Good day, everyone, and welcome to the FTI Consulting Fourth Quarter And Full Year Twenty Earnings Conference Call. As a reminder, today's call is being recorded. And now for opening remarks and introductions, I will turn the call over to Molly Hawkes, Managing Director of Investor Relations at FTI Consulting. Please go ahead.
Good morning. Welcome to the FTI Consulting conference call to discuss the company's 2016 fourth quarter and full year 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 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 factors and forward looking information in our most recent Form 10 K 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. Adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per share and adjusted net income.
For a discussion of these and other non GAAP financial measures, as well as our reconciliation of non GAAP financial measures, to the most recently comparable GAAP measures, investors should review the press release and accompanying financial tables that we issued this morning. 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 has been updated to include our 2016 fourth quarter and full year results. Of note, during today's prepared remarks, management will not speak directly to the quarterly and full year 2016 earnings presentation. To ensure our disclosures are consistent, these slides provide the same details as they have historically and, as I have said, are available on the Investor Relations section of our website.
With these formalities out of the way, I'm joined today by Steve Gumy, our 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
Thank you, Molly. And welcome to everybody, and thanks for joining us. I'd like to talk about 2017, but before we get there, let me spend a few minutes on 2016. 2016 was a superb year for our company, It was the 2nd year in a row of double digit EPS gains, which is the first time the company has achieved double digit EPS gains 2 years in a row since 2007 to 2009. At that level, this was a superb year, but in fact, something we expected.
We actually expected double digit EPS gains 2 years in a row. What we didn't expect as the year started was just how strong double digit growth we would ultimately achieve. GAAP EPS was not up 10% or 12%, but rather was up 30 percent year over year, with adjusted EPS up 22% year over year. Over the last two years, GAAP EPS is up 42% and adjusted EPS is up 36%. Said another way, Over the last two years, we've delivered 3 years of double digit growth, and that was something we did not anticipate.
Some of these powerful forces results were driven by positive market forces, particularly in Corp Fin. And some of the results were delivered driven by items that you just can't count on recurring every year. For example, our tax rate benefited GAAP and adjusted EPS by $0.13 $0.15 respectively this year compared to 2015. Tailwinds, you end up closer to the original adjusted EPS guidance we provided at this time last year. But said another way, even stripping out these discrete items we are left with a picture of a year of strong double digit EPS growth, even while making substantial investments.
And to me, that is the most important element of these results, the confidence reinforcing element. Our teams here are making and executing on investments and strategies that and the company as a whole into sustained growth engines. Ajay will give you details on 2016, but let me highlight a few points. In 2 of our businesses, Corporate Finance And Economic Consulting, our results were driven by the fact that we have powerful leading professionals with commanding competitive positions that allowed us to take advantage of partial market surges, not true booms in the market as a whole, but partial surges. Let me start with Corp Fin.
I think most of you have a sense of the strength of our position in Corp Fin, but let me illustrate it a bit. In 2016, we were ranked by the deal as the number 1 U. S. Crisis management firm by total number of engagements. Being number 1 is nice.
To me, what's more impressive is that's the same position we've held for the last 9 years. And in the most recent tables, we had more than double the number of newly opened cases. Compared to our nearest competitor. Similarly, if you look at the deal's most recent list of top restructuring professionals, FTI has the most advisors listed by and Mike Eisenban leads the list again. And I could go on.
It is the strength of that restructuring practice in the U. S. And increasingly abroad as well as the actions the team has taken that have allowed us to move this business ahead over the past couple of years, even in the face of continued loose money by the federal authorities. We win powerfully whenever work occurs, for example, in the mini boom in energy and retail and mining, As a result, in 2016, we were able to follow a very strong 2015, growing revenues another 10% year over year and adjusted EBITDA for the segment 8% year over year following a 62% increase in 2015. Similarly, our econ consulting business, as many of you know, is seen by many people as the leading economic consulting practice globally.
For example, in 2016 Who's Who Legal named Compass Lexicon, both the Competition Economists firm of the Year and the world's top expert consulting firm. And FTI has the most experts of any firm named to whose, whose legal inaugural consulting expert guide. With 98 experts from 24 Cities across the globe listed. And 10 of those professionals from FTI and Compass Lexicon were recognized as the most highly regarded experts in their fields worldwide with the next closest firm having 3 individuals named. In 2016, the strength of that team in Econ Consulting allowed us in the midst of a market, which was not a boom for M and A as a whole, especially compared to 2015 to win the biggest jobs, the biggest antitrust cases, and at the same time, grow other parts of our econ consulting business substantially.
