FTI CONSULTING INC

Previous wording

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. 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”). 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. Historical results and any discussion of prospective results may not indicate our future performance.

Current wording

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, 2024 and significant factors that could affect our prospective financial condition and results of operations. 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”). For a similar discussion and analysis of our results for the year ended December 31, 2023 compared to our results for the year ended December 31, 2022, 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, 2023, filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”) on February 22, 2024. Historical results and any discussion of prospective results may not indicate our future performance.

Previous wording

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. We deliver a wide range of services centered around four core offerings: Business Transformation, Strategy, Transactions and Turnaround & Restructuring.

Current wording

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 and governments. We deliver a wide range of services centered around three core offerings: Transactions, Transformation & Strategy and Turnaround & Restructuring.

Previous wording

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. 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.

Current wording

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 & investigations and disputes, supported by our data & analytics technology-enabled solutions, with a focus on highly regulated industries. 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.

Previous wording

Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting services. 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 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.

Current wording

Our Technology segment provides companies, law firms, private equity firms and government entities with a comprehensive global portfolio of digital insights and risk management consulting and data services. 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 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 and Analytics Services and Expertise, and Information Governance, Privacy & Security Services.

Previous wording

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. 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. Fixed-fee arrangements may require certain clients to pay us a recurring retainer. Our contract arrangements may also contain success fees or performance-based arrangements in which our fees are based on the attainment of contractually defined objectives with our client. This type of success fee may supplement a time and expense or fixed-fee arrangement. Success fee revenues may cause variations in our revenues and operating results due to the timing of when achieving the performance-based criteria becomes probable. Seasonal factors, such as the timing of our employees’ and clients’ vacations and holidays, may impact the timing of our revenues across our segments.

Current wording

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. 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. Fixed-fee arrangements may require certain clients to pay us a recurring retainer.

Previous wording

•the utilization rates of the revenue-generating professionals we employ;

Current wording

•the utilization rates of the billable professionals we employ;

Previous wording

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. As described in Note 20, “Segment Reporting” in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report, we evaluate the performance of our operating segments based on Adjusted Segment EBITDA, and Segment Operating Income is a component of the definition of Adjusted Segment EBITDA.

Current wording

We have included the definition of Segment Operating Income, which is a GAAP financial measure, below in order to more fully define the components of certain non-GAAP financial measures in the accompanying analysis of financial information.

Previous wording

We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects current core operating performance and provides an indicator of the segment’s ability to generate cash.

Current wording

We define Segment Operating Income as a segment’s share of consolidated operating income. We define Total Segment Operating Income, which is a non-GAAP financial measure, as the total of Segment Operating Income for all segments, which excludes unallocated corporate expenses. We use Segment Operating Income for the purpose of calculating Adjusted Segment EBITDA, which is a non-GAAP financial measure. We define Adjusted Segment EBITDA as a segment’s share of consolidated operating income before depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges and goodwill impairment charges. We use Adjusted Segment EBITDA as a basis to internally evaluate the financial performance of our segments because we believe it reflects core operating performance and provides an indicator of the segment’s ability to generate cash. We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses.

Previous wording

We define Total Adjusted Segment EBITDA, which is a non-GAAP financial measure, as the total of Adjusted Segment EBITDA for all segments, which excludes unallocated corporate expenses. We define Adjusted EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, gain or loss on sale of a business and losses on early extinguishment of debt. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these non-GAAP financial measures, considered along with corresponding GAAP financial measures, provide management and investors with additional information for comparison of our operating results with the operating results of other companies. We define Adjusted EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues.

Current wording

We define Adjusted EBITDA, which is a non-GAAP financial measure, as consolidated net income before income tax provision, other non-operating income (expense), depreciation, amortization of intangible assets, remeasurement of acquisition-related contingent consideration, special charges, goodwill impairment charges, gain or loss on sale of a business and losses on early extinguishment of debt. We define Adjusted EBITDA Margin, which is a non-GAAP financial measure, as Adjusted EBITDA as a percentage of total revenues. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with a more complete understanding of our operating results, including underlying trends. In addition, EBITDA is a common alternative measure of operating performance used by many of our competitors. It is used by investors, financial analysts, rating agencies and others to value and compare the financial performance of companies in our industry. Therefore, we also believe that these non-GAAP financial measures, considered along with corresponding GAAP financial measures, provide management and investors with useful supplemental information.

