FTI Consulting Inc (FCN) 2009 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 Eric Boyriven of FD. Please go ahead, sir.

Good morning, and welcome to the FTI Consulting conference call to discuss the Company's 2009 first quarter results that were reported this morning. Management will begin with formal remarks, after which they will take your questions.

Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 that involve uncertainties and risks. Forward-looking statements include statements covering our plans, objectives, goals, strategies, future events, future revenues, future results and performance expectations, plans or intentions relating to acquisitions and other matters, business trends and other information that is not historical, including statements regarding estimates of our future financial results.

Words such as estimates, estimates, expects, anticipates, projects, plans, intends, believes, forecasts and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements, including, without limitation, estimates of our future financial results, are based upon our expectations at the time we make them and various assumptions. Our expectations, beliefs and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management's expectations, beliefs and projections will result or be achieved or that actual results will not differ from expectation.

The Company has experienced fluctuating revenue, operating income and cash flow in some prior periods and expects that this will occur from time to time in the future. The Company's actual results may differ from our expectations. Further, preliminary results are subject to normal year-end adjustments. Other factors that could cause such differences include the current global financial crisis, continuing deterioration of global economic conditions, the crisis in and deterioration of the financial and real estate markets, the pace and timing of the consummation of past and future 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 under the heading Risk Factors in our most recent Form 10-K and with the Company's filings with the Securities and Exchange Commission.

Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this earnings call. We are under no duty to update any of the forward-looking statements to conform such statements to actual results.

We define EBITDA as operating income before depreciation and amortization of intangible assets plus non-operating litigation settlements. We use EBITDA in evaluating financial performance. Although EBITDA is not a measure of financial condition or performance determined in accordance with GAAP, we believe that it can be a useful operating performance measure for evaluating our results of operation as compared from period to period and as compared to our competitors.

EBITDA is a common alternative measure of operating performance used by investors, financial analysts and rating agencies to value and compare the financial performance of companies in our industry. We use EBITDA to evaluate and compare the operating performance of our segments and it is one of the primary measures used to determine employee bonuses. We also use EBITDA to value the business -- the businesses we acquire or anticipate acquiring.

Reconciliations of EBITDA to net income and segment EBITDA to segment operating profit are included in the accompanying tables in today's press release. EBITDA is not defined in the same manner by all companies and may not be comparable to other similarly titled measures of other companies unless the definition is the same. This non-GAAP measure should be considered in addition to but not as a substitute for or superior to the information contained in our statements of income. Reconciliations of EBITDA to net income and segment EBITDA to segment operating profit are included in the accompanying tables in today's press release, available at www.fticonsulting.com.

With these formalities out of the way, I'd like to turn the call over to Jack Dunn, President and Chief Executive Officer of FTI Consulting. Jack?

Thank you very much. Good morning and thank you all for joining us to discuss our first-quarter 2009 results.

I hope you've had a chance to review our press release. If you have not, it is available, as he said, on our website at www.fticonsulting.com.

With me on the call are Dennis Shaughnessy, our Chairman; Jorge Celaya, our Chief Financial Officer; David Bannister, our Chief Administrative Officer; Dom DiNapoli, our Chief Operating Officer; and Declan Kelly, our Chief Integration Officer.

This quarter, the first quarter of 2009, was as important for our Company as any quarter in its history. Our 13% growth in one of the most difficult quarters the world economy has ever seen is a testament to the business model we have developed and a confirmation of our strategy to differentiate FTI from the rest of the pack.

It is only in the crucible of an environment like the present that you will find out what you're made of, and the 33,347 employees of FTI, as you can see, and I hope you'll agree, are made of pretty stern and remarkable stuff. In a world of new and jugular challenges, we have built a unique array of skills, services and geographic presence to address them, we believe, no matter what the cycle of the economy or what the state of the world. To put it succinctly, in an environment where the issue du jour can literally destroy you, no one can surround it more effectively, plummet more deeply, analyze it more expertly or communicate it more clearly than the professionals of FTI.

Now to the quarter. Revenues for the first quarter of 2009 were $3 million -- $347.8 million, an increase of 13.3% over revenues of $307 million in the prior year period. Net income for the first quarter of 2009 was $31.7 million, compared to net income of $30.7 million in the prior year period. Earnings per share were $0.60 compared to $0.58 last year. And EBITDA was $74 million, or 21.3% of revenues, compared to $68 million, or 22.2% of revenues in the prior year period. Revenues were an all time record performance for our Company, and net income earnings per share and EBITDA were all records for our first quarter.

As we mentioned a little less than two months ago when we reported our 2008 earnings, we entered this year experiencing an unprecedented amount of demand for our restructuring services. This is clearly a global recession, and our efforts to build an international restructuring practice are paying off as we realize very strong growth in our U.K.-based restructuring practice and a promising initial contribution out of our recently formed Canadian and Latin America practices.

In addition, we also discussed how we have been selected to investigate several of the major alleged frauds of the day. These cases continue to take on a life of their own and were instrumental in the upturn and performance in our Forensic and Litigation Consulting and Technology segments, which have collaborated handsomely on these cases and provided a unique and effective solution to our client's needs.

These were among the key factors that drove the 13% increase in our revenues in the quarter, which included positive organic growth of about 2.5% after the negative drag of about 3.5% from foreign currency translation.

Contrary to our normal practice, you'll hear us talk a little bit today about sequential results a little more than usual, and that's for three reasons. First, you'll remember that the first quarter of 2008 was an extraordinary quarter for us when all our markets were strong, our segments were firing all cylinders and we generated 30% organic growth.

In six months, the world has turned on its head, and the fact that despite this current dreadful economy, we can report a first quarter that exceeds that kind of a strong first quarter is further evidence of our ability to grow across the economic cycle in both good and bad times.

Second, we have continually explained that the second half of an election year is always slow. Comparison on a sequential basis will help you to judge the applicability of that cycle to the present.

Finally, in FLC and Tech, the comparisons sequentially are all organic, so it provides perhaps a better picture of what's really happening in those markets.

During the quarter we maintained our strong financial position, and we ended the quarter with cash and equivalents of over $157 million, which provides us with a lot of firepower and flexibility to pursue our strategy.

Now, let's look at the segments. Corporate Finance Restructuring had another remarkable quarter as the global financial crisis now settles into trench warfare. There is hardly a single industry that has remained unscathed, and we are busy across a wide range of sectors. Apart from being active in the long-standing challenge financial services , home building, automotive and retail sectors, we have begun to see the issue spreading to the telecom, media, leisure, healthcare, commercial real estate and other areas in a very fast timeframe. In short, anyone who has debt or needs money is facing challenges never before encountered. We continue to open new matters at a rapid pace.

