Mollie Hawkes - Managing Director, Investor Relations and Communications Steve Gunby - President and CEO Ajay Sabherwal - CFO.

Randy Reece - Avondale Partners Kevin McVeigh - Deutsche Bank Marc Riddick - Sidoti & Company Tobey Sommer - SunTrust Robinson Humphrey Tim McHugh - William Blair & Company.

Good day everyone and welcome to the FTI Consulting Third Quarter 2016 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 Mollie 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 third quarter of 2016 earnings results as reported this morning. Management will begin with formal remarks, after which we will 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, 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 most recent Form 10-K and in 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 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 the 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 third quarter of 2016 results.

Of note, during today's prepared remarks, management will not speak directly to the quarterly 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 our Investor Relations website.

With these formalities out of the way, I am joined today by Steve Gunby, our President and Chief Executive Officer; and Ajay Sabherwal, our recently appointed Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gunby..

Thank you Mollie and thanks to all of you for joining the call this morning. Let me start actually by welcoming you, Ajay, to your first FTI earnings call. I think a few of you on the phone have had a chance to meet Ajay. For those of you haven't, I hope you get a chance to do so soon.

He is not only a capable public company CFO, he is an action oriented and practical and committed executive. I am very delighted to have you on Board, Ajay. Before Ajay takes all of us through the details in the quarter, let me highlight three points. First, the quarter ended up very much in line with what we expected.

It actually started with a very slow July. We had a lot of projects wind down. We expected some and some other ones, as happens in this business, then wound down unexpectedly. And then because we were so busy in the first half of the year, a lot of folks took vacation. So, July was slower than I expected.

August recovered, although it also felt some of the summer vacation effects, and then we had a very strong September. Overall, however, from an EPS perspective ultimately the quarter came in about what we expected. And we are reaffirming our guidance for the year of adjusted EPS between $2.15 and $2.45 for this year.

Second, let me use this opportunity to talk about our path-forward in our Technology business. As you may recall, in February, we shared a number of observations about this business. First, and probably most importantly that this has been a great business for us historically.

Not only one of the most important contributors to our P&L over the years, but also a driver of the brand building complex work that we strive to stand for everyplace at FTI.

We also talked about our Ringtail software, which we believe by many measures is the best software in this market generally and certainly for the most difficult complicated high profile assignments.

And we talked about the fact we have a terrific consulting and services business populated with professionals who are viewed by many as the most outstanding consultants in this field. So, there are a lot of good things we discussed. But we also discussed that like many businesses -- like all businesses and all technology businesses, the world changes.

And we have had some thought that we needed to change as well. We talked about how there were fewer large jobs in the market. And that as large jobs rolled off, they are being replaced. The market is growing, but being replaced by many smaller and medium sized jobs, which requires agility in our sales efforts that we may not have needed in the past.

We talked about how we have historically gone to market with a very integrated strategy keeping our software essentially for ourselves. That was an extraordinarily successful strategy in the past, but we wondered whether the changing market dynamics meant that that might not be the right strategy going forward.

So, in February, although, we expressed a lot of confidence in both sides of this business, we thought we needed to do a fundamental relook to think about how we best support both parts of our businesses moving forward. So, over the last six months, we have look hard at all of those questions.

While at the same time managing a business; investing heavily in our Ringtail software to keep it at to its leading position, and also make it user-friendly. And we focused on improving the underlying financial performance, and we have been thinking through leadership structure issues. So, let tell you about the result of those efforts.

First, in terms of structure, we have decided to depart from our prior integrated strategy and delink the consulting and software businesses. They will continue to be operated as part of a single technology business segment, but with separate leadership focuses.

In our Consulting business, we remain committed to our current e-Discovery business supported by Ringtail, but we also have a series of extensions to that business, that we will think -- we think will be powerful and additive and importantly, can leverage the terrific people we have.

These extensions include further investment and acceleration in our information governance practice as well developing several new consulting and service offerings that we think represent substantial new revenue streams going forward.

On the software side, we have created a focused management team dedicated to growing the ecosystem substantially, which means expanding the number of Ringtail users beyond us and our current partners. I am excited about that break from our historical approach.

