FTI Consulting Inc (FCN) 2008 Q1 法說會逐字稿

Good day, and welcome to the FTI Consulting conference call. As a reminder, today's call is being recorded.

For opening remarks and introductions, I would like to turn the call over to Mr. Eric Boyriven, of FD, please go ahead, sir.

Good morning. By now you should have received a copy of the Company's first quarter 2008 press release. If not copies of the press release can be found it 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 the site for 90 days.

Your host for today's call are Jack Dunn, President and Chief Executive Officer, Dennis Shaughnessy, Chairman, Dominic 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 actually results will not differ from the Company's expectations. The Company has experienced fluctuating revenue, 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 year-end 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 and Exchange Commission.

I will now turn the call over to Jack Dunn, President and CEO of FTI. Jack, please go ahead.

Thank you very much. Thanks to everyone for joining us on our 2008 first quarter conference call. 2008 is off to an excellent start. Not only was the first quarter extremely satisfying from the perspective of our financial and operating performance, it was also a period in which we made very significant process in furthering the strategic development of our business and it's platform. Year-to-date we have made nine acquisitions that are consistent with our strategy to capitalize on our global platform by expanding our services in to new markets.

Several of these will also enable us to build the framework for a new global practice in real estate and construction, to take advantage of the impending issues in those industries. While not strictly a first quarter event, we have also recently completed the development of our new business plan for the next five years, having achieved the key elements of our initial 5-year plan in 2007, two years ahead of schedule. I will share with you, the key components of FTI 2012, our current plan later on in the call.

First however I would like to give you the highlights of our performance in the first quarter, and the drivers which shaped that performance. Revenue EBITDA and net income in the first quarter were the highest for any quarter in the history of our Company. These records are particularly notable in that they came in a quarter that is typically our least profitable, because of the burden of payroll related expenses.

Revenue in the period was $307.1 million which was an increase of 35% over the $227.7 million that we reported in last year's first quarter. Organic growth in the quarter was excellent at almost 30%. As you will remember, our organic growth last year was running at 24 to 25% in the second half.

So our underlying growth in Q1 was consistent with that pace. As we discussed at our last conference call, we were seeing accelerated demand from the global credit crisis, and this was certainly the case in the first quarter. Our business benefited from an environment of very strong demand, supplemented in some cases by very significant engagements that either came in or scaled up during the quarter. In particular, our technology segment had a tremendous quarter, including intense activity in two very large short-term cases.

Corporate finance continued to show significant growth, and had the benefit of several success fees confirming the business model for the healthcare sector of that business, which is retainer fee plus success fee based. These tend to be slightly fourth quarter and first quarter weighted depending as they do on measurable benchmarks that typically take several months to occur before you can recognize the success. The first quarter effect of these two large cases and the success fees was approximately 200 to 250 basis points improvement in our margins. We expect our margins to return to more normalized levels for the remainder of the year.

Profitability in the quarter was excellent. EBITDA was 68 million up from 44.4 million a year ago. The EBITDA margin was 22.2%. A meaningful improvement from 19.5% a year ago. Our robust margin in the quarter was a function of the outstanding performances of technology and corporate finance, combined with the high revenue rate which levered our overhead expense.

These serve to offset the typical first quarter burden of front-end loaded expenses for such things as Social Security, 401-K matches, discount on our employee stock purchase plan, and the timing differences between annual salary increases and the associated billing rate adjustments.

We reported earnings per diluted share of $0.59, an increase of 64% over last year. This again despite a headwind of a 25% increase in the share count, from the secondary offering we did in October, plus the shares we issued in connection with acquisitions, option exercises, and share-based compensation.

Net income of $31.3 million was also a record. From a talent standpoint, we had a productive period, adding over 400 revenue generating employees so far this year. Our attrition rate in the first quarter was 3.4%. Or an annualized rate of 13.6% still one of the lowest turnover rates, if not the lowest turnover rate in the industry.

This excellent performance in terms of growth, profitability, expansion and retention, demonstrates the true differentiation of FTI in the market place. Our intellectual capital, our broad array of diversified services and our propriety technology all of which are enhanced and accelerated by our global network. A network that we are committed to strengthen and expand. Nothing demonstrates this differentiation of strength better than the recent global credit crisis, where all of our businesses collaborated, to anticipate and surround the issues, and to provide clients with a vital service domestically and around the globe.

Beyond our operating results, the quarter was also significant for the nine acquisitions that we have announced to-date, that increase our geographical and service breadth. We went into detail about them on the conference call on April 1, so I will only discuss them them briefly when I talk about the segments. But the bottom line of it, is that they served to advance our strategy across several different dimensions.

We have created the platform for our new real estate practice, that we expect to thrive in the current and future environment. We extended our FLC practice into London, one of the world's largest and most important financial and business centers. established our initial presence in the European political and regulatory hub of Brussels, built on our expanding business in China, Latin America, and the U.K., and augmented our capabilities in important areas for us, such as eDiscovery. Most of these acquisitions occurred late in the quarter or shortly after the end.

We would expect them to be meaningful contributors from this point forward, as we have stated generating revenue of approximately $100 million, and earnings per share of $0.12 to $0.16. As significant as all of these transactions are, we want to be clear that this is just the beginning of an ongoing process and will continue. Adjusted for the purchases which closed after the quarter, we have as of April 30, approximately $150 million of cash on our balance sheet, and $150 million of available credit on our bank facilities. This combined with our normal transaction structure, which also utilizes equity and performance components, gives us more than adequate resources to pursue strategic acquisitions.

Now I would like to provide some color on the segment performance. As I mentioned technology had an excellent quarter and was the largest contributor to our growth. Revenue in the period was 56.5 million, an increase of 71% from $33.1 million a year ago. In addition, EBITDA more than doubled to $23.3 million, from $10.6 million in the prior period. The margin rose significantly to 41.3% in the first quarter, from 32.1% last year. While continuing strong organic growth domestically and around the world, the segment also benefited from work on two very large short-term cases.

FTI has a differentiated value proposition of domain expertise in key verticals, such as pharma, financial services, hedge funds, banking, and private equity, combined with the ability to process massive volumes of data. We call this our financial and enterprise data analytics. This has increasingly distinguished us, and made us the partner of choice for assignments such as these, which brings with them highly profitable software licensing and processing fees.

This favorable revenue helped drive the expansion of our margins in the quarter. We will be continuing to develop, partner, and acquire additional products that augment our existing suite, adding to our propriety intellectual capital. The technology segment continued to develop it's indirect channel strategy to leverage it's traditional direct sales model, and signed eight channel partners during the quarter.

Finally demand is increasing from Europe and Asia, due to greater market awareness of FTI's global presence. The opening of a European network operating center in the second quarter of last year, and our reputation for managing large and complex multi-national cases. Being a global player, and part of a consulting firm with a core competency around litigation matters, puts our technology offering in a different category, from companies offering a standalone technology solution.

Our technology segment also made it important acquisition that of Strategic Discovery, Inc. which furthers our business in several important dimensions. SDI gives us a significant presence in the northern California market, which will help us to better serve clients there, and will act as bridge to Asia. Where we can leverage their on-going work with clients, to extend other capabilities into that region. Furthermore, SDI will accelerate our expansion into the corporate market place for eDiscovery products and services, an important source of new opportunities for us.

