? Does something else happen? Does somebody call off a merger? Does the government decide to throw in the towel on a merger? It is -- I’ve tried really hard to say, well, can’t we know. What we do know, accept them until the day we -- it changes completely and this thing that we thought we’re going for three months stops immediately. And by the way, I’ve been surprised at how fast big jobs line up. A board finds out something about a company that is a significant issue, we can have 25 people out and near the company and a week later, scaling to 60 people. So it’s -- maybe when you retire there, you can come inside and tell me how to predict this better, Tim. I’ve been trying.

Just to add to what Steve said. Please don’t take our telling you that don’t multiply a quarter by 4, our telling you that large ops can and cannot end abruptly, do not take that in any way as taking anything away from the strength of the quarter. And these are beyond our expectations. It’s early. It’s only one quarter into the year. So we’re maintaining our guidance. But I mean, the strength has come from a variety of places, business transformation. We’ve added people there, and we are winning great jobs there. And those companies are not all distressed companies. Every company wants to improve its profitability. And they find us a very good value proposition. In construction solutions, I mean, our business has grown handily in those areas whilst it’s not a booming market, but we have expanded the markets. Look at how much we are getting from Europe, from EMEA, from Middle East, from Latin America. In Strategic Communications, not only have we grown in Continental Europe but also in North America. So growth in adjacencies, growth in services. I mean, cybersecurity, we didn’t have a practice a few years back. And it’s a large -- it’s a significant component for what we do today. So growth in adjacencies, growth in markets, taking share away and tremendous operational discipline is what resulted in these quarters with the leadership team that is focused on growth and staff utilization.

Okay. And one last question, I guess, just to follow up on Tobey’s question because just, if you just look at headcount growth and revenue per head, the revenue per consultant was very high. So your comments earlier sounded like you’re going to continue the, as you say, invest in, as you have been, and we’ll start to see headcount growth pick up because there will be kind of fewer offsets in terms of areas you’re cutting back. But I guess to follow up on that, are you, coming off a quarter like this, does this accelerate your hiring plan? Does it change at all as you look forward for the rest of the year? Or it does not really change how you view how quickly you want to add heads in this department?

So look, this quarter is obviously a blip above the trend. But I think, actually, it is really, to me, this is also a continuation of what I’ve been seeing about the potential of this business. So I think we have been committed to growing our headcount with, a couple of years ago, we talked mid-single digits on a sustained basis going forward. That got clouded by some of the correction activity we took in some underperforming businesses last year. And it looked like we weren’t, but the truth is on some of these other businesses, we were growing headcount double-digit. And so you just have to look at that. I, now I think, look, over time, I suspect we can grow faster and faster. I came from a business before this where we were able to grow headcount double-digit year in, year out. We didn’t have, for a couple of years before, not here, we had negative organic growth. So we’re on a process, progress towards increasing the sustained organic growth rate that we think is possible here. You don’t, that’s a steady process we’re on. Now you have to address places where you got it wrong in the past. We bet on growth in construction solutions. We didn’t get it right exactly how much it is, and we got some people who are overworked. So we’ve got to address that and so forth. But we haven’t changed our fundamental underlying strategy here, which is that we can deliver sustained organic growth, and then on top of that, we’ve got a really terrific cash flow. And between that, we can deliver good results for our shareholders while investing enough in the business and behind our best professionals that we have motivated teams. And I think that’s still our core strategy there, Tim.

And we’ll go next to Marc Riddick with Sidoti.

I was wondering if you could touch a little bit or maybe just sort of give maybe a broader color around the geographic strength that we saw in the quarter. Certainly, some of the things you’re talking about make sense. But with the over 20% in the EMEA region, over nearly 30% in Asia Pac, I was wondering if you can sort of give maybe a broad-based sort of view of sort of what you’re seeing there, whether from a macroeconomic standpoint or any specific things that you could give a little greater color on that geographic strength. Thank you.

Yes. Marc, let me just be careful about, so Europe, I think, is just a continuation of the same story. That has been a place where we invested for growth. We had the right leadership. We invested for growth several years ago, and we’ve had a pretty sustained growth engine, which doesn’t mean you can’t have quarters that are off, but we’ve had a pretty sustained growth engine. The thing that sometimes happens in Europe and some of these overseas markets is some of the results get affected by FX. So I think in other quarters, we were saying it was growing, and you look at the numbers, you say, hey, that doesn’t look like it. This one, we had the opposite effect. I think probably -- I think we show like 20% growth in Europe. I think at least half of that is FX this quarter. So you just have -- I think this is more of a -- it’s a terrific -- we’re excited about what’s going on in Europe across a whole range of businesses we’ve been investing, and it’s been working and we’ve got people who are driving, and we’ve got a big group of people involved in figuring out where we can take it, and that energy is spilled over in the markets, so the phones ringing off the hook. So I feel really good about that. But it’s not -- but the results -- this thing -- are a little bit affected by the FX. Does that help on Europe?

Yes. Yes, it does. And then I guess touching on the -- in a way touching on sort of the headcount questions. I was wondering if you could maybe give a sense of how you feel about that general labor markets of the folks that you look at and the scarcity or changes that you may see now versus maybe a few months ago?

Look, I think when you’re looking for the best talent in the market, you always have a scarcity issue. It’s why it’s a pretty important -- it’s not just in our people’s interests that our people believe that we’re willing to invest in them, that we’re going to stick with them in -- even in bad quarters. It’s actually pretty important to the shareholders because it’s only by having that commitment to grow a professional services firm, that commitment to help build a business, that you can attract and retain the best professionals. And so that is a big change. Look, the best professionals are always -- you always have to -- they’re always expensive. And you always have to be willing to spend the money for them. That’s -- but that was true years ago, too. I think what we’re doing is we’re relentless about making sure we go after those people in good quarters and bad, and we’re willing to take the hits to their earnings. If we find the right people in a bad quarter, we’re still going to hire them even though it doesn’t help the quarter because I think that’s how you build the business.

And that concludes our question-and-answer session. I’d like to turn the conference back to our speakers for any closing remarks.

We want to thank you for your attention and your ongoing support. If you have other questions, please reach out to Mollie and Ajay. Thank you very much.

Thank you, everyone. That does conclude today’s conference. We thank you for your participation. You may now disconnect.