Good day, everyone, and welcome to the FTI Consulting Second Quarter of 2018 Earnings Conference Call. As a reminder, today's call is being recorded. And now for opening remarks and introductions, I'll turn the call over to Molly Hawkes, Managing Director of Investor Relations at FTI Consulting. Please go ahead, ma'am.
Good morning. Welcome to the FTI Consulting conference call to discuss the company's second quarter of 2018 earnings results as reported this morning. Management will begin with formal remarks, after which we'll take your questions. Before we begin, I would like to remind everyone that this conference 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 related 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.fticonsulting.com, as well as other disclosures under the heading of risk factors and forward looking information in our Form 10 K for the year ended December 31, 2017. And in our other filings filed with the SEC. Investors are cautioned not to place undue reliance on any forward looking statements which speak only as of 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 For a discussion of these and other non GAAP financial measures, as well as our reconciliation of non GAAP financial measures to the most directly comparable GAAP measures, investors should review the press release and the accompanying tables that we issued this morning which includes 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 Excel and PDF of our historical financial and operating data. Which have been updated management will not speak directly to the quarterly earnings presentation posted to our Investor Relations website. To ensure our disclosures are consistent, These slides provide the same details as they have historically, and as I said, are available on our Investor Relations section of our website.
With these formalities out of the way, I am joined today by Stephen Gumbi, our President and Chief Executive Officer Nadjay Sabrawal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Dunby.
Thank you, Molly, and thank you all for joining us this morning. As I'm sure many of you saw in the press release this morning, this quarter, once again, we had results that I have a hard Revenues increased 15% year over year, with almost all of that growth being organic. That revenue growth translated not surprisingly into record earnings per share. GAAP and adjusted earnings per share each totaled $1.14 per share in the 2nd quarter alone. This quarter, combined with the outstanding first quarter, delivered a record first half for the company.
Revenues for the first half of twenty eighteen increased 13% compared to the first half of twenty seventeen. Those revenues in turn resulted in adjusted EPS of $2.18 for the first half of twenty eighteen. So the numbers are terrific and Ajay is here leaning forward. I think he's very eager take you through them in a lot of detail, and that's what we'll spend a fair amount of time here on this morning. But before we go through the numbers, Ajay and I both thought that I could take a couple of minutes to go a bit deeper on a couple of points that you've heard us talk about before points that go beyond the numbers and discuss some topics that we believe are critically important.
And so let me take a couple
of minutes there, and then Ajay, he'll take us through the numbers. The first is the pride that not just the management has, but this entire company has in the progress this company is making. This group of professionals is delivering on the underlying potential of the firm. For our professionals and for you the shareholder. I am proud of that progress.
I'd like to underscore it in these remarks but also make it come to life
a bit
more. The second point I'd like to emphasize is to suggest that we not get seduced by quarters. Even great quarters. Quarterly financial results history has shown are simply not very good yardsticks with which to measure progress. So I'd like to suggest some other yardsticks, which I think are more indicators of the sustainable long term progress that we are making.
As we've discussed in any given quarter in this business, results can deviate substantially from the underlying realities of the business, from the driving underlying forces. These deviations come from essentially 2 factors: 1, over any short period of time, we have a very fixed cost structure. And 2, we combine that fixed cost structure with the potential for substantial short term revenue volatility. The reason we have so much relative revenue volatility is there are a variety of sources for it, including things like the timing of success fees, In professional services, it can be because of the time, sometimes people get so busy, they can't respond to leads, and there are a lot of other causes. But primarily, it's driven by the fact that we are a big assignment firm.
We help clients with assignments where there are huge stakes assignments that are often on the front page of the Wall Street Journal of the Financial Times. Because of those stakes, we can be asked to ramp up teams of 50 or 100 professionals and more rapidly. And when those assignments end, the opposite can occur. If you combine any business, a relatively fixed cost structure with that potential relative revenue volatility, monthly earnings and quarterly earnings can be whipsawed. And importantly, they can be whipsawed in ways that overshadow the underlying forces, the forces that are the critical driver of performance for any medium term for our company.
Thus, last year, you'll remember, we began poorly due to some successes and successes, delays in success fees because we swung and missed at a couple of big jobs. Or conflict that out of a few cases. At that point, we stressed that you can't take the 1st quarter and multiply it by 4 or take the first half of twenty seventeen and multiply it by 2. Those quarters, in our opinion, didn't reflect the underlying realities that were driving our business. Our increase in competitive position the activities our professionals were doing to build our businesses.
