FTI Consulting, Inc. Price & Performance (FCN)

For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward looking statements, investors should review the Safe Harbor statement in the earnings press release issued this morning, a copy of which is available on our website at www.fticonsulting.com. As well as other disclosures under the headings of Risk Factors and Forward Looking Information in our Annual Report on Form 10 for the year ended 12/31/2024, or our quarterly reports on Form 10 Q and in our other filings 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. FTI Consulting assumes no obligation to update these forward looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. During the call, we will discuss certain non GAAP financial measures, A discussion of any non GAAP financial measures addressed on this call and reconciliations to the most directly comparable GAAP measures are included in the press release and the accompanying financial tables that we issued this morning. Lastly, there are two items that have been posted to the Investor Relations section of our website for your reference.

These include a quarterly earnings presentation, and an Excel and PDF of our historical financial and operating data which have been upgraded to include our first quarter twenty twenty five results.

With these formalities out of the way, I'm joined today by Stephen Gunby, our President and Chief Executive Officer and Ajay Sabarwal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gumby.

Thank you, Molly. Welcome, everyone. Thank you all for joining us today. As I hope you saw this morning, we reported a strong first quarter. The first quarter did benefit as Ajay will detail some one time items. But even adjusting for anything one might think of as anomalous, it was a solid quarter. So as we all know, there are lots of puts and takes in the world right now. Lots of uncertainty. The start of this year is overall quite consistent with what our expectations were in February when we gave you guidance for the year. Ajay will, as usual, go through the details of this quarter. In his typical structured fashion. Given the complexity of the world today with all the various theories of where the market and client needs might go. I thought we thought it might be worthwhile for me to go a little deeper than I normally go. On the individual businesses. And share some qualitative observations both on the performances of each of those businesses so far this year, but also on some of the different theories of what their outlooks could be. So I'll be a little longer than usual. I hope you'll forgive me that.

I want to start with FLC, this quarter. I hope you saw just how fabulous a quarter FLC had. I think the EBITDA this quarter was roughly comparable to what we probably average for half a year for that business over the last few years. The driver of those results is that the teams there have been winning and delivering on some incredibly major roles. I would love on this call to talk about a lot of the specifics. Unfortunately, many of those assignments are confidential because of the nature of the work. But the roles the teams are playing are important, they're critical, they're powerful. And for us their brand building. At least among the people who know the work they're doing. As I've talked about a number of times, we've always had terrific people. In FLC. The issue we've sometimes faced in that business is that it insufficient amount of the world knew how great our people were. I actually think the world at large still know that fully. But over the last while, with a new set of energy across the various leadership levels as well as a somewhat higher level of aggressiveness by many of our SMBs, we now have a bit more of the world understanding the quality of our people and the quality of what we can do And that is true across a range of the business.

Whether it's the power of the deep technical expertise we have in some sub areas like cyber, [indiscernible] anti consumer fraud, export controls and sanctions, or others. For the core data analytics, and forensic accounting capabilities, that often underpin much of the work or the strengths of some of the other businesses, disputes businesses, like construction and project and assets business or disputes business more general. Our experience is that as increasing parts of the world start to really understand the depth of that expertise, as well as the commitment level of the people in those groups. We increasingly get those important large jobs jobs that are often critical to the future of our clients. There's of course some serendipity of that, There's also some serendipity to when those projects in. And therefore, zigs and zags. But my sense is through the zigs and zags over past few years, we have continued to increase that visibility And you can see in the quarter, this results this quarter, just how powerful that can be. Let me turn from the quarter to a more forward setting thoughts. [indiscernible] side of thoughts. The power of our team the increased visibility that doesn't go away.

But of course individual major assignments can end. And important for this business, as we talked about last quarter, this is a business that can be affected by policies in Washington. Particularly when you think about our strengths and things like anti consumer fraud anti money laundering or FCPA. Areas where regulatory posture is potentially changing. So regulatory shifts could have a considerable effect on this business as the year goes on. We are therefore cautious about not assuming the current strength will get replicated through the end of the year. But important, given that capability, given the strength of our go to market strategies, It is not just this quarter that I am excited about. I am fundamentally excited about where the team is taking the medium and long term trajectory of this business. So I took a little extra time on FLC because I really think the team deserved it. I would try to be a little briefer on some of the other segments. But I want to go through both all those sorts general topics with everybody. So let me turn to Corp. Ben. Here results are roughly in line with where we expected them to be at this point in the year.