Aside point, I think some of you know one avenue explored was whether a potential partner could help us accelerate the broadening of the ecosystem of Ringtail materially. We ended up talking to a great number of potential partners, and there was actually a lot of interest.

Ultimately, we did not come up with a partner we thought could work with us in a way that we thought would actually accelerate the broadening of the ecosystem. So, we have stopped that process.

What that means going forward is that we will, of course, be ourselves a heavy user and heavy licenser of Ringtail, but the team that is running the software business will no longer focus solely on us.

We will be aggressively expanding our ecosystem, and will deal with the market in a neutral way in a way that takes advantage of the very present active needs in the market for high end software. While these two strategic initiatives have been underway, the team has also been focused on improving the basic economics of the business.

We focused on making our cost structure more efficient. As you know, we took some cost structure out -- cost activity out -- cost actions in the first quarter and we have been tightly managing the business since.

At the same time, we have invested in Ringtail to enhance its usability and make it more attractive to third parties and we focused on aggressively winning those small and medium sized jobs. And I am pleased to say over the last three months, they have been the strongest in the last year in terms of revenue from new engagements.

Lastly, I am pleased to announce in case you do not see it earlier in the month that we appointed Sophie Ross as the new leader for Technology business. I will say we have a lot of strong candidates, external candidates, but also internal candidates. But I am actually thrilled that Sophie is taking on this role.

To recap, in the Tech business, we are driving a fair -- a great number of changes.

A leaner cost structure, agility in our sales force, winning more small and medium sized jobs, expanding the consulting offering, committing to grow the ecosystem on our software side, and behind that we have put strong leadership with discipline and accountabilities for others initiatives.

All of those steps to me collectively lead me to a positive view on where this business can go. And importantly, we believe that we can make 2016, in financial terms, the bottom for this business.

Lastly, before I turn the call over to Ajay, let me update everyone as I have sometimes done on where I see this company in its journey to realize what I see as incredible potential. I mean, this company is improving every day, but every step of improvement just leads to more potential and the upside of this company is enormous.

The journey we have been on has had a couple of different trusts. One goal has been to make this company more than the sum of the parts. And I think that's a goal that were making progress on, but will be in front of us for years to come. And if -- that goal actually can be a fundamental foundation for sustainable growth for us for many years ahead.

The second goal has actually occupied more time.

A bigger chunk of our efforts over the last couple of years, which is to make sure each individual business, each segment in each geography, each sub-segment in each geography has enough focus, enough initiatives, enough investment support, enough discipline to move businesses that in many cases were trending downward.

There's a lot of volatility, but through the trend volatility, many of them were trending downward and turn this businesses into businesses that will still have volatility, but through the volatility are trending upward. Last week we had a town hall for all of our staff.

To me the most exciting part of that town hall was some of the discussion of some of the transformations that have happened in this company. I don't think anybody listened to that town hall, any of our staff without walking about -- walking out motivated and excited about where we are moving the company.

The people moves we are making, the ability to track people, the support of our people, and the combination of focus and support that is taking businesses, not only turning them up, but creating better platforms for our businesses going forward. On these calls, we have talked about that at a higher level.

We talked about Corporate Finance, that had many years of decline. And we thought we had globally -- it had bottomed out in 2014, and was moving ahead in the right direction. And we had similar conversations around E-Con, and about the major strategic turnaround in Strat-Comm.

We talked about the fact that those businesses, in various years had been substantial drags on earnings, but indicated confidence that by any -- over an extended period of time, these businesses had been turned into growth engines, and I continue to hold that belief. We also talked to you about two businesses we didn't think were there yet.

One was the Tech business we just discussed, and as I just said I am confident that beginning next year, this business starts to return to being a growth engine again. The other one we talked about was FLC, which has a lot of subparts, some of which were growing and some of which we had fix agendas. And we have talked about some of the fix agendas.

And the fact that we thought we would get those efforts, health solutions, some overseas positions, done by the end of this year.

So, in closing, I am restating my conviction, not only that each of these businesses are great businesses with terrific professionals and real opportunity, but I actually believe that all of these businesses, by the end of this year, will be put in a place where they are engines for growth going forward.