Those two businesses CF And Econ were substantial contributors to our success in 2016, but by no means the only contributors. Of our success in 2016 came from places where we were able to move our businesses ahead this year despite little or no market support. Where the comms and our European, our EMEA business as a whole. Let me start with EMEA. I think we've discussed on a number of these calls, the focus we've had in EMEA over the last several years, our focus on making key vets to build that business, to invest behind people and positions where we see ourselves having the right to win in the marketplace.
I am extraordinarily pleased to say those bets are performing. Our European teams have thought incredibly hard about where to make the vets and how to make them work. And as we've made the vets are incredibly committed to making them work. And the result is that in 2016, EMEA region delivered record revenues and adjusted EBITDA, along with growing count by 11% this year and 30% over the last 2 years. And along the way, winning many leading assignments across all of our businesses.
I think it's fair to say our European business is moving. And importantly, that movement is being seen not just by us, but by our clients and leading professionals. It is one of the most gratifying advances of the last several years and one that has us focused on saying how do we build on this? To sustain that momentum going forward. Another strong story in 2016 and in fact, over the past 3 years is strategic communications.
The strategic communications team has now moved a business that had over 5 years of sustained declines in adjusted EBITDA to 3 years of sustained adjusted EBITDA growth. Doing so, while investing in This year, we also continued the progress and the process of ongoing systematic deep strategic looks at our business and we took a hard look at our Technology And Health Solutions business. In both of these, where we'd had substantial declines over the last few years, we put in place new leadership teams, and we put in place new strategies, strategies that we believe will fundamentally improve the trajectories of these businesses, moving them from the steep declines that we've had recently, declines that have some masked, some of the progress we've had in other businesses back contributors to growth and we believe that progress will begin already in 2017. In technology, the new leadership team took out major cost, including headcount reduction of 18%. The team restructured our R and D organization to enhance effectiveness and nimbleness utilization of the business going forward, thinking of it as 2 businesses with somewhat overlapping, but actually quite separate needs.
A consulting and services business, in which we will continue to invest in eDiscovery as well as rapidly expand adjacent offerings such as information governance and a software business. One that consists of great software that we will use, but also aggressively licensed to others. We expect these actions to bear fruit with a return Similarly, in our Health Solutions practice within FLC, our new leadership team there also took a strategic relook That relook resulted in staff reductions, substantial reductions focused on a portion of the business where we didn't think we had a right to win. But also outlined an expansion plan for our advisory businesses and an expansion plan for the operational parts of the business, where we have a right to win, including focusing on historical places where we have 1 and places where we have pre existing relationships, but also extending the business to work collaboratively with places where TI as a whole as a right to win. For example, working closely with corporate finance around healthcare bankruptcies and healthcare transactions, and econ consulting around hospital mergers and post merger integration.
These moves began to show fruit as early as December, And that's progress we expect to continue into this year. Let me turn to our outlook The guidance for 2017 is not up substantially from what our results Although there's always uncertainty, we are not forecasting double digit EPS gains again this year. But I'd like to work to make sure no one misinterprets this operations that this company be a sustained double digit growth company over a multiyear period. To the contrary, the success over the past several years reinforces that belief. But the truth is because of the market forces and some discrete items in 2016, we delivered 3 years of EPS growth over the last two.
We continue to see ourselves putting ourselves on the business on a powerful upward trajectory, but primarily due to the outperformance in 2016, we expect 2017 to be the we are excited about the underlying investments we have made and continue to make in corporate finance. We believe that those investments, which are going to continue to make this year, even with some market headwinds are going to create even stronger positions going forward and generate substantial earnings growth for the company over time. But for 2017, we are forecasting a down year for corporate finance. We don't believe the market forces that supported refinance in 2016 are going to continue into 2017. Ajay will provide more color, but generally, we expect a substantial decline in bankruptcy filings in 2017 compared to 2016.
That's corporate finance, we also expect moderated economic consulting growth compared to double digit top and bottom line growth in 2015 2016 for the econ group. On the other side of the ledger, we do believe that in the businesses drag this year, the teams have taken the actions to make sure they are turning back to be contributors to growth in profit in 2017. So our forecast in 2017, which Ajay will speak to in more detail, is a combination of believing we have our businesses generally headed in the right direction, offset by headwinds in corporate finance, particularly in the first half of the year, and the omission of some discrete benefits we had in 2016. But it is in no way a retreat from confidence that FTI is and can continue to be a sustained double digit EPS growth company over time. So let me close these opening remarks by reiterating what I said in a slightly different way.
Yes, we see 2017 as a possible flat part of a stair, but I still see us on a substantial multiyear upward trajectory. We continue to believe firmly that betting behind the strongest professionals and our strongest positions in the places where we have a right to win will continue to deliver organic growth And that growth plus the prudent unit's use of cash will allow us to deliver both sustained double digit EPS growth over time and deliver to our professionals a richer set of opportunities for growth. With that as an introduction, let me turn it over to Ajay to take you through the quarter and full year in more detail then he and I will both be back to answer your questions.
