FTI Consulting Inc (FCN) 2007 Q4 法說會逐字稿

Good day, and welcome to the FTI Consulting fourth quarter 2007 earnings call. As a reminder, today's call is being recorded. For opening remarks and introductions, I would like to turn the call over to [Eric Royavan] of FD. Please go ahead, sir.

Good afternoon. By now, you should have received a copy of the Company's fourth quarter 2007 press release. If not, copies of the press release can be found on the FTI website at www.fticonsulting.com. This conference call is being simultaneously webcast on the Company's website, and a replay will be available on this site for 90 days.

Your hosts for today's call are Jack Dunn, President and Chief Executive Officer, Dennis Shaughnessy, Chairman, Dom DiNapoli, Executive Vice President and Chief Operating Officer, Jorge Celaya, Executive Vice President and Chief Financial Officer, and Dave Bannister, Executive Vice President and Chief Development Officer. 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 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 flow in prior periods, and expects that this may occur from time to time in the future. As a result of these possible fluctuations, the Company's actual results may differ from our projections.

Further, preliminary results are subjected to normal yearend adjustments. Other factors that could cause such differences include pace 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 & Exchange Commission.

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

Thank you, Eric, and good afternoon and thanks to all of you for joining us on our 2007 fourth quarter and yearend conference call.

The fourth quarter was just an outstanding finish to an extremely good and important 2007 for FTI. For the full year we saw the tangible results of the investments we had made in our people, our brand, and our infrastructure in prior periods. For the quarter we maintained the extremely strong momentum that we had built over the course of the year, enabling us to produce not only a record year for our Company, but an important milestone for FTI, and by that I mean the virtual completion of our 2009 five-year plan two years early.

As you will remember, the essentials of that plan were to double our revenue to $1 billion, have 15% of those revenues originate from outside the U.S., maintain our industry leading profitability, and maintain our leverage of below three times EBITDA.

I am pleased to report that for 2007 our revenue topped a billion dollars, 16% of those revenues originated from outside the U.S., we maintained our industry leading profit margins, and our net leverage was below one times EBITDA at yearend. Achieving these goals fully two years ahead of plan is a tribute to our people, to our strategy, to the platform we've built, and to our focus on execution.

Our products are proving to be the right ones, and our plan for geographical expansion is enjoying not only strong demand for our services from the local markets, but also demand from the multinational organizations coming to us as one of the select few providers with both the critical mass and the ability to perform in multiple venues as they increasingly globalize their operations. We think that achieving this plan this year, in year three, is another validation of that strategy and a confirmation of how rapidly our business is truly coming together.

To begin our review, let me give you some key stats for the year, and then provide some color behind the numbers. As mentioned, for 2007 we reported revenue of a billion dollars, up more than 41% compared to 2006. That performance included outstanding organic growth of 19% for the full year and was augmented by our acquisitions, each of which is performing well and at or above plan.

EBITDA for the year also increased 41% to $216 million or 21.6% of revenue, confirming the margins we had achieved in 2006. We earned $2.00 per share compared to $1.04 on a GAAP basis in 2006 which, as you will remember, included a $0.32 charge in special termination charges. So, in addition to the sheer growth of FTI, we are delighted at the pace at which we are realizing our strategic objectives.

Before I discuss the fourth quarter highlights, I would be remiss if I did not address the major business driving our industry and, indeed, the world. The topic that's on everyone's mind, and that is the global credit crisis. What began as a virus in the U.S. subprime mortgage sector has erupted into a full-blown financial and economic pandemic, attacking transparency, liquidity, and, most importantly, confidence throughout the world's financial markets and the institutions and enterprises that rely on them.

These views on transparency, liquidity, and confidence are vital to enterprise value. These are the very issues and skill sets that we are designed to illuminate, and the very value our mission statement calls for us to protect. We are seeing broad based international demand in every one of our segments from credit related engagements, and that demand appears to be accelerating.

In corporate finance restructuring we saw the first signs of the credit crisis appear in the real estate market, and had previously reported to you that we were seeing large disruptions in the homebuilding and mortgage related markets. Since that first call, we received over a year ago, to assist the struggling subprime originator, New Century, we have been at the forefront of assisting financial institutions cope with the growing plague.

More recent engagements includes monoline insurers, hedge funds, and continued work with homebuilders and their related suppliers. We have been active in assisting major private equity firms in their analysis of potential restitute plans for struggling institutions, such as Northern Rock in the U.K. and, as we have predicted, the effect is now beginning to show-up in areas dependent on consumer discretionary spending.

For example, we have active engagements for six of the eight large retailers who have recently filed bankruptcy in the last several weeks. Stakeholders and household names, such as Fortunoff, Levitt's Furniture, Bombay, and Sharper Image have sought our expertise and advice.

In Technology we are seeing significant new work from major financial institutions in the U.S. and Europe, as they seek to understand and value their portfolios. Investigations are at the early stages, beginning with electronic information discovery and analysis. These investigations may lead to valuation and reserve adjustments, financial restatements, and, of course, eventually to security litigation.

In Strategic Communications we have been called on to assist clients' channels by the impacts of the credit crisis. These clients are as diverse as Centro, the major Australian retail property developer, highlighted on the front page of the Wall Street Journal today, to Societe Generale in France. We are assisting literally dozens of clients in the U.K. and the U.S. as they seek to understand and communicate the affect the credit crisis may have on their institutions and their stakeholders.

In FLC, our role in the Bear Stearns' hedge fund insolvency was probably our highest profile engagement, but underlying that we have seen a number of new cases, beginning at the end of last year that will begin to ramp-up. This work is anticipated to include restatement work for homebuilders and mortgage lenders, investigation into investment vehicles related to subprime, CDOs, CDOs squared, cubed, wraps, rewraps, FIVs, [auction] rate securities, mark-to-market, and asset impairment accounting, and shareholder litigation.

Because of the strength of our Corporate Finance Restructuring practice we often get an early look at the issues that grow into significant financial statement investigation engagements. FLC works closely with the restructuring team, but really begins their heavy lifting somewhat later into the crisis. They focus on the analysis, investigation, liability causation, and damages assessment issues that are so critical in the trial phase.

Finally, as an economic consultant, we have seen a tremendous increase in the high stakes commercial litigation related to the liquidity crisis. In fact, we have begun 19 new engagements since just the beginning of this year, addressing everything from securities class actions regarding fraud and exploitation of adverse conditions in the credit markets, to refusals to fund mega deals and reliance on the so-called [MAC] clauses.

Past issues that have driven our business include governance run amuck relating to Sarbanes-Oxley in 2001 through 2003, the reinsurance crisis of 2004, the hedge fund issues in 2005, and most recently the options backdating scandals of last year. While the magnitude and longevity of this global credit crisis is unknown, the breadth, scope, and dollars at risk could dwarf the aforementioned issues.

Now to the quarter. As you can see from our fourth quarter numbers, the momentum we enjoyed throughout the year continued to accelerate. Our revenue in Q4 was $280.5 million, 29% higher than the $216.8 million that we reported in the same period last year.

Organic growth in the quarter, measured by excluding the contributions from businesses we acquired in the past 12 months, was 24%, which maintained the pace of the third quarter. Top line drivers of this outstanding performance were an increasing amount of work from enterprises being impacted by the global credit crisis, the continuing pace of legal, regulatory, and corporate integrity activity, and increased strategic M&A activity.