And not only do I believe that, but importantly the leaders of the businesses and the people within those businesses believe that. That does not mean we cannot have a setback for a quarter in any of these businesses or market forces that are in our headwind for a year. And it certainly doesn't mean there isn't any opportunity for improvement.

I think the most energizing part of that town hall was that the businesses that had most changed saw themselves with the most opportunity ahead, and the most opportunity for further improvement. But it does mean that all of our businesses in my view are extremely well-positioned going forward.

And I have a lot of confidence and where we can take each of these businesses, and therefore the company as a whole. So, with that, let me turn the call over to Ajay to take you through the quarter in more detail before we take your questions..

retail, energy, and mining, where enough disruption had occurred to trigger distress even with the current accommodating liquidity environment. Our results in the third quarter reflect a sequential slowdown in restructuring activities in these sectors in aggregate.

In Strategic Communications, revenues declined $4.1 million sequentially as Q2, 2016 was a very strong quarter with activity peaking on a number of projects.

Some of our largest projects were completed during or shortly after Q2, 2016 which explains a portion of the shortfall with the remainder from seasonality effects from the summer months and a slowdown due to Brexit in EMEA. Other businesses did better sequentially.

Economic Consulting revenues increased $4.5 million as we had some large M&A related antitrust cases in the third quarter specifically in the healthcare sector.

So, despite global M&A activity hitting a three-year low during the quarter, we continued to win more than our share of the opportunities that are in the market and that supported our sequential revenue increase. In Technology, revenues increased $2.2 million sequentially.

Consolidated adjusted EBITDA of $47.2 million declined $8.9 million on a quarter over prior year quarter basis.

At the segment level, the decrease was primarily due to an $8.9 million decline in adjusted segment EBITDA related primarily to underutilization and higher costs in Corporate Finance from the ramp-up of experienced hires brought on during the quarter.

In Technology, a $3.4 million decline in adjusted segment EBITDA was a result of lower demand and realized pricing for our managed review services on large scale projects compared to the prior year quarter.

These declines were only partially offset by adjusted segment EBITDA improvements in our Forensic and Litigation Consulting business or FLC resulting from higher success fees in our health solutions practice and in Economic Consulting where we reported revenue growth and improved utilization.

On a consolidated basis, we reported adjusted EBITDA margin of 10.8% compared to adjusted EBITDA margin of 12.3% in the prior year quarter. Now sequentially, adjusted EBITDA for the quarter declined $9.4 million despite adjusted segment EBITDA improvements in Economic Consulting, Technology, and FLC.

These improvements were more than offset by a $14.3 million decline in adjusted segment EBITDA in Corporate Finance, as well had lower volume for our higher margin distressed work and higher costs resulting from the 6% sequential increase in billable staff in Corporate Finance, a portion of which is our annual influx of campus hires, but about half of the headcount increase was experienced hires.

Speaking to sequential increases in billable headcount in aggregate, billable headcount grew to 3,618 professionals which is up 3.9% sequentially and 1% from Q3, 2015.

This 1% year-over-year growth is in the face of headcount reduction actions we have taken in the last 12 months, including exiting a Brazil business in FLC in 4Q, 2015, headcount reductions in the first quarter in our Technology business, and second quarter actions in our health solutions practice.

Excluding these reductions, billable headcount was up 4.3% year-over-year. Unallocated corporate expenses of $21.7 million increased $800,000 or 4.1% compared to $20.9 million in the prior year quarter. Next, I will discuss liquidity. During the quarter our cash and cash equivalents grew by $42.5 million to $225.2 million.

In addition, we repaid $25 million of our senior secured bank revolving credit facility. Total debt now stands at $475 million, down from $520 million at the end of Q3, 2015. We did not repurchase any shares in the quarter. Our net debt declined and we have ample liquidity to opportunistically return capital to shareholders.

In June our Board authorized a $100 million stock repurchase program. We will opportunistically look to take advantage of this authorization going forward. Turning to guidance. We are now guiding downwards to $1.8 billion in revenue for 2016, the lower end of the previously provided revenue range of $1.8 billion to $1.87 billion.

In addition, to year-to-date results, where revenue was lower than anticipated in the third quarter, there are several potential risks from both external and internal factors that we considered when deciding to guide to the lower end of our previously provided revenue range.

