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What changed in FTI CONSULTING, INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of FTI CONSULTING, INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+339 added−353 removedSource: 10-K (2024-02-22) vs 10-K (2023-02-23)

Top changes in FTI CONSULTING, INC's 2023 10-K

339 paragraphs added · 353 removed · 247 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDuring 2022, the awards and recognitions received by the Company include the following: • FTI Consulting and Compass Lexecon led the Who’s Who Legal Arbitration: Expert Witnesses for the 13th consecutive year with 65 experts recognized. • FTI Consulting named to Forbes magazine’s list of America’s Best Management Consulting Firms for the seventh consecutive year, recognized in 13 sectors and functional areas. • FTI Consulting recognized as Consulting Firm of the Year by Who’s Who Legal for the seventh consecutive year. • FTI Consulting ranked #2 and its subsidiary Compass Lexecon ranked #1 on Global Arbitration Review ’s GAR 100 Expert Witness Firms’ Power Index. • FTI Consulting named a Best Firm to Work For by Consulting magazine for the fifth consecutive year. • FTI Consulting named to Forbes magazine’s list of America’s Best Employers for Women. • FTI Consulting named to Forbes magazine’s list of America’s Best Employers for New Graduates, ranking as the #1 professional services firm. • FTI Consulting named Global Turnaround Consulting Firm of the Year and Crisis Communications Firm of the Year by Global M&A Network . • FTI Consulting recognized as a leading firm by Chambers Litigation Support 2022 in the second annual Chambers Crisis and Risk Management 2022 guide. • FTI Consulting ranked #1 U.S.
Biggest changeDuring 2023, the awards and recognitions received by the Company include the following: • FTI Consulting and Compass Lexecon led the Who’s Who Legal Arbitration: Expert Witnesses for the 14th consecutive year with 74 experts recognized. • FTI Consulting named to Forbes magazine’s list of America’s Best Management Consulting Firms for the eighth consecutive year, recognized in 15 sectors and functional areas. • FTI Consulting recognized as Consulting Firm of the Year by Who’s Who Legal for the seventh consecutive year. • FTI Consulting ranked #1 and its subsidiary Compass Lexecon ranked #3 on Global Arbitration Review ’s GAR 100 Expert Witness Firms’ Power Index. • Compass Lexecon was named Competition Economics Firm of the Year by Who’s Who Legal for the ninth year in 2023, with 67 experts recognized in its 2023 Competition Guide. • FTI Consulting named a Best Firm to Work For by Consulting magazine for the sixth consecutive year. • FTI Consulting named to Forbes magazine’s lists of America’s Best Employers for Women and for New Graduates for the second consecutive year. • FTI Consulting named to Forbes magazine’s list of America’s Best Employers for New Graduates, for the second consecutive year. • FTI Consulting named Global Turnaround Consulting Firm of the Year and Americas Public Relations Firm of the Year by Global M&A Network . • FTI Consulting recognized as a leading firm in the Chambers Litigation Support 2023 Chambers Crisis and Risk Management 2023 and Chambers FinTech 2023 guides. • FTI Consulting ranked #1 U.S.
We perform sophisticated economic analysis and modeling of issues and provide expert testimony relating to transactions, commercial disputes, regulatory proceedings and a wide range of securities litigation to regulated and unregulated industries and government regulators, including the following offerings: • Contractual Claims • Rate Setting • Securities Litigation & Risk Management • Transfer Pricing • Valuation 5 International Arbitration.
We perform sophisticated economic analysis and modeling of issues and provide expert testimony relating to transactions, commercial disputes, regulatory proceedings and a wide range of securities litigation to regulated and unregulated industries and government regulators, including the following offerings: • Contractual Claims • Rate Setting • Securities Litigation & Risk Management • Transfer Pricing • Valuation International Arbitration.
We also engage independent contractors, who exclusively provide services to FTI Consulting, to supplement our professionals on client engagements as needed. We advance the best interests of all our stakeholders through: • Attracting and Retaining Highly Qualified Professionals. Our professionals are crucial to delivering our services to clients and generating new business.
We also engage independent contractors, who provide services to FTI Consulting to supplement our professionals on client engagements as needed. We advance the best interests of all our stakeholders through: • Attracting and Retaining Highly Qualified Professionals. Our professionals are crucial to delivering our services to clients and generating new business.
We design and provide communications to protect and enhance business reputations, build organizations’ public profiles and support their business outcomes, including the following offerings: • Crisis & Issues Management • Cybersecurity & Data Privacy Communications • Digital, Analytics & Insights • ESG & Sustainability • Litigation Communications • People & Transformation Financial Communications.
We design and provide communications to protect and enhance business reputations, build organizations’ public profiles and support their business outcomes, including the following offerings: • Crisis & Issues Management • Cybersecurity & Data Privacy Communications • Digital, Analytics & Insights • ESG & Sustainability • Litigation Communications 7 • People & Transformation Financial Communications.
The growth of multinational companies and global consolidation can precipitate antitrust and competition scrutiny and the spread internationally of issues and practices that historically have been more common in the U.S., such as increased and complex litigation, corporate restructuring and bankruptcy activities, and antitrust and competition scrutiny.
The growth and continuation of multinational companies and global consolidation can precipitate antitrust and competition scrutiny and the spread internationally of issues and practices that historically have been more common in the U.S., such as increased and complex litigation, corporate restructuring and bankruptcy activities, and antitrust and competition scrutiny.
We help companies streamline and optimize legal operations through expertise and technology, including the following offerings: • Advisory on Governance, Policy, Standards and Execution • Advisory on Operational Efficiencies • Contract Services • Legal Technology Selection and Implementation • Subscriptions and Managed Services E-discovery Services and Expertise.
We help companies streamline and optimize legal operations through expertise and technology, including the following offerings: • Advisory on Governance, Policy, Standards and Execution • Advisory on Operational Efficiencies • Contract Services • Legal Technology Selection and Implementation 6 • Subscriptions and Managed Services E-discovery Services and Expertise.
Our professionals help organizations better address risk as the growing volume and variety of enterprise data intersects with legal, regulatory and compliance needs.
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 combine public policy, capital markets and sector-specific expertise to offer unique insights for clients operating at the critical intersection between business and government, including the following offerings: • Government Investigations • Government Relations • Public Affairs Research & Opinion Polling • Public Affairs Support of Business Strategies • Public Policy Advocacy Our Industry Specializations We employ professionals across our segments and practices who are qualified to provide our core services plus a range of specialized consulting services and solutions that address the strategic, reputational, operational, financial, regulatory, legal and other needs of specific industries.
We combine public policy, capital markets and sector-specific expertise to offer unique insights for clients operating at the critical intersection between business and government, including the following offerings: • Government Investigations • Government Relations • Public Affairs Research & Opinion Polling • Public Affairs Strategy • Public Policy Advocacy Our Industry Specializations We employ professionals across our segments and practices who are qualified to provide our core services plus a range of specialized consulting services and solutions that address the strategic, reputational, operational, financial, regulatory, legal and other needs of specific industries.
For the year ended December 31, 2022, we derived approximately 63% and 37% of our consolidated revenues from the work of professionals who are assigned to locations inside and outside the U.S., respectively. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.
For the year ended December 31, 2023, we derived approximately 63% and 37% of our consolidated revenues from the work of professionals who are assigned to locations inside and outside the U.S., respectively. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.
Copies of this Annual Report, as well as other periodic reports filed with the SEC, may also be requested at no charge from our Corporate Secretary at FTI Consulting, Inc., 16701 Melford Boulevard, Suite 200, Bowie, MD 20715, email address: joanne.catanese@fticonsulting.com. 13
Copies of this Annual Report, as well as other periodic reports filed with the SEC, may also be requested at no charge from our Corporate Secretary at FTI Consulting, Inc., 16701 Melford Boulevard, Suite 200, Bowie, MD 20715, email address: joanne.catanese@fticonsulting.com. 14
Our services following the close of a transaction include post-M&A integration, transformation and disputes services. 8 • Operational Challenges and Opportunities . Operational challenges and opportunities drive demand for services across all of our segments. Businesses facing challenges require the evaluation and re-evaluation of strategy, risks and opportunities.
Our services following the close of a transaction include post-M&A integration, transformation and disputes services. • Operational Challenges and Opportunities . Operational challenges and opportunities drive demand for services across all of our segments. Businesses facing challenges require the evaluation and re-evaluation of strategy, risks and 9 opportunities.
Clients During the year ended December 31, 2022, no single client accounted for more than 10% of our consolidated revenues and no reportable segment had a single client that accounted for more than 10% of its respective total segment revenues.
Clients During the year ended December 31, 2023, no single client accounted for more than 10% of our consolidated revenues and no reportable segment had a single client that accounted for more than 10% of its respective total segment revenues.
We deliver a wide range of services centered around three core offerings: Antitrust & Competition Economics, Financial Economics and International Arbitration. In 2022, our Economic Consulting segment offered the following services: Antitrust & Competition Economics.
We deliver a wide range of services centered around three core offerings: Antitrust & Competition Economics, Financial Economics and International Arbitration. In 2023, our Economic Consulting segment offered the following services: Antitrust & Competition Economics.
Additionally, 99 of the top 100 law firms as ranked by American Lawyer Global 100 Most Revenue List refer or engage us directly or on behalf of numerous clients on multiple matters.
Additionally, 98 of the top 100 law firms as ranked by American Lawyer Global 100 Most Revenue List refer or engage us directly or on behalf of numerous clients on multiple matters.
We provide services that help companies more efficiently manage complex and evolving data collection and discovery amid a rapidly evolving landscape of new data sources and types, including the following offerings: • Analytics Research • Artificial Intelligence & Data Analytics • Blockchain Advisory Services • Investigations and Digital Forensics • Cryptocurrency Disputes and Investigations • Digital Asset Advisory Services • E-discovery and Data Compliance Management • Managed Document Review and Production • M&A-related Second Requests Information Governance, Privacy & Security Services.
We provide services that help companies more efficiently manage complex and evolving data collection and discovery amid a rapidly evolving landscape of new data sources and types, including the following offerings: • Analytics Research • AI & Data Analytics • Blockchain Advisory Services • Cryptocurrency Disputes and Investigations • Digital Asset Advisory Services • E-discovery and Data Compliance Management • Emerging Data Sources Discovery and Governance • Investigations and Digital Forensics • Managed Document Review and Production • M&A-related Second Requests Information Governance, Privacy & Security Services.
We deliver a wide range of services centered around three core offerings: Corporate Reputation, Financial Communications and Public Affairs. In 2022, our Strategic Communications segment offered the following services: Corporate Reputation.
We deliver a wide range of services centered around three core offerings: Corporate Reputation, Financial Communications and Public Affairs. In 2023, our Strategic Communications segment offered the following services: Corporate Reputation.
Our experts conduct investigations over a wide scope of issues and allegations, including the following offerings: • Accounting Advisory & Restatements • Anti-Bribery & Corruption Investigations • Anti-Money Laundering Investigations • Cybersecurity • ESG & Sustainability • Export Controls, Sanctions & Trade • Financial Regulatory Investigations • Foreign Corrupt Practices Act (“FCPA”) Violations • Forensic Accounting & Fraud Investigations • Monitorships Economic Consulting Our Economic Consulting segment, including subsidiary Compass Lexecon LLC (“Compass Lexecon”), 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.
Our experts conduct investigations over a wide scope of issues and allegations, including the following offerings: • Accounting Advisory & Restatements • Anti-Bribery & Corruption Investigations • Anti-Money Laundering Investigations • Cybersecurity • Environmental, Social and Governance (“ESG”) & Sustainability • Export Controls, Sanctions & Trade • Financial Regulatory Investigations • Foreign Corrupt Practices Act (“FCPA”) Violations • Forensic Accounting & Fraud Investigations • Monitorships 5 Economic Consulting Our Economic Consulting segment, including subsidiary Compass Lexecon LLC (“Compass Lexecon”), 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.
Corporate Finance & Restructuring 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.
Corporate Finance & Restructuring Our 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.
Our professionals include PhDs, MBAs, JDs, CPAs, CPA-ABVs (CPAs accredited in business valuations), CPA-CFFs (CPAs certified in financial forensics), CRAs (certified risk analysts), Certified Turnaround Professionals, Certified Insolvency and Reorganization Advisors, Certified Fraud Examiners, ASAs (accredited senior appraisers), construction engineers and former senior government officials. • Inclusive and High-Performing Culture.
Our professionals include Ph.Ds, MBAs, JDs, CPAs, CPA-ABVs (CPAs accredited in business valuations), CPA-CFFs (CPAs certified in financial forensics), CRAs (certified risk analysts), Certified Turnaround Professionals, Certified Insolvency and Reorganization Advisors, Certified Fraud Examiners, ASAs (accredited senior appraisers), construction engineers and former senior government officials. • Inclusive and High-Performing Culture.
To attract and retain highly qualified professionals, we offer various compensation opportunities, including sign-on bonuses, forgivable loans, retention bonuses, cash incentive bonuses and equity compensation, along with a competitive benefits package and the opportunity to work on challenging global engagements with highly skilled peers. • Experts-Driven Model.
To attract and retain highly qualified professionals, we offer various compensation opportunities, including sign-on bonuses, loans (including forgivable loans), retention bonuses, and incentive pay opportunities, along with a competitive benefits package and the opportunity to work on challenging global engagements with highly skilled peers. • Experts-Driven Model.
We help clients better navigate their evolving privacy obligations, prepare for and respond to external threats, decrease storage costs, remediate and secure corporate data, enable faster and deeper insight into data, and provide expert testimony to defend corporate data management processes, including the following offerings: • Data Privacy Program Development and Implementation 6 • Data Remediation, Disposition and Protection • Data Subject Access Requests • Migration of Enterprise Data to Cloud Applications • Post Data Breach Privacy Analysis and Response • Regulatory Readiness Advisory and Implementation Strategic Communications 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 help clients manage emerging data, navigate their evolving regulatory and privacy obligations, including AI, prepare for and respond to external threats, decrease storage costs, remediate and secure corporate data, enable faster and deeper insight into data, and provide expert testimony to defend corporate data management processes, including the following offerings: • Data Privacy Program Development and Implementation • Data Remediation, Disposition and Protection • Data Subject Access Requests • Migration of Enterprise Data to Cloud Applications • Pixel, Ad Tracker and AdTech Services • Post Data Breach Privacy Analysis and Response • Regulatory Readiness Advisory and Implementation Strategic Communications 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 expert solutions driven by investigations, litigation, M&A, antitrust and competition, and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security Services. In 2022, our Technology segment offered the following services: Corporate Legal Department Consulting.
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. In 2023, our Technology segment offered the following services: Corporate Legal Department Consulting.
We provide our clients with expert advice and solutions involving business transformation & strategy, transactions, turnaround & restructuring, construction & environmental solutions, data & analytics, disputes, health solutions, risk and investigations, antitrust & competition economics, financial economics, international arbitration, corporate legal department consulting, electronic discovery (or “e-discovery”) services and expertise, information governance, privacy & security services, corporate reputation, financial communications and public affairs.
We provide our clients with expert advice and solutions involving business transformation, strategy, transactions, turnaround & restructuring, construction, projects, assets & environmental solutions, data & analytics, disputes, healthcare risk management & advisory, risk and investigations, antitrust & competition economics, financial economics, international arbitration, corporate legal department consulting, electronic discovery (or “e-discovery”) services and expertise, information governance, privacy & security services, corporate reputation, financial communications and public affairs.
We are also an advisor to 82 of the Fortune 100 companies, 50 of the world’s top 50 bank holding companies and 50 of the top 100 private equity firms on the Private Equity International 300 list. • Demand for Integrated Solutions and a Consultative Approach .
We are also an advisor to 83 of the Fortune 100 companies, 38 of the world’s top 50 bank holding companies and 64 of the top 100 private equity firms on the Private Equity International 300 list. • Demand for Integrated Solutions and a Consultative Approach .
We perform sophisticated economic analyses and provide expert testimony on international and regulatory antitrust and competition proceedings, practices and litigation, including the following offerings: • Merger & Acquisition (“M&A”)-Related Antitrust • Non-M&A-Related Antitrust Financial Economics.
We perform sophisticated economic analyses and provide expert testimony on international and regulatory antitrust and competition proceedings, practices and litigation, including the following offerings: • M&A-related Antitrust • Non-M&A-related Antitrust Financial Economics.
