Fti Consulting, Inc Q3 FY2024 Earnings Call

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

Good morning. Welcome to the FTI Consulting conference call to discuss the company's third 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, including scientific or technical developments, 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 September 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 fees 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 the reconciliations. Lastly, there are two items that have been posted to the Investor Relations section of our website for your reference. These include quarterly earnings expectations and an Excel and PDF of our historical financial and operating data, which have been updated to include our third quarter 2024 earnings results. Of note, during today's prepared remarks, management will not speak directly to the quarterly earnings presentation posted to the Investor Relations section of our website. To ensure our disclosures are consistent, these slides provide similar details as they have historically. 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 all for joining us once again this morning. I'm sure, as usual, many of you saw the earnings announcement this morning. So what I'd like to do is briefly comment on how I view those results and then with your permission, let Ajay take you through the performance in more detail. If you had time to look at the third quarter results, you saw that they were weaker than we've been reporting in most quarters recently. They were also weaker than we expected. Year-on-year revenue growth was only 3.7% this quarter, which is nothing like what we've been averaging over the last several years and nothing like what we aspire to. For the first time in a while, we actually delivered less revenue this quarter than in the prior quarter. As usual, when there are not terrific quarters or even when they're terrific quarters, there are multiple causes. In this quarter, some of the revenue pressure was due to market causes. I'm sure many of you monitor the markets for consulting firms, and you know that right now, in many places around the world, they are not particularly robust. For example, we have some challenges in our Asia businesses. But of course, we are not alone; it's happening to a number of players in the region. So some of these challenges are due to market forces. However, some of the causes, as usual, also come from internal issues, either delays in assignments, which for example, we had this quarter in our very capable North American FLC business, or some slowness in our strategy business where it happened that some large client engagements all concluded at roughly the same time. Addressing a potential question that perhaps some of you have in mind, I want to underscore that the shortfall in our performance this quarter was not the result of cost pressure from the investments we've been discussing all year. The shortfall is not really a bottom-line story. The real issue this quarter was revenue. We are still making those investments, and as you might expect, they probably will have some effect on the bottom line. But many of those investments have only just begun to come into play and are only starting to hit the P&L. Therefore, this quarter's shortfall should primarily be viewed as a revenue issue. Let me, however, pivot to talk a little more about the investments. Because notwithstanding their potential to create some headwinds in our business and our P&L going forward, they are an area of considerable continued excitement for me and I believe for the company as a whole. We announced roughly 25 SMD hires in the last six months compared to roughly half of that in the prior six months. And that is far from the number of SMDs who have accepted our offers—just the number of SMDs that we've been able to announce and aspire from the number of SMDs and MDs who are discussing with us with excitement about potentially joining. It is also important to note that we are not just looking to add talent at the most senior levels. Our company is not just an SMD and MD group; we need talent across all levels to