Corporate finance restructuring also had an excellent quarter, maintaining the momentum that had started to build in the second half of last year. Revenue in the quarter increased 28% to $79.3 million, from $62.1 million a year ago. While EBITDA rose 47% to $21.9 million, from $14.9 million a year ago. Margins expanded 360 basis points from 24% to 27.6%, as it was able to realize higher billing rates, and record a number of success fees.

The segment was busy with restructurings in the subprime mortgage, financial institution, and housing related, primarily homebuilding sectors. In addition, as the credit crisis matures it's impact has spread to sectors that are affected by the reduced value of housing stock, such as building materials, retail, consumer hardlines and monoline insurers. Most recently we are finally seeing a tipping point with gasoline at $4 a gallon. As consumers must decide whether discretionary dollars go in to travel, leisure, gambling, new clothes, and consumables, or go in the gas tank. Those industries will be challenged for some time to come and we anticipate being active for the foreseeable future.

As mentioned the healthcare practice within core fin had a very good quarter, where it was active in restructuring and consulting engagements, particularly in the areas of managed care. While it did not close until early April, the largest transaction, we have done this year was the acquisition of the Schonbraun McCann Group, the leading consultant to the real estate industry. SMG puts us squarely in position to be the preeminent advisor to the real estate industry, an area where we see a tremendous amount of opportunity. SMG will collaborate with our construction industry practice, and a group within our corporate finance practice, that has historically been the leader in serving financial institutions, structured finance companies, and real estate companies in their restructuring needs.

Strategic communications reported another excellent quarter, with revenue rising 42.9% to $54.6 million, from $38.2 million a year ago. Segment EBITDA increased to $12.7 million, or 23.2% of revenue, from $10 million, or 26.1% of revenue last year, reflecting a greater proportion of pass-through revenues in the recent quarter compared to a year ago. The Communications segment had good growth in retained revenue, especially in contributions from the businesses it has acquired over the past year, all of which are meeting or exceeding expectations.

The high level of M&A and other capital markets translated-related engagements, that was prevalent a year ago has in fact subsided, but FD has successfully replaced that work with consulting engagements to clients that are being affected by the global credit crisis. FD and the other FTI segments, primarily corporate finance and FLC, are doing an increasing amount of joint work with clients, who require investigations, performance improvement, and advice regarding strategic alternatives. We are delighted that the level of collaborative pitching continues to increase.

Within our communications segment, we purchase Brussels-based Blueprint Partners in the quarter, the leading public affairs, policy, advice and strategic communications consultancy in that market. Having a presence in Brussels has been a long-standing ambition of FTI, and we would hope to continue to develop Brussels, as an important hub of intellectual capital for all of the Company's activities.

Revenue in FLC increased 10.8% to $60.3 million, from $54.4 million a year ago. EBITDA at FLC was $14.7 million, compared to EBITDA of $14.1 million last year. As a percentage of revenue, the segment's fourth quarter EBITDA was 24.3%, compared to 25.9% in Q1 '07. The global business intelligence and investigations practice which was formed last year, continues to perform extremely well especially in Asia and Latin America. Reinforcing our decision to invest significantly in both markets.

To take further advantage of the Latin America market opportunity, we are in the process of building out an office in the south Florida region, which will house all of our practices and positions senior executives to be at the frontline of that emerging market opportunity. In general, we remain very optimistic about prospects in 2008 and beyond. As the global credit crisis and turmoil in the credit markets has started to provide multiple engagements, and is yet in the early stages.

Issues involved will include valuation of complex financial instruments. Financial statement reporting and investigations in the business practices, all key areas of expertise for FTI. What is more, our global footprint uniquely positions us to support clients on these matters, regardless of where they occur.

During the quarter, we purchased several firms within our FLC practice. In addition to SMG, we built out our capabilities in the real estate and construction sector, with the acquisition of Rubino and McGeehin consulting group based in Washington D.C. and London-based Brewer Consulting. As you will remember, SMG will be in our corporate finance restructuring practice, so we look for a significant amount of cross-segment collaboration there, as we build a virtual practice in real estate, construction, and related financial practices.

These are very timely acquisitions we believe, as the real estate and construction cycle is clearly maturing, and government contract compliance issues are becoming more critical. We will be positioned with the strongest and broadest capabilities to protect our clients, in what could be a much more vibrant, contentious and unfriendly business climate going forward. We also acquired Forensic Accounting LLP, or as we call it FA, the preeminent London-based independent forensic accounting firm. FA gives us the long-desired solid foundation in London, to provide a great European hub, that ties to our practices on the Continent, in the U.S., South America, and Asia.

We also acquired Thompson Market Services which offers a full range of intellectual property and brand protection solutions in China. TMS complements our existing computer forensic and financial investigation capabilities in Asia, to give us greater coverage of China, to better protect the patent, copyrights, trademarks, and other intellectual property of our clients in that market.

Finally, we purchased TSC Brazil, the leading computer forensic and IT security consultant in the Brazilian and greater South American market place. TSC will be part of our international risk and investigations practice, and will extend our eDiscovery and technology capabilities into this large and dynamic market, where we are experiencing accelerated litigation, dispute, due diligence, anti-money laundering, and foreign growth practices act activity.

Economic consulting saw it's revenue increase a very robust 41% to $56.4 million, from $40 million a year ago. EBITDA in Econ increased 19.9% to $13.3 million, from $11.1 million. Margins were 23.6%, compared to 27.7% EBITDA margin. While still very strong, we are effected by the expense associated with hiring a big-named economist while his practice ramps up, as well as higher equity based compensation expense due to the rise in our stock price.

The credit crisis continued to benefit economic consulting, as the strong revenue growth was caused by credit and liquidity issues in addition to strategic M&A assignments, in sectors such as financial services, hospitals, airline, and internet IT. The segment's revenue performance was also due to financial consulting engagements relating to transactions in which private equity buyers had been unwilling or unable to consummate acquisitions at originally agreed prices, and increasing frequency of private actions against companies and Boards, of Directors, alleging various results of credit crisis and liquidity, and lack of confidence.

Now I would like to discuss our plans for the next five years, and where we intend to take the Company. When we achieved our 2009 business plan last year, fully two years ahead of schedule, we naturally had to go back and create a new one, that would take us into the future, and excite not only our shareholders, but our employees.

After a significant amount of analysis of our markets, our internal capabilities, our international opportunities, and our financial resources over the past weeks and months, we recently completed our FTI 2012 plan, that covers the ambitions of the Company for the next five years. The process included all of our segments, dozens of our leaders, formal surveys, and input from our clients and potential clients, and it culminated in our recent senior management meeting with almost 100 of our top leaders from around the world. We are focused on delivering the plan. And as you have seen from the first quarter's results we are off to a strong start.

I would now like to share with you the key components of the plan. We intend to be the gold standard brand in the world, and employer of choice for what we call event-driven consulting. We will achieve that goal through, continuing to expand our global footprint, we have made enormous progress during the past few years, but we need to continue to fill in our various services in all of the key markets around the globe.