Further, whereas in past years these cases would be across the spectrum, today they are heavily weighted towards bankruptcy and restructuring, with new bankruptcy matters in the quarter doubling to 28 from the first quarter of 2008 and new restructuring matters more than doubling from 38 to 78 in the quarter. Not surprisingly, as a result, organic revenue for corporate finance increased 37.9%, and together with contributions from acquisitions grew a total of 61% to $127.5 million from $79.3 million last year.

Because of the demand for our people and resulting utilization and robust pricing, EBITDA increased 86% to $40.7 million, equal to 31.9% of revenues.

In the quarter, we generated the most revenue from the construction, retail, telecom and financial services sectors. Our new Media, Entertainment and Telecom Group, bolstered by the addition of CXO that was acquired in December, continued to gain traction in the market and has been winning assignments in telecom and media, two sectors that we think will continue to be very active for us going forward.

The performances of our practices outside the United States continue to validate our reason for expanding into new global markets. Strong demand and expansion of staff in the U.K. enabled our restructuring group in Europe to grow revenue by more than 85% over the same period last year. After you remove the impact of currency translation charges, their business more than doubled.

Our new office in Toronto, which joined us at the end of 2008, hit the ground running and made a material contribution to (inaudible) results in the quarter with a growing list of engagements in Canada and Latin America.

Forensic and Litigation Consulting, as expected, improved its performance on the strength of a significant increase in the U.S. investigations practice. Revenues increased 11% year-over-year and, more important, I think, for the reasons stated above, 14% sequentially over the 2008 fourth quarter to $66.9 million. High utilization from large cases drove EBITDA to $15.7 million, up $1 million from a year ago and up $3.5 million from the prior quarter. EBITDA margins also improved to 23.5% in the first quarter of 2009 relative to fourth quarter levels.

While the Madoff, Stanford and Dryer matters were significant drivers of the segments performance, the Intellectual Property, Construction, Regulated Industries and Latin American Investigations practices also had strong performances, offsetting slower contributions from the Asian Investigations practice, which is somewhat dependent on financial services clients and financial markets activity.

Revenues in the Economic Consulting segment were $54.8 million compared to its record revenues of $56.4 million a year ago. Segment EBITDA was $10.3 million, or 18.8% of segment revenues, compared to $13.3 million, or 23.6% of segment revenues, in the prior year period.

The year-over-year EBITDA performance reflects significant investment in building out the segment domestically and overseas. This included the initial hiring of 26 or so revenue-producing professionals, including three big name economists in the U.S. and Europe, increased investments and infrastructure to support the segments' geographic expansion and higher expenses for branding and marketing in Europe to accelerate the entry into that market.

New engagements booked in the first quarter, coupled with the anticipated contribution from the new hires I mentioned once they have settled into the business are expected to fuel the growth of the segment over the remainder of the year.

In our Strategic Communications segment, foreign exchange continue to be a major factor in the first quarter performance. On a constant currency basis, revenue would've declined 8%, which is a very solid performance in a market such as this.

The segment also continued to be affected by the downturn in the global capital markets and recessionary effects on their clients. Merger Market, the key publication which follows global M&A activity, noted that the volume transactions was down almost 60% in the first quarter and that total value of M&A transactions in the first quarter was the slowest period for M&A in almost five years. In addition, strategic communications is experiencing pressure on fees from its clients, which are feeling their own financial and operational challenges.

Offsetting the currency headwinds built by the segment to a significant degree was the segment's work on a number of large financial and strategic advisory assignments. In addition, retention of clients has been good despite significant fee pressure.

While we are not Pollyanna-ish, we believe that there is opportunity here as a strong, well-capitalized market leader to increase our share, and in fact, Strategic Communications has been expanding relationships with a number of key clients who are using them for a broader range of assignments, and in a number of their markets, they have maintained or enhanced their market position during this downturn.

With that as a backdrop, segment revenue inclusive of the impact of foreign exchange declined 21.7% year-over-year. While the impact of the environment was felt most acutely in the larger, more mature U.S. and U.K. markets, Strategic Communications continues to perform very well and strong in some of its newer emerging markets such as Asia Pacific, Australia, as well as in France and Germany.

EBITDA in Strategic Communications was $5.8 million in the quarter. Results reflected the lower revenues and included a severance charge of $1.6 million that we took to bring the headcount into alignment with the reality of the current business climate. As it was implemented late in the period, there was little benefit in the first quarter, but we expect to realize the annualized cost savings of about $7 million beginning in the second quarter.

That completes our snapshot of the first quarter. Before we turn it over to your questions, I'd like to talk a little bit about our outlook and prospects, but I'd like to do it in the context of a question that we continually get more and more these days as we have been very interactive with our investors. And that question is, "Why are your results seem to vary so much from those of your competitors or peer group?"

Frankly, we can''' profess to be an expert on our peer group and certainly wouldn't have the knowledge that you all, the analysts and the investors, have of them, but as we've discussed with many of you, there is a real question in our mind about how well the usual grouping really lines up against our skill sets. What I'd like to do is take a few minutes and tell you what I think the differentiation from our -- for our Company is and why we are so confident in our outlook, not just for the remainder of this year but into the future.

First, I would be remiss if I didn't start with our people. Whether it's the top three competition policy economists in the world, seven of the top restructuring professionals, the guy who wrote the book on e-discovery, the best securities practitioners or the top communication strategists, we are committing to being the best place for the best. This pays great dividends in good times but even better dividends in hard times, as there is almost always work for the best.

Second, it is our commitment to what our Chairman likes to call our gold standard practices. Not only are our individuals continually recognized for their achievements, but our businesses as well, and it is not just sporadically, but quarter after quarter, year after year.

Third is our geographic presence. We have invested heavily in this, and there is no better time than right now to see that this investment is paying off. On the micro side, quite simply, money, trade, commerce problems are always on the move. As we have seen from this quarter, we are strong in Asia, Germany, France in Strategic Communications as other areas are slower due to the economy.

Our Investigations practice in South America is strong while Asia is somewhat slower in this economy as it depends on the capital markets.

On a macro basis, however, is where the investment really pays off. Over the last several years, we have grown from a U.S.-based professional services firm to now one of a handful of firms that can handle global problems for global clients. I might add that the rest of that handful is probably the Big Four, so that we have really jump-shifted our game in terms of our global competition. As our -- or as our advertisement says, the game has changed, and we want to be the leaders of that change.

The final factor is the breadth of our services, both within the individual practices and then across the firm as a collection of practices. Take FLC, for example. It is not just a group of great forensic accountants, the best at their business, but a combination of skills and expertises that allow us to address all of a client's needs, getting into his matters sooner and getting into them deeper. It is former prosecutors and intelligence people who are at the front end and can put the client ahead. And it is domain experts who, while the matter continues, can keep the client there.