Ajay? Thanks, Steve. In my prepared remarks, I will take you through and end with providing you with our guidance for 2017. And year over prior year results. 1st, I will speak to highlights of our results and lay out the special charges and other items that affected our 4th quarter and full year.
2nd, like last quarter, instead of walking through every of each segment's results individually, I will speak to those aspects at the segment level, which have a significant impact on our consolidated financial results. Before finishing, I will speak to our 2017 guidance. Starting with some of the highlights of the year Our full year 2016 GAAP EPS was $2.05. Our adjusted EPS of $2.24 were in line with our most recent of double digit EPS gains with GAAP EPS up 29.7% and adjusted EPS up 21.7% compared to 2015. As for operating results, our economic consulting, corporate finance and restructuring and strategic communication segments reported both revenue and very strong adjusted EBITDA growth.
Our technology and forensic and litigation consulting or FLC segments declined in both revenues and adjusted EBITDA, but As I will speak in part because of the headcount actions we took in 2016, but just as significant because of the refresh strategies and new leadership we put in place. Our balance sheet is from the lower interest charges from deploying our cash to reduce debt, which resulted in a $0.27 benefit to GAAP and adjusted EPS in 2016. And for the full year. There were several discrete items that impacted EPS in 2016, especially in fourth quarter, Let me lay out these items and their impacts in the fourth quarter. These items relate to Four areas: First, we took a special but did not impact adjusted EPS.
These reductions included 52 professionals, primarily in R&D in the U. S. And in Australia in our technology segment as the majority of these professionals are non billable you will not see The headcount reductions also included 17 professionals in our Health Solutions practice within our FLC segment. Of note, this headcount reduction is not reflected in our 4th quarter billable headcount table included in our earnings release as those who were impacted left the company subsequent to year end. This reduction will be reflected in our first quarter 2017 headcount table.
And lastly, the headcount reductions included 18 non billable employees in corporate as we consolidated parts of our finance infrastructure. 2nd, we took a charge related to a write down of certain components of capitalized software in our technology business, which reduced both GAAP and adjusted EPS by $0.06 and third, there was a benefit related to a reversal of an uncertain tax reserve during the quarter, which increased In addition, during fourth quarter, the estimated negative impact to GAAP and adjusted EPS resulting from the For the full year, This includes the $0.06 impact in the 4th quarter as well as headcount actions in the 1st and second quarter in our Technology segment and health solutions practice within FLC. For the full year, the estimated positive impact to GAAP and adjusted EPS resulting from the net impact of FX translation losses and transaction gains Now, let's prior year periods. In each of our segments, our revenue results for the quarter and for the full year were negatively impacted by foreign exchange translation or FX largely due to the decline of the British pound relative to the U. S.
Dollar As Molly mentioned, you can see a detailed financial breakout of segment revenues and adjusted EBITDA for the quarter in the supplemental slides available on our Starting with the 4th quarter, revenues of $441,900,000 compared to revenues of 442 $200,000 in the prior year quarter. Excluding the $11,900,000 estimated negative impact of FX, revenue increased 2.6% compared to the prior year quarter. Revenue strength in economic consulting and to a much lesser extent in corporate finance and restructuring and strategic communications, largely offset underperformance in our FLC And Technology segments. In economic consulting, revenue increased 9% compared to the prior year quarter primarily driven by higher demand for our M and A related antitrust services including some big name antitrust cases like the Aetna Humana and Anthem Cigna contemplated mergers. FLC revenues declined 9.6% compared to the prior year quarter.
This business was particularly weak in the fourth quarter as some cases settled early. We had delays in the start of new engagements and we experienced increased vacation time. In technology, revenues decreased 6.6% compared to the prior year quarter. The decrease in revenues was primarily due to lower for M and A related second request and litigation services as we had strong second request demand in the prior year quarter. Adjusted EBITDA of $30,300,000 or 6.9 percent of revenue declined 13.8 percent from $35,200,000 or 8 percent of revenues in the prior year quarter.
4th quarter net income for the company of $7,100,000 decreased 31.4% compared to $10,300,000 in the prior $1,000,000,000 were up 1.8% compared to 2015 and were slightly ahead of our excluding the $32,800,000 estimated negative impact of FX, revenues decreased 3.6% compared to the prior year. Primarily due to higher demand for In corporate finance and restructuring, we also reported record revenues, up 9.7% supported by tremendous first half of 2016 in our restructuring practice. These increases more than offset revenue declines in Technology And FLC of 18.7% 5.1% respectively. Adjusted EBITDA was $203,000,000 or 11.2 percent of revenues compared to $205,800,000 or 11.6 percent of revenues in the prior year. Adjusted EBITDA growth in the Economic Consulting, Corporate Finance And Restructuring And Strategic Communications segment was more than offset by adjusted The decline in adjusted EBITDA and adjusted EBITDA margin was also impacted by higher costs primarily from higher compensation related While we did not meet our total billable headcount growth target of 5% for the year, We added significant headcount in the businesses that were performing well in 2016.
