Huron Consulting Group Inc (HURN) 2007 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Huron Consulting Group's webcast to discuss results for the fourth quarter and full year 2007. At this time all conference call lines are on a listen only mode. Later we will conduct our question-and-answer session for conference call participants, and instructions will follow at that time. As a reminder, this conference call is being recorded. Now I would like to turn the call over to Gary Holdren, Chairman and Chief Executive Officer of Huron Consulting Group. Mr. Holdren please go ahead.

Good morning, and thank you for joining us for today's webcast to discuss Huron Consulting Group's fourth quarter and full year 2007 results. Before we begin I would like to point all of you to the disclosure at the end of our news release for information about any forward-looking statements that we made or discussed on this call. We have posted a news release on our website. Please review that information along with our filing with the SEC for disclosure of factors that may impact subjects discussed in this morning's webcast.

Also on this call, we will be discussing one or more non-GAAP financial measures. Please look at our earnings release and on our website for all disclosures required by the SEC including reconciliation to the most comparable GAAP numbers. Joining me on the call today in Chicago are Gary Burge, our Chief Financial Officer; Dan Broadhurst, our Chief Operating Officer; and Mary Sawall, our Vice President of Human Resources.

Today I would like to spend the majority of my time talking about 2008 and the market demands and opportunities that exist for each of our businesses. I know that many of you have questions about the macroeconomic environment and whether this will hurt or help Huron in 2008. I will address this for each of our businesses as I discuss the market demands.

Before beginning on market demands, I want to just say a few words about 2007. Gary Burge will give you all the financial results in just a few minutes. In 2007 Huron substantially broadened its portfolio of service offerings with the Wellspring, Glass and Callaway acquisitions. We lowered our turnover rate to less than 16%. We added 89 new managing directors through hires, promotions and acquisitions. We now have more than 2000 employees and full-time equivalents who help Huron succeed in the marketplace every day and more than 1100 clients who trusted us to serve them this past year.

The consulting business is a people talent business and the way we will keep winning in 2008 and beyond is to keep doing more of the same, attract and retain the best people. When you review the proxy statement this year you will see that all the Huron executive officers received zero cash bonuses in 2007. The officers made a unanimous decision since we didn't achieve our stretch internal revenue goals, we would put our bonus dollars into the staff bonus pool.

Now let me turn to 2008 and beyond. I want to reiterate to all of you that we believe that Huron can continue to deliver a 20% topline organic growth rate and a 20 to 25% bottom line EPS growth rate. We have been told since the beginning of when we were going to be a public company if we could deliver 20% organic revenue growth and 20 to 25% bottom line year-over-year that we would be a great company. We're going to deliver these results in 2008.

Our balanced portfolio, service offerings and our ability to adapt to changing market conditions allow us to continue to be able to deliver these results. These results may not come from the same practices in the past, but that is why we continue to go where the market is hot and unique. That is Huron's strength. We also believe you should look at Huron on a year-over-year basis and invest in us because of our 20, 25 organic growth metrics combined with some tuck-in acquisitions which could add another 10 to 15% of annual revenues each year.

As our business grows and as those conditions change, there will be quarters when the precision of our forecast will be affected by multiple events starts and stops in big foundation jobs, large volume swings in our velocity assignments, contingent fee write-ups and on and on. Our priorities and sights remain on meeting and exceeding our annual and long-term growth rates, not just quarterly numbers.

Let's take a look at some of the stories behind the results. I will start with our health and education consulting business first. This business has tremendous long-term growth potential given our market position with research universities and troubled, distressed and healthy hospitals. Spending on health and education is about 25% of US GDP, and it is growing faster than most segments of the economy. Huron has number one market share with these two service offerings. Our portfolio of healthcare offerings has done very well, and we expect great things in 2008. The 5500 hospitals in the US are not getting financially stronger. Our healthcare practice continues to knock the cover off the ball by delivering services that help our hospital clients dramatically improve their operating performance and financial results.

We have booked seven new hospital assessments in the first six weeks of 2008, which bodes well for implementation work over the balance of 2008. Wellspring revenues are back-end loaded in the calendar year. In 2008 we will be working to expand more into the academic medical center space and provide a full range of performance improvement services to all hospitals whether troubled or healthy. This business continues to move upstream in the marketplace; we recently added some larger multihospital systems and academic medical centers to our client base, including prestigious teaching institutions.

Huron's practice that address the pharmaceutical health plans has a great start in 2008 and will have a great year. Our work with health plans have included several large engagements involving Medicare and Medicaid compliance issues. We continue to see more litigation investigations in this sector like Attorney General Cuomo's action last week against United Healthcare. Claims processing, technical and industry issues continued to affect health plans and recent events indicate that there will be even more attention paid to this industry by regulators in the months ahead.

