Fti Consulting, Inc Q2 FY2024 Earnings Call

Good day and welcome to the FTI Consulting Second Quarter 2024 Earnings Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Ms. Mollie Hawkes, Head of Investor Relations. Please go ahead, ma'am.

Good morning. Welcome to the FTI Consulting conference call to discuss the company's second quarter 2024 earnings results as reported this morning. Management will begin with formal remarks, after which they will take your questions. Before we begin, I would like to remind everyone that this 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, initiatives, projections, prospects, policies, processes and practices, objectives, goals, commitments, strategies, future events, future revenues, future results and performance, future capital allocations and expenditures, expectations, plans or intentions relating to acquisitions, share repurchases and other matters, business trends, ESG related matters, climate change related matters, new or changes to laws and regulations, scientific or technological development 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 quarterly report on Form 10-Q for the quarter ended June 30, 2024, our annual report on Form 10-K for the year ended December 31, 2023, and in our other filings with the SEC. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call and will not be updated. During the call, we will discuss certain non-GAAP financial measures, such as total segment operating income, adjusted EBITDA, total adjusted segment EBITDA, adjusted earnings per diluted share, adjusted net income, adjusted EBITDA margin and free cash flow. For a discussion of these and other non-GAAP financial measures, as well as our reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures, investors should review the press release and the accompanying financial tables that we issued this morning, which include these reconciliations. Lastly, there are two items that have been posted to the Investor Relations section of our website for your reference. These include a quarterly earnings presentation and an Excel and PDF of our historical financial and operating data, which have been updated to include our second quarter 2024 results. Of note, during today's prepared remarks, management will not speak directly to the quarterly earnings presentation posted to the website. To ensure our disclosures are consistent, these slides provide similar details as they have historically, and as I've said, are available on the Investor Relations section of our website. With these formalities out of the way, I'm joined today by Steven Gunby, our President and Chief Executive Officer; and Ajay Sabherwal, our Chief Financial Officer. At this time, I will turn the call over to our President and Chief Executive Officer, Steve Gunby.

Thank you, Mollie. Welcome, everyone, and thank you for joining us this morning. As many of you saw in our press release, we once again delivered impressive results this quarter. As usual, some sub-businesses and regions exceeded or fell short of their expectations. However, overall, it was an excellent quarter, which, combined with the strong first quarter, gave us an exceptional first half of the year. Ajay will discuss this shortly, but we experienced some one-time factors that positively impacted results, particularly our lower-than-expected tax rate. Even after accounting for these one-time factors, the first half of the year was outstanding. Our total revenue grew by 12%, with almost all of this being organic growth, and our adjusted EBITDA increased by 27% compared to the first half of last year. We feel very positive about the first half of the year and the strength of our businesses. Looking ahead to the second half of the year, I want to share a couple of points. First, Ajay typically notes that the second half of the year, especially the fourth quarter, includes the holiday season when many of our professionals and clients take time off. The December effect is not consistent from year to year due to various factors in our business. For instance, last year, we were pleasantly surprised by the strength of December and thus our fourth quarter results. However, a slowdown in December often occurs, and it can significantly influence our results, which we factor into our forecasts. More specifically this year, I want to highlight the comparisons with last year. So far, we have been comparing against a very weak prior year for the first half of this year, but we project that our business will remain strong, creating a much stronger set of comparables from last year. This does not imply that we anticipate weak business in the second half, but as the year progresses, we expect year-on-year growth to appear different than what we've achieved thus far. The third point I want to make is more substantial; this year we have not experienced the level of headcount growth that I strive for, which is typically necessary to meet our multi-year growth goals and the level of growth we have delivered. We have clear plans to address these shortfalls in the second half of the year. Most of our campus hires will join us in the third quarter, and we are also committed to finding and investing in senior talent. To summarize, despite the uncertain economic environment, we feel great about our performance this year and the strength of our global positions. Regarding senior talent, we are currently engaged in what I believe may be the most comprehensive discussions about potential senior hires we've ever had. After I mentioned this last time, some people asked Mollie why there haven't been many announcements. I hope you have begun to see our announcements; we have announced 19 senior managing director hires across various segments and regions, including business transformation, transactions, and IT. In addition to these announced hires, we have many conversations taking place with senior candidates. At this level, there is often a delay between reaching an agreement and making a public announcement because these individuals usually have existing commitments that we respect. As a result, we probably have at least another 15 senior managing directors lined up to join us, although we haven't announced them yet while they fulfill their previous obligations. We are also having an incredible number of further discussions. As is typical with early and mid-stage conversations, it is uncertain whether they will lead to hires. However, given the volume and quality of the dialogues we are having, I believe many of these discussions will result in successful hires. As noted by Ajay, these hiring investments will impact our P&L in the second half of the year or into 2025. Typically, senior hires may not immediately yield financial benefits due to various constraints, but this approach represents our commitment to investing in exceptional talent that meets critical client needs and contributes to our growth strategy. This commitment has transformed our company into a growth engine and has elevated our reach, relevance, profitability, reputation, and ability to attract top professionals who deliver excellent results for our clients. If we maintain this philosophy, accompanied by the necessary discipline to ensure we find truly great hires and effectively integrate them, I am confident we will continue to build on our company's strong history and accelerate our growth trajectory. With that, I will turn it over to Ajay for the quarter's details.