In economic consulting, our billable headcount was up 9.5%. It's worth noting that our SMD headcount grew 8.6% as we added senior professionals. In corporate finance and restructuring, billable headcount was up 6.8%. In strategic communications, billable headcount was up 8% and SMD headcount grew 17.9% as we added senior professionals from the government and corporates in our higher margin public affairs and crisis offerings. And in EMEA, the majority of our headcount growth for the year came from our billable hire which grew by 11 as we continue our momentum in Net income for the company increased 29.5 percent to $85,500,000 compared to $66.1000000 in the prior year.
Steve talked about the actions taken and the new leadership teams in place in our technology segment and health solutions practice within FLC. With respect to FLC, more generally, Our FLC results this year did not meet the high expectations of our FLC leadership or the core FLC team. Some of that shortfall was related to the Health Solutions practice, but there was also underperformance in some of our overseas operations and in some of our strongest positions in the U. S. We have a great team in FLC and this team is actively engaged to the growth that down $18,000,000 compared which resulted in a Our tax rate in 2016 was 33.1 percent compared to 37.3 percent in 2015.
In 2016, we benefited from the tax reserve reversal I mentioned earlier that we had in the fourth quarter. Also worth calling out, in 2015, we had tax items that increased our tax rate. So on a year over year basis, as Steve mentioned, our tax rate benefited GAAP and adjusted EPS by $0.13 15 respectively. I will now discuss and our efforts over the last couple of years have only enhanced our ability to generate cash. Cash and cash equivalents were $216,200,000 at December 31, 2016, up $66,400,000 compared to $149,800,000 at the end of 2015.
This increase in cash was achieved by $130,000,000 during 2016 and spending $21,500,000 on share repurchases during 2016. $18,600,000 of those repurchases were in the 4th quarter. Total debt, net of cash, was $153,800,000 at year end 2016, down $196,400,000 from year end 2015 I think it is fair to say that measured in many different ways. The balance sheet of this company has never been stronger than it is today. Cash collections Our DSO of 91 days was down from 97 days at the end of 2015.
Turning to our guidance. Starting with revenues, we estimate that revenues for 2017 will be between $1,800,000,000 $1,900,000,000. We expect our GAAP EPS to be between $1.95 $2.30 and that adjusted EPS will be 17 is related to estimated lease cancellation charges for a Washington DC office move which will result in an We expect this office move to Looking at our adjusted EPS range This flat guidance is because, as Steve mentioned, we So what does this mean for 2017? Let me talk through our guidance at the segment level. Our 2017 guidance assumes Corporate finance and restructuring will have a weaker first half compared to the first half of twenty sixteen, where we benefited from a mini boom in restructuring activity in 3 sectors: energy, mining and retail.
There were only 8 retail bankruptcy filings in the second half of twenty sixteen, and none of them were sizable. Thus far in 2017, the pace has not turned up, and more importantly, none of the filings in 2017 have been sizable. In the energy space, oil prices have remained above far from the lows we saw in early 2016 when all prices dropped below $30. So while the energy story is not over, the pace of new bankruptcy filings has slowed. In mining, metal prices have risen sharply since early 2016.
The second half of twenty seventeen for Corporate Finance should be stronger than our weaker second half of twenty sixteen, given the easier comparisons and our expectation that restructuring activity will pick up in the second half of twenty seventeen. Overall, but that downward comparison will be more evident relative Notwithstanding market headwinds, as Steve said, we have a very strong team of practitioners in corporate finance, And although there may be ups and downs in the markets, our leading position and the underlying investments we are making in EMEA and Across the Globe, continue to give us confidence that this business already a very competitive business continues to strengthen its strong position around the world. Which we expect will bear significant fruit for us over the coming years. However, we are up against tough comparisons after a record year in 2016, in particular in the First And Fourth Quarters of 2016, where we had record levels of M And A related antitrust activity. As a result, we expect more moderate growth compared to double digit growth in 2016.
