10-Q: FTI Consulting Reports Q1 2026 Results: Revenue Up, Net Income Down

FTI Consulting's Q1 2026 filing shows a 9.5% revenue increase to $983.3 million, but net income declined by 6.8% to $57.6 million.

Summary

• FTI Consulting reported first-quarter 2026 revenues of $983.3 million, an increase of 9.5% compared to the same period in 2025.
• Net income for the quarter was $57.6 million, a decrease of 6.8% from $61.8 million in the prior year's first quarter.
• Adjusted EBITDA decreased by 15.9% to $96.8 million, with the Adjusted EBITDA margin falling to 9.8% from 12.8% in Q1 2025.
• Diluted earnings per share (EPS) increased to $1.90 from $1.74, primarily due to a lower weighted average number of shares outstanding.
• Net cash used in operating activities decreased significantly by 33.4% to $310.0 million, and Free Cash Flow improved to an outflow of $320.6 million from $483.0 million in Q1 2025.
• The company repurchased $126.8 million of its common stock during the quarter.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed performance. While revenue growth is positive, the decline in net income, Adjusted EBITDA, and segment profitability in key areas like Economic Consulting indicates underlying challenges that temper the overall sentiment.

Positives

• Revenue increased by 9.5% to $983.3 million, driven by growth in Corporate Finance, Strategic Communications, and Technology segments.
• Excluding FX impact, revenue grew by 6.8% ($60.8 million).
• Diluted EPS rose to $1.90 from $1.74, attributed to a reduction in outstanding shares.
• Net cash used in operating activities decreased by 33.4% to $310.0 million.
• Free Cash Flow improved, with a smaller outflow of $320.6 million compared to $483.0 million in the prior year.
• The Corporate Finance segment saw a significant 19.2% revenue increase and a 108.1% rise in segment operating income.
• Strategic Communications segment revenue increased by 18.4%, with gross profit up 33.3% and gross profit margin improving to 39.2%.

Negatives

• Net income decreased by 6.8% to $57.6 million.
• Adjusted EBITDA declined by 15.9% to $96.8 million, and the Adjusted EBITDA margin decreased to 9.8% from 12.8%.
• The Economic Consulting segment experienced a 2.3% revenue decrease and a significant 50.3% drop in gross profit, resulting in a segment operating loss of $7.3 million.
• Forensic and Litigation Consulting (FLC) segment gross profit decreased by 9.9%, and gross profit margin fell to 33.9% from 38.1%.
• Interest expense increased significantly by $5.5 million to $6.4 million due to higher borrowings.
• The effective tax rate increased to 26.6% from 23.3%.

Risks

• Changes in demand for services.
• Ability to recruit and retain qualified professionals and senior management.
• Conflicts of interest preventing representation of certain clients.
• Former employees joining or forming competing businesses.
• Legislation impacting enforceability of contractual protections against competition by former employees.
• Management of headcount, utilization rates, and billing rates, and ability to maintain or increase pricing.
• Challenges in identifying suitable acquisition candidates, negotiating terms, and integrating acquired operations.
• Risks associated with operating in non-U.S. markets.
• Ability to replace key personnel with specialized skills.
• Protection of confidential and proprietary information from cyberattacks, system failures, or bad actors.
• Legislation or judicial rulings impacting data privacy and discovery processes.
• Periodic fluctuations in revenues, operating income, and cash flows.
• Damage to reputation from service quality claims, IT system failures, or adverse publicity.
• Fee discounting, renegotiation, lower pricing, less advantageous contract terms, and unexpected termination of client engagements.
• Competition for clients and key personnel.
• General economic factors, industry trends, restructuring and bankruptcy rates, legal or regulatory requirements, capital market conditions, merger and acquisition activity, major litigation activity, geopolitical disruptions, and other events outside of the company's control.
• Ability to manage growth.
• Risk of non-payment of receivables.
• Amount and terms of outstanding indebtedness.
• Risks related to the obsolescence, replacement, protection, implementation, or operation of information technology systems, software, intellectual property, and trade secrets.
• Risks related to the adoption and integration of technological innovations like AI and machine learning.
• Foreign currency disruptions and fluctuations.
• Changes in U.S. and foreign tax laws.
• Physical risks related to climate change impacting business operations and IT systems.
• Failure to meet evolving governmental, investor, or stakeholder expectations regarding climate change and sustainability initiatives.
• Fluctuations in the mix of services and geographic locations of clients.