Likewise, our pharmaceutical practice continues to see strong demand related to compliance. Investigations and disputes in the (inaudible) in the areas of pricing, off label promotions and sales and marketing activities. Our health and education practices are continuing their rapid expansion domestically, and they are also seeing new opportunities and projects in developing economies. The reputation of our health and education practice is helping us make significant inroads with projects in the Middle East to create and develop better universities and healthcare institutions.

We recently added Dr. Robert Crone from Harvard Medical International to help us seek business with domestic healthcare clients who are looking to develop international strategies and assist global healthcare entities improve their quality of care and management of healthcare operations.

In the US our service to research institutions continues to grow at a very rapid pace. The complexity, risk and challenges associated with performing laboratory based and clinical research has created a very solid environment for our seasoned team. We don't think there are any macroeconomic pressures that can slow the health and education consulting business growth for Huron over the next several years.

Now our legal consulting business which continues its growth in a high demand marketplace. The core business is doing very well and has added several large companies to its existing client portfolio. The demand from general counsels to help improve their law department efficiencies is coming from companies across all industries. We continue to add new big Fortune 500 companies each month. We are also seeing an active demand from European Union based companies. We have already been asked to serve two EU-based companies even though we have not actively pursued that market. We continue to create demand in our role as a trusted business advisor to the largest law departments and that truly differentiates us from our competitors.

We believe we have the number one market share by a wide margin in advising corporate counsel of Fortune 1000 companies. We are seeing clear market acceptance over discovery consulting strategies who are engaging us for discovery advice, collection, processing and review, all in a very integrated manner. And emerging in 2008 is our latest offering, the general counsel marketplace, V3locity. This product was launched at the legal tech conference in New York earlier this month. We have recently got some new clients that have multi-year agreements, and we have dozens of new opportunities that we hope will translate into more multi-year agreements.

V3locity is a game changing offering to the marketplace for discovery services and significantly reduces discovery costs for clients. For law firms and general counsel discovery has become a trying and inefficient process and it represents nearly 70% of the general counsel's budgets. V3locity gives our clients a competitive advantage in litigation matters, investigations and second request and regulatory reviews. We are the only provider with an integrated solution that doesn't rely on third parties. V3locity's guaranteed per page pricing structure and highly accurate analysis makes it another strategic addition to Huron's rapidly growing legal consulting business. I look forward to giving you updates on this exciting new product as the year progresses.

With the position we have in the marketplace and our new V3locity product we believe our organic growth over the next three to five years will be quite good regardless of the economy. I am also excited about the strategy developing for Huron's financial consulting business which now includes the Callaway acquisition which has been fully integrated and is now going to market under the Huron name. We are positioning Huron to provide everything but the audit to the office of the CFO and his or her direct reports. Our complement of full-service finance and accounting experts combined with our on demand resources are being well received in the marketplace today. And by focusing on selling services to companies of all size, offering them solutions from complex accounting, tax and internal audit, valuations and just multiple engagements to manage accounting data we tap a much bigger market to help us retain our organic growth rate in financial consulting.

On the financial consulting foundation job front we saw some traction compared to Q3. But frankly not at the levels we were hoping for. We continue to actively market our capabilities to win work in a credit crisis but we have not yet seen a significant amount of work. We are confident we will get our fair share. We just can't predict exactly when it will start. Our financial consulting business without Callaway is down substantially from a year ago in our Q1 guidance and we are forecasting modest growth in our annual guidance excluding the Callaway business.

This is a great business, and we will work very hard to get us back under Joe Floyd and Tim Hart's leadership. Our MDs are in the marketplace every day working on getting business, and I personally have been in this business very long and know that this business will come back. You will be very proud of the financial consulting business before 2008 is over.

In corporate consulting our strategy practice, Galt, continues to thrive in the marketplace by helping the C-suite improve shareholder value. We are helping management bring the disciplines of the capital market inside of corporations. We anticipate getting two or three new strategy opportunities in the upcoming quarters.

On the restructuring and turnaround front the year is off to a strong start compared to 2007 and all of our resources are highly utilized particularly with companies in the auto sector. We have also seen some nice wins with our utility consulting business. We really believe we can become a market leader in this space. As I mentioned last quarter, our Tokyo office is ready for the JSOX market. As of today we have 5 managing directors and we look forward to this office having a positive impact on our 2008 results.