No one else can offer the restructuring capability that we have that is exceptional in all cycles but really especially in times like these. No one has the communications capability that we have, and frankly, while they may have technology as a tool, no one has the commitment to being a leader in that and to having it as a backbone of everything they do that FTI does.

Most importantly, this group of practices did not just come together. We are a trusted advisor to our clients, and our strategy works hand and glove with theirs. We work hard at coordinating these practices into holistic solutions.

In summary, we have built a company that helps build and defend our clients' enterprise value. This value is a product of their results times their reputation. The FTI brand is increasingly being recognized as a global basis to accomplish this and their goals. With that, we'd like to turn it over to your

(OPERATOR INSTRUCTIONS). And our first question comes from Andrew Fones with UBS.

Yes, thanks. I wanted to ask a couple of questions about margins. First, on technology, you rolled out the new platform in the quarter and we saw a nice jump in the margin. How sustainable is that? I know you've continued to invest there. Thank you.

Hi, Andrew, it's Dennis. Actually, we -- the new platform did not have a big impact on the margin in the first quarter, but we see it helping us going forward. I think the margin in the first quarter was really a product of really just sustained new business across technologies platform in the U.S. and over in Europe, and I would say that we're very pleased with the rapid return to our historic margins. We have not accomplished it by slowing down any of our R&D, so we would expect this margin to continue at this rate, maybe some slight improvement towards the end of the year, but we -- I think we said we'll definitely aggressively continue to spend the R&D, which would be one of the main differentials in the historic margin here and the mid-30s margin that we're looking at for this quarter.

Okay, and then you mentioned making investments in economic consulting, and that -- including the hires in infrastructure and that weighing on the margins there. Are you expecting these new hires to kind of ramp over the next quarter or two? And how should we think about the margin trajectory there, please?

I think as you know, when you bring a lot of these high-powered economists and their teams come with them, we have a lot of upfront expense to bring them in house and sign them up and all of the portable type expenses of getting them in our shop to practice. There tends to be a time lag that is just simply them getting acclimated to us and sometimes some legal restrictions as to when they can start aggressively servicing clients and billing and working on some of their old client relationships.

So I would say you would start to see the benefit of this build up in this quarter and moving forward especially into the second half. I think that the penalty to margin that signing this many people up this rapidly in a quarter that you saw in the first quarter will clearly flatten out as these people start to bring in a contribution.

And then, finally, we've had one of the best new engagement signups in a while in the first quarter, and we would expect that the new engagements that we've been putting on the books will start to actuate and activate more aggressive billing as we go forward. So you should see margin improve by those two factors, especially in the second half.

Yes, there's nothing in terms of the investments that we've made that has a lingering nature that would impact the normal margins that you've come to expect from that business when it becomes fully mature.

Okay, thanks. And then, just finally, on Strategic Communications, the restructuring there, did that have any impact in Q1, and do you expect the restructuring to enable you to maintain or even -- have you -- how should we think about the margin trajectory there for Q2 and beyond?

It cost $1.6 million in direct expense in Q1. We're estimating a savings of about $7 million on an annualized basis going forward. So, just lightning math, take three-quarters of the $7 million, and that should be a benefit that they would receive over the remaining three quarters.

Okay, thank you.

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

Good morning. This is actually Torin Eastburn for Arnie Ursaner.

Yes, how are you this morning?

Good. How are you?

Very well.

My first question is on Finance and Restructuring. Obviously it was a fantastic growth in the quarter. A month into the second quarter, have you seen any positive or negative change in that trend?

Actually, it was interesting. We looked at the case openings just to kind of bring it today -- looked a couple days ago. And I think in April we had opened in the neighborhood of 66 cases through a couple -- three weeks of it. So it certainly is not abating, but I have the expert here, so Dom, I'm going to turn it over to you.

We haven't seen a slowdown at all in the new cases coming in, and we've actually seen some even larger opportunities than the average cases that we've seen after we've got the Lehman Brothers and the other cases that were mentioned before. So we're pretty optimistic that that practice is going to have a strong 2009.

And then on Communication, you mentioned in the prepared remarks that you feel like you have an opportunity to increase share there. What exactly will it take for that to happen?

Well, what happens traditionally is the strong competitors do get stronger. We have the added advantage that a large part of our practice is strategic or sometimes crisis management, special situations. Those are opportunities where they're a little bit less discretionary than retained business. We get those clients. We are able to impress them. And we pick them up as retained clients as the cycle changes. So that's the opportunity. We also think that, again, as a -- I think the FD people who've joined us are very happy at FTI. They've become proselytes for what we do here. I think our opportunity to hire people from some of the competitors will be an increasing one over the course of the year. So I look to expand the business that way.

Declan, you might want to comment on that.

I think the only additional point is that in this economy, we've seen a tremendous amount of number of clients come to us and say, "We want to stay with you," rather than some of our competition, who have just lost clients and lost revenue. So we're not experiencing a dramatic fall off in client relationships or contractual relationships. It's more contraction on the billing side depending -- because of what's happening in the market.

So to Jack's point about the strength of the segment, we at this time see a number of larger clients coming to us to work with us because they're confident in the long-term durability of what we have to offer. And actually, in the last month or so, we've actually signed a number of very large engagements in different places around the world that reflect that dynamic. So having been in this business for over 25 years or 23 years, I think the quality underpinning the segment is really being borne out in the market.

Okay. Those are very helpful answers. Thank you for taking my questions.

Thank you.

And we'll take our next question from [Jim Jannasky with Stifle Nicholas]

Yes, good morning. Could we spend a little bit of time looking at the environment or the macro environment, I guess, within the FLC area? You talked -- is there really new activity coming out of the new government, or do you think it's more that these are the large broad cases that you've been involved in, and so the shift is really more towards your company than any real activity? And if there is real activity, what areas of the government is it coming from? Thanks.

Let me start. Jim, it's Dennis. I think it's -- we would turn around and say it's a combination of both. It's just a matter of the amount of speed and build up that we see in the momentum. Clearly we're the beneficiary of being selected for these historic odd cases and others that we really cannot even talk about. The fact that the economy and the traumas and the wealth disruption is obviously putting so much more visibility on people that operated around the edges under the best case and operated within blatant frauds under the worst case is clearly going to be a driver at work for us.