We do this by attracting and retaining experts in their fields, empowering a diverse and inclusive global workforce, providing opportunities for advancement and personal growth, and supporting the communities in which we do business. As of December 31, 2022, we employed 7,635 employees, of which 6,063 were revenue-generating professionals.
We do this by attracting and retaining experts in their fields, empowering a diverse and inclusive global workforce, providing opportunities for advancement and personal growth, and supporting the communities in which we do business. As of December 31, 2023, we employed 7,990 employees, of which 6,350 were revenue-generating professionals.
We deliver a wide range of services centered around three core offerings: Business Transformation & Strategy, Transactions and Turnaround & Restructuring. In 2022, our Corporate Finance segment offered the following services: Business Transformation & Strategy.
We deliver a wide range of services centered around four core offerings: Business Transformation, Strategy, Transactions and Turnaround & Restructuring. In 2023, our Corporate Finance segment offered the following services: Business Transformation.
Our operations span the globe encompassing locations within: (i) the Americas, consisting of our 44 U.S. offices located in 23 states, and four offices located in Canada; (ii) Latin America, consisting of six offices located in Argentina, Brazil, Colombia, Mexico, the Cayman Islands and the Virgin Islands (British); (iii) Asia Pacific, consisting of 17 offices located in Australia, China (including Hong Kong), India, Indonesia, Japan, Malaysia, Singapore and South Korea; and (iv) Europe, Middle East and Africa, consisting of 35 offices located in Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Qatar, Saudi Arabia, South Africa, Spain, Switzerland, United Arab Emirates and the United Kingdom (“U.K.”).
Our operations span the globe encompassing locations within: (i) the Americas, including 42 U.S. offices located in 22 states and Washington, D.C., and four offices located in Canada; (ii) Latin America, including six offices located in Argentina, Brazil, Colombia, Mexico, and the British Oversees Territories of the Cayman Islands and the Virgin Islands; (iii) Asia Pacific, including 16 offices located in Australia, China (including Hong Kong), India, Indonesia, Japan, Malaysia, Singapore and South Korea; and (iv) Europe, Middle East and Africa, including 35 offices located in Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Netherlands, Qatar, Saudi Arabia, South Africa, Spain, Switzerland, United Arab Emirates and the United Kingdom (“U.K.”).
We support our global clients with disputes of all kinds, including the following offerings: • Claims in International Public Law • Complex Commercial and Regulatory Disputes • Financial Products and Broker-dealer Disputes • Insurance-Related Disputes • Intellectual Property • Labor and Employment Health Solutions.
We support our global clients with disputes of all kinds, including the following offerings: • Claims in International Public Law • Complex Commercial and Regulatory Disputes • Energy-related Disputes • Financial Products and Broker-dealer Disputes • Insurance-related Disputes • Intellectual Property • Labor and Employment Healthcare Risk Management & Advisory.
We provide advisory services to help our clients stabilize finances and operations to reassure debtors, creditors and other stakeholders that proactive steps are being taken to preserve and enhance value, including the following offerings: • Company Advisory • Contentious Insolvency • Creditor Advisory • Dispute Advisory & Litigation Support • Interim Management 3 Forensic and Litigation Consulting 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 in risk and investigations and disputes, including cybersecurity, and a focus on highly regulated industries such as with our Construction & Environmental Solutions and Health Solutions Services.
We provide advisory services to help our clients stabilize finances and operations to reassure debtors, creditors and other stakeholders that proactive steps are being taken to preserve and enhance value, including the following offerings: • Company Advisory • Contentious Insolvency • Creditor Advisory • Dispute Advisory & Litigation Support • Interim Management Forensic and Litigation Consulting Our 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.
Companies in the developing world and multinational companies can benefit from our expert advice to access capital and business markets, comply with the regulatory and other requirements of multiple countries, structure transactions and conduct due diligence, which drives demand for the services of all of our segments. • Financial Markets .
Companies in the developing world and multinational companies can benefit from our expert advice to access capital and business markets, comply with the regulatory and other requirements of multiple countries, structure transactions and conduct due diligence, which drives demand for services across all of our segments. • Emerging Data, Including Cloud-Based Collaboration and Communications Platforms.
We provide services that help clients strategize, structure, conduct diligence, integrate, carve-out, value and communicate around business transactions, including the following offerings: • Diligence • Investment Banking & Transaction Opinions • Merger Integration & Carve-Out Advisory • Strategic Alternatives • Valuation Turnaround & Restructuring.
We provide services that help clients strategize, structure, conduct diligence, integrate, carve-out, value and communicate around business transactions, including the following offerings: • Diligence (Financial, Tax, HR, IT, Synergy and Regulatory) • Fairness and Solvency Opinions • Investment Banking • Merger Integration & Carve-Out Advisory • Strategic Alternatives • Valuation Turnaround & Restructuring.
We provide independent business transformation and strategy expertise to help drive change across the enterprise, enhance performance, build sustainable growth and value and foster a culture of excellence, including the following offerings: • Enterprise Transformation • Environmental, Social and Governance (“ESG”) & Sustainability • Office of the CFO & Finance Transformation • People & Change • Revenue & Operations • Strategy • Technology Transformation Transactions.
We provide independent business transformation expertise to help drive change across the enterprise, enhance performance, build sustainable growth and value and foster a culture of excellence, including the following offerings: • Enterprise Transformation • Office of the Chief Financial Officer & Finance Transformation • People & Change • Revenue & Operations • Technology Transformation Strategy.
Our Technology segment primarily competes with consulting and/or software providers specializing in e-discovery, electronically stored information and the management of electronic content. Competitors may offer products and/or services intended to address one piece or more of those areas.
Our Economic Consulting segment primarily competes with individually recognized economists, specialty boutiques and large consulting companies with service offerings similar to ours. Our Technology segment primarily competes with consulting and/or software providers specializing in e-discovery, electronically stored information and the management of electronic content. Competitors may offer products and/or services intended to address one piece or more of those areas.
The major industry groups that we service include: • Aerospace & Defense • Agriculture 7 • Airlines & Aviation • Automotive & Industrial • Construction • Energy, Power & Products • Environmental • Financial Services • Healthcare & Life Sciences • Hospitality, Gaming & Leisure • Insurance • Mining • Private Equity • Public Sector & Government Contracts • Real Estate • Retail & Consumer Products • Telecom, Media & Technology • Transportation & Logistics Our Business Drivers Factors that drive demand for our business offerings include: • Developing Markets .
The major industry groups that we service include: • Aerospace & Defense • Airlines & Aviation • Blockchain & Digital Assets • Chemicals • Construction & Environmental • Energy • Financial Services • Food & Agriculture • Healthcare & Life Sciences • Hospitality, Gaming & Leisure • Industrials & Automotive • Insurance • Mining • Private Equity • Power, Renewables & Energy Transition • Public Sector & Government Contracts 8 • Real Estate • Retail & Consumer Products • Telecom, Media & Technology • Transportation & Logistics Our Business Drivers Material factors that drive demand for our business offerings include: • Artificial Intelligence and Other New and Emerging Technologies.
Corporate Information Our common stock is listed on the New York Stock Exchange (the “NYSE”) under the symbol FCN. Our executive offices are located at 555 12 th Street NW, Suite 700, Washington, D.C. 20004. Our telephone number is 202-312-9100. Our website is http://www.fticonsulting.com .
Our executive offices are located at 555 12 th Street NW, Suite 700, Washington, D.C. 20004. Our telephone number is 202-312-9100. Our website is http://www.fticonsulting.com .
We foster a culture where our professionals can grow their careers and achieve their full potential. We also hire and strive to retain professionals with the diverse set of qualities, backgrounds and expertise that our clients and teams need.
We also hire and strive to retain professionals with the diverse set of qualities, backgrounds and expertise that our clients and teams need.
We provide compliance, investigative, litigation consulting and remediation expertise on a wide range of investigations to boards of directors, executive management, in-house counsel and their outside legal advisors at law firms.
Our key services include the following offerings: • Disputes and Investigations • Financial Advisory • Managed Care & Value Based Care • Risk, Regulatory & Quality Risk and Investigations. We provide compliance, investigative, litigation consulting and remediation expertise on a wide range of investigations to boards of directors, executive management, in-house counsel and their outside legal advisors at law firms.
This diversity helps to mitigate the impact of economic cycles, crises, events and changes in a particular practice, industry or country. • Diversified Portfolio of Elite Clients .
Our broad range of practices and services, the diversity of our revenue streams, our specialized industry expertise and our global reach distinguish us from our competitors. This diversity helps to mitigate the impact of economic cycles, crises, events and changes in a particular practice, industry or country. • Diversified Portfolio of Elite Clients .
We work with clients across healthcare providers, healthcare payers, life sciences companies, commercial/private equity and law firms to discern innovative solutions that optimize performance in the short-term and prepare for future strategic, operational, financial and legal challenges.
We work with healthcare providers, healthcare payers, life sciences companies, and law firms to discern solutions that address business risks and advise and prepare our clients for both short-term and future strategic, operational, data and technological, financial and legal challenges.
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: • Corporate Finance & Restructuring; • Forensic and Litigation Consulting; • Economic Consulting; • Technology; and 1 • Strategic Communications.
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.
All full-time FTI Consulting employees are eligible to participate in our Corporate Citizenship program, which includes charitable gift matching, paid time off for volunteering and corporate-sponsored pro bono engagements. Employment Agreements As of December 31, 2022, we had written employment agreements with substantially all of our 703 Senior Managing Directors and equivalent personnel (collectively, “SMD”).
All full-time FTI Consulting employees are eligible to participate in our Corporate Citizenship program, which includes charitable gift matching, paid time off for volunteering and corporate-sponsored pro bono engagements.
We deliver a wide range of services centered around five core offerings: Construction & Environmental Solutions, Data & Analytics, Disputes, Health Solutions and Risk and Investigations. In 2022, our FLC segment offered the following services: Construction & Environmental Solutions.
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. In 2023, our FLC segment offered the following services: Construction, Projects, Assets & Environmental Solutions (“Construction Solutions”).
The value of such equity and cash-based awards, in the aggregate, as well as on an individual basis, has been and is expected to continue to be significant. Select SMDs may participate in certain incentive compensation programs in which they are eligible.
The value of our incentive-based opportunities, in the aggregate, as well as on an individual basis, has been and is expected to continue to be significant.
Since our businesses depend in large part on professional relationships, there are low barriers of entry for professionals, including our professionals, electing to work independently, start their own firms or change employers. 12 Our Corporate Finance segment primarily competes with specialty boutiques and publicly traded companies providing restructuring, bankruptcy and M&A services and, to a lesser extent, large investment banks and global accounting firms.
Since our businesses depend in large part on professional relationships, there are low barriers of entry for professionals, including our professionals, electing to work independently, start their own firms or change employers.
Year Ended December 31, 2022 2021 Corporate Finance & Restructuring 36 % 34 % Forensic and Litigation Consulting 21 % 21 % Economic Consulting 23 % 25 % Technology 11 % 10 % Strategic Communications 9 % 10 % Total 100 % 100 % The following table sets forth the number of offices and countries in which each segment operates, as well as the number of revenue-generating professionals in each of our reportable segments.
Year Ended December 31, 2023 2022 Corporate Finance & Restructuring (1) 39 % 38 % Forensic and Litigation Consulting (1) 19 % 19 % Economic Consulting 22 % 23 % Technology 11 % 11 % Strategic Communications 9 % 9 % Total 100 % 100 % (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. 2 The following table sets forth the number of offices and countries in which each segment operates, as well as the number of revenue-generating professionals in each of our reportable segments.
Larger competitors may be able to react more quickly to new regulatory or legal requirements and other changes and may be able to innovate more quickly and efficiently. Our Strategic Communications segment competes with large public relations firms, as well as boutique M&A, crisis communications and public affairs firms.
Larger competitors may be able to react more quickly to new regulatory or legal requirements and other changes and may be able to innovate more quickly and efficiently.
Our FLC segment primarily competes with other large consulting companies and global accounting firms with service offerings similar to ours. Our Economic Consulting segment primarily competes with individually recognized economists, specialty boutiques and large consulting companies with service offerings similar to ours.
Our Corporate Finance segment primarily competes with specialty boutiques and publicly traded companies providing restructuring, bankruptcy and M&A services and, to a lesser extent, large investment banks, management consulting firms and global accounting firms. Our FLC segment primarily competes with other large consulting companies, specialty boutiques and global accounting firms with service offerings similar to ours.
Restructuring Advisor by The Deal for the 15th consecutive year. • FTI Consulting named as Communications Firm of the Year by M&A Advisor Turnaround Awards. 9 • FTI Consulting recognized as Cybersecurity Public Relations Agency of the Year by Cybersecurity Excellence Awards. • Diversified Service Offerings .
Restructuring Advisor by The Deal for the 16th consecutive year. 10 • FTI Consulting recognized as Cybersecurity Public Relations Agency of the Year by Cybersecurity Excellence Awards for the third consecutive year. • Diversified Service Offerings . Our five reportable segments offer a diversified portfolio of practices providing services across our four geographic regions.
While we aggressively seek new business opportunities, we maintain high professional standards and carefully evaluate potential new client relationships and engagements before accepting them. 10 • ESG . At FTI Consulting, we believe proactively identifying and addressing ESG risks and opportunities are integral to sustaining our strong growth trajectory and critical to maintaining our competitive position in today’s dynamic market.
While we aggressively seek new business opportunities, we maintain high professional standards and carefully evaluate potential new client relationships and engagements before accepting them. 11 Human Capital Resources At FTI Consulting, we seek to provide the highest quality services to our clients.
December 31, December 31, 2022 2022 2021 Offices Countries Billable Headcount Billable Headcount Corporate Finance & Restructuring 67 22 1,946 1,702 Forensic and Litigation Consulting 71 21 1,584 1,496 Economic Consulting 47 18 1,007 921 Technology 42 17 556 468 Strategic Communications 40 19 970 814 Total 6,063 5,401 2 Our Reportable Segments The Company is organized into five reportable segments, each of which seeks to be a global leader in its own right by serving as a trusted advisor when our clients are presented with challenging issues and the risks are high.
Our Reportable Segments The Company is organized into five reportable segments, each of which seeks to be a global leader in its own right by serving as a trusted advisor when our clients are presented with challenging issues and the risks are high.
We provide commercial management, risk-based advisory and dispute resolution services for complex construction projects across multiple industries and help organizations manage environmental issues or programmatic challenges. Our key services include the following offerings: • Asset Lifecycle Management • Capital Program Risk Management • Cost Analytics and Auditing Services Data & Analytics.
We provide dispute resolution, advisory & transformation services that address the strategic, financial, operational, regulatory, and capital needs of complex construction & environmental projects, programs, liabilities, and physical asset management for organizations across multiple industries, and help organizations address environmental programmatic challenges and liability-related issues.
Some service providers are larger than we are and, on certain engagements, may have an advantage over us with respect to one or more competitive factors. Specialty boutiques or smaller local or regional firms, while not offering the range of services we provide, may compete with us on the basis of geographic proximity, specialty services or price.
Our Strategic Communications segment competes with large public relations firms, as well as boutique M&A, crisis communications and public affairs firms. 13 Some service providers are larger than we are and, on certain engagements, may have an advantage over us with respect to one or more competitive factors.
Some or all of the principal amount and accrued interest of the loans we make will be forgiven by us upon the passage of time, or their repayment will be funded by us through additional cash bonus compensation, provided that the recipient is an employee or consultant on the forgiveness date.
Loans provide that the principal amount and accrued interest will be forgiven, or repayment will be funded through an additional cash bonus payment, over the passage of time (subject to continued service) ranging from two to nine years.
We offer robust Diversity, Inclusion & Belonging programs and training opportunities to our employees across the globe at every level. • Talent Development. We support the development of our professionals at all levels of their careers.
We offer robust Diversity, Inclusion & Belonging programs and training opportunities to our employees across the globe at every level, including, among others, the FTI Women’s Initiative Network (FTI WIN), Pride Network, Asian Diversity Network, Hispanic/Latinx Organization for Leadership & Advancement (HOLA) and Black Employee Network (BEN).
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These services are supported by our data & analytics technology-enabled solutions, which help our clients analyze large, disparate sets of data related to their business operations and support our clients during regulatory inquiries and commercial disputes.