We reported EBITDA in the quarter of [$64.3] million, 26.4% higher than last year, and 22.9% of revenue. In the fourth quarter of 2006 we reported EBITDA of $50.9 million and EBITDA margins of 23.5%. This very small decrease in our EBITDA margin was primarily caused by the substantial completion of the rollout of our long-term incentive and retention plan. In addition, we continued opportunistic spending at the Corporate level on branding and infrastructure, where we believe we can make a real and permanent impact on our future. The results in revenue growth for the quarter and the year would indicate that we can.

Our earnings per share in the fourth quarter increased 43% to $0.60 from $0.42 last year. This was accomplished despite the headwind of a share count that increased 24% from the prior year due to our equity offering in October, shares issued for stock based compensation and acquisitions, and the impact of our share re-price increase on the calculation of stock options and convertible notes. Needless to say, EBITDA, revenue, and EPS were records for the Company, and virtually every one of our segments had an outstanding performance.

As mentioned above, an important strategic initiative in the fourth quarter was our successful stock offering in October of 4.8 million shares, which raised about $232 million for us. These proceeds combined with the cash we generated from operations enabled us to exit the year with cash and equivalents of $360 million, which provides us with the financial strength to continue in hiring the best people and acquiring businesses that enhance our capabilities and geographical reach.

We have always said that a critical aspect of our business is obviously the hiring and retention of our people. We added over 150 revenue generating employees in the fourth quarter, exiting the year with over 1,950 people, up from just under 1,600 a year ago. Our attrition was 15.8% for the year, which continues to be one of the lowest in the industry. With our aggressive hiring so far this year, today our headcount stands at 2,800 strong, with 2,200 billable.

Now for the segments. It's ironic that having spent the last several years suggesting a more [abundant] restructuring market and declining to predict the "turn", in the last few months we have seen not only a change but the financial landscape littered with over $1 trillion of write-offs from corporate and financial institutions, the firing of seven CEOs of major financial institutions, the precipitous drop in home sales, and for the first time in recent memory home values, a 90% jump in home foreclosures in January, oil popping $100 a barrel for the first time, gasoline reaching $4 a gallon, the Euro at $1.51, and a dramatic increase in corporate bankruptcy filings predicted by many sources to grow by at least fourfold this year. We may have to acknowledge that the restructuring bankruptcy market is back.

Not surprisingly, given these dynamics, Corporate Finance Restructuring reported its strongest performance of the year with revenues increasing 27.2% to $73.6 million compared to $57.9 million in the prior period. Segment EBITDA increased 48.1% to $22.4 million from segment EBITDA of $15.1 million in the prior period, with margins expanding more than 4 points from 26% to 30.4%. As we said, we can no longer explain this performance as an anomaly. We believe it is the beginning of a robust market.

The bottled restructuring, and one of my must reads is the Deal Magazine. You've heard me quote it and recommend it to you many times for its lead tables, industry insight articles, and so forth. In fact, in its third quarter recap it named FTI as "the top crisis management firm" in its first ever lead tables measuring just that skill set, with almost double the cases of our nearest competitor.

After our last conference call, Matt Miller, the excellent writer with a good sense of humor, from that fine publication, took me to task in print for mentioning bankruptcy only one time and restructuring only eight times during the call. For the record, let me say bankruptcy and restructuring are critical to our Company and its performance over the next several years. I cannot emphasize that enough. We now have over 108 active cases, in the subprime mortgage space we have 20, in the real estate construction space we have 5, in retail we have 13, including the 6 of the last 8 notable cases that I mentioned, in technology and telecom we have 17, and in healthcare we have 10.

Again, for the record, no one should be able to look at us and say that restructuring and bankruptcy are not an important and core competency for our Company. As I've said, we believe this is the beginning of a robust market, and restructuring and bankruptcy will be a key to it.

With regard to Strategic Communications, it reported another outstanding quarter, with revenue rising 47.4% to $60 million from $40.7 million a year ago. SC's EBITDA increased to $16.2 million or 26.9% of revenue from $14.2 million or 34.8% of revenue last year. This reflects the introduction of a new bonus plan in 2007, whereas there was none in the fourth quarter of 2006, it's first as a part of FTI.

The U.K., France, Germany, and the U.S. put in strong performances due to growth in retained clients, particularly in the U.K., and strong contributions from businesses they acquired during the year, Russia, Asia, and in the Middle East, the markets in which they are investing continued to generate strong momentum with growing profitability.

SC acquired two financial communications firms, one in Dublin and one in Chicago in the fourth quarter, which when combined with those made earlier in the year in London, Latin America, Australia, and China extended its global footprint and provided further geographical and service diversification, as it also opened its first office in Singapore. The integration of SC with the rest of FTI is progressing very well, and there continues to be growing appreciation around the FTI network of the value SC brings to companies wishing to protect their reputations and valuations in the financial markets.

With respect to Forensic and Litigation Consulting, revenue in FLC increased 6.9% to $54.8 million from $51.2 million a year ago. EBITDA at FLC was $15.4 million compared to EBITDA of $15.6 million last year. As a percentage of revenue the segment's fourth quarter EBITDA was 28.1%, the highest of the year, but down from 30.5% in Q4 of '06.

It was a particularly difficult quarter to lap as it compares to a period that was exceptionally strong due to all the stock options backdating cases that were being worked on last year, with a special emphasis to get them finished by yearend, cramming a lot of work into the fourth quarter.

The Global business, Intelligence and Investigations practice, which was formed last year, was a standout, driven by accelerated foreign corrupt practices activity and a growing number of cross border assignments from domestic clients, expanding into Asia and Latin America.

We're very optimistic about the prospects in 2008, as the global credit crisis and turmoil in the financial markets has started to provide multiple engagement openings as yet only in their initial stages. Issues involved include valuation of complex financial instruments, financial statement reporting and investigations into business practices, all key areas of expertise for FTI. What's more, our global footprint uniquely positions us to support clients on these matters, regardless of where they occur.

In Technology, the segment contributed another superb quarter, with revenue of $47.5 million, up 52%, 52.4% from $31.2 million a year ago. EBITDA in Technology increased the pace with 54% to $19.6 million from $12.7 million last year, and margins expanded to 41.1% from 40.1%.

Growth of this segment continued to be driven by global product liability matters, forward initiated investigations, including FCPA matters, large classed actions, and antitrust second request issues.

Technology's domain expertise in the global pharmaceutical, financial services, banking, hedge fund, and private equity industries is continuing to be a competitive advantage. Demand was increasing from Europe and Asia due to greater market awareness of FTI's global presence, the opening of a European network operating center in quarter two, and its reputation for managing large and complex multinational cases.

Margins in the segment again benefitted from a continuing shift in the revenue mix from services, to software licensing, and processing fees. The Company's Ringtail suite of products is benefitting from new capability enhancements and heightened demand for tailored solutions that can scale for high volume, high profile matters, and support a global base of opportunities based on Ringtail's strong multilingual capabilities.

In the fourth quarter Technology began to sell its Ringtail technology through value added resellers in domestic and international markets to speed its market penetration and get more geographical coverage. As a result of these new partnerships and by offering resellers both engineering and sales support to a broader prospect base, the segment is seeing accelerated demand from its partners.

Economic Consulting also continued to excel, seeing its revenue increase 24.4% to $44.6 million from $35.8 million a year ago. EBITDA in ECON increased 7.1% to $11.8 million from $11 million last year. The margins were 26.4% compared to 30.7%. EBITDA margin, while still very strong, was affected by the need to use outside consultants to add capacity to meet demand, and it was also affected by higher equity based compensation expense.