We are seeing increased activity from the government. We're seeing it primarily, I think as we've said before, in the engagements that were being received on our economic side. So we're seeing a lot of retention, first, of our top experts in anticipation of having to use them to respond to a wide variety of governmental inquiry. Now, a lot of that centers around competition, but it also centers around securities issues, and so we're certainly seeing that work being booked. It's early in that cycle. In other words, the inquiries, the subpoenas, the regulatory investigations are just touching the target companies or potential target companies. So we're very early. And again, we have to remember it's -- I think today is the hundredth day of the administration, and a lot of this has probably simply been pent up stuff that a different view in Washington allowed to open up.

I think we're finally seeing companies in just the civil litigation. As Jack said, our IP practice is doing extremely well. Some of the other practices within FLC are doing well. And it's just a result of that companies can sit on litigation, delay trying to resolve issues. But eventually they have to get them resolved, and if they can't get them resolved through friendly means, they have to go to a third-party venue. And we're definitely starting to see that activity definitely start to pick up. So a lot of the engagements that were probably put on the books in the third and fourth quarter are activating as companies simply get too frustrated with a delaying process and get a lot more aggressive as they move forward.

I don't think it changes our perspective on saying that most of this activation will benefit us primarily in the second half. So I think we're the beneficiary of things that are going on in the commercial market right now. Whether you attribute that to gaining share or keeping share, I'll let you make that decision. And I think we'll be the beneficiary of what we're now seeing as increased regulatory investigation and activity in the second half as the responses to these inquiries start to mature and the actual hand-to-hand combat start to begin in the second half.

Okay, thanks. Thanks. That's helpful. Now, just shifting now to the revenue side of the Technology segment, you had talked -- and we had talked in the past about some of these large forensic type cases, including the technology component, especially early on in the case. With that backdrop in mind, how should we look at sequential revenue progression in the tech segment as we move through 2009?

I think when we talked last on our annual earnings call, we said that we expected tech to grow sequentially from Q4, quarter-over-quarter-over-quarter-over-quarter for the balance of the year. Without a doubt, we're very happy with the performance in the first quarter. They almost lapped the highest quarter of record in the history that was driven by two very unique projects.

So I think we're hopefully that we can continue the sequential growth. On the other hand, we've outperformed our initial estimates, so I think we've got to look hard at that. I think they are poised to do sequential growth, but it still is a tough market out there pricing wise in parts of the continuum. We're not immune to that. I think we're doing a good job of overcoming that, as the first quarter results start to demonstrate, but I think we have to be realistic that there could be some other surprises in the market that could dampen some of that growth, especially since the first quarter outperformed our initial expectations.

Okay, great. Thank you.

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

Hi, good morning.

Hi, David.

Wanted to drill down a little bit on restructuring. Couple of questions there. One -- or favorite question from 2002 to 2003, which is can we add some color to -- I know this is probably not going to be fair, but where you think we are in the process or the, quote, unquote, "cycle," but more so, but do you think, based on the sharp ramp up that things are really accelerated this time versus, say, the historical performance there.

David, Dom. I think we're at the beginning of the cycle. I think we're going to have a strong practice through 2010 at least. And as Jack mentioned, that no industry has been spared from the credit crisis. Any company with debt maturing, any company with a highly leveraged balance sheet is going to have trouble refinancing debt. There was a lot -- there's a lot of LBO debt that'll come due over the next 18 months that needs to be refinanced and by definition, it will be more levered as the operating results of these companies have suffered because of the recession. So there will be challenges in every industry, no company spared.

And we sound like a broken record, but over the last, I guess, two calls, the industries that we're really spending a lot of time in will continue also, and they include retail. They include automotive. They include -- commercial real estate's really starting to pick up, as we had said before. You look at healthcare, that's going to continue. As they change some of the reimbursement rules, that's going to increase the amount of healthcare work. Until this economy recovers, and it won't recover until the consumer recovers, we're going to be very busy in that space. And the good news is we're able to bring in other practices into that space, particularly the Strategic Communications practice, where roughly 40% to 50% of the work that we do is on the company side. So we can be very influential in demonstrating how important it is to effectively communicate with the creditors, with employees, with the shareholders and lenders in these situations to get them resolved on a timely basis.

I would defer to Dom, but I don't think we've seen anything from our perspective to believe that this isn't a spiral that's continuing. You have a bunch of traps for the unwary, if you will, coming up. You have -- I don't believe there's any company in America that isn't looking to revalue its good will at this point as their stock prices and they have to look at those types of issues.

At the same time, you have portfolios and regional financial institutions that are chock full of commercial real estate, as Dom says, and as those things get revalued and devalued, people have to look at ratios and things like that. There's just a tremendous amount of work that goes with, basically, a resetting of valuation in the global economy. And the good news, as Dom says, is that not only involves our restructuring folks, but as things get into restatements and to other issues, balance sheet issues and valuation issues, it involves other areas of our Company such as Econ and FLC. So I think -- I'm glad the stock market's doing better and all of that, but I think from where we're sitting, we're not really seeing an abetting of what's going on in the credit markets.

David, I think the other thing that's a differentiation for us is we're a global company now versus being pretty much an American company back in the last cycle. As Jack said, our European practice in constant currency very quickly doubled their revenues, more than doubled their headcount. We're aggressively looking to push the practice deeper onto the continent where clearly there's more and more business for us, as well as we're doing business, restructuring business in Asia and especially Australia.

I think it -- we should not overlook the fact that we are now being retained to advise sovereign governments on financial challenges within their countries. Again, for us it is a new and different type of restructuring assignment which could have a different set of legs, a longer type of runway as we get involved with countries that have deep systemic or structural issues that are going to take years to change.

So I would say one of the biggest differentiations besides the depth that Dom talked about is geography. We simply are much better positioned as a global company to not only benefit here in the states like we did in the last time but in this one.

Got you. Got you. That's help. Just one other. The other side of the question of strength and restructuring is both utilization and hiring climate there. Can you give some color on both of these, basically, A, where could we go on utilization from, say, 83%? Or will it now be more a function of adding the right people to help you do some of this business as it comes in?

I think it's really above, David. We've had times where we have spiked over 100%. Clearly 100% isn't a sustainable rate over a long period of time, but if you think about it, it's 40 hours a week. It's 100%. So we certainly can do that. We can go to 120%. We've got people in multiple offices, so that makes it a little bit difficult to keep everybody working at the highest rate possible because if you've got a piece of work -- if you've got a person with four hours free in L.A., you can't easily use him or her in a project in New York for those four hours. So geographically, it becomes a challenge, but we've got pockets of the practice working well over 100%.

We are able to attract a lot of talented people. We're bringing in a significant number of people around the world in corporate finance, and I think people are recognizing that coming to FTI they get an opportunity to work on some of the larger, more interesting and challenging opportunities, and clearly we're -- we've got to compensate them competitively. So we are a preferred place to work, given our size and opportunities that we present to their young careers.