These include slowing restructuring activity and foreign currency translation impacts, especially related to the decline of the British pound following Brexit. Having said that, our adjusted EBITDA for the quarter was very much in line with our expectations and we are reaffirming our 2016 guidance for adjusted EPS of between $2.15 and $2.45.

Before I open the call for your questions, I would like to reiterate some key themes both from our Q3 results and from what I see after two months at FTI. Our results were in line with our expectations for adjusted EPS. Our billable headcount is growing, and with that organic revenue growth potential.

Our Technology business, that has been underperforming its potential is showing signs of improvement. We have a portfolio of market leading businesses and a growing global footprint.

We have very strong cash flows and numerous opportunities for capital allocation, including continued organic growth, returning capital to shareholders, reducing debt and acquisitions. As Steve mentioned at the beginning of the call, this is my first earnings call with the company, and I am delighted to be here.

And thank you, for your continued support of FTI. With that, we will open the call up for your questions..

[Operator Instructions] And we will take our first question today from Randy Reece from Avondale Partners. Your line is open. .

Morning..

Good morning, Randy.

How are you?.

Doing all right. I was wondering if we could talk about bankruptcy and restructuring activity by vertical, and what kind of changes that you had seen there..

Sure, let me give a high level view and then if you need to you can supplement. You know more of the details. I think there has been -- the way to think about this I think is that the overall bankruptcy market is at this point and hasn't been in a boom state. Right? Because we still have loose money.

I actually have a lot of confidence over the next few years, you know, the global authorities will not keep the loose money forever. And so, over the next few years, I think we have a lot of confidence that this will be growth business.

But what really has been helpful in the last couple of years has been three verticals mining, energy, and then also retail. And I think I mentioned, we probably got out ahead of the market last year. We started reporting higher numbers early last year, basically through strength in all three of those.

Mining, incredible strength and also we just won disproportionate shares of the other jobs. We still continue to win jobs. There has been some slowdown in the overall market.

I think the belief is that there will be energy deals for some time to come and mining deals, but the first wave of deals has happened and now you are on the second wave and so forth. And if $50 an oil sticks around, we will not -- the business will not plummet, but it will no longer be a boom business, it will taper.

And then we were somewhat surprised to see that there were almost no retail filings during the course of the summer. And we were a little perplexed last year just about the surge of retail filings. It's just seemed -- obviously, there are some secular things going on that cause mall stores to be under stress, the internet and so forth.

But it seemed like the surge we had in 2015 and into the early 2016 was disproportionately high, and that is one reason I had cautioned about this. The summer looks like disproportionately low, and I don't actually know why that is. But we are seeing general slowdown in the amount of volume in energy and mining. It's not a precipitous decline.

And we saw a big drop in the amount of filings in retail over the summer. I don't know if that's just a temporary low or not.

And, I mean, just to close that, I think longer term we feel like the overall market will be up, but that will be requiring not just industry specific issues, but just a reduction of this -- of the world's loosest money that the world has ever seen.

Did I answer your question, Randy?.

Yes, very well. I had one other question about what are the cost implications of the decisions that you made in the Technology segment..

Cost implications of the businesses? I think you mean, in terms of reduction of cost to be -- look, we have already taken out a fair amount of cost in that business, Randy. I think, as you know, both in the -- I gave you somewhat of an update on that -- I guess pretty full update, I think in the second quarter that said we were taking actions then.

We have continued to run that tight. There's always attrition in businesses, and you have choices as to whether to backfill that or no, and we have backfilled some but a lot fewer. So, if you look at the headcount in the business, it's down considerably versus where it was a year ago. I think we have got a much leaner operation there than we did.

And I think….

So, this doesn't change your path for spending intentions in the future?.

Well, we have -- certainly -- look, there are lots of elements to the strategy, and I am not sure how much detail we're going into. But as you remember, we -- I made a point of making sure we invested an awful lot in Ringtail this year.

Internally we had a meeting and I authorized an additional -- I don't know if we say the number, but multimillion dollar spend on Ringtail relative to the budget they had at that point in time, because I wanted to get it to be over the hump on certain capabilities and ready for third parties if we were going to do it.