Like the other segments, ECON benefitted from an increased frequency of disputes and associated financial consulting engagements created by the turmoil of the global credit markets. Since December 2007 the segment has received 19 new engagements in the financial arena, including subprime. Demand for the segment's M&A services also continued very strong, with 14 new cases since December, as decreased liquidity in the credit markets is causing a shift in M&A activity from private equity towards strategic buyers who historically are more likely to contend with antitrust and anticompetitive issues and require registration. The increased Corporate M&A activity extends across a number of business sectors, notably financial services, hospitals, airlines, and industrial corporations.

Finally, the segment is seeing an increasing volume of rail, commercial, and regulatory work as a result of revised regulatory standards, and continued seeing strong demand resulting from antitrust enforcement, with eight new engagements since December, involving antitrust price fixing and rate setting, as global competition becomes ever more jugular.

Now, a snapshot of 2008. As you can see from our announcement so far this year, we have begun the year at a rapid pace. Through the first two months we have announced four acquisitions and have strategically advanced our business. Strategic Discovery is an e-discovery Company based in San Francisco that will be integrated into our Technology segment. SDI gives us a very strong technology offering on the West Coast. They have developed a rapidly growing business with Asia, and we see SDI serving as a bridge for us with Asia that extends our offering into that region. In addition, their market strategy of engaging clients through corporate in-house counsels has been complementary to ours, which has been to come in through our clients' outside law firms. We think the combinations of these two market strategies is compelling.

Rubino & McGeehin Consulting Group, based in Washington, D.C., is a nationally recognized consulting firm that provides practical and cost effective financial solutions to complex issues facing both owners and contractors in the construction and government contract area. RMCG will be integrated into our Construction Solutions and Government Contracts practice. We think it is a very timely acquisition as the construction cycle is clearly maturing and government contract complex issues are becoming more critical, and we will be positioned with the strongest and broadest capabilities to protect our clients in what could be a much more contentious and unfriendly business climate going forward.

Last week we purchased Thompson Market Services, which offers a full range of intellectual property and brand protection solutions in approximately 20 cities in China. TMS complements our existing computer forensic and financial investigations capabilities in Asia to give us greater coverage of China to better protect the patents, copyrights, trademarks, and other intellectual property of our clients in that market.

Just minutes ago we announced the acquisitions of TSC Brasil, the leading computer forensic and IT security consultant in the Brazilian and greater South American marketplace. TSC will extend the e-discovery capabilities of our forensic litigation consultants into this large and dynamic market, where we are experiencing accelerating anti-money laundering and foreign corrupt practices act activity.

Even having closed these four acquisitions, our pipeline of potential opportunities has never been more robust, and we anticipate several more announcements over the balance of the first quarter.

We have also been extremely active in increasing our outstanding pool of talent. FD, as I mentioned, opened an office in Singapore. Dennis Carlton rejoined our Economic Consulting practice after serving as Deputy Assistant Attorney General for Economic Analysis in the Antitrust Division of the United States Department of Justice, where he focused on rationalizing and looking at international aspects of antitrust law.

Professor Carlton will be a member of the [Complex Lexiconic Consulting Team], already the best group of competition economists in the market. His experience with antitrust regulators around the world will enhance our credibility in overseas markets, and increase the likelihood of our being chosen for the most complex assignments in the field.

We have recruited, hired, or promoted 22 new senior managing directors so far this year. As you know, we are dedicated to finding and retaining the best intellectual capital in the world. That is "the" way to build a professional services business.

And, now, I'd like to talk about guidance. As you saw from our press release of this afternoon, we're providing our initial guidance for 2008, which I would like to go over with you. And, as you can see in the release, we have consolidated our guidance into what we deem to be the key indicators of our Corporate performance. This is how we think you should evaluate us; it's how we think of the business. This format is also more consistent with best practices over a broad range of companies and industries. We will, however, continue to report our segments as we have in the past.

For the year we look for revenue of between $1.28 billion and $1.32 billion, an increase of 27% to 31% over what we reported in 2007. The bottom end of this range anticipates organic growth of 17.5%, while the higher end uses 19.5%, reflecting stronger growth from the current global credit crisis.

In addition to organic growth, we have factored in revenue of between $100 million and $120 million from acquisitions that we have announced so far this year, or that are expected to be announced during the first quarter, and that will contribute to the remaining three quarters of the year.

First quarter acquisitions in aggregate are expected to have annual revenue of approximately $120 million, EBITDA of $35 million, and a purchase price of $220 million, approximately $170 million of which was funded, was or will be funded in cash, and the balance in restricted stock. This implies acquisition multiples of 6.2 times, consistent with our objectives.

For 2008, due to accelerated amortization of backlog and other intangibles, some integration costs, and the fact that we will not have a full year of contribution, revenue contribution is expected to be between $100 million and $120 million, and the affect on EPS is expected to be between $0.12 and $0.16. For a normalized full year from these companies we expect a contribution, excluding acquisition related wrapper amortization, to be closer to $0.40.

We expect EBITDA to be between $300 million and $310 million, which represents an EBITDA margin of 23% to 24%, compared to 21.6% in 2006. This margin improvement is primarily driven by the incremental contribution of acquisitions, which do not require proportional incremental overhead. The lower end of our margin expectations reflects a small improvement over last year due to some operating leverage from the higher revenue and management of expenses. The higher end would be a function of the stronger demand driving higher utilization and billing rates and more operating leverage from the higher revenue.

All this translates into earnings per share of $2.40 to $2.50 per share, compared to $2.00 in 2007. Our EPS guidance is predicated on a tax rate of 40% and weighted average shares outstanding of about 54 million shares for 2008, which is an increase of almost 20% over the 46 million shares for 2007.

While we provide guidance on an annual basis, for those of you who have come to know FTI in the past year, I would like to remind you about the seasonality of our business as it affects our quarterly results. In brief, we experience seasonality in our businesses that affects primarily the first and fourth quarters. Additionally, we expect an overall improving trend in margins through the year, reflecting the contribution from acquisitions that are more profitable at the margin.

The first quarter's earnings typically are the lowest in the year, primarily due to frontend loaded expenses for such things as social security, 401(k) matches, discount on the employee stock purchase plan, and the timing difference between annual salary increases and associated billing rate adjustments. Revenue is often somewhat below the robust fourth quarter. To help you in your modeling we estimate that the first quarter EBITDA margin will be about 300 to 350 basis points below what we experienced for all of last year.

The second quarter does not have any appreciable seasonality, so it is an average quarter relative to the year. Q3 is also relatively average, except that it is subject in some cases to summer vacations in July and August, as well as lower utilization from the influx of recent college graduates who join us during the summer and have yet to become fully billable and fully utilized.

And finally, as you have seen in our most recent results, the fourth quarter is seasonally the strongest of the year. Those new hires who joined us in Q3 have become fully billable. We receive the benefits from an active M&A calendar and success fees, and there is a natural tendency on the part of our clients to try and resolve projects by yearend. With this yearend activity, fourth quarter and the EBITDA margin is about 300 basis points higher than the full year.

To conclude, last Monday we were fortunate to be named to the Wall Street Journal's list of top 50 performing companies in terms of shareholder value for both the one year and [ten year] categories. We believe excellence is a matter of not producing once or twice, but producing consistently. It is no accident that we continually admire great organizations, like Goldman Sachs and McKinsey, or that we market with great organizations, like the New York Yankees, Forbes Magazine, and The Economist. They consistently not only perform but outperform, and that is our goal.

Over the past several years we have been consciously building FTI into a Company that we expect will perform well, regardless of where we are in the economic cycle. In 2006 and the first half of 2007 we reported strong results and a healthy business climate. We continued to do well through the second half of 2007, even as the equity and debt markets stumbled and cracked and the economy appeared, and we believe we will have another record year in 2008 when there are even more widespread signs of global dislocations. The fact is is that there will always be risks, and we think we are uniquely structured to help our clients face and manage their risks on a continuing basis.