With of course lots of puts and takes at the sub business level. The corporate business as I think you all know, can be sharply affected by macroeconomic factors. For example, whether the restructuring market or the M and A markets are up or down. We of course are not totally driven by those end market moves. We've shown I believe over the last several years, our ability to gain share through the cycles. We're not totally affected. But we're obviously not totally driven, but we're obviously The restructuring market is booming. This business is going to boom. And if the M and A market is booming, our transaction business is going to benefit. Right now as I believe you know either of these markets is So in this quarter, we were relying on our competitive strengths. To power those businesses. Even though there weren't that many big restructuring jobs out there, we won a number of the few that were out there. And we saw pockets of strength in markets such as Germany, And we were actually surprised that our transaction business was as strong as it was this quarter given the pause in the deal markets. I think a lot of that had to do with the commercial aggressiveness of our teams today.

Important this quarter, we also made and we are making good progress in addressing a couple of the businesses that were drags on our results in 2024. In part through targeted headcount actions we took this quarter, which Ajay will speak to, but at least as much with some refocused commercial activity by the terrific talent in those sub businesses. That's some comments on the quarter. Let me look forward.

Looking forward on this business and the macroeconomic factors, I think as we all hear every day, there's huge amounts of uncertainty on those macroeconomic factors. Lots of discussion of whether MA is coming back or not whether there's an increased chance of recession, I don't think anybody knows what is going to happen. Right now, from our perspective, no signs are so definitive that we are changing our expectations for the year. The stepping away from these short term factors that can be material for the business, these short term factors of course in no way change tremendous trajectory that this business has been on or our tremendous conviction of the strength of this business in the medium term.

Let me turn to tech.

Which is another business that can be particularly affected by macroeconomic factors. In this business as well as our e com business, we have record M and A second request revenues. 2024. That's related to antitrust. So our sense is that this business faces some real headwinds at least in that portion of the business. I was talking to Sophie the other day, in just the last couple of months, I think the team had something like six potential second requests canceled. Either because the deals were cold, or because the regulatory authorities decided not to challenge. So understandably, that team is worried about the potential near term headwinds. Stepping back from that, however, that tech team has by any measure I can see had the fastest organic growth rate in the industry. For a number of years. So if you think about it, if we face headwinds, those headwinds are likely to be even stronger for some of our competitors. Many of whom have serious debt loads. In my experience, typically that would mean over the medium term we will pick up talent. We will gain even more share.

So given that competitive strength, not just in M and A, but also in investigations and litigation businesses, as well as our continued investments in key areas like crypto digital assets and AI.

And we remain very bullish on this business's medium term trajectory. But to be clear, we also can't gainsay the headwinds the team is facing. This year in 2025. In econ consulting, the set of departures we've seen in Compass Lexicon below the senior level has ended up being roughly consistent with what we would happen when we talk with you in February. It is of course an important hit. But put it in perspective, the total departures represent less than 10% of our headcount in econ and roughly put that business back to the headcount level it was two years ago. And the court still leaves us as the leading economic consulting firm globally. And I think the leading economic consulting firm globally by far, And of course, from the overall company's perspective, it represents less than 2% of the company's total headcount. As we talked about last time, however, the financial impact on the bottom line is more sizable than simply the headcount impact. The key reason is that when circumstances like this occur, even if you do a terrific job, that the teams are doing and keep most of our people, you end up in many instances adjusting compensation levels.

And that's clearly happened here. So that's something I believe we talked about last time. There's been an additional development since last time. Which I believe in the long term is a fabulous thing, but is adding to the near term financial pressure. Which is that this business has since we last talked focused enormous amount of attention replenishing talent. I think we've spent more attention on that in our competition side than ever in the business history. And important, we've had enormous success in that endeavor. We have already been able to track an unbelievable set of academic affiliates and new arrivals. Many more and unbelievable talent more than we expected a couple of months ago. And these are folks who bring expertise across antitrust, We have some additions to our financial economics business and across key industries. Such as healthcare, finance, TNT, digital assets, AI, If you look at their website and encourage you to do so and see their resumes, you'll see these are people with tremendous academic credentials. But in addition, in many cases, they have served previously in senior roles in government, including the FTC, the FCC, and the SEC. And I was speculating with one person.