So, those activities, which were surges in spending, which, of course, you don't have to replicate surges in spending. We have lots of activity underway in terms of datacenter, movements and so forth. So, we have got a lot of activity underway that is part of just making this into the leanest, most fighting machine.

But we have already made a lot of progress on that, Randy. And I think we have -- right now, have a business that I have confidence in. We'll be heading in the right direction next year.

Does that help?.

Yes. Thank you..

Thank you. And we will take our next question today from Kevin McVeigh with Deutsche Bank. Your line is open. .

Kevin.

How are you?.

Hey, Steve. Never better.

Yourself?.

Good.

Do you like the new digs?.

I do. I do. [Indiscernible]. Thanks. Thanks for asking. I was going to ask Ajay that very same question. That would be my second question.

Ultimately, as you think about the Technology business overall, specifically spanning the Ringtail vertical, how does that impact the go-to market strategy? Do you think you will get any kind of pushback from some of those potential clients given that you use it in-house?.

Well, obviously that's something we think hard about, particularly given our history as a company. I mean, I went out to the marketplace. As you know I was not here five years ago. But more recently I went and talked with people who dealt with us.

And we were not seen as somebody who was interested in licensing our technology on a neutral way, to anybody who could be perceived as a potentially competing with the consulting business. And so, obviously, if you're going to build the ecosystem, you have to address that squarely.

Nobody is going to license from you if they don't believe that you are going to deal fairly with them and that they're getting treated as well as your internal colleagues. And we are heavily focused on that, which is why we have very much separate attention focused on it organizationally within the segment.

And a set of incentive structures being worked on for the leaders of that to make sure that they're focused on the right part of it. I am not sure I want to go into any more detail then. But it's a perfect question. And you will never make the ecosystem grow unless you address it. So let me just say, we understand that and we are addressing it.

I hope that helps..

No. It does.

What -- if you think about the Restructuring business currently, what's the mix of kind of what you called distressed versus non-distressed right now?.

That is a good question. We get it every quarter.

I usually defer to my CFO for that, but I don't know if you're up to speed enough to know the answer, Ajay?.

Over half. Just over half is distressed..

That is helpful. And then my last one and I will get in queue.

Ajay, I know you haven't been on the ground that long, but any thoughts on kind of initial reads, ups, you know, positives, or just any initiatives you think about as you are kind of settling in it?.

As I summarized as the end of my prepared remarks, what stands out for me is the practitioners in this company. And I get a report on all the matters that the company is winning every day, and I feel like I am reading an excerpt from virtually every financial newspaper on the planet.

The breadth, width, scope of the practitioners globally and the kind of work that their winning is stunning. In terms of initiatives, it's a combination of -- as a CFO, it is in my DNA to watch cost and cash, and I continue to do that. But at the same time you have to optimally allocate resources for growth. I won't go into any further specifics..

Okay. Thank you..

Nice to talk with you..

Likewise..

[Operator Instructions].

You did a great job, Ajay. Nobody here -- nobody is asking questions. That's good. Okay. Well, look, thank you very much. I have got -- we have another question -- sorry.

Are we good?.

Pardon me interruption. We actually do have another question..

Okay. .

We can go to Marc Riddick with Sidoti & Company. Your line is open. .

Hi. Good morning..

Marc, are you settling into the new role?.

Yes, I am. Thank you. I appreciate it. I wanted to get a sense of maybe sort of give us a bit of an update on what you're looking at for year-end headcount. I think maybe previously, you were looking sort of at least 5%, or so. And then maybe some of the areas that you may be targeting. And then I have a follow-up on that..

Yeah, look, I don't have the exact forecast ahead -- in front of me. Maybe someone could dig this out. But, look, let me just say a couple of things about that more conceptually. First of all, the goal of having all of our businesses to be growth engines, means that -- growth engines will typically at least have 5% growth in headcount a year.

And if you look at the businesses which we said were positioned to be growth engines as of now -- we talked about in that way earlier this year, you'll see the numbers are much higher.

I mean, my sense is that Corp-Fin, E-Con, Strat-Comm, I mean, those businesses are probably closer to -- average closer to 10% headcount growth, than they do 5% or at least in the middle of that. And over a couple of years even higher. I think Crop-Fin might be up close to 25% over two years, which is probably not sustainable.