Previous wording

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. We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with an additional understanding of our business operating results, including underlying trends.

Current wording

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. We use Adjusted Net Income for the purpose of calculating Adjusted EPS. Management uses Adjusted EPS to assess total Company operating performance on a consistent basis. We believe that these non-GAAP financial measures, when considered together with our GAAP financial results and GAAP financial measures, provide management and investors with useful supplemental information on our business operating results, including underlying trends.

Previous wording

We define Free Cash Flow, which is a non-GAAP financial measure, as net cash provided by operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with an additional understanding of the Company’s ability to generate cash for ongoing business operations and other capital deployment.

Current wording

We define Free Cash Flow, which is a non-GAAP financial measure, as net cash provided by operating activities less cash payments for purchases of property and equipment. We believe this non-GAAP financial measure, when considered together with our GAAP financial results, provides management and investors with useful supplemental information on the Company’s ability to generate cash for ongoing business operations and capital deployment.

Previous wording

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.

Current wording

There were no special charges recorded during the year ended December 31, 2023.

Previous wording

Net income for the year ended December 31, 2023 increased $39.4 million, or 16.7%, as compared with 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. 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. Operating income was partially offset by higher income taxes resulting in an increase in net income.

Current wording

Net income for the year ended December 31, 2024 increased $5.2 million, or 1.9%, compared to the year ended December 31, 2023. The increase in net income was primarily due to higher revenues, lower income taxes and an FX gain compared to an FX loss in the prior year. This increase was partially offset by higher direct compensation expenses, which includes the impact of a 4.5% increase in billable headcount, higher selling, general and administrative (“SG&A”) expenses, which includes the impact of a 6.2% increase in non-billable headcount, and an increase in bad debt and outside services expenses.

Previous wording

Adjusted EBITDA for the year ended December 31, 2023 increased $67.2 million, or 18.8%, as compared with the year ended December 31, 2022. 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. 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.

Current wording

Adjusted EBITDA for the year ended December 31, 2024 decreased $21.1 million, or 5.0%, compared to the year ended December 31, 2023. Adjusted EBITDA Margin of 10.9% of revenues for the year ended December 31, 2024 compared to 12.2% of revenues for the year ended December 31, 2023. The decrease in Adjusted EBITDA was primarily due to an increase in direct compensation expenses, which includes the impact of a 4.5% increase in billable headcount, higher SG&A expenses, which includes the impact of a 6.2% increase in non-billable headcount, and an increase in bad debt and outside services expenses, which was partially offset by higher revenues. Adjusted EBITDA for the year ended December 31, 2024 excludes the $8.2 million special charge.

Previous wording

EPS for the year ended December 31, 2023 increased $1.13 to $7.71 compared with $6.58 for the year ended December 31, 2022. The increase in EPS was primarily due to the higher net income described above.

Current wording

EPS for the year ended December 31, 2024 increased $0.10 to $7.81 compared to $7.71 for the year ended December 31, 2023. The increase in EPS was primarily due to the higher net income described above.

Previous wording

Adjusted EPS for the year ended December 31, 2023 increased $0.94 to $7.71 compared with $6.77 for the year ended December 31, 2022. Adjusted EPS for the year ended December 31, 2022 excluded the $8.3 million special charge, which increased Adjusted EPS by $0.19.

Current wording

Adjusted EPS for the year ended December 31, 2024 increased $0.28 to $7.99 compared to $7.71 for the year ended December 31, 2023. Adjusted EPS for the year ended December 31, 2024 excludes the $8.2 million special charge, which increased Adjusted EPS by $0.18.

Previous wording

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. The increase in net cash provided by operating activities was primarily due to higher cash collections resulting from increased billings. 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. Days sales outstanding (“DSO”) was 100 days at December 31, 2023 and 97 days at December 31, 2022.

Current wording

Net cash provided by operating activities for the year ended December 31, 2024 increased $170.6 million to $395.1 million compared to $224.5 million for the year ended December 31, 2023. The increase in net cash provided by operating activities was primarily due to an increase in cash collections, which was partially offset by higher compensation, forgivable loan issuances, operating expenses and income tax payments as compared to the same period in the prior year. Days sales outstanding (“DSO”) was 97 days at December 31, 2024 and 100 days at December 31, 2023. The decrease in DSO was primarily due to cash collections that outpaced the increase in revenues.

