FTI Consulting Inc (FCN) 2006 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the FTI Consulting first quarter results conference call.

Following opening remarks from FTI's management, there will be a brief question-and-answer session.

[OPERATOR INSTRUCTIONS]

I would now like to turn the call over to Jessica Liddell with Abernathy MacGregor Group.

Please go ahead, Ms. Liddell.

Good morning, and thank you for joining us to discuss FTI 's first quarter results.

By now, you should have received a copy of the earnings press release, which was issued yesterday.

Before we begin, I'd like to remind everyone that this conference call may include forward-looking statements that involve uncertainties and risks. There can be no assurance that actual results will not differ from the Company's expectations. The Company has experienced fluctuating revenues, operating income, and cash flows in some prior periods, and expects that this may occur from time-to-time in the future. As a result of these props, the possible fluctuations, the Company's actual results may differ from our projections, further, preliminary results and projections to normal year-end adjustments. Other factors that could cause these differences could include take and timing of additional acquisitions, the Company's ability to realize cost-savings and efficiencies, competitive and general economic conditions, retention of staff and clients, and other risks described in the Company's filings with the Securities and Exchange Commission.

I would like to turn the call over to Jack Dunn, President and CEO of FTI.

Thank you very much.

I'd like to wish everyone a good morning, and thank you for joining us this morning as we discuss our financial results for the first quarter of 2006.

Joining me on the call are Dennis Shaughnessy, Chairman of FTI, Ted Pincus, Executive Vice-President and Chief Financial Officer, and Don DiNapoli, Executive Vice-President and Chief Operating Officer.

Before we get into the details of the quarter, I would like to address FASB statement 123(R), which requires us to expense share-based compensation payments, beginning with the first quarter of 2006. As a result of this implementation, first quarter results of $0.31 per share, were after a reduction of $0.06 per share of stock-based compensation. This combination of 31 plus $0.06, combines for a 27% increase over last year's pre-stock-based compensation of $0.29.

On an apples-to-apples basis, after stock-based compensation, earnings per diluted share in the first quarter of 2006, were $0.31, compared to 25% on a pro forma basis for the first quarter of 2005, a 24% increase. With regards to the stock-based compensation, we would expect the first quarter to bear probably the heaviest burden of that expense this year because of the impact of our stock -- employee stock purchase plan, which allows the non-executive employees of the Company to participate in their company's stock. This is is a program of which we are very proud, and its impact was about $0.02 to $0.03 of the stock-based compensation in the first quarter and will not be the same during the rest of the year.

With regards to our margin, I would also like to point out that they were impacted by about $800,000 or so of 401K and social security payments, which, because of the amount of the salaries that our professionals pay, again, create an undue expense in the first quarter, which will be ameliorated over the rest of the year. We spent about $2 million in our expansion efforts in Europe, and we spent about $1 million or so on our program to resign our senior executives. We think that's probably the best investment we have ever made. We had a targeted 30 people. We are proceeding on an orderly basis, and at this point, we have commitments from more than half of those people to resign with FTI as we move forward into a very bright future.

That said, the first quarter of 2006 was a very powerful one for FTI . We enjoyed record starts to the year as we continued to build upon the strong momentum of 2005. Growth was exceptional across all of our business segments as we continued to capitalize on the demand for our services through increasing market recognition of FTI as the leader with first-to-last mile execution capability. We have continued to prove we are in the right markets with the right people, solving the complex problems facing businesses today.

In the quarter, like our competition, we saw the shift toward firms like ours continue to increase as the emphasis on government and integrity in corporate America remains strong, and therefore, the desire to eliminate any perceived conflict of interest remains very, very high.

Our technology business posted strong results in the first quarter as a separate business segment as the marriage of content, investigation, and technology services continues to cement its position as a powerful tool in today's corporate and regulatory environment.

In short, the foundation we established last year paved the way for this quarter and strengthened, terrifically, our optimism in our ability to become a highly profitable international billion-dollar company by 2009.