deliver for our clients and for our growth. In that connection, I'm pleased to announce that in this quarter, we welcomed more than 320 professionals from campuses, which is once again our largest class ever. If you will permit me, let me try to zoom out from the quarter to some topics that I see as more fundamental. I've just talked about the fact that this quarter wasn't anywhere near what we typically hope for in terms of revenues, which is a result of those revenues regarding EPS. The more fundamental question is, what does that mean? What does it mean not just for the quarter, but what, if anything, does it mean about our long-term trajectory? Does it change the bullish view that we've had of the potential of this company? After any quarter, I think hard about those questions, and I talk to colleagues about them because that's the most fundamental question. My conclusion, after all of this thought, may not be surprising to those of you who have followed it for a while. This quarter, though weaker than we would have liked, is absolutely nothing about the fundamental long-term trajectory of this company. Just like sometimes an extraordinarily good quarter can occur, sometimes things go wrong. While this quarter disappointed our expectations, it's worthwhile to have a little perspective on that shortfall. It is still the third highest revenue quarter we've ever had, only eclipsed by the prior two quarters. So a little perspective is one reason I don't think it changes my view of the long-term trajectory. More fundamentally, the data now, at least convinces me, shows that quarterly results are not particularly good indicators of the core causal factors that actually determine medium- and long-term success in professional services. As we've discussed multiple times, I have never seen anyone build a great business in professional services with a straight line up. There are always zigs and zags, sometimes substantial zigs and zags in individual businesses, geographies, and sub-businesses. Sometimes those zigs and zags are driven by market factors or timing or ending of large jobs or other idiosyncratic factors that happened that quarter in professional services. These fluctuations, however, actually don’t mean much. What matters over time is the underlying trajectory. Are those fluctuations around a flat line? Are they around a downward sloping line, or what they should be? If you are building a great firm for your people and shareholders, those fluctuations should be around a fundamentally upward-sloping line. Perhaps the core question, which overshadows any short-term concerns, are we making a difference for our clients? Are we standing still? Or are we continuing to evolve our capabilities so we are becoming ever more relevant to our clients? And has that helped us attract and support driven professionals who care deeply to make an impact and build teams with similar values? I believe the data shows that if you commit to these activities over extended periods, you end up winning in both markets important in professional services: the markets for great clients and great talent. You become more capable, more relevant, and better equipped to help clients with their most significant challenges. Clients ultimately recognize this, aided by our marketing efforts and our senior managers, which allows us to win bigger jobs. Simultaneously, we are perceived as the best workplace for ambitious individuals who want to make a difference and develop into their best selves. Even if you do everything right, any business can still have a poor quarter. But if you maintain your relevance and create a great platform with the best professionals, you will still experience fluctuations—fluctuations around an overall upward-moving line. That has been not just a theory but our experience over the past 10 years. When I look at our business today, the powerful positions we have established not only in the United States but also in many markets overseas, along with the leading talent that has grown with us over the years, makes me increasingly confident about where this company can go. With that, let me turn the call over to you, Ajay.