But measure of, when you have the businesses positioned -- we have the ability to attract great people, and when you have the businesses positioned and you go after it, it happens. The issue is, as we have been sequentially working through businesses and figuring out where we have a right to win, it's meant we have cut back other places.

So, if you looked at Strat-Comm, which has gone a lot over the last year. And the first year, actually looked like it did not grow it headcount at all and that was because we were investing some places, like Brussels and some places and we were exiting other places.

And so you look at things and see net headcount zero or down in certain subparts while you're doing that focus. And that's what we've been going through this year with Tech and some parts of FLC.

And so, I think the three parts of the business which we have thought we had got into fundamentally a good place are well on that way and well north of 5%, I think if you look at the numbers year-on-year and will be at the end of the year. The issue is how much corrective action had to take place in some of the other places.

And how much does that drag. And so, it is the net of those that will affect the end of the year numbers. If you remember, FLC, you know, we exited 85 people in a business in Brazil. We took some overhead actions and some actions in various overseas places, and then we have had all of these movements that we have been doing in Tech.

My view was earlier that notwithstanding all of that, the net of that would come out in the mid single digits. And I was targeting 5% at the end of the year. Whether our current forecast is 3.8% or 5.2%, I don't know, but probably somebody can get back to on that if we disclose at that level. But it still mid single digits for this year..

Okay. Great. And I guess, one other question is, just touching on the share repurchase program that there. If I recall there was sort of a temporary hold placed on it for a while.

I was wondering is still in effect, or what we should look as far as going forward on that because the $100 million program authorization back in June, I was wondering when that might kick-in. Thank you. .

Yeah, so, look, there is no hold on that at this point. I put a temporary hold on it, while Ajay was getting on Board just so that I would not make also the decisions..

Got you. .

That he then said, what the heck did you do, Steve? So, -- we don't make any commitments as to when we are going to use that. If you think about this company's history, we've done a lot of share repurchases and in retrospect, we did it at market peaks.

And you know -- what I am trying to do with this company is cumulate enough cash that we can take advantage of lots of things in the marketplace. If ever the stock fell out of favor you want to have cash.

I remember starting this company and the company had just bought back stack at 42 and before -- shortly after the stock was then at 29 and I wanted to go buy back shares and we did not have any money to buy back shares. I said four weeks before I joined you bought it back at 42. And they said, so what's your point? We never get into the situation.

But also, I think the cash -- we have been very careful about acquisitions. My sense is great acquisitions come along when they come along. I always want to have the cash available for great acquisitions when we have it.

So, we are not -- we are not -- one of the things that happens in professional services firms, it’s almost like -- sorry -- philosophy -- it’s almost like -- if you look at industrial companies, if you look at industrial companies they are flush with cash when the markets are booming, and that's when they do their acquisitions.

And then when the markets are in troughs, nobody has any money to do acquisitions. We are never going to do that. I want to have cash available to be opportunistic on share repurchases, acquisitions, when the time is right. And we have moved this company into that position.

The balance sheet of this company I think is never been as strong, and I don't know that there are very many stronger ones in this industry. So, we do have -- we have no constraints on -- no artificial blockage on share repurchases, but nor are we making any specific commitments as to timing on any of that.

Does that at least address your question?.

Yes. Yes, it does. That is excellent. I appreciate it. Thank you.

Great.

Do we have any other questions?.

We do. We will go next to Tobey Sommer with SunTrust. Your line is open. .

Hi, Tobey. .

Thank you. Good morning.

Is the mid single digit target for billable headcount growth by year-end a net number, or are you adjusting it for headcount reductions, because you gave the figures in the prepared remarks?.

The number I always use is net..

Okay. .

No. No. On gross, we add a lot of people. In professional services, there is always turnover. Right? I mean, I don't know many professional services firms that don't have 15% turnover in a given year or whatever. So, if you're going to grow X you have to grow 15 or whatever plus X, so it was net..

Second question is, how does the 3% year-over-year kind of proactive headcount reductions that you cited in, I guess primarily Brazil, Tech, and healthcare.

How does that differ from what you may consider normal needs on an annual basis to kind of look at the businesses pruning a little bit, is that 3% larger, the same, or smaller than could be an annual type of activity?.