Similarly, this year, it sometimes feels like, we're winning every big It seems like every prior investment is paying off, and we have some parts of our business that are running at unsustainably high utilization. I think in a good great quarter like this, you also the stress that you can't take this quarter and multiply it by 4, or you can't combine this quarter and last quarter and multiply them by 2. Quarters simply aren't a terrific measure of the long term performance of a company. You can't understand or really measure this company by any single quarter's financial results. We spent some time talking about that in our company.
We talk even more about the fact that we as a management team cannot manage a company based on quarterly results. And so let me spend a minute on the management point. A firm like this exists. It's built by attracting great people, supporting those people in driving their ambitions, promoting them, talented people, driven people. People want to be invested, helping their clients who are keen to build behind that client success build their own personal prominence, build teams behind that success, build businesses behind that success.
If that's what you want, that has some requirements. It requires supporting people when they see the new opportunities as they chase businesses and new adjacencies regardless of whether it happens to be a great quarter. You have to attract the great talent when that talent is available. You have to promote your great talent when people are ready And you have to do that when those opportunities present themselves regardless of a given quarter's performance. That has been our commitment, and that is what we've been doing.
Importantly, sometimes that commitment will exacerbate a slow quarter. Because when you have the ability to attract the talent, it's not necessarily a talent that's going to be immediately billable. But if the right team becomes available or the right business opportunity, we need to, we have been and we will seize it. Even if it costs us in a slow quarter. It's because doing so, that one can actually create value that is not just quarterly.
Instead, you can create value that is real and sustainable for your clients, for your leading professionals and for you, the shareholders, the value that comes from creating a more powerful firm. That has been our aspiration. So a little more succinctly, our business results will always have substantial Zigs and Zags. We are even willing to exacerbate the Zags if it's helpful in building the enterprise. Our goal is not to minimize the Zags.
But to invest aggressively and wisely to have a core trend through the Zix and Zags, a core trend that over time is powerfully up. And I think that is what we've been doing. And I think that is what most of us at FTI are most proud of. It is not the record quarter is a deeper sense of just how much on an underlying basis this firm is moving. You get that not from looking at quarterly financials, but there are lots of indicators.
If you got a chance to talk with some of our entrepreneurial leaders at Investor Day, You heard not only the success that people were having in moving into adjacencies of building on our current positions, but their enthusiasm and their perception of how much further we can go with the teams we have and the teams we're attracting or when you talk with some of the lateral hires we've made over the last several years. And you hear somebody talk about, wow, it's kind of unnerving to come in. I had a slow start, but I started the team with this person and then you see those people flourish. And build businesses and build opportunities for us that we didn't have before, you can't help but be excited. Or if you talk with a recent promote to SMD, And you see not only this person doing terrific work for our client, but you say, wow, that person is going to take this firm in new direction as well.
Some of those are harder for you to do. You don't have access for all of our people. But one thing I sometimes am amazed by is to just simply walk through the number of headline grabbing assignments, I get the ones that are private, many of them are not private, but even the public ones, you walk through, you can't help but get the sense of how much this company is moving. These markers are success. They are more qualitative.
But in my opinion, they are much truer and more lasting markers of the success we are having. In any given quarter, they can be overshadowed. That can be overshadowed by positive or negative short term volatility. But these, not the short term factors are why we have been succeeding. Not just in a quarter, but on a sustained basis, over several years, even in the face of no booming markets.
They are at a fundamental level the most meaningful measures of progress, deeper indicators of long term success. They also happen to be the most satisfying measures of progress. They are ones we are committed to deliver on an ongoing basis going forward. Ajay had some fun with the numbers.
Thank you, Steve. Good morning everybody. I will start by summarizing our quarterly results. At the segment level and key cash flow and balance sheet items. In summary, as Steve said, the second quarter was another record quarter.
Revenues grew in each of our segments led by solid growth in our corporate finance and restructuring forensic and litigation consulting, or FLC, Strategic Communications And Economic Consulting segments. Our revenue growth and higher utilization particularly in our Corporate Finance And FLC segments resulted in improved margins. And consequently, our adjusted EBITDA surged, increasing 77.4% year over year. We are delighted with these results. Moving on to the details for the quarter.