I think you can see Huron has a bright future, and we believe that the overall economic environment will have little negative impact on our business. In closing, we have a great business. We have a plan to grow this business 20% plus for the next five years. We are attracting and retaining the best people. Our balanced portfolio and being aware of challenging and changing market conditions is the strength of Huron. I know that many of you might think this is corny or puffy but teams beat individuals. Huron is a team and that is our strength. The leaders, managing directors of people at Huron want to be together. We are also substantial shareholders. Our interest and your interests are the same, increase shareholder value.

Thank you, and I will turn it over to Gary Burge for our financial results and our outlook for 2008.

Thanks, Gary, and good morning, everyone. I would like to start off by saying that we had a very good quarter which met our topline and bottom line expectations. Some of the financial highlights included revenues of $136 million were up 63% year-over-year with consolidated organic growth of 11% for the quarter, which I will talk about more as I address each of the segments. I would like to point out that the organic growth -- while the organic growth did moderate for the quarter, was 22% for the full year.

Our customer diversification continues to improve as our top 10 customers represented 29% of total revenue for the quarter compared to almost 37% a year ago. EBITDA increased more than 65% to $29.2 million for the fourth quarter compared to $17.6 million a year ago and our adjusted EBITDA rose more than 71% to $34.8 million. Also our adjusted EBITDA margins increased 130 basis points to 25.6% as we continue to leverage our SG&A costs.

Operating income increased 61% to $23.2 million for the quarter, up from $14.4 million last year. Operating margins remained about the same, 17.1% compared to 17.3% a year ago due to the impact of rapid amortization on intangible assets. However, excluding $1.2 million of rapid amortization in the fourth quarter of 2007, our adjusted operating margin would have been 18%. The fourth quarter of 2006 had no rapid amortization.

Finally, diluted EPS improved 37% coming in at $0.63 compared to $0.46 a year ago. Now for some comments regarding each of our businesses. Revenues for the financial consulting segment were $46.7 million for the fourth quarter of 2007, increasing 53% from $30.6 million in the fourth quarter of 2006. As a reminder, this segment now includes the project based on demand resources from the Callaway acquisition that we completed in the third quarter.

Excluding Callaway, fourth quarter revenues for the financial consulting would have been down 5% organically from a year ago as our financial and economic consulting practice, an event driven practice, continues to have tough quarterly comparisons as this business was running so strong for us a year ago. Having said that, revenues for our financial and economic consulting practice did improve sequentially by about $1.5 million from the third quarter of 2007 as we saw some rebound in foundation job activity in 4Q.

Segment operating income increased 23% to $17.8 million from $14.4 million in the same quarter a year ago. Utilization declined from an unsustainably high 86% a year ago to 68% in this year's fourth quarter, which also impacted operating margins for the segment which were down from a year ago. The financial consulting business has contributed tremendous results for us over the last five years, and we are counting on its continued growth albeit with the choppiness in results that can come with the event driven business that they are in.

Results for the legal consulting segment were $20.4 million for the fourth quarter of 2007, increasing 13% from $18 million in the fourth quarter of 2006. While our core legal consulting services were up strongly compared to a year ago, more than 40%, this segment also had a tough comparison to the fourth quarter of 2006 as our event driven document review business had several major cases and tight review guidelines in the fourth quarter of last year that drove a high volume of revenue.

Segment operating income increased approximately 8% to $5.9 million from $5.4 million in the same period a year ago. Operating margins declined slightly in this segment as we continued our business development and investment activities relative to our V3locity product. As we said before, we believe there is great potential for this business. The comprehensive menu of services that we provide to the general counsel is second to none. It is a matter now of educating the market and filling the pipeline with sales activity.

Revenues for the health and education consulting segment were $50 million for the fourth quarter of 2007, increasing 109% from $23.9 million in the fourth quarter of 2006. Organic growth for our core higher ed and pharma health plan businesses remain very strong at more than 30%. We remain very pleased with the strength at Wellspring, our healthcare provider practice, has displayed in the community hospital market. Since joining the Huron platform in January of 2007 Wellspring revenues have increased about 40% on a year-over-year basis, 2007 over 2006. In total, the health and education segment operating income was outstanding, increasing more than 200% to $21.3 million from $7.1 million during the same period a year ago.

Revenues for corporate consulting were $18.8 million in the fourth quarter of 2007, increasing 71% from $11 million in the fourth quarter of 2006. Organic growth was 32% for this segment, driven primarily by our strategy practice, Galt, that had a great year. And we were also pleased with the revenues generated by our new Tokyo office. This segment did have mixed results, however, as some elements of our restructuring and turnaround and operational consulting practices fell short of our expectations for the quarter. Segment operating income declined to $2.8 million in the fourth quarter of 2007 from $4.6 million during the same period a year ago, reflecting these mixed results at the practice level including lower utilization as well as investments we have made in starting up Japan.