David, this is one of the best hiring markets we've ever seen. I think the trauma in the financial services community, and to a lesser extent some of the other professional services companies, has given us a much broader runway in the universities for recruiting there as well as hiring seasoned professionals to come in. So we're certainly a beneficiary of a marketplace that has a very good set of supply dynamics for our demand.

Terrific. Thank you all.

Thank you.

We'll take our next question from Tim McHugh with WilliamBlair.com

Okay. We just wanted to first ask -- you didn't say anything formally about your guidance that you had given last quarter. Is it fair to say that you'd leave that unchanged, given that you didn't comment on it?

It's been our practice to review guidance significantly at the end of the second quarter, so we will continue that practice, yes.

Okay. And then next I want to ask about the Technology margins. You kind of attribute it to it sounded like new business activity globally. My question, I guess, why I'm a little unclear is that the revenue -- or the EBITDA went up by more than the revenue sequentially, and so I'm just trying to understand -- some cost exited the business in some fashion. Just trying to understand how that impacted the margins.

Well, I think we told you that -- we did tell you that we would begin to integrate the Attenex business in the first quarter after we've integrated the platforms, and that has begun in recognized costs all through the quarter in an effort to basically begin to eliminate the redundancy in these organizations. We're not totally finished that, but we're very, very close. But we have, in fact, integrated the platform.

I think the other is efficiency. A lot of these large international assignments, both some of the ones you've been reading about in the paper and a bunch of them that we've gotten over in Europe and Asia, you can really get extremely efficient in your allocation of large teams onto them. Utilization gets very high. The utilization of that technology is very profound. And the demands on just scale and size as far as some of the ancillary services hosting things really come into play.

So I think it's a combination of, as we said, the beginning of the Attenex organization, which clearly would consolidate some costs, the integration of that into FDI. And then, finally, just the efficiencies you gain from a lot of just very large business from around the globe.

Did you maintain the R&D function within Attenex or --?

Well, we increased it. We're integrating the R&D function with our R&D function. We have not cut it back. If anything, we've actually increased the combined run rate.

Okay, great. And then on the forensic accounting side, there were some questions earlier about looking at the broader environment and the -- versus the impact of some of the large fraud cases that you've seen. Can you in any way quantify the sequential improvement just in a directional sense, if you don't want to give a specific number? But is half the improvement due to three to five of the large cases that you won, or -- is that in the right ballpark? How can we think about the impact of those? As well as, then, it might be helpful, any comments on the length of those engagements that you expect?

Clearly they're prominent engagements and they help, so I think you have to start off with that. I think all of them are very complex. Some of them are growing more complex the deeper we get into them, so we certainly would view them having significant legs, at least through the balance of this year.

I honestly go back to something that Jack said. I think we were fully expecting to see good sequential growth off of the end of an election year. I think as Jack has said before in some of other comments, it seems like every presidential cycle, either because of the lame duck nature of the Department of Justice, whatever, and then this one you couple with a very moribund and rabidly declining economic scenario. We fully expected to see some degree of snap back, not only in federal-driven litigation or litigation support but also in civil. We are feeling that. We're feeling it from the point of view of increased engagements. We're feeling it from the point of view of increased investigation. And we're certainly seeing it activate in a lot of our boutique practices, as we talked about, IP and things like that.

Okay, thank you.

And we'll take our next question from [Toby Summer with SunTrust Robinson].

Thank you. Was hoping that you could comment on your expectations for cash flow this year and maybe in that context and with the pile of cash you have on the balance sheet, describe what the market is looking like for you to be able to deploy that.

Toby, as I think most people know, we [throw off] a lot of cash. We would anticipate, given our guidance and our margins and the amount of noncash charges that we have on the books, that that would continue. We are seeing a lot of opportunities to invest. We're obviously being careful and selective in the way we look at those opportunities because, in all honesty, if companies like ourselves may have some degree of challenge and visibility, smaller organizations have a much greater challenge in visibility. So I think you have to be a little more careful.

Secondarily, there are clearly issues of valuation. Good companies and their managements understand how markets are valuing them, and oftentimes it's reluctance on their part to bring their companies to market in an environment that we have.

So I think you'll see us continue to be aggressive in acquisitions. Dave Bannister has a lot on his plate. But we're very selective right now. We're seeing a lot of things. We've turned a lot of things down. And those that we're looking at, we're trying to get creative in bridging the valuation gap between our expectations of what we should be paying in the market and possibly a seller's expectations of what the true enterprise value is. So I think we feel we're in very good shape liquidity wise to continue to execute our five-year plan, which does call for us to be aggressive in making acquisitions. We're always looking for the next leg of the stool, the big acquisition that could make a significant impact, but again, it would have the margins that we're used to would be a C-suite, a boardroom sell and would be global in its reach. So within those parameters, trust me, Dave Bannister's out there looking.

Thank you. And then I wanted to ask a question on the currency side. Most of that exposure, if I recall correctly, is in Strategic Communications, and we can't forecast exactly where those rates will go, but based on where they sit now, sort of in the back half of the year that starts to abate. So constant currency versus GAAP rates would start to normalize. Is that accurate?

We have September labeled in red on the calendar as the liberation day from -- that was when the precipitous fall in the pound took place.

Great. And most of my other questions have been answered, so thank you.

Thank you, Toby.

And we'll take our next question from Paul Ginocchio with Deutsche Bank.

Thanks. Just a question on Strategic Communications. Your headcount looks like it's down 26 people Q-on-Q. Does that capture the entirety of the severance, or is there more than that? Thanks?

More or less that covers it, yes.

Okay. And would you expect the --

Let me put it this way, though. We continue to be aggressive there. Since the first quarter of last year, we've done several acquisitions, and we have areas of the world that are extremely active right now. As we mentioned Asia with the activism of the Chinese government in M&A activity, and we're very active in -- Germany has continued to be a good market, and France. So that -- but that snapshot captures basically what we did by coincidence.

And so would that be maybe a good indication of what you're thinking revenue would be down this year on an ex-acquisitions to ex-currency?

No, we really didn't look at it that way at all.

Okay. Final question. Would you expect it to get worse from here, the ex-acquisition, ex-currency revenue trends?

This is Declan. I think in the last month or so we've seen some, to use this phrase, green shoots of activity in various markets around the world, and so we're encouraged with the most recent trends after the difficulties of the first quarter, which was explained. And I think we're hopeful and optimistic that we can maintain the performance of what we've seen in the last month or so. So a lot depends on our larger crisis management engagements that we can get in some of the larger markets, specifically in the U.S. and the U.K. But in the last couple of weeks in particular, there have been strong indications that that kind of activity is returning.