2nd quarter 2018 revenues $512,100,000 were up $67,400,000 or 15.2 percent compared to revenues of $444,700,000 in the prior year quarter. Fully diluted earnings per share or EPS were $1.14 in 2Q 2018 compared to fully diluted loss per share of $0.13 in 2Q of 2017. As a reminder, EPS in the second quarter of last year was impacted by headcount and real estate actions we took during that quarter, which resulted in a special charge that reduced EPS by $0.52. Adjusted EPS in 2Q 2018 were also $1.14, which compared to $0.40 in the prior year quarter. Adjusted EPS, as a reminder, excludes special charges, which we did not have during this quarter.
2nd quarter 2018 net income of $43,600,000 compared to a net loss of $5,200,000 in the prior year quarter, which included the 2Q 2017 pretax special charge I just mentioned of $30,100,000. The increase in net income was largely due to higher operating profits particularly compared to the prior year quarter which included a special charge and a lower effective income tax rate compared to the prior year quarter. 2nd quarter 2018 adjusted EBITDA of $72,400,000 or 14.1 percent of revenues compared to $40,800,000 SG and A for 2Q of 2018 of $117,900,000 was 23 percent of revenues. This compares to SG And A of $108,100,000 or 24.3 percent of revenues in the second quarter of 2017. The increase was primarily due to higher incentive compensation and higher recruiting costs.
Our effective tax rate for the second quarter of 2018 of 24.4% compared to 37.8% in the second quarter of 2017, which excluded the impact of the special charges than the prior year due to the favorable impact of the US tax reform and the benefit of certain discrete tax items recorded in Q2 related to changes in certain state tax laws. For the balance of 2018, we expect our effective Total headcount at the end of the Of this, we had 11 fewer billable professionals and 10 fewer non billable professionals. Sequentially, total headcount was also down by 21. We expect headcount to increase during the balance of Now I will share some insights at the segment level. In corporate finance and restructuring, revenues increased $23,900,000, or 20.3 percent to $141,400,000 in the quarter compared to $117,500,000 in the prior year quarter.
The increase in revenues was due to higher demand for restructuring services coupled with higher realization for restructuring and business transformation services in North America and EMEA. During the quarter, we worked on some of the largest restructuring assignments, including major retail and financial services engagements on both the company and creditor sites. Our business transformation practice also delivered continued strength led by Office of the CFO, Performance Improvement, Car Route and merger integration work. Adjusted segment EBITDA was $35,800,000 or 25.3 percent of segment revenues, compared to $20,000,000 or 17.1 percent of segment revenues in the prior year quarter. The year over year increase in adjusted segment EBITDA was primarily due to higher revenues and a 7 percentage point improvement in utilization.
Turning to FLC, we reported record quarterly revenues and adjusted segment EBITDA. Revenues increased $22,100,000 or 19.9 percent to $133,500,000 in the quarter, compared to $111,400,000 in the prior year quarter. The increase in revenues was primarily driven by strong demand and improved realization for our investigation services as well as continued strength in our construction solutions practice. Adjusted segment EBITDA was $27,600,000 or 20.7 percent of segment revenues, compared to $13,000,000 or 11.7 percent of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to On a sequential basis, FLC revenues increased $5,500,000 or 4.3 percent and adjusted segment EBITDA improved $1,900,000 or 7.2 percent, reflecting significant top and bottom line contributions from our investigations business, again, with particular strength from large global investigative mandates.
Our economic consulting segment reported revenues of $133,300,000 in the quarter, up $9,300,000 or 7.5 percent compared to $124,000,000 in the prior year quarter. The increase in revenues was primarily due to higher demand for our financial economics and international arbitration services. Which was partially offset Adjusted segment EBITDA was $15,500,000 or 11.6 percent of segment revenues compared to $15,500,000 or 12.5 percent of segment revenues in the prior year quarter. Adjusted segment EBITDA was consistent with the prior year quarter. As the increase in revenues was offset by higher variable compensation costs and an increase in billable headcount.
In technology, revenues increased $900,000 or 1.9 percent to $46,400,000 in the quarter compared to $45,600,000 in the prior year quarter. The increase in revenues was primarily due to improved demand for consulting and hosting services. In particular, we benefited from increased demand for our digital forensics and information governance. Privacy and security offerings. This increase was largely offset by lower demand for managed review services compared to the prior year quarter.