As we've said many times, a balanced portfolio serves us well; giving us the ability to manage through fluctuating markets. This strategy proved its value again this quarter as strong results in our healthcare, pharma health plan, higher ed and strategy practices allowed us to show patience with our event driven businesses like financial and economic consulting and document review, and also allowed us to make investments in V3locity and in Japan.

Now for a few more stats. DSO came in at 67 days at the end of the quarter compared to 55 days in the end of the fourth quarter last year. Our DSO did improve four days from the third quarter of this year, and we will continue to see if we can manage this statistic down in future quarters. Cash flow from operations was $43 million in the fourth quarter of 2007, reflecting these improved cash collections.

And finally, return metrics for Huron remain strong with a return on assets of approximately 12% and a return on equity of 28% over the last 12 months.

Now guidance for Q1 and the full-year 2008. As you saw in our press release for Q1 we expect revenues in the range of $142 to $147 million, EBITDA in the range of $28 to $30 million; operating income in a range of $23 to $25 million; and $0.66 to $0.70 in diluted EPS. We expect that first quarter results will also include a little over $6 million in stock-based compensation costs.

For the full-year 2008 we expect revenue range of $640 to $670 million, EBITDA in a range of $132 to $138 million, operating income in the range of $111 to $117 million and diluted EPS in the range of $3.10 to $3.28. Full-year share based compensation cost is estimated to be a little over $28 million.

Other full-year modeling assumptions would include approximately 1,350 billable consultants on board by the end of the year and approximately 700 average FTEs for the year. Average utilization rates will be in our 70 to 75% target range and a 5% lift in our average hourly bill rates compared to the fourth quarter of 2007. Weighted average diluted share counts for 2008 are estimated to be approximately 18.4 million for Q1 and 18.6 million for the full-year 2008. Finally, with respect to taxes you should assume an effective tax rate of 44% for the full year.

To recap, we are pleased with our top and the bottom line results for the fourth quarter and full-year 2007. We are also pleased with the positive results of our acquired businesses. And finally as Gary mentioned, we are very excited about our prospects for growth as we continue through 2008. Let's now open it up for questions.

(OPERATOR INSTRUCTIONS) Tim McHugh, William Blair & Co.

I just want to touch on the guidance. You mentioned there is a few things that can impact the quarter and that is why perhaps your Q1 guidance for organic growth is probably a little lower than is implied for the full-year. Specifically, you mentioned Wellspring might be back end loaded for the year, and I think you suggested that perhaps Galt and some of the corporate consulting could be back end loaded. I was wondering if you could just elaborate on that.

What Wellspring is -- what happens with Wellspring is that they start the year and they do assessments and the assessments don't get the same rates, and then they start the implementation which are 8 to 12 months. And those implementations are at higher rates and if they complete them every one of them, they meet certain standards, then they have write-ups in them which increase the profitability and sort of back end load the results. So they start beginning the year getting us estimates and buildup. Galt is just not as much back end loaded. They just got a lot of demand. And right now what is probably affecting Q1 more than anything is just we are not having the same level of success with our core legal financial consulting business that we had in the six quarters when it ran 85% hot. And we just believe that how good we are at that and how much we know about the marketplace and how big the market is that just has to come back in the second half just because of how aggressive we are out in the marketplace and what we know about the market space.

Okay, and then on restructuring, you mention that the demand trends there looking out seem fair for both but in the fourth quarter it did not quite meet your expectations. Can you elaborate on that?

The business wasn't as good and the margins weren't as good and all of a sudden we started getting work, and we have only got 70 some people there and most of them are utilized. So they are just -- they just won jobs in quarter one, and they didn't have them in quarter four.

Okay, and then -- just one last one here -- V3locity, can you talk about the reception in the marketplace as you've launched that now for a little over a month or so?

Yes, I think the thing that -- the comments we keep getting is what a lot of people just can't believe and we are going to have to do some education on it is, people believe the product is too good at the price. And they just keep wondering how you can deliver all you say you can deliver and are you tricking us on the price and can you really do that. So right now what we've got to continue to do is have our existing clients tell prior clients that we can do it and get people to try us because they believe it is just so game changing at such a favorable price that we just got to keep working the marketplace.

Okay, thank you.

Andrew Fones, UBS.

Thank you. First of all, on the corporate division I was wondering if you could explain what drove the lower utilization; you mentioned that ramping up in Japan perhaps right on the utilization you also mentioned restructuring and operational consulting perhaps coming in a little bit below your own expectations. Can you kind of perhaps just give us some flavor as to what drove most of that decline in utilization?