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. As Steve said, our results this quarter, primarily revenue, were below our expectations. Revenue growth of 3.7% was not enough to offset the 4.9% increase in direct costs and a 10.7% increase in selling, general, and administrative (SG&A) expenses, which resulted in a 13.3% decline in adjusted EBITDA. FX remeasurement losses versus gains in the prior year quarter and a higher tax rate further dampened earnings. Year-over-year, our quarterly earnings per share declined by $0.49 or 20.9%. In our Economic Consulting and Technology segments, we continue to report year-over-year revenue growth, but revenues in our Corporate Finance and Restructuring and Strategic Communications segments declined year-over-year. Forensic and Litigation Consulting (FLC) revenues were up slightly year-over-year. Turning to our results in detail, revenues of $996 million increased $32.8 million compared to revenues of $893.3 million in the prior year quarter. Earnings per share of $1.85 in the third quarter of 2024 compared to $2.34 in the prior year quarter. Net income of $66.5 million compared to $83.3 million in the prior year quarter. SG&A expenses of $206 million were 22.2% of revenues, compared to SG&A expenses of $186.1 million or 20.8% of revenues in the third quarter of 2023. The increase in SG&A was primarily due to higher non-billable headcount and related compensation, as well as an increase in investments, including in AI capabilities, and expenses related to travel, entertainment, and legal. The adjusted EBITDA for the third quarter of 2024 was $102.9 million or 11.1% of revenues compared to $118.7 million or 13.3% of revenues in the prior year quarter. Our third-quarter effective tax rate of 25.1% compares to 22.6% in the third quarter of 2023, with the higher tax rate primarily related to unfavorable tax return adjustments compared to the prior year's income tax provision. For the full year, we continue to expect our effective tax rate to range between 20% and 22%. Weighted average shares outstanding (WASO) for the third quarter ended September 30, 2024, was 35.9 million shares compared to 35.7 million shares for the prior year quarter. Billable headcount increased by 181 professionals or 2.8% and non-billable headcount increased by 112 professionals or 7% compared to the prior year quarter, with the largest increases in Technology, Corporate Finance and Restructuring, and Economic Consulting. Sequentially, billable headcount increased by 325 professionals or 5.1%, which included 322 new hires from university campuses, our largest class ever. Non-billable headcount increased by 20 professionals or 1.2%. Now, I will share some insights at the segment level. Corporate Finance & Restructuring revenues of $341.5 million decreased by 1.7% compared to the prior year quarter. The decrease in revenues was mainly due to lower demand for our business transformation and strategy services, which more than offset an increase in demand for our transaction services. Restructuring revenues were flat year-over-year. Adjusted segment EBITDA of $57.9 million or 17% of segment revenues compared to $68.1 million or 19.6% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower revenues and higher SG&A expenses, mainly due to an increase in bad debt. In the third quarter, restructuring represented 47% of segment revenues, business transformation and strategy represented 28%, and transactions represented 25% of segment revenues, compared to 46% for restructuring, 33% for business transformation and strategy, and 22% for transactions in Q3 of '23. Sequentially, Corporate Finance & Restructuring revenues decreased by $6.5 million or 1.9%, as 8% growth in restructuring was more than offset by a 13% decline in business transformation and strategy revenues and a 4% decline in transactions revenues. As Steve mentioned, our business transformation and strategy business had certain large jobs conclude and billings were significantly lower than last year. Adjusted segment EBITDA decreased by $8.5 million or 12.9% sequentially, primarily due to lower revenues and higher SG&A expenses. Turning to Forensic & Litigation Consulting (FLC), revenues of $168.8 million increased by 1.6% compared to the prior year quarter. Acquisition-related revenues contributed $1.9 million in the quarter. Excluding acquisition-related revenues, the increase in revenues was primarily due to higher construction solutions and dispute revenues, which were partially offset by a decrease in data analytics and investigations revenues. Adjusted segment EBITDA of $20 million or 11.8% of segment revenues compared to $21.5 million or 12.9% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was mainly due to higher compensation and SG&A expenses. Sequentially, revenues were flat. Adjusted segment EBITDA increased by $5 million, primarily due to lower compensation, which was driven largely by a true-up in the second quarter from a change in compensation plans, partially offset by increased SG&A expenses. Our Economic Consulting segment's revenues of $222 million increased by 14.5% compared to the prior year quarter. The increase in revenues was mainly due to higher demand for M&A-related antitrust services, partially offset by lower demand for non-M&A related antitrust services. Adjusted segment EBITDA of $35.2 million or 15.9% of segment revenues compared to $27.8 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 were partially offset by an increase in compensation that included the impact of a 3.2% increase in billable headcount. Part of the revenue increase this quarter was due to recognizing $8.1 million in revenues that were previously deferred, as client acceptance conditions for revenue recognition were met, which boosted adjusted segment EBITDA by approximately $7 million in the third quarter. Sequentially, revenues decreased by $8.8 million or 3.8% primarily due to lower financial economics revenues, which were partially offset by higher M&A-related antitrust revenues. Adjusted segment EBITDA decreased by $9.1 million primarily due to lower revenues. In