Welcome to the FTI Consulting Second Quarter 2020 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity Please note this event is being recorded. I would now like to turn the conference over to Molly Hawkes, Vice President of Investor Relations. Please go ahead.
Good morning. Welcome to the FTI Consulting conference call to discuss the company's second quarter of 2020 earnings results as reported this morning. Management will begin with formal remarks, after which they will take your questions. Before we begin, I would like to remind everyone that this 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.f ticonsulting.com, as well as other disclosures under the heading of risk factors and forward looking information in our annual report on Form Ten K for the year ended December 31, 2019, and updated in our quarterly report for the second quarter ended June 30, 2020, as well as in our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward looking statements which speak only as the date of this earnings call and will not be updated. During the call, we will discuss certain non GAAP financial measures, such as total segment operating income, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per diluted share, adjusted net income, adjusted EBITDA margin and free cash flow. Of non GAAP financial measures to the most directly comparable GAAP measures, investors should review the press release and the accompanying financial tables that we issued this morning.
Which include 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 have been updated to include our second quarter of 2020 results. Relations section of our website. To ensure disclosures are consistent, these slides provide the same details as they have historic and as I've said, are available on the Investor Relations section of our website.
With these formalities out of the way, I'm joined today by Stephen Gumby, President and Chief Executive Officer and Ajay Sabrawal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gunby.
And Molly, for one side, got the mute off before he turned it over to me. So thank you, Molly, and thank you, everyone, for joining us. I obviously hope all continues to be well with each of you and all of your loved ones in these complicated times. Ajay, in a moment, we'll take you through the details of the quarter. What I'd like to do upfront is first, underscore just how pleased I am and we are with our 2nd quarter results and thank our teams for incredible efforts that drove those results extraordinary efforts over the past few months to support our clients and each other from home, the major efforts over the last few years that have put us in a position such that even in these difficult times, we are seen as highly relevant resources for our clients.
I'd like to start with that. And then with your permission, also share a couple of perspectives on the future, those the inherent near term uncertainty these days for a number of our businesses, but also the enormous confidence that we have in the medium and long term prospects for all of our businesses. So let me start with the results. One way to look at them a pessimistic way to look at them Just to note that our adjusted EPS of $1.32 is down significantly from a year ago.
Another way to look
at it, however, is to note first that we happen to be cycling an all time record quarter for adjusted EPS. So the comparison is a difficult one. But second and more important, if you step back and think about it, in the face of COVID, in the face of some parts of our business is being at record low levels of utilization due travel restrictions, court closures and other challenges arising from COVID, and in the face of a substantial amount of extra capacity that was added pre COVID, we still managed to deliver the 5th best adjusted EPS ever in the history of this company and the highest revenue quarter ever. So I am extraordinarily positive about the results, and I hope you are too. As we discussed during the last quarter's earnings call, we expected this to be a slow quarter and parts of our business were in fact extraordinarily slow, obvious a number of parts of FLC, but in truth, parts of every segment.
And yet overall, we have been able to deliver incredibly solid results. Let me just try to describe a little bit of how that happens. In part, it happens because the markets not only take away they give, though discretionary spend on consulting services is of course down considerably. And as I think, you know, deal flow is reduced in court's closures and that litigation was postponed The COVID crisis and resulting economic turmoil created need as well, need for restructuring for crisis communication, for crisis litigation support, So some of what we are seeing is simply a major shift in client's needs and spend versus simply a reduction. So some of these results are market driven.
To me, what is much more powerful and much more relevant to our long term efforts to build this enterprise for our people and for you, our shareholders is to talk about the part of the results that are not due to market forces. But rather do in recent times to the incredible efforts by our team to work effectively from home, together with over the last several years, the efforts of our people to strengthen our positions to extend into new adjacencies and geographies and to anticipate and deliver on our client's needs. I'd like to try to illustrate that duality. 1st, in Corp Fin where you obviously see incredible second quarter results, but also into our other businesses at Econ and FLC and Stratcoms in tech as well. Let me start with Hope Penn.
I think I suspect that anyone in restructuring today is busy. And of course, most of you remember that Corp Bend 10 years ago in the midst of a market boom had record results. So it's obviously easy to simply say, wow, the markets are up so is FTI's corp thin business as well. Meet framing this point that way, misses critical powerful points points that suggest that, obviously, we are affected by markets, we are not forks on a wave. Over time, we determine our destiny.