You answered yourself, Andrew. We added 20 some people or we had 20 some people at the end of the year in Japan, which was a building process; our operational consulting business was slow, and our RT business was slow. All those together -- Galt was doing very well but it is only 40 people. And so the combination and so what has happened and what is happening in the first quarter is RT restructuring is busy. We've got some better favorable results in Japan, and Galt is still busy and we are continuing to work on corporate. So Q4 wasn't very good, but Q1 is going to be better.

Okay, thanks. And then regarding Q1, can you give us the number of days that you expect in the period, what the impact could be for Easter? And perhaps also if you could perhaps give us the number of days that were in Q4 and what you are expecting for the full-year '08. Thanks.

We got 64 days in Q1, and you had 61 days in Q -- I think we use about 250 for the year, is that right? 253 for the year, total business days available. Doesn't take effective days for vacation but we use -- that's the way we run our business. We look at revenues per day and so we divide by revenues per day in Q1 is going to have 64, revenues per day is going to have 253 for the year.

Okay, thanks. And finally, and I guess kind of Tim also touched on this but it seems as though the guidance for Q1 -- the organic growth implied by that versus for the full-year you are expecting some acceleration as you move through the year. Should I understand most of that could come from financial consulting as you look at it?

I think you've got -- I think it's a combination of factors. One, we hope to have an increase in financial consulting. We also think that we should see some improvement in our V3locity business. We also think that Wellspring will be back end loaded. We also hope that we are going to grow headcount. So it's a combination of everything.

Okay, and kind of in terms of the comps, as well, you mentioned that the comps certainly are easier for financial consulting in the second half of the year.

Restate your question again.

Just looking at the comps, I think you also mentioned for financial consulting that the comps get easier as you work through the year.

Yes, I mean if you start looking you know you can go back and look, I am looking at it myself, we had $36 million in Q1 of last year and it just kept working its way down through Q2 and then we made the Callaway acquisition in Q3 and Q4. But the business just kept coming down during the year to where it came down under $30 million. So it is going to make the comps easier as we go. With what Joe Floyd and Tim Hart are doing and what we're seeing in the marketplace and what we think will happen just from being more active is that that business that we just have to get more business. We know the law firms are busy; we know there is business out there. We are not going to wait for the big whale like subprime. We are just going to go one brick at a time and we are just going to add to this business each day with a new assignment.

Okay, thanks and just finally on that point, it looks like we saw a sharp pick up in securities litigation during the fourth quarter. Are you seeing any impact from that on your business in terms of particularly on I guess financial consulting division?

No, we haven't yet. We've got a few proposals out but to be honest with you, we haven't. We hope that is upside. But we are not guiding to it. We are not putting it in our guidance yet.

Okay, thanks.

Mark Bacurin, Robert W. Baird.

Couple questions. Gary Burge, last quarter you gave us kind of breakdown of the number of foundation clients and what the revenue contribution was. I was hoping maybe we could get that again for Q4.

Yes, Mark, with respect to those foundation clients we did have some rebound in activity in the fourth quarter of 2007. We had six of those foundation clients up from I believe three in the third quarter. The revenues of course were up as well in the fourth quarter, as I mentioned earlier because the revenues were up sequentially in the financial consulting segment third quarter versus fourth quarter. And the revenues in total relative to those six foundation jobs was about $14 million versus $8 million that we had from foundation jobs in the third quarter. So improved; we're still out there in the marketplace looking for more of those foundation jobs as well as smaller jobs and time will tell. We expect we will be able to see improvement as the year goes on here in 2008.

Thank you, and then looking at within legal the nonbillable consulting piece, you saw a decline in FTEs as well as continuing sequential erosion of the revenue stream there. Can you comment just generally about has there been any impact from the buildup to V3locity, the demand-side waning as people waited to see that product? I know you said there were some large projects but I guess I'm surprised at the lack of kind of revenue stream here.

I think what happened, Mark, is we were focused and Chris Getner and his team, processing team were basically beta testing and trying to get V3locity ready. And the fact is I think that we had some slippage in jobs and so we continue to see the revenues from processing and document review continue to slide in the results in Q4. But I can tell you they are back in a pretty nice way in Q1. You will be pleased with the Q1 results.

That's good to hear. Any reason to think the sales cycle for the V3locity product offering -- I mean I know this is initial learning phase but any reason to think the sales cycle for that new integrated product is going to be different than what you experienced in that in the past?