Happily, we experienced growth across all of our segments in the first quarter. Revenues for the quarter increased 45.2% to record levels of $169.3 million, compared with $116.6 million for the first quarter of 2005. Forensic and litigation and the technology practices had exceptionally strong performance in the quarter related to continued government regulatory law enforcement and institutional shareholder activism, and the growing adoption of technology is a critical investigation and litigation tool.

Merger and acquisition activity, litigation, and, increasingly, strategic counseling in the energy sector continue to drive revenues in our [inaudible] consulting segment. In corporate finance restructuring, a solid core performance continuing from the fourth quarter, and really, the second-half of last year, was enhanced by the addition of our healthcare practice this year, as well as the results of cross-selling.

The first quarter marked the first full quarter of reporting technology as a separate business segment. Technology has always provided us with a great deal of stickiness with our clients, and we continue to be a leader in the data-hosting and data-mining industry. Under Barry Kaufmann's leadership, we believe there is tremendous opportunity for this segment, and we are exceptionally well-positioned to build on our market share. To put it into numbers for you, the electronic evidence documentation market is estimated to be at least $1.3 billion marketplace. FTI 's current run-rate of over 100 million, up from only half of that a year ago, shows just how dynamic the growth potential for us in this technology business is.

We continue to focus on expanding our global reach and entering into new service offerings outside of our traditional markets. During the quarter, as I mentioned, we spent approximately $2 million on Europe to increase our presence, and anticipating expanding into the Pacific-rim and into South America in the near future. Our goal, as you know, is to have $150 million of revenues generated from outside of the U.S. by 2009.

During the quarter, we added approximately 80 revenue-generating professionals as we continue to build our ranks, based on what we see as the prospects for our market. We continue to make investments in the business and our technology to maintain and, also, and to attract the highest caliber professionals. We pride ourselves on our people, employing the best PHDs, MBAs, and CPAs in the largest cadre of former-FCC people in the business.

Now, let me talk a bit about some of the dynamics effecting each of our markets and how we are positioned to capitalize on the growing activity in each one.

In forensic and litigation, the driving force of tighter standards and reporting procedures and increased investigation activity continued to place our services in strong demand. A recent survey has shown that in the last year, the size of settlements in securities litigation is up over 156%, almost 55% of such litigation was based on the weaknesses, or perceived weaknesses, in internal controls. So, the people who think the effect of Sarbanes-Oxley is waning, I think, have really missed the boat as that market will continue to be driven by the plaintiff's lawyers and, increasingly, by an active institutional shareholder base who, when companies that have problems, want their money back.

Revenues for the business segment increased to 31.8% to 50 million in the first quarter from 38 million last year. Segment EBITDA was 13 million, a 26% of revenues, an increase of 16% from 11.2 million in the prior year, or 29% of revenue. Prior year revenues have been adjusted to exclude the new technology consulting segment.

Technology consulting and the use of technology as a critical litigation and investigation tool, continues to really revolutionize the market place. Our ability to marry technology and content investigation is exceptional and is evidenced by the continued strong growth in this business, both here and abroad. Technology will play an increasingly important role in the overall growth of our business as we move forward.

Revenues in technology increased 130% to 27 million in the first quarter, from 11.7 million in the same period of the prior year. Segment EBITDA was 11 million, 40% of revenues, and an increase of 189% from 3.8 million, or 32% of revenues, in the prior year.

Economic consulting, in the first quarter, revenues grew 50%, including the previously announced acquisition of Competition Policy Associates, or what we call Compass, to 38 million from 25.4 million in the first quarter of 2005.

Segment EBITDA was 8.7 million, or 22.9% of revenues, an increase of 50% from 5.8 million last year.

In 2006, we increasingly -- we saw increased activity in consulting and litigation activity related to energy and increasingly, also, on the intellectual property areas sectors, as an active regulatory environment in the U.S. and Europe will continue to drive growth in the business. Right now, there is a brewing healthcare crisis in the UK, due to radical new funding mechanisms proposed for public healthcare. A collaborative team of FTI economists and folks from Cambio are now on the scene to assess the opportunities, but this has the same potential impact as did changes in Medicare and Medicaid reimbursements in our own system several years ago.