With that, we'd like to turn it over to questions.

(OPERATOR INSTRUCTIONS.)

And we'll take our first question from Tobey Sommer of Suntrust Robinson Humphrey.

Regarding acquisitions in 2008, can you give us what your additional debt assumption is maybe, and then free cash flow and CapEx?

Yes, our assumption is that we will be using the cash on our balance sheet, and not all of it for the ones that we've outlined in the guidance, which would leave us with sufficient cash balances over the year, so we would not look for any more debt.

Okay. And, also, do you expect strategic foreign buyers to keep the Economic Consulting busy all year?

They're actually not so much strategic foreign buyers as they are strategic buyers within the U.S. acquiring other companies. There certainly is a component of that business, I think about 16% or 17% of it was from offshore last year, but we're seeing it broad based among -- it's more driven by sectors that are seeing a financial need to do acquisitions than to merge for out of distress and other issues.

Okay. Thank you very much.

Thank you, Tobey.

And we'll take our next question from Arnie Ursaner from CJS Securities.

Jack, can you hear me?

Hi, Arnie. Yes.

It's rare to hear an executive so excited about a very challenging economic world, but it really is playing to your strength. A real quick question to ask you, I think I may have misheard something you said in your prepared remarks about the '08 guidance. I think I heard you say that the acquisitions you believed would add $0.12 to $0.16, but then I thought after that you mentioned the $0.40 number?

Yes, $0.40 would be the -- after we get -- typically on an acquisition you have some accelerated amortization and depreciation for things under the accounting rules where, for example, you have to attribute a part of the purchase price to backlog, and then you have to burn that off as the contracts burn off. So what we're talking about on a normalized basis we would think going forward after about 15 months that these acquisitions could provide us on an annualized basis about $0.40.

And, Arnie, it's Dennis. We only model these acquisitions for the last three quarters, so we wouldn't have the benefit of a full year's ownership anyway.

Well, what I find intriguing is, again, it's premature to think about '09, but you kind of are already laying out a $0.25, $0.30 cushion as you think about '09, you're almost at $3.00 without any growth, which is a pretty interesting way to think about your business. I hope I'm not thinking about it the wrong way?

No.

The other question I have about your guidance is the 17.5% to 19% organic growth it seems, again, that's obviously quite a strong absolute number, but I'm trying to understand that relative to the growth you've had in '07, the accelerated growth you had in the back half of year, and most importantly the comments you made about each of your segments looking into '08, what is causing you to believe your revenue growth will slow from what you're seeing right now?

Arnie, it's Dennis, again. Look, I think what we're -- whenever you do this modeling, you sit back and you try to project not only where the demand is taking you, but your ability to match the capacity, you know, the service demand with the demand. I think that 19% is replicable of what we did last year across the entire year, and I would say for most companies probably going into a recession if they did 19% top line growth they would be popping champagne bottles.

I think 17% is a more conservative number, and it clearly, I agree, it looks conservative compared to the 25%, but I think in all honesty, one, if we modeled 25% you'd probably laugh at us, and, two, realistically to sustain 25% over a long period of time you do get into capacity issues, and we felt it was more appropriate to model something closer to the annual result rather than the last six months.

Okay. In the same spirit, two more questions, if I can? In Economic Consulting the thing that really [cost] your margin was the tremendous excess demand you had. You had to use outside consultants, and yet in the body of your report you highlighted since December, it's an incredible number of new engagements. Why would you be taking on that many new engagements if you're already capacity constrained, and if you are taking them on why aren't you pricing it to either maintain or even expand your margin?

Well, we are using outside contractors. We're in a business where you don't turn down business. We're also, more importantly, in a business where we have a tremendous amount of momentum and a tremendous amount of credibility in economic consulting. We have, as we've joked before, we have three of the top two competition policy economists in the world. They all want to work with us. We are, you know, we had meetings yesterday and the day before, strategizing with them how to get more people to do that work. Our goal is to make our great experts available. It's work you can't turn down because everybody wants us. There literally aren't other people to do some of that work, so we will find a way to do it through outside contractors when we have to, but we are aggressively hiring and looking to acquire as fast as we can.

You know, I think, Arnie, the impact to our margin was obvious. On the other hand, it's still a very impressive margin, with extremely good top line growth, so I think you want to keep doing it, we want to recruit people so that we can be either less dependent on the outside or co-op the outside consultants to come join us fulltime, but I think it's a high class problem when you have this kind of demand, and we're working aggressively to try to build the capacity.

If I can add one final question, if I may? I know you've at least considered the possibility of a carve-out or spinout for your Tech Group, and it's just booming. Where -- what's the update of the status of that, please?

You know, I think, I'll go back and repeat what we've said and answered that question pretty consistently, our job as the Management of this Company is to maximize value to the shareholders. It is quite obvious that the Technology Group is enjoying, you know, a tremendous amount of growth, not only in the U.S. but very gratifying to us, in Europe and in Asia, and now beginning in Latin America. I think, Arnie, we would continue to look at the relative valuations of companies that are primarily softwares and service companies.

The revenues this upcoming year will be about 65% classic technology, licensing fees and hosting fees, versus consulting. So each year that number approaches more and more of a pure technology offering, and I think we just have to be very, very keenly aware of, again, our job to maximize value, and we keep trying to get the story out that this is a unique part of the Company and a very valuable part of the Company. So I think we'll be watching to see if we receive value from the investment community for this Division's performance, or else.

Okay. Great execution. Terrific job. Thank you very much.

Thank you, Arnie.

Thank you.

And we'll take our next question from Brandt Sakakeeny from Deutsche Bank.

That's Brandt. So just a couple questions, again, on that Technology segment, that did reaccelerate it looks like sequentially 3Q to 4Q. Did you get any additional projects there? Was there anything that really drove that business in the fourth quarter?

They received some very large projects, offshore, Brandt, predominantly for out of the Magic Circle Law Firms in the U.K. for a lot of European clients, and received several large assignments in the pharma area on a global basis, which have really kicked in in the fourth quarter and are continuing to kick in in the first quarter.

Okay. Great. And just a question on the restructuring business, I mean that traditionally has been a great margin business. As you start to see it cycle up again and some initial engagements, what's your sense for what the margins could be this cycle? Probably not as high as they were the previous cycle, but are you seeing anything that would make you think that that you couldn't get some margin expansion out of the [court fin and restructuring] business as that segment ramps up?

Well, you know, this is Dom DiNapoli, when we're talking utilization margins can ramp-up a bit. You know, we've put in place, as Jack mentioned, [defensive] plans and retention plans just to secure our top people, so that's cost us a little bit, but if we can keep our people busier, as the assignments get larger we can leverage them better and with higher leverage we can make higher margins because it's the younger professionals where we make the higher margins. So a more robust restructuring market should definitely lead to [fuzzy], higher margins than we've experienced in the recent past.

Additionally, we're moving from more of the TAS business, which is the Transaction Advisory, the diligent business, which historically has been a slightly lower margin than the restructuring business, so just that, the movement from that practice into the core restructuring should help with margins a bit, also.

Yes, Brandt, I think the record margins that we showed in the last restructuring cycle were sort of in the low 40s. I think none of us here feel that we will replicate those margins. I think structurally the business is different. As Dom said, we've changed the way we compensate the people, differently.

On the other hand, I think we've also said that this is the one area where we do believe if the utilization, and as Dom said the jobs come in, you will continue to see margin expansion but not at the record levels that you may have seen if you looked at us in the last big recycling cycle.