I think the thing is is that you wouldn't think it would be, and I don't want it to be, but I don't think I can tell you with 100% accuracy which way it is going to turn. That is why we're going to have to -- we had the whole sales team in here Monday of this week meeting with them on this product. And we sure have a lot of inquiries and a lot of demands and we have a lot of big companies asking us to do a lot of big things and they are just continued to question how can this be this good, how can you do what you say you are doing? That continues to be the number -- and so one company big financial institution is going to give us a pilot and they are going to let us try it because they continue to believe it is too good to be true. That is our number one problem right now we are fighting is people are probably going to give us pilots versus give us the whole work now because they just don't know whether we can do it.

And you're comfortable with now going direct to the corporate side as opposed to getting the referrals through the law channel or the channel that.

Probably the majority of our business if you wanted our strategy -- will be build your core business with corporates, do one-off events with law firms but the majority of the business will be with just continual master service agreements with very large corporations where we will do all their discovery.

If I could on the financial side, obviously very good results out of the Callaway side of the business. Could you comment generally about -- I know you are doing everything but the audit -- but can you talk about specific demand drivers where you are seeing -- where you're putting most of the resources?

We are pushing our people to go talk to lawyers. We are pushing our people to go talk to -- there is a chance to outsource an internal audit function. There is tax things to be done. There is people who are thinking about carve outs. We are pushing both in the traditional channels of lawyers but we are also pushing more and more into corporations and the internal audit head, the tax head, the chief accounting officer trying to just get more feet on the street and make more sales and people aware of what we can do at the price points.

The biggest thing right now is people are somewhat leery that they've never heard of Huron, they never heard of this new offering. And you come in and tell us you can do it with these resources that are this experienced on demand at this price; again some of the stuff seems too good to be true. So we just have to continue being there, getting our message out, being persistent and convincing clients that it is as good as we say it is.

One final one, Gary Burge, there is a $32 million accrual for business acquisition. Is that just an earn-out? Can you tell us what that is related to and does that get paid out in Q1?

Yes, that is an earn-out for acquisitions completed in 2007 and in prior years and it will get paid in Q1.

Great. Thank you.

Tobey Sommer, SunTrust Robinson.

I wanted to ask you a question about what your acquisition pipeline looks like. Others have touched on the quarter and guidance, and wondering if you can comment about what your expectation would be for contribution in 2008 from acquisitions. Thanks.

Right now we don't have anything really very close, and at this point I can't tell you whether we are going to have something. There might be some small stuff but it normally takes us three to five months to do something from the start and nothing is really very close. So I am not sure we are going to have a lot of acquired revenues in '08. But you know, things can change. But my guess would be clearly be in the second half of the year if anything happens of any significance.

Okay, and relative to your uses of cash and your sort of view on the capital structure of the firm or any changes relative to how much leverage you think the business should comfortably support?

Plans for cash generated from operations this coming year would be, absent new acquisitions, would be to continue to pay down our debt. However, should we see good acquisition opportunities we can certainly increase our leverage and would be comfortable doing that.

Okay, and then Gary Burge, I was wondering if you could -- I think you mentioned some of the organic growth rates by segment. If you wouldn't mind repeating those and what the overall organic growth rate was in the quarter. Thank you.

Yes, overall organic growth rate for the quarter, Toby, was 11% for the Company, 22% for the full-year and so revenues in 2007 were more front-end loaded as opposed to back end loaded the way the year turned out. But in terms of those organic growth rates for the corporate consulting practice, we had 32% organic growth rate. The organic growth rate for financial consulting which includes Callaway and the financial and economic consulting practice itself and if you strip out Callaway it was 5% decline in revenues for the reasons we've talked about.

Overall for organic growth rates for legal consulting for the full quarter -- for the quarter and fourth quarter was 13%, 27% for the full-year. And that organic growth rate decline relative to the full year was an entirely related to the document review business. Our core legal consulting business had approximately a 36% organic growth rate year-over-year.

And then lastly our higher education and healthcare segment had an overall 20% organic growth rate and that is primarily due to the results from our higher education practice as well as on our pharma and health plans business had outstanding years.

Thank you very much.

Jim Janesky, Stifel Nicolaus.

Gary, I have a question on the way of looking at it, is the lack of business coming out of the credit market so far. If you can just give us an idea why you think there isn't much business. Is it because possibly the business is going elsewhere? Are companies just sitting on their hands and/or crossing their fingers and hoping that the regulators just go away, or what are your thoughts as to just generally what happens in a crisis -- I guess the subprime crisis really came to a head in the October timeframe of last year and may take a good 6 to 8 months before we get a substantial amount of revenues out of that area.