And part of what we are seeing is the markets, but part of what we are seeing is the result of actions that our teams have taken over time, not simply the markets. Couple of ways to see that. One way is to recall that Corp Fin, our Corp Fin business, was growing and thriving even before this market boom. In fact, during 2018 2019 when the restructuring market was hovering around all time lows, We delivered record revenues, up 17% 28% respectively. That was no way we were writing.
That was us lifting us. It was a result of our team's investments and incredible efforts that drove those results. Equally as powerful is to not just look at how similar we are in Quilts then to where we were 10 years ago, but to look at how we've changed since then, how we've enhanced our positions. 10 years ago, during But we were primarily U. S.
Business at that point in time. We were in London, but we were probably number 4 in London. We didn't have a German business. We didn't have an Asian on Australian business. We had a smaller business in Latin America.
And even in the U. S, we were primarily known as the best creditor rights We did in fact do company side work, but we were known primarily for our middle market company side capabilities and tended not to win the big company side cases there. Fast forward to today. In North America, we are still the number one creditor rights business. But this year, we've already won 3 of the biggest companies side jobs in North And South America.
If you look outside in North America, we are no longer number 4 in London. We're now number 1. We have power on the continent we didn't have 10 years ago with the addition of Anders in Germany and the addition of other terrific professionals elsewhere in Europe. We have the leading position in Hong Kong has strengthened practice in Australia and now a leading practice in Latin America with people on the ground in places like Mexico and Brazil. And that's all before we talk about what we've built in corp fin that goes well beyond restructuring.
Our practices in OCFO in transactions and carve outs and performance improvement and merger integration, etcetera. There are waves in our business. What our teams have done is to take a fundamentally strong U. S. Business and rather than sit on it, they've made it fundamentally stronger.
Turning us into a powerful global multidimensional player Our success today reflects not just the markets, but the changes that our teams have driven. And that is true for Corp Fin, but it's also true for our other segments as well. I won't be as long winded on the other segments,
but let me touch on that.
In strat comms, for those of you who have been long term shareholders, you may remember that 10 years ago when the recession hit that business in large part melted down, not because we weren't good, but we because we were focused on one part, an important part a small part of our clients' core needs. Today, some parts of this business are also extraordinarily slow, but critically other parts are soaring with the result that if you exclude the negative impact from FX and have through revenues and look at Stratcom normalized for those, Our Stratcom revenues are actually up for the first half of twenty twenty.
And I don't know
of any other competitor in that industry, if you can say that. Similarly, if you look at econ, 10 years ago, we already had a fabulous econ business, it was primarily a fabulous fabulous North American business. Today, we still have a fabulous business in the U. S, but now we have a fabulous business in multiple locations around the world. And as a result, at a time when litigation, investigations and M and A transactions are down and some have been delayed and travel is restricted and you can't get to your clients We have a business And even in FLC, whereas you can see from our results, we have had a drastic decline in revenues in a number of places.
Due to some large jobs rolling off and the effect of the travel restrictions and the delays in litigation investigations. Even there, The breadth of the conversations we are having across multiple dimensions with clients remains robust. Reflect the investments our teams have made increased the depth and the reach of our offerings from construction to cyber to investigations to data and analytics in multiple places around the world. So yes, what you are seeing on the negative and the positive side is somewhat a function of markets. Markets fluctuate up and down and those affect us.
To me, what is much more powerful and more durable is the non market driven pieces. The way our teams have invested to control our destiny by growing core capabilities that allow us to serve the most important client needs in a wide range of circumstances. And that to me is the more powerful and the more exciting part of the results you're seeing from this company. Let me see if I can tie those observations about the quarter and our history to what we see going forward. First of all, the most obvious point, but one I have to underscore is something I'm sure you all believe as well is that there is amendous uncertainty in the world.
I don't think anybody on this call or anywhere else knows exactly where COVID is going on a global basis or unfortunately, even in the United States. I don't think anyone can definitively say what the impact of COVID will be over the longer term or even in the medium term on things like bankruptcy M and A litigation trends or the economy more generally or what the specific impact looks in different places in Latin America. The U. S, India and Asia, the UK. So I believe we have to recognize this clearly just a lot of uncertainty in the world, particularly in a short term.