Great. Thanks. That's helpful. And I guess just for Jorge, a couple quick modeling questions. Jorge, the tax rate for '08, what should we assume?

It'll be approximately 40%, Brandt.

Okay. And stock comp and expense in the quarter?

For the fourth quarter?

Yes.

I'll get back to you on that, Brandt.

Okay. Perfect. Thanks.

And we'll take our next question from Andrew Fones of UBS.

Hi. Can you hear me?

Yes.

Okay. I had a question on the acquisitions. First, I think you mentioned that as of today you've added about 246 in billable headcount since the end of the year, is that -- can you tell us does that include TSC, and what proportion of that headcount is hired through those acquisitions? Thanks.

It's about 50, 50. You know, it would be 50% would be just new hires, net new hires, and 50% would be from the first four acquisitions.

Okay.

Andrew, that's approximate.

Okay. So it does include the TSC?

It would include TSC.

It would include TSC, yes.

Okay. And then I think on the balance sheet you had $360 million in cash at the end of the year?

Yes.

Are you saying that you'll spend $170 million on acquisitions during the first quarter?

Yes.

Can you tell me what the bonus payout is we should expect? And so I guess what I'm trying to understand is how much cash you'll have left to pursue acquisitions beyond the first quarter? Thanks.

Jorge, do you know the bonus, total bonus payout?

It's going to be probably approximately [$90 million].

Okay. So you'll have about $100 million or so, plus any cash from ops?

Right, right, you know, cash from ops in the first quarter would add to that.

Okay. Okay. And then you've got some interesting statistics on bankruptcies, cases that you're currently active on, at the end of the year, by different verticals. Can you perhaps compare that to what you were seeing a year ago? And beyond the obvious increases in subprime and real estate, have you seen increases in some of those other areas? Is there any evidence that the bankruptcies are spreading into other verticals? Thanks.

Well, in 2007 early on we saw in the automotive sector, and we had some of the largest cases that we've ever had, including [Delphi], which is a tremendous bankruptcy restructuring case. So as consumer confidence started to wane away we spread into the other areas, as Jack mentioned.

So just recently, though, we've really seen a pick-up in the retail bankruptcies. Jack mentioned we've been fortunate in 15 or 16, probably since September or October, several of which we got just in the last two weeks. So there's a lot of pick-up there. The consumer is feeling the pinch of the higher energy costs and the housing prices plummeting. We're going to see a lot more on the -- certainly, on the real estate side, the automotive side is going to continue, and the retail, particularly specialty retailers are really starting to feel the pain.

On the subprime and the financial institution type work, that's -- I mean that's really starting to pick-up. We've been involved with some of the builders in the last, probably the last six months, but that looks like that may be accelerating also.

So, you know, generally, the restructured market is looking pretty strong going forward, but we haven't seen the mega cases that we've seen in prior years yet, and that really drives profitability through higher utilization, but we assume if the business, the market continues to deteriorate, we'll be seeing a lot more of the larger cases over the next six to nine months.

Andrew, we are seeing a creep in the hospitality, as well. We recently have received some engagements in the hospitality industry, restaurant chains, things like that. But, again, right to what Dom said, I think it's linked to the consumer's disposable income and the way he chooses to allocate it.

Okay. That's really helpful. And then just a final one on hiring, if you could perhaps help us understand what your plans might be, which Divisions you'll be hiring most aggressively in, and perhaps back to that earlier question on economic consulting, what your thoughts are there? And perhaps, you know, of that 50% that came from organic hiring in the first quarter how that breaks out approximately?

We would look over the course of the year to increase our headcount by about 25%, but for an average that'll creep in over the year. It's as we always say, it'll be about 10% to 12%, and that's how we get, you know, part of our estimates for our growth, because we do need in many of our businesses that type of headcount growth to produce the billable hours.

As you can imagine, two areas that stand out are Technology, where we have very aggressive hiring plans, and in Restructuring. And FLC, right now, we will try to temper that with what we see as the growth in that marketplace, that's a little bit behind the others in terms of responding to the credit crisis [belt].

And in terms of economic consulting, we'll take as many people as we can, but as you consider that business, because it tends to be very much a -- in terms of a very credentialed business, it's not as easy to find the number of bodies when you're looking for the PhDs and economists out of the great universities, so that will be a little slower, but it will be as fast as we can at this point. As we talked earlier, we really do need the people there.

Okay. Thanks. And just to be clear, that guidance, does that -- the headcount guidance, does that include the acquisitions?

We would look to probably add -- that would include the acquisitions we have so far, but not any additional ones we would do towards the second half of the year.

Okay. Thank you.

And we'll take our next question from Chris Agnew of Goldman Sachs.

Thank you. Good afternoon.

Good afternoon.

A couple questions on Technology, and I guess, as you said, the mix shift moving more towards pure technology is benefitting margins. Where can you see margins going to for the Technology business?

Well, it is a hybrid offering, and we actually think that the strength of the offering is the fact that it's a mixture of technology offered services and domain expertise. You know, clearly, the repetitive nature of the business in that we're now hosting a little more than a billion electronic pages in our network operating center in the U.S. and in the U.K., I mean it's sticky, you don't have to replace it. The seed licenses just keep recurring. The client server installed base licenses are recurring.

So by definition that just keeps building, and you should have some margin expansion, but the consulting will always be meaningful here, so you'll never morph into a classic gross profit margin for a technology business where your main costs are media and then your other costs are marketing, packaging, and R&D.

So I think you're right, I think we would expect that you could see this Division continue to show some margin improvement, but it wouldn't be by leaps and bounds to get you up into the gross profit margin basis of a pure technology play.

Okay. And then the new sales channels for the Ringtail technology, did they have a miniscule impact in 4Q, is that something that's going to accelerate, that shifts the software licensing? And who are the value added resellers, and would they include some of your maybe competitors that just don't have the scale for a technology business?

It would be -- the answer to the question would be yes to all of the above. It would be some of our competitors have vanity branded it, and that's a unique channel. You know, there are other value added retailers in certain parts of the world where we don't have a direct channel and distribution that we're utilizing that clearly facilitate our ability to access certain users. And if we began to feel an impact of it in the fourth quarter primarily, and the effort was most -- was really started this summer, so we would hope that impact would continue as we go forward.

It's not a question of the scale of the value added resellers, some of them are very, very large organizations, rather it's the proprietary intellectual capital that we had and their need for that proprietary capital.

Right.

Okay. That makes sense. And then I think given the success you're having, and I think I heard on another conference call someone talked about the e-market, e-discovery market being flooded by new entrants. I mean what are you seeing there? And does that impact in any way maybe your pricing power?

Obviously, it didn't in the fourth quarter. I think, you know, look, we've heard for numerous years more and more companies saying that they're manning up, they're coming in, it's a major growth opportunity for them, it's a major initiative, and I have no clue of what their growth looks like. We can only monitor our own, and we've done very well over the last three or four years.

Without a doubt, when you have a dynamic market like this, I mean Gartner and [Varser], and Yankee, all projected it's growing market wise worldwide at a 30% to 40% growth rate top line. You're going to have new entrants coming in, and you're going to have new competition, and I think that you have to be prepared to be flexible and to be aggressive in the way you're investing in your product and scale.

I can assure you that we are investing aggressively in this Division, given the margins that we have, to keep our leadership position. We are adding new feature sets to our proprietary technology. We are partnering with other companies to link their technology into our feature sets, and we will be looking at these companies and other companies as a potential acquisition target to fold their technology under our tent and offer a broader continuum to the client to keep our lead.