I think among this group it might even be a couple of people who have been potential Nobel Prize winners. So I hope you got from my tone of voice that we're excited about these additions. I step back from those additions what they do is they enhance what has always been the case. My powerful confidence, my strong confidence in the medium term prospects of this business. This is a great presence. With terrific bee slant.

And so we have enormous confidence in where this business will be in the medium term. But we need to say that our guess is the near term P and L hit. Will be at least as hard as we speculated about in February. Not a bit more. Finally, our Stratcom business. Our Look, I think as you know, our Stratcom business had some struggles the last couple of years. Not fundamental struggles, not struggles in competitive position or bottom line results but struggles getting back to the sort of growth that I've been proud to show for a number of years. I think that this quarter suggests we're beginning to get back on track. We still have ways to go to bring that growth back up to our aspirations. But we're seeing good progress. As people are focused on supporting our clients in this unbelievable political and regulatory uncertainty. That strengthening Stratcom was expected. We had confidence in the team. Overall, our performance this quarter was in line with what we're hoping to see from Stratcom at this point the year. [indiscernible] simply reinforces our strong confidence that the business's medium term prospects. Are strong. I hope look, I went a lot more detail through individual segments that I often do.

I think given the uncertainty in the world, Ajay and I thought it makes sense. But of course, then it's a question of when you step back from the individual segments, where does it all add up to? I think the answer with respect to this year is probably an answer you knew coming into this call because it's the answer that almost every company is saying today. But it means with respect to this year is uncertainty. And if you looked at our guidance range, you realize that within our guidance range is a scenario where even in the face of the Compass Lexicon disruption, we end up with a solid year. But it also encompasses a very real scenario for the very first time in my tenure, we're down. In adjusted EPS. So there's lots of uncertainty. About the year Important that uncertainty does not do is shake my conviction about the powerful future this company has. Sure, we have challenges and there are headwinds in the market. Over the last ten years, we have faced lots of challenges. There have been tremendous variability in market conditions. Periods of busts in various markets. If you remember right there was a period where our testifiers couldn't testify because the courts were closed.

And there's times when competitors have been crazily aggressive As a consequence, we've had tremendous zigzags in individual businesses. And in geographies, and even substantial zigzags for the company as a whole in multiple quarters. But we have also talked about the fact that if through the Zigs and Zags, we remain committed to doing the right things for this business. Monitoring the market forces and adjusting where we have to, but underlying that focusing on what matters in professional services, attacking dedicated people, great people, supporting those people who have a drive to make a difference for their clients and make a drive make a difference for the people who are underlying who work for them and mentor those people. If you do that, you still have zigs and zags in portions of the business and perhaps overall. But through those zigs and zags, you attract and retain and develop many more great people than you ever lose. You build capability, you increase your relevance for the clients on their most important issues. As a consequence, those zigzags surround a powerfully upward sloping line. For our clients, for our shareholders, and for our people, We have talked about that as a philosophy we've talked about that as a theory.

I believe the data of the last ten years have turned that to [indiscernible] Into a proven proposition. We will maintain that commitment. Include that commitment I believe this company will continue to deliver a future that is extraordinarily [indiscernible] With that, let me turn the call over to Ajay review the details of the quarter.

Thank you, Steve.

Good morning, everybody.

In my prepared remarks, I will take you through our company wide and segment results for the quarter. First quarter of twenty twenty five revenues of $898,300,000 decreased $30,300,000 or 3.3% compared to the first quarter of last year. Sequentially, compared to Q4 of last year, our revenues were up slightly. GAAP earnings per share of 1.74 compared to $2.23 in the prior year quarter. Adjusted EPS of $2.29 compared to $2.23 in the prior year quarter. The difference between our GAAP and adjusted EPS for the quarter reflects a $25,300,000 first quarter special charge related to severance and other employee related costs which reduced GAAP EPS by $0.55 Net income of $61,800,000 compared to $80,000,000 in the prior year quarter. The decrease in net income was largely driven by lower revenues and the special charge. Which was partially offset by a decrease in SG and A, and direct costs.