Adjusted segment EBITDA was $7,500,000 or 16.2 percent of segment revenues. Compared to $5,400,000 or 11.9 percent of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues and lower variable compensation costs for managed review services. Sequentially, revenues increased $5,500,000 or 13.5 percent. The sequential increase in revenues was primarily a result of higher demand for managed review services related to an increase in M and A related second request activity and increased demand for our consulting services.
Strategic Communications also reported impressive quarterly revenues, revenues increased $11,200,000 or 24.3 percent to $57,500,000 in the quarter compared to $46,200,000 in both project and retainer based revenues related to our financial communications and public affairs practices. Where we continue to be engaged on global high profile mandates. The uptake and financial communications was driven by higher levels of activity for our public affairs services in the U. S, UK and Brussels. Adjusted segment EBITDA of $11,000,000 or 19.1 percent of segment revenues more than doubled year over year compared to $4,900,000 or 10.5 percent of segment revenues in the prior year quarter.
The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by higher variable compensation costs. Sequentially, segment revenues increased $4,700,000 or 8.9 percent, the sequential increase in revenues was primarily a result of an increase in project driven revenues in EMEA. From a geographic perspective, similar to the first quarter of this year each of our regions delivered double digit revenue growth compared to the prior year quarter with North America and EMEA both delivering record revenues and representing nearly equal share of the key cash flow and balance sheet items. We generated net cash from operating activities of $34,600,000 and free cash flow of $26,100,000 we are paying down debt. During the quarter, we reduced our revolver balances by $70,000,000 Total net of cash was $258,400,000 at June 30, 2018.
Compared to $293,000,000 at March 31, 2018, and $346,500,000 at June 30, 2017. Turning to our guidance for the year. We now expect 2018 revenues will range between $1,910,000,000 $1,960,000,000. Reflecting an $85,000,000 increase $875,000,000,000. And 2018 EPS and adjusted EPS, are now expected to from our prior Our updated guidance for the full in the second half of twenty eighteen.
In revenues have a much larger impact, both positive and negative to the bottom line. Our revised guidance assumes moderation in our business performance based primarily on historical precedents, It also considers several specific factors, including a slower pace of work in the summer and in fourth quarter, as our colleagues may take time off for summer vacations and the year end holidays, particularly after such a busy first half increased headcount as we onboard both fall hires from campuses and a number of senior hires that we are expecting to join us in and success rate in winning businesses may moderate. And finally, as Steve said, we are a big job firm. Given our fixed cost structure and the event driven nature of our business, the ebbs and flows of business from the end of current large engagements and the start of new large engagements may result in large engagements not being immediately replaced. Before we open the 1st and foremost, our people and their relationships are our core strength And this has only been further enhanced by the quality of the people we have promoted and attracted, including through acquisitions like the CDG group.
2nd, our bedrock core competencies in areas like disputes and investigations and business improvement are finding even more relevance as we build adjacent practices in business transformation, cyber security, information governance, construction solutions, and public affairs globally. 3rd, our fixed cost nature means that we will have peaks and valleys in quarterly earnings but scale economies have resulted in peaks and valleys around a rising mean over time. 4th, we have a leadership team that is committed to growth with strong staff utilization while hiring in key places where we believe we have a right to win. 5th, our balance sheet strength gives us the flexibility capitalize on multiple capital allocation strategies to enhance shareholder value, including organic investments, acquisitions, share repurchases and debt reduction. With that, let's open the call up for your questions.
Thank you very Our first question will come from Mark Riddick Sidoti.
Hey, good morning.
Good morning, Mark. How are you?
Very good. Very good. I wanted to just go over just a couple of quick things. You did mention sort of the traditional summer hires that you're looking to do and some of the senior headcount. I was wondering if you could sort is there a general magnitude that you're thinking about for headcount additions for the remainder of the year?
Well, let me let Ajay answer whether we release that. Obviously, we think a lot about that, Mark. It's one of the most important things we do is mean, our assets are people. I will say this that, between the leaders we have in place and the success we're having in the marketplace, I don't certainly in my time, the phone's never been ringing off the hook as much as it is now. With people wanting to join us.
And we have very tight screens, but we're excited when people have the ability to join us. So that, that is going on in a very rich way. It's actually been going on for a while, although some other moves we made last year obscured it, because you grow a one place in the accident market, it nets out. But there are a lot of people looking to join us, and we're going to we're taking advantage of And then on the junior staff, we always have growth in hiring. In fact, we've grown so many senior hires, and we've been so busy.