Previous wording

Free Cash Flow was an inflow of $174.9 million and $135.7 million for the years ended December 31, 2023 and 2022, respectively. 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.

Current wording

Free Cash Flow was $360.2 million and $174.9 million for the years ended December 31, 2024 and 2023, respectively. The increase in Free Cash Flow for the year ended December 31, 2024 was primarily due to higher net cash provided by operating activities, as described above, and a decrease in net cash used for purchases of property and equipment.

Previous wording

Net cash provided by operating activities and existing cash resources, including our senior secured bank revolving credit facility (“Credit Facility”) were used to repay the $315.8 million principal amount of our 2.0% convertible senior notes due 2023 (“2023 Convertible Notes”) at maturity. 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. We had $460.7 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2023.

Current wording

A portion of net cash provided by operating activities was used to repurchase and retire 51,717 shares of our common stock under our Repurchase Program for an average price per share of $197.53, at a total cost of $10.2 million during the year ended December 31, 2024. We had $450.4 million remaining under the Repurchase Program to repurchase additional shares as of December 31, 2024.

Previous wording

The following table includes the net headcount additions by segment and in total for the year ended December 31, 2023.

Current wording

The following table includes the net headcount additions by segment and in total for the year ended December 31, 2024. The net additions include targeted reductions in areas of each segment described in the “Special Charges” section above:

Previous wording

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. The decrease was primarily due to $9.3 million in net FX losses for the year ended December 31, 2023 compared to $0.1 million in net FX gains for the year ended December 31, 2022.

Current wording

Interest income and other, which includes FX gains and losses, increased $15.2 million to a gain of $10.4 million for the year ended December 31, 2024, compared to a loss of $4.9 million for the year ended December 31, 2023. The increase was primarily due to a $0.5 million net FX gain for the year ended December 31, 2024 compared to a $9.3 million net FX loss for the year ended December 31, 2023 and a $3.3 million increase in interest income.

Previous wording

We evaluate the performance of each of our operating segments based on Adjusted Segment EBITDA, which is a GAAP financial measure. 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:

Current wording

We evaluate the performance of each of our operating segments based on multiple measures of segment profit, including Adjusted Segment EBITDA, which is a non-GAAP financial measure. The following table reconciles Segment Operating Income to Adjusted Segment EBITDA for the years ended December 31, 2024 and 2023:

Previous wording

(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.

Current wording

(1)The number of billable 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 776 and 670 as-needed employees during the years ended December 31, 2024 and 2023, respectively.

Previous wording

(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. Available hours are determined by the standard hours worked by each employee, adjusted for part-time hours, U.S. standard work weeks and local country holidays. Available working hours include vacation and professional training days, but exclude holidays. Utilization rates are presented for our segments that primarily bill clients on an hourly basis. We have not presented utilization rates for our Technology and Strategic Communications segments as most of the revenues of these segments are not generated on an hourly basis.

Current wording

(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. Available hours are determined by the standard hours worked by each employee, adjusted for part-time hours, U.S. standard work weeks and local country holidays. Available working hours include vacation and professional training days, but exclude holidays. Utilization rates are presented for our segments that primarily bill clients on an hourly basis. We have not presented utilization rates for our Technology and Strategic Communications segments as most of the revenues of these segments are not generated on an hourly basis.

Previous wording

(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. 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.

Current wording

(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. 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.

Previous wording

Gross profit increased $34.5 million, or 18.7%, to $218.7 million for the year ended December 31, 2023. Gross profit margin increased 1.9 percentage points from 2022 to 2023. 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.

Current wording

Gross profit increased $21.8 million, or 5.0%, to $453.8 million for the year ended December 31, 2024. Gross profit margin increased 0.5 percentage points from 2023 to 2024. The increase in gross profit margin was primarily due to the impact of higher realized bill rates, which was partially offset by a 2 percentage point decline in utilization.

Previous wording

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.

Current wording

Revenues increased $92.2 million, or 12.0%, to $863.6 million for the year ended December 31, 2024, primarily due to higher demand and realized bill rates for our M&A-related antitrust and financial economics services and higher realized bill rates for our non-M&A-related antitrust services, which was partially offset by lower demand for our non-M&A-related antitrust services.