We are very pleased with the way this business is progressing. We've contributed only about 5% to our overall revenues in 2002, is now a solid over-20% contributor to our annual revenues.

We closed the Compass acquisition in the first quarter, which re-enforced our leading position in intellectual content, and as we are proud of saying, we have three of the top-five antitrust economists in the world with our company. That's a team that you want on your side.

In corporate finance restructuring, we are, again, pleased with our performance this quarter. Revenues were 54 million, compared with 41 million last year, or an increase of 30%. Segment adjusted-EBITDA was 14.3 million, or about 26% of revenues, an increase of 6% from 13.4 million last year.

The core restructuring market continues to hold its own. The depth of our services in intellectual capital is unmatched, and our expertise in certain industry sectors, particularly, healthcare, energy, and automotive, distinguishes us from our peers. While we are conservative in our market projections for the year, we expect that our unique national platform and great reputation will allow us to capitalize to the fullest extent on any upturn in that industry. In closing, I would like to update you on our look for 2006.

Based on results for the first quarter and market conditions, we are re-affirming our previously provided outlook for 2006, adjusted for an estimate of the impact of share-based compensation. Revenues are anticipated to range from 616 million to 640 million. Earnings per diluted share are expected to range from $1.24 to $1.33, including the impact of expensing stock options in accordance with FASB 123(R). We anticipate pre-tax share-based compensation of approximately 12 to $13 million, or approximately $0.21 to $0.22, or 14% per diluted share. However, this cannot be predicted with certainty given it will depend on a variety of factors, including higher performance evaluation of retention programs and potential acquisitions.

Average bill rates per hour, in 2006, are expected to range from $342 to $344, and utilization is anticipated to range from approximately 79% to 80%, while revenue-generating headcount at the end of 2006 is anticipated to range from 1,127 to 1,155.

Overall, we are very excited by our performance in this quarter. We believe it presents an opportunity for us to capitalize on future growth opportunities, to continue to attract and retain the best people in the business, and to grow our business to a billion-dollar international business with 25% EBITDA margins by 2009.

As we look ahead to the remainder of 2006, we are excited about prospects and enthusiastic about the opportunities that lie before us.

With that, I would like to open it up to questions.

Thank you, sir.

Ladies and gentlemen, at this time, we'll begin the question-and-answer session.

[OPERATOR INSTRUCTIONS]

Our first question is from Tobey Sommer.

Please state your company name, followed by your question.

Good morning. This is Mike Fitz with SunTrust Robinson, calling in for Tobey.

Good morning.

Good morning.

A couple questions -- first, on the cash flow, it looks like you guys went through a decent amount. Can you walk us through maybe any kind of pattern you are expecting to see in your cash flows for the balance of the year to get to your guidance?

Sure.

This was actually a normal first quarter in which we were a user of cash. We tend to pay all of both bonuses and taxes, and it's also the first quarter of the year in which, after having really worked with our clients at year-end to reduce our DSOs substantially, we do relieve a little of that pressure, traditionally, in the first quarter of the year, and those are normal factors. We anticipate, as customary, that the last three quarters of the year generate all of our cash and are re-affirming our guidance for our overall cash flow for the year as provided in our press releases -- roughly 80 to $90 billion or thereabouts, in cashflow.

In summary, perfectly normal occurrence -- we expect DSOs to come back down for the remainder of the year as bonus accruals continue to increase and generating cash flow for us.

So, you are expecting to get it back at level increments, not--?

As we have for the last seven years--.

Okay. And then, another question on the hiring that went on in the quarter. Can you give us a sense of what level those hires were? I know a couple of quarters back. you had mentioned that you were focusing on some senior level folks. Are you filling in still below the ranks, or what was the competition there?

Yes, I think the object was, as we stated back then, and you're good to remember that, that we believe in hiring the senior people first and then, filling out the dance card when we have the work to do, and clearly, we are in an environment now where we have plenty of work on the table. So, the game plan of being able to get the senior professionals first, and then, being able to attract the young people that in the middle of a ten-year folks that want to work with them, it's really starting to pay off. So, that's where you saw the bulk of the hiring in the first quarter.

One last question, and I'll hop back into queue.