Developing new products and services, for example, the acquisition of FD 18 months ago, creating an entirely new segment within FTI, and with the recent acquisition of the Schonbraun McCann Group, we created a new real estate practice to better serve clients that in that industry, and the real estate issues faced by companies in general. Increasing our penetration of the corporate market we are extremely well-placed with the intermediaries, who bring us into engagements, such as law firms and private equity players, where we believe we can have a more significant entry to corporate executives and Boards that can hire us directly. The acquisition of SDI is a great example of that.

Building our brand. Every day that passes FTI Consulting is touching more and more people in more places around the world. We intend to focus very strongly on building that brand awareness, and strengthening it's positioning around the world over the next five years to achieve gold standard status, and awareness of everything we do as a Company. We also intend to personalize that brand awareness, and experience, for each and every one of our employees, because it is they more than anyone else who exhibited their confidence in this Company through their efforts and dedication.

Finally, insuring that our acquisitions are integrated properly each and every time, focusing on building one Company with one mission, maximizing the cross-collaboration between all of our business segments and all of our geographies. What this means from a financial standpoint is that we intend to be a $2.5 billion company by 2012, through organic growth, supplemented by strategic acquisitions that extend our geographical reach, and broaden our service offerings.

Because of the huge opportunities that we see in international markets and the steps that we have and will take to build our presence internationally, we expect that between 25 and 35% of that $2.5 billion revenue base will come from markets outside the U.S. As we are always mindful of profitable, we are targeting EBITDA margins of 25% excluding the FAS 123R option expense.

Finally as you would expect from us, we intend to maintain a very strong balance sheet. We think this plan hits a proper mix of ambition and achievability, for us to continue to generate attractive returns to our share holders, and we intend to work very, very hard to achieve it.

Now a few words about our outlook. As you know, the Company's long-standing policy is not to provide formal updated guidance including a full analysis, until the end of the second quarter. This enables us to have a more detailed understanding of the trends for the year, and the underlying factors affecting performance, and what might have changed from the work that we do extensively at the end of the year to put forth our guidance.

Consequently we will be providing such formal updated guidance at the end of the second quarter as usual. However, notwithstanding this fact, and based on the performance from the first quarter and the visibility that we have from here, we did want to make some comments on outlook for the year even at this early stage, since certain indicators are already emerging.

In brief, we expect organic growth in the 20 to 27.5% range for the entire year. And are comfortable in saying that we now expect revenue to be in the range of $1.3 billion to $1.375 billion. We also anticipate earnings per share will be in the range of $2.50 to $2.63. Incorporated into this informal outlook is the expected contribution of approximately $100 million from the acquisitions we made in the first quarter, and just after as we discussed.

We are retaining our previous guidance for EBITDA margins of share count, and we now expect our tax rate to be 39.6% for the year, compared to 44% in the first quarter last year. And remember, there was a one-time catch-up benefit in the second quarter last year as you do your models. Keep in mind, that we expect to experience our usual seasonality in margins, notwithstanding the exceptional performance in the first quarter. So you should adjust for our outperformance as it were in Q1, and expect us to have our more usual margins for the rest of the year.

To conclude, as you can see, the first quarter was one of the most successful in the history of the Company on almost all fronts. I can't help but say it is a tribute to our people, the intellectual capital, and really the expansion of our global footprint, which gives us a tremendous amount of range of options, as we prosecute our business around the world.

We begin 2008 with a tremendous amount of momentum, and a strong financial position to fund our ambitious plans. We are embarking on a new 5-year plan that has been rigorously planned, endorsed by our people, and we believe is realistically achievable. We are optimistic, we embrace the future. We are focused and determined to indeed become the world's leading provider of event-driven consulting.

With that, I would like to turn it over to your questions.

(OPERATOR INSTRUCTIONS) We will pause for just a moment to give everyone an opportunity to signal.

We will take our first question from Arnold Ursaner with CJS Securities.

Good morning.

Good morning.

Jack, thank you for the very thorough rundown. A question about your plan, 2012 you obviously are including a combination of organic and acquisitions. Can you give us a sense of obviously the 20 to 27% organic growth is probably not overly sustainable. Give us a feel for what is organic--?

Arnie, could you speak up a tiny bit, I am having trouble hearing you?

Could you kind of a little more about what organic growth is embedded in that?

Yes, it is Dennis, Arnie, let me take that. If you think of the plan obviously having it's inception being this year as follows, if we end up the year, at about, we will split the range and say $1.350 billion for revenues for the balance of this year.

If you look at the run rate, given that we don't have the acquisitions that we have acquired already for an entire year, you are at about $1.4 billion run rate. So the math works something like this, if you are at a 1.4 billion run rate at the end of this year, if you grow over the next four years, the remaining four years of the plan at 11.5%, organically, that would take you up to like 2.1 to $2.2 billion. We would look to acquire over the next 24 months, another $200 million in revenues and businesses strategically placed around the world. And we would expect that 200 million to obviously grow faster than the mothership at 11.5%. So that math would pretty much take you to the 2.5.

So baked into the plan, after this year, given this year, that the numbers are going to be very high. 11.5% assumed organic growth rate for the remaining four years. The acquisition of about 200 million of revenues, in say the next 2.5 years, and then a higher growth rate on the acquired revenues it would round it up to 2.5 million. Clearly if we experience organic growth rates that we have been seeing over the last three years, which are much higher than 11.5%, will hit the plan faster, but that is our basic assumption.

Just one minor issue on the forensic and litigation consulting. That seems to be an area where activity seems to be very robust, and yet your margins there, and rate of growth were a little slower than even some of your other businesses. Is there some factor holding back that business in the short run?

No, I think we have received a fair amount of engagements. I think there tends to be lag between when you're hired or when you are clearing conflicts with people to start to begin work on these. And when they really start heating up to where you are billing a lot of hours. I think what we are seeing at least in our shop there, as far as the litigation support, I think it is sort of a lag period.

And I think you would probably see a more robust second half there, the investigative side is actually very busy as Jack said. We are very busy in Asia. We are very busy in Latin America. And so I think that we would say stay tuned. You should see better numbers in the second half.

Arnie, we have got a lot of medium sized litigation cases that we are involved in, but it is really the mega-cases that we are not seeing at this point, where we can put 20 to 30 professionals on them that has really driven some of the successes that we have had in the prior years. Right now we are doing a lot of blocking and tackling, and just waiting for the larger cases to come down the pike.

I think as we look and test the bellwethers for that business, our performance is very good compared to others. I think it is a tribute not only to the quality that we have in the division, but also to the fact that through the global footprint we have been able to go to where the action is, and I think that that is a differentiator for us and an advantage in the market place.

If I can ask one more real quick question. To achieve your longer term plan what sort of head count growth do you believe you need over the next four years?

At a minimum it would be on the -- for the internally generated business it would be somewhere around that 11 to 12% minimum amount. Kind of ameliorated by the fact that we continue to see our scalable businesses, such as communications and technology growing. So we can do a little bit less in head count and a little bit more in terms of scalability. So around that level is a good healthy level for us.

Thank you very much.

And we will take our next question from Andrew Fones with UBS Securities.