Technology, revenues of $110.4 million increased by 11.7% compared to the prior year quarter. The increase in revenues was mainly due to higher demand for M&A-related second request litigation and information governance services, which were partially offset by lower demand for investigation services. Adjusted segment EBITDA of $16.5 million or 14.9% of segment revenues compared to $14.9 million or 15% of segment revenues in the prior year quarter. The increase in adjusted segment EBITDA was primarily due to higher revenues, which were partially offset by an increase in compensation, including the impact of a 14.1% increase in billable headcount. Sequentially, revenues decreased by $5.5 million or 4.7%, mainly due to lower demand for M&A-related second request and investigation services, which was partially offset by higher demand for litigation and information governance services. Adjusted segment EBITDA decreased by $4.5 million sequentially, primarily due to lower revenues. Revenues in the Strategic Communications segment of $83.3 million decreased by 4.1% compared to the prior year quarter. Excluding the estimated positive impact from FX, revenues decreased by $4.4 million or 5.1%. The decrease in revenues was mainly due to a decline in pass-through revenues and lower corporate reputation revenues, which were partially offset by higher public affairs revenues. Adjusted segment EBITDA of $12.1 million or 14.6% of segment revenues compared to $13.5 million or 15.5% of segment revenues in the prior year quarter. The decrease in adjusted segment EBITDA was primarily due to lower revenues and higher SG&A expenses compared to the prior year quarter. Sequentially, revenues in Strategic Communications decreased by $1.6 million or 1.9%, mainly due to a decrease in pass-through revenues and lower financial communications revenues. Adjusted segment EBITDA increased by $0.5 million, primarily due to lower direct compensation and SG&A expenses, which more than offset the decrease in revenues. Let me now discuss key cash flow and balance sheet items. The net cash provided by operating activities for the quarter was $219.4 million compared to $106.7 million for the prior year quarter. The year-over-year increase in net cash provided by operating activities was primarily due to an increase in cash collections. Days sales outstanding (DSO) was 108 days at the end of September 2024 compared to 114 days at the end of September 2023. Free cash flow was $212.3 million in the quarter. Total debt, net of cash and short-term investments, was negative $386.3 million at September 30, 2024, compared to positive $59.4 million at September 30, 2023, and negative $166.4 million at June 30, 2024. The sequential decrease in total debt, net of cash and short-term investments, was mainly due to an increase in net cash provided by operating activities. There were no share repurchases during the quarter. As of September 30, 2024, approximately $460.7 million remained available for common stock repurchases under the company's stock repurchase program. Turning to our guidance, we are updating our guidance for revenues and EPS as follows: we estimate revenues will range between $3.7 billion and $3.75 billion, compared to our previous revenue guidance range of $3.7 billion to $3.79 billion. We estimate EPS will range between $7.90 and $8.35, compared to our previous EPS guidance range of $8.10 to $8.60. Our guidance is shaped by several key considerations. First, our revenue and EPS guidance is provided within the range. At times, we find actual results are outside even such a range because ours is a fixed cost business in the short term, where significant new matters stopping or ending can cause short-term swings in revenue that have a disproportionate impact on earnings per share. Second, we expect the slower revenue momentum going into the fourth quarter may persist. Third, though restructuring activity remains robust, we have had weakening results in our business transformation and strategy practices. Additionally, economic consulting, which has been very strong for the entire year, has a large matter that is slowing down. Fourth, the fourth quarter is typically a weaker quarter for us because of a seasonal business slowdown as professionals may take time off during the holidays. I want to recognize that last year was an exception in this regard as many of our practitioners were busier than typical during the fourth quarter. Fifth, as Steve has said, we have the appetite to continue making investments. Although our headcount growth this year has not yet been significant, we have welcomed top-notch senior professionals, and we expect to build teams around them. We continue to have many additional conversations, but we cannot say with certainty when such investments will be made and how much impact they may have this calendar year. Lastly, you may have noticed that our updated guidance at the midpoint essentially brings us close to where we were when we first set guidance for this year, with a narrower range as we have only one quarter left. Before I close, though I obviously want to acknowledge that this quarter was not the quarter we aspired to, I want to reiterate four key themes that I believe continue to underscore the strength of our company. First, we are an expert-driven firm, and we are confident that the deep expertise of our professionals is what sets us apart and allows us to help our clients navigate more complex situations. Second, we have a set of businesses that is uniquely diverse, allowing us to grow regardless of business cycles. Third, we have a growth mindset, focused on both retaining and attracting top talent, as evidenced by key senior hires announced this year in areas such as business transformation and strategy, transactions, cybersecurity, forensic accounting and advisory, and construction solutions. Fourth, our balance sheet remains exceptionally strong. We have the ability to enhance shareholder value through share buybacks, organic growth, and acquisitions when we see the right opportunities. With that, let's open the call for questions.