Previous wording

Gross profit increased $51.4 million, or 13.5%, to $432.0 million for the year ended December 31, 2023. Gross profit margin decreased 1.1 percentage points from 2022 to 2023. The decrease in gross profit margin was largely due to an increase in contractor costs.

Current wording

Gross profit increased $16.5 million, or 7.5%, to $235.1 million for the year ended December 31, 2024. Gross profit margin decreased 1.1 percentage points from 2023 to 2024. The decrease in gross profit margin was primarily due to an increase in compensation and outside consultant expenses as a percentage of revenues, which was partially offset by the impact of higher realized bill rates.

Previous wording

(3)Includes personnel involved in direct client assistance and revenue-generating consultants and excludes professionals employed on an as-needed basis

Current wording

(3)Includes personnel involved in direct client assistance and billable consultants and excludes professionals employed on an as-needed basis

Previous wording

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.

Current wording

Revenues increased $29.8 million, or 7.7%, to $417.6 million for the year ended December 31, 2024, primarily due to higher demand for our M&A-related “second request” and information governance, privacy & security services, which was partially offset by lower demand for our investigations services.

Previous wording

SG&A expenses increased $20.5 million, or 25.7%, to $100.3 million for the year ended December 31, 2023. SG&A expenses of 25.9% of revenues for 2023 compared with 24.9% in 2022. The increase in SG&A expenses was primarily due to higher compensation, infrastructure support, bad debt expenses and lease abandonment costs.

Current wording

SG&A expenses increased $2.3 million, or 2.3%, to $102.6 million for the year ended December 31, 2024. SG&A expenses of 24.6% of revenues in 2024 compared to 25.9% of revenues in 2023. The increase in SG&A expenses was primarily due to higher compensation, infrastructure support and travel and entertainment expenses, which was partially offset by lower bad debt expenses.

Previous wording

We typically finance our day-to-day operations, capital expenditures, acquisitions and share repurchases through cash flows from operations. 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.

Current wording

Our annual cash flows from operations generally exceed our cash needs for capital expenditures and debt service requirements. We typically finance our day-to-day operations, capital expenditures, acquisitions and share repurchases through cash flows from operations. 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.

Previous wording

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. 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. 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. Our ability to borrow or raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:

Current wording

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. 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, political and workforce disruptions arise, including any impact of future public health crises, or economic, political 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 adverse 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. 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. Our ability to borrow or raise additional capital, if necessary, is subject to a variety of factors that we cannot predict with certainty, including:

Previous wording

Net cash used in financing activities of $354.7 million for 2023 compared with $106.0 million for 2022. 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.

Current wording

Net cash used in financing activities decreased $339.3 million, or 95.7%, to $15.4 million compared to $354.7 million for the year ended December 31, 2023. The decrease was primarily due to the repayment of the $315.8 million principal amount of our 2023 Convertible Notes at maturity during 2023, a decrease of $10.8 million in payments for common stock repurchases under the Repurchase Program and an increase in proceeds on stock option exercises of $9.6 million as compared to the prior year.

Previous wording

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.

Current wording

The effect of exchange rate changes on cash and cash equivalents had an unfavorable impact of $12.3 million for 2024 compared to a favorable impact of $15.6 million for 2023.

Previous wording

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. 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. 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.

Current wording

As of December 31, 2024, our capital resources included $660.5 million of cash and cash equivalents and available borrowing capacity of $900.0 million under the revolving line of credit under our Credit Facility. 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.

Previous wording

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. 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). 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.

Current wording

enter into transactions with affiliates or related persons; or engage in any business other than consulting-related businesses. 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). As of December 31, 2024, we were in compliance with the covenants contained in the Credit Agreement. See Note 14, “Debt” in Part II, Item 8 of this Annual Report for a further discussion of the Credit Agreement.

Previous wording

•capital expenditures, primarily for information technology equipment and information or financial systems, office furniture and leasehold improvements;

Current wording

•capital expenditures, primarily for information technology equipment and systems, office furniture and leasehold improvements;

Previous wording

•debt service requirements, including interest payments on our long-term debt;

Current wording

•debt service requirements, including interest payments;

Previous wording

•compensation to designated executive management and senior managing directors under our various long-term incentive compensation programs;

Current wording

•compensation to designated executive management and senior managing directors under our various long-term incentive compensation programs, including forgivable loans;