Yes, thank you. I was wondering if I could go into a bit more detail on the guidance. Could you give us a sense of what you are assuming for depreciation, amortization and interest expense for the year? Thanks.

Andrew it is Dennis. I think as Jack said in the speech, we have always found that it makes sense for us to review guidance after we have two quarters of data to look more at cost trends, margins, pricing, plus having the visibility of the last two quarters. So we felt that we had to acknowledge the obvious impact of the first quarter on the overall plan.

That is why we tried to share with you our outlook. But we really think it is the smartest thing for us to do is to wait until we have another quarter to go into a deeper dive, and at least to share with you guys our feelings on margins, cost trends and the final visibility. So we are not going to talk about that.

Okay. In terms of the end of quarter head count. Can you just walk us through what acquisitions were included, and then the acquisitions that aren't included what impact they will have on head count? Beyond the end of March? Thanks.

If you look at, we gave you the total head count as of May 1. If you see in the press release it was 3,094. Of that we have had approximately 445 people came to us during the period through acquisitions. And the rest of the growth would be from just our normal hiring and practices. And of course that was all augmented by the fact that we had a tremendously low turnover rate. The nice news is that people are not in any hurry to leave FTI. It seems to be a pretty good place to work.

But if I look in detail, is it just SMG that is not included in these quarter end head counts, or were there any --?

SMG is not in the first quarter but they are included in the May numbers we gave you, and forensic accounting is not included either.

The FLC acquisition in London.

Okay. Thanks. And then just a quick final one, you gave us the margin impact in the technology division for the two large contracts, thanks for that. Could you give us the revenue impact as well. That is all, thanks.

Because of the sensitivity of the engagements we really don't break out individual revenue impact. I think it was the profitability of them that helped shift the first quarter in to such a large EBITDA improvement, and we thought we needed to show you that, in order to make sure that you understood why we felt our margins for the balance of the year would be normalized. So we don't give out individual revenue guidance, sorry.

Okay. Thank you.

And we will take our next question from Brandt Sakakeeny with Deutsche Bank.

Just again on the margin question, did you say 250 basis points of success fees in the quarter, or was that related specifically to the technology? And then as I look to the second quarter, traditionally you have about 100 basis points of leverage, 1Q to 2Q, as you get through the Social Security and the 401k stuff. Are you saying the second quarter should be flat with the first quarter because of that? Or should be up traditionally because of the seasonality?

Yes I would say, we would expect the second quarter and third quarter to look something like the first quarter, maybe a slight improvement. And then the fourth quarter would have it's normal blip up for all the reasons we have talked about in the past. The 250 basis point improvement in margin is a result of the combination of more success fees than we had planned, that hit in the first quarter.

And the profitability since we had two very large jobs in technology, and technology by it's nature has the highest profit margin of any of our divisions, that those two factors together, created the 250 basis point improvement.

Okay, okay. So traditionally, so maybe 2Q, 3Q might be flat, with 1Q, or down a 100 bips to adjust for all those different items?

This is Jorge. Usually the impact of the items you mentioned, you said 100 basis points, it is usually a little more than that.

I was going to say we get to your conclusion by looking at the 250 basis points, kind of offsetting what is usually the difference in the first quarter, and between the first quarter and the fourth quarter.

Okay. Okay. Yes, I was just eyeballing it. It looked like 60 bips last year. Do you have stock base comped for the first quarter?

123, our in total was 6.7 million. You will see it on the cash flow statement.

Right. And I guess just finally update on the integration of the acquisitions, are those going smoothly and any comments you have there? Thanks.

I think the integration of the acquisitions is going extremely well. As David Bannister like to say, there is nothing to help grease that wheel as there is being extremely busy, and everybody is extremely busy. As you can see from our results, there is plenty of work. They are handing work back and forth. That is also something that really makes integration go very well, and we are very, very pleased with how that is proceeding.

Perfect, great, nice quarter, thanks.

And thanks to the people who that have joined us, we have great new partners and welcome aboard.

Great, thank you.

We will take our next question from Scott Schneeberger with Oppenheimer.

Thanks. Scott Schneeberger with Oppenheimer. Good morning, congratulations guys. In the technology segment, the value-added resellers I think you mentioned eight new signed on. Could you give us an update on how that is progressing and how that is driving revenue?

I think the status, Scott, it is progressing well. As you know, it is a new initiative to build an indirect channel for the technology offerings. It really commenced sort of at the end of Q3 last year, and in Q4. We are now seeing the actual partnerships being put together, and I again, it had minimal impact on operations in Q1. I wouldn't expect to see significant impact in Q2, but I think we will start to feel a good impact from these channels, in the second half of the year.

They are people that are either strategically located in places of the world, where we see activity, and they have a stronger domestic presence than we do, maybe a stronger identity in the market place than we do, or their brand name partners, have a need for our technology in their own right, and through a channel partnership see it as the best way to go to market to serve their own clients, so no impact Q1, we may see a little impact Q2, we would be hopeful we would start to feel a much better impact from these.

And we intend to add more channel partners. Again, we are not looking to get the channel cluttered, but I think we clearly are looking for opportunities to partner up with people on distribution, especially in unique parts of the world that we feel they would be in a better position than we would be to distribute.

Could you update us on the mix of fee-based versus recurring in the segment, in tech consulting?

It is approximately, the number is approaching 60% fee-based. So that would be hosting technology licensing fees, and general technology processing fees, versus time and materials consulting.

Okay. Thanks. And then some commentary about it looks like your planning on being more aggressive with these future acquisitions in the technology consulting segment. I guess could you speak a little bit more to that, and then also, your thoughts on as from time to time there is consideration of spinning that segment off, with the new 5-year plan sound like you are moving away from that, talking about acquisitions. Could you just kind of bring us up to date there?

It is David Bannister. Regarding acquisitions in the technology space, as you know, one of the foundations of that business was a small acquisition we did in Australia a number of years ago, Ringtail. We continue to believe that that technology group is the best positioned in the market. However there are additions or augmentations or extensions to it's intellectual property, that could significantly extend that lead, and really make it a company that has a very strong foundation in the software space.

We have any number of folks we are talking to and think that there are some things there that could make some sense for us, as we have said repeatedly in the past, and we will continue to evaluate them carefully. We have experience in doing those sorts of acquisitions. We have a great team in that division who is looking hard at this for us. We have a leader Eddie O'Brien who founded Ringtail in Australia, who particularly spent time on this along with Dave Remnant and Joe [Luby], and some other folks. We will continue to look hard in that space.

As it relates to a potential liquidity event or spin off, or what have you, I think we consistently said we will evaluate any options that we think can enhance overall shareholder value. It is certainly not on the table or off the table. It is something we are continuing to look at and will continue to evaluate as the year unfolds.

Thank you. One real quick follow-up there. Just as far as acquisitions going forward and you are sounding aggressive, it certainly looks like you will be looking strong in technology. Any other segments more than others, that might get a little more weight to the future acquisitions strategy? Thanks.