And so therefore, you can run a lot of scenarios in terms of how a business is going to perform. For us, you could run an incredibly negative scenario. You could say, wow, what would happen if bankruptcy slowed down dramatically in the businesses that are slow, stay slow? That would be pretty negative scenario. We don't believe that's the most likely scenario.
As Ajay will talk about, our current belief is the strong businesses are likely to stay strong and our businesses that have been weak so far this year are likely to see a recovery, a gradual recovery, better recovery. And that's how we came to the judgment for the rest of the year that reaffirms our guidance. But we have to underscore the concept of uncertainty here. In these COVID days, in truth, nobody knows the depth and duration of the impact we may see. And although we have enormous confidence in all of our businesses over any medium term, you could have a scenario where government actions caused a temporary pause on bankruptcies in some place around the world.
And of course, you can always have the random idiosyncratic factors like you would lose some big jobs instead of winning them. Please recognize, although we are reaffirming guidance, we also are a need to underscore just how uncertain the world is now. Let me therefore, instead, talk to what I believe is more important, which is where, based on the efforts, our team have made and arm making, we can drive this business in the medium and longer term. Because over the medium and longer term, I believe markets matter, but more at the poor, we control our deficit. As we just talked about my experience and I believe our results have shown that if you do the right things over a medium term period, even though quarters can fluctuate in market conditions fluctuate through the fluctuations you build the business.
So we focus a lot on making sure we're thinking hard about what the right things are. Maybe not most critically, but importantly, focusing on knowing the difference between a bad business and a good business that tends to be hurt by some temporary factors. Exogenous fact. We can't mix that up. We can't take a good business like our FLC business or our EFC business and overreact to temporary exogenous factors.
2nd, it's about being willing to support those good businesses during slow times and indeed, invest in them even in slow quarters. In fact, in general, in some talent because it's oftentimes the case that precisely in slow quarters, the most great talent is available. And to think about our history here, as we've talked about a few times, some of the most important outside hires we've done have been during slow times in our business. We got terrific cyber capabilities during a period where FLC was slow. We acquired CDG, which augmented our company side capabilities in the U.
S. A time when Corp Fin was slow. And as you may have noticed, we just closed the deal with Delta Partners, which is in the non restructuring part of CF. A period when the non restructuring part of CF is not booming. We made each of those investments because we could find great talent talent that we sought would collaborate terrifically with the rest of our firm at those point in time, talent we have confidence in, and it has proven, at least so far in the first two cases, if you get great talent, whenever it is available, over any medium term, it pays for itself, even if at that point in time that business is slow.
Our core belief therefore is not withstanding fluctuations in earnings. We always need to be focused on attracting developing and betting behind terrific talent, whether it is recruited or it's homegrown. My experience is that if one does that, if we continue to do that, we will continue to do the essence of places, grow our brand, attract, grow and retain and develop great people, and as a result, be more relevant for your clients and take market share. And thereby, you build a firm that makes your people proud to be there and attracts other great people. And through that, ultimately, but also powerfully delivers for you our shareholders.
That is the path we have been on these past few years. And I believe in the face of COVID, it is even more important path to commit to stay on going forward. So with that, let me turn this over to Ajay to take you through the quarter in more detail. Ajay?
Thank you, Steve. In my prepared remarks this morning, I will provide an overview our company wide and segment results and discuss guidance for the full year. Beginning with the 2nd quarter results, as Steve said, We reported record quarterly revenues and our results were better than we anticipated at the time of our last earnings call. Considering the impact of the COVID 19 pandemic on us, our clients and our employees, We are very grateful for these results. Revenues of $607,900,000 were up $1,700,000 or 0.3 percent compared to revenues of $606,100,000 in the prior year quarter.
As expected, our revenue growth year over year was driven by record quarterly performance in our Corporate Finance And Restructuring segment. Because of the surge in demand for our restructuring services. GAAP EPS of $1.27 in 2Q 20 compared to earnings per share of $1.69 in 2Q 2019. Adjusted EPS for the quarter were 1.32 which compared to $1.73 in the prior year quarter. The difference between our GAAP and adjusted EPS in 2Q 20 reflects $2,300,000 of noncash interest expense related to our convertible notes, which decreased GAAP EPS by $0.05.