Added
We report financial results for the following five reportable segments: • Corporate Finance & Restructuring (“Corporate Finance”); • Forensic and Litigation Consulting (“FLC”); • Economic Consulting; • Technology; and 1 • Strategic Communications.
Removed
We provide strategic business solutions to clients requiring in-depth analysis of large, disparate sets of financial, operational and transactional data where our professionals work hand-in-hand with industry, regulatory, legal and topical specialists. Our key services include the following offerings: • Anti-Corruption and Anti-Money Laundering • Dispute Resolutions • Identifying Sanction Breaches and Fraud • Investigations and Remediation Disputes.
Added
December 31, December 31, 2023 2023 2022 Offices Countries (1) Billable Headcount Billable Headcount Corporate Finance & Restructuring (2) 70 26 2,215 2,100 Forensic and Litigation Consulting (2) 68 19 1,447 1,430 Economic Consulting 47 19 1,089 1,007 Technology 43 18 628 556 Strategic Communications 42 22 971 970 Total 6,350 6,063 (1) “Countries” include the British Overseas Territories of the Cayman Islands and Virgin Islands (2) 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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Our key services include the following offerings: • Business Transformation • Digital Health • Financial Advisory • Healthcare Managed Services • Revenue Solutions 4 • Risk, Regulatory & Quality Risk and Investigations.
Added
Our FTI Delta strategy offering delivers tangible value throughout the entire strategy-to-execution journey for top-tier corporations, private equity and debt investors, mid-market companies and governments from our industry-specialized strategy practice, including the following offerings: • Commercial Diligence • Commercial Excellence • Cost Transformation • Merger & Acquisition (“M&A”) Strategy • Organization and Governance 3 • Product Innovation and Research & Development Transactions.
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Our five reportable segments offer a diversified portfolio of practices providing services across our four geographic regions. Our broad range of practices and services, the diversity of our revenue streams, our specialized industry expertise and our global reach distinguish us from our competitors.
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Our key services include the following offerings: • Environmental Cost & Damages Analyses • Environmental Dispute Resolution • Expert Services in Delay, Disruption, Quantum & Damages • Project Delivery and Asset Management Advisory & Transformation • Technology Enablement, Data Intelligence & Construction Analytics Data & Analytics.
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As a professional services firm, FTI Consulting’s environmental impact is primarily driven by two factors: our business travel and leased office locations. FTI Consulting has committed to reaching net-zero greenhouse gas emissions by 2030.
Added
We provide in-depth analysis of large, disparate sets of financial, operational and transactional data, often when our clients are faced with a regulatory inquiry or a dispute. We provide strategic business solutions, including custom application and software development, to solve critical client needs.
Removed
To remain transparent about our ESG practices, FTI Consulting has disclosed ESG metrics in our 2021 Corporate Sustainability Report according to several reporting frameworks, including the Task Force on Climate-Related Disclosures and the Sustainability Accounting Standards Board.
Added
Our professionals, who include computer scientists, Ph.D data scientists, mathematicians, business and finance experts, work together with industry, regulatory, legal and other experts.
Removed
Additionally, we are a participant of the United Nations (“UN”) Global Compact and support its Ten Principles on human rights, labor, environment and anti-corruption, as well as the UN Sustainable Development Goals. Human Capital Resources At FTI Consulting, we seek to provide the highest quality services to our clients.
Added
Our key services include the following offerings: • Anti-corruption, Anti-money Laundering, Sanctions and Fraud Investigations 4 • Data Strategy, Governance and Reconciliation • Data Visualization, Process Improvement and Business Intelligence Solutions • Dispute Resolution • Machine Learning and Other AI Solutions • Remediation and Settlement Administration Disputes.
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These arrangements generally provide for fixed salary and eligibility for incentive payment programs (which, in some cases, may be based on financial measures such as Adjusted EBITDA, Adjusted EBITDA Margin, revenues or relative total shareholder return), salary continuation benefits, accrued bonuses and other benefits beyond the termination date if an SMD leaves our employment for specified reasons prior to the expiration date of the employment agreement.
Added
We have identified AI and other new and emerging technologies as future growth engines for FTI Consulting. We currently offer AI-related consulting as a service to clients and are actively investigating other opportunities. We also incorporate AI, machine learning and other new technologies to perform certain of the other services that we currently offer.
Removed
The length and amount of payments to be paid by us following the termination or resignation of an SMD will vary, depending on whether the employee resigned with or without “good reason” or was terminated by us with or without “cause,” died or became “disabled,” or was terminated as a result of a “change in control” (all such terms as defined in such SMD’s employment agreement).
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We have been making judicious investments to refine our strategy, develop new services, identify opportunities, improve our performance and client satisfaction, and otherwise benefit our clients. Our segments employ specialists in AI and other developing technologies who provide specialized services and expertise.
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All of our written employment agreements with SMDs specify the required notice period to be given by us or the SMD prior to termination of employment and include covenants providing for restrictions on the SMD 11 competing against, and soliciting employees from, the Company for a specified period of time following the end of the SMD's employment.
Added
We believe that demand for AI, machine learning and other innovative technology-related consulting services will continue to grow as the development of AI and other technologies progress, investment increases, markets expand, products and applications develop, innovation continues, technology matures, acceptance rises, regulation advances, and ethical and similar issues are addressed.
Removed
Incentive, Retention and Sign-on Payments Our SMDs, consultants and other professionals may receive incentive, retention or sign-on payments through unsecured general recourse forgivable loans, equity awards and/or other payments (collectively, “Retention Awards”), generally structured to vest, be forgiven or be payable over various multi-year periods.
Added
We believe that organizations will seek out expertise like ours to improve workflow and outcomes. • Developing Markets .
Removed
We believe that providing these Retention Awards greatly enhances our ability to attract and retain key professionals.
Added
New and disparate communication systems, built on the cloud to enable easier access for global and mobile workforces, present new challenges for organizations to control, understand, manage and remediate their data.
Removed
The value of the forgivable loans we have made, in the aggregate, as well as on an individual basis, has been, and we anticipate will continue to be, significant. Our executive officers and outside directors are not eligible to receive loans, and no loans have been made to them.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSome of these factors we cannot predict with certainty, including general economic and financial market conditions; the complexity, number, type, size and timing of client engagements; the level of demand for our services; appropriate professional staffing levels, in light of changing client demands and market conditions; utilization of professionals across segments and geographic regions; competition; and acquisitions.
Biggest changeA number of factors affect the utilization of our workforce, some of which we cannot predict with certainty, including general economic and financial market conditions; the complexity, number, type, size and timing of client engagements; the level of demand for our services; appropriate staffing levels, in light of changing client demands, expectations or market conditions; redeployment or utilization of staff across segments and geographic regions; competition; acquisitions; or the utilization of temporary independent consultants who may be compensated on a different or higher basis than certain employees, provide services under fixed-term and/or fixed-fee contracts that are not amenable to extension or early termination, or are not as disposed to redeployment to other client engagements, segments or practices.
The positive effects of certain events or factors on certain segments and practices may not be sufficient to overcome the negative effects of those same events or factors on other parts of our business.
The positive effects of certain events or factors on certain segments and practices may not be sufficient to overcome the negative effects of those same or other events or factors on other parts of our business.
Certain of our clients prefer fixed and other alternative fee arrangements that place revenue ceilings or other limitations on our fee structure or may shift more of our revenue-generating potential to back-end contingent and success fee arrangements.
Certain clients prefer fixed and other alternative fee arrangements that place revenue ceilings or other limitations on our fee structure or may shift more of our revenue-generating potential to back-end contingent and success fee arrangements.
We expect that these arrangements will continue and that the Company has and will continue to enter into similar arrangements with other economists and professionals hired by the Company.
We expect that these arrangements will continue, and the Company has and will continue to enter into similar arrangements with other economists and professionals hired by the Company.
Although our clients generally contract for services with us as a company, and not with an individual professional, in the event that a professional leaves, such clients may decide that they prefer to continue working with a specific professional rather than with our Company.
Although our clients generally contract for services with us as a company, and not with an individual, in the event that a professional leaves, such clients may decide that they prefer to continue working with a specific professional rather than with our Company.
Our senior secured bank revolving credit facility (“Credit Facility”), or our other indebtedness outstanding from time to time, contains or may contain operating covenants that may, subject to exceptions, limit our ability and the ability of our subsidiaries to, among other things: (i) create, incur or assume certain liens; (ii) make certain restricted payments, investments and loans; (iii) create, incur or assume additional indebtedness or guarantees; (iv) create restrictions on the payment of dividends or other distributions to us from our restricted subsidiaries; (v) engage in M&A transactions, consolidations, sale-leasebacks, joint ventures, and asset and security sales and dispositions; (vi) pay dividends or redeem or repurchase our capital stock; (vii) alter the business that we and our subsidiaries conduct; (viii) engage in certain transactions with affiliates; (ix) modify the terms of certain indebtedness; (x) prepay, redeem or purchase certain indebtedness; and (xi) make material changes to accounting and reporting practices.
Our senior secured bank revolving credit facility (“Credit Facility”), or our other indebtedness outstanding from time to time, contains or may contain operating covenants that may, subject to exceptions, limit our ability and the ability of our subsidiaries to, among other things: (i) create, incur or assume certain liens; (ii) make certain restricted payments, investments and loans; (iii) create, incur or assume additional indebtedness or guarantees; (iv) create restrictions on the payment of dividends or other distributions to us from our restricted subsidiaries; (v) engage in M&A transactions, consolidations, sale- 26 leasebacks, joint ventures, and asset and security sales and dispositions; (vi) pay dividends or redeem or repurchase our capital stock; (vii) alter the business that we and our subsidiaries conduct; (viii) engage in certain transactions with affiliates; (ix) modify the terms of certain indebtedness; (x) prepay, redeem or purchase certain indebtedness; and (xi) make material changes to accounting and reporting practices.
There is no assurance that (i) the software we license to provide our services will remain competitive or technologically innovative, (ii) new, innovative or improved software or products will not be developed by others that will compete more effectively with the software or products we currently license or use to service our customers, or (iii) we can enter into licenses or other agreements on economically advantageous terms to license or enter into other agreements to use new or more innovative third-party software and products to provide our services.
There is no assurance that (i) the software we license to provide our services will remain competitive or technologically innovative, (ii) new, innovative or improved software or products will not be developed by others that will compete more effectively with the software or products we currently license or use to service our customers, or (iii) we can enter into licenses or other agreements on economically advantageous terms to utilize new or more innovative third-party software and products to provide our services.
Trustee could find that we no longer meet the disinterestedness standard because of real or potential changes in our status as a disinterested party and order us to resign, which could result in disgorgement of fees. Acquisitions may require us to resign from a client engagement because of relationship issues that are not currently identifiable.
Trustee could find that we no longer meet the disinterestedness standard because of real or potential changes in our status as a disinterested party and order us to resign, which could result in disgorgement of fees. Future acquisitions may require us to resign from a client engagement because of relationship issues that are not currently identifiable.
In addition, our mix of practice offerings adds complexity to the task of predicting revenues and results of operations and managing our staffing levels and expenditures across changing business cycles and economic environments. 14 Our results are subject to seasonal and similar factors, such as during the fourth quarter when our professionals and our clients typically take vacations.
In addition, our mix of practice offerings adds complexity to the task of predicting revenues and results of operations and managing our staffing levels and expenditures across changing business cycles and economic environments. Our results are subject to seasonal and similar factors, such as during the fourth quarter when our professionals and our clients typically take vacations.
In addition, our global expansion into or within locations where we are not well-known or where demand for our services is not well-developed could also contribute to low or lower utilization rates in certain locations. Segments may enter into engagements such as fixed-fee and time and materials with caps.
In addition, our global expansion into or within locations where we are not well-known or where demand for our services is not well-developed could also contribute to low or lower utilization rates in certain locations. Certain practices within our segments may enter into engagements such as fixed-fee and time and materials with caps.
Such controversial engagements or negative reactions may adversely affect our reputation or the reputations of our 22 employees and other professionals who provide services, or may otherwise harm our ability to attract or retain clients, employees and other professionals, all of which could have an adverse effect on our results of operations, business or prospects.
Such controversial engagements or negative reactions may adversely affect our reputation or the reputations of our employees and other professionals who provide services, or may otherwise harm our ability to attract or retain clients, employees and other professionals, all of which could have an adverse effect on our results of operations, business or prospects.
In addition, we may not pursue legal remedies if we determine that preserving cooperation and a professional relationship with a former employee or his or her clients, or other concerns, outweighs the benefits of any possible legal recourse or the likelihood of success does not justify the costs of pursuing a legal remedy.
In addition, we may not pursue legal remedies if we determine that preserving cooperation and a professional relationship with a former employee or his or her clients, or other concerns, outweighs the benefits of any possible legal recourse or the likelihood of success does not justify the costs of pursuing a legal 25 remedy.
In addition, as a corporation whose securities are registered under the Securities Act and publicly traded on the NYSE, our executive officers, outside directors, employees and independent contractors are required to comply with the prohibitions against insider trading of our securities. In addition, we impose certain restrictions on the trading of securities of our clients.
In addition, as a corporation whose securities are registered under the Securities Act and publicly traded on the NYSE, our executive officers, outside directors, employees and 19 independent contractors are required to comply with the prohibitions against insider trading of our securities. In addition, we impose certain restrictions on the trading of securities of our clients.
In addition to the risks discussed below and elsewhere in this Annual Report, other risks and uncertainties not currently known to us or that we currently consider immaterial could, in the future, materially and adversely affect our business, financial condition and financial results.
In addition to the risks discussed below and elsewhere in this Annual Report, other risks and uncertainties not currently known to us or that we currently consider immaterial could, in the future, materially and adversely affect our business, prospects, financial condition and financial results.
We are not able to predict the positive or negative effects that future events or changes to the U.S. or global economies will have on our business or the business of any particular segment.
We are not able to predict the positive or negative effects that future events or changes to the U.S. or global economies will have on our business or the business of any particular segment or practice.
In some cases, our segments are engaged by certain clients who are experiencing or anticipate experiencing financial distress or are facing complex challenges, are engaged in litigation or regulatory or judicial proceedings, or are facing foreclosure of collateral or liquidation of assets.
In some cases, our segments are engaged by certain clients who are or anticipate experiencing financial distress or are facing complex challenges, are engaging in litigation or regulatory or judicial proceedings, or are facing foreclosure of collateral or liquidation of assets.
Those payments have taken the form of unsecured general recourse forgivable loans, stock options, restricted stock, cash-based stock appreciation rights and other equity- and cash-based awards, and cash payments to attract and retain our professional employees.
Payments have taken the form of unsecured general recourse forgivable loans, stock options, restricted stock, cash-based stock appreciation rights and other equity- and cash-based awards, and cash payments to attract and retain our professional employees.
Factors that could negatively affect utilization in our segments include: Corporate Finance — The completion of bankruptcy proceedings; the timing of the completion of other engagements; fewer and smaller restructuring (including bankruptcy) cases; a recovering or strong economy; easy credit availability; low interest rates; fewer, smaller and less complex M&A and restructuring activity; and less capital markets activity or fewer complex transactions.
Factors that could negatively affect utilization in our segments include: Corporate Finance — The completion of bankruptcy proceedings; the timing of the completion of other engagements; fewer and smaller restructuring (including bankruptcy) cases; a recovering or strong economy; easy credit availability; lower interest rates; fewer, smaller and less complex M&A and restructuring activity; and less capital markets activity or fewer complex transactions.
ITEM 1A. RISK FACTORS All of the following risks could materially and adversely affect our business, financial condition and results of operations.
ITEM 1A. RISK FACTORS All of the following risks could materially and adversely affect our business, prospects, financial condition and results of operations.