Scott, I think as we have said consistently we think the real opportunity for us is to continue to add meat to our bones internationally, and in all of our practices. So if you look at our themes in the first quarter, we added forensic ability in London for the first time. We added it to the construction business in London, and into the Middle East. We added technology capability in South America. We added some intellectual property capability in China. It is those sorts of things that we particularly focus on.

It is less focused on practice or segment, and more on where do we have holes in our practices around the world. That having been said, we think that obviously with the restructuring market, very hot again, that we think there are some opportunities in that space to add intellectual capital and capacity in that space. So that might be something that gets a little more emphasis. But I really think the international growth opportunity is where we will be spending most of our time.

Scott it is Dennis. I think it was critical for us to be able to open up the right type of operation in Brussels. I mean Brussels on a scale of economy, people, it is going to become the Washington D.C. of Europe. We are delighted with the acquisition we were able to make. The people there are very, very wired in already into the appropriate ministries, and with our economic business picking up, as the European Commission increases it's scrutiny of it's European based companies, as well as U.S. based companies, we think that this acquisition will give us the perfect entry, to start to build more practices on top of you know the delivery platform that we have acquired there.

We are very, very pleased with that, and we would see us being very active to build that out. The other areas that we are looking at very closely are the emerging markets in Europe. And we have a rapidly growing office in Russia in Moscow, and we are looking hard at what our best entry point into some of the very dynamic economies in central Europe. So that would be the other area of interest for us.

Great. Thanks very much.

And we will take our next question from Tobey Sommer with SunTrust Robinson Humphrey.

Thank you. I wanted to dovetail on a previous question. When I look at your international offices, the principal ones, London, Hong Kong. How many much your current service offerings are available in those markets, and any commentary you could have as to what the pace would be, in terms of expectations you would expect to be able to offer more of those services over time? Thank you.

Well, I will start off. In London, we now have our forensic group is there through the acquisition. Construction under the forensic group is also obviously there with Brewer, FD is, of course their international headquarters is London. As you know, we were very lucky to acquire the restructuring team out of Ernst & Young in London. They have been doing very well for us.

The technology team through acquisitions and organic growth is also based in London that services Europe, and we have a network operating center dedicated to their use, which is outside of London.

The only practice that we don't have physically located in London, where we are parachuting people in to do the work is economics.

Tobey, I would like to add something. This is Dave Bannister. When you look at London in the corporate finance area for example, we have about 20 people. That should be a substantially larger perhaps over time. In the forensic area we have 40 people. That should be a substantially larger practice over time. While we are there, and we have very strong practitioners and very strong partners those are significant growth opportunities for us.

Right. In Asia, we have predominantly, our FLC practice, as represented through the international risk operation, the Thompson operation, which are focused on investigations, IP, dispute mitigation, and very politically sensitive types of due diligence.

We have just started a restructuring practice in the Singapore area. And obviously it is a drop in the bucket, but we would expect it to grow fairly dramatically. We are very active in our transactional support work on behalf of hedge funds, private equity funds, investment banks, in the Asian market place. Through a combination of our offices out in Asia, as well as parachuting people in. But again it is growing very rapidly.

FD of course is, their Asian operations are in Australia, as well as a sizeable operation in Hong Kong. And they are the preeminent communications consultant out there. But, we certainly have tremendous room to grow on restructuring. We have tremendous room to grow in forensics. We are just barely scratching the market place.

And I think that you will see us using a lot of resources and assets out there. And just to finish up. We are very happy with the growth and traction that we are getting in the Middle East. We are now in Abu Dhabi, Dubai, and Bahrain. We have been able to represent everything, from the families to the sovereign funds, to corporate clients over there. A wide variety of opportunities, and we would expect to see that market grow significantly, it is serviced locally on the ground out of those offices, but also supported out of both Hong Kong and London.

And then finally as we talked to you before, our Latin America business not only on the specialty investigation group, which is just printing incredible numbers for us right now, but also FD has made a serious commitment through an acquisition in organic growth into Latin America. They are now in Panama, they are in Colombia, we are in Mexico, Brazil, Argentina. And we are very excited about those growth opportunities, too. So not only just the London and the Hong Kong sites that we think will grow. The FD other areas are contributing, and in some cases at a much more rapid pace.

Tobey, Dominic DiNapoli. Just to follow-up on the London point. London is our second largest office in the Company. We have in excess of 300 professionals in London. That is really our hub in Europe. And I think you will see us branching out to other countries, including Germany, could see something. France, Italy, Spain. So we really look at London as the hub, and they will support the spokes for the rest of the Europe

Thank you very much. Very helpful. Wanted to ask you a question about the technology unit, which has seen a significant ramp in ongoing software and fee revenue. And as a percentage of the overall segment mix. Given the fact that it is close to 60%, do you have any expectations you could share with us, about how that mix shift may proceed, perhaps in your 2012 plan? Thanks.

Well, Dennis again, I will start off Tobey. The nice thing about the technology revenue, for the most part it is recurring, so clearly licensing fees, unless people switch out, and change out technologies, recur versus project consulting revenues, where you have to replace as the project goes.

So I think it is natural to iterate going forward that as you get a larger installed base, as these indirect channels of distribution kick in, and start feeding even more technology revenues through to you, than I think you will probably see a higher percentage of revenues in technology to consulting each year. It is just iterative.

I think the other thing that would influence is going back to David's statements, and that is that predominantly the acquisition targets or companies we are investigating are technology-based companies. They are not consulting.

SDI was a consulting based company, as well as a technology company. So in that instance it is somewhat of a hybrid, and looks like ourselves. But the other ones that the teams are investigating right now, are in conversations with, are pretty much pure technology plays. So that could accelerate the change in the percentage, even further away from consulting. Right. As well as simply expanding the pie.

At the same time, Tobey, we really think that the highest and best software, or technology companies, are ones that combine both the proprietary intellectual capital, in the form of software and products, with experts who can apply it in the most complex situations. So if you look at the highest valued companies in the market, you will see that combination of expert applications, as well as expert services.

Software as a service company. So that is really what strategically where we are taking it. We don't think that just the technology alone, or just the people alone solves the clients' problems. We really need to attack them with both.

Thank you very much. I will finish with one last question. The economic consulting business has seen very good growth and utilization. And to some extent, M&A has been a driver in prior years. I was just wondering if you could comment on the resiliency of that, given the fact that M&A on an overall basis has slowed?

Well, as you know they not only are specialists in anti-trust but also in regulated industries. And you are seeing a situation now where the M&A [milleau] has moved from people that want to, to people that have to. You can't pick up the paper without looking at people that because of liquidity, because of oil prices, because of any number of factors, competitive factors, are being forced to the marriage table.

And not only that, they are being forced to it with some degree of expediency, because the administration is going to change presumably, or at least there will be a new level of activism potentially in Washington in the upcoming years. So we are seeing still, in terms of that kind of area, especially regulated industries, we are seeing a heavy continuation of our activity in that area.

So it has been a very good market for us. We also are seeing a lot more anti-trust litigation activity, again as times get tougher, and people take a closer look at what the competitors are doing, and people take a look at their competitors to get to the altar before they do, in terms of acquisitions are taking a very hard look at that. So our business continues to be robust.

And we have without a doubt some of the top experts in the world in the whole area of complex damage calculations, model-building, class action certifications, and [race endetra] for either resisting certification, or trying to change the impact of certification.