Just looking on an adjusted per option expense basis, looks like your EBITDA margins were down slightly year-over-year. Is that a function of the hiring, considering utilization was up? Is it a mixed shift there, or what's happening?

It was a function of the investment that we made in Europe. It was a function of the fact that we spent the money on designing and implementing with lawyers and consultants, our retention plan for our senior executives. So, those were the major impacts, and the 401K and social security expenses are lumpy in the first quarter.

Okay.

Thank you very much.

Thank you.

Our next question is from Arnie Ursaner.

Please state your company name, followed by your question.

Hi. This is Arnie Ursaner, CJS Securities. The first question I have is tax rate in Q1 was relatively high. Could you give us your view of tax rates for the balance of the year?

Yes, Arnie, if we eliminated the effects of stock option expense for a moment, our actual tax rate has increased a 0.5 point from the 42% for last year, to roughly 42.5% this year.

The tax rate reflected in the financials, of course, will be the GAAP tax rate in which you have to take into account stock options and recognizing, for example, that our employees stock purchase plan does not give us a tax deductions, where you do get an eventual tax deduction for options when they are exercised, assuming that they are not calls.

So, you can expect to see this level of tax rate on an after-tax option, after share-based compensation expense, Arnie, and before the actual rate has increased -- approximately 50 basis points.

You mentioned in the prepared remarks that you hope to have 150 million of revenue outside the U.S. by 2009. What is your current run-rate, and can you get to the 150-goal without some acquisitions?

We believe we can -- the run-rate -- the rate last year was about $40 million plus or minus, and that was work, for the most part, since we have such a small cadre of folks overseas, where people were parachuted in to do the jobs. Our goal is for -- to have $150 million of revenue actually generated outside the United States by that time.

We believe that we will be able to do that, but we will do acquisitions to do that. So, we have ringtail, certainly, as out the U.S., where we have operations in Australia. We have install-base in Europe and UK and in Australia. So, we would look to acquire, as we said, the areas we are looking heavily now would be in the Pacific-rim and in South America in the investigation business, because we believe that gets us into cases earlier and paves the way for us to bring the rest of our services.

Two more number questions, if I can -- your technology consultant, you'd never broken out before as a separate entity, was roughly 16% of current quarter revenue. Is that a good number to use on a go-forward basis as a percent of total revenue?

Well, Arnie, at this point in time, all we can say is that we re-affirm the guidance, and our guidance, admittedly, for our technology practice is rather conservative we suspect, but until we do our normal, halfway through the year, bottoms-up re-forecasting, you'd have to stick with the proportions that are in the guidelines.

My final question, if I can is your operating margin in both forensic and litigation, as well as corporate financial work, materially lower than the year-ago number, and yet, in your guidance, you have dramatically higher numbers for full-year expectation. Can you walk us through the steps of how we can improve margins through the balance of the year in those two segments?

Only two things will happen -- number one, some of the stock option expenses were left within the segment themselves because our senior people in some of the segments have -- have options, so you are seeing the effects of that; and number two, the things that Jack talked about and Dennis talked about that effect the first -- impact the first quarter in particular, also reflect -- are reflected in the margins of the segments. Obviously, the 401K matches and the social security costs in particular, and the UK, of course, that investment is reflected almost entirely at this point in the focused [inaudible] infrastructuring segment.

Yes, we would expect to see, as with most our businesses, that within six months, we would start to see a significant dividend on that.

Thank you.

Thank you.

Thank you.

Our next question is from Lionel Jolivot.

Please state your company name, followed by your question.

Yes, I'm from Goldman Sachs.

Good morning, first of all.

And then, just a quick question on the forensic and litigation mediation, you were at 84% in the first quarter, which was meaningfully higher than what I expected, but your guidance for the full-year is only 76% to 77%. Are you just being overly conservative given the [inaudible] bullish outlook for forensic obviously, and litigation, or is there a change in the business at this point?

Not to be facetious, but we were overly busy.