I'd say we were behind on our recruiting of junior hires with a fair amount of catch up agenda. So I can give you that qualitative answer. I think Ajay is kicking you table saying we don't do more than that. Is that right, Ajay?
I think, sir, you answered the question adequately.
Thank you.
Also, I wanted to touch
a bit on the, if you wanted to maybe give some thoughts on the opportunity set in front of you, particularly being a big assignment firm, I wanted to get a sense of some of the driving forces of the assignments that you're competing for and maybe how that is is different maybe now than it was at the beginning of the year?
So I'm not sure that different than it was at the beginning of the year.
I mean,
I think there are 2 phenomena that go on. Well, there's 3 phenomena that go on. 1 is, the ebbs and flows of big jobs, which happen in every subpart of our business. In M and A, it's most obvious, right? Big M and A deals come or sometimes they, they're not there.
But it's true in other things, big fraud is, I guess, a recurring, a recurring phenomenal of human nature since biblical times, but the amount of big fraud that happens this quarter versus last quarter or the status of cases can be pretty variable. We can't control that and we don't try to. I mean, the truth is the underlying there's demand out there, but it can ebb and flow a bit. The thing that we focus most on is our competitive position. What can we do to strengthen our competitive position?
Importantly, look, we have great professionals. We're not necessarily great chest thumpers. So some of what we're trying to do is also make sure that where we have great professionals, people don't just execute the work, but occasionally we'll talk about it. And sometimes that's hard because some of our clients are confidential and you can't. But sometimes, boards of directors will issue major reports profiling our work.
And it's okay if that's the case for us to mention that to other people. So what we've been doing is mostly working on reinforcing the strength and capabilities of our business, looking aggressively at adjacencies that our clients want us to move into, because investigations today encompassed cyber investigations, which they did in 15 years ago. The skill set of, of our corporate finance guys allows us to do performance improvements. We need to recognize the adjacencies, invest behind it, and occasionally, for professionals who are more focused on delivering for clients than they are on chest pumping and occasionally let people know a little bit more about the stuff we're winning And that allows us through the noise of the ups and downs of the markets and whether you want a particular job or not to grow. That's what we're focused on.
It's why we always discourage quarterly looks, but do hold ourselves accountable for the long term trends. Mark, does that help a little bit?
Oh, certainly. Absolutely. And then just one last one for me. With the debt reduction during the quarter, I was wondering if you could just sort of give an update to where you are comfort level wise on debt. And certainly, you've been buying back shares as well, but I went sort of get a quick update on that given the bid debt pay down during the quarter?
Thank you.
Mark, Obviously, we're very comfortable where we stand, but to be frank with you, we were comfortable where we were even before that it wasn't as if the debt load is high in this company. I'd like to see on a gross basis no more than 2.5 on a net basis no more than 1.5 that that sort of debt levels, but clearly, the company can accommodate even higher leverage. But those are the comfort zone parameters where we're heading with this total debt reduction and the free cash flow is an even lower place.
Okay, excellent. Thank you very much. Thank you, Mark.
Thank you. Our next question will come from Tobey Sommer SunTrust.
Thanks. Wanted to ask another question about headcount additions. And see if we can't maybe not target, numerical targets for this year, but longer term, because without an understanding of how you plan to grow headcount over time, It's difficult to get an understanding for what the growth profile looks like over time, because we do have the larger projects the events that you described kind of really come into fruition in the first half. So could you speak to that, please?
I'll speak to it as much as my friend here, Ajay, allows me to and then, and then, look, Toby, of course, we need to add heads to meet our growth aspirations. I think what's not so clear is we have been. I mean, the last few years, we've been doing a fundamental relook across every business and every geography both to find places to bet on growth and also to figure out places where we didn't have a right to win, where we had to exit. I think I told you at one point, we exited 100 people of a business we didn't believe in in Brazil. And we've told you about different offices we've closed and so forth.
That sort of stuff obscures the steady state commitment to growing businesses we've had. And as we've finished mean, you always have stuff to fix in professional services, but as we finish that first fundamental look across our businesses, the fact that we are continuing to look to add headcount every place where we have a right to win is going to be much more apparent in the external visible numbers. I think you can look at that maybe. You probably can go look at a couple of segments. Or that where we didn't do as much restructuring and you can see that force over the last couple of years.
I think Corkfin is up probably 20% over the last 2 years in headcount. And that was even with some some different restructurings of different parts around the world. We are committed to headcount growth because the market is out there. We're attracting and developing the people to seize that market. There's huge amounts of upside in market share.