And, again, I think all of this rests upon the fact that we have five to six years of reputation of delivering tremendous results now across the world for a wide variety of either key intermediaries, the large corporate law firms in the world, or Fortune and 100 type of clients who we're hosting all these pages for.

And, again, I have to emphasize that the hosting part of this business, when you're holding a billion pages of sensitive documents, you know, in Europe, Asia, and the U.S. for very, very large clients, it is a very sticky relationship, and it is not a relationship that they're inclined to move very quickly. So I'm sure we'll see new competition coming in.

We are hopeful that the investments that we're making, the developments that our own people are making internally, the potential acquisitions that we could possibly add here to bolster it and, again, our reputation and client relationships here will hold us in good stead against the competition.

Yes, I think you have to think of it in terms of the market it serves, as well. When you think about the legal market, there are literally thousands of law firms, but there are 200 that really control the commerce of the major, literally the major companies and enterprises of the world. There will be e-discovery companies out there that will serve the smaller firms, that will be boutique, and that individual practitioners will like, but when you're talking the types of international matters that we use, where you literally have to have an international capability, that really narrows the playing field. And, as Dennis said, I think they're more likely to be acquisition targets than they are to be a threat to us going forward.

Okay. Thank you. And maybe just one last question? Now you've achieved your long-term goals, is it time where you think about setting some new targets?

Yes, I think clearly we've told people that we have aspirations to be a $2 billion revenue business by 2012. We think we can accomplish that and maintain the same margins that we have and also maintain the integrity of our balance sheet. We would expect that you would see a business plan, which we are finishing up as we speak, and we'll actually announce into the marketplace probably sometime at the end of the second quarter, that will show that at that five-year, new five-year milestone you would see probably instead of the 16% to 19% offshore business that we did last year, that number would most likely increase into the 30s, so that would be one of the major differences, but I would say $2 billion in 2012. That's accomplished really through an 11.5% compound organic growth rate, and the acquisition of about $250 million in revenues in the first two years of the plan. As I said, we've already acquired about $220 million at the end of this quarter, so we're well along our way to that.

Great. Thanks very much.

And we'll take our next question from David Gold of Sidoti.

Hey, good afternoon. A couple of questions. One, can you just go over for me, Jack, on the acquisitions, how much revenue is already in-house?

From these acquisitions?

Right, the first quarter. I know you said I think 120 was the goal, but just how much of that we've done?

Yes, David. Dave will go into that, David.

Perfect, thanks.

We would expect about, we have about $27 million, $27 million to $28 million expected in-house.

$27 million is --?

Is done, has been announced.

Is announced? Okay, then that's including today's?

Right, correct.

Got you, so there's --

Contribution to this year.

Sorry?

Contribution to this year.

Sorry?

Contribution to this year.

Right, right, right, right. And presumably in the 120 number that you gave was for this year, as well, so there's something --?

Well, David, the 120 is an annualized number, the 90 to 100 is for this year.

Okay. Got you. But I guess the point there is there's still something decent sized to be done over the span of the next month?

Correct.

Okay. And then can you talk a little bit about the plan with, say, the rest of the cash once that's done? I guess at the time that you did the offering I got the sense, and maybe incorrectly, that you were targeting maybe some bigger acquisitions rather than those tuck-in, and so I was just curious if that still would be the thinking or if we're more inclined to, say, do some nicely accretive tuck-ins and do them, say, a little more slowly as we do them?

Well, number one, if we had $130 million of revenues, $120 million of revenues on an annualized basis in the first quarter that's 12% of our revenue base starting the year, so that, you know, that obviously makes an impact. But I think, as Jack said, when you normalize the amortization of the intangibles that, as you know, you have to eat normally in the first to sort of four to first six quarters of your ownership of them. You know, we'd been looking at those to contribute $0.40 a share, so that's pretty accretive.

Uh-huh.

I think that we would continue doing those deals because we -- if we can buy companies that tuck-in very nicely to us and pay 6.2 to 7 times trailing EBITDA, you know, that's a very accretive arbitrage for the shareholders, as well as building out our platform internationally and bringing in some domain expertise domestically.

We are always looking, David, as you and I have talked about, at larger deals, we've talked to people about larger deals, so we're not afraid to do a larger deal. I think that it's just that these were the ones that in the last four months are coming to fruition, and it's coincidental. In all honesty, they happened to be closing sort of right on top of each other in the first quarter, but it does make it easier for us to model them and give you some guidance. But we're, you know, we are looking at other large deals and would not be afraid to do one.

Okay. Got you. And one other, well, actually a couple of others. I know you didn't break-out by Division, but curious if you can give a sense for how you're thinking about growth in the restructuring business for this year?

We didn't give segment guidance for specifically that reason, especially because of -- the credit crisis is really a perfect example, it's affecting all of our Divisions. We have people who are crossing over and doing work, and it just makes it very hard to do that, so we think it's much better to look at our Company on an overall growth rate. So if we start just telling you Corporate Finance and just telling you Technology, I guess would kind of undo what we're thinking about. But I think that if you look at the fourth quarter that was, you know, that gave a pretty healthy indication of where the momentum is in our different businesses.

You know, David, the -- I mean the nice thing about the group of our practice, it creates very good interdisciplinary teams, and the confusing part of giving segment guidance would be how we allocate the time when you have these joint efforts. I mean we have some instances where we started out in restructuring. The restructuring led to having to bring in forensic investigation, the forensic investigation is going to lead to potential defense activity, and at the same time the client has hired our communications arm to help manage the communication.

We're somewhat Solomoness sitting here and saying, "Okay, you can get credit for this much, you get credit for that much." It means something internally, but really can distort the numbers when people are trying to analyze the segments, and we thought given where we saw the business going certainly in the foreseeable future that it'd be better off not to do that.

Got you, got you, fair. One more, if I might? Any success fees sizable enough that we should know about them in the fourth quarter?

We did have success fees in the fourth quarter. You know, they would not be material enough to want to comment on.

Okay. That's helpful. Thank you, all.

Great.

And we will take our next question from [Alan Kurtz] of Lord Abbott.

Hi, guys. Another great quarter. Thanks, again. Most of my questions have been hit at this point, but the one I didn't see in your prepared remarks, where are your DSOs at the end of the year?

78.

78.

78, all right, (inaudible). And the other thing would be just I know in Strategic Communications, for example, a lot of the work is retainer based, but if you're getting this level of demand within that area and a couple of the others, what kind of pricing are you able to take on a YOY basis?

Well, they typically are on fixed price, and they're able to raise, like the rest of our companies, their prices, again that 7% to 10% that we look at each year, they're consistent with the rest of our practices.

Okay. And [Interphone] started to hit on this earlier, actually. You had a big spike in headcount in a couple of the different areas at the end of the year. You said you see a lot of the headcount in the year coming on through the restructuring unit. But how do you see that playing out sort of through the year, like on a quarterly basis?

Well, we don't -- we have hiring targets and we also obviously have to meet our demand, so you would see it -- the hiring budgets are for a fairly even growth through the year, but remembering that all the kids that we get, all the people out of college, would come in the September timeframe, so that's where you'd see a little bit of a spike.

And that's predominantly the Corporate Finance and the SLC practice, that they'll hire them as they come out of school, and they'll start in August, September.

Okay. Got it. Thanks a lot.

Thank you.

And we'll take our next question from Jim Janesky of Stiefel Nicolaus.

Jack, when you were commenting on the seasonality of the first quarter, did you say that it -- that we could expect that revenues could be down sequentially or just EBITDA? I didn't catch that part.