We had -- what we would look at is in the normal course of that business, becomes solidified and the brand takes hold, we would expect to follow the normal course of operation where there would be a normal state of hiring after the summer period, where you have people bring-on, and you would factor them in. So, we would see the plateau rising, and we would expect that there would be a little bit of down-time, through seasonality, as we always experience. So, at this point, we have not changed our guidance in that regard, but we are actively out recruiting.

This is Dennis Shaughnessy.

This is also the one thing of our business that is the lumpiest and the most difficult to predict. It tends -- we tend to be picked often to go into very serious, large, but short-term oriented projects, to where you have to man them with a lot of people. It's a high billing rate, high utilization, and all of that is very good. The problem is when you try to annualize off of quarters where you might have had some large engagements, you can assume you'll get more large engagements going forward, but it gets difficult to predict off that number.

So, I think we tend to be more cautious on this one than the other segments because the engagements tend to be a little shorter, and therefore, have to be replaced, and while we can look at our pipeline, and take some confidence that we feel good over the overall number, it's difficult to simply extrapolate off of one successful quarter and say that's a run-rate.

Okay.

It seems to me that you will be recruiting a lot in this segment, and it seems that your competitors will be recruiting a lot as well. Do you have any problems, at this point, to get the right professional in the door, or are you still able to get the people that you are going after?

Well, 80 people is pretty good, so I think we are -- it is a robust market out there, which is a good thing. We are -- we haven't changed our standards. Every person that's come in here, we're proud of and believe has the opportunity to be an SMD or an partner-level person. So, we haven't had to sacrifice. It's a good old-fashioned competition, and the good news is that's because there is a lot of work out there to do. So, I think -- we've doubled our efforts, and we haven't had a problem yet.

Okay.

And looking -- going back to your cash flow statement, it seems that your recruit compensation pretty dramatically during the quarter, and clearly, more than last year. I guess it's just the timing of the bonus payments, but is it just because you paid more in bonuses this year than last year? Is that why there's such a difference?

That's right. That's right. We will a very good year in 2005 compared to 2004, and much of the cash flow related to those bonuses is paid in early-2006.

Okay.

And last thing -- you talked earlier a bit about the expansion internationally, and I'm interested in Europe, particularly, the $2 million that you spent this quarter -- it's just to bring some new professionals in the business, or -- how do you see the growth in Europe at this point?

We did a couple of things there -- we expanded our office space; the bulk of it though, was in professionals, and also, we are seeing an increasingly -- an increasing opportunity for electronic and the technology business there, so we will be making some investment in technology there as well in near future, which I think will be very exciting development for our company.

Okay.

Thank you very much.

Thank you.

Your next question Brett Manderfeld.

Please state your company name, followed by your question.

Hi. It's Piper Jaffray, and congratulations on a really nice quarter, guys.

Just following-up on the European questions I guess -- can you talk about maybe where you are at in terms of professionals, and how quickly you plan on ramping-up the professionals there?

And then, you mentioned the technology in Europe -- makes a lot of sense that you would want to replicate what you've done in U.S., but in the U.S., can you talk about where you are at in terms of capacity on the technology side, and how big you can get with the current infrastructure, and when and if you might have to expand on the technology front?

Thanks.

We look at the -- that as an opportunity. The good news about our company, over the years, is we've typically expanded with the work as opposed to in anticipation of the work.

So, we have the ability to increase the size of our technology offering by 1.5 times with a very small capital expense, and probably, as a percentage, even less of a personnel expense because that is an entirely scalable business. So, we're a magnitude that's within the CapEx guidance that we've given already. So, I wouldn't look at that to be a major expansion.

In -- as always, the major expansion in Europe, and probably on an order of magnitude, we probably have about 15 to 20 folks there now. We probably have about 15 or so folks in Australia. We would look to significantly increase that over this year.

I think you will see us again in the technology area and probably in the forensic area, compliment the offering we already have there in both Palladium Partners and in the restructuring area.

We'll also be adding in the economic consulting area in Europe in the near future.

I think it was Jack that had stated earlier, we are very excited about the prospects of sophisticated financial investigations business as it applies in Asia and Latin America. Really, not only is there a great demand for this, we're already working on some projects and joint ventures with some people who are located there for some of our larger clients, but we also see it as an opportunity to expand the footprint, number one, but as Jack said, it leads very quickly to the utilization of some of our other high value-added services.