Our operations involve financial and business risks that differ among the jurisdictions in which we operate including: (i) cultural and language differences; (ii) various levels of FTI Consulting “brand” recognition; (iii) different employment laws and rules, employment or service contracts, compensation methods, and social and cultural factors that could result in employee turnover, lower utilization rates, higher costs and cyclical fluctuations in utilization that could adversely affect financial and operating results; (iv) foreign currency disruptions and currency fluctuations between the U.S. dollar and foreign currencies that could adversely affect financial and operating results; (v) differing legal and regulatory requirements and other barriers to conducting business; (vi) difficulties resolving the collection of receivables when legal proceedings are necessary; (vii) difficulties in managing our non-U.S. operations, including client relationships, in certain locations; (viii) disparate systems, policies, procedures and processes; (ix) failure to comply with the FCPA and anti-bribery laws of other jurisdictions; (x) higher operating costs; (xi) longer sales and/or collections cycles; (xii) potential restrictions or adverse tax consequences resulting from the repatriation of foreign earnings, such as trapped foreign losses and importation or withholding taxes; (xiii) different or less stable political and/or economic environments; (xiv) conflicts between and among the U.S. and countries in which we conduct business, including those arising from trade disputes or disruptions, the termination or suspension of treaties, or boycotts; (xv) civil disturbances or other catastrophic events that reduce business activity; (xvi) political interference with our ability to conduct business in the applicable jurisdiction; (xvii) impact of Coronavirus Disease 2019 (“COVID-19”) or other 17 public health crises, including varying governmental responses and requirements, client impacts and travel restrictions; (xviii) failure to achieve or maintain a diverse workforce or otherwise meet evolving governmental or client-related standards and requirements pertaining to ESG-related issues; and (xix) physical risks associated with climate change, including rising temperatures, severe storms, energy disruptions, and rising sea levels, among others.
Our operations involve financial and business risks that differ among the U.S. and the different foreign jurisdictions in which we operate including: (i) cultural and language differences; (ii) various levels of FTI Consulting “brand” recognition; (iii) different employment laws and rules, employment or service contracts, compensation methods, and social and cultural factors that could result in employee turnover, lower utilization rates, higher costs and cyclical fluctuations in utilization that could adversely affect financial and operating results; (iv) foreign currency disruptions and currency fluctuations between the U.S. dollar and foreign currencies that could adversely affect financial and operating results; (v) differing legal and regulatory requirements and other barriers to conducting business; (vi) difficulties resolving the collection of receivables when legal proceedings are necessary; (vii) difficulties in managing our non-U.S. operations, including client relationships, in certain locations; (viii) disparate systems, policies, procedures and processes; (ix) failure to comply with the FCPA and anti-bribery laws of other jurisdictions; (x) higher operating costs; (xi) longer sales and/or collections cycles; (xii) potential restrictions or adverse tax consequences resulting from the repatriation of foreign earnings, such as trapped foreign losses and importation or withholding taxes; (xiii) different or less stable political and/or economic environments; (xiv) wars and other geopolitical conflicts; (xv) conflicts between and among the U.S. and countries in which we conduct business, including those arising from trade disputes or disruptions, the termination or suspension of treaties, or boycotts; (xvi) civil disturbances or other catastrophic events that reduce business activity; (xvii) political interference with our ability to conduct business in the applicable jurisdiction; (xviii) impact of public health crises, including varying governmental responses and requirements, client impacts and travel restrictions; (xix) failure to achieve or maintain a diverse workforce or otherwise meet evolving governmental or client-related standards and requirements pertaining to ESG-related issues; and (xx) physical risks associated with climate change, including rising temperatures, severe storms, energy disruptions, flooding and rising sea levels, among others.
On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and 18 Profit Shifting (“Framework”) which agreed to a two-pillar solution to address the tax challenges arising from the digitalization of the economy.
On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting which agreed to a two-pillar solution to address the tax challenges arising from the digitalization of the economy.
Our failure to achieve and maintain a diverse and inclusive workforce may impair our ability to attract and retain qualified employees, win and maintain clients or attract investment, which could have a material adverse effect on our business and financial results, as well as reputational harm.
Our failure to achieve and maintain an inclusive workforce may impair our ability to attract and retain qualified employees, win and maintain clients, or attract investment, which could have a material adverse effect on our business and financial results, as well as reputational harm.
If we fail to effectively protect the confidentiality of our clients’ or our own IP and proprietary information from disclosure or misuse by our employees, contractors or third parties, the financial results of the affected segment or the Company would be adversely affected.
If we fail to effectively protect the confidentiality of our clients’ or our own IP and proprietary information from disclosure or misuse by our employees, contractors or third parties, the financial results of the affected segment or the Company 18 and our reputation would be adversely affected.
Our Technology segment faces certain risks, including (i) industry consolidation and a highly competitive environment, (ii) downward pricing pressure, (iii) data breach, (iv) technology changes and obsolescence, and (v) failure to protect intellectual property (“IP”) used by the segment, which individually or together could cause the financial results and prospects of this segment and the Company to decline.
Our Technology segment faces certain risks, including (i) industry consolidation and a highly competitive environment, (ii) downward pricing pressure, (iii) data breach, (iv) technology changes and obsolescence, including AI and machine learning, and (v) failure to protect intellectual property (“IP”) used by the segment, which individually or together could cause the financial results and prospects of this segment and the Company to decline.
If our Technology segment is unable to license or otherwise use competitively innovative or technologically advanced software and products to provide our services, we could be unable to retain clients, grow our business and capitalize on market opportunities, which would adversely affect our operating margins and financial results.
If our Technology segment is unable to license or otherwise use competitively innovative or technologically advanced software and products to provide our services, we could be unable to retain clients, grow our business and capitalize on market opportunities, which would adversely affect our operating margins and financial results, competitive position and reputation.
In reaction to publicized incidents in which electronically stored personal and other information has been lost, accessed or stolen, or transmitted by or to third parties without permission, U.S. and non-U.S. governmental authorities have proposed or adopted or are considering proposing or adopting data security and/or data privacy statutes or regulations, including the California Consumer Privacy Act and the General Data Protection Regulation of the European Union.
In reaction to publicized incidents in which electronically stored personal and other information has been lost, accessed or stolen, or transmitted by or to third parties without permission, U.S. and non-U.S. governmental authorities have proposed or adopted or are considering proposing or adopting data security and/or data privacy statutes or regulations, including the California Consumer Privacy Act as amended by the California Privacy Rights Act of 2020, and the General Data Protection Regulation of the European Union.
Our operations are highly competitive. 23 Our competitors include large organizations, such as the global accounting firms and the large management and financial consulting companies that offer a broad range of consulting services; investment banking firms; IT consulting and software companies, which offer niche services that are the same or similar to services or products offered by one or more of our segments; and small firms and independent contractors that focus on specialized services.
Our competitors include large organizations, such as the global accounting firms and the large management and financial consulting companies that offer a broad range of consulting services; investment banking firms; IT consulting and software companies, which offer niche services that are the same or similar to services or products offered by one or more of our segments; and small firms and independent contractors that focus on specialized services.
Risks Related to Our Reportable Segments Changes in capital markets, M&A activity, legal or regulatory requirements, general economic conditions and monetary or geopolitical disruptions, as well as other factors beyond our control, could reduce demand for our practice offerings or services, in which case our revenues and profitability could decline.
Risks Related to Our Reportable Segments Changes in capital markets, M&A activity, legal or regulatory requirements, general economic conditions and monetary or geopolitical disruptions, as well as other factors beyond our control, could reduce demand for one or more of our segment or practice offerings or services, in which case our revenues and profitability could decline.
To the extent that we misjudge our ability to properly manage and integrate acquisitions, we may have difficulty achieving our operating, strategic and financial objectives.
To the extent that we misjudge our ability to effectively manage and integrate acquisitions, we may have difficulty achieving our operating, strategic and financial objectives.
Our failure to manage the utilization of our professionals who bill on an hourly basis, or maintain or increase the hourly rates we charge our clients for our services, could result in adverse consequences, such as non- or lower-revenue-generating professionals, increased employee turnover, fixed compensation expenses in periods of declining revenues, the inability to appropriately staff engagements (including adding or reducing staff during periods of increased or decreased demand for our services), or special charges associated with reductions in staff or operations.
Our failure to manage the utilization of our professionals who bill on an hourly basis, or maintain or increase the hourly rates we charge our clients for our services, could result in adverse consequences, such as non- or lower-revenue-generating professionals, increased employee turnover, fixed compensation expenses in periods of declining revenues, the inability to appropriately staff engagements with employees and/or independent consultants (including adding or reducing staff during periods of increased or decreased demand for our services, or redeploying staff to other practices or engagements), or special charges associated with reductions in staff or operations.
Fluctuations, changes and disruptions in financial, credit, M&A and other markets, political instability and general business factors could impact various segments’ operations and could affect such operations differently.
Fluctuations, changes and disruptions in financial, credit, M&A and other markets, political instability, significant geopolitical conflicts and general business factors could impact various segments’ operations and could affect such operations differently.
Risks Related to Our Client Relationships If we are unable to accept or continue client engagements due to real or perceived relationship issues, our revenues, growth, client engagements and prospects may be negatively affected.
If we are unable to accept or continue client engagements due to real or perceived relationship issues, our revenues, growth, client engagements and prospects may be negatively affected.
Although we seek to prevent, detect and investigate these network security incidents and have taken steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in the future or that our security measures will be effective.
We expect to continue to face such attempts. Although we seek to prevent, detect and investigate these network security incidents and have taken steps to mitigate the likelihood of network security breaches, there can be no assurance that attacks by unauthorized users will not be attempted in the future or that our security measures will be effective.
This may be true in light of general economic conditions; lingering effects of past economic slowdowns or recession; or business- or operations-specific reasons. Such clients may not have sufficient funds to continue operations or to pay for our services.
This may be due to general economic conditions; lingering effects of past economic slowdowns or recession; or business- or operations-specific reasons. Such clients may not have sufficient funds to continue operations or to pay for our services.
For example, in periods of limited credit availability, reduced M&A activity and/or declining business and/or consumer spending, while not always the case, there may be increased restructuring opportunities that will cause our restructuring practice to experience high demand.
For example, in periods of limited credit availability, reduced M&A activity and/or declining business and/or consumer spending, while not always the case, there may be increased restructuring opportunities that will cause our restructuring practice to experience high demand as was the case for our Corporate Finance segment in 2023.
Failure to effectively manage professional hours and other aspects of alternative fee engagements may result in the costs of providing such services exceeding the fees collected by the Company.
Failure to effectively manage staff utilization and other aspects of alternative fee engagements may result in the costs of providing such services exceeding the fees collected by the Company.
We experience fluctuations in growth of our different segments, practices and services, including periods of rapid or declining growth. Periods of rapid expansion may strain our management team or human resources and information systems.
We may not manage our growth effectively, and our profitability may suffer. We experience fluctuations in growth of our different segments, practices and services, including periods of rapid or declining growth. Periods of rapid expansion may strain our management team or human resources and information systems.
If we are not able to quickly adapt to or effectively manage our operations in geographic markets outside the U.S., our business prospects and results of operations could be negatively impacted.
If we are not able to quickly adapt to or effectively manage our operations in the geographic markets in which we conduct business, our business prospects and results of operations could be negatively impacted.
Our success is dependent, in large part, on our ability to keep our supply of skills and human resources in balance with client demand around the world. To attract and retain clients, we need to demonstrate professional acumen and build trust and strong relationships. Our professionals have highly specialized skills. They also develop strong bonds with the clients they serve.
Our success and future growth is dependent, in large part, on our ability to keep our supply of skills and human resources in balance with client demand around the world. To attract and retain clients, we need to demonstrate professional acumen and build trust and strong relationships. Our professionals have 21 highly specialized skills.
On December 20, 2021, the OECD released Pillar Two Model Rules introducing a global minimum corporate tax rate of 15% to apply to certain multinational enterprises. The OECD continues to release additional guidance on these rules.
On December 20, 2021, the OECD released the Global Anti-Base Erosion (“GLoBE”) Model Rules introducing a global minimum corporate tax rate of 15% to apply to certain multinational enterprises. The OECD continues to release additional guidance on these rules.
On the other hand, those same factors may cause a number of our other segments and practices, such as our antitrust & competition practice in Economic Consulting, to experience reduced demand.
On the other hand, those same factors may cause one or more of our other segments and practices, such as our 15 antitrust & competition practice in Economic Consulting, to experience reduced demand.
Different factors outside of our control could affect demand for a segment’s practices and our services.
Different U.S. and/or international factors outside of our control could affect demand for a segment’s practices and our services.
Therefore, the barriers to our professionals pursuing independent business opportunities or joining our competitors or clients should be considered low.
Therefore, the barriers to our professionals pursuing independent business opportunities or joining our competitors or clients are low.
If we are unable to manage staffing levels on a timely basis in light of changing opportunities or conditions, including as a result of COVID-19 or the emergence of new variants or future public health crises, our ability to accept or service business opportunities and client engagements, take advantage of positive market and industry developments, and realize future growth could be negatively affected, which could negatively impact our revenues and profitability.
If we are unable to manage staffing levels on a timely basis in light of changing opportunities or conditions, our ability to accept or service business opportunities and client engagements, take advantage of positive market and industry developments, and realize future growth could be negatively affected, which could negatively impact our revenues and profitability.
Changes to factors described above, as well as other events, including by way of example, contractions of regional economies, or the economy of a particular country, trade restrictions, monetary systems, banking, real estate and retail or other industries; debt or credit difficulties or defaults by businesses or countries; new, repeals of or changes to laws and regulations, including changes to the bankruptcy and competition laws of the U.S. or other countries; tort reform; banking reform; a decline in the implementation or adoption of new laws or regulation, or in government enforcement, litigation or monetary damages or remedies that are sought; or political instability may have adverse effects on one or more of our segments or service, practice or industry offerings.
Changes to factors described above, as well as other events, including by way of example, contractions of regional economies, or the economy of a particular country, trade restrictions, sanctions, prohibitions or restrictions, or laws, regulations, or other conditions or limitations, on conducting business in certain geographies or with certain persons or governments or authorities, monetary systems, banking, real estate and retail or other industries; government shutdowns; inflation and interest rate fluctuations; debt or credit difficulties or defaults by businesses or countries; new, repeals of or changes to laws and regulations, including changes to the bankruptcy and competition laws of the U.S. or other countries; tort reform; banking reform; a decline in the implementation or adoption of new laws or regulations, or in government enforcement, litigation or monetary damages or remedies that are sought; climate change; or political instability and wars may have adverse effects on one or more of our segments or service, practice or industry offerings.
The available legal remedies for the use or misuse of social media may not adequately compensate us for the damages caused by such use or misuse and consequences arising from such actions. We may not manage our growth effectively, and our profitability may suffer.
The available legal remedies for the use or misuse of social media may not adequately compensate us for the damages caused by such use or misuse and consequences arising from such actions.
Reductions in workforce or increases of billable rates will not necessarily lead to savings. In such events, our financial results may decline or be adversely impacted. A number of factors affect the utilization of our professionals.
Reductions in workforce or increases of billable rates will not necessarily lead to savings. In such events, our financial results may decline or be adversely impacted.
We incur substantial costs to hire and retain our professionals, and we expect these costs to continue and to grow. We may pay hiring or retention bonuses to secure the services of professionals.
We incur substantial costs to hire and retain our professionals, and we expect these costs to continue and to grow. We may pay hiring or retention bonuses to secure the services of professionals and maintain incentive compensation programs for their benefit.
We face certain risks relating to cybersecurity, the failure to protect the confidentiality of client information against misuse or disclosure, and the use or misuse of social media. Our reputation for maintaining the confidentiality of proprietary, confidential and trade secret information is critical to the success of our segments.
We face certain risks relating to cybersecurity and the failure to protect the confidentiality of our or our client’s information against misuse or disclosure. Maintaining the confidentiality of proprietary, confidential and trade secret information is critical to maintaining the trust of our clients, the success of our segments and the reputation of our company.
We cannot assure that we will be able to attract or retain qualified professionals to maintain or expand our business. If we are unable to successfully integrate, motivate and retain qualified professionals, our ability to continue to secure work may suffer.
We cannot assure that we will be able to attract or retain any particular qualified professionals or replace those that choose to leave us, or maintain or expand our business. If we are unable to successfully integrate, motivate, retain or replace qualified professionals, our ability to continue to secure or perform work may suffer.
In such situations, we will have to weigh the benefits of decreasing our workforce or limiting our service offerings and saving costs against the detriment that the Company could experience from losing valued professionals and their industry expertise and clients.
In such situations, we will have to weigh the benefits of decreasing our workforce or limiting our service offerings and saving costs against the detriment that the Company could experience from losing valued professionals and their industry expertise and clients. Risks Related to Our Operations Our operations involve financial and business risks that differ among the U.S. and foreign jurisdictions.