Yes, it's not unusual to have just a tiny bit smaller revenues in the first quarter than in the fourth quarter. It's a seasonal pattern we've seen year after year. The business kind of plateaus, and you do a lot of ramping up in the fourth quarter to look at your year, and that's what happens, you start off coming back from the holidays, and then it begins to build, and then in your second quarter you really start knocking the cover off the ball.

Sure. Well, now last year that didn't happen, except for in -- at the -- we're already into February here, is that something that you could expect in -- for this quarter, you know, based upon the demand, the strong demand that you're seeing across the board?

Yes, we're just trying to give people a heads up on their models for what we've seen for the past couple of years. The, again, we're talking about amounts that are almost too close to call, so I would say that be aware of that for your model, but that it wouldn't be anything to worry about.

Okay. Now, looking at the organic growth rate for 2008, you know, obviously, on a billion dollars, a lot of companies would like to have organic growth rates at the amount that you're projecting. How much of that are, you know, really has to, is really on the [come] versus I know you don't really have backlog per se, but when you're looking at that I mean do you think the momentum of the business is pretty, you know, you're confident that it can sustain that level of organic growth, or is there still an amount of selling that's involved or marketing in order to hit those targets as we move throughout the year?

Jim, it's Dennis. Number one, I think you have to look at the fourth quarter, fourth quarter over third quarter. I mean there's good sequential growth, fourth quarter to third quarter as well as obviously tremendous YOY growth, fourth quarter to fourth quarter.

I think that to go back to your earlier question, you know, we're, as Jack said, we're trying to enlighten you to the seasonal patterns. We're not trying to predict that we would necessarily be down. You know, obviously, we are aware of the momentum that's there, we're just trying to be honest in what the history has looked like.

I think on the organic growth, we are very busy, we have a lot of engagements. The engagements are picking up, not declining. As Dom talked about on the restructuring side and we've talked about how sticky technology is per se, so that business doesn't tend to reverse itself easily, it's more sort of incremental.

FD is another good example where first quarter, you know, again tends to be a more stable quarter for them because it's more of a work product type of quarter rather than new company business, but they again are a retainer based business so most of their work they have good visibility on.

So I would say we have pretty good visibility going forward. We are still an event driven consultancy, so we live and die with new engagements as they come forward, but given the technology portion of the tech business, the retainer portion of the FD business and then, of course, simply the momentum that we're seeing in some of our other businesses, we feel pretty good about the trajectory.

And typically in the past the restructuring cases and bankruptcy are longer term engagements so they do build-up.

Sure.

We had 90 at the end of the third quarter, we now have 108, those don't go away in three months like some of the litigation cases do.

Right. And if you look across the practices, (inaudible) elephant hunter, so the larger cases that often last longer, now, particularly (inaudible) certainly can settle at any time but our experience is that these litigation cases and ECON cases and the restructuring cases, they may last anywhere from three months to 24 months plus.

So given the momentum that we've got and the cases that we've got in-house over the last quarter, we're relatively comfortable that ['08] will be a pretty good year, and the cases aren't going to settle overnight, and given that the cases that have come in have been across all practices, the risks of a tremendous drop-off are less, but anything can happen.

Okay. Sure. A question for Jorge, when -- since you folks have modeled in the incremental acquisitions, you know, about another $60 million to $70 million in -- for the balance of 2008, we obviously want to take into account that upfront amortization. Can you give us an idea of what the incremental amortization versus, you know, will be? You reported about $2.8 million in the December quarter, is that going to be $1 million a quarter in incremental amortization or more?

Without the acquisitions the amortization will be pretty similar to what it was last year, and with the acquisitions you could see us a little more than doubling.

More than doubling, okay, so and that is acquisitions in hand and that you've modeled; right?

About a million dollars a month for acquisitions that we would expect to be announced in the first quarter of incremental amortization, but that should -- that based now, on $90 million to $100 million of revenue. I'm not sure where the number $60 million you gave came from?

I think you were taking the number that we had said were those original four that we've announced, and then --

Yes, that's right. You said that was about $30 million, $35 million, so you're obviously very confident that you'll be announcing between another $60 million to $70 million that will affect calendar 2008. Yes, that's, that was the number I was talking about.

Got it.

Okay. Thank you.

And we'll take our next question from Scott Schneeberger of Oppenheimer.

Thanks. Good afternoon, and congratulations.

Hi, Scott.

Hi, Scott.

Hi. First question, in the Economic Consulting Group the outsource consultants, who are these folks? Are you getting them from competitor firms, are you getting independents? Are these people that you might be hiring on, since obviously the demand is robust and in-house you currently don't have enough? When do you think that that will balance off?

They are high level testifying experts. They would be normally fairly well known academics who are actively teaching. They would be working with our researchers, staffers, model builders, you know, who are doing the analysis, building the models, building the case, and they would be ones who will be assisting sort of some of the rock stars in their testimony work, or actually doing the testimony themselves.

Predominantly right now the demand for these individuals has been in our West Coast operations, so they have actually been somewhat West Coast centric. And, yes, we're talking to them constantly about recruiting them, coming in, things like that.

It's not unusual, that's the way we get our people, is they want to associate with people like [Bobby Wilig], and [Jana Shorthover], and [Dan Fushell] and Dennis Carlton, and [Meg Garen Calvert], and [John Worzag], and when they come in they find they like it here, and it becomes a very easy model for them to hook-up with.

I think it was a confluence of demand that surprised us in that we were literally being named on all sides of every conceivable permutation, and in order to create teams that could be Chinese walled off we were having to bring other people in, and the margin that you get on the people that you bring in is clearly not as great as those who work for you, but I think we are actively trying to recruit some of them and some of their colleagues to join us.

Sure, and it sounds like a high class problem, but do you think will we be seeing this in forward quarters or are we getting close to having it remedied?

I think you can see it continue in the first quarter, although without a doubt we're working hard to take steps to increase the capacity. I think you'll see it abate going forward because it will have been successful over our efforts in the next quarter, in the next two quarters to bring in more capacity.

Okay. Thanks. Moving over to the Technology Consulting space, you know, it's fairly fragmented. We talked earlier about a lot of new entrants there. Could you give us an idea of the -- I think, Jack, you referred to the top 200 law firms, how many of the competitors are serving them? Is that very fragmented, or is it just a few? And then just kind of high level thoughts on where you see this industry two to three years from now? Will there be a lot of consolidation and just a few large players or still widely scattered? Thanks.

Yes, my view of that is there are probably ten people that we watch in the different categories. We very closely watch the top ten lists to come out. The surveys that are done continually of who do the litigators like, who are they using, who is the installed base in the law firms.

And I think there, absolutely you will see consolidation, you will see the big enterprise software players want to acquire these firms because they want to get back to the source. By getting the attorneys and the legal departments they get the entire companies for their software suites, and that's what they're after at the end of the day, I believe.

So it's a [Galpin], which is an industry analyst that tracks these things and sort of runs lists, but does have some pretty good research. If you want to access to that, if you want to call us offline we can do that, and clearly they were the firm that picked us as the top one in all capabilities last year, so I don't mind giving you that resource.

Okay. Thanks. Appreciate that. One final one, if I can? Obviously, it was in the third quarter, and I imagine you did it again, but and I think I read that, infrastructure and branding spending, something that you've been pushing on, obviously a great global operation you have, how aggressive are you going to be in '08, can you talk about what percentage of --?