Thank you, Steve. Good morning, everybody. In my prepared remarks, I will take you through our company-wide and segment results and discuss guidance for the full year. Beginning with our second quarter results. We had a strong quarter with earnings per share of $2.34, which grew 33.7% year-over-year. Let me at the outset caution that in this quarter we had significant tax benefits that resulted in an effective tax rate of 18.2% compared to 26.7% in the prior year quarter. We expect these benefits to be largely behind us now, resulting in an expected effective tax rate for full year 2024 of between 20% and 22%. Even without this tax benefit, I'm pleased to report that our underlying results were strong. Overall, year-over-year revenue growth of 9.8% more than offset an 8.4% increase in direct costs and a 10.7% increase in selling, general and administrative or SG&A expenses, resulting in adjusted EBITDA growth of 15.7% year-over-year. All of our segments grew with particularly strong growth in Corporate Finance & Restructuring, Economic Consulting and Technology. These segments also had year-over-year adjusted segment EBITDA growth, which offset a decline in adjusted segment EBITDA in Forensic and Litigation Consulting or FLC and in Strategic Communications. Considering our record revenues and EPS in the first half of the year, we are raising our revenue and EPS guidance ranges for the year. Turning to our second quarter 2024 results in more detail. Revenues of $949.2 million compared to $864.6 million in the prior year quarter. Earnings per share of $2.34 compared to $1.75 in the prior year quarter. Net income of $83.9 million compared to $62.4 million in the prior year quarter. This increase was primarily due to higher revenues, a lower effective tax rate and FX remeasurement gains compared to losses in the prior year quarter, which was partially offset by an increase in compensation and SG&A expenses. SG&A expenses of $206.2 million were 21.7% of revenues. This compares to SG&A expenses of $186.4 million or 21.6% of revenues in the second quarter of 2023. The increase in SG&A was primarily due to higher compensation and bad debt. Second quarter 2024 adjusted EBITDA of $115.9 million or 12.2% of revenues compared to $100.2 million or 11.6% of revenues in the prior year quarter. Our second quarter effective tax rate of 18.2% compared to 26.7% in the prior year quarter. The lower tax rate was primarily because of a higher discrete favorable tax adjustment related to share-based compensation due to the exercise of a larger number of non-qualified stock options, which is not expected to recur. This quarter, we instituted a change in the compensation plan for senior practitioners where we now have more performance-weighted compensation. The increase in compensation in FLC this quarter is largely because of a year-to-date catch-up accrual related to this new plan. For the second half of the year, we now expect our effective tax rate to be between 22% and 24%, resulting in an overall expected effective tax rate for full year 2024 of between 20% and 22%. Weighted average shares outstanding, or WASO, for Q2 of 35.8 million shares compared to 35.7 million shares in the prior year quarter. Billable headcount increased by 103 professionals or 1.7% compared to the prior year quarter. Non-billable headcount increased by 81 professionals or 5% for the same period. Sequentially, billable headcount decreased by 32 professionals as attrition slightly exceeded gross hiring. Non-billable headcount increased by 14 professionals. Now I will share some highlights at the segment level. In Corporate Finance & Restructuring, revenues of $348 million increased 9.5% compared to the prior year quarter. The increase in revenues was primarily due to higher demand and realized bill rates for business transformation and strategy and transaction services, which was partially offset by lower restructuring revenues. Adjusted segment EBITDA of $66.5 million or 19.1% of segment revenues compared to $45.5 million or 14.3% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by an increase in variable compensation. In the second quarter, restructuring represented 43%, business transformation and strategy represented 32% and transactions represented 25% of segment revenues. This compares to a split of 47% for restructuring, 28% for business transformation and strategy and 25% for transactions in the prior year quarter. Year-over-year, business transformation and strategy revenues grew 24% and transactions revenues grew 13%, while restructuring revenues declined 1%. Sequentially, Corporate Finance & Restructuring revenues decreased $18 million or 4.9% as 10% growth in transactions revenues was more than offset by a 13% decline in restructuring revenues and a 3% decline in business transformation and strategy revenues. Adjusted segment EBITDA decreased $8.8 million sequentially, primarily due to the sequential decline in revenues, which was only partially offset by lower compensation and SG&A expenses. Turning to FLC. Revenues of $169.5 million increased 2.9% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for dispute services and higher realized bill rates for construction solution services, which was partially offset by lower demand for investigation services. Adjusted segment EBITDA of $15 million or 8.8% of segment revenues compared to $25.6 million or 15.5% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to an increase in compensation and SG&A expenses, which more than offset the increase in revenues. Sequentially, FLC revenues decreased $6.6 million or 