Direct costs of $608,900,000 compared to $626,000,000 in the prior year quarter. The decrease in direct costs was primarily due to lower variable compensation and contractor costs, which was partially offset by higher benefits and salaries. SG and A of $184,300,000 or 20.5% of revenues compared to SG and A of $201,900,000 or 21.7% of revenues, in the first quarter of twenty twenty four. The decrease in SG and A was primarily due to a benefit from litigation settlements in Q1 and lower bad debt.

First quarter twenty twenty five adjusted EBITDA of $115,200,000 or 12.8% of revenues compared to $111,100,000 or 12% of revenues in the prior year quarter. Our first quarter twenty twenty five effective tax rate of 23.3%, compared to 19.6% in the prior year quarter. The prior year quarter tax rate was exceptionally low, because of large option exercises in Q1 of last year, and the resulting discrete tax adjustment. For full year 2025, we continue to expect our effective tax rate to be between 2325%. Weighted average shares outstanding, or WAISO, for Q1 of 35,500,000.0 shares compared to 35,800,000.0 shares in the prior year quarter.

Billable headcount increased by 0.5% compared to the prior year quarter, with the largest increases in corporate finance and restructuring, forensic and litigation consulting, and technology which was partially offset by headcount declines economic consulting and strategic communications.

Non billable headcount increased by 1.2% year over year.

Sequentially, billable headcount decreased by 3.6% and non billable headcount decreased by 1.8%. The sequential decreases in headcount were primarily due to headcount actions. Taken across our business to better align with demand, and the departure Steve mentioned in our Economic Consulting segment. Now turning to our performance at the segment level. In Corporate Finance and Restructuring, revenues of $343,600,000 decreased 6.1%. Compared to our record first quarter twenty twenty four revenues. The decrease in revenues was primarily due to lower demand, and realized bill rates, for transformation and strategy, and restructuring services. Which was partially offset by higher realized bill rates for transaction services and an increase in success fees. In the quarter, restructuring represented 46% of segment revenues.

Transformation and Strategy represented 29% of segment revenues. And transactions represented 25% of segment revenues. This compares to a split of 47% for restructuring, 31% for transformation and strategy, and 22% for Transactions in the prior year quarter.

Adjusted segment EBITDA of $55,900,000 or 16.3% of segment revenues, compared to $75,200,000 or 20.6% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower revenues.

Which was partially offset by lower compensation.

Sequentially, corporate finance and restructuring revenues increased 2.4%. As 19.5% growth in transactions. More than offset a 3.9% decline in Transformation and Strategy, and a 1.5% decline in restructuring. Adjusted segment EBITDA increased $11,200,000 sequentially. Primarily due to higher revenues and lower compensation. Turning to forensic and litigation consulting or F. FLC. Record revenues of $190,600,000 increased 8.3%. Acquisition related revenues contributed $1,300,000 in the quarter. Excluding acquisition related revenues, the increase in revenues was primarily due to higher realized bill rates for risk and investigation services and higher realized bill rates and demand for data and analytics services. We are supporting incident response, readiness, and regulatory compliance in cybersecurity. Investigations in consumer finance and anti money laundering, in financial services. And we design and implement compliance programs related to export controls and sanctions. Adjusted segment EBITDA of $37,500,000 or 19.7% of segment revenues compared to $33,700,000 or 19.1% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues. Which was partially offset by an increase in compensation and SG and A expenses. Sequentially, FLC revenues increased 8.4% primarily due to higher risk and investigations and construction solutions revenues. Adjusted segment EBITDA increased by $19,500,000 sequentially.

Primarily due to higher revenues and lower SG and A expenses. In Economic Consulting, revenues of $179,900,000 decreased 12.1%. The decrease in revenues was primarily due to lower demand for M and A related antitrust financial economics, and non M and A related antitrust services. Which was partially offset by higher realized bill rates. The departures in the competition practice encompass Lexicon and the resulting uncertainty for that practice impacted revenue adversely. As did the reduction in the number of large mergers and acquisitions. Adjusted segment EBITDA of $14,400,000 or 8% of segment revenues compared to $14,200,000 or 6.9% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to lower compensation which includes the impact from a 6.6% decline in billable headcount and lower bad debt expense which more than offset the decline in revenues. Sequentially, economic consultant revenues decreased 12.7%. Primarily due to lower demand for M and A related antitrust services and lower realized bill rates for non M and A related antitrust services. Adjusted segment EBITDA decreased $1,400,000 sequentially primarily due to lower revenues.