Our convertible notes had a potential dilutive impact on EPS of approximately 507,000 shares in weighted average shares outstanding for the quarter. As our average share price of $121.03, this past quarter was above the $101.38 conversion threshold price at maturity. Worth noting, the trigger for conversion of our convertible notes prior to maturity was not met during the quarter 2nd quarter 2020 net income of $48,200,000 compared to net income of $64,600,000 in the prior year quarter. The year over year decrease was largely due to higher compensation, which was primarily related to an 18.2% increase in billable headcount and higher variable compensation, which was partially offset by a decline in SG And A expenses and a lower tax rate. SG and A expenses for 2Q 20 of $126,900,000 or 20.9 percent of revenues.
This compares to SG And A of $129,900,000 or 21.4 percent of revenues in the second quarter of 2019. The decrease was primarily due to lower travel and entertainment expenses resulting from COVID 19 related travel restrictions, which was partially offset by an increase in bad debt. 2nd quarter 2020 adjusted EBITDA of $75,800,000 or 12.5 percent of revenues compared to $97,200,000 or 16 percent of revenues in the prior year quarter. Our effective tax rate for the second quarter of 23.1% compared to 24.8% in the prior year quarter. A 1.7% decline was primarily due to a favorable discrete tax adjustment related to share based compensation.
For the balance of 20.20, we expect our effective tax rate to range between 25% 27%. Billable headcount increased by 7 15 professionals or 18.2% compared to the prior year quarter. Sequentially billable headcount was up by 65 professionals or 1.4%. Worth noting, during the quarter, 66 professionals focused on performance analytics, permanently transferred from our forensic and litigation consulting segment to our business transformation and transactions practice within our Corporate Finance And Restructuring segment. Now I will share some insights at the segment level.
In corporate finance and restructuring, record revenues of $246,000,000 increased 29.5%. Compared to the prior year quarter. Relative to the extraordinary success fees in the prior year quarter and lower business transformation and transaction services revenues higher demand and realization for our restructuring services, which includes revenues related to our acquisition of ENDERS AG in August of 2019 resulted in the significant increase in segment revenues. Worth noting during the quarter, we were engaged in some of the largest company and creditors side restructuring mandates. Particularly in the retail and consumer, energy, automotive, airline, telecom and financial services sectors.
Adjusted segment EBITDA of $76,300,000 or 31 percent of segment revenues compared to $50,500,000 or 26.6 percent of segment revenues in the prior year quarter, as increased revenues more than offset related to the 34.7 percent increase in billable headcount and higher variable compensation. On a sequential basis, corporate finance and restructuring revenues increased $38,300,000 or 18.4 percent, as growth in our restructuring practice was partially offset by a decline in demand for our business transformation and transaction services. Turning to FLC, revenues of $106,400,000 decreased 27.1 percent compared to the prior year quarter. The decrease in revenues was primarily driven by lower demand for investigations and dispute services in part because certain matters were at least deferred due to travel restrictions to client locations, foreclosures and delays. Adjusted segment EBITDA was a loss of $9,000,000, which compared to adjustment segment EBITDA of $28,200,000 or 19.4 percent of segment revenues in the prior year quarter.
The year over year decrease in adjusted segment EBITDA was due to lower revenues with lower staff utilization and higher compensation related primarily related to a 9.4% increase in billable headcount, which was only partially offset by a decline in SG and A expenses. Sequentially, FLC revenues decreased $41,200,000 or 27.9 percent as we experienced lower demand for our investigations, disputes, and data and analytics services. In addition to the COVID 19 related impacts that I previously mentioned, as negatively impacting revenues, a few large investigations ended during the second quarter. Our economic consulting segment's revenues of $151,500,000 decreased 2.6% compared to the prior year M and A related antitrust engagements and achieved higher realization. This increased demand for M and A related antitrust services, was more than offset as well as lower realization for non M and A related antitrust and international arbitration services compared to the prior year quarter.
Adjusted segment EBITDA of $21,700,000 or 14.3 percent of segment revenues compared to $23,300,000 or 15 percent of segment revenues in the prior year quarter. The year over year decrease in adjusted segment EBITDA was due to lower revenues as well as higher SG and A expenses. Primarily related to an increase Sequentially, economic Consultings revenues increased $19,400,000, or 14.6% due to increased realization and demand for our M and A related anti trust services. In technology, revenues of $47,100,000 decreased 15.4% compared to the prior year quarter. The decrease in revenues was primarily due to lower demand for litigation and global cross border investigation services in part arising from COVID-nineteen related delays of investigations and travel restrictions as well as lower revenues related to the completion of our transition services associated with the September 2018, ringtail divestiture.
