Good day, everyone, and welcome to the FTI Consulting Second Quarter 2017 Earnings Conference Call. As a reminder, today's call is being recorded. And now for opening remarks and introductions, I'll turn the call over to Mollie Hawkes, Managing Director of Investor Relations at FTI Consulting. Please go ahead.

Good morning. Welcome to the FTI Consulting conference call to discuss the Company's second quarter of 2017 earnings results, as reported this morning. Management will begin with formal remarks, after which we'll take your questions. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues, future results and performance expectations, plans or intentions relating to financial performance, acquisitions, share repurchases, business trends and other information or other matters that are not historical, including statements regarding estimates of our future financial results and other matters. For a discussion of risks and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the Safe Harbor statement in the earnings press release issued this morning, a copy of which is available on our website at www.fticonsulting.com, as well as other disclosures under the heading of Risk Factors and forward-looking Information in our most recent Form 10-K and in our other filings filed with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speaks only as of the date of this earnings call and will not be updated. During the call, we will discuss certain non-GAAP financial measures, such as, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per share, adjusted net income, adjusted EBITDA or adjusted segment EBITDA margin and free cash flow. For a discussion of these and other non-GAAP financial measures, as well as our reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the press release and accompanying financial tables that we issued this morning, which includes these reconciliations. Lastly there are two items that have been posted to the Investor Relations section of our website this morning for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical financial and operating data, which has been updated to include our first quarter of 2017 results. Of note, during today's prepared remarks, management will speak directly to - will not speak directly to the quarterly earnings presentation posted on our Investor Relations website. To ensure our disclosures are consistent, these slides provide the same details as they have historically, and as I have said, are available on the Investor Relations section of our website. With these formalities out of the way, I am joined today by Steve Gunby, our President and Chief Executive Officer; and Ajay Sabherwal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gunby.

Thank you, Molly. And welcome to all of you who are joining us on the phone. As most of you know, we had a tough start to this year. It was slow start one that persisted through the first quarter and well into the second. It is of course not fun to have such a slow period. As we discussed during the first quarter call however, we were confident at that point the factors that drove that slowness will not persist throughout the whole of the year. Importantly I'm pleased to say, by the end of the second quarter we were back on track. And as we are projecting a much more solid second half of the year, and a much more solid foundation going into 2018. We would like to do on this call is give you a flavor for those changes that happened during the course of the first half of the year and our sense of our expectations going forward. The main but not only driver of the improved performance was in Corp Fin. As we discussed in the first quarter call, there are some real market headwinds and restructuring market that we believe at that time and still believe will be with us for a while. Having said that, as we also discussed much of the shortfalls and performance early in the year had to do not with the market but with some painful idiosyncratic factors, most of which we thought we could reverse as the year went on. For example, we had delayed in success fees, we’re conflicted out of two of the largest jobs in the restructuring market, we had some anomalous performance in some businesses that are almost always strong such as our TMT business and some others. We had confidence then that…

Thanks, Steve. As I have in the past, first, I will summarize our quarterly results. Then I will review significant segment level quarter-over-quarter and sequential quarter comparisons. After that, I will discuss guidance for the remainder of the year. In summary, we had a slow start to the year. Despite this, we are entering the second half of the year with positive momentum especially in our corporate finance and restructuring segment. This, coupled with the cost actions we have taken and the successful deployment of cash to both buyback stock and acquire a complementary business gives me confidence about our prospects for the second half of this year. For the second quarter of 2017, net loss of $5.2 million included a special charge of $30.1 million and compares to net income of $26.5 million in the prior year quarter. The special charge is comprised of three items. First, we took headcount actions that accounted for $16.1 million of the charges, these actions impacted approximately 4% of our employees split approximately 60% and 40% between billable and non-billable staff respectively. Second, the disposal or closure of several small international locations resulted in $1.6 million of the special charge. Thirdly, we exited our Washington D.C. office and moves to a new location in Washington D.C., the remaining $12.4 million of the special charge is for estimated lease curtailment cost, losses from subleasing space at lower rates than what we are obligated to pay in our prior building to 2021. Our D.C office is our third largest office globally with over 270 professionals from all five business segments plus corporate employees. This relocation was design to provide economic, employee and business development benefit. From an economic standpoint, we were able to take advantage of lower rent in a building with lower operating expenses…

Thank you [Operator Instructions] Our first question today comes from Tim McHugh of William Blair & Company.

Hi. Good morning. Just want to kind of follow up on the commentary about the second half. From the comment about the corporate financing restructuring, the new wins I guess you described and I apologize if I missed this, but can you elaborate just more on which is that more of restructuring, is that more of the non-distressed side of the business, I guess what is that you competing better or you’re seeing more opportunities emerge in that sector?