As you could imagine with the financial crisis that we have all been watching, a lot of very large financial institutions have already started to reach out, and retain some of our top people, in anticipation of some serious class action type of suits to be filed against them in the future. So we would expect that side of the economics business to be very busy in the next two years.

Thank you very much.

And we will take our next question from David Gold, Sidoti & Co.

Hi, good morning. A couple of questions. One on SMG, I think on the initial conference call, you mentioned that just a little bit of that business was restructuring based. Curious there, how long presumably it takes to sort of in this environment transition it a little bit, and also what you are seeing in light of the slow down in real estate transactions in the first quarter?

David, actually very little of their business was restructuring. They had a small practice that had valuation of leases and to come up with potential asset values in a restructuring or a bankruptcy. Their core business is in the M&A area, they do a lot of valuation work. They do a lot of real estate strategy. And their clients are predominantly the big REITs, and real estate companies. And one of the opportunities we see with them is expanding their client base to the many corporate and financial institution, clients that we currently serve.

David, what they represent on the restructuring side where we are excited about their contribution is, they represent a solution to many of the restructuring challenges that our teams are facing as they are in a lot of these companies.

SMG represents sovereign funds as a conduit of capital. They represent offshore investment funds and banks. And they represent the cream of the crop in world class developers. And they are in a perfect position to work with our restructuring people that are already in the jobs, to try to help develop a real estate strategy, bring the right players in to acquire the companies as part of that strategy. It might being anything to defease debt, it might be something to rationalize retail operations. You can imagine, if you can apply that kind of expertise into a restructuring. So we would view them as an aid to the solution, not so much, sort of extra man power to dump into a restructuring process.

The existing skill sets they have are very applicable to major restructuring assignments. They don't need to do things differently. They need to go in with our teams and help people out, and bring that focused expertise to the engagement.

When you look at what is going on particularly in the private equity business, where transactions have slowed down, just the numbers of transactions, what are the principals trying to do? They are trying to create as much liquidity in their portfolio of clients as they can. One of the core expertise that SMG brings to the table to us is, helping to sell lease backs and to bring their existing clients to the table to liquify some of the assets of the portfolio clients.

They are particularly very active in the health care area, where they have got a number of their REIT clients that do sale lease backs of hospitals. With everything going on in the credit markets, they really help to bring a liquidity solution to many of our clients, not only our struggling clients, but some of the better performing clients, that just want to maximize on their cash returns.

So it sound like in aggregate, presumably you figured out places where the teams can work together, and now it is just a matter of cross-selling those engagements?

Absolutely. And last week we had the first meeting of all of our key real estate people across the country, to create our real estate construction solutions practice, where we are going to combine the skills of all our real estate professionals, and apply those skills across the board, in all of the projects that may have some applications to real estate.

Got you. And one other, sort of longer term fundamental on restructuring. One of the experts we have heard from recently, suggested that given the way the landscape has changed, that fundamentally, there may have been a big change in the restructuring, or say bankruptcy market, on the basis that a lot of the debt out there is basically covenant light, and perhaps that is one of the reasons that we haven't really seen the elephants just yet. Curious just on your thinking there?

Well, you are right. One of the things that, maybe frustrating is the wrong term. Over the last couple of years, I mean we saw many, many deals being done at multiples that we thought were going to create problems, if the economy continued to grow. Now a lot of these deals that had been able to be refinanced, are not getting refinanced.

And we are seeing these lack of liquidity causing a lot of companies to come to the table a lot sooner now, than they had over the last couple of years. And it was the covenant light deals that were allowing companies to mask the real operational problems that they had, with just refinancing their deals, and moving on to, it was like musical chairs. When the music stops, now where you can't get financing as readily, we are getting a lot more active in, going to the table on behalf of the banks or the companies to actually fix the businesses.

As Jack mentioned, with the economy and oil at $120 a barrel, discretionary spending is significantly contracting in the United States. You are going to see a lot of opportunities in industries that historically have been able to use restructuring as a tool, including real estate, and anything related to homebuilding, from materials to the actual builders. And we are very active in that area. And you are going to see it in the leisure industry. Travel is going to be significantly restrained, because of the lack of cash to pay $4 for a gallon of gas.

David, I never like to miss an opportunity to talk about our people. And we do a state of the union message in restructuring every year, and our January 31 report this year, talks specifically about what you are saying. We noted that many of the transactions were covenant light, but when those entities went back to reborrow which inevitably they do, the lenders were getting their pound of flesh, in terms of not only significantly more restrictive covenants, but also in terms of fees.

So it is turning out that yes, the tap has been turned on a little bit here in the last couple of weeks, but the people who need it the most as usual are finding it the hardest to get, and they are really having to swallow a lot of stuff. There is as much business potentially for us, and we are starting to see it in the renegotiation of these deals, as there is in what would be a more fundmental restructuring. But I do note with all that said I think both Moody's and Standard & Poor's are looking for a three-fold increase in the default rates coming up. You just have all kind of indicators that indicate that eventually that is going to be the case.

You had this year I think also, all of last year there were 100 bankruptcies, for either large, private or public companies, and this year already, we have had 55 in the first quarter. So it is starting to get back to something that is more predictable and, and recognizable.

Okay, okay. So not really a long term maybe just what, I am thinking for I guess the last couple of years, just a delay?

Well, David, it is Dennis. Don't forget and I will use the term that they have one of the biggest private equity firm gave me. The private equity firms that did most of these deals were getting 5 to 7 times EBITDA leverage, when they put the deals together. He described these deals now as zombies.

They are alive. They are cash flowing, but the problem is, you can only borrow 2 to 3 times on them, so effectively the private equity firms have no equity in the deals. So even if they are servicing the debt, the private equity firms now have gotten phenomenally introspective into their portfolios, and we are now starting to see work being brought in to help change the actual game plan, so they can defease debt, so that they can change numbers around, so they can rebuild equity into the investments they made, given the change in the capital markets.

So I think that is a real trend. That is not going to go away. Until at least we sort of see you know the round of investments that were made in the last three years, have to be harvested eventually, and they are going to have to change the game plan.

Perfect. Thank you all.

Thank you.

And we will take our next question from Kevane Wong from JMP Securities.

Three things. First I will try the question that other people have tried to do. There were a few things that obviously helped the quarter here. The success fees, and the corporate restructuring, and two large cases in technology. Can you give us maybe in the aggregate, how much these sort of, I don't want to say 'special' but sort of sizeable, pieces that helped the quarter, impacted top line and bottom line, or just bottom line?

It was in the aggregate between the cases and the success fees, you probably had a benefit of around 12 to 14 million in revenues.

We said that the aggregate of them was about 250 basis points--

I thought you said what was for one of the segments.

No that was in the aggregate.

That was the success fees and the two cases in aggregate.

Okay perfect. Also looking at the economic segment, utilization at 90% in the quarter, obviously very high. Was there anything that made that bump up, or was it simply a lot of cases, and in response you would hire more people to try to bring that down to a more sustainable level over the year here?

Well as we have mentioned, very much aggressively looking to hire more people, but not to bring that down. We would like to add more people at 90%.