3.7%, primarily due to lower demand for investigations and dispute services. Our Economic Consulting segment's record revenues of $230.9 million increased 14.4% compared to the prior year quarter. The increase in revenues was primarily due to higher demand and realized bill rates for M&A related antitrust and financial economic services, which was partially offset by lower demand and realized bill rates for non-M&A related antitrust services. Adjusted segment EBITDA of $44.3 million or 19.2% of segment revenues compared to $35.5 million or 17.6% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was partially offset by higher compensation and SG&A expenses. Sequentially, Economic Consulting revenues increased $26.3 million or 12.9%, primarily due to higher demand and realized bill rates for M&A related antitrust services. In Technology, record revenues of $102.9 million increased by 18.9% compared to the prior year quarter. The increase in revenues was primarily due to higher demand for M&A related second request services, which was partially offset by lower demand for investigation services. Adjusted segment EBITDA of $20.9 million or 18.1% of segment revenues compared to $20.1 million or 20.6% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which was largely offset by an increase in compensation and higher SG&A expenses. In Strategic Communications, revenues of $84.9 million increased 2.8% compared to the prior year quarter. The increase in revenues was primarily due to a $1.7 million increase in pass-through revenues. Excluding pass-through revenues, revenues increased 0.7%, primarily driven by higher public affairs revenues, which was partially offset by lower corporate reputation revenues. Adjusted segment EBITDA of $11.6 million or 13.7% of segment revenues compared to $12.3 million or 14.8% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to higher SG&A. Let me now discuss key cash flow and balance sheet items. Net cash provided by operating activities of $135.2 million compared to $11 million of net cash used in operating activities for the second quarter of 2023. The year-over-year increase in net cash provided by operating activities was primarily due to an increase in collections resulting from higher revenues, which was partially offset by higher operating expenses and an increase in compensation payments. Free cash flow was $125.2 million in the quarter. Total debt net of cash of negative $166.4 million on June 30, 2024 compared to $137.2 million on June 30, 2023 and negative $39 million on March 31, 2024. Turning to guidance. After a record first half of 2024, we are raising our full year 2024 guidance ranges for revenues and EPS. We now estimate revenues will range between $3.7 billion and $3.79 billion, which compares to our previous range of between $3.65 billion and $3.79 billion. We now estimate EPS will range between $8.10 and $8.60, which compares to a previous range of between $7.75 and $8.50. Our updated guidance is shaped by several key factors. First, with half of the year's results accounted for, it is time to narrow our guidance range. And we are moving up the bottom end of both our revenue and EPS guidance. With EPS year-to-date above our expectations, primarily because of the lower effective tax rate, we are revising the top end of our EPS guidance upwards. Second, we typically expect both our clients and practitioners may take vacation in Q4, which has historically impacted our results. I want to recognize that last year was an exception in this regard as many of our practitioners in many areas were this year more than is typical during the fourth quarter. Third, I am sure many of you will be interested in our views on both restructuring and M&A for the balance of the year and how one may offset the other. Let me at the outset say that predicting this reliably is difficult. Our modeling that shapes guidance assumes that restructuring activity remains at Q2 levels through year end. Though we expect that M&A related work, particularly in the Economic Consulting and Technology segments will remain strong, we do not anticipate it will continue at the record levels we saw in Q2, particularly as we see certain matters ending. Fourth, as Steve shared, we are making investments in our business. Although our headcount growth this year has not been significant, we continue to have lots of conversations with senior individuals. We cannot say with certainty, though, when such investments will be made and therefore, how much impact they may have in this calendar year. Additionally, at the junior level, we are poised to welcome more than 300 campus hires in the second half of the year. Before I close, I want to emphasize a few key themes that I believe underscore the attractiveness of our company. First, as we continue to grow our presence globally, we have maintained our commitment to being an organization that deeply cares for its professionals. As demonstrated by our recent certification as a great place to work in 11 countries, Australia, Brazil, Canada, France, Germany, Hong Kong, Singapore, Spain and the UAE, the UK and the US. Second, our portfolio of businesses is uniquely diversified, which can allow us to grow regardless of business cycle. Third, as Steve said, we have the ambition, wherewithal and opportunity to invest in great talent. Finally, the strength of our balance sheet allows us the flexibility to continue to build shareholder value through organic headcount growth, share buybacks and acquisitions when we see the right ones. With that, let's open the call up for your questions.