Yes, so, let me give a high-level answer and then I don’t know whether we’re giving details of the specific wins or not Ajay, but it's on both sides Tim, I mean and it was a confluence of things. Yes, on the restructuring side, I think they are little more -- if there are more opportunities perhaps we also just one more couple of -- and obviously we’re affected by big wins, we’re winning all through it, but if you remember during the first quarter, we conflicted out of two of the largest assignments and we looked like we’re positioned to win and we got conflicted out, half of that happened in the second quarter, and we just won a lot on that side, which is more in line with what we expect candidly, and we have very good business there and we thought the performance in the first quarter was somewhat anomalous. But also on our we’re calling it business transformation services, none of our clients call it non-distress Tim, I’ve gotten re-educated, I going to have to see if I can get you re-educated on that to. We also won more there, there I think we actually in second on a couple of things late in the last year and the beginning of this year for example merger integration stuff that we do in there and then we just rebounded and won some stuff there as well as a variety of other things. I think we just had a stronger sometimes things go one way in the quarter and sometimes they rebound the next quarter. So, I think it's both sides, Ajay anything to add?

I’ll just add, I’m really, really excited by what I’ve seen in the corporate finance group coming out of this quarter. Obviously, we cannot give you names of the clients, but it’s all of the above, it’s in restructuring, it’s in retail, it’s in energy, it is globally, it is leveraging the full strength in terms of the practitioners, the people, the bench strength, the global platform, it is terrific for me to see how we are winning and where we’re winning in both restructuring and on the business transformation side.

Does that help Tim?

Yes, the sequential improvement there, how much -- you talk about Q1 being very low from a success fee standpoint. And then you talked about an improvement in 2Q I guess how much of this sequential improvement or any way you want to describe it I guess it I guess was the high success fees in the quarter?

Certainly Tim. In the first quarter, our success fee was closer to the lower end of what we typically get. In the second quarter, it was well above average but certainly not at that top end. So, success fee was a contributor, we expect it to continue to be, but also, we expect to win from these wins that we got towards the later part of the quarter.

And I guess what's that normal range for success fees again. So, if you're saying low high end in range. What are you thinking about there?

I'll be more of the more than I usually have. As low as $3 million as high as 15 with an average around 7 aggregate for the comp. And that that is a quarterly number.

Right, okay. And then lastly just the higher-level question. I know is there any way you can I guess give us more comfort other than obviously we see the math on the expense cuts, but the improvement needed in the second half to get to the guidance range is pretty meaningful. So, is there anything I guess in more granularity other than I guess the size or just the fact you feel better towards the end of the quarter and you're seeing new wins that you would point to your -- has given you confidence and visibility to the people?

Absolutely. So, you should see our second -- we are reaffirming guidance. I mean that and itself is something we take seriously. So that's number one. Number two, you should see our second quarter as a threshold. We set and we expect to do better than in the second quarter. And then the second quarter we haven't yet benefited from the cost actions. So mathematically add the cost actions to what we have delivered in the second quarter and you got the first half of $0.74 take second quarter as a benchmark or a threshold add the cost actions on a EPS basis and there isn't that much improvement in performance required to get at least to the lower end. Now on top of that telling you, the momentum we are seeing in corporate finance and the expectations for the rest that math is not too difficult.

The other thing I would say Tim, is our business on a short-term basis is extraordinarily fixed cost. There is some businesses that have very variable comp structures our is below the executive committee reasonably effects coming from our accounting background and so forth. So, it doesn't actually take that much revenue movement to actually drop a fair amount of money to the bottom line and that's cut both ways, it can take that much shortfall in the early part of the year to actually have EPS drop. But that's part of the volatility. We have volatility in the business but there is a lot of month-to-month and quarterly quarter movement just by reasonably modest levels of revenue. And right now, we're projecting better revenue going forward. Because we have wins inhouse that we were seeing on horizon in the first quarter, but they were not yet in the bank. Does that help Tim?

[Operator Instructions]. We'll go next to Tobey Sommer of Sun Trust.

I was wondering if you could comment about regulatory driven work. We've seen news reports about slow to fill, spend it considerable jobs by the Trump administration. Wondering if that is impacting the pace of regulatory driven work versus prior to the change in the administration. Thanks.

We have a lot of discussion in that about our company. That plus uncertainty around antitrust how much is that effecting M&A which can affect a number of our businesses. So, we have a lot of discussion around that, just as we add around Brexit and how much can that effect our London business, undoubtedly some of that is having an effect. The truth is what we find is that we can -- if we do the right things and we win more than our share, we can overcome that. And so, the focus and since we can’t change any of that, our focus has been really around okay, so what do we need to do, clearly there is enough market out there for us to continue to grow, if we do the right things, it’s obviously easier if there is a regulatory boom or there is an M&A boom. But I think our focus here is to say, let’s assume there isn’t what can we do and I think we’re focused around that. But yes, I suspect there could be some better regulatory environments to make it easier, Tobey. Does that help?