Which was partially offset by a decline in compensation, which includes an 8.2% decline billable headcount and lower bad debt. Technologies revenues of $97,200,000 decreased 3.5%. The decrease in revenues was primarily due to lower demand for M and A related second request services. Which was partially offset by higher demand for investigation services. Adjusted segment EBITDA of $11,600,000 or 11.9% of segment revenues compared to $14,600,000 or 14.5% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower revenues which was partially offset by lower bad debt. Sequentially, technology revenues increased 7.2%. Primarily due to higher M and A related second request services. Adjusted segment EBITDA increased $5,000,000 sequentially. Primarily due to higher revenues.

Worth noting, our technology team had several M and A related request matters, that largely began and subsequently concluded in Q1.

And we do not expect the sequential increase in M and A related activity in Q1 to continue in Q2, given the broader market slowdown Steve spoke to. Worth noting, the federal pre merger notification program administered under the Hartz Scott Rodino Act recorded just 89 transactions in March 2025. Marking the lowest monthly filing total in nearly five years. To put this in perspective, this compares to a monthly average of 188 transactions in the prior twelve month period. Strategic communications record revenues of $87,000,000 increased 7.2%. The increase in revenues was primarily due to a $3,500,000 increase in pass through revenues and higher demand for corporate reputation services. As we support clients with important cybersecurity, regulatory advocacy, and crisis communications needs. Adjusted segment EBITDA of $12,900,000 or 14.8% of segment revenues compared to $12,400,000 or 15.3 of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by higher pass through expenses and an increase in compensation. Sequentially, Strategic Communications revenues were up point 5%, primarily driven by an increase in pass through revenues. Adjusted segment EBITDA decreased $900,000 primarily due to higher pass through expenses, which were partially offset by lower direct compensation and SG and A expenses.

Let me now discuss a few cash flow and balance sheet items. As is typical, we pay the bulk of our annual bonuses in the first quarter.

Net cash used in operating activities of $465,200,000 compared to $274,800,000 used in the prior year quarter. The year over year increase in net cash used in operating activities was primarily due to an increase in forgivable loan issuances. Higher variable compensation and a decrease in cash collections.

Noteworthy this quarter, we funded $162,000,000 in forgivable loans, net of repayments.

To both retained professionals and attract new academic affiliates.

Mostly our economic consulting segment.

During the quarter, we repurchased 1,126,995 shares. At an average price per share, of $165.15 for a total cost of $186,100,000 Subsequent to quarter end, and as of 04/22/2025, we have repurchased a further 602,549 shares at an average price per share of $159.33 You may have noticed that our Board of Directors has authorized an additional $400,000,000 for share repurchases. As of 04/22/2025, we had approximately $568,300,000 remaining available for share repurchases under the program including the additional amount approved by our both. Turning to guidance. As is typical, we will reevaluate guidance once we have another quarter under our belt.

At the end of the second quarter, to see if any changes are warranted. Now, though in aggregate, this quarter we beat our earnings expectations. Let me share some of the considerations that impact our projections. First, our SG and A was exceptionally low this quarter.

Primarily due to legal settlements.

We expect SG and A to be approximately $15,000,000 to $20,000,000 higher in each of the next two quarters than it was in Q1. Second, as I mentioned, we funded $162,000,000 in forgivable loans net of repayments this quarter. Most of which were at the end of the quarter. Amortization of these loans typically occurs over three to six years.

And we will begin [indiscernible] adjusted EBITDA in Q2. Third, our Forensic and Litigation Consulting segment had a record quarter [indiscernible] has strength going into the second quarter.

However, regulatory scrutiny is a key driver of this business. And to the extent that scrutiny declines, amidst the changing regulatory posture in The United States, that could have a negative impact on our business going forward.

Fourth, as you know, there is considerable uncertainty in the M and A market. According to Reuters, U. Deal volume fell 13% year over year, and only one mega deal over $10,000,000,000 was announced in Q1. To the extent that M and A remains subdued, it may result in continued lower demand for our related services in economic consulting, and technology and lower demand for our transaction services in corporate finance and restructuring. Fifth, and conversely, very recently, we have seen a pickup in restructuring matters.

In The United States. [indiscernible] in part from tariff induced stress.

However, it is still early to say just how significant this pickup may be.