So, I don't know where the 3% number comes from. So, let me answer the question conceptually. All right? I think it is a good question. We will always have ongoing pruning which is day-to-day stuff. We will also always have some businesses where we made bets, where we thought they would work, and have some fix agendas.

All right? So the notion of saying, well, we are not hitting our headcount needs because of fix agendas is if used universally is not an appropriate thing to do.

I think the way to think about this though is, in the last two years, what we have done is done a systematic move that -- I don't think we have ever done in this company, business-by-business, subbusiness-by-subbusiness, turning over each business, and saying, okay, where do we really have the right to win in Strat-Comm? Which subparts of it are we betting on? Which parts are we retreating from? Where do we have the right to win in each of the other businesses? And that systematic process as we have gone business-by-business, has led to -- in my experience -- a bigger set of resets both positively and negatively than you would do on an ongoing basis.

And so when I exclude Brazil, I do it because that is a consequence of a more systematic process that hadn't been done in this company for a long period of time.

I think, going forward, I think if it's normal routine attrition, when we're saying each business should be headcount for growth, net of all that we ought to be growing headcount 5% or more, even including all those things.

Did I address your question, Tobey?.

Sure. I was looking for kind of a numerical answer, but that's okay.

In terms of the quantity of revenue in EBITDA, could you kind of maybe ballpark what the headwind may have been from those, I guess, more rigorous scrubbing of the businesses and the closure of Brazil? And the headcount reductions in Tech and healthcare? Just trying to get a sense for what the rest of the business, how it performed by comparison to quantify the impact of those actions would be helpful..

Tobey, we don't break it down to that level of granularity, I am afraid. But you can see that -- if you look at the year-to-date, you can see the Technology -- sorry -- the E-Con, the Corporate Finance, which are the big engines doing quite well. And you can see that the Technology side and some of the FLC sides, not as much.

And that is virtue of some of those situations which we have addressed..

Okay. Last question for me and I will get back in the queue.

How long do you think it will take to build third-party relationships to adopt Ringtail? When should we have -- when could we reasonably expect to ask you the question about seeing progress, and have you -- have gestated the process long enough to give us a kind of full response on that?.

Yeah, it is a good question. And it is one that I am having active discussion with internally. So, look, we'll give you updates -- as we always do, we will give you updates as any material strategic changes occur.

It obviously can't take four years before you sign new contracts or else you're kidding yourself, right? I mean, that's just not the way professional services work. And we have got some people pretty focused on it. And there's a lot of interest in the market to be honest at this very point in time.

So, we'll figure out the right way in the normal course of updates to keep you guys informed..

Okay. We will stay tuned. Thank you..

Thank you..

Thank you. We will take our next question from Tim McHugh with William Blair & Company. Your line is open. .

Good morning, Tim.

Are you a Cubs guy?.

I'm a south-side of Chicago guy. If you familiar with Chicago, that's the answer. But everyone in Chicago is a Cubs fan right now. So….

Good luck..

Thanks. First, I guess -- and I apologize I joined a little late because of multiple calls. But the Technology comments splitting kind of the two sides.

Can you comment at all on how we should think about the financial aspect -- the financial split of those in terms of the revenue or EBITDA share between the two businesses?.

I think, look, I will let -- if there is more technical answer, I will let that Ajay. That's going to stay as one reporting segment at this point. So, we're not going to be breaking those out at this point..

The answer there, it’s a -- the opportunity there is to expand our market opportunity by allowing us to use channel partners as well. So, it is a future state..

Fair enough. Lots of change in that part of the world. The -- maybe the comment I missed or you said earlier that basically September got a fair amount better in terms of your performance versus even July and August.

Can you give us more color was that in particular business segments? Was that broad-based? I guess what parts got better later in the quarter?.

Well, it probably wasn't universal, but it was broad-based. It was very broad-based. We just had -- and I think it just happens sometimes, you had a lot of stuff and some of it we expected, some of it we did not expect, because, you know, sometimes litigation ends abruptly, usually because of good things for your client. But we had a bunch of stuff.

And then if people have been working as hard as they were in the first half of the year, and it happens to be July and August, people don't necessarily go -- return phone calls.