And the first question will come from Tobey Sommer with Truist.

I wanted to ask a question about hiring, Steve, since you and both Ajay spoke about it at length. What are the prospects as you see them for group hires as opposed to individual consultants coming over laterally?

A lot of that depends on the specific agreements that senior people have with their current employers. We honor people's non-competes and non-solicits. It's just part of being an ethical public company and ethical company, period. So it is, in many cases, senior people are not allowed to bring the whole group with them. On occasion that is the case because there are dislocations and competitors that mean that they're released from their non-competes and so forth and we certainly look eagerly at that. What does happen more typically is you hire a senior person and then that gets us on the radar screen. Some of the junior people reach out to us separately. And then certainly, in most cases, a year after people have joined us, there's no restrictions on them and then they can directly reach out to those people. But for us it has not been often like 80 people joining at once. It's just the honor and legal restrictions prevent that. Over time, some of that gets reconstructed. Does that respond, Tobey?

It does. If you could, on the antitrust side, describe the demand outlook that you see in for non-M&A related antitrust, if you think that has legs, it's top of mind given our elections here as well as election globally in recent months.

And Tobey, it has legs. It is continuing. I'm not going to link it to the elections because who knows with that. But the matters are continuing and new matters emerge. And what stood out this quarter was more the M&A related antitrust.

And then could you comment on the seasonal December slowdown that you say is in your forecast, which segments feel this the most?

They all do, Tobey, they all do, because both stake location and client stake location. Last year, there was an exception. And I think if you look at the commentary from Steve, after our fourth quarter, we were exceptionally pleased that people were serving our clients when the demand was there and we had that higher revenue in Q4 than Q3, which almost never occurs. So that's not what you can model.

Let me just add to that. Essentially, people take vacations unless there is a crisis. There are exceptions to this, as it happens across all of our segments, except those impacted by a crisis. A crisis could be a bankruptcy, a deal, or some other significant issue. It’s during these times, particularly in December, that clients and we end up working over the holidays. However, most people do not lose out during this time, and on average, it doesn’t frequently happen; it occurs occasionally. Does that help, Tobey?

It does. Last question for me. Could you expand and provide some color on the change in compensation that you rolled out, how that kind of originated, how it's been received and any contours and dimensionalize the change for us?

So let me give the answer on the dimensionalizing first and then we'll work backwards. So the way to look at the EBITDA for the segment is average the first two quarters, that's a better way than looking at the first quarter separately and the second separately. Our first quarter was terrific on margins and EBITDA in FLC and we would like to get back to that, though it might take a couple of quarters to get there. So that's the first one on the EBITDA part. In terms of the compensation plan, essentially it's a more variable based compensation plan with if you hit a certain revenue threshold, you get a certain bonus. And also, if you do a certain type of work, you get a percentage of the revenue generated from that type of work. So it's a more variable piece. And this is similar to what we have in CF, Corporate Finance, for example, in certain geographies. This is not a new type of plan for us. Now there are also some reductions in fixed compensation that come with it that you see the impact of in subsequent quarters but it's smaller. So that's the overall plan and its contours.