Adjusted segment EBITDA of $6,400,000 or 13.7 percent of segment revenues compared to $12,900,000 or 23.1 percent of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was due to lower revenues and higher compensation, primarily related to a 19.5 Technology revenues decreased $11,600,000 or 19.8 percent because of decreased demand for Global Cross Border Investigations And M And A Related Services. Revenues in the Strategic Communications segment of 56 $900,000 decreased 3.8% compared to the prior year quarter. Excluding the impact of FX the decrease in revenues was primarily due to a $1,900,000 decline in pass through revenues, which include billable travel and entertainment expenses client event costs and media buys. The decrease in revenues was partially offset by higher demand for public affairs and Financial Communication Services.
Adjusted segment EBITDA of $10,000,000 or 17.6 percent of segment revenues compared to $10,500,000 or 17.7 percent of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was due to higher compensation, primarily related to a 13.2% increase in billable headcount. Which was partially offset by a decline in SG and A expenses. Sequentially, strategic communications revenues decreased $1,500,000 of 2.6%, primarily due to a decline in pass through revenues, which was largely offset by higher demand for services provided to clients managing through urgent communication projects related to restructuring and financial issues. Let me now discuss key cash flow and balance sheet items.
We generated net cash from operating activities of $153,000,000 and free cash flow of $147,300,000 in the quarter. $100,100,000 year over year from $147,100,000 at June 30, 2019, to $47,000,000 at June 30, 2020. During the quarter, we repurchased 470,853 shares at an average price per share of $108.41. For a total cost of $51,000,000. In the last 12 months ended June 30, 2020, We have repurchased 1,270,000 shares at an average price per share of $107.78, for a total cost of $137,100,000.
On July 28, 2020, our Board of Directors authorized an additional $200,000,000 for share repurchases. As of July 28, 2020, we have purchased 8,200,000 shares pursuant to the repurchase program at an average price per share of $54.90 for an aggregate cost of approximately $450,400,000 We have approximately $249,500,000 remaining available for share repurchase under the program. Turning to our guidance in several prior quarterly calls, we have shared with you that a small change in revenue for us and have an outsized impact on EPS because of the relatively fixed cost nature of our business and associated margins. This cuts both ways as was abundantly evident this quarter in a positive way for our Corporate Finance segment and a negative way for our FLC segment. Our decision to reaffirm guidance for the year even in this very uncertain time is based not only on our results today, but also on several assumptions about the balance of the year.
First, we expect elevated demand for our restructuring services at least for the balance of this year, driven by strong demand in several verticals, including oil and gas exploration production and drilling automotive, department stores, financials, telecommunication services, healthcare, airlines, restaurants, and entertainment and entertainment venues. 2nd, our guidance assumes an improvement. The very gradual and utilization for many of our practices across several segments, but in particular, for our FLC segment. We are starting to see virtual depositions and arbitrations being rescheduled, and some paused on-site client works starting to resume. I caution though that this situation is fluid as the majority of our client premises are still not open We are restricting travel for our employees, even where airlines are operating or where cross border travel is allowed.
Business development is hampered by not being in person, and backups in court proceedings may push certain work into next year. 3rd, we believe this pandemic will continue to result in a new genre of disputes investigations and conflicts that our experts are well positioned to assist with and support. Our expertise is needed as distressed transactions, crisis communications, litigations related to material adverse effect clauses, disputes related to business interruption, and investigations arising from improprieties grow. 4th, with business travel all but stop there is an associated drop in billable and non billable travel and entertainment expenditures. 5th, our guidance is for a finite period the next two quarters, and we typically have lower utilization in the 4th quarter as many of our professionals may be even more pronounced than usual.
Before I close, I want to reiterate a few key themes that underscore the strength and potential of our business. The relative strength and stability of our collective grouping of businesses shine through this quarter Despite a global pandemic, we reported record revenues and reaffirmed guidance. We continue to attract talent because our colleagues are working on the highest profile engagements in their fields across the globe. And we believe our investments in talent with higher utilization will drive profitability. As Steve mentioned, over the years, example, in EMEA, Asia and Australia, in corporate finance, and expanded it to adjacencies, such as non M and A related antitrust business information cyber security and public affairs.