I think -- it's Dennis, again -- I think that what -- we will continue to do that, and I think that what you'll see is that the overall percentage of SG&A as a percentage of revenues will decline slightly. The actual spend on marketing brand building, you know, as a percentage of revenues will be pretty constant, so it will increase in absolute dollars, stay about a constant level for this year. We just think it's very important, especially building this platform overseas that we continue to drive home the capabilities of the brand, the depth of the brand, and the reach of the brand, and so we can't back off of that. We know we've got to keep the expense basically within the same proportions that we experienced last year.

Great. Thanks very much.

Good. Thank you.

And we'll take our next question from Tim McCue of William Blair & Company.

Yes, just wanted to ask about the unannounced or uncompleted acquisitions at this point. Can you give us an idea of what segment you had hoped to complete those in as we complete our models, as well as the annual EPS accretion you mentioned from acquisitions, how much of that would be from stuff not yet completed?

Well, I think what we've -- we really can't disclose those for obvious reasons, and we only really have about four quarters left in the -- four weeks left in the quarter, so we expect to get these things done in a pretty timely manner.

Yes, I think the numbers we're willing to talk about right now is the per share numbers that we've disclosed, that would be what this year after the amortization would contribute, and that's in that $0.14 type of range that we talked about. After that amortization burns off then we would be looking for more of a $0.40 annualized. And I think, I mean I'm not trying to be sort of cute, but I think really we'll put out a lot more information on them in the next four weeks as you see us making these announcements, and I think it would just be unfair to the companies to maybe shed some light on them when the deals aren't 100% finished yet.

Okay. And then looking at the margin expansion that is embedded in your guidance, you mentioned SG&A is down slightly so that implies some nice improvement in your gross margins next year. What is -- what's driving that, is that utilization improvement, a revenue mix shift? Any comments there would be helpful.

Could you repeat the question?

Yes, you were breaking up a little bit. I'm sorry.

Oh, I'm sorry. EBITDA margin expansion that's embedded in your guidance, it's been pretty nice. You mentioned SG&A would be down slightly, which implies pretty solid gross margin expansion. I was just wondering if you could comment on what you feel the drivers of that were?

There's a couple drivers. I think as Dom said, you know, clearly as we anticipate utilization going up in some of the areas that drives better margin, more profitability. I think the acquisitions that we are acquiring, number one, in their own right have a higher EBITDA margin right now than we do. And then, number two, they are in areas that do not require significant incremental expense to support them, so on an operating leverage basis we, again, once we get through sort of this artificial write-off of the intangibles we see significant leverage.

So it would really come from a combination of controlling the cost on an absolute basis so that the percentage goes down as the revenues go up, and that's just general SG&A. Number two would be higher utilization in some areas that simply give us higher margins. And then, number three, of the $120 odd million of revenue that we're acquiring on an annualized basis the margins are, one, higher than ours in the aggregate and, number two, the support that we need to give them, given the type of acquisitions that they are and how they'll fit into the organization is not significantly incremental.

And, also, we're always looking at ways to reduce costs in the duplication within the practices, between the practices and Corporate, et cetera. We've got a project going on now that we'd hoped to eliminate some of the redundancies that there may be in some of the support areas.

Okay. Thank you.

And we'll take our final question from Dan Suzuki of Merrill Lynch.

Yes, good afternoon. Just a couple of questions here. I wanted to better understand the forensic and litigation, the slowdown you saw in revenue growth there. I understand in the press release, in the prepared remarks, you talked about the large amount of options backdating work you did last year, but is there anything else? Are there any particular segments that you're seeing slowness in?

Well, number one, the $50 million, we did about $52 million, I think in the fourth quarter of 2006, and that was a -- "the" record quarter in this Company for forensic and lit that we had ever had, so we were lapping the highest quarter we ever had, so just on a pure comparison basis, Dan, it was just a tough quarter to lap. And that was, in all honesty, driven by artificial demand from our clients to get the stock option backdating over so they could quantify the hit, if any, put it in their P&Ls and get their audited reports done.

You know, I think without a doubt, as we've been saying all along, we did not see any huge assignments coming in the first half of the year. We thought it was somewhat of a sluggish year. We were doing all right, you know, low double-digit growth, and I think that that continued into the third quarter. I think but for the fourth quarter tough comp it would have been, again, low double-digit growth.

And I think that we are now beginning to see the larger assignments come in, although they did not have a significant impact in the fourth quarter, these will be foreign practice cases of which we've gotten quite a few. A lot of those are teamed between the Technology Group and the Forensic Group. Technology goes first and brings in an awful lot of the information, hosts it, harvests it, silos it, organizes it, and then the investigators from FLC get involved and do a lot of the forensic type of investigation.

So we're seeing a lot of [Forensic] practices activity, and we're beginning to see the beginnings of credit crisis oriented type of work, the high stakes securities potential litigation, obviously, we've talked about hedge fund investigations, and I think we're starting to feel the pick-up, but it wasn't there enough -- [my sense from this] it is just beginning and it didn't mature enough in the fourth quarter to overcome a very difficult comp.

Okay. That's very helpful. And then on the Economic Consulting side, just trying to reconcile the lack of capacity you had to fulfill the strong demand you had there, with the utilization rate flat YOY and down sequentially by 6 percentage points, I'm just trying to reconcile?

It's a function of where utilization is, so if you can think of a theoretical case where you bring in an expert, and we have one of our experts working, we have a whole team of people doing a lot of the work, if it's going to mature to where you have to start doing a lot of the testifying work, the actual team, so your younger people, may have been finishing their work and their utilization might slack-off enough. Your experts might have utilization up around 100%, 110%, 120% because that's the time where they really have to get involved in sort of the personal activity or the interaction between the regulators, the Commission over in Brussels, DOJ here, or in cases of litigation it could be a courtroom.

So a lot of it is simply how the work flows in the mix. So if we would segment that and break it down you might see some quarters where the experts would have utilization that might be down in the 70%, you know, 60% range, and your staff would have utilization up at 100%, and then it could flip the next quarter depending on the maturity of the actual case to where the experts are up in the 100s and the staff back-off. And I think it was just more of a quarter anomaly where we just literally had to have a lot of people who were "expert status", where most of the modeling research work had already been done, and it just, you know, it'll -- I can tell you already it's equilibrated.

We also brought in about ten additional hires in the fourth quarter in ECON.

Right.

It takes awhile --

In the research side, yes.

-- right, and that turned right around the first quarter.

Yes.

Okay. That makes a lot of sense. And then on the communications side of the business, the bonus plan, and pardon me if I missed this, is that a onetime catch-up?

No, it's an annual plan, so the margins that you saw in the fourth quarter were pretty much right on the same margins you saw in third, second, and first, and that's what we would expect going forward. There was no bonus plan in the [stub] period that we owned the company in 2006. We put it in for the first full year in 2007, and that plan will stay in as it is, so you would expect to see margins next year the same that you saw in the trailing four quarters.

Okay. And then so it's going to be a fourth quarter event?

No, no, no, no, no.

We're saying it was reflected this year for the full year.

Okay.

Each quarter.

Right. That makes a lot of sense. And then one quick question for you guys, the growth rate, do you have any idea how much FX impacted the growth rate?

Very small, it really wasn't very significant.

Yes.

Okay. All right. Thanks, guys.

And that does conclude the Q&A session. I would now like to turn the call back over to Management for any additional or closing remarks.

Okay. Well, again, I'd like to thank everyone for being with us. We wanted to use this time period to be able to give you some time to digest what was a fairly full and frank disclosure of all the things we have going on. We're very optimistic for 2008, and we look forward to speaking with you after our first quarter results, if not before. So, with that, thank you very much, and we look forward to talking with you.

And that does conclude today's conference. We do appreciate your participation. You may disconnect at this time.