Okay. Could you provide a little bit more color about the senior headcount additions that you cited I think in the first half, just so we can understand the magnitude of those? And then on a go forward basis, after the headcount reduction actions in 2Q, what is the outlook for billable headcount growth which is kind of integral to the organic growth strategy [indiscernible]. Thanks.

Yeah. Look in terms of the senior hires, this is been something that we’ve been doing all along, I don’t want to make it sound like this is an anomaly, but I also wanted to make sure that we underscore that just because we took some headcount reduction actions doesn’t mean we abandon that commitment and we have some terrific practices which are growing and we believe can continue to grow fast and we supported them because we’ve encoding [ph] terrific people around the world and then eventually they come. And so that’s what I was underscoring, in terms of the areas, Mollie can give, I think we’ve done a lot of announcements Mollie will send you all those in a bundle, but I mean included substantial support for our retail practice in the US all the way to Australia, they included a great group that came from a competitor in our capital advisors group. They included the CEG acquisition, those were just in Corp Fin, and I’m sure I’m missing in some other additions of talent in Europe. That’s just in our Corp Fin group, and it goes across and FLC we were able to attract the great group of people in South Africa which so much that was priority but we came across a great group people and when you come across a great group of people, we take them on similarly we had -- I mean these are small groups, but they mount up and they create a platform for growth, we had a small group that wanted to join us our strong construction solutions business in Hong Kong. And so, we added them, I think this is all within the first six months or plus or minus a month. Mollie can correct me if I’m a little bit off in the timing. And so forth throughout the rents, it’s not hundreds of people, but its meaningful for and I just gave you a couple of snapshots, there are some others across the rest of the business, it’s meaningful, our business going forward example we also attracted a very talented guy who ran cyber security for the National Security Council in the Whitehouse. The cyber security is an important business for us, which is growing and the ability to attract the talent like that is something you do and my point was not so much this radical or it obviously lateral hires like that can cost you money in the first six months as they’re getting their business and we factor that into our forecast. The point is that we are continuing to do that even while we right size other things and that’s an important part of our strategy going forward. Does that help Tobey? And answer the second part of the question, Ajay can answer it. Does that address the first part of the question?

Sure. And just about like hiring plans on a go forward basis, thanks.

Yeah, let me help. Whilst we have characterized 4% of the workforce, 60% of billable and non-billable. I want to emphasize, billable customer, we didn't take all the junior people and laid them off, we did not do that. This was across the bench strength. We looked at every area that we needed to look at, that will go as far as that. And there was no just take the most recent hires aspect of it. In terms of hiring plans, clearly, we have commitments that we have made to hiring for example from university campuses that we will certainly honor. But we believe we have the bench strength now to produce higher revenue overtime. We will certainly grow, but for this year I'm not going to characterize with a percentage growth target from where we are from the beginning of the year or longer-term aspirations remain a mid-single digits headcount growth. But for this year that will be well muted from that number.

Okay. And then wanted to ask you a question about EBITDA, in EBITDA growth. Do you feel like the company is positioned now to grow EBITDA, EBITDA in recent years is kind of inched down a little bit, and kind of flattish to down rather than focusing on adjusted EBITDA, it feels like investors kind of pay more attention to the EBITDA? Thank you.

Hey I was thinking you're asking about adjusted EBITDA, but I think the answer kind of is the same. Let me give an answer Ajay, if you have different one feel free. Yeah, I think the answer is yes. I think look the truth is, that EBITDA for a long time in this company was dropping. We've slowed that decline but we haven't and we've talked about this we didn’t believe this year, we didn't believe we have yet had it on a growth trajectory. We believe we have in addition to EBITDA growth terrific cash flow that allows us to build returns to shareholders through acquisitions or through other means. But in terms of the goal of getting organic EBITDA growth, we are in a process here. But I think we are well into that process. I think from -- there is always variability quarter-to-quarter, but I think we have expectations from where we are here to be growing EBITDA. And it can vary quarter-to-quarter. This is a business where you can always have a year where just everything goes wrong, just like we had first quarter where lots of things went wrong. But that is the goal, and I don't think we're far from that goal at this point Tobey.

And at this time, we have no further questions. I'd like to turn the conference back over for any additional or closing remarks.

Well thanks everybody for the time. And hopefully everybody gotten some time to get some time off for the summer. We are looking forward to having that first half of the year behind us and looking forward to the second half of the year and beyond. Thanks very much.

And this does conclude today's conference long-term. We appreciate everyone's participation today.