They sort of say, can we meet in three weeks after I take my vacation? So, we had -- we always have lots of vacations in July and August, but we had a lot, a lot of vacations in July and August. So, it was pretty broad -- widespread. It was just more than I expected.

And then we had good pipeline of work and people kept reassuring me that September would be better. And I was like, all right, is August going to be better? And so, August was better. It was not fabulous, but it was better. So then you get reassured. And then September actually has been good, but it was pretty widespread. It wasn't like one spike..

And you talked about healthcare, when you talk about FLC broadly and trying to get it back to you where you want it to be. Healthcare, I know is a smaller piece, but I know it's been a focus area to try and get back on track. It sounded better in 2Q, but worse kind of again in 3Q. You have that business, have you figured out where you want to take it.

And is it where you want it to be?.

Yeah, I am not sure it was worse in 3Q than it was in 2Q. So, -- but -- look, I think -- here is the thing, I think we have good leadership in that group at this point, who is really focused on the right stuff. It's actually probably the most bonded leadership team. It's not a big partner group in there. It's probably 20 partners, maybe 25.

And they're all focused on the right stuff at this point in time. I think they're heading in the right direction. Part of your question was, do I think it's where I want it to be now? No. Do I believe it will be there pretty soon? Yes. They are working on the right stuff.

And I think that's the same thing for some of the other subparts of FLC that were lagging. That's why I believe this FLC as a whole will be returned to be a contributor to organic growth beginning next year because I think the weakest parts we have really good attention on. And the good parts -- it works. I mean, it's interesting. I pulled aside.

I took a -- look at a chunk of North America, where I think we are so strong. And I looked at how many headcount we had added over the last two years, and it was 100 heads -- billable heads. And I looked at what our revenue per billable person was in that part from two years ago and this year, we added 100 heads to that subpart.

And the revenue per billable head changed $1 a year. For that subpart -- maybe I shouldn't say the exact numbers. But when we add headcount behind the right set of professionals in the right markets, it just continues to grow the business. And maybe there's a six-month delay, or maybe you get a headwind, but it works.

It's a matter, sometimes we've had some positions where we've been not focused on realistically assessing how strong or weak we are in doing the things that we needed to. And I think we now have management focused on that. Some places you wish had it happened a little earlier, but I think we have management focused on that everyplace.

And I think that's why I have the confidence that we're going to have all the businesses turned into a sustainable engine for growth beginning next year.

Did I address your question, Tim?.

Yes. Just one and then -- maybe I thought of one quick follow-up. The headcount additions you did make -- and maybe I am parsing it too finely here.

But when in the quarter did they come in? I am just trying to think about the expense impact of all the hiring and whether we saw full impact from that in Q3, or if I need to be thinking about a higher expense run rate as you kind of have all these people onboard and continue to hire going into Q4..

I don't know that specifically. I will let Ajay think about this. My experience is that you don't have the full effect in the third quarter, because you don't have that many -- the third quarter is July, August, September, right? You don't typically have the new hires from campus starting in July. They usually start in September.

Now the lateral hires can start pretty evenly through. And those tend to be more expensive people. The sheer numbers -- the numbers are usually in the third quarter. The numbers are mostly the campus hires and those usually come in September..

It's about half-and-half. And your characterization in terms of the months is correct..

Thank you..

And I am showing we have no further questions at this time. I would like to turn the call back to Steve Gunby for any closing remarks today..

Well, good. Thank you very much. I mean, just to reiterate where we were. I think the quarter actually came in very much where we expected. And we are reaffirming guidance. I think the more important issue is the progress we're making on all of these businesses, and I am excited about that.

And as some of your questions point out, we are not through all the fix agendas, but we are not that far away either. And it does not mean we will not have fix agendas in businesses going forward, you always do. But this first systematic walk though all of our businesses, I think we're near completion.

And when you look at the places where we have completed it, and the trajectory they have and the confidence that the people have as we heard in the town hall, or where you see in the results. It's fun. It's fun. And sometimes this business can be pretty fun. So, thank you very much your time and attention, and your support. Have a good day..

This does conclude today's conference. Thank you for your participation. You may disconnect at any time..