Okay. Very good.

One follow-up, if I may, just -- Jack, when do you expect to complete the incentive program for the other half of the 30 senior people that haven't re-upped yet? When should we look for that to be finally complete?

Thanks.

I would expect that in another month, we would have a really good handle on the rest of the folks.

Okay. Very good.

Thank you.

These are -- they are not adversarial, they're just life decisions that folks are making to invest seven years of their life -- or five years, or six years -- and we are not rushing them. We are trying to do this with the full respect that they deserve.

We have been very satisfied with the results so far. So I don't want to give anyone an impression that there's an issue. In fact, I think, so far, the actual signatures-to-offers are in the 90%-level approximately. So, I think we are optimistic that we will be retained -- the people that we want to retain, and we're just trying to do it in a senseful manner.

Thank you.

Our next question is from Jim Wilson.

Please state your company name, followed by your question.

Thanks. It's JMP Securities.

Good morning, gentlemen.

Good morning.

My questions, I guess, are about margins in particular because obviously, outstanding effort across the board, on the revenue side -- couldn't possibly pick on anything, but, on the margin side, as I was going through the segment EBITDA, the only one that stood out as causing a lot of questions in my mind was the forensic and litigation side, which has been fairly steady over time. I don't know if all of your expansion expenditure efforts in Europe actually flow through the expense line for litigation, as opposed to being spread anywhere else, but as I'm calculating off of the release, your margins -- your EBITDA margin there was well below 20%, which you have never been anywhere close to that low, or is some other one-time, or specific item within that number that makes it look funny this quarter?

The answer -- first of all, the -- let's take the cost in Europe. Much of those particular investments in Europe were related to the corporate finance restructuring practice, with some in economic and some in [inaudible], but only a little of that.

It is true that a nice proportion of the stock option expense is reflected in the forensic -- the forensic group, and again, I really re-iterate that we do anticipate that our overall margins will be -- re-affirmed the guidance, as adjusted for stock option expense, and as Dennis said, with only one quarter, it's is a little too early in the year to change any of this. A lot of the 401K -- they have the largest number of people as well, and so, a lot of the 401K expenses, et cetera, and social security--.

I think some of it, as well, is basically the fact that we have broken out technology for first time. Technology, as we tried to discuss last year, is part of our strategy, is clearly the most profitable segment on a margin basis. So, if you would break it out, you would definitely have a -- even though it's smaller percentage, it has to influence by some points, a year-over-year comparison.

And I did that because you gave last year's too, so--.

In a predicate to your question, you said the margin was way below what?

Where -- if you took out -- even given one quarter here, obviously, which is -- you gave last year's now breaking out technology, so that we have apples-and-apples, so no other perspective, but as I calculate it, you did, just for the quarter, forensic and litigation alone was 17%, Q1 this year; 29, last year; and technology was 7% last year, 13.5% this year. All of the other divisions made a lot of sense, particularly, year-over-year, et cetera, and overtime, it's just that litigation stood out as the anomaly.

Anyway, we can follow-up because maybe there's something more in there, or--.

I'm sorry. We are looking it as 26% EBITDA margin for the quarter.

Okay.

Well, maybe we can follow-up.

29% last year, which had the technology involved, so we were trying to -- we are not following your question here. I'm sorry.

Okay. Well, we can follow-up. That's fine.

Then, my other question then, was then looking at the full-year so we don't get down to the divisions, and I know you have re-affirmed guidance, but didn't specify gross or operating margin, but should we think about -- I know the stock-based comp is more or less 2% of revenues roughly. Other than that, are you thinking that operating margin -- EBITDA margins or gross margins -- probably all the same -- roughly the same as last year? Is that a fair assumption?

Again, I would really have to revert back to the fact that we still anticipate achieving the margin that we put into the guidance, and I think that's probably give or take about same, within a couple of points -- tenths of a point -- as we achieved last year for our eventual goal of a 25% EBITDA margin. Again, that was also before share-based compensation.