Technology and FLC should represent the majority of the improvement over 2016, as our refresh strategies and cost actions should result in year over year growth in both segments especially in the second half of the year as we gain traction. And finally strategic communications should continue to be a solid contributor in 2017. We will complete the remaining $81,400,000 repurchase authorization in 2017, which will be dependent on fluctuations in the price per share of the company's common stock the timing of stock repurchases, market conditions and other future events that may be beyond the company's control. We expect The completion of this program in 2017. Worth noting, in February, we hosted an all SMD meeting The cost of the meeting should result in approximately all SMD meeting as a company.
And my first, this cost in addition to the record comparisons and weakened restructuring market will create a meaningful shortfall as a CFO, I am always worried about cost. But from my experience at this meeting, it is clear that this investment to bring will continue to generate new business leads and ideas for new and enhanced ways to serve our clients through leveraging our global and diverse platform. Before I open the call for your questions I'd like to reiterate 5 key themes. The restructuring outperformance we saw in the first half of twenty sixteen is not expected to recur to have improved performance and we are buying back shares and plan to complete the remaining $81,400,000 of our 100,000,000 share repurchase authorization in 2017. We have a growing global platform with I believe the best practitioners in their fields.
Because of this global platform and our high caliber of professionals We are well positioned to take advantage of market dislocation and regulations, especially on large cross border engagements involving, for example, M and A antitrust issues and in industries where there is disruption, such as Energy And Healthcare. And finally, most importantly, We have confidence that over time we will continue to see earnings growth with volatility around a rising mean. With that, We will
you.
And we will take our first question from Kevin McVeigh with Deutsche Bank.
Abby.
I wonder if you could give us a sense of and very helpful on the guidance kind of how we would get to kind of the low end versus the high end of the range, kind of what's implied in that?
It's the volatility, Kevin, around the rising means. So if we have certain assumptions, for example, on where our corporate finance segment would go, And we have certain assumptions on the extent of the turnaround, for example, in FLC, in Health Solutions in in the tech area. If you assume pessimism, you get to the lower end.
Got it. And then Jayjay, in the retail space in particular, I mean, obviously, there's been a fair amount of dislocation and you can continue to see it on some of the larger retails. Part to bankruptcy, have you seen any business kind of increasing on maybe some initial restructuring to try to take that business to more optimal expense levels or just given the kind of structural issues in that business, any thoughts on the outlook there in the near term? Retail specific?
Yes, you're saying, are you, you are asking us, are we planning to restructure and reduce our professionals? Are you saying
the business in general, I mean, obviously even Target coming out this morning at this point in guidance. I mean, clearly, there's a lot of structural issues on the big box side?
Yes. Yes. So Kevin, look, let me just say maybe there's a broader there's a narrow question to answer your question on a broader one. This is a volatile business, but you can't look out in the market and not believe over the next several years, this is going to be a growing business. I mean, yes, there were like almost no bankruptcies filed in the last few months and certainly no significant ones.
So you can say, oh my god, retail bankruptcies are gone. And then you look out in the market and just like you did and you know, there are going to be major restructurings in retail over the next couple of years. And I think that's a general point on this business. We're thinking we're facing major headwinds in this business this year because the energy stuff has rolled off and we still have loose money in the economy. And so what you could do is say, oh, we should cut back our hiring in this thing.
We're not gonna because we think it is only a matter of time before there is a movement of this business as a whole back to levels that we seen historically, and we are extraordinarily well positioned against it. And so we believe this is a great business over the next few years, just not a great business in the first half of this year, and probably for the year as a whole. And generally, and then also specifically with respect to retail, does that I answer your question? Yes, it did. And just one more
and I'll jump back in the queue if I could. From an M and A perspective, any thoughts on this administration versus the prior one in terms of how it sits across the enterprise? And then just are you seeing more second looks or do you think there'll be more activity that offsets maybe a more stringent government approach to it?
Yes, look, that's conversation that we're having a lot inside at this point, I think our current view is, you don't know. I mean, that's the real bottom line. But I think at a higher level, I think it's this that you look back over time, as administrations come in, And frankly, as the world evolves, certain businesses slow down and then put other businesses grow. And I think that is our history. You look back, at one point, we were doing backdating options stuff in FLC, and then that's gone away.
But then the mortgage backed securities work came. And when the SEC stopped prosecuting because of, it was distracted by the financial crisis. There were huge amounts of work to grow in bank monitorships and other sorts of things. I think the nature of our business is that, government policy and changes in government policy on average creates more work. It doesn't always create places where we've done it historically.
Sometimes it creates an adjacent area. So I think we're pretty optimistic about the general demand environment over the next few years. But the real talk internally is for us to be on top of what's going on. So we can pivot into adjacencies as as is necessary. And that's kind of our high level view at this point.
Kevin, do you have a different view?