Thank you very much.

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

Thanks. Good morning. I guess I'd like to start off -- obviously the restructuring segment very, very strong, but would like to get an update on the integration of SMG. What's happening that's good and bad there? Doesn't seem to be much a headwind, so could you just talk a bit deeper there?

Well, obviously the strength of the core restructuring can overshadow everything. But SMG is integrating very nicely with Corporate Finance, as well as other practices, including Financial Dynamics. They're working on joint projects around the world. So it is integrating very nicely.

Clearly this is the worst real estate market anybody's seen in their career, so because of the lack of M&A activity and lack of financing in real estate, the core mergers and acquisitions business is down, but the work that they do on a day-to-day business for their REIT clients and other real estate-related entities continues. So -- and theyr'e slugging it out. But the key here, though, is the ability to cross-sell their services within FTI, and that's an internal client they have now that they hadn't had before, and they're clearly focused on that. So while the outside opportunities are fewer, the inside opportunities are significant. So they're holding their own, and they're pretty much operating at a level where we would expect in this environment.

Scott, they were a U.S. based company. We have clearly taken them abroad. They're doing restructuring work and consulting with financial institutions in Europe, governments in Europe as well as a lot of activity right now down in the Persian Gulf.

Thanks. Shifting it up a little bit, economic consulting, the -- looking at the average rate in that segment, it's my understanding that you've been doing some price increases, and sequentially it looks about flattish. Just kind of curious -- is it the new hires coming on that we're going to see the pickup there? Or am I expecting to see too much in the pricing?

We put a price segment in this segment back in November of last year, and so I think you would expect to see some degree of sequential flatness given the price increase went in at the end of the year. So I would say the demand there warranted the increase. The market has received it well. We haven't gotten very much pushback on it at all. I think we'll just have to look at how these engagements that we talked about activate, as well as how the new teams that we brought on hit the road, and that could influence whether we make another interim adjustment sometime later in the year.

Yes, and remember that that figure that's published is just a reflection of the mix of people that worked during that period. If you still look apples-to-apples at any given economist in the group or whatever, you'll see that their rates have gone up. It just reflects whether, in fact, a big-named economist was in trial or whether more of the work was being done on research during the period and that kind of thing. So that's -- that published figure gives you an indication of the activity mix in the period but not of the actual price structure or rate card, if you will, that might be used in any given segment.

Okay, thanks. And one more, if I may. In Technology Consulting, could you just update us a little deeper on the pricing environment and what you're seeing there? Thank you.

Again, I think you have to look at them across the continuum. In the -- I would say in the broad-based search culling type of e-discovery effort, which is in the beginning of the continuum, we think there's extremely aggressive pricing there. In more of the midmarket, down-market cases where a more simplistic approach -- in other words, these are not complex issues -- we're seeing significant competitive pricing there. Where we're not seeing a lot of it is obviously in the more sophisticated uses of the technology, the actual management, siloing, movement, privileging of the data. And then, finally, the more complex the cases are, the more global the reach. For example, some of these huge foreign corrupt practices investigations that touch the Middle East, Asia, Africa, places like that, we're really not seeing a lot of pricing competition there at all. So I think it would be a function of significant pricing competition in the frontend of the technology continuum, significant pricing competition in the midmarket to down market more simplistic type of classes, a lot less as you move up the technology continuum, and much, much as less as you up the complexity of the issues.

Okay. Thanks very much.

And we'll take out next question from Kevane Wong with JMP Securities.

Hi, good morning, guys. Just a few things. First, looking at the acquisition revenues in Corporate and Restructuring, basically doubled in first quarter from the fourth quarter of '08. Was that all basically CXO and Canada ULC acquisitions, and is that sustainable? Or were there other factors that sort of drilled that (inaudible)?

No, the main impact is SMG. We acquired SMG right at the end of the first quarter, so really second quarter is the first quarter of last quarter that we had it, and then the other two certainly contribute it. But the main differential would be SMG.

So (inaudible) sounds like SMG and had actually sequentially a pretty big pickup from fourth quarter.

SMG is performing better than we had budgeted them in the first quarter.

Okay. And do you basically suspect that's sustainable, or should that continue to ramp?

I think Dom answered it pretty succinctly. I think they've acquired a huge new client that's called FTI, and that client's allowing them to move into areas where they haven't gone before and geographies where they haven't been. So I think where they'll really ramp is as we get to basically clearing prices in these various municipalities for a lot of this commercial real estate that's going to come out, I think they're going to be an integral player in developing the capital solutions for those. And as the credit markets open up, and again, the money comes in to address the opportunities with these clearing prices, I think you'll really see them ramp from that.

Okay. Excellent. Looking at headcount in Forensic and Litigation, again, sort of the sequential drop in those -- in the headcount there, do you feel that you've gotten now to the level on headcount there that this is a base for the year? Or do you think there's reason to think that should be further cut in a year?

We don't have plans to make significant cuts in here. Obviously for all the practices, we watch -- we monitor very closely, and Forensic -- what we've -- we've morphed that practice into a collection of specialty practices. We're no longer just general litigation consultants. So we're specializing in real estate, the global investigation. We've got a tremendous healthcare practice. We do a lot of monitorships. So we've found that it's important to specialize, and more and more, we -- right-sizing's the wrong word. We're just -- maybe we're just building practices within FLC that meet the current demands of our clients. We're moving people from generalist to specialist. And if that's -- if we're not able to do that, we've got to bring in new specialists.

So we're really focused on the areas within that sector that have the most growth, and it's not being a general litigation specialist.

Yes, I think the one thing -- you shouldn't get -- you should understand we're a calendar year company, and so we do our valuations of our people on a calendar year. So you could see -- it could be a false positive or a false negative. You could see changes in headcount Q4 to Q1 that is nothing more than involuntary movement of people in small numbers where we simply don't feel that their career alignment is going to be best with FTI. So I think Q1's a little bit of an anomaly because that is when we do all of our evaluations, and you do have some fallout from that on a normalized basis.

Yes, year-to-date, we've hired 24 billable professionals in that period. So we're actively looking for people. It's just a question of --

Yes.

It's such a great market now, we're able to really, again, attract the best to FTI, and that's what we're about --

Sometimes you just see some dips, Q4 to Q1, and then it'll come back and continue to grow. As I think Jack said before, we're looking at about 14% across the [personnel complement] in this year.

And this is one of the areas we expect to grow.

Got you. Two other just quick ones. One, last quarter you talked a lot about putting more money into brand development, et cetera. When I'm looking at corporate activities expense, it was basically at the level of a year ago, down from the fourth quarter. Is that going to pick up going forward? How should we look at that?