Okay. That's fine.

Thanks.

Thank you.

[OPERATOR INSTRUCTIONS]

Our next question is from David Golds.

Please state your company name, followed by your question.

Hi. Good morning. It's Sidoti & Company.

Hi, David.

Just a couple of questions -- just following-up on the comments I think Dennis made on the forensics business and how lumpy that is. If we looked at forensics and technology, anything in the first quarter or any reason -- any large projects there that should give us cause to believe the business would come down over the next couple of quarters?

Technology wouldn't -- it wouldn't apply to technology in that, in a way, technology tends to be the antithesis in that you're building a repetitive base, quarter-to-quarter-to-quarter, on a lot of the technology and servicing offerings -- the data management offering, the royalties off of ring-tail -- so I don't think we have -- I agree it looks very conservative at this moment given the run-rate that technology has, I think given that we are lacking quarters for the first time in our experience where we've really had these technology offerings, which really started, in earnest, the second quarter of last year, I think it's prudent, at least for the first half of the year, to be conservative there. They are not influenced as much, David, by the project lumpiness that we have in forensics.

In forensics, in the first quarter, there were a couple of large jobs, which started at the end of fourth quarter, and while they will continue going forward, I would say the bulk of the heavy-lifting work was finishing in the first quarter.

So, the answer to your question would be, yes, in that area, we did had -- we were influenced by a couple of large jobs. Now, that is our business. We tend to get the large jobs. We anticipate we will get more large jobs. We have large jobs pipelined in our new business effort. It's simply difficult to project how they will hit, when they were hit. This is the slipperiest stuff.

If it's delayed by one quarter, clearly it has an influence on your guidance. It may dramatically increase your fourth quarter results and your first quarter results, but could effect the whole year's guidance.

So, we really feel more comfortable in looking at this one, given that it is more lumpy and given that we were the beneficiary of some exciting and big jobs at the end of the year, and in the beginning of our first quarter here, to be cautious in annualizing the numbers out.

Okay.

But correct me if I'm wrong, the way it sounds is that you're basically, by re-iterating guidance, you are not suggesting that you have reason to believe it slows from here, it's just -- you are just not ready to update it at this point?

David, there is also the normal seasonal pattern of course.

Sure. Sure, but even ex'ing that, it's just--.

David, that's a fair question, and the answer is yes.

People are not here ringing their hands. They are excited about what we have done and how to build on it. Especially, as Dennis mentioned, the annuity aspect of the technology business, which is feeding every other division of the Company. So, it really is a very exciting time right here.

As Ted said, I think we feel we are in a much better position in this Company to look at our guidance, obviously, first, in the beginning of the year when we're trying to structure it for the year, and more importantly, in the beginning of the third quarter, when we have a half of year under our belt and a fairly good feel for how these new projects are going to break in the third and fourth quarter.

I think it's just a better practice for this company to be addressing changing guidance after two quarters are under our belt, rather than one.

David, one last point.

Notwithstanding the fact that we always have large engagements, I just want to point out that no one particular engagement [inaudible] the whole truth, represents a significant question of our business. Not one engagement is greater than 5%, and the actual fact that the largest engagement was probably 2 to 3% of revenues, if it was that. We don't expect it to be any different this year.

Okay.

One other minor, Ted, while I have you on, the change -- the variance in corporate in your forecast. Is that all options related -- it's about plus 6, 8 million from when you gave it in February?

It's not all options, but options have a significant effect on that. It is true that a small proportion of the share-based compensation did hit in the corporate expenditures. In fact, if you pulled out the amount that was included in corporate expenditures, our corporate overhead is not running any different than it did in the fourth quarter of 2005, for example.

Got you. Okay. Perfect.

Thanks so much to all of you.

Thank you.

Thank you.

Our next question is from [Richard Jenkins].

Please state your company name, followed by your question.

Hi. It's Richard Jenkins from [Tri-America Investments].

Just a mathematical question -- I'm trying to follow -- and I didn't pick it up from the releases -- the total number of shares outstanding, basic, where you are with your buy-backs, et cetera, and just trying to get a sense of the outstanding stock.