Sixth, we expect that the headcount actions we took will result in cost savings of approximately $85,000,000 in salary and benefits on an annualized basis.

Offsetting a substantial portion of these savings we have some terrific investment opportunities.

And we have already invested considerably this year including announcing 31 S and D hires across the business in addition to the 21 academic affiliates we've announced in Compass Lexicon so far this year.

We expect to continue investing in areas where we see exceptional opportunities to hire talent. Which typically has a negative impact on adjusted EBITDA.

At least through the first year after hiring. Before I close, I want to reiterate five key themes that I believe underscore the attractiveness of our business. First, this is a time of incredible disruption for our clients. And we are actively engaged in helping our clients in areas such as cybersecurity, export controls and sanctions, regulatory advocacy, cryptocurrency and digital assets. Second, we are the leading restructuring practice in the world and we are better positioned than ever before to help our clients globally.

Third, despite the headwinds this year, I believe that our economic consulting group as a whole remains the best in the world.

And as Steve mentioned, we believe the practice has been further strengthened by the addition of new academic affiliates in Compass Lexicon this year. Fourth, our enviable balance sheet allowed us to opportunistically repurchase 1,700,000.0 shares through April twenty second of this year, and we have the ability to create further shareholder value to organic headcount growth, share buybacks, and acquisitions when we see the right one. Ones.

Finally, while remaining focused on utilization, the number of talented people who want to join us is up across the board. And we continue to make investments in talent in areas such as antitrust, financial economics, transformation and strategy, healthcare, financial services, and investigations. And in geographies across the globe. With that, let's open the call up for your questions.

Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one on your telephone keypads. If you are using a speakerphone, we do ask that you please pick up your handset. Before pressing the keys. To withdraw your questions, you may press star and two. Once again, that is star and then one to join the question queue. Our first question today comes from James Yarrow from Goldman Sachs. Please go ahead with your question. Good morning and thanks for taking my questions, Steve and Ajay. Steve, just starting here on the tariffs and the impacts on your business, could you maybe speak a little bit on which of the businesses as part of FTI consulting that could be affected either positively or negatively by tariffs. And have you started to see any of these potential impacts thus far? I know it's early, but just an early read there.

Yeah, look, I think whenever you have something, a major policy change, one of the issues are there's the first order consequences, then there's a second and then a third order consequences. I don't think first of all, I don't even think everybody's absolutely certain about where the tariff thing is gonna end up, let alone the first order, second order, and third order So we're in a speculative mode everybody is on exactly. But you see things happening. Expert controls and sanctions, our focus involved in that. [indiscernible] just busy as all can be. You know, supply chain people who are helping try to think about things like that. You know, there's national security issues being discussed based on some of this. There's some strategy questions Our stratcom people are being asked to help with communications issues and so forth. The big wildcard is restructuring. If you're somebody who is totally dependent on cost of goods sold coming out of China right now, you have some stress on you. And so that I think is behind a couple of more recent things that Ajay was referring to. So there's a lot of stuff Wasn't the driver of most of the first quarter, I would say, but you see a lot of discussion and activity going on right now Orion, around a lot of different areas.

Does that help James?

It's really helpful. Thanks, Steve. Maybe just another one, related to policy. I know it's still early, but we've had a little bit more time on this one than we have had on tariffs. But perhaps you could just talk about the impact of Doge thus far on the business and perhaps with particular focus on the forensic and litigation consulting business?

So far I would say we have not seen an effect of that. I think and abstracting from those specifically those initiatives as we talk about, if the thrust of this administration is to cut back regulatory enforcement on a number of key areas that can have a pretty big effect on us. We have been one of the leaders in in anti consumer fraud issues We have a big practice in FCPA. We have a big practice in anti money laundering To the extent those policies get rolled out either because of conscious decisions or because of headcount reductions, then that can have a substantial impact on us. But as you saw in FLC, which is the most likely to be affected business right now FLC has been booming. So I think we are pretty carefully monitoring those. We think it could have a pretty substantial effect if those are maintained, and that's what we tried to telegraph here. But as of now, we can't find a huge effect on our business. You disagree, I'll tell you, or is that pretty much your Yeah.

Does that help James?

Excellent. Thank you. And then just one last one for me. I just wanted to make sure that I understand your comments on guidance. So is the guidance for this year that you gave at the fourth quarter twenty twenty four earnings call still applicable? Or are you saying that it been suspended and you'll give us an update at the second quarter earnings call?