The next question will come from James Yaro with Goldman Sachs.

Maybe just starting with the updated EPS guidance, I think when I try to run some of the back of the envelope math, it appears to factor in relatively little EBITDA margin expansions second half even after the billable headcount did come down in the second quarter. Maybe you could speak to whether we should anticipate margin pressure in the second half of this year and perhaps whether this is driven by the robust hiring of senior managing directors you talked about and whether this would be in SG&A or in direct costs.

Let me clarify. Hiring is a crucial element. We anticipate a minimal decline in the second quarter compared to the first quarter. We always expected hiring to ramp up in the third quarter, and that will happen. As Steve mentioned, we are in discussions with many potential candidates. However, I can't specify exactly when this will happen or its duration and impact, but it's part of our considerations regarding direct costs. Additionally, we hope many employees will reach the performance thresholds I mentioned earlier. Typically, bonuses increase as we approach the year's end, which also affects direct costs. Regarding SG&A, I believe we've reached the peak for the second quarter this year. There can be exceptional events, such as large gatherings, that may affect costs. Ultimately, revenue is always the key factor. Last year's Q4 is an example, but that's not how we model or project. Therefore, we do anticipate a slight margin contraction at the midpoint.

Maybe just an election adjacent question. If we do you see a change in administration, how would you expect this to affect two businesses specifically? Firstly, the M&A and non-M&A antitrust business, Econ Consulting and then the second request business in tech. And specifically, I think the assumption that I'm embedding in my question is that there might be a more permissive antitrust backdrop under a Republican administration?

As you might expect, these topics are frequently discussed in our firm, and my conclusion is that no one has a perfect foresight. Most people are unable to predict the outcomes of elections, and the actions taken after elections can also be unpredictable, making it difficult to foresee their impact on individual businesses. I believe we should continue these internal discussions while also focusing on building our business. When we concentrate on developing great talent, even if antitrust deal flow decreases, our skilled people can adapt and engage in other opportunities. Our history shows that we have navigated various administrations and global events over the past decade, often with different predictions. While some of these events, like Brexit, seemed significant, we’ve remained a strong growth engine when we focus on doing the right things. So, while there’s a lot of internal discussion, I feel nobody can accurately predict the future. If you have an answer, James, I’m open to it. Did I avoid your question, James?

No, as an analyst, I felt I needed to ask. I don't have a crystal ball either, but I appreciate your insights. Perhaps I can ask one more thing: it's great to see your cash levels increased by $23 million quarter-over-quarter, and it's clear you have lower interest expenses compared to last year. You've mentioned your goals for organic growth and your hiring plans. Could you share how you might consider using any excess capital if your cash continues to grow?

We expect cash to continue to rise. First, we will pay down the small revolver we have. Then, we will start investing in the right organic growth since we have more than enough capital for that. We have a strong desire for acquisitions, but we will pursue them only when the right opportunities arise. Over time, we have returned capital to shareholders, but we do this opportunistically.

Let me add that cash is a powerful engine of growth for this company, but it only serves that purpose effectively when used wisely. Historically, there have been periods when we did not utilize it properly, which did not create long-term value. Therefore, we take seriously the need to leverage our cash for the long-term interests of our shareholders and the company. Sometimes, this means that cash accumulates until the right opportunity arises, and we are not hesitant to act when that moment comes. This is a philosophy I have thoroughly discussed with the Board and our management team. We are committed to ensuring that cash is utilized effectively to advance the company, and we keep a close eye on it. However, we will not waste cash simply because it is available.

Absolutely. I appreciate both of your thoughts.

The next question will come from Andrew Nicholas with William Blair.

I'm going to ask the restructuring one, which is, I think, actually kind of encouraging. But in the whole, can you speak to kind of the bankruptcy market? I think it was flat for you guys this quarter, but it sounds like sequentially down because some larger projects running off. Has there been any change relative to last quarter or two in the market as a whole based on where you're sitting? And maybe a little bit more context for why you expect or baking in restructuring staying at Q2 levels through the rest of the year?