If we cannot compete effectively or if the costs of competing, including the costs of hiring and retaining professionals, become too expensive, our revenue growth and financial results could be negatively affected and may differ materially from our expectations. We may face competition from parties who sell us their businesses and from professionals who cease working for us.
If we cannot compete effectively or if the costs of competing, including the costs of hiring and retaining professionals, become too expensive, our revenue growth and financial results could be negatively affected and may differ materially from our expectations.
Changes to corporate income tax rates, tax legislation, tax rules and regulations and tax treaties in the jurisdictions in which we conduct business may substantially negatively impact our effective tax rate and financial results of operations and increase our cash tax payment obligations.
Changes to corporate income tax rates, legislation, rules and regulations and tax treaties in countries in which we operate may negatively impact our effective tax rate and financial results and increase our cash tax payment obligations.
These include: (i) fluctuations in U.S. and/or global economies, including economic downturns or recessions and the strength and rate of any general economic recoveries; (ii) the U.S. or global financial markets and the availability, costs, and terms of credit and credit modifications; (iii) level of leverage incurred by countries or businesses; (iv) M&A activity; (v) frequency and complexity of significant commercial litigation; (vi) overexpansion by businesses causing financial difficulties; (vii) business and management crises, including the occurrence of alleged fraudulent or illegal activities and practices; (viii) new and complex laws and regulations, repeals of existing laws and regulations or changes of enforcement of laws, rules and regulations, including antitrust/competition reviews of proposed M&A transactions; (ix) other economic, geographic or political factors; and (x) general business conditions.
These include: (i) fluctuations in U.S. and/or global economies, including economic downturns or recessions and the strength and rate of any general economic recoveries; (ii) the U.S. or global financial markets and the availability, costs, and terms of credit and credit modifications, including interest levels and inflationary pressures; (iii) level of leverage incurred by countries or businesses; (iv) M&A activity; (v) frequency and complexity of significant commercial litigation; (vi) overexpansion by businesses causing financial difficulties; (vii) business and management crises, including the occurrence of alleged fraudulent or illegal activities and practices; (viii) new and complex laws and regulations, repeals of existing laws and regulations or changes of enforcement of laws, rules and regulations, including antitrust/competition reviews of proposed M&A transactions; (ix) other economic, geographic or political factors, including wars and other geopolitical conflicts; (x) widespread public health crises, including epidemics and pandemics and government restrictions or regulations enacted in response thereto, or employees’ refusal to adhere to such restrictions; and (xi) general business or other conditions in the U.S. and other jurisdictions in which we conduct business or our employee population resides.
Our Credit Facility is guaranteed by substantially all of our wholly-owned domestic subsidiaries and will be required to be guaranteed by future domestic subsidiaries, including those that join us in connection with acquisitions. Substantially all of our U.S. subsidiaries guarantee our obligations under our Credit Facility, and substantially all of their assets are pledged as collateral under the Credit Facility.
Our Credit Facility is guaranteed by substantially all of our wholly-owned domestic subsidiaries and will be required to be guaranteed by future wholly-owned domestic subsidiaries, including those that join us in connection with acquisitions.
We are exposed to certain physical and regulatory risks related to climate change, which could adversely affect our business, financial condition and results of operations. Due to the global nature of our business, we are exposed to a variety of physical risks related to climate change, including rising temperatures, severe storms, energy disruptions and rising sea levels, among others.
Due to the global nature of our business, we are exposed to a variety of physical risks related to climate change, including extreme temperatures, severe storms, energy disruptions, floods and rising sea levels, among others, all of which are beyond our control.
There is no certainty that we can maintain the confidentiality or prevent the misuse of our or our clients’ information. The use or misuse of social media by employees or others could reflect negatively on us or our clients and could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, the use or misuse of social media by employees or others could reflect negatively on us or our clients and could have a material adverse effect on our business, financial condition and results of operations.
In the case of employees outside the U.S., we draft non-competition provisions in an effort to comply with applicable foreign law. In the event an employee departs and acts in a way that we believe violates his or her non-competition or non-solicitation agreement, we will consider any legal remedies we may have against such person on a case-by-case basis.
In the event an employee departs and acts in a way that we believe violates an applicable non-competition or non-solicitation agreement, we will consider any available legal remedies we may have against such person on a case-by-case basis.
We may decide that preserving cooperation and a professional relationship with a former employee or client, or other concerns, outweighs the benefits of any possible legal recourse. We may also decide that the likelihood of success does not justify the costs of pursuing a legal remedy.
We may decide that preserving cooperation and a professional relationship with a former employee or client, or other concerns, outweigh the potential benefits of litigation or other options to seek legal or equitable remedies. We may also decide that the likelihood of success does not justify the costs of pursuing a claim.
Our inability to accept engagements from existing or prospective clients, represent multiple clients in connection with the same or competitive engagements, or any requirement that we resign from a client engagement may negatively impact our revenues, growth and financial results.
From time to time we decide that we cannot or should not accept an engagement from an existing or prospective client or represent multiple clients in connection with the same or competitive engagements. In addition, upon occasion, we decide that we should or must resign from a client engagement. Such decisions may negatively impact our revenues, growth and financial results.
Such attacks, if successful, could harm our overall professional reputation, disrupt our business operations, cause us to incur unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information. We expect to continue to face such attempts.
We are subject to and routinely face cyber-based attacks and attempts by hackers and similar unauthorized users to gain access to or corrupt our information technology systems. Such attacks, if successful, could harm our overall professional reputation, disrupt our business operations, cause us to incur unanticipated losses or expenses, and result in unauthorized disclosures of confidential or proprietary information.
Our information systems may be compromised by power outages, computer and telecommunications failures, computer viruses, security breaches, hackers, catastrophic events, human error and other events, many of which are beyond our control, and are subject to obsolescence and technological changes.
Our information systems may be compromised by power outages, computer and telecommunications failures, computer viruses, security breaches, hackers, catastrophic events, human error and other events, many of which are beyond our control, and are subject to obsolescence and technological changes. We continue to implement and improve the utilization of our new ERP system that went into effect in April 2023.
Our Technology segment faces significant competition from other consulting and/or software providers specializing in e-discovery and the management of electronic content. There continues to be consolidation of companies providing products and services similar to those offered by our Technology segment, which may provide competitors access to greater financial and other resources than those of the Company.
There continues to be consolidation of companies providing products and services similar to those offered by our Technology segment, which may provide competitors access to greater financial and other resources than those of the Company.
These risks could impact our ability to maintain business continuity, including by affecting our access to our leased office space in affected geographies and the integrity of our information technology systems.
The threats from environmental events could adversely impact our ability to maintain business continuity, and could impair access to our leased office space in affected geographies and the integrity of our information technology systems.
Delays finalizing and implementing our new ERP system or if any of our information systems, including our new ERP system, fail to work properly or otherwise become unavailable, could cause us to expend substantial time, effort and costs to repair or replace such systems, or otherwise carry out our operations, including preparation of our financial statements and maintaining effectiveness of our internal controls, without the ability to use such systems.
Delays in fully finalizing and implementing our new ERP system or any of our other information systems or failure of such system to work properly or if any of them should become unavailable, could require us to expend substantial time, effort and costs to adjust our processes, implement changes or corrections, or repair or replace such systems, to carry out our operations, including preparation of our financial statements and to maintain the effectiveness of our internal controls.
In such event, there may be restrictions on the ability of the professionals who join the Company to compete and work on client engagements. In addition, the Company may enter into arrangements with the former employers of those professionals regarding limitations on their work until any time restrictions pass.
In addition, the Company may enter into arrangements with the former employers of those professionals regarding limitations on their work until any time restrictions pass.
A compromise of the security of our information technology systems leading to theft or misuse of our own or our clients’ proprietary or confidential information, or the public disclosure or use of such information by others, could result in losses, third-party claims against us and reputational harm, including the loss of clients.
Any significant compromise of the security of our information technology systems leading to theft or misuse of our own or our clients’ proprietary or confidential information, or the public disclosure or use of such information by others, could result in losses, damages or penalties, third-party claims, reputational harm and the loss of clients and other adverse business consequences, which could negatively impact our financial results or financial condition.
The engagement letters that we typically enter into with clients do not obligate them to continue to use our services. Typically, our engagement letters permit clients to terminate our services at any time without penalty. In addition, our business involves large client engagements that we staff with a substantial number of professionals.
Typically, our engagement letters permit clients to terminate our services at any time without penalty. In addition, our business involves large client engagements that we staff with a substantial number of professionals. At any time, one or more client engagements may represent a significant portion of a segment’s revenues.
Instead, we compete with different companies or businesses of companies depending on the particular nature of a proposed engagement and the types of requested service(s) and the location of the client or delivery of the service(s).
We do not compete against the same companies across all of our segments, practices, services, industries or geographic regions. Instead, we compete with different companies or businesses of companies depending on the particular nature of a proposed engagement and the types of requested service(s) and the location of the client or delivery of the service(s). Our operations are highly competitive.
Risks Related to Competition If we fail to compete effectively, we may miss business opportunities or lose existing clients, and our revenues and profitability may decline. The market for some of our consulting services is highly competitive. We do not compete against the same companies across all of our segments, practices, services, industries or geographic regions.
We make the determination whether to pursue any legal actions against a client on a case-by-case basis. Risks Related to Competition If we fail to compete effectively, we may miss business opportunities or lose existing clients, and our revenues and profitability may decline. The market for some of our consulting services is highly competitive.
Dollar borrowings at the Secured Overnight Financing Rate (“SOFR”) and, for borrowings in British Pound, the Sterling Overnight Index Average (“SONIA”), which expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our cash flows could be adversely affected.
If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our cash flows could be adversely affected.
Strategic Communications — Fewer event-driven crises affecting businesses; general economic decline that may reduce certain discretionary spending by clients; a decline in capital markets activity, including M&A; and fewer public securities offerings. 15 Our segments may face risks of fee non-payment, clients may seek to renegotiate existing fees and contract arrangements, and clients may not accept billable rate or price increases, which could result in loss of clients, fee write-offs, reduced revenues and less profitable business.
Our segments may face risks of fee non-payment, clients may seek to renegotiate existing fees and contract arrangements, and may not accept billable rate or price increases, which could result in loss of engagements, fee write-offs, reduced revenues and less profitable business.
If we incur new indebtedness or other liabilities, the related risks that we and our subsidiaries may face could intensify. We may not be able to generate sufficient cash to service our indebtedness, and we may be forced to take actions to satisfy our payment obligations under our indebtedness, which may not be successful.
We may be unable to generate sufficient cash to service our indebtedness, and we may be forced to take actions to satisfy our payment obligations under our indebtedness, which may not be successful.
If we default on any guaranteed indebtedness, our U.S. subsidiaries could be required to make payments under their guarantees, and our senior secured creditors could foreclose on our U.S. subsidiaries’ assets to satisfy unpaid obligations, which would materially adversely affect our business and financial results.
If we default on any guaranteed indebtedness, our U.S. subsidiaries that are guarantors could be required to make payments under their guarantees, and the lenders under our Credit Facility could foreclose on certain of our U.S. subsidiaries’ assets to satisfy unpaid obligations, which could materially adversely affect our business and financial results. 27 Our variable rate indebtedness will subject us to interest rate risk, which could cause our annual debt service obligations to increase significantly.
We rely heavily on our executive officers and the heads of our segments and industry and regional leaders for the success of our business, the loss of whom may negatively impact our business and operations. We rely heavily on our executive officers and our segment, industry and regional leaders to manage our operations.
We rely heavily on our executive officers and our segment, industry and regional leaders to manage our operations.
The terms of the agreements governing our Credit Facility and other indebtedness limit, but do not prohibit, us from incurring additional indebtedness. 25 Our ability to incur additional indebtedness may have the effect of reducing the funds available to pay amounts due with respect to our indebtedness.
We and our subsidiaries may incur substantial additional indebtedness, including additional secured indebtedness, in the future. The terms of the agreements governing our Credit Facility and other indebtedness limit, but do not prohibit, us from incurring additional indebtedness.
Future U.S. subsidiaries will be required to provide similar guarantees and asset pledges under the Credit Facility.
Substantially all of our wholly-owned U.S. subsidiaries guarantee our obligations under our Credit Facility, and substantially all of their assets are pledged as collateral under the Credit Facility. Future wholly-owned U.S. subsidiaries, subject to certain exclusions, will be required to provide similar guarantees and asset pledges under the Credit Facility.
Transactions may be postponed or canceled, litigation may be settled or dismissed, and disputes may be resolved, in each case with little or no prior notice to us. If we cannot manage our work in process, our professionals may be underutilized until we can reassign them or obtain new engagements, which can adversely affect financial results.
Transactions may be postponed or canceled, litigation may be settled or dismissed, and disputes may be resolved, in each case with little or no prior notice to us.
There is no assurance that clients of the acquired entity or local, state, federal or foreign governments will agree to novate or assign their contracts to us. 24 The Company may also hire groups of selected professionals from another company.
Further, such engagements may be subject to security clearance requirements or bidding provisions with which we might not be able to comply. There is no assurance that clients of the acquired entity or local, state, federal or foreign governments will agree to novate or assign their contracts to us.
The compromise of confidential or proprietary information could damage our reputation, harm our businesses and adversely impact our financial results. The Company’s own confidential and proprietary information and that of our clients could be compromised, whether intentionally or unintentionally, by our employees, consultants or vendors.
The Company’s own confidential and proprietary information and that of our clients or vendors could be compromised, whether intentionally or unintentionally, by our employees, consultants, contractors or vendors. In addition, physical risks associated with climate change, including energy disruptions, flooding and other events, may adversely impact the integrity of our information technology systems.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease offices to support our operations in 34 other cities across the U.S., including New York, Chicago, Denver, Houston, Dallas, Los Angeles and San Francisco, and we lease office space to support our international locations in 30 countries — the U.K., Ireland, Finland, France, Germany, Spain, Belgium, Switzerland, Denmark, Italy, Netherlands, Australia, Malaysia, China (including Hong Kong), Japan, Singapore, the United Arab Emirates, South Korea, South Africa, Argentina, Brazil, Colombia, Mexico, Canada, Indonesia, India, Qatar, Saudi Arabia, the Cayman Islands and the British Virgin Islands.
Biggest changeWe also lease offices to support our operations in 32 other cities across the U.S., including New York, Chicago, Denver, Houston, Dallas, Los Angeles and San Francisco, and we lease office space to support our international locations in 30 countries and territories — the U.K., Ireland, Finland, France, Germany, Spain, Belgium, Switzerland, Denmark, Italy, Netherlands, Australia, Malaysia, China (including Hong Kong), Japan, Singapore, the United Arab Emirates, South Korea, South Africa, Argentina, Brazil, Colombia, Mexico, Canada, Indonesia, India, Qatar, Saudi Arabia, the Cayman Islands and the Virgin Islands (British).

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe currently are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect on our financial condition or results of our operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 27 PART II
Biggest changeWe currently are not aware of any asserted or unasserted legal proceedings or claims that we believe would have a material adverse effect on our financial condition or results of our operations. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(4) Includes 2,229 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock. (5) During the month ended October 31, 2022, we repurchased and retired 196,823 shares of common stock, at an average price per share of $149.75, for an aggregate cost of $29.5 million.
Biggest changeThere were no repurchases of shares of our common stock pursuant to the Repurchase Program during the quarter ended December 31, 2023. (2) Includes 429 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock currently trades on the New York Stock Exchange (the “NYSE”) under the symbol FCN. As of January 31, 2023, the number of holders of record of our common stock was 252.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Common Stock Our common stock currently trades on the New York Stock Exchange (the “NYSE”) under the symbol FCN. As of January 31, 2024, the number of holders of record of our common stock was 273.
Securities Authorized for Issuance under Equity Compensation Plans The following table includes the number of shares of common stock of the Company authorized or to be issued upon exercise of outstanding options, warrants and rights awarded under our employee equity compensation plans as of December 31, 2022: (a) (b) (c) Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Plan Category (in thousands, except per share data) Equity compensation plans approved by our security holders 339 (1) $ 36.91 1,027 (3) Equity compensation plans not approved by our security holders 53 (2) $ 36.75 — Total 392 $ 36.89 1,027 (1) Includes up to (i) 9,620 shares of common stock issuable upon exercise of fully vested stock options granted under our 2006 Global Long-Term Incentive Plan (as Amended and Restated Effective as of May 14, 2008) and (ii) 328,971 shares of common stock issuable upon exercise of fully vested stock options granted under our 2009 Omnibus Incentive Compensation Plan (as Amended and Restated Effective as of June 3, 2015).
