FTI Consulting Navigates Turbulent Waters in Q1 2025 Amid Revenue Headwinds

FTI Consulting, Inc. (NYSE: FCN) reported mixed results for its first quarter ended March 31, 2025, as the global consulting firm grappled with declining revenues and restructuring costs, yet demonstrated resilience in key segments and strategic cost-cutting measures. While headline figures showed a 3.3% year-over-year revenue drop to $898.3 million, the company’s focus on margin management and share repurchases suggests a strategic pivot toward profitability over growth.

Revenue Declines, But Adjusted Metrics Signal Strength

The top-line contraction stemmed largely from underperformance in two critical segments: Corporate Finance & Restructuring (down 6.1%) and Economic Consulting (down 12.1%), which together account for nearly half of FTI’s business. These declines, attributed to reduced demand for restructuring services and antitrust work, were partially offset by strong performances in Forensic and Litigation Consulting (+8.3%) and Strategic Communications (+7.2%). The latter two segments, benefiting from rising litigation costs and corporate reputation management needs, now represent 28% of total revenue, up from 26% in 2024.

While net income fell to $61.8 million from $80.0 million, Adjusted EBITDA rose to $115.2 million, a 6.4% increase from $111.1 million in Q1 2024. This underscores the effectiveness of FTI’s cost-saving measures, including a $25.3 million special charge tied to layoffs of ~5% of its workforce. The company now anticipates annualized savings of $85 million from these actions, a critical factor in maintaining margins amid softening demand.

Cash Position and Capital Allocation: A Delicate Balance

FTI’s cash reserves have come under pressure, dropping to $151.1 million at quarter-end—down from $660.5 million at year-end 2024—due to share repurchases, annual bonuses, and increased loan issuances. The company spent $186.1 million buying back 1.13 million shares in Q1, and its Board approved an additional $400 million authorization on April 21, 2025. While this signals confidence in the stock’s long-term value, the aggressive repurchases have strained liquidity.

Investors should monitor whether the $85 million in projected annual savings materializes, as this could alleviate cash flow concerns. The company’s net debt rose to $8.9 million from -$39.0 million in Q1 2024, reflecting the shift from a net cash position to modest leverage.

Sector-Specific Opportunities and Risks

FTI’s results highlight both challenges and opportunities in its core markets:
- Litigation and Forensics: The 8.3% revenue growth here suggests demand for risk mitigation and data analytics services, which may persist amid global regulatory scrutiny.
- Strategic Communications: The 7.2% increase underscores the growing need for corporate reputation management, particularly in industries facing ESG (Environmental, Social, Governance) controversies.
- Weakness in Corporate Finance: The 6.1% decline in restructuring services reflects reduced merger and acquisition activity, a trend likely tied to economic uncertainty.

Conclusion: A Firm in Transition

FTI’s Q1 results paint a company in transition: one that is trimming costs to protect margins while navigating sector-specific headwinds. The adjusted EPS growth to $2.29 (from $2.23) and improving EBITDA margins are positives, but the top-line contraction and liquidity pressures are cause for caution.

The firm’s decision to prioritize share repurchases over cash preservation may pay off if the cost-savings materialize and demand rebounds in its weaker segments. Investors should weigh these strategic moves against the risks of prolonged softness in corporate finance and economic consulting.

Key data points support cautious optimism:
- Adjusted EBITDA margin growth (12.8% vs. 12.0%) signals operational efficiency.
- $85 million annual savings from layoffs could offset revenue declines in struggling segments.
- Strong balance sheet flexibility: Despite reduced cash, the company retains $568.3 million remaining in its repurchase authorization, offering a buffer for future opportunities.

However, FTI’s stock price reaction—down 2.1% pre-market on April 24—suggests investors remain skeptical about near-term growth. For now, the firm’s focus on profitability over expansion may position it to weather current challenges, but success hinges on stabilizing its core businesses and capitalizing on emerging demand in litigation and strategic communications.

In a market increasingly focused on cost discipline, FTI’s restructuring efforts may prove a prudent move—even if they come at the expense of short-term revenue growth.