Future Outlook

The company anticipates that its future capital requirements will be met through cash flows from operations, supplemented by borrowings under its Revolving Credit Facility and Incremental Term Loan. For the remainder of 2026, FTI Consulting expects additional capital expenditures between $34 million and $42 million, excluding potential expenditures from future acquisitions or specific client engagements.

Management Comments

• Revenues for the three months ended March 31, 2026 increased $85.1 million, or 9.5%, compared to the three months ended March 31, 2025.
• Net income for the three months ended March 31, 2026 decreased $4.2 million, or 6.8%, compared to the three months ended March 31, 2025.
• Adjusted EBITDA for the three months ended March 31, 2026 decreased $18.3 million, or 15.9%, compared to the three months ended March 31, 2025.
• Net cash used in operating activities for the three months ended March 31, 2026 decreased $155.2 million, or 33.4%, to $310.0 million compared to $465.2 million for the three months ended March 31, 2025.
• Days sales outstanding (DSO) of 98 days at March 31, 2026 compared to 100 days at March 31, 2025.

Industry Context

StockSavvy.ai notes that FTI Consulting's performance in Q1 2026 reflects a dynamic consulting landscape. The revenue growth, particularly in Corporate Finance and Strategic Communications, aligns with increased demand for restructuring, M&A advisory, and crisis management services. However, the decline in net income and Adjusted EBITDA, alongside challenges in the Economic Consulting segment, highlights the competitive pressures and operational costs inherent in the global professional services industry.

Comparison to Industry Standards

• FTI Consulting's revenue growth of 9.5% in Q1 2026 outpaces the general economic consulting industry average, which has seen more moderate growth in recent periods.
• The decline in Adjusted EBITDA margin to 9.8% from 12.8% suggests potential pressure on profitability, which is a concern across many professional services firms facing rising labor and operational costs.
• The significant increase in interest expense due to higher borrowings is a trend observed in companies leveraging debt for growth or share repurchases, a strategy that requires careful management of leverage ratios.
• The improvement in Days Sales Outstanding (DSO) to 98 days from 100 days indicates better working capital management, a positive indicator for operational efficiency in the consulting sector.

Legal Proceedings

• The company is not aware of any asserted or unasserted legal proceedings or claims that it believes would have a material adverse effect on its financial condition or results of operations.

Stakeholder Impact

• Shareholders: Potential impact from decreased net income and Adjusted EBITDA, offset by share repurchases and EPS growth due to reduced share count.
• Employees: Continued focus on headcount management and utilization rates; potential impact from special charges in prior periods.
• Creditors: Increased interest expense due to higher borrowings may impact debt servicing capacity, though covenants are currently met.
• Clients: Continued provision of consulting services across various segments; potential impact from any service quality issues or data security breaches.

Next Steps

• Continue to manage headcount and utilization rates.
• Monitor and manage billing rates and pricing.
• Pursue suitable acquisition candidates and integrate acquired operations.
• Adapt to and manage risks associated with operating in non-U.S. markets.
• Continue to protect confidential and proprietary information.
• Monitor and adapt to changes in legislation and judicial rulings.
• Manage growth and potential non-payment of receivables.
• Manage outstanding indebtedness.
• Adapt to technological innovations like AI and machine learning.
• Monitor foreign currency fluctuations.
• Respond to changes in tax laws.
• Address physical risks related to climate change.
• Meet evolving expectations regarding climate change and sustainability initiatives.

Key Dates

Recommendation

FTI Consulting presents a mixed financial picture. While revenue growth is a positive sign, the decline in profitability metrics like net income and Adjusted EBITDA, coupled with challenges in specific segments, warrants a cautious approach. The company's ability to manage costs, integrate acquisitions, and navigate economic uncertainties will be key. The ongoing share repurchase program and improved cash flow are supportive, but the overall performance suggests a 'hold' rating until clearer signs of sustained profit improvement emerge.

Keywords

FTI Consulting, 10-Q, Quarterly Report, Financial Results, Revenue, Net Income, EBITDA, EPS, Corporate Finance, Forensic and Litigation Consulting, Economic Consulting, Technology, Strategic Communications, Cash Flow, Stock Repurchase