Securities Authorized for Issuance under Equity Compensation Plans The following table includes the number of shares of common stock of the Company authorized or to be issued upon exercise of outstanding options, warrants and rights awarded under our employee equity compensation plans as of December 31, 2023: (a) (b) (c) Number of Securities to Be Issued upon Exercise of Outstanding Options, Warrants and Rights Weighted Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Plan Category (in thousands, except per share data) Equity compensation plans approved by our security holders 300 (1) $ 37.29 875 (3) Equity compensation plans not approved by our security holders 53 (2) $ 36.75 — Total 353 $ 37.21 875 (1) Includes up to (i) 1,243 shares of common stock issuable upon exercise of fully vested stock options granted under our 2006 Global Long-Term Incentive Plan (as Amended and Restated Effective as of May 14, 2008) and (ii) 299,121 shares of common stock issuable upon exercise of fully vested stock options granted under our 2009 Omnibus Incentive Compensation Plan (as Amended and Restated Effective as of June 3, 2015).
(3) Includes 1,026,963 shares of common stock available for issuance under our 2017 Omnibus Incentive Compensation Plan, all of which are available for stock-based awards.
(3) Includes 875,277 shares of common stock available for issuance under our 2017 Omnibus Incentive Compensation Plan, all of which are available for stock-based awards.
(2) Includes 13 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock. (3) Includes 27 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock.
(3) Includes 5,250 shares of common stock withheld to cover payroll tax withholdings related to the lapse of restrictions on restricted stock. ITEM 6. [RESERVED] 32
Sales of Unregistered Securities None. 28 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information with respect to purchases we made of our common stock during the fourth quarter of 2022: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (1) Approximate Dollar Value That May Yet Be Purchased Under the Program (in thousands, except per share data) October 1 through October 31, 2022 197 (2) $ 149.75 197 (5) $ 114,050 November 1 through November 30, 2022 84 (3) $ 156.05 84 (6) $ 100,987 December 1 through December 31, 2022 147 (4) $ 156.08 144 (7) $ 478,452 Total 428 425 (1) On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the “Repurchase Program”).
The shares were issued pursuant to the exemption from registration under Section 3(a)(9) of the Securities Act. 31 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table provides information with respect to purchases we made of our common stock during the fourth quarter of 2023: Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Program (1) Approximate Dollar Value That May Yet Be Purchased Under the Program (in thousands, except per share data) October 1 through October 31, 2023 1 (2) $ 186.35 — $ 460,653 November 1 through November 30, 2023 — $ — — $ 460,653 December 1 through December 31, 2023 5 (3) $ 206.18 — $ 460,653 Total 6 — (1) On June 2, 2016, our Board of Directors authorized a stock repurchase program of up to $100.0 million (the “Repurchase Program”).
Removed
During the year ended December 31, 2022, we repurchased an aggregate of 574,418 shares of our outstanding common stock under the Repurchase Program at an average price of $154.23 per share for a total cost of approximately $88.6 million.
Added
Sales of Unregistered Securities On August 17, 2023, we issued a total of 1,460,740 shares of our common stock to holders in connection with the conversion of their 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”) at maturity, which represents the excess of the conversion value over the principal amount of $280.3 million.
Removed
(6) During the month ended November 30, 2022, we repurchased and retired 83,700 shares of common stock, at an average price per share of $156.05, for an aggregate cost of $13.1 million.
Removed
(7) During the month ended December 31, 2022, we repurchased and retired 144,493 shares of common stock, at an average price per share of $155.94, for an aggregate cost of $22.5 million. ITEM 6. [RESERVED] 29

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe net additions reflect programmatic headcount reductions, primarily in our FLC and Corporate Finance segments, described in the “Special Charges” section above: Billable Headcount Corporate Finance (1) FLC Economic Consulting Technology Strategic Communications Total Non-Billable Headcount Total Headcount December 31, 2021 1,702 1,496 921 468 814 5,401 1,379 6,780 Additions, net 244 88 86 88 156 662 193 855 December 31, 2022 1,946 1,584 1,007 556 970 6,063 1,572 7,635 Percentage change in headcount from December 31, 2021 14.3% 5.9% 9.3% 18.8% 19.2% 12.3% 14.0% 12.6% (1) There were 41 revenue-generating professionals added during the year ended December 31, 2022 related to the acquisition of a business within the Corporate Finance segment. 35 RESULTS OF OPERATIONS Segment and Consolidated Operating Results: Year Ended December 31, 2022 2021 (in thousands, except per share data) Revenues Corporate Finance $ 1,088,573 $ 938,969 FLC 638,478 584,835 Economic Consulting 695,208 697,405 Technology 319,983 287,366 Strategic Communications 286,666 267,647 Total revenues $ 3,028,908 $ 2,776,222 Segment operating income Corporate Finance $ 195,295 $ 145,765 FLC 54,822 66,643 Economic Consulting 98,178 111,462 Technology 33,431 42,927 Strategic Communications 46,982 49,708 Total segment operating income 428,708 416,505 Unallocated corporate expenses (124,830) (104,457) Operating income 303,878 312,048 Other income (expense) Interest income and other 3,918 6,193 Interest expense (10,047) (20,294) (6,129) (14,101) Income before income tax provision 297,749 297,947 Income tax provision 62,235 62,981 Net income $ 235,514 $ 234,966 Earnings per common share — basic $ 6.99 $ 7.02 Earnings per common share — diluted $ 6.58 $ 6.65 Reconciliation of Net Income to Adjusted EBITDA: Year Ended December 31, 2022 2021 (in thousands) Net income $ 235,514 $ 234,966 Add back: Income tax provision 62,235 62,981 Interest income and other (3,918) (6,193) Interest expense 10,047 20,294 Depreciation and amortization 35,697 34,269 Amortization of intangible assets 9,643 10,823 Special charges 8,340 — Remeasurement of acquisition-related contingent consideration — (3,130) Adjusted EBITDA $ 357,558 $ 354,010 36 Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS: Year Ended December 31, 2022 2021 (in thousands, except per share data) Net income $ 235,514 $ 234,966 Add back: Remeasurement of acquisition-related contingent consideration — (3,130) Special charges 8,340 — Tax impact of special charges (1,584) — Non-cash interest expense on convertible notes — 9,586 Tax impact of non-cash interest expense on convertible notes — (2,492) Adjusted Net Income $ 242,270 $ 238,930 Earnings per common share — diluted $ 6.58 $ 6.65 Add back: Remeasurement of acquisition-related contingent consideration — (0.09) Special charges 0.23 — Tax impact of special charges (0.04) — Non-cash interest expense on convertible notes — 0.27 Tax impact of non-cash interest expense on convertible notes — (0.07) Adjusted earnings per common share — diluted $ 6.77 $ 6.76 Weighted average number of common shares outstanding — diluted 35,783 35,337 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow: Year Ended December 31, 2022 2021 (in thousands) Net cash provided by operating activities $ 188,794 $ 355,483 Purchases of property and equipment (53,098) (68,569) Free Cash Flow $ 135,696 $ 286,914 Year Ended December 31, 2022 Compared with December 31, 2021 Revenues and operating income See “Segment Results” for an expanded discussion of revenues, gross profit and SG&A expenses.
Biggest changeBillable Headcount Corporate Finance (1) FLC (1) Economic Consulting Technology Strategic Communications Total Non-Billable Headcount Total Headcount December 31, 2022 2,100 1,430 1,007 556 970 6,063 1,572 7,635 Additions, net 115 17 82 72 1 287 68 355 December 31, 2023 2,215 1,447 1,089 628 971 6,350 1,640 7,990 Percentage change in headcount from December 31, 2022 5.5% 1.2% 8.1% 12.9% 0.1% 4.7% 4.3% 4.6% (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. 37 RESULTS OF OPERATIONS Segment and Consolidated Operating Results: Year Ended December 31, 2023 2022 (in thousands, except per share data) Revenues Corporate Finance (1) $ 1,346,678 $ 1,147,118 FLC (1) 654,105 579,933 Economic Consulting 771,374 695,208 Technology 387,855 319,983 Strategic Communications 329,230 286,666 Total revenues $ 3,489,242 $ 3,028,908 Segment operating income Corporate Finance (1) $ 216,504 $ 197,424 FLC (1) 81,296 52,693 Economic Consulting 109,818 98,178 Technology 48,196 33,431 Strategic Communications 47,167 46,982 Total segment operating income 502,981 428,708 Unallocated corporate expenses (125,420) (124,830) Operating income 377,561 303,878 Other income (expense) Interest income and other (4,867) 3,918 Interest expense (14,331) (10,047) (19,198) (6,129) Income before income tax provision 358,363 297,749 Income tax provision 83,471 62,235 Net income $ 274,892 $ 235,514 Earnings per common share — basic $ 8.10 $ 6.99 Earnings per common share — diluted $ 7.71 $ 6.58 (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. 38 Reconciliation of Net Income to Adjusted EBITDA: Year Ended December 31, 2023 2022 (in thousands) Net income $ 274,892 $ 235,514 Add back: Income tax provision 83,471 62,235 Interest income and other 4,867 (3,918) Interest expense 14,331 10,047 Depreciation and amortization 41,079 35,697 Amortization of intangible assets 6,159 9,643 Special charges — 8,340 Adjusted EBITDA $ 424,799 $ 357,558 Reconciliation of Net Income and EPS to Adjusted Net Income and Adjusted EPS: Year Ended December 31, 2023 2022 (in thousands, except per share data) Net income $ 274,892 $ 235,514 Add back: Special charges — 8,340 Tax impact of special charges — (1,584) Adjusted Net Income $ 274,892 $ 242,270 Earnings per common share — diluted $ 7.71 $ 6.58 Add back: Special charges — 0.23 Tax impact of special charges — (0.04) Adjusted earnings per common share — diluted $ 7.71 $ 6.77 Weighted average number of common shares outstanding — diluted 35,646 35,783 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 224,461 $ 188,794 Purchases of property and equipment (49,562) (53,098) Free Cash Flow $ 174,899 $ 135,696 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.
Results of operations for our non-U.S. subsidiaries are translated from the designated functional currency to our reporting currency of the 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.
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.
We calculate DSO at the end of each reporting period by dividing net accounts receivable 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.
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.
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 additional acquisitions.
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.
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.
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.
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 30 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.
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.
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).
In 48 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).
While we believe that our estimates and assumptions used for revenue recognition are reasonable, subsequent changes could materially impact our results of operations. 48 Goodwill and Intangible Assets.
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.
Our professionals help organizations better address risk as the growing volume and variety of enterprise data intersects with legal, regulatory and compliance needs.
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.
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 • Adjusted Earnings per Diluted Share • Free Cash Flow 31 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.
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 34 • 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.
We derive substantially all of our revenues from providing professional services to both U.S. and global 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.
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.
(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.
(4) 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.
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 2022.
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 2023.
Significant New Accounting Pronouncements See Note 2, “New Accounting Standards” in Part II, Item 8 of this Annual Report. 49
Significant New Accounting Pronouncements See Note 2, “New Accounting Standards” in Part II, Item 8 of this Annual Report.
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, 2022 and significant factors that could affect our prospective financial condition and results of operations.
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.
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, such as any worsening effects of COVID-19 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.
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.
(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.
(3) 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.
We deliver a wide range of expert solutions driven by investigations, litigation, M&A, antitrust and competition, and compliance and risk through three core offerings: Corporate Legal Department Consulting, E-discovery Services and Expertise, and Information Governance, Privacy & Security Services.
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.
Unit-based revenues include revenues associated with the software products that are 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.
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.
For a similar discussion and analysis of our results for the year ended December 31, 2021 compared with our results for the year ended December 31, 2020, 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, 2021, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 24, 2022.
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.
We deliver a wide range of services centered around three core offerings: Business Transformation & Strategy, Transactions and Turnaround & Restructuring.
We deliver a wide range of services centered around four core offerings: Business Transformation, Strategy, Transactions and Turnaround & Restructuring.
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, losses on early extinguishment of debt, non-cash interest expense on convertible notes and the gain or loss on sale of a business.
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.
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 and workforce disruptions arise, including related to COVID-19 or any future public health crisis, or economic 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 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.
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 and workforce disruptions arise, including any future impact of future public health crises, or economic 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 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.
As of December 31, 2022, we had no outstanding borrowings under our Credit Facility and $0.4 million of outstanding letters of credit, which reduced the availability of borrowings under our Credit Facility. We use letters of credit primarily in lieu of security deposits for our leased office facilities.
As of December 31, 2023, we had no outstanding borrowings under our Credit Facility and $0.1 million of outstanding letters of credit, which reduced the availability of borrowings under the Credit Facility. We use letters of credit primarily in lieu of security deposits for our leased office facilities.
Special Charges 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 current business demand.
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.
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 relating to the operation of our businesses; • capital expenditures, primarily for information technology equipment and information or financial systems, office furniture and leasehold improvements; • debt service requirements, including interest payments on our long-term debt and payment of the 2023 Convertible Notes principal and conversion premium at maturity or upon earlier conversion or repurchase; • compensation to designated executive management and senior managing directors under our various long-term incentive compensation programs; • discretionary funding of the Repurchase Program; • contingent obligations related to our acquisitions; • potential acquisitions of businesses; and • other known future contractual obligations.
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 relating to the operation of our businesses; • capital expenditures, primarily for information technology equipment and information or financial systems, office furniture and leasehold improvements; • debt service requirements, including interest payments on our long-term debt; • compensation to designated executive management and senior managing directors under our various long-term incentive compensation programs; • discretionary funding of the Repurchase Program; • contingent obligations related to our acquisitions; • potential acquisitions of businesses; and • other known future contractual obligations.
Any of these events or circumstances, including any new business opportunities, could involve significant additional funding needs in excess of the identified currently available sources and could require us to borrow under our Credit Facility or raise additional debt or equity funding to meet those needs.
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.
Any new debt funding, if available, may be on terms less favorable to us than our Credit Facility or the 2023 Convertible Notes.
Any new debt funding, if available, may be on terms less favorable to us than our Credit Facility.
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.
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”).
The lower effective tax rate in 2022 was primarily due to a combined $9.6 million tax benefit from the release of the U.S. foreign tax credit valuation allowance, 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.
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.
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. 46 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; enter into transactions with affiliates or related persons; or engage in any business other than consulting-related businesses.
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; enter into transactions with affiliates or related persons; or engage in any business other than consulting-related businesses.
See information under the heading “Risk Factors” in Part I, Item 1A of this Annual Report. 45 Cash Flows Year Ended December 31, 2022 2021 Cash Flows (dollars in thousands) Net cash provided by operating activities $ 188,794 $ 355,483 Net cash used in investing activities $ (60,061) $ (79,093) Net cash used in financing activities $ (106,012) $ (61,674) Effect of exchange rate changes on cash and cash equivalents $ (25,518) $ (15,184) DSO (1) 97 94 (1) DSO is a performance measure used to assess how quickly revenues are collected by the Company.
See information under the heading “Risk Factors” in Part I, Item 1A of this Annual Report. 47 Cash Flows Year Ended December 31, 2023 2022 Cash Flows (dollars in thousands) Net cash provided by operating activities $ 224,461 $ 188,794 Net cash used in investing activities $ (73,835) $ (60,061) Net cash used in financing activities $ (354,663) $ (106,012) Effect of exchange rate changes on cash and cash equivalents $ 15,571 $ (25,518) DSO (1) 100 97 (1) DSO is a performance measure used to assess how quickly revenues are collected by the Company.
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.
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.
Net cash used in investing activities of $60.1 million for 2022 compared with $79.1 million for 2021.
Net cash used in investing activities of $73.8 million for 2023 compared with $60.1 million for 2022.
Capital Expenditures During 2022, we spent $53.1 million in capital expenditures to support our organization, including direct support for specific client engagements. During 2023, we currently expect to make capital expenditures to support our organization in an aggregate amount of between $54 million and $66 million.
Capital Expenditures During 2023, we spent $49.6 million in capital expenditures to support our organization, including direct support for specific client engagements. During 2024, we currently expect to make capital expenditures to support our organization in an aggregate amount of between $35 million and $42 million.
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 in risk and investigations and disputes, including cybersecurity, and a focus on highly regulated industries such as our Construction & Environmental Solutions and Health Solutions Services.
