FTI Consulting, Inc. Q3 2026 Earnings Call Summary

Resumption of Historical Growth Trajectory

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• Management attributed the record Q3 performance to a 'resumption of the growth trajectory' established between 2017 and 2024, which had been obscured for the last five to six quarters by a major dislocation in the Compass Lexecon business.

• Performance was significantly bolstered by 'higher than usual success fees' and a lower tax rate; management normalized the record $3.84 adjusted EPS to approximately $2.90 to account for these one-time positive factors.

• The Economic Consulting segment transitioned from a $22 million quarterly year-over-year drag to being accretive, removing the primary headwind that previously masked growth across the rest of the company.

• Operational strength was driven by the ability to win a high share of complex cases despite mixed market conditions, resulting in record success fees in Corporate Finance and record bill rates in Economic Consulting and FLC.

• Management implemented targeted headcount actions affecting approximately 4% of employees to 'clean up' specific bets that did not meet investment cases, particularly in the Middle East, UK, and construction solutions outside the U.S.

• The strategic framework remains centered on a 'virtuous loop' where retaining top talent leads to winning brand-building work, which in turn attracts further world-class professionals.

Multi-Year Recovery and Efficiency Outlook

• Management expects a 'modest recovery' for the Economic Consulting segment over a multi-year period, cautioning that profitability will not immediately jump back to historical levels.

• Guidance for Q4 assumes typical negative seasonality, with Economic Consulting adjusted segment EBITDA expected to return to levels closer to Q2 performance.

• Headcount and real estate actions taken in Q3 and Q4 are projected to result in approximately $80 million in annualized cost savings.

• The outlook for Forensic and Litigation Consulting (FLC) remains cautious in the near term due to a 'continued pullback in regulatory enforcement' under the current U.S. administration.

• Management intends to maintain a 'low-leverage, expert-based model,' prioritizing organic growth and opportunistic share repurchases with remaining authorization of $264.7 million.

Restructuring and Litigation Context

• A $46 million special charge was recorded in Q3 for headcount actions and real estate costs, with an additional $7 million charge expected in Q4.

• GAAP EPS was reduced by $0.13 due to 'extraordinary litigation-related expenses,' which management characterized as an anomalous and non-recurring event.

• Corporate Finance success fees reached $40.7 million, including a 'particularly large' fee from a loan portfolio sale for the Federal Reserve Bank of Boston.

• The company issued an 'unprecedented' amount of forgivable loans during the recent Economic Consulting crisis, with approximately $50 million expected to burn off this year.