It is still applicable, James, and we will give you an update at the second quarter earnings call.

Excellent. Thank you so much. Our next question comes from Tobey Sommer from SunTrust.

Please go ahead with your question.

Thank you. I'd like to start on the economic segment. Now that more time has passed, can you size the revenue, annualized revenue headwinds from the departures and maybe give us a framework for what you think the the long term margin profile of the business looks like? Because they're clearly are some moving parts that are difficult to assess from the outside.

Let me talk conceptually about the margin and then I'll let Ajay decide whether how much details we give on the revenue side on the stuff. Look, the business is going to have a major impact on the EBITDA. There is no question about it. I speculated certain numbers last time, think if anything the effect is going to be higher, not because the number of departures is different than we were speculating against last time and maybe a little bit because some of the retention programs that we put in place or the people we kept you know, there's a bit there can be different people asking, going after your people and you may spent a little bit more than I think we expected on that. But actually also because of a good thing, which was we've attracted a lot of new affiliates. And that is a great thing for the medium term, but almost always in this company new strong people cost you money in the first year. Either some of the folks who are attracting are new in their career and they're up and coming and we're helping to attract them with a view that hockey stick is pretty substantial over the next few years.

But even with the people who are established testifiers bringing theoretically big books of business, sometimes the book of business doesn't transfer immediately. For a variety of reasons. And so you spend a fair amount of money, these forgivable loans that Ajay referred to, And then and you spend the beginning now and some of the revenue comes later. And so this is that's why we're underscoring this. I mean, we're not underscoring this because we think this is life threatening to the business. To the contrary, I think this is the best group of economists in the world and I think the people we're attracting just reinforces that. But the financial hit to the bottom line is substantial. I think last time I speculated it could be $35,000,000 versus last year. I think the number is likely to be higher than that. Think we have so much detail that we can get more specific than that.

Okay, so that's on the bottom line impact. I don't know how much detail we give on the revenue. So Tobey, you already see the impact in revenue this quarter. So you already see that. In terms of the cost side on in the short term, the next few quarters, have been very explicit on the incremental at least forgivable loans given through this quarter. And as I said, they're mostly at the end of the quarter. We've said the amortization happens over three to six years. You can average it and calculate the quarterly impact. So you have the revenue, that's the incremental piece is forgivable loans, You already saw the headcount coming off in the first quarter with the ensuing savings there. So you have all the piece parts already. And our guidance that that is in place has a range of outcomes that Steve mentions already incorporated in that range. Okay.

So the new hires, sometimes the matters or the revenue comes later. Is the does the first quarter capture the all of the revenue that that sort of, was attached to the departing employees? So let's be clear about that. Most of the departing people departed towards the end of the quarter. So no, it didn't. I mean now we also had market slowdowns and other factors in that first quarter. But no, the revenue impact of departing employees really starts to show up more in the second, third quarter. But the first quarter also had some other headwinds in it. So it's hard to know And further, there is obviously a disrupted practice. So to that extent, yes, as I said explicitly in my remarks, it's a combination of factors, the markets, departures, which as Steve said happened towards the end, but also the disruption in the practice. Thank you.

And clearly, new hires come over time.

Thank you. Could you talk about trends in your healthcare business within FLC? What did you experience there in the quarter? And what's the the outlook for the year?

Yeah, it's been good, but it's been good. I mean, we have good practice with a couple of different healthcare practices, performance improvement within CF and then the more regulatory oriented one in in FLC. And it's a good they both had good businesses this quarter. I don't know what else you want to say about that. Yes. And particularly so, Tobey, because last year, there were somewhat weak. So the year over year comparisons show up more, which is what we talked about. Okay.

And then if I could ask a follow-up on the regulatory question.

Can't predict, what the changes will be and what the effects will be going forward. But could you size for us the parts of the business or maybe proportion of business that is regulator led investigations and the like? That's a difficult one to answer. At the end of the day, regulators are you know, every investigation has some regulatory aspect to it. But whether it is the speculation is, is it the federal or is it the state regulation, which one would take precedence? Of course, we're only talking States. There's also regulators in Europe and other other geographies So that one is really an impossible one for me to answer. All I can tell you is that our practitioners, once we have struck a portion tone for obvious reasons, our practitioners in the business remain very positive.