You don't want to burn them out, either, right?

If you look historically our economic and tilting practice has gotten some of the highest levels of utilization, and it is very common for them to be in the high 80s to 90%.

You know all joking aside, they are involved in some of the most interesting work in the world. Literally. And the work is not a burden to them. You think about 90%. That is working 36 hours a week, or something like that.

Oh.

And it is office-based. They are not out on the road like many of our other people who we hardly ever see because they are continually on the road. This is interesting stuff that would you want to do all of this that you can. It is very rewarding and challenging, and you are butting heads with the greatest minds in the world. So it is not a model where I believe they are being burned out at 90%. I think they are enjoying every minute of it.

And clearly we added capacity at the top, which is reflected in the fact with the margin declined temporarily, because of the ramp-up time, but we had announced previously that we were able to bring Dennis Carlton back, who was assistant Attorney General of Justice for Anti-trust Chief Economist. And Dennis has given us significant capacity at the top end, and we are building teams around Dennis, to work with him for the balance of the year, as he starts to reengage into the practice, so we have added capacity at the top, and that is a significant addition for us, getting Dennis back.

And also the last one, people obviously concerned, there is at least one peer probably a number that have had more of an impact on their demand, simply because of where they do their consulting.

Just to sort of allay the fears can you address sort of, are there any points or parts of your business that are having any negative impacts from the current economy, or is it really not a problem that you are seeing, because of the way you are positioned?

One of the things we noted was there has been a shift in work in our strategic communications where as we had hoped but you never know until you are in the crucible. We had hoped that the stacking of some of the IPO transactions would be offset by, the reason it was giving rise to that, the liquidity crunch creates the need for some additional strategic and even crisis communication, and that has clearly been the case, as reflected in the first quarter results. The first quarter for them is a very interesting quarter. And I think the fact that that seamlessly transitioned is a very healthy sign. Also the acquisitions they have made have been prescient.

To get in to the Asian markets and Pacific Rim at this time, where you still have vibrant flows has been great. And we have had obviously as some of the liquidity issues have turned into litigation assignments, they have done an awful lot of that work as well.

Fantastic. All right thanks guys.

Thank you.

And we will take our next question from Tim McHugh with William Blair & Company.

Good morning Just wanted to quickly ask, we are running long here so I will keep it fairly short. You mentioned the term 'aggressively recruit' in your economic group, as well I am sure across the rest of the business. One, how that is faring and two, in order to meet the growth that you are seeing, would you get any more aggressive on signing bonuses, or what else are you doing to lure more people in?

Well, I think as we mentioned before we have a lot of momentum right now. So, we have, I don't know that as an organization, we have said that we need to increase our signing bonus. I think we are in some respects an employer of choice. We just added a tremendous number of people through the acquisitions we have done. The good news is that with the acquisitions of forensic accounting in London, and the Schonbraun Group, Schonbraun McCann group, we have people that have a tremendous amount of ability to handle a lot of work.

So I think we are right on plan. We are aggressively out there. We haven't dramatically changed the parameters of what we pay to hire, because we are getting our opportunity to be out there, because the story is good.

People come in, they have things like our stock purchase plan, a chance to get options if they are successful. A chance to enter our SMD program if they come here and be successful, and frankly they are finding this a good place to come in and cast their lots. I think we are very happy with where we are.

Yes, we are also benefiting from the travail in the financial markets. There are a lot of talented people that are being displaced by the retrenching of the investment banks, commercial banks, insurance companies, et al.

And then clearly we are not seeing the same type of competition from these institutions in our graduate school and college recruiting. So that may be a short-term lull, but it is a real opportunity for us, certainly this year and probably next year, to take advantage of the restructuring that they are going through, and an opportunity where we are expanding rapidly.

It is interesting, too. Talent like to follow talent, and winners like to follow winners, and we added 400-odd people through acquisitions, every one of those people has a friend or associate or what have you, they are talking about the opportunity here, and they in effect, become our recruiting staff. Not only is our existing team of people thinking about adding their friends. When you add that many new people, it is a whole new vein for us to mine.

I think at the higher professional level, the enthusiasm for this new 5-year plan, the fact that it really will allow a professional to practice on a global platform, that is going to rapidly grow, and the toughest assignments for the biggest clients, I can't tell you how it makes it a much easier sell, when you can lay that out in front somebody, to be able to attract them. So it is not money that gets the people here. It is one, the momentum, and two, a pretty clear sense of where they are going to go, and the ability to practice their trade.

And the money.

You mentioned the college recruiting there. Can I just quickly follow-up. How many are slated to join you later this year?

Well, I think if you turn around and say we're growing by 25%, and you back out the, I will use Jack's math, you are probably going to see us you know probably bring in second half of the year, 200 to 300 people, and then you will who lose some people, so you will have a net about 200 college recruits.

Okay. And then last question here, if you could touch on the corporate expense was actually a little lower than I thought. Update us on plans to invest in branding initiatives. You mentioned in new office in you know Florida, I believe it was, for Latin America, and other corporate level initiatives this year.

Yes, we are building out a significant office in Florida. It will house not only the expansion of our Latin American operation, which is right out of space already existing. We are doing a lot of work across the entire state of Florida in restructuring and, probably will pick up in litigation support.

So that office will really serve all of our operations, as well as we are moving senior executives out of corporate into that, to put them closer into what we see as a tremendous short term growth opportunity, that really needs a lot of hands-on attention. But I would say the expense is a normal billed out type of expense. We have 22 offices here in the States, and we are in 22 to 23 countries. We have a lot of offices. There is nothing extraordinary about that, except that it is really being driven by the demand down there.

Secondly, I think that the corporate expense as a percentage of revenues, we have told that you we spent a lot of money the last three years to support a $1 billion company, and to support a global platform of distribution. Clearly as revenues go up, we would expect to see as a percentage of the revenue that start to moderate. It will still go up but it will go up at a slower rate and as a percentage of revenues would moderate. Jorge?

Your observation is right. We did have in the first quarter, it always tend to happen, a little slowdown in some of the hiring we wanted to do. Delayed some marketing expenditures. So yes, going forward, looking at back of the fourth quarter of last year, the run rate in corporate expense may get back to that same level.

Okay, great, thank you.

And we will take our next question from Mark Bacurin with Robert W. Baird.

Good morning. Most of my questions have been answered. I did want to drill down maybe on the economic consulting business. Just looking at the revenue trend there, you were up about 12 million from Q4, which is obviously a very large sequential increase. And if I am looking at the numbers correctly, it looked like flatish head count. So I am wondering there, were there big success fees in that quarter, and then also the margin and EBITDA growth was not as robust, and I heard you talk the one hire there, but were there also a heavier than normal use of outside consultants, like there were in Q4 as well?

It is funny because the increase in revenue in the first quarter, that is a very individual driven business, and frankly Christmas and the holidays can affect there you in that practice. That was purely seasonality. That this quarter's production from them is not out of the realm of something that is repeatable and replicable.

In terms of the expenses, they really were due to the new hire of the individual, and these are the big named economists are very expensive people, but they tend over a period of time to be literally worth their weight in gold.