Firstly, I acknowledge that I've often been incorrect about this. Achieving reliability in these projections is quite challenging. However, we observe the trends and create projections with ranges. Currently, no rating agency is indicating that speculative debt default rates are expected to rise, which marks a significant shift. There is general agreement on this point. Additionally, we're noticing a greater focus on liability management rather than operational restructuring. In the past, there was substantial government-related debt in circulation, and this allowed for raising more unsecured debt through unrestricted subsidiaries. Thus, a lot of liability management is taking place, which primarily benefits investment banks rather than our full restructuring services. This outlines the current market situation. We've projected that second quarter levels will persist; however, this could change. We're managing several matters, though none are particularly large at this time. A significant matter could potentially alter our projections upward, but the most realistic midpoint assumption aligns with the second quarter levels.

And then on kind of hiring commentary, Steve, I think you made mention of the fact that usually, these hires, lateral hires don't hit the ground running immediately, which makes perfect sense. I'm just curious if you could remind us kind of what that productivity curve looks like? Is it a couple of orders? Like if you start hiring very aggressively or some of these announcements come through and people are live in July and August, is that 2025, meaning they're at their full run rate, or just any additional color there for how we should think about the lag?

Look, I think there's no science to this exactly, but the rule of thumb I've used now for several decades in professional services, senior hires losing money the first year, they break even the second year and they start making money in the third year. And sometimes you beat that, sometimes you don't beat that. It’s not a bad rule of thumb. And I use that internally to say, don't hire somebody you're not willing to invest in for a while because that's what we're doing. We're trying to build businesses. So the future hires follow that if they're on an island with those senior hires and are totally tied to those senior hires. And the junior hires are redeployable across things, the junior hires can be made accretive much quicker than that. Does that respond to your question?

Definitely, definitely. And then maybe if I could squeeze in one more. On economic consulting, obviously, really, really strong revenue growth in dollars this quarter. I understand that there's some catch-up on the revenue deferral from last quarter, but margins stepped up pretty meaningfully sequentially. And I'm just trying to kind of put that next to previous commentary about your expectation that margins would be down in this segment year-over-year. Does the strength of that kind of end market backdrop adjust that outlook at all? Is Q2 a likely outlier or any other kind of commentary around the economic consulting margins in the aggregate would be helpful?

No, it doesn't change my perspective on the margins. First, consider the first and second quarters. In the first quarter, we mentioned that things were slow, but the deferred revenues and related factors were present. The deferred revenue, along with the $8.5 million EBITDA, indicates revenue is around $9 million to $10 million, and most costs have already been incurred. This results in a very high margin EBITDA. Therefore, take into account the first two quarters and assess the margin in that context. Second, we still face competitive pressures, which we have discussed across our business, not just within Economic Consulting, and these pressures affect margins related to compensation. Lastly, in Economic Consulting, we operate as a major M&A antitrust firm, where large matters can fluctuate and there can be gaps in work. These are all the factors influencing our judgment.

Your next question is a follow-up from Tobey Sommer with Truist.

If you are able to achieve your hiring objectives in a year, 1.5 years, something that's far enough away to comment on, how rapidly would headcount be growing? And is it possible to increase EBITDA if you achieve that headcount growth?

Let me clarify. I believe the growth potential of this company remains strong and is on par with what we've achieved in the past. There is significant potential for this company over many years ahead. We haven't lowered our growth expectations or our plans for increasing headcount. This year, our billable headcount is only growing by 2%, which is below our aspirations. Additionally, I am not specifically focused on increasing EBITDA percentages. However, as we have expanded our headcount and maintained our EBITDA percentages alongside revenue growth, our EBITDA has increased significantly. I see that as a key objective. While I don't aim for specific quarterly targets, we have ambitious goals for substantial growth in this company. Consequently, we expect to see significant growth in both our top line and bottom line over time. Does that answer your question?

It does. It's just going from 1%, 2% headcount growth to some aspirational kind of longer term trend of mid to high single digits if those people are productive that can weigh on dollar growth? I'm not asking a margin question.

We don't anticipate that the new hires will be less productive than our current employees in the long run. There may be temporary challenges as we transition from a low growth phase to a higher growth phase, but over time, we expect things to stabilize, allowing us to grow revenue without reducing EBITDA percentages in the long term. A surge in hiring may have short-term effects, but we don't view this as a permanent decline in EBITDA percentage. I appreciate your continued attention and support. We're enthusiastic about this quarter and the first half of the year, as well as the overall trajectory of the business. We operate in two distinct markets: client markets and the talent market. Despite the temporary effects of adding talent, the fact that we are a sought-after destination for exceptional talent is a promising indicator for the company’s future. I hope this information is helpful, and thank you for your support.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.