We continue to believe that these areas will come out strong as we emerge on the other side of the pandemic. Our business generates tremendous free cash flow as evidenced by the $100,100,000 reduction in net debt over the last 12 months despite us repurchasing $137,100,000 worth of our shares over the same timeframe and making a well timed acquisition On top of this, our balance sheet strength gives us the flexibility to continue to create shareholder value in numerous ways. Worth noting, following the close of the second quarter on July 1, 2020, we closed the acquisition of Delta Partners. We believe This acquisition, along with our already very strong position in the technology, media and telecom vertical, makes us one of the preeminent TMT focused consulting practices in the world And today, we announced a $200,000,000 increase to our share repurchase authorization. With that, let's
questions.
The first question comes from Andrew Nicholas with William Blair. Please go ahead.
Hi, good morning. Thanks for taking my questions. First, I just wanted to touch on CFR and the bankruptcy environment. I realize market and economic conditions are evolving pretty rapidly, but I'm just hoping to get your take on the runway for this level of demand and CFR how do you see the bankruptcy market kind of evolving over the rest of this year and into next? And then relatedly, if you could speak to the lengths of the typical engagement in the current environment, obviously recognizing that each case is unique, that'd be helpful.
Let me take a crack at it Ajay and then chime in if you'd like to add anything. Look, I think the world is a very complicated and fluid place at this point. Andrew, as you know, I think our sense is our guide sentence in Corp Fin is that This is likely to be a long cycle but with some potential fees along the way, right? I mean, you just don't know how would government actions get taken. Some places around the world, governments are suspended bankruptcies for a period of time.
You don't think that will happen forever. And that sort of thing can happen at any point in time. And it can have a material impact on your business. But I think if you think about the more fundamental macro factors, there's just been a loose, loose money for an extended period of time, which means that a lot of companies that would have been restructured in the past are somehow surviving to live another day. And that eventually cures itself.
So I think our guys are feeling quite, bullish about the need for submitting out restructuring services for an extended period of time, but that makes that doesn't necessarily mean each quarter looks like this quarter. Certainly not. There's going to be a lot of idiosyncratic factors that can affect it. So on the medium term, I think we're quite bullish on that business quarter to quarter. It's it's almost anybody's guess exactly how that plays out.
Ajay, do you want to add anything on the length? I don't know where we describe the length some of the assignments are different lengths. I don't know how you'd answer that, but maybe you can help.
Yes, no, no, no, no, I'll try. So, Andrew, to be precise, and we used our words incredibly carefully in my script. We expect the strength in corporate finance to continue at least for the balance of this year. We'll talk about guidance for next year in February next year, but at least for the balance of this year, Number 1, number 2, if there is, if you want me to hazard an average, it's about 6 months for an assignment.
Got it. That's helpful.
And then the next question I had is looking at some
of the mandates that you won throughout the quarter, you saw a handful of examples where you were also tasked with helping in another area kind of alongside a restructuring win. Have you seen an uptick in your ability to cross sell services in the current environment specifically? I know that's been a trend over the past several years. More broadly, but just curious on the cross sell opportunity in that environment and progress there.
I don't know if this is the environment. I think you're right, Andrew, that what's happened is, our firm has gotten to know each other a lot better. Over the last few years. And our leadership team has gotten to know each other a lot better. And, and where it's made sense for teams to collaborate.
We're just doing it a lot more. That's been a general trend over the last few years. Whether this environment creates new opportunities, I mean, look, what does happen in this environment, challenging economic conditions as I've been educated tends to reveal big frauds, for example. And big frauds tend to be associated with with big bankruptcies. And so those sorts of macro forces tend to tee up big joint efforts between our FLC business and our bankruptcy business.
But I think what I've been seeing more is the general increase collaboration across our firm rather than anything I can point to for COVID. Do you see something different, Ajay, or would you agree with that?
No questions, sir. I completely agree with you, the culture of the company is engendering this. The one thing that I might add is our strategic communications practice, especially quarter, benefited significantly from Allang itself with the corporate restructuring practice.
That's good. Yes. Does that answer your question, Andrew, or at least give you Yes.