No, I agree. I mean, I think it's, again, I think overall even if you get less kind of second reviews and things like that to the extent there's more activity that's just going to help you folks and I fully that. I mean, I think, depending upon the sector and even retail being another one, you'll probably start to see some consolidation, but I mean, obviously a large portion of the economy that's going to go through a major restructuring and I think that bodes well.
Thanks, Kevin.
Yes, thank you.
And we will now hear from Tim McHugh with William Blair And Company.
Yes, thanks. I just wondered, can you, given the moving parts below the EBITDA line, I guess, can you talk about the EBITDA margin or the EBITDA growth rate that's embedded in the guidance And then secondly, I think just the, I guess, the confidence in it seemed like you're pointing to the second half for technology and FLC to improve I guess, is that cost related or is that revenue related that you're expecting in the second half?
So let me answer it simply. The answer to the EBITDA and the margin, the quick answer is flat. It's in line with the, with the earnings guidance that we're giving you. We're, when we make the earnings guidance, we're not expecting for example, tax rate changes. And those are very difficult to predict.
So you don't we're assuming the standard 36%, 37% on the tax rate. The interest savings, we've already reduced the debt. And so we continue to get the interest savings, but not the year over year impact. So as you see flat EPS, you're assuming flat EBITDA. And now certainly changes in mix between the segments can affect it, but largely that's where we're at.
In terms of the, in terms of the FLC and the tech health solutions, it's both revenue and cost. Cost actions are usually more in one's control. And as you've seen in fourth quarter, we've taken the actions. In terms of revenue, they gain traction over time.
Maybe I can add a little bit to that. On the I think the other reason we're saying the second half of the year, if you look back at tech and at FLC as a whole, but also health solutions, which we don't break out. The revenue side, was much weaker in the second half of the year. The first of the year, the revenue side was not. So we believe we're going to make progress on the revenue side and all those businesses in the first half of the year.
Relative to the run rate we were running in the second half of last year, but it won't show up on year on year comparisons until the second half of the year, Tim. Was that clear?
Yes, that's helped. I guess just, AJ, one quick follow-up. The tax rate then given the movements last year, what's assumed there?
For 2017, 36%, 37% in that order magnitude. Okay.
Thank you very much. Which is quite
a bit higher than what we actually experienced in 2016, right?
Yes, sir.
So that's a headwind for us, Tim versus 2016. Because 2016, we had these one time stuff that benefited it. Thanks, Tim. You're sending us good weather from Chicago again?
Got it. Thanks. And our
next question comes from Randy Reece with Avondale Partners.
Good morning, Randy.
Good morning. I noticed in here, you had a major EBITDA be buried and then EBITDA missed because of one segment, FLC. Now I was wondering if there was some amount of severance expense or something that would explain, the levels of expenses and low level of the segment profit contribution from quarters?
Yes, no, I don't think there's anything extraordinary. Ajay, you can correct me if you will. Look, I think there's three things with respect to FLC, 2 of which we were addressing and then one of which I was surprised by in the fourth quarter. And I think Ajay was 2. I mean, I think FLC, you can think about 3 parts of the business.
Our Health Solutions business, which we have a potential for a great but we really needed to rethink its strategy. And that effort, after we changed management, took force during last year. And I think we have now got that business headed in the right direction, but that was a drag in 2016. The second part of FLC that you want to think about is the overseas positions. Over the last while, we have really looked hard at the overseas positions and retooled them.
Some places we've shrunk considerably, like we exited a business in Brazil, some other places we shrunk didn't think we had a right to win. In other places, we have made big bets because we think we have a right to win and create stronger positions. And I feel like we made a lot of progress over the last year and that in FLC as well. And that helps going into 'seventeen. The third issue with FLC, which was a surprise, is that some of our strongest businesses for FLC, like our U.
S. Businesses underperformed in the second half of last year. And that was surprise to our leaders in that practice and was a surprise to Ajay and me. And so we've had some serious conversations about that. The truth is answer that is not restructuring.
It's a great business with great professionals. It's a series of things that we got to get in the marketplace and solve and there's a lot of activity underway on that. But I would say the big surprise for me in the second half of the year on FLC was that one. The other stuff I knew about, that one surprised me and was, it was disappointing. Does that answer your question, Randy?
And our next participant is Mark Riddick with Sidoti And Company.
Hi, good morning.
Good morning, Mark. How are you?
Doing fine. Thanks.
I wanted to, I guess, maybe start on the headcount adjustments that you've talked about. And I wanted to get a sense of, and it was nicely laid out sort of where they were and the ones that were not in billable. But I wanted to get a sense of now that, that, as we've come past the end of the year, should we expect that to continue sort of where are you in that process? And I mean, I don't know if you want to put it as what inning you're in as to where you are with your headcount adjustments, but I was wondering if you could start with that.