This is Gary Holdren's opinion. Some based on my opinion and some based on facts. I will tell you that we have gone to every financial institution in New York. I think we've gone to every major litigator, and every law firm who is working in this area. We aren't hearing that we are losing proposals to others and winning. What I think -- there are two things that I think that are happening is I do not think the SEC yet has been very actively engaged yet like they were in stock options and others as to whether the timing of when they mark the securities to the right price, was done at the right time. Of it should have been done -- which if that investigation starts you can imagine that would be a great business driver but that hasn't started.

I think the other thing if I look back to the Savings and Loan crisis and I think about that, those were small companies, Savings and Loan. The resolution trust came and bailed them out. Right now these are big institutions, and if Merrill Lynch loses this or Citicorp or whatever there hasn't been a bailout yet like there could have been. So if the government was going to buy all these loans and want to know the value like they did with the resolution trust corp, that could drive it. I think litigation is starting but I think it is in the early stages. So I think it is a combination of all those.

I think you have to believe that there is $400 billion of wealth that was traded. Someone is going to be mad and there is going to have to be lawsuits about that. I think what may be happening is people are trying to see who has the money and where do I go get the money if I lost it. And I think that just made -- if you think about it trials sometimes take three to five years from the time they are initiated to trial, so I think it is a little combination of all that. But I can tell you we are actively in the marketplace trying to figure this out and trying to be there. We just haven't seen it come yet.

And you do believe that based on the current pipeline of business and looking at your backlog in your experience with being able to turn that back or convert that backlog into business that you can do the range of numbers that you gave in '08, and that any subprime work could be incremental. Is that a correct way of looking at it here?

I think right now we have not given -- when you say backlog we consider backlog to be signed arrangements that is actual work. What we are now working on is we've got backlog but the backlog is not the level it needs to be to get back to where we were. So what we need to do is we need to create new work, and we need to create new opportunities. And I think what we are saying is that having been in this long and knowing how much work is out there and knowing what our people need to do that it has -- we have to get work.

We just never -- I've been doing this since 1983. If you are out in the marketplace the law firms have $70 billion worth of billings. There is plenty of work, there is plenty of disputes. We know from our corporate clients that their number of cases being filed their cost is not going down; so we know there is no change in the market conditions. There may have been a change in how many investigations are going on from stock options, but there is plenty of litigation, there are plenty of disputes, there is plenty of work to do. We just need to go get refocused, get it booked and start working and when we do that, then our numbers will come back.

Some of that could be subprime, some could be credit crisis, some of them could be investigations. We can get hired to do maybe an investigation with this thing that Cuomo did on United Healthcare. There could be a lot of different things. What we have to do is be in the marketplace every day, knocking on doors, talking to attorneys, talking to our corporate clients and getting work. When that happens -- it is not an if -- it is when it happens then you will see the business come back and we will have better results than what we are even forecasting.

Okay, thank you.

Abhishek Gami, Banc of America.

This is (inaudible) calling on behalf of Abhi Gami. A couple of questions, one is on the utilization front, if this is trending down this quarter I would like to know how fast do you expect to ramp it back to the mid 70 levels? And secondly the utilization down for the second consecutive quarters, have you seen any trend or (inaudible) and start up of new engagements?

I heard the second part of the question, which was asking whether utilization being down was that related to a delay in the startup of engagements, and I would say at this stage no, we are still out there in the marketplace, as Gary said, obtaining and seeking new work. And we are positive and encouraged that that will certainly happen. And then you were breaking up a little bit with your question; we didn't hear the first part of it.

Yes, the first part was how fast do you expect them to ramp up to the mid 70 levels.

Back up to what was a 70 to 75% level? Certainly that is in our business plan for 2008 that we will get back to those levels and we will -- the key is selling the work. Then the utilization takes care of itself.

A couple of questions on your guidance. Looking at your guidance it seems the group is a little back end loaded. I would like to know what is giving you the confidence to offer a really back ended guidance with the growth being back ended? Are you binding upon your backlog or the pipeline and are you counting upon something later in the year? And secondly, how much of the revenue from the newly introduced V3locity discovery solution has been baked into this (inaudible) revenue guidance?

We are having a real difficult time hearing you, but I think you are asking a lot about why guidance is back end loaded.

My question is what is giving you the kind of confidence (inaudible) are you banking upon your backlog or pipeline or are you counting upon something later in the year?

I think we are counting a lot on our experience in the market demands like we believe and we've had consistent growth in our higher education practice. And the more people we hire the more we do and so we're going to continue to hire. So you would continue to see higher education and the pharmaceutical and health plans just grow because they have more people and there's enough demand and they are doing very well. So that would be traditional that you would see that go up and be back end loaded.