I think -- this is Declan. We obviously made a decision that we were going to invest in the brand and invest in the marketing of the company around the world, and we have done that. However, we've also done it prudently, and we continue to do so. We've found that there's been considerable leveragability in the way we've gone to market, and we've found that some of the expenditures that we had planned to make, we didn't need to make because of the reaction to the campaign, frankly. And so we have tremendous flexibility built into the way we're going about the marketing program, and we'll manage it on a month-by-month basis. But so far that's worked really well for us, that approach, not to spend all the money upfront and then see what happens. We're spending it as we go, and it's working really well.

I think the other thing you should understand, on an opportunistic buy basis, there's probably never been a better time to try to use media to enhance your brand. Clearly, the pricing, the opportunities, the partnerships that are available at a totally different pricing structure and financial commitment to, say, two to three years ago have helped enhance what we wanted to do, number one, but allowed Declan to actually lessen the impact of it on our P&L. So I think they've done a good job of balancing both taking advantage of the opportunity but also taking advantage of phenomenal process.

And just as a practical matter, given the scale of the matters that we're involved in and the high-profile nature of many of the assignments, frankly a large number of the largest news organizations in the world consistently want to talk to us about what we're doing and our advice on what's going to happen around the world as we continue to expand our portfolio of interest around the world. So in many cases we don't need to spend money because people are coming to us asking us for our opinion because we have the leading experts in the world, as Jack said, across so many different segments in our business.

Got you. And then my last question here is for Jorge. I know one of the things you've pointed to before -- usually going from fourth quarter to first quarter, you have a 200 to 300 basis point drop in margins, EBITDA margins. Obviously a much better performance this quarter. Did you expect -- usually going from first quarter to second quarter, you also get a lift. Do you also expect to see that from these levels, or was this just particularly strong and you might not sequentially see that same kind of lift you would normally see seasonally?

You did see the fourth quarter to first quarter in the gross margin percent or EBITDA margin percent a bit. Especially on the gross margin you'll see it. I think going into the second quarter you will typically see a couple hundred basis point improvement due to those factors we talked about.

On the flip side, the previous question, on the marketing side, we are going to continue to spend. We probably spent in the first quarter, for the reasons we just talked about, a little less than we had anticipated, but we think we'll get back to our plan in second quarter. So you're going to see that margin improvement at the gross margin level, but you may see the SG&A going up a bit in the second quarter.

Got you. Okay, perfect. Thank you.

And we'll take our next call from Dan Leben with Robert W. Baird.

Great, thanks. On the Civil Litigation and Dispute side, looking out at the year and talking about some of the engagements you signed back in the third quarter and fourth quarter finally starting to ramp up, what does the new engagement activity look like in the first quarter and so far in April?

I think it's good. I think we feel that -- the economists especially are seeing a lot of retentions. I think we've already talked about how the specialty practices are extremely busy and have very high utilization, and I think we're seeing good traction -- the economy is generating a lot of spotlight on companies, and their investors, the regulators, the investigators are getting very busy. So as a result, that group is getting more busy.

Okay. And then just on the restructuring business, can you talk a little bit about -- you mentioned that you're starting to see some larger engagements coming through posting phenomenal numbers in total engagements. But just to the extent that you start getting some bigger and bigger engagements coming in, is there any thought that your ability to be able to continue to hire to ramp those, or do you need to potentially turn away some smaller restructuring deals to focus on some of the larger ones?

Clearly we're focusing on the medium and larger engagements, and our focus is not the smaller ones because we do have to rationalize our -- where we put our people. But we don't see significant constraints in handling the number of cases that are coming over the transit now. Nor do we believe we'd have problems handling larger ones as those opportunities arise.

Remember, we've got a [TAS] practice that we've moved into the core Restructuring business for the most part. We're able to move those people over because they've got the same skill sets, and they've got the same financial experiences that many of the younger non-core restructuring people have. So we're able to do that, and we're able to also move over some FLC people where needed. So there are opportunities to continue to grow that practice even from our internal bench, and that's what we continue to do. And right now we're probably three-quarters of the way in moving the TAS people over to the structuring practice, and that's going very well because many of them started their careers as restructuring professionals, and the model that we've built is to be able to move people back and forth in different economies.

Great. Thanks, guys.

And we'll take our next question from Sean Jackson with Avondale Partners.

Yes, again good morning. Real quickly, can you quickly talk about within the FLC segment the distribution of revenue throughout the quarter? Was it a measurable pickup in March? And how did that distribution compare to previous years?

I would say January traditionally, as you can imagine, is a vacation extension out of December, so people don't come back anymore and hit the ground running. So January would have been okay, not great. February and March were extremely good. So it was -- it would be weighted into the last two months of the quarter, but again, some of the engagements, in fairness, have been sitting on the books for a quarter and a half, so it wasn't as if we didn't have them. It's simple when the people decided to push the buttons and start to work, and that seemed to pick up significantly in February.

And again, I think a lot of this is, again, when people decide they can't wait anymore and when they get frustrated by not being able to get a solution to their problems, and they've got to move more aggressively into a different venue.

Okay, so it sounds like the pickup this year was a little more pronounced than the pickups in previous years? Or not?

I think it was because you had an election. Again, I think you just had an awful lot of non-action, of people simply waiting out what would happen, and -- so you had, for us, a perfect storm. You had the election, number one, freeing up people either civilly or responding to potential criminal issues to get on the ball and start moving. You had very, very large cases that we received not only here but in Europe. And then I think just a combination of the normal seasonal movement up. So I wouldn't say -- taking out the election, I'm not sure it was dramatically different than what we experience. The election clearly was a demand-suppressing agent last year, and I think with that gone we saw demand free up.

And as we start these large investigations, there is a big spike in activity because we need to put a large number of professionals on the field very quickly. So we were fortunate, as Jack and Dennis have mentioned, to get several of the larger investigations making the headlines.

Now, you talk about the tail of these fraud cases being fairly long. I didn't get exactly what the exact numbers that you put toward that. Do you expect these to last several years or [till they come up]? What's your expectation?

I think the answer we gave is they're very complex, and they're global. A lot of them are -- they're not related simply to the U.S. So a lot of it is -- we think they have legs through the end of this year. To predict it beyond that gets a little more difficult, and part of that will be how [intergovernments] get together -- there are activities in some of these that you need governmental cooperation offshore in order to continue the investigation or to really intensify it, and that comes with fits and starts. So I think predicting how the government negotiations, government-to-government on access to information, access into institutions that are foreign-chartered institutions but would be under the umbrella of these organizations that are being investigated is very difficult to forecast. And obviously the frequency of deals is tough because each -- or the way to forecast it is tough because each country's different.