Yes, I'll give a take on that. Look, I think We've gone through a series of major relooks at our businesses. And unfortunately, actually, it's required looking at almost every one of our businesses. And as we've done that, it's led to substantial increases in headcount some places, but also some rationalizations of positions. And, I think that's the process, you go through all the time in professional services.
But I would say the first time you've gone through it in a lot of years, you tend to have bigger changes. And we've just gone through that. We started that first with Stratcom when I got here and then we walked through each of the other businesses. I think we are through the bulk of that first round of look. We've done that across the businesses.
And so I don't expect us to be having major headcount announcements on a routine basis across all of our businesses over the next while. That doesn't mean you don't to continue to fine tune things, and you will always in professional services. And it doesn't mean that if a bowler wakes out breaks out worldwide. We don't have to adjust to new environmental conditions. But I think the systematic walk through of the businesses that has led to that, I think is largely behind us.
Does that answer your question, Mark?
Yes, it doesn't. And it actually sort of leads me into the next thing that I was kind of getting to. You touched on this a little bit, but maybe you could expand a bit. As you look at the business with that strategic view. I was wondering if there are any differences or takeaways that you would be willing to share as to how you view the EMEA region international overall, but the EMEA region, in particular, and whether or not there's any, whether you want to view it as a post Brexit changes into priorities or that nature that you might want to share?
Yes, look, I think our the opportunities we have are enormous. I just want to say I also think they are enormous in the U. S. And I think for a while, we were neglecting the U. S.
In terms of a growth engine. And I think we are committed to turning the U. S. Back to a growth engine. But I think the our opportunities overseas are substantial.
And I don't think it requires market, the market. I think the truth is as the guy we now have heading Europe says, this is our time in Europe is, Kevin Hewitt now the leader of that. And I think he believes that we now have a critical mass of professionals that our brand is at a higher level such that, just we're getting many more referrals than we used to in the past. Many more professionals are looking at us and saying, wow, this is the place to be. And I think that can happen independent of whether what Brexit does to various forces because it's just about us getting stronger in that market.
And I think that's an important powerful force over the next couple of years, particularly in Europe. I think in Asia Pac, our positions, we're continuing to strengthen those positions. It's not as big a region. It will not have as material a benefit to our P and L over the few years as we expect Europe will, but we think of that as an important position to strengthen, for the long term future of our company. And the same thing for Latin America, Does that help, Mark?
Yes, it does. Thank you. And just the last thing is sort of a little bit of a housekeeping type items. Was wondering if the guidance for 2017, if you have a FX impact, assessment embedded in that and the second part of that being the mention of the SMD meeting in the first quarter that will have an impact. I was wondering if you had a dollar value impact into the first quarter expenses
on that? Thank you. Yes.
So certainly, we incorporate
FX
when we think about our guidance. And we base our guidance on our internal plans with with certain variability. And our internal plans are based on year end effects. So we don't take a sort of a forward curve or a futures curve we take where FX was at the end of the year and we take it from there. And I want to emphasize that FX has a significant impact on revenue as we have mentioned, but on profitability, the impact is muted because our costs are also in the same currency.
There is an impact, but it's not as large as it is on revenue. So that was the first comment. And then the SMD meeting, I think we said it's a $0.04 earnings impact in the first quarter
And we will now hear from Tobey Sommer with SunTrust.
I was wondering, you already commented a little bit about this, but to give you an opportunity to expand perhaps. What are the changes under Trump Administration that you think may be impactful on your business, both from a tailwind and headwind perspective?
Look, I think, truth, I sit here in Washington. I don't think actually anyone knows exactly what the changes are going to actually come out of the Trump administration, let alone the impact on the business, right? I mean, you just read the paper There are lots of thrust, there are lots of stated intentions. What actually happens is still quite unclear to the world as a whole, at least the ones that I listened to. And then, therefore, the second order consequence of how will that affect our business is even more unclear.
I think the way we have a lot of conversation about that is this all SMD meeting. We talked a lot about actually more about the potential opportunities coming out of different speculated changes and how do we make sure we're front and center of it. I think people more bullish about the opportunities for us than they are pessimistic. But, but I think candidly, I think the big takeaway was that we need to be nimble that any sort of changes in the economy shuts down certain businesses and or affects certain businesses in negative ways, but also almost always creates other opportunities in adjacent areas that we are well equipped to serve And frankly, there was a little bit of reflection that said, in some points in the past, we haven't been as nimble as we need to be. And some statement of determination that we are going to be on top of this and make sure that we figure out, regardless of how this flows, how that we are best position to serve that.
So that's really as good as I can do, Tobey. I mean, if you know exactly what's going to come out of this administration, you should take a, at least take a major role in one of the newspapers, perhaps. But that's hopefully helpful.