The Wellspring business, the healthcare Wellspring business is definitely back end loaded because they get implementations, they get higher rates and they typically get some write-ups from those. Our legal consulting business is growing fast. We are planning on that continuing to grow with headcount, that continues to grow throughout the year. We got about 130 some college students coming in between in the summer months to the fall. We believe that we are going to have more volume and growth in the V3locity business as it gets launched, so that will have a little bit more back end loaded. And we have not at this point put anything in our guidance that assumes the financial consulting business will come back. If that comes back that would be even more back end loading.

Just one more thing. How much of revenues from the newly introduced V3locity discovery solution has been baked into the (inaudible) guidance?

How much V3locity revenue is in guidance?

Yes.

We don't give that level of detail.

Thanks a lot.

(OPERATOR INSTRUCTIONS) Kevane Wong, JMP Securities.

Two things; first, what were the performance fees in the quarter?

Minimal 2% or less of total revenues.

Okay, good, and just to clarify on the legal consulting as far as the quarter, it sounded like what I've pulled out is it was really taking your eye off the ball during the quarter as you were launching V3locity up that was the main factor. Was there really anything else or is it really just a matter of focus sort of diverted at the time, which is now back on target?

I think it is a little bit of we needed to get the V3locity product launched and it hurt our processing revenues, and we continue to have some jobs slip. That we had a big job -- the second request job that we thought was going to start like in November, that didn't really start until like the 20th of December. So it was a combination of a big job that slipped that is now completed and we completed it in sixty days and it was a great job. There was some slippage in when we thought jobs were going to start and basically getting V3locity ready.

And it was big enough to sort of move the needle for the quarter it sounds like.

Yes.

Are there any other particular -- looking at March quarters are there any particular big jobs in that grouping that could have a similar effect or that you would expect to or is everything right now so far running pretty much on track in legal consulting?

We've had some big jobs in V3locity or in their processing in Q1 but we also think we've got some good ones starting in Q2. Right now what we don't is we don't have any visibility right now in Q3 and Q4 with those big jobs. We've got our sales engine and our hype going with V3locity that we think that we can fill in. So Q1 had some big jobs that are over. Q2 has got some starting that we know of. And so that is a little bit about what I tried to say in my opening remarks is that it is a little bit of experience in managing this whole portfolio of businesses and keeping them all going and not over promising and having these stops and starts. The way we could basically get a little bit of lumpiness out is just continue to have more sales and have more corporate clients so we don't have any lumpiness in V3locity because big jobs -- I mean we had a real big job in Q1 that had 60 million pages that had to be reviewed in two months. So you can just imagine what that does to your revenues.

It's also nice that you are able to actually be able to handle those kind of jobs, so it is marketplace positioning obviously (multiple speakers).

One of our big selling points is we got a client now that we did 60 million pages at a price that is a per page price that is a great reference for us; so it was a great job from a lot of reasons.

Also lastly here, corporate consulting you mentioned as far as your restructuring practice did not hit what you were expecting. Could you give a little insight as far as what is happening in the marketplace, was it a marketplace issue, was it a Huron issue? Was it a bit of both? What happened as far as that sort of missing on that restructuring business?

I think it could have been a little bit of both; I think you never know. We weren't winning jobs in '07 and whether the market is more vibrant or not, I am not positive but we are winning jobs now. So whether we were at the wrong place or we had the wrong resources going after the wrong jobs I'm not positive, but I know right now that we are hitting more on eight cylinders versus four.

And as far as RFP flow etc. that's sort of what you're looking at, what you're seeing now and can you give a -- did that start picking up at a certain point in 4Q as far as sort of RFPs and the like that you were seeing?

We don't get RFPs, but we get calls from credit hedge funds or creditors or debtors or whatever, and we just started getting more calls in the auto sector, and we started having the right skills to meet what the market wanted.

Perfect. All right, thank you.

Mr. Holdren we have concluded the allotted time for this call. I would like to turn the conference back over to you. Please proceed, sir.

Okay I want to thank all of you for your time today, and I want to just continue to try to make sure you understand that we don't talk about stuff that we don't believe we can deliver. And I think we've got a pretty good solid reputation of when we say something we can do it. We really have been doing this a long time. We know this business. So if you are concerned about that we don't have a good handle on the back end of this business or we are back ending and hoping it happens, I just want to assure you that is not what we are here talking about.

We are big shareholders and we're going to deliver the results and we know how to run this business. So in closing I just want to thank all the people from Huron and all the hard work they did in 2007 and for helping them -- for them helping us build this great company. So we look forward to speaking to all of you in May when we have our first quarter 2008 earnings. Thanks.

That concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect. Have a wonderful day.