10-Q: FTI Consulting Reports Q2 2026 Results, Revenue Up, Net Income Down

FTI Consulting announced its second quarter 2026 financial results, showing a 5.3% increase in revenue but a 19.4% decrease in net income compared to the prior year.

Summary

• FTI Consulting reported revenues of $993.5 million for the three months ended June 30, 2026, an increase of 5.3% from $943.7 million in the same period of 2025.
• Net income for the quarter decreased by 19.4% to $57.8 million, down from $71.7 million in Q2 2025.
• Diluted earnings per share (EPS) were $1.99, a decrease from $2.13 in the prior year's second quarter.
• Adjusted EBITDA decreased by 6.4% to $104.5 million, with the Adjusted EBITDA margin declining to 10.5% from 11.8%.
• Net cash provided by operating activities for the quarter significantly increased to $152.3 million from $55.7 million in Q2 2025.
• The company repurchased $393.2 million of its common stock during the quarter.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing as slightly negative due to the decrease in net income and profitability metrics, despite revenue growth, largely influenced by increased operating expenses and significant litigation costs.

Positives

• Revenue increased by 5.3% to $993.5 million for the second quarter of 2026 compared to the prior year.
• Net cash provided by operating activities saw a substantial increase of 173.5% to $152.3 million for the three months ended June 30, 2026.
• The Corporate Finance segment showed an 8.5% revenue increase for the quarter.
• The Technology segment reported an 18.4% revenue increase for the three months ended June 30, 2026.
• The company's credit rating from S&P Global supports its unsecured senior credit facility.
• The company has $344.0 million remaining under its stock repurchase program as of June 30, 2026.

Negatives

• Net income for the second quarter decreased by 19.4% to $57.8 million compared to $71.7 million in Q2 2025.
• Diluted EPS decreased to $1.99 from $2.13 in the prior year's second quarter.
• Adjusted EBITDA decreased by 6.4% to $104.5 million, and the Adjusted EBITDA margin declined to 10.5%.
• Unallocated corporate expenses increased by 41.6% to $56.3 million, largely due to Extraordinary Litigation-Related Expenses.
• Interest expense increased by 121.2% to $11.6 million due to higher borrowings.
• The Economic Consulting segment experienced a 1.5% revenue decrease for the quarter and a 41.9% decrease in segment operating income.
• Gross profit margin in the Forensic and Litigation Consulting segment decreased slightly to 35.1% from 35.3%.

Risks

• The company faces risks related to changes in demand for its services, the ability to recruit and retain qualified professionals, and competition.
• Potential for former employees to join or form competing businesses and legal challenges to contractual protections against competition.
• Risks associated with managing headcount, utilization rates, and maintaining or increasing service pricing.
• Challenges in identifying suitable acquisition candidates, negotiating terms, and integrating acquired operations.
• Risks related to operating in non-U.S. markets and adapting to local conditions.
• Potential for cyberattacks, systems failures, or misuse of data impacting confidentiality and operations.
• Fluctuations in foreign currency exchange rates could impact financial results.
• The company is subject to legal actions arising in the ordinary course of business, though it believes it has adequate defenses.

Future Outlook

The company anticipates that its cash flows from operations, supplemented by borrowings under its Revolving Credit Facility and Incremental Term Loan, will provide adequate cash to fund its needs for at least the next 12 months. Future capital requirements are expected to include operating expenses, capital expenditures, debt service, incentive compensation, share repurchases, contingent obligations, potential acquisitions, and other contractual obligations.

Management Comments

• "Revenues for the three months ended June 30, 2026 increased $49.8 million, or 5.3%, compared to the three months ended June 30, 2025, primarily due to higher revenues in our Corporate Finance, Technology and FLC segments, which was partially offset by a $9.2 million decline in pass-through revenues."
• "Net income for the three months ended June 30, 2026 decreased $13.9 million, or 19.4%, compared to the three months ended June 30, 2025. The decrease in net income was primarily due to higher direct costs, selling, general and administrative (SG&A) expenses and interest expense, which was partially offset by the increase in revenues and a lower income tax provision compared to the same quarter in the prior year."
• "Adjusted EBITDA for the three months ended June 30, 2026 decreased $7.2 million, or 6.4%, compared to the three months ended June 30, 2025."
• "Net cash provided by operating activities for the three months ended June 30, 2026 increased $96.6 million, or 173.5%, to $152.3 million compared to $55.7 million for the three months ended June 30, 2025."

Industry Context

StockSavvy.ai notes that FTI Consulting's performance reflects the ongoing demand for expert advisory services in complex financial, legal, and operational environments. The revenue growth across several segments indicates resilience, while the net income decline highlights the impact of increased operating expenses and litigation costs, a trend that may be observed across the broader consulting industry facing inflationary pressures and unique legal challenges.

Comparison to Industry Standards

• FTI Consulting's revenue growth of 5.3% in Q2 2026 is a positive indicator in the professional services sector, which has seen varied performance across firms.
• The decline in net income and Adjusted EBITDA margin, while concerning, is partly attributed to specific litigation expenses, which are not typical performance indicators for the industry.
• The company's focus on segments like Corporate Finance and Technology, which showed strong revenue growth, aligns with industry trends favoring specialized digital and transaction advisory services.
• Competitors such as Alvarez & Marsal and AlixPartners also operate in similar restructuring and advisory spaces, with performance often tied to economic cycles and corporate distress levels.

Legal Proceedings

• The company is involved in litigation captioned FTI Consulting, Inc. et al., v. Jonathan M. Orszag et al., which has been deemed 'Extraordinary Litigation-Related Expenses' starting in Q2 2026.
• 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 may be impacted by the decrease in net income and EPS, although revenue growth and share repurchases could be viewed positively.
• Employees may be affected by increased compensation expenses and potential workforce realignments, as indicated by past special charges.
• Creditors and lenders are impacted by the increased debt levels and covenants under the Credit Agreement, though the company remains in compliance.

Next Steps

• Continue to monitor the impact of Extraordinary Litigation-Related Expenses on future financial results.
• Evaluate the company's ability to manage operating expenses and improve profitability in upcoming quarters.
• Assess the ongoing demand and performance across all five business segments.
• Monitor the utilization of the remaining stock repurchase authorization.

Key Dates

Recommendation

While revenue growth is positive, the decline in net income, EPS, and Adjusted EBITDA, coupled with significant litigation expenses, warrants a cautious approach. The company's ability to manage costs and navigate legal challenges will be key determinants of future performance, suggesting a 'hold' recommendation pending further clarity.

Keywords

FTI Consulting, Quarterly Report, 10-Q, Financial Results, Consulting Services, Corporate Finance, Forensic and Litigation Consulting, Economic Consulting