Okay. In the technology business, just wondering if you could kind of provide a little color on how the new strategy is working and if 2016 represented a bottom in terms of profitability and growth.
Yes. Look, I think I'm actually pretty excited about this. I mean, there's a lot of elements, some of which will not only start to kick in in the second half of twenty seventeen and some which we have expectations for 2018 and beyond, but let me be clear on that. We think the cumulative effort that we've taken makes we'll make 2016 the bottom for that business. So some of this is long term, but some of it is actually very near term.
Look, I think the truth is for that business, the first half of 'sixteen was the strongest part in terms of sales because I think if you remember, part of what we've been doing in this business is running off some very big jobs and then having to sell a lot of singles and doubles to make up for some very big jobs. And we still had, one of the very big jobs running the first half of of 'sixteen. So when you look on the 1st 2 quarters of this year, you're going to see us up on the revenue side against that. And you might be saying, well, Steve, where's all this stuff that Steve is saying is already starting to make progress. But if you selling and having some success even on the revenue side and the cost side is there.
So I have a lot of confidence that we have this business historically was a great business if you talk to the leaders of the business, they'll be quite frank about the fact that they were slow to re examine their strategy, but we've retained really strong talent And people in that group are incredibly enthusiastic about the direction we're heading going forward and feel that we're really making progress. So I'm I have a lot of confidence that twenty teen was the bottom for that business.
Does that help? It's a last question for me. EBITDA has seen decline, adjusted EBTIDA declines for a couple of years. And you're, I think, Ajay, you mentioned kind of flattish adjusted EBITDA, the outlook for this year. What do you think we can get to EBITDA growth?
Because in our interactions, we kind of feel that investors focus more on that than the EPS? Thank you.
Yes. So let me let me be clear. I think the way to think about the last of years is basically been flat EBITDA, not a decline. I mean, frankly, we're within the noise range of flat, particularly if you do anything adjustment for for FX and so forth. Let me give a broader answer on that, Tobey and maybe actually some thoughts Look, the business, as you know, right, from 2009 to 2014 drop EBITDA $20,000,000 a year.
It was an average of $20,000,000 a year for that multi year period. And that is actually at a time when we were doing a lot of acquisitions. I think we spent roughly $50,000,000 a year in acquisitions. So you're buying $10,000,000 a year of EBITDA. You adjust for that, we were dropping at $30,000,000 a year.
Or you can say we're adjusting at $20,000,000, while dumping a lot of cash back into the business. What we have managed to do while investing in organic growth, while fixing some of the businesses, turn that to flat. Flat without the help of acquisitions. And so what you see on that regard is an enormous surge in our cash generation capability. I mean, I think it's important for people to look at that because I think, if you're in an acquisition mode, you don't really look at cash so much.
You don't look at a balance sheet strength because you think you're using all your cash for acquisitions. Here, we have not been using our cash for acquisitions. And so the stuff we did for refinancing debt, the cash we have, the repurchase of shares, all of this is sustainable. And it's also usable when a great acquisition comes along. So the strength of our balance sheet and the improvement in underlying cash flow think should become a focal point where it may not have been one in the past.
Having said that, my aspiration, and I think frankly, you can create a lot of economic value for shareholders with flat EBITDA if you use the cash wisely. Having said that, that isn't my aspiration. My aspiration is to make this a you. And we had it's coming down for a long time. We're now in the flat part of the you, and the goal is to actually come up on the you.
I think the truth is we've had a lot of success as we've walked through business after business. I mean, you know, right, the first business we looked at was Stratcom, which was plummeting, And we've been up the last 3 years on the up part of the U. And econ was down and is up and up the last few years. Corp Fin was down has been up. EMEA, we don't talk about EBITDA, but you can see it on the revenue where we focused a lot of energy So frankly, as we've walked through each of the businesses, I think we've got them positioned to be contributors to growth.
The unfortunate thing over the last 2 years is this Moving late on, on, on tech actually costs us. I think the EBITDA for tech over the last 2 years probably dropped, I don't know, $35,000,000 or $40,000,000. That's $0.50 a share. I mean, that's a lot of headwind. And this year, unfortunately, I think we are thinking the mark there's market headwinds on Corp Fin.
So I think our goal is we can't do anything about market headwinds. What we can do is to strengthen each of those businesses. I believe as we come out of the market headwinds here, and we have the business is positioned right. This company has the ability to be a substantial EBITDA growth with and generate cash And I think that's the home run for this business. And that's my aspiration.
Does that answer your question, Tobey? All right. I think, thank you very much for your attention and your time. And We look forward to ongoing engagement. Thanks very much.
Bye. And that concludes our conference for today. Thank you for your participation. You may now disconnect.