Okay. Last one for me. Ajay, could you give us some color on the headcount actions maybe color on the distribution segments, geographies, split between back office versus fee generators, that kind of thing? Thank you.

Sure, sure, sure. Look, it's all laid out in the 10 Q in terms of the breakdown by segment. And I don't remember all those numbers off top of my head. But what I will tell you, it's about 400 plus folks. Between, you know, q four and q one. It is spread across all levels. Fact, remarkably proportional to the mix we have in build and on the billable side, it's remarkably evenly spread, the same proportions as we have seniors versus juniors. Perhaps a little bit more weighted on the senior side. And a smaller on the non billable side. And it's across the globe As you know, we have most of our people in The United States and EMEA, so a little bit more in EMEA than in The United States. But otherwise it's across globe. Thank you.

Our next question comes from Andrew Nicholas from William Blair. Please go ahead with your question.

Hi, good morning. Thank you for taking my question.

I wanted to ask first on the restructuring business. It sounds like you've seen a little bit of an incremental stress in the system the past couple of weeks.

The question I want to ask is just around kind of the bifurcation in that market between liability management and your traditional like, Chapter 11 bankruptcy activity. Is is there any shift from what you can tell in preference for for one route or the other right now, and and maybe understanding that it's difficult to to predict the future If you think the next couple months or quarters in this specific environment might skew one way versus the other relative to what you've seen in past couple of years? So, there's quite a few questions embedded in that one. I I found an interesting statistic the other day that you know, what was S and P reported that, you know, last quarter, 42% odd of the bankruptcies were repeats.

Bankruptcies.

So liability management doesn't always work. In fact, that creates a market in the future for restructuring Well, we hope our clients do well, but typically taking on more debt if you have already have high leverage with unsecured unsecured you know, other unsecured positions doesn't necessarily get you out of trouble. And we can see evidence of that already. Where the fault line is running through working capital with these tariffs, And because the working capital is getting increased with the tariffs and you don't get realized value. So how and if you're extremely over levered to begin with, how that can be solved through liability management beats me. So this is a serious challenge that is creating a demand, and we bring a whole slew of services from cost cutting to changing supply channels to transactions and in the ultimate analysis restructuring to the equation.

That's helpful. Thank you. And then kind of going back to economic consulting, Ajay, cited some statistics on the HSR. Kinda deal counts. Is and I apologize if you outlined this already, but just to clarify, is that primarily regulatory driven slowdown? Or are there other kind of macro dynamics that already show up in that in that figure? Just trying to get a sense for you know, overall backdrop, some of the complex account specific headwinds? No, no, no, it's, the biggest backdrop is uncertainty. It's people freeze when they don't know and it's the tariffs more than the regulatory, people freeze when they don't know which which way things are going to come down. And that shows up in M and A. At least that's our supposition.

Great. And then maybe one last question. You know, obviously dealing with some of the departures in Compass Lexicon, there's specific headwinds within that segment. But I'm curious are there any kind of ripple effects that you expect from some of the lost revenue there to other parts of your business? I know in the past, you've talked about you know, having some success driving additional cross sell between EC and technology or CFR and Stratcom. I'm just kind of curious outside of what's isolated to that segment, if there's anything that you'd say there. Thank you.

So two things. First, those range of outcomes that one can reasonably foresee, related to either economic consulting, complex or second, third order are in our guidance. So that's number one. Number two, this could be unique. They're not no, there is no such expectations of this big cross order, but there could be some, but I wouldn't read too much into it.

Helpful. Thanks again.

There are no other questions. I just want to say thank you for your continued attention. Look, as we all know, the world is filled with uncertainty and as we talked about individual businesses of our can be affected by those uncertainty negatively or positively You know, just come back to the general point. That's there's a unique constellation of uncertainties today. But the notion that our business has surged and soared through periods of uncertainty in the past the thing I would come back to. And in fact, our company exists to help companies in the face of the deepest uncertainty. Does it mean you can't have a pause for a while or a big effect on one business or another and can always have cost issues as you're stabilizing business that has some departures and stuff like that. Nothing about the current uncertainty changes my fundamental conviction of this company is that the is closer to the beginning of its journey than the end. So look forward to being on that journey with all of you. Thank you very much.

And ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.