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.
Stock Repurchase Program During the year ended December 31, 2022, we made $85.4 million in payments for common stock repurchases under the Repurchase Program. We had $478.5 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2022.
Share Repurchase Program During the year ended December 31, 2023, we made $21.0 million in payments for common stock repurchases under the Repurchase Program. We had $460.7 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2023.
Unallocated corporate expenses Unallocated corporate expenses increased $20.4 million, or 19.5%, to $124.8 million compared with $104.5 million for 2021. Excluding the impact of special charges recorded in 2022, unallocated corporate expenses increased by $19.6 million, or 18.8%.
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 $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 (“EUR”), British pound (“GBP”), Australian dollar (“AUD”), Canadian dollar (“CAD”), Swiss franc (“CHF”) and Japanese yen (“JPY”).
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.
Principal Sources of Capital Resources As of December 31, 2022, our capital resources included $491.7 million of cash and cash equivalents and available borrowing capacity of $899.6 million under the $900.0 million revolving line of credit under our Credit Facility.
Principal Sources of Capital Resources As of December 31, 2023, our capital resources included $303.2 million of cash and cash equivalents, a $24.4 million short-term investment and available borrowing capacity of $899.9 million under the $900.0 million revolving line of credit under our Credit Facility.
A portion of net cash provided by operating activities was used to repurchase and retire approximately 0.6 million shares of our common stock under our Repurchase Program for an average price per share of $154.23, at a total cost of $88.6 million during the year ended December 31, 2022.
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.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this report. 32 Full Year 2022 Executive Highlights Financial Highlights Year Ended December 31, 2022 2021 % Increase (Decrease) (dollar amounts in thousands, except per share amounts) Revenues $ 3,028,908 $ 2,776,222 9.1 % Special charges (1) $ 8,340 $ — 100.0 % Net income $ 235,514 $ 234,966 0.2 % Adjusted EBITDA $ 357,558 $ 354,010 1.0 % Earnings per common share — diluted $ 6.58 $ 6.65 -1.1 % Adjusted earnings per common share — diluted $ 6.77 $ 6.76 0.1 % Net cash provided by operating activities $ 188,794 $ 355,483 -46.9 % Total number of employees 7,635 6,780 12.6 % (1) Excluded from non-GAAP financial measures Revenues Revenues for the year ended December 31, 2022 increased $252.7 million , or 9.1%, as compared with the year ended December 31, 2021 , which included a 3.1% estimated negative impact from FX.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included elsewhere in this report. 35 Full Year 2023 Executive Highlights Financial Highlights Year Ended December 31, 2023 2022 % Increase (Decrease) (dollar amounts in thousands, except per share amounts) Revenues $ 3,489,242 $ 3,028,908 15.2 % Special charges (1) $ — $ 8,340 (100.0) % Net income $ 274,892 $ 235,514 16.7 % Adjusted EBITDA $ 424,799 $ 357,558 18.8 % Earnings per common share — diluted $ 7.71 $ 6.58 17.2 % Adjusted earnings per common share — diluted $ 7.71 $ 6.77 13.9 % Net cash provided by operating activities $ 224,461 $ 188,794 18.9 % Total number of employees 7,990 7,635 4.6 % (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.
The increase in SG&A expenses was primarily driven by higher infrastructure support, compensation, travel and entertainment, and other general and administrative expenses. 42 TECHNOLOGY Year Ended December 31, 2022 2021 (dollars in thousands) Revenues $ 319,983 $ 287,366 Percentage change in revenues from prior year 11.4 % Operating expenses Direct cost of revenues 206,611 176,527 Selling, general and administrative expenses 79,835 67,912 Special charges 106 — 286,552 244,439 Segment operating income 33,431 42,927 Percentage change in segment operating income from prior year -22.1 % Add back: Depreciation and amortization 13,161 12,812 Special charges 106 — Adjusted Segment EBITDA $ 46,698 $ 55,739 Gross profit (1) $ 113,372 $ 110,839 Percentage change in gross profit from prior year 2.3 % Gross profit margin (2) 35.4 % 38.6 % Adjusted Segment EBITDA as a percentage of revenues 14.6 % 19.4 % Number of revenue-generating professionals (at period end) (3) 556 468 Percentage change in number of revenue-generating professionals from prior year 18.8 % (1) Revenues less direct cost of revenues (2) Gross profit as a percentage of revenues (3) Includes personnel involved in direct client assistance and revenue-generating consultants and excludes professionals employed on an as-needed basis Year Ended December 31, 2022 Compared with December 31, 2021 Revenues increased $32.6 million, or 11.4%, to $320.0 million from 2021 to 2022, which included a 2.4% estimated negative impact from FX.
The increase in SG&A expenses was primarily driven by higher infrastructure support, bad debt, compensation, outside services, and other general and administrative expenses. 44 TECHNOLOGY Year Ended December 31, 2023 2022 (dollars in thousands) Revenues $ 387,855 $ 319,983 Percentage change in revenues from prior year 21.2 % Operating expenses Direct cost of revenues 239,343 206,611 Selling, general and administrative expenses 100,316 79,835 Special charges — 106 339,659 286,552 Segment operating income 48,196 33,431 Percentage change in segment operating income from prior year 44.2 % Add back: Depreciation and amortization 14,515 13,161 Special charges — 106 Adjusted Segment EBITDA $ 62,711 $ 46,698 Gross profit (1) $ 148,512 $ 113,372 Percentage change in gross profit from prior year 31.0 % Gross profit margin (2) 38.3 % 35.4 % Adjusted Segment EBITDA as a percentage of revenues 16.2 % 14.6 % Number of revenue-generating professionals (at period end) (3) 628 556 Percentage change in number of revenue-generating professionals from prior year 12.9 % (1) Revenues less direct cost of revenues (2) Gross profit as a percentage of revenues (3) Includes personnel involved in direct client assistance and revenue-generating consultants and excludes professionals employed on an as-needed basis Year Ended December 31, 2023 Compared with December 31, 2022 Revenues increased $67.9 million, or 21.2%, to $387.9 million for the year ended December 31, 2023, primarily due to increased demand for investigations and litigation services, which was partially offset by lower demand for information governance, privacy & security services.
The increase in gross profit was nearly offset by higher SG&A expenses, primarily due to an increase in travel and entertainment expenses as our professionals have increasingly resumed business travel, a s well as higher non-billable compensation expenses, which includes the impact of a 14.0% increase in non-billable headcount, and an increase in outside services, resulting in higher Adjusted EBITDA.
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.
In the market approach, we utilize market multiples derived from comparable guideline companies and comparable market transactions to the extent available. 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.
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. 50 The process of evaluating the potential impairment of goodwill requires significant judgment and estimates.
The unfavorable effect of exchange rate changes on cash and cash equivalents increased $10.3 million for 2022 to $25.5 million compared with $15.2 million for 2021.
The effect of exchange rate changes on cash and cash equivalents had a favorable impact of $15.6 million for 2023 compared to an unfavorable impact of $25.5 million for 2022.
SG&A expenses of 19.9% of revenues in 2022 compared with 17.9% in 2021.
SG&A expenses of 25.9% of revenues for 2023 compared with 24.9% in 2022.
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”).
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 increase in SG&A expenses was primarily due to higher compensation, travel and entertainment, infrastructure support, and other general and administrative expenses. 43 STRATEGIC COMMUNICATIONS Year Ended December 31, 2022 2021 (dollars in thousands) Revenues $ 286,666 $ 267,647 Percentage change in revenues from prior year 7.1 % Operating expenses Direct cost of revenues 177,910 165,386 Selling, general and administrative expenses 60,716 50,114 Special charges 369 — Amortization of intangible assets 689 2,439 239,684 217,939 Segment operating income 46,982 49,708 Percentage change in segment operating income from prior year -5.5 % Add back: Depreciation and amortization of intangible assets 3,269 4,605 Special charges 369 — Adjusted Segment EBITDA $ 50,620 $ 54,313 Gross profit (1) $ 108,756 $ 102,261 Percentage change in gross profit from prior year 6.4 % Gross profit margin (2) 37.9 % 38.2 % Adjusted Segment EBITDA as a percentage of revenues 17.7 % 20.3 % Number of revenue-generating professionals (at period end) 970 814 Percentage change in number of revenue-generating professionals from prior year 19.2 % (1) Revenues less direct cost of revenues (2) Gross profit as a percentage of revenues Year Ended December 31, 2022 Compared with December 31, 2021 Revenues increased $19.0 million, or 7.1%, from 2021 to 2022, which included a 5.9% estimated negative impact from FX.
The increase in SG&A expenses was primarily due to higher compensation, infrastructure support, bad debt expenses and lease abandonment costs. 45 STRATEGIC COMMUNICATIONS Year Ended December 31, 2023 2022 (dollars in thousands) Revenues $ 329,230 $ 286,666 Percentage change in revenues from prior year 14.8 % Operating expenses Direct cost of revenues 210,151 177,910 Selling, general and administrative expenses 71,615 60,716 Special charges — 369 Amortization of intangible assets 297 689 282,063 239,684 Segment operating income 47,167 46,982 Percentage change in segment operating income from prior year 0.4 % Add back: Depreciation and amortization of intangible assets 3,742 3,269 Special charges — 369 Adjusted Segment EBITDA $ 50,909 $ 50,620 Gross profit (1) $ 119,079 $ 108,756 Percentage change in gross profit from prior year 9.5 % Gross profit margin (2) 36.2 % 37.9 % Adjusted Segment EBITDA as a percentage of revenues 15.5 % 17.7 % Number of revenue-generating professionals (at period end) 971 970 Percentage change in number of revenue-generating professionals from prior year 0.1 % (1) Revenues less direct cost of revenues (2) Gross profit as a percentage of revenues Year Ended December 31, 2023 Compared with December 31, 2022 Revenues increased $42.6 million, or 14.8%, to $329.2 million for the year ended December 31, 2023, primarily driven by higher demand for our corporate reputation and public affairs services.
The increase in net income was primarily due to higher revenues, which was partially offset by an increase in billable compensation expenses, which includes the impact of a 12.3% increase in billable headcount, resulting in higher gross profit.
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.
The increase in SG&A expenses was primarily driven by higher travel and entertainment, infrastructure support, compensation, marketing and business development and other general and administrative expenses. 41 ECONOMIC CONSULTING Year Ended December 31, 2022 2021 (dollars in thousands, except rate per hour) Revenues $ 695,208 $ 697,405 Percentage change in revenues from prior year -0.3 % Operating expenses Direct cost of revenues 510,987 508,575 Selling, general and administrative expenses 86,012 77,368 Special charges 31 — 597,030 585,943 Segment operating income 98,178 111,462 Percentage change in segment operating income from prior year -11.9 % Add back: Depreciation and amortization 4,881 5,724 Special charges 31 — Adjusted Segment EBITDA $ 103,090 $ 117,186 Gross profit (1) $ 184,221 $ 188,830 Percentage change in gross profit from prior year -2.4 % Gross profit margin (2) 26.5 % 27.1 % Adjusted Segment EBITDA as a percentage of revenues 14.8 % 16.8 % Number of revenue-generating professionals (at period end) 1,007 921 Percentage change in number of revenue-generating professionals from prior year 9.3 % Utilization rate of billable professionals 68 % 72 % Average billable rate per hour $ 508 $ 509 (1) Revenues less direct cost of revenues (2) Gross profit as a percentage of revenues Year Ended December 31, 2022 Compared with December 31, 2021 Revenues decreased $2.2 million, or 0.3%, to $695.2 million from 2021 to 2022, which included a 4.0% estimated negative impact from FX.
The increase in SG&A expenses was primarily driven by higher infrastructure support, compensation and bad debt expenses. 43 ECONOMIC CONSULTING Year Ended December 31, 2023 2022 (dollars in thousands, except rate per hour) Revenues $ 771,374 $ 695,208 Percentage change in revenues from prior year 11.0 % Operating expenses Direct cost of revenues 552,697 510,987 Selling, general and administrative expenses 108,859 86,012 Special charges — 31 661,556 597,030 Segment operating income 109,818 98,178 Percentage change in segment operating income from prior year 11.9 % Add back: Depreciation and amortization 5,989 4,881 Special charges — 31 Adjusted Segment EBITDA $ 115,807 $ 103,090 Gross profit (1) $ 218,677 $ 184,221 Percentage change in gross profit from prior year 18.7 % Gross profit margin (2) 28.3 % 26.5 % Adjusted Segment EBITDA as a percentage of revenues 15.0 % 14.8 % Number of revenue-generating professionals (at period end) 1,089 1,007 Percentage change in number of revenue-generating professionals from prior year 8.1 % Utilization rate of billable professionals 67 % 68 % Average billable rate per hour $ 547 $ 508 (1) Revenues less direct cost of revenues (2) Gross profit as a percentage of revenues Year Ended December 31, 2023 Compared with December 31, 2022 Revenues increased $76.2 million, or 11.0%, to $771.4 million for the year ended December 31, 2023, primarily due to higher realized bill rates and demand for our non-M&A-related antitrust services and higher demand and realized bill rates for our financial economics and international arbitration services.
See Note 14, “Debt” in Part II, Item 8 for a further discussion of the 2023 Convertible Notes.
As of December 31, 2023, we were in compliance with the covenants contained in the Credit Agreement. See Note 14, “Debt” in Part II, Item 8 for a further discussion of the Credit Agreement.
The increase in SG&A expenses was primarily driven by higher infrastructure support, travel and entertainment, compensation and other general and administrative expenses. 44 LIQUIDITY AND CAPITAL RESOURCES Liquidity For the years ended December 31, 2022, 2021 and 2020, our cash flows from operations exceeded our cash needs for capital expenditures and debt service requirements.
The increase in SG&A expenses was primarily driven by higher infrastructure support, travel and entertainment, compensation, and other general and administrative expenses. 46 LIQUIDITY AND CAPITAL RESOURCES Liquidity We typically finance our day-to-day operations, capital expenditures, acquisitions and share repurchases through cash flows from operations.
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.
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.
Income tax provision Our income tax provision decreased $0.7 million, or 1.2%, to $62.2 million in 2022 from $63.0 million in 2021. Our effective tax rate of 20.9% for 2022 compared to 21.1% for 2021.
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.
Higher revenues were partially offset by an increase in billable compensation expenses, which includes the impact of a 12.3% increase in billable headcount, resulting in higher gross profit.
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.
We deliver a wide range of services centered around five core offerings: Construction & Environmental Solutions, Data & Analytics, Disputes, Health Solutions and Risk and Investigations.
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.
For more information on our 2023 Convertible Notes and Credit Facility, refer to Note 14, “Debt” in Part II, Item 8.
Future Contractual Obligations We have no future contractual obligations as of December 31, 2023 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.
We evaluate our estimates, including those related to revenues, goodwill and intangible assets, income taxes and contingencies, on an ongoing basis.
Refer to Note 1, “Description of Business and Summary of Significant Accounting Policies” in our consolidated financial statements for further information on our significant accounting policies. 49 We evaluate our estimates, including those related to revenues, goodwill and intangible assets, income taxes and contingencies, on an ongoing basis.
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 our consolidated financial statements for further information on our significant accounting policies.
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.
The decrease in gross profit margin was primarily driven by higher compensation as a percentage of revenues. SG&A expenses increased $10.6 million, or 21.2%, from 2021 to 2022, which included a 5.1% estimated positive impact from FX. SG&A expenses of 21.2% of revenues in 2022 compared with 18.7% in 2021.
Gross profit increased $10.3 million, or 9.5%, to $119.1 million for the year ended December 31, 2023. Gross profit margin decreased 1.8 percentage points from 2022 to 2023. The decrease in gross profit margin was primarily driven by higher compensation expenses as a percentage of revenues.
Gross profit margin decreased 0.1 percentage points from 2021 to 2022. The decrease in gross profit margin was primarily due to a 2 percentage point decline in utilization, which was partially offset by lower compensation as a percentage of revenues. SG&A expenses increased $22.1 million, or 21.1%, from 2021 to 2022, which included a 2.0% estimated positive impact from FX.
The increase in gross profit margin was primarily due to lower variable compensation expenses as a percentage of revenues and higher realized bill rates, which was partially offset by a 1 percentage point decline in utilization. SG&A expenses increased $22.8 million, or 26.6%, to $108.9 million for the year ended December 31, 2023.