And there's only so high you can go in utilization. So I think this is going to show up in a much more visible way as we now work through some of the actions we've taken in the past, Tobey, than it probably peers in the data?
Yes. I completely echo what you're saying, Steve. I mean, first, the increased profitability comes from increase your utilization, but beyond a certain point, you have to increase your capacity. So that's just the math. Beyond that math, it's not one size fits all for every sub practice and every area and every geography.
We have been growing headcount handsomely in cyber security in public affairs and information governance in many areas we have been It's obscured, as Steve said, by the cuts we did in various areas. And Q2 in particular is the seasonal high in attrition as well, because It's just how it is every year. So there's no question we're committed to growth, increase, but all so increased utilization. These are not mutually exclusive.
That help a little bit, Toby?
We threw some extra mud in the water there, but let me ask you about the sustainability of utilization which is higher. And like you said, underneath the covers of the kind of gross numbers, you do have pockets where you've grown headcount significantly and then over the last several years had some restructurings, which kind of masked that. But Ajay, in your prepared remarks, you also talked about some as being unsustainable. Could you delineate those for me so we kind of get a handle for where utilization and EBITDA margins should, should be able to sustain themselves?
Yes. So that's again, a great question, though. We are again the math. So in our denominator of utilization, we don't subtract locations, for example. Other people do.
So that by itself means, at least some people do have to take vacations every once in a while. You can't get to 100%. But you're not
planning to take a vacation.
So that's number 1. Number 2, above 80% consistently, you're going to burn people out. And we have sub practices that are now in those areas. Now that doesn't mean is there because we've given you our total utilization, which is approaching 70 in some of the in corporate finance and FLC, etcetera. So in some areas when at those sorts of levels and also opportunistically, you will grow headcount.
We are focused on growth and increased utilization. That's it. And the other thing
on that is just the problem is when you're in a big job business, not everybody is fungible. I mean, our best testifiers for disputes are not the same people who are going to do devised a communication strategy or even within a segment, not everybody is fungible. So if you're committed to growth, and you believe you have a right to win, you support a particular group, they grow, they lose a big job, they're going to have 40% utilization for a while, so the next job comes in. And so the average of 70 hides the fact that that, that group was running at 85 until now and is now running at 40 for 3 months while they're waiting for the new job, whereas some other group that was running 40 is now running at 85. We're in a lot of sub businesses.
And if you're in a lot of sub businesses with a lot of big jobs, there's a limit and you have the sort of lumpy revenue set, there's a limit to where that can go. We've made there was clearly we were not at the level we should have been at a year ago. That's a different issue. And there's still some sub businesses where we're not quite at the level. But we clearly have a lot of businesses right now where we're burning our staff in ways that we have to change now.
It's not good right for our clients and it's not great for our staff.
That's helpful. Yes, it is.
Just two questions for me and I'll just get back in the queue. Could you tell us what the underlying realized bill rate increases are like for the company as a whole? Because I'd imagine that the bill rate increases are in part in the reported quarter due to mix with more senior staff at kind of at a higher rate and they carry an intrinsically higher bill rate. Kind of want to get the underlying rate of year over year bill rate changes. And then could you comment on your appetite and for acquisitions and what the pipeline looks like?
Thanks.
And is easy. I'm not we don't comment on M and As. I'm not going to comment on pipeline of acquisitions. But in terms of the, in terms of the other one, you know, what you see, we do provide bill rate and what you see is unless a misunderstanding question. What do you see is the underlying rate?
There is a correlation between higher utilization and build rate. Our folks are busy. Not only are we using senior folks, but when our folks are busy and much desired, they don't particularly feel compelled to provide discounts. So and the realization is higher. So these are consistent themes and our underlying themes.
One thing I'd just add on the acquisitions. I just reiterate something on that. I mean, we remain committed to exploring acquisitions. And probably we're evaluating more acquisitions now than we ever have in the past. What we are not we what we are committed to as a company is to grow organically regardless of what acquisitions, because great acquisitions don't don't just come along because you're you want them to.
We when your great acquisitions come along, you need to jump on them. Even if by the way, that industry flow. And that's what we did with CDG. We didn't buy CDG last year because we thought there's a boom in Corp Fin or restructuring. We bought it because it's a great group of fessionals who we thought together with us would create even more value.
And it's something that I think is happening, and that's great. And we will do that. But we are committed to grow with 0 acquisitions. We are committed as a company. And I think this is a deviation from some of the original history of the company.