The other thing is that we have a number of our big-named economists are independent consultants with an exclusive to us, but they do have, they are not technically employees although they receive a lot of money and were are joined at the hip. And when they get stock options and believe me, these people are brilliant people, so they want them in FTI. We have to expense for them as variable rate accounting on the price of the options. And we have a number of those, and with the stock price in the first quarter, where it ended at a very high number, it accelerated what the charge was for that in the quarter. So those are the two things that affected the margin there.

Okay. And then just one final follow-up. On the sub prime related engagements you are seeing, just wondering from the nature of some of those engagements, it seems to me that we are probably on a timeline more in the discovery point, if that is the right term, on some of these engagements, and the bigger revenue opportunities for you might come, as we move to more formal investigation suits et cetera. Just wondering if you can help us understand the timeline, and then how much revenue lift there might still be from some of those types of engagements?

If you remember I mentioned, for example in our neurology division, we have an exceptional capability to be able to analyze portfolios, trends, et cetera, through the use of technology. That is heavy lifting and again, extremely valuable to our client. That is very intense. In terms of some of the work we are doing with hedge funds, or with other parties who are in the middle of this crisis, we are doing a lot of analysis work. A lot again of heavy lifting. So I think what we think is for some of our segments there is a lot of work right now, as what we were thinking is that as it extends into the litigation phase, that is when you would tend to see a more of an impact in our forensic and litigation division.

They think that is the second half of the year, but more importantly, continuing well into 2009. When you think about the crisis we saw in 2001 and 2002, in terms of the Enrons and the World Coms. You really saw that litigation begin in 2003 and 2004, and literally saw it just tail off in the last couple of years with the trials of [Scruci], and Skilling, and Ken Lay, and that kind of thing. It will have a good long life to it. It is just it will be heavy lifting for different divisions at different times.

As Jack mentioned, the litigation side of those projects happen later on. But right now, the corporate finance, particularly the restructuring team is enjoying a significant amount of activity. Subprime and all credit crisis related work. And we are in a lot of mono lines. We are working for a lot of the hedge funds.

So I mean there is a lot of activity going on. A lot of revenue being generated on corporate finance, and that will shift, a year or 18 months from now, to more of the litigation work to pick up the pieces, and go after the alleged culprits that created the mess.

Thank you.

And we will take our next question from Michel Morin with Merrill Lynch.

I will keep it brief. In technology did you say that the two projects have already wound down?

No. We said that they were either came in or scaled up during the period, and we would anticipate they will have some life, but I wouldn't say that they create a new level for the rest of history. They are shorter term projects related to litigation.

So they will continue to contribute at least in Q2 to a certain extent?

That would be our anticipation.

Yes.

Okay. Then the 30% organic growth. How much of that was from the currency, would you happen to have that?

I'm sorry, say again?

How much did currency contribute to your 30% organic growth?

De minimus.

Very little.

Very little. Okay. And within specifically within the communications segment, would you happen to have that? Presumably that is where you have more international?

Again, it was very small.

Very small. Okay, great, thanks.

And we will take our next question from Chuck Ruff with Insight Investments.

Hi. Very good quarter. Just a quick question, you have made a number of acquisitions right before, right after quarter end. Can you tell us how much the acquisition payments were after quarter end, that are not reflected in the balance sheet and cash flow statement?

Yes. It was about $100 million as we, I think we go back to the call we said it was about $100 million in cash.

Okay, yes.

Cash.

Okay. That's all I had, thanks.

Great. That is how we get to the 150 million availability in our cash and cash equivalents today, as opposed to 250 or so at the end of the quarter.

Okay.

And we do have a follow-up question, and it will be our last question for today's question-and-answer session, and it will come from Andrew Fones with UBS Securities.

Hi, thanks, yes, just regarding the 200 to 250 basis point impact from these kind of short-term natured drivers, backing that margin out of the corporate finance and technology businesses in Q1, it looks to me as though the margins for those businesses would look somewhat similar to how they looked in Q1 '07. Can you just kind of explain how we should think about the margin profile for those businesses as we go through the year? And then I have a follow-up, thanks.

Well, I think, it is Dennis. I will take a shot at that. I think in the aggregate what we are saying is that we are comfortable that our typical margins for Q2 and Q3, which I think we said were in the 22.5 to 23.5% range, would be what we would expect.

In Q4, we would expect those to go up as they normally do in the fourth quarter, because it benefited by new hires being employed, by success fees, and so you might see a 200 basis point to 250 basis point increase in margin in Q4. I think that we don't have enough, we feel that certainly given how busy corporate finance is, that there is more pricing power there than there has been in the past. If it continues to stay that way, you will probably see some margin improvement there. But it is impossible to program that, you sort of have to experience it.

On technology, again gradually the margin will increase a little bit, simply because your mix changes. But we don't think it would be as dramatic as weapon experienced in the first quarter, because of simply the magnitude of the work that they had in some sensitive issues. So I would say, figure that the margins will look very similar to last year, and we are just thankful that the quarter where we had, really our traditionally lowest margins, we had some good tenants offset it.

Yes, Andrew I would mention a couple of things. One, when you can't just take the margin out, without taking out the revenue.

And remember also in technology, last year at this time, we were explaining to you that it was not the end of the world. That the reason their margins were slightly lower than we all expected, was because of the time in bringing on the operating center in London. And that turned out to be a brilliant move. So I think that I wouldn't say that the technology margin would go back to the 32% of last year. I think you are going to have a very nice margin there over the rest of the year.

Right and on corporate finance, Andrew, as the mix changes, more restructuring, maybe a little less transaction advisory, we get higher margins on the restructuring work than we do on transaction advisory, and the success fees are hard to figure when they are going to hit. We were fortunate this quarter to get significant success fees in corporate finance. We expect to continue to get success fees, but probably not in any one quarter. The magnitude that we achieved in '01. First quarter.

When you think about those, especially in our health care related practice, and especially in FD, a lot of those are related to year-long projects, or things that have very visible and viscerable benchmarks. And they tend to come due around the end of the year. That is when you get the visibility, and so you get paid either at the end of the year, or the very first part of it, that is why they are just a little more heavily weighted in those periods. But we will have success fees throughout the entire year.

Okay. Thanks. I apologize if this one catches you somewhat by surprise, but this morning, [Marshall McManon] announced they might potentially sell parts of [Crowell]. In light of that I was wondering how you would tell us if you would approach potentially the financing of a large acquisition?

Well, I just looked at the release, or the report of it. And I don't know that we have put a value on the pieces that are there. I don't necessarily yet understand the strategy of what they are keeping, and what they are spinning off, and how those things fit together. In terms of financing, we have a tremendous amount of dry powder as we described, but we are not even, we haven't even looked at the situation yet, so I think the cart would be way ahead of that horse at this time.

Okay. Thank you very much.

Great, thank you.

And that concludes our question-and-answer session for today. I would like to turn the conference back over to management for any additional or closing remarks.

I just want to thank everybody again for being on the call. We look forward to talking to you the next time and we look forward to the rest of this year, and to the next five years for our 5-year 2012 plan. Thank you.

Thank you, that does conclude today's conference. You may disconnect at this time.