First, let me add that we do expect to file our 10-K within a day or two, so that you will have the full level of detailed information that you'd have on things that can help to estimate that. The shared denominator here for the quarter was 40 million to 43. We have, in our guidance, estimated that for the year, taken as a whole, it would be approximately 40.5 million, so we are roughly at the same rate as we're anticipating for the year.

Actual shares outstanding, at March 31, are down somewhat to 39 million. The difference being the effect of options, et cetera, that are outstanding.

I'm not sure if that answers, fully, your question.

That's the one part, and then, can you just give us an update on buy-backs? What is completed? What is left outstanding, and what you're thinking for the year?

Yes, that's also in the press release, and -- let me just turn to it so I can give you the exact numbers for you.

Well, if it's in the press release, I apologize.

No. No, don't apologize.

I just don't have it committed to memory. I want to be certain of what I tell you.

We purchased 300,000 shares in the first quarter for $8.5 million, and we also settled up on previous accelerated stock buy-back program at $6.8 million. Without remaining under the program, was $41.5 million.

Okay.

Can you gives some sense of thought on that as you just play that as it goes for the next year, or is there an intention to have that offset options that are issued, or--?

I think, as we've consistently said, and as part of our plan over the next three or four years, we can't necessarily represent that we can offset it one-to-one on an annualized basis, but it's our intention, over a three or four year period, to offset it in the aggregate. So, we would intend on using that money, buying the stock on an opportunistic basis, or on a program basis, and I think, as it's been the pattern of the Company in the past, we'll use that -- that allocation, and go back to the Board and ask for more.

Thank you.

Thank you.

[OPERATOR INSTRUCTIONS]

Our next question is a follow-up question from Arnie Ursaner.

Please go ahead.

Hi.

Question on economic consulting -- obviously, you did have a pretty good acquisition in the number. Can you break out the core growth in economic consulting and the contribution from the acquisition in the quarter please?

Let me put it this way, Arnie, when we acquired Compass, we gave some estimate as to what its effect would be. We said its revenues would be 22 to 24 million, and then, it has a very hardy EBITDA margin that we expected EBITDA -- I think it was -- 10 or $11 million for the year. It is tracking true on that.

How many months did you have it in the quarter?

The full three months -- actually -- well, we acquired on January 6. So there was one week less than three full months in the quarter.

Okay.

Thank you.

Thank you.

The next question is from [Dave Kerdell].

Please state your company name, followed by your question.

Brahman Capital.

Two quick questions -- were there any success fees in the quarter that were material?

We had our normal amount of success fees, nothing particularly unusual. They are built into our annual guidance, and when I say "normal," you're talking about in the few-millions.

Okay.

Is the comparable to the same quarter last year?

I don't have that information at my finger tips, but we had a normal amount last year as well. I don't remember what the quarterly break of it was.

It might be slightly higher, but again, I think the answer is it was not significantly material.

And just a follow-up on Arnie's question, can you give us any range of where organic growth was for each of the businesses roughly speaking, and for the Company as a whole?

I think it's fair to say that in the technology business and the forensic business, the vast majority of that growth was organic.

And in corporate finance, we had an acquisition halfway through last year of Cambio, which obviously, was not in the first quarter, so the question of corporate finance's growth was represented by acquisition.

And in economic, we just talked about the Compass acquisition that did influence this first quarter's results. [Inaudible], our best quarter.

Taken as a whole, I believe we'll get -- this particular quarter was between 15% and 20%. Sometimes, it's a little difficult to estimate because we integrate our acquisitions, and it's hard to answer the question would the next hire have been made and where does it go. Is it organic growth from the pre-existing business, or is the organic of the acquisition -- after acquisition? It's hard to discern that in an integrated business.

Understood.

Thank you.

Thank you.

Gentlemen, at this time, we have no further questions.

Please continue with any closing remarks you would like to make.

Again, on behalf of FTI , thank you very much for being with us, and we look forward to you at our next analyst call.

Thank you, sir.

Ladies and gentlemen, this concludes the FTI Consulting first quarter earnings conference call.

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We thank you for your participation in today's call.