Great professional services firms grow by developing their people, by promoting people, by people, great people being dislocated at other companies and saying, wow, FTI is going places. Let me call them up and join them. That is the cornerstone of our growth. And then as great acquisitions come along, we will jump on them. But that's not, that's not, programmatic.
Responsive to the opportunities that are out
Our last question will come from Tim McHugh, William Blair.
Good morning, Tim. Hi, good morning. So just one quick or a few questions, I guess. Start with I guess following up here a little bit on the bill rate topic, the utilization was good, but it actually wasn't quite as strong as first quarter. Your headcount was lower even first quarter and yet revenue went up.
So as success fees, can you talk about those? Were they a significant contributor and If not, I guess, what's the bridge? Because it seems like, I know you used the phrase realization a fair amount that whether it's pricing or I guess what the delta is there that helps explain that.
So success fee is, consistent to, Tim, it's actually slightly below average. So no, this is not a, I mean, I'm hoping for a lot more success fees, but hope is not a strategy. And the success fees were below average, slightly below average, this quarter. We are seeing strong consistent utilization and, strong, some improvements in our, in our bill rate as well. So those are the drivers I don't know which particular data point you're looking at that is prompting the question, but barring small changes in from one quarter to the other, the first two quarters have been largely consistent.
Okay. Made a comment about the second quarter being seasonally higher, just a level of turnover given the timing of bonuses and so forth. But I guess can you Given that comment, can you talk about, kind of the overall turnover metrics and how they compare to last year or to your targets at this point of the year?
Well, yes, the turnover overall turnover is lower than last year. Is last year, if you remember, we took some action in some places where we didn't, I think we had a right to win. Remember, we closed some offices and so forth. So I'm not sure that's the relevant comparison. But in general, our turnover is in very much in line with our historical norms.
And, and as I've mentioned before, lower than ones that I've seen at other professional services firms, I do worry a little bit that some places we're burning our staff out. I mean, turnover is, look, this is a challenging job. You have a lot of work. It's travel. It's not the right job for everybody.
You don't want to lose great people. And sometimes if you burn people out you lose them. It doesn't show up so much in the numbers, but anecdotally, you can tell when people are overworked and we're trying to solve that. But actually, the turnover rate so far is in line. We're more trying to address that proactively so that we don't lose great people.
Does that help, Tim?
Yes, then it And then, the comment about when we think about the second half and the impact of big projects, I guess, I recognize this can change tomorrow, if you want a bunch of big projects tomorrow. But I guess if we just think the last 3, 4, 5 months, I guess I recognize the revenue could have been driven by proxy Q1 last year, Ethan, right? But if we look at the ingestion of of new big projects? And I guess how that compared to what you're seeing second half of twenty seventeen? To what you've seen kind of in the last 3 to 6 months?
So
let me try and be helpful without being specific. We talked about this. We have a bedrock of investigation disputes and restructuring, but the adjacencies we have built in cyber security information governance, public affairs, business transformation. The nature of what triggers a dispute or an investigation is changing. And we have really hit the color of the ball in those adjacencies and therefore made our core competencies more applicable for our clients and leveraging those relationships we've built over the years.
That is what is enabling us to succeed so much. Now 6 months from now or 6 years from now, those things could change again. But for now, we're doing really, really well. And the guidance for the second half of the year is not precipitated on anything I particularly know that will make in a cliff occur or whatnot or a job end or whatnot. It's just simply based on historical precedents.
Of some moderation. So there's no specific thing that I'm pointing to. It's more in his observation of empirical evidence over time. So I hope that helps.
Yes. Okay. And then last question, just Obviously, the Navigant's announcement selling their dispute business, I guess, you have a new competitor there, a bigger competitor, kind of 2 of them coming together. I guess, how do you does that maybe just talk about opportunities for recruiting talent as well as, I guess, if it changes anything about your perception of the competitive environment at all or any other strategic thoughts on the marketplace following from that?
What?
We wish them luck. We are strong competitors. We wish them luck, and competition brings out the best in all us.
Thank you very much.
Well, thank you everybody for your time and attention. And, we are pleased that what a terrific quarter this is but I will underscore one more time. We're even more pleased by what we're building at this firm. And, it's a great time in this company. Thank you very much for your support and your attention.
Thank you very much. Ladies and gentlemen at this time, this conference has now concluded. You may disconnect