Yes, I wouldn't be so quick to view this as a bubble going through a snake either. If you -- just this morning the SEC announced it's creating a task force to look at this type of fraud, and as sure as we're sitting here, there's more. There's more off the pages of the Wall Street Journal and the New York Times and the FT today. So I think it's -- so as I say, I wouldn't -- when we have had the first options backdating case or the first finite reinsurance case, we thought, "Gee, that's a one-time spike," but those typically are endemic of something else going on. So as I say, I think our investigations people are going to be busy for a long time, both on the existing matters, which at this point, as in many situations, we don't know which way they're going to go, whether they're going to end up in years of litigation or whether they're going to end relatively quickly. So I would sit back and say that was a nice benefit to the quarter.

The other areas that we mentioned -- the FLC segment is doing very well and improving as we predicted. We had expected it to be a little bit more backend loaded than it us, but we'll take this as it comes, and I think, as I say -- I don't think it's just an asymptomatic couple of cases have popped out here in the first quarter.

I'd be remiss not to also mention that we try to be proactive with the vast majority of fund-to-funds and hedge funds that clearly are doing a good job, don't have these problems but need a different type of transparency and review of their investors. And we feel that we're uniquely equipped -- one with the experience that we have that Jack outlined and our domain expertise in forensics and the financial services industry. Obviously the confidence that the government and others have shown in giving us these very large cases, we're in a unique position to put together a product to really help bridge that transparency between all of these fund managers and the vast institutional investors.

So we have launched this product. It is a hedge fund/private equity fund-to-funds transparency product. It has gotten very good reception from not only the people who will be using this product as far as generating this information. That's the funds themselves. It's gotten extremely good traction and support from some of the large institutional investors that clearly see the benefit of the funds using this type of product in their communication with their investors. So I think we'll start to see some benefit from that towards the second half of the year and certainly into next year as the market calms down, a lot of these funds go out to market to raise new capital and they change the way they're reporting their results and everything on an interim basis to their investors.

Okay last -- the very last question. The competition in some of the hotter areas -- specifically restructuring, has there been new people that you're seeing, or is there just so much business there that you're not seeing anybody else.

Well, you can never say you don't see anybody else. I think, though -- I believe, though, that for the larger cases, they go to the established practices that have been around, like our practice. So we do get an opportunity at bat on almost all of the larger matters. But we haven't really seen the growth of a lot of new competitors in the higher-profile larger cases that we're considered for.

Now, our competition in the U.S. would be boutique investment banks, several -- a couple of large private consulting firms, and overseas the competition is predominantly the Big Four, and that's who we see, Dom, I would say in 90%, 95% of the big cases.

Certainly if the cases are being driven by the large banks, which in Europe in particular they are, the Big Four are our largest competitors. But some of the larger boutiques that we see here are also in Europe and of course and around the world.

Okay. All right, thank you.

And we'll take our final question from Joseph Foresi with Janney Montgomery Scott.

Hi, guys. My first question here -- and I'll just make them two quick ones because it's -- we've gone on a little bit here. On the Communications side, can -- I guess a lot of people wondering can that business work at the same time that Restructuring is working? Maybe you can give us some idea of what you expect out of that business in the back half of the year and just your thoughts in general on a high level, whether those two can work at the same time.

This is Declan. In fact, I'm glad you raised that point because there has been a tremendous amount of cooperation between both Corporate Finance and FD over the course of the last several months, and we've seen a significant pickup in that since the backend of last year and all throughout the first quarter. So in the United States in particular, and now increasingly in the U.K., and our Communication segment in the U.K. actually launched a Restructuring practice inside of its own business at the beginning of this year to reflect the demand.

So the answer to your question is yes, we've worked on -- we're working on several of the cases together at the current time, and we do think that there is a lot of lift in that potentially for the backend of the year.

Would you say that we're getting close to a bottom in that business, or is it too early to tell, or -- just your general thoughts on the trajectory leaving this quarter into next and the back half of the year.

As I said earlier, I think in the last several weeks now, three, four, five weeks, we've been more encouraged than in the first two or three months in terms of the matters that are coming forward. And so we are more encouraged. We're still cautious because of the obvious volatility in the market, but we've taken all the measures we can possibly to take to be able to take advantage of it, and we are one of the largest players in the industry. And so, at this time, if large matters do come forward, we are actually at a better place than most to be able to take them on.

I think there's -- we have pretty carefully built this company, as we talked about in our opening remarks, to be for all cycles of the economy. And I think it's interesting that you only have to go back to the comparable quarter to see a time when Restructuring and Strategic Communication were both humming. And they weren't humming necessarily because they were each feeding the other. There are times in the economy when you're turning from the poor economy, where restructuring is still rocking and rolling, and you're also at a critical time for communications. So as we have said, we believe that for the next five years, you'll see a situation grow from this to where our practices get into balance to perhaps in five years time where they go the other way. But we think we have the right mix of businesses right now to provide not just a good 2009 but a sustainable platform as we increase it globally for the next five years.

One additional point is that as we're brought into an increasing number of Restructuring matters, more and more clients are asking for the Communications offer. That's an important point and an important differentiator between those and our competitors. So we are able to sell in more services at one time, which previous, of course, was not possible before the segments were put together.

Okay. And then just lastly, on e-discovery, we talked a little bit about it showing a little bit better signs in the beginning of the year. Has that business stabilized yet, in your opinion, or is it being driven by some of the larger cases and litigation? And if so, what do you think of the trajectory of that business on an annual basis versus what we're typically used to?

I think as we tried to say, it's a combination of a lot of things. I think clearly the large cases help the globalization of a lot of cases, the business we're getting out of Europe, given the complexity of it, certainly helps. It's a lumpy business. I think you can get intense work on a short-term basis, which can really distort a quarter, which is why we're being somewhat cautious in saying you can expect to see just seriatim, good sequential growth from this point on.

I think that we are spending R&D at a rate that the Company has not experienced in the past. On the other hand, we're spending it because of the opportunities that we see going forward to possibly come up with some significant disruptive technologies to introduce into the market.

So I think as Jorge was talking before, we're pleased with the way they've started. We think they're going to have a very good year. The competitive arena has not changed much. In some instances it's increased as far as price competition. We've been able to manage through that fairly well, and we're pushing very hard to introduce new and much more creative technological solutions into this marketplace on a faster rate of introduction than we had originally planned.

Thank you.

And it appears there are no further questions at this time. I would like to turn the conference back over to management for any additional or closing remarks.

Again, thank you all for being with us, and we look forward to speaking to you for our sequence results. Thank you.

And that does conclude today's conference. Thank you for your participation.