Thank you. Our first question comes from Andrew Nicholas with William Blair. Please go ahead.

Hi, good morning. I was hoping you could start by talking a little bit more about restructuring, I guess, after a decent sequential step down last quarter, looks like it bounced back a little bit. Can you talk a little bit about that business, that environment? How much of maybe credit pressures are getting to you in the form of bankruptcy or restructuring and just overall outlook on that part of the business?

So, Andrew, restructuring remains strong. The restaurant chain that has customers not going there because of changing post-COVID patterns has to file if they get to that situation. Or the airline facing inflationary cost pressures and competitive pressures may have no other choice. Even in the last quarter, I mentioned liability management; we have a couple of instances where those liability management companies have now filed. So restructuring remains strong. Obviously, if interest rates fall by 200 basis points and credit becomes more available, that could dampen demand. But for now, it's robust.

Okay. Thank you. And then on the M&A front, it sounds like at least year-over-year, things have improved. You see that in M&A-related antitrust, you see it in transactions, although sequentially a little bit weaker. Can you just speak to that environment as well? Maybe if there is any distinctions in terms of M&A appetite by firm size, all that color would be helpful.

Again, the availability of credit is spurring transactions. You got it just right. Roughly speaking, M&A has accounted for about 15% of our revenues, driven from technology, economic consulting, and corporate finance. This year, it's been 15% and 20%, and there was a 1% slippage this quarter versus the sequential quarter—not much. So it is a robust environment and we're doing quite well. We have distinctly strong positions in a variety of our segments to assist our clients.

All right. Thank you. And then if I could just squeeze one more in. You mentioned part of the increase in SG&A was an increase in investments and you noted AI capabilities within that. Can you elaborate on some of those investments or what you can say on how you're planning to leverage that technology within your various businesses going forward?

Would you like me to answer that, Ajay? Okay. Look, we are like everyone else regarding AI. I think Bill Gates famously said that pundits who confidently predict the first few years of a fundamental new technology always get it wrong and tend to overestimate the speed of progress. But for fundamental new technologies, on the other hand, people typically underestimate the dramatic effects they will have over time. We are doing many things to ensure we stay at the forefront and are not caught off guard. This relates to developments we've made for a while now. Our tech and data analytics business has been at the forefront of machine learning, extending into that. We’ve been working on internal tools to help our company navigate, but also engaging with clients to determine what early-stage projects they're implementing, identifying how we can assist them, and recognizing the associated risks. We have invested a lot of internal resources and some funds to build tools and so forth, as well as time training our broader teams. What we aim for over time is to have 750 SMDs and a number of MDs who can engage in conversations with our clients on what's happening and the risks involved. I consider that an investment because yes, we've seen some revenue from it. However, much of what we've done has not been driven with a P&L in mind but has focused on building the capability of our organization. Does this start to address your question, Andrew?

It does. Thank you. I will get back in the queue.

And our next question today comes from Tobey Sommer at Truist. Please go ahead.

Hi, it's Tyler Barish on for Toby. Just excluding the outcome of the election, could you talk about some of the headwinds and tailwinds that the business will face in 2025? Thank you.

Tyler, I have steadfastly refused to predict an election or its effects on our business. Many people in our company can do that, especially in our Strategic Communications segment. Most pundits out there seem to be incapable of predicting even the outcome of this election, let alone its consequences. I will say that things like elections and geopolitical events can influence our business. However, we’ve followed a pattern since I've been here of not reacting to immediate events, but rather focusing on the needs that will arise as a result of these events. Therefore, I believe you cannot predict any effects from these forces but can ensure we are ready to address the needs they create. I hope that helps somewhat.

Got it. And then just looking forward, how should we think about uses of cash going forward? Can you talk about your willingness to buy back stock even with the stock at a higher multiple historically?

While we typically do not comment on our specific cash intentions in the next quarter or two, we are mindful that good versus poor cash usage is key to creating shareholder value. We've focused on this since Ajay and I took our roles. We’ve never felt pressured to use cash in any given quarter, and we have aimed to identify leverage points to advance the business and reward long-term shareholders. Sometimes we’ve utilized cash to buy back expensive debt, while at other times we’ve made acquisitions when the right opportunities arise. We haven’t executed many acquisitions, but we’ve used cash where we found suitable opportunities. Occasionally, we’ve responded to significant drops in the stock market that negatively affected our share prices, evidenced by buying back around 10% of our company during significant declines in mid-2017 and the end of 2020. In such moments, significant buybacks yield tremendous returns for loyal shareholders. Consequently, we carefully assess cash usage without the compulsion to do so in any given quarter, yet we engage in discussions with the Board about ways to enhance shareholder profitability. Anything to add, Ajay?

No.

And then just one final question. Can you discuss areas where you see potential for margin expansion moving forward?

I believe much of it relates to simply increasing revenue. We operate a fixed-cost business, and thus fluctuations can significantly impact margins. Unlike other professional services firms with highly variable compensation models, our structure—especially inherited from the big four—tends towards a fixed cost system, even affecting SMDs. If you believe in the business and its personnel, you can manage costs despite declines, but if you see the potential for growth, then generating revenue is essential. We could cease investments in new geographies and AI-focused areas, but doing so would inhibit our growth potential and result in stagnation. It means tightening hiring in unpromising segments while sustaining investment in growth areas or where strong talent can be acquired. For such businesses, success hinges on revenue generation. We don't aim for 3.7% revenue growth; we aspire for significantly more. Does that clarify?