No, that's helpful. And then just last one, if I could squeeze it in. On FLC, I think, you mentioned on several occasions that both travel restrictions and the court systems being closed had an impact. I'm just curious, because I want to understand as we move through the rest of the year, how how this could all play out. Is the travel restrictions a bigger impact or the court systems, or is there any way for us to kind of rank those just because I would imagine as things hopefully improve on the travel front over the course of
the rest of the year,
I just want to have a sense of what that could mean for this business.
Again, Andrew has I guess here. The travel feels like the bigger factor right about now. Because on the quote, we are getting virtual depositions, although on the court, what we are seeing there is log jams. There's only so many judges. So things are getting pushed into next year, but I mean, that's fine.
I mean, as long as the business isn't lost, I mean, that's okay if it gets pushed into, it's the travel restrictions that are hurting, because they also hurt to some extent in business development
The next question comes from Tobey Sommer with SunTrust. Please go ahead.
Thank you. I wanted to get your perspective on the hiring environment in here, how you're thinking about kind of utilizing the the throttle that you control with respect to that. And if you could also comment on the opportunity to hire people, particularly in EMEA in the UK given some of the scrutiny and perhaps disruption among traditional consulting and auditing competitors there?
Yes, thanks, Tobey. Hope you're doing well. I hope your family's doing well. Thanks for the question. Look, I think you've touched on the yin and yang of the hiring conversations.
I mean, your instinct, of course, is not to hire lots of people into a slow business until the business starts to perform. So that's one instinct. On the other side, the instinct is you jump on talent whenever it's available. And when great talent isn't just automatically on the market, what causes great talent to be on the market is disruption either disruption in markets or disruption in competitors. And during these times, you have a fair amount of disruption in different parts around the world.
As you say, some of it because of regulatory scrutiny of some of our competitors in certain places around the world, sometimes potentially because of financial pressures created by COVID, And so look, we actively talk about that. You don't hire you don't you you don't overhire at junior levels into businesses that are slow, but you also don't when they've gone offers, you've made 9 months ago to people coming from college because you're in the business for a long term and eventually those people will be needed and you have to honor your commitments. And so you honor your commitments, you focus on developing people, you try to get them busy so they can develop and so forth. You try not to overhire into business that slow, but you really mostly what we focus on is first making sure that any business that slow is a good business. And that we believe in it for the long term.
And if we do, then we tend to follow a conservative business as usual scenario because you're hiring sometimes 9 months in advance. And then we're also out there very much looking to take advantage of dislocations in our competitors. And that's one of the reasons I keep underscoring that because if we have a chance, even in a slow business, to pick up a terrific amount of talent, we'll do it even if it hurts earnings for a quarter because that's how you build the business over a medium term. So those are the yin and yang of what we think about. I don't know that I can comment specifically on specific competitors in a given market on a call like this, but does that give you a sense?
It does. With respect to the opportunity in the UK rather than talk about a specific competitor, Would you say it's improving staying the same or worse?
It's been, look, as you know, Europe has been a very fertile ground for us be attracting senior talent now for several years. And I would say nothing in the environment there has made it less fertile. To the contrary, all the scrutiny that you're talking about is just keeps reinforcing the number of resumes from very attractive folks that we are getting in particularly in the UK, but also on the continent. Does that help?
It does. With respect to the balance sheet and the convert, could you give us a little bit kind of a color of how you're thinking about that, whether you've kind of liked having an equity linked instrument or may eventually look to replace that with an alternative source of financing? Thanks.
Wiseman once said hindsight is 2020. So, clearly, clearly, we, at this juncture, we're very bullish on our stock, very bullish on our company's prospects, beyond where we were at when we issued the convert. But it's a low interest bearing instrument, and we've been buying back stock very aggressively to offset a potential dilution. We do not need to raise additional debt at this juncture under any circumstance that back and forth.
And then, could you delve into the in the econ segment, the, exposures on in your M and A related work, between, excuse me, antitrust related work, between M and A related and non M and A related, investors on the outside often struggle to understand their relative importance of those 2 components of the segment. Thank you.
So, both are very key drivers for us. So we were typically in, MMA antitrust shop, but we are now in a preeminent position to be on non M and A antitrust as well. I mean, this quarter, if you step back and think about it, M and A is down. Large M and A is down. Yet our economic consulting practice, you may have noticed it quite well.