The following table reconciles net income to Total Adjusted Segment EBITDA, a non-GAAP financial measure, for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 (in thousands) Net income $ 235,514 $ 234,966 Add back: Income tax provision 62,235 62,981 Interest income and other (3,918) (6,193) Interest expense 10,047 20,294 Unallocated corporate expenses 124,830 104,457 Total segment operating income 428,708 416,505 Add back: Segment depreciation expense 32,876 31,072 Amortization of intangible assets 9,642 10,818 Segment special charges 7,564 — Remeasurement of acquisition-related contingent consideration — (3,130) Total Adjusted Segment EBITDA $ 478,790 $ 455,265 38 Other Segment Operating Data Year Ended December 31, 2022 2021 Number of revenue-generating professionals (at period end): Corporate Finance 1,946 1,702 FLC 1,584 1,496 Economic Consulting 1,007 921 Technology (1) 556 468 Strategic Communications 970 814 Total revenue-generating professionals 6,063 5,401 Utilization rates of billable professionals: (2) Corporate Finance 61 % 59 % FLC 54 % 56 % Economic Consulting 68 % 72 % Average billable rate per hour: (3) Corporate Finance $ 460 $ 452 FLC $ 361 $ 350 Economic Consulting $ 508 $ 509 (1) The number of revenue-generating professionals for the Technology segment excludes as-needed professionals, who we employ based on demand for the segment’s services.
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: Year Ended December 31, 2023 2022 (in thousands) Net income $ 274,892 $ 235,514 Add back: Income tax provision 83,471 62,235 Interest income and other 4,867 (3,918) Interest expense 14,331 10,047 Unallocated corporate expenses 125,420 124,830 Total segment operating income 502,981 428,708 Add back: Segment depreciation expense 39,233 32,876 Amortization of intangible assets 6,159 9,642 Segment special charges — 7,564 Total Adjusted Segment EBITDA $ 548,373 $ 478,790 40 Other Segment Operating Data Year Ended December 31, 2023 2022 Number of revenue-generating professionals (at period end): Corporate Finance (1) 2,215 2,100 FLC (1) 1,447 1,430 Economic Consulting 1,089 1,007 Technology (2) 628 556 Strategic Communications 971 970 Total revenue-generating professionals 6,350 6,063 Utilization rates of billable professionals: (3) Corporate Finance (1) 60 % 60 % FLC (1) 57 % 54 % Economic Consulting 67 % 68 % Average billable rate per hour: (4) Corporate Finance (1) $ 494 $ 456 FLC (1) $ 386 $ 359 Economic Consulting $ 547 $ 508 (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.
Interest income and other Interest income and other, which includes FX gains and losses, decreased $2.3 million to $3.9 million for the year ended December 31, 2022, compared with $6.2 million for the year ended December 31, 2021.
The increase was primarily due to higher compensation expenses, which was partially offset by higher allocation of infrastructure support spend. 39 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.
Adjusted EPS for the year ended December 31, 2022 excludes the $8.3 million special charge, which increased Adjusted EPS by $0.19.
Adjusted EPS for the year ended December 31, 2022 excluded the $8.3 million special charge, which increased Adjusted EPS by $0.19. 36 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.
We employed an average of 561 and 518 as-needed employees during the years ended December 31, 2022 and 2021, respectively.
(2) The number of revenue-generating 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 670 and 561 as-needed employees during the years ended December 31, 2023 and 2022, respectively.
The decrease in EPS was primarily due to an increase in diluted weighted average shares outstanding, which was partially offset by the higher net income described above. Adjusted EPS for the year ended December 31, 2022 increased $0.01 to $6.77 compared with $6.76 for the year ended December 31, 2021.
EPS and Adjusted EPS EPS for the year ended December 31, 2023 increased $1.13 to $7.71 com pared with $6.58 for the year ended December 31, 2022. The increase in EPS was primarily due to the higher net income described above.
We believe that our cash flows from operations, supplemented by borrowings under our senior secured bank revolving credit facility (“Credit Facility”), as necessary, will provide adequate cash to fund our long-term cash needs for at least the next 12 months, including the payment of our 2023 Convertible Notes at maturity on August 15, 2023, unless earlier converted or repurchased.
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. Generally, our cash flows from operations for the full year exceed our cash needs for capital expenditures and debt service requirements.
Under our operating leases as described in Note 15, “Leases” in Part II, Item 8, we have current obligations of $31.9 million and non-current obligations of $221.6 million. These 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.
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. Critical Accounting Estimates General.
We had $478.5 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2022. Free Cash Flow was an inflow of $135.7 million and $286.9 million for the years ended December 31, 2022 and 2021, respectively.
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.
Year Ended December 31, 2022 Compared with December 31, 2021 Net cash provided by operating activities of $188.8 million for 2022 compared with $355.5 million for 2021.
Year Ended December 31, 2023 Compared with December 31, 2022 Net cash provided by operating activities of $224.5 million for 2023 compared with $188.8 million for 2022. The increase of $35.7 million, or 18.9%, in net cash provided by operating activities was primarily due to higher cash collections resulting from increased billings.
Net cash used in financing activities of $106.0 million for 2022 compared with $61.7 million for 2021. The increase of $44.3 million, or 71.9%, in net cash used in financing activities was primarily due to an increase of $39.3 million in payments for common stock repurchases under the Repurchase Program as compared to the prior year.
The increase of $248.7 million, or 234.5%, in net cash used in financing activities was primarily due to the repayment of the $315.8 million principal amount of our 2023 Convertible Notes at maturity, which was partially offset by a decrease of $64.4 million in payments for common stock repurchases under the Repurchase Program as compared to 2022.
Gross profit margin increased 3.4 percentage points from 2021 to 2022. The increase in gross profit margin was largely due to a 2 percentage point increase in utilization and higher realization, which was partially offset by an increase in compensation, primarily attributable to a 14.3% increase in billable headcount.
Gross profit increased $40.8 million, or 23.2%, to $216.8 million for the year ended December 31, 2023. Gross profit margin increased 2.8 percentage points from 2022 to 2023. The increase in gross profit margin was primarily due to a 3 percentage point increase in utilization and higher realized bill rates.
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.
In 2023, 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.
The decrease in Free Cash Flow for the year ended December 31, 2022 was primarily due to lower net cash provided by operating activities, as described above, which was partially offset by a decrease in net cash used for purchases of property and equipment. 34 Other Strategic Activities During the year ended December 31, 2022, we acquired a leading restructuring, transactions, digital and transformation advisory firm in the Netherlands.
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.
In parts of Asia, travel restrictions continued to have an adverse impact on our business. Headcount The following table includes the net headcount additions by segment and in total for the year ended December 31, 2022.
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.
The decrease of $166.7 million, or 46.9%, in net cash provided by operating activities was primarily due to higher compensation, operating expenses and income taxes paid, which was partially offset by an increase in cash collected compared to the prior year. DSO was 97 days as of December 31, 2022 and 94 days as of December 31, 2021.
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. DSO was 100 days as of December 31, 2023 and 97 days as of December 31, 2022.
Adjusted EBITDA Adjusted EBITDA for the year ended December 31, 2022 increased $3.5 million, or 1.0%, as compared with the year ended December 31, 2021. Adjusted EBITDA Margin of 11.8% of revenues for the year ended December 31, 2022 compared with 12.8% of revenues for the year ended December 31, 2021.
SG&A expenses increased $17.0 million, or 14.4%, to $134.7 million for the year ended December 31, 2023. SG&A expenses of 20.6% of revenues in 2023 compared with 20.3% in 2022.
SG&A expenses increased $30.4 million, or 22.8%, from 2021 to 2022, which included a 2.6% estimated positive impact from FX. SG&A expenses of 15.0% of revenues in 2022 compared with 14.2% in 2021.
SG&A expenses increased $10.9 million, or 18.0%, to $71.6 million for the year ended December 31, 2023. SG&A expenses of 21.8% of revenues in 2023 compared with 21.2% in 2022.
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. 39 CORPORATE FINANCE & RESTRUCTURING Year Ended December 31, 2022 2021 (dollars in thousands, except rate per hour) Revenues $ 1,088,573 $ 938,969 Percentage change in revenues from prior year 15.9 % Operating expenses Direct cost of revenues 719,167 652,444 Selling, general and administrative expenses 163,691 133,275 Special charges 2,444 — Amortization of intangible assets 7,976 7,485 893,278 793,204 Segment operating income 195,295 145,765 Percentage change in segment operating income from prior year 34.0 % Add back: Depreciation and amortization of intangible assets 14,698 12,847 Special charges 2,444 — Fair value remeasurement of contingent consideration — (3,130) Adjusted Segment EBITDA $ 212,437 $ 155,482 Gross profit (1) $ 369,406 $ 286,525 Percentage change in gross profit from prior year 28.9 % Gross profit margin (2) 33.9 % 30.5 % Adjusted Segment EBITDA as a percentage of revenues 19.5 % 16.6 % Number of revenue-generating professionals (at period end) 1,946 1,702 Percentage change in number of revenue-generating professionals from prior year 14.3 % Utilization rate of billable professionals 61 % 59 % Average billable rate per hour $ 460 $ 452 (1) Revenues less direct cost of revenues (2) Gross profit as a percentage of revenues Year Ended December 31, 2022 Compared with December 31, 2021 Revenues increased $149.6 million, or 15.9%, from 2021 to 2022, which included a 2.7% estimated negative impact from FX.
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. 41 CORPORATE FINANCE & RESTRUCTURING Year Ended December 31, 2023 2022 (1) (dollars in thousands, except rate per hour) Revenues $ 1,346,678 $ 1,147,118 Percentage change in revenues from prior year 17.4 % Operating expenses Direct cost of revenues 914,707 766,514 Selling, general and administrative expenses 210,388 172,760 Special charges — 2,444 Amortization of intangible assets 5,079 7,976 1,130,174 949,694 Segment operating income 216,504 197,424 Percentage change in segment operating income from prior year 9.7 % Add back: Depreciation and amortization of intangible assets 14,333 14,941 Special charges — 2,444 Adjusted Segment EBITDA $ 230,837 $ 214,809 Gross profit (2) $ 431,971 $ 380,604 Percentage change in gross profit from prior year 13.5 % Gross profit margin (3) 32.1 % 33.2 % Adjusted Segment EBITDA as a percentage of revenues 17.1 % 18.7 % Number of revenue-generating professionals (at period end) 2,215 2,100 Percentage change in number of revenue-generating professionals from prior year 5.5 % Utilization rate of billable professionals 60 % 60 % Average billable rate per hour $ 494 $ 456 (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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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+2 added−4 removed1 unchanged
Biggest changeDecember 31, 2022 December 31, 2021 2023 2024 to 2027 Thereafter Total Fair Value Total Fair Value Long-Term Debt (dollars in thousands) Fixed rate $ 316,219 $ — $ — $ 316,219 $ 509,682 $ 316,245 $ 466,619 Average interest rate 2.0 % — % — % 2.0 % — % 5.4 % — % Foreign Currency Exchange Rate Risk Exchange Rate Risk Our FX exposure primarily relates to intercompany receivables and payables and third-party receivables and payables that are denominated in currencies other than the functional currency of our legal entities.
Biggest changeForeign Currency Exchange Rate Risk Exchange Rate Risk Our FX exposure primarily relates to intercompany receivables and payables and third-party receivables and payables that are denominated in currencies other than the functional currency of our legal entities. Our largest FX exposure is unsettled intercompany payables and receivables, which are reviewed on a regular basis.
See Note 8, “Interest Income and Other” in Part II, Item 8 of this Annual Report for information. 50 Translation of Financial Results Most of our foreign subsidiaries operate in a currency other than USD; therefore, increases or decreases in the value of USD against other major currencies will affect our operating results and the value of our balance sheet items denominated in foreign currencies.
See Note 8, “Interest Income and Other” in Part II, Item 8 of this Annual Report for information. 51 Translation of Financial Results Most of our foreign subsidiaries operate in a currency other than USD; therefore, increases or decreases in the value of USD against other major currencies will affect our operating results and the value of our balance sheet items denominated in foreign currencies.
Our most significant exposures to translation risk relate to functional currency assets and liabilities that are denominated in the euro, Australian dollar, British pound and Canadian dollar. The following table details the unrealized changes in the net investments of foreign subsidiaries whose currencies are denominated in currencies other than USD for the years ended December 31, 2022, 2021 and 2020.
Our most significant exposures to translation risk relate to functional currency assets and liabilities that are denominated in the Euro, Australian dollar, British pound and Canadian dollar. The following table details the unrealized changes in the net investments of foreign subsidiaries whose currencies are denominated in currencies other than USD for the years ended December 31, 2023, 2022 and 2021.
Our largest FX exposure is unsettled intercompany payables and receivables, which are reviewed on a regular basis. In cases where settlement of intercompany balances is not practical, we may use cash to create offsetting currency positions to reduce exposure. Gains and losses from FX transactions are included in interest income and other on our Consolidated Statements of Comprehensive Income.
In cases where settlement of intercompany balances is not practical, we may use cash to create offsetting currency positions to reduce exposure. Gains and losses from FX transactions are included in interest income and other on our Consolidated Statements of Comprehensive Income.
Year Ended December 31, 2022 2021 2020 Changes in Net Investment of Foreign Subsidiaries (in thousands) Euro $ (9,187) $ (12,381) $ 12,543 Australian dollar (4,930) (4,002) 6,619 British pound (29,738) (3,132) 13,599 Canadian dollar (747) (247) 1,209 All other (3,280) (2,643) 442 Total $ (47,882) $ (22,405) $ 34,412 51
Year Ended December 31, 2023 2022 2021 Changes in Net Investment of Foreign Subsidiaries (in thousands) Euro $ 6,210 $ (9,187) $ (12,381) Australian dollar (161) (4,930) (4,002) British pound 15,842 (29,738) (3,132) Canadian dollar 1,017 (747) (247) All other 3,354 (3,280) (2,643) Total $ 26,262 $ (47,882) $ (22,405) 52
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates, changes in the price of our common stock and changes in foreign exchange rates. Interest Rate Risk and Market Risk We are exposed to interest rate risk related to debt obligations outstanding.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to market risk from changes in interest rates and foreign exchange rates. Interest Rate Risk and Market Risk We are exposed to interest rate risk associated with borrowings under our Credit Facility.
Future interest rate risk may be affected by revolving line of credit borrowings subsequent to December 31, 2022 and prior to the November 21, 2027 maturity date of our Credit Facility. From time to time, we may use derivative instruments to manage our interest rate risk and market risk exposure.
A hypothetical 100 basis point increase in interest rate for the year ended December 31, 2022 would have a $0.1 million effect on interest expense. Future interest rate risk may be affected by revolving line of credit borrowings subsequent to December 31, 2023 and prior to the November 21, 2027 maturity date of our Credit Facility.
Removed
Interest rate changes expose our fixed rate long-term borrowings to changes in fair value and expose our variable rate borrowings to changes in our interest expense. As of December 31, 2022, there were no variable rate debt instruments outstanding as there were no outstanding borrowings under our Credit Facility.
Added
For details related to variable interest rates on our Credit Facility, refer to Note 14, “Debt” in Part II Item 8 of this Annual Report. As of December 31, 2023, our Credit Facility had no borrowings outstanding. Variable interest borrowings had a weighted average interest rate of 7.09% during the twelve months ended December 31, 2023.
Removed
All of our derivative transactions are entered into for non-trading purposes. The following table presents principal cash flows and related interest rates by year of maturity for our 2023 Convertible Notes and the fair value of the debt as of December 31, 2022 and 2021.
Added
A hypothetical 100 basis point increase in interest rate for the year ended December 31, 2023 would have a $0.8 million effect on interest expense. As of December 31, 2022, our Credit Facility had no borrowings outstanding. Variable interest borrowings had a weighted average interest rate of 3.64% during the twelve months ended December 31, 2022.
Removed
Our stock price affects the fair value of our 2023 Convertible Notes, as changes in stock price impact the value of the conversion premium and resulting trading prices of our 2023 Convertible Notes. The fair value is determined based on the last actively traded prices in an over-the-counter market for our 2023 Convertible Notes.
Removed
The last actively traded prices for our 2023 Convertible Notes per $1,000 principal amount were $1,529.50 and $1,475.50 as of December 31, 2022 and 2021, respectively.

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