Yes. Thank you.

And our next question comes from James Yaro with Goldman Sachs. Please go ahead.

Good morning, and thanks for taking my questions. Steve, you have your growth strategy, and I have no doubt it will continue. But as you mentioned, could you outline the drivers behind the consulting industry’s weaker backdrop, which seems less favorable than global economic growth? What do you believe could lead to improvement in this landscape? Furthermore, is your business more or less impacted by these industry trends?

The second part of your question is easier. Overall, I think we are somewhat less impacted by these industry trends for a couple of reasons. First, some of our businesses are not correlated with others; for example, restructuring doesn’t specifically correlate. Furthermore, in recent years, we have seen gains in market share in many of our segments. If you are gaining share, you are less affected by competitors losing share, right? As for why major firms like the big four are experiencing slowdowns, you've seen in their earnings reports, and I haven't found an entirely satisfactory answer to the question. However, I suspect some could relate to over-exuberance and deal-making in the last few years, with the sustainable growth rate below what we initially perceived. This lift could be a catch-up or catch-down situation. Factors may include global economic conditions, as Europe is not exactly showing robust growth, or geopolitical conditions affecting spending. There’s typically a pause in spending triggered by uncertainty, recalling how both good news and bad can activate spending pauses. But I find myself collating various plausible answers, and I don’t have a definitive response. If you have insights, I welcome them.

No, I think it is really interesting, Steve, because I'm not sure I have the answer either. But that's very helpful color. Maybe just one last question. I think you've received several inquiries from investors regarding the potential for a soft spot in revenue and earnings growth as you transition from lower hiring in the back half of last year and the first half of this year to stronger hiring reflected in this quarter's results. Is that the case? Importantly, over what time period do you forecast a return to healthier top-line growth rates that we have seen in the past?

Yes, James. We won't provide guidance for next year just yet. You'll have to wait until February for that. However, we have never aspired for just 3.6% revenue growth. I will leave that there in terms of when we will want to return to that higher growth rate. Let me add that the hiring this quarter primarily comprised university hires we committed to a year prior, so don't interpret it as accelerating hiring. Regarding hiring for other professionals, we will hire exceptional talent based on merits, regardless of our business cycle or sub-practice statuses.

Excellent. That's very clear, Ajay. Thank you. Just one last question regarding hiring; hiring has fluctuated slightly in recent quarters. Given that the company is now considerably larger than a few years ago, can you share what you see as a normalized or longer-term hiring growth rate? I think that might help us understand the company's long-term growth trajectory.

Yes. I've never provided a specific target on that, but I did mention in our Investor Day in 2017 that by combining mid- to high-single-digit organic growth and effective cash management, we can generate top quartile returns compared to the S&P 500 over time, and I've seen this be true ever since. We have averaged nearly double-digit organic growth during that period, which aligns with my aspirations, though we would like to hit lows of 5% or 6%. If you can achieve that, you'll have the opportunity to invest in initiatives that foster internal development. It's challenging to sustain vibrancy at only 3.7% growth for long periods. While we may not consistently meet upward growth expectations, we've typically maintained rates closer to 10% or 12% over the past few years, and we aim to revert to the higher growth spectrum sustainably. It's feasible to experience poor growth results over time, but doing the right things can lead to better outcomes beyond two years when assessing quarter performance. I hope that provides some historical context.

Absolutely. Thank you so much, Steve.

Thank you. And we have no further questions at this time.

Let me just say thank you again for your attention. Look, 3.7% growth, as we've said multiple times, is not our aspiration. However, I recently learned from Mollie’s team that since Ajay has been CFO and I've been CEO, we've had 17 down quarters, averaging almost two a year. During that time, our actual results have quadrupled. Our business isn't fundamentally about maintaining straight-line growth each quarter; it revolves around building a business that returns value to shareholders while ensuring that we foster a vibrant growth engine with talented individuals who want to be part of our organization. We are committed to this, focusing on creating substantial, lasting value. Thank you for your time.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.