And And that is part of the reason the earnings have exceeded where our internal expectations were at the beginning of the quarter. And we've got both M and A related work and non M and A related work. Large cases on M and A side continuing. We're also seeing a lot of mergers being contemplated that could never have been contemplated before with Vertical Horizontal integration that requires antitrust scrutiny and therefore very relevant for hiring our firm. And on the non M and A side, you mean, you just have to open the newspaper every morning to see major, major technology and other firms facing antitrust scrutiny.
So it's this scenario where both sides are doing quite well. Did I answer your question though?
You did. And as a follow-up and then I'll get back in the queue. Could you give us a sense for how far in advance of an M and A transaction being reported on and out in the public domain, the company is retained and or utilized by customers as they think about and plan for potential
limiting.
So I joke about this. Every morning, I look at all the cases we are in the complex database around the world is first thing I do in the morning. And, it feels like I'm reading the financial times the Wall Street Journal in the South China Morning Post 3 weeks before publication. Certainly on major cases, We get hired in advance of the cases, whether it's 3 weeks or 2 months, I can't say for sure, but it's in that zip code.
The next question comes from Mark Riddick with Sidoti And Company. Please go ahead.
Hi, good morning, gentlemen.
Good morning, Mark. How are you?
Very good, very good. Thank you for all the detail that you provided on the call. One of the things I did want to touch on is, regarding the court closures and activity, I was wondering if spend a little bit more time on maybe some of the actions that you're seeing and ways that they impact you whether certain jurisdictions are doing maybe a little better than others. As far as virtual, a testimony and things of that nature and then kind of sort of how you react to those things. And also if you could maybe touch on if there are certain, if certain jurisdictions are just doing maybe further ahead than others?
Thanks.
So mercifully, the bankruptcy courts in North America didn't close down. Delaware coach didn't, Southern District didn't close down. And in any way, so with virtual depositions and what have you. So that was terrific. So that's one bookend.
At the other bookend, P and L you have in Australia, in Germany, in various places moratoriums on director liability on courts, on filings in fact. So you have a whole spectrum And in FLC, in particular, of course, for a while and an economic consulting, there was clear log jams in the court systems and freezing for a while. Now virtual depositions have kicked in. Now the greater issue is there's a logjam.
Okay that's helpful. Thank you very much.
Next, we have a follow-up call. Our follow-up question from Tobey Sommer with SunTrust.
Thank you for taking the follow-up. With respect to the court system and the log jammer slowdown and kind of throughput broadly, How do you think of that in terms of demand deferral versus potentially in some cases demand destruction? Thanks.
I think that it's the right question and the answer is we don't know because most what happens Toby, as you might imagine, is it initially all starts as demand deferral, right? The court date gets postponed. They couldn't have a court in May and somebody looks at the calendar when they're back in the office. They're already booked were already booked in the second half of the year. So they targeted it for June of next year, and they put the date on June of next year because that's the 1st open date.
The issue is so it shows up as a deferral, right? The problem is because between now June of next year, people settle or the world changes such that the case goes away in some way. And so we don't have any real data on that. I mean, I think our current judgment is it's going to be a mix. A lot of it's going to actually show up next year because many of these cases have been floating around for years and they haven't settled till now, but some of it will undoubtedly go away.
By the advent of the deferral. And we have no empirical data to give you any percentages on that as of now. Does that I assume that ties to your intuition that says some of it's going to go away, right?
Correct. And then my last question is, With respect to government investigations being a driver of your business, what could you give us some color on what you're seeing there as the government is certainly backstop a lot of bankruptcy stuff and kind of stymied the natural course of the market. And, maybe comment about how the government investigations have been historically as a driver under administration from different parties. As we look towards the presidential election in November.
We said, I said in my remarks, Steve also said that this was create a new genre of disputes, investigations, etcetera. And part of it may be government given government is becoming such a large participant and owner part of it could be in the government area. So it doesn't necessarily have to have a precedent. I can't say for sure it will, but the judgment would say it probably will when you're making such large investments in such a wide swath of the economy all around the world, there will be issues into some percentages. And Our firm is with our combination of our corporate finance practice and our FLC practice, I cannot imagine if I'm better positioned than us to help in that regards.
I'm not actually clear on what prior political dispensations did in prior recessions in this regard. So I don't know the answer to that question.
Okay. We'll take it up in 90 days. Thank you.
This concludes the question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.