FTI Consulting, Inc.
Q3 2009 Earnings Call Transcript

Published: 5 Nov 2009

[Operator:]

Good day and welcome to the FTI Consulting 2009 third quarter conference call. As a reminder, today’s call is being recorded. For opening remarks and introductions, I would like to turn the conference over to Eric Boyriven of FD; please go ahead sir.

[Eric Boyriven:]

Good afternoon and welcome to the FTI Consulting conference call to discuss the company’s 2009 third quarter results which were reported after close of trading today. Management will begin with formal remarks after which they’ll 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 concerning 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. A word such as 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 expectations. The company has experienced fluctuating revenue, operating income and cash flow in some prior periods and expects this will occur from time-to-time in the future. Further, preliminary results are subject to normal year end adjustments. Other factors that could cause such differences include the current global financial crisis and continuing deterioration of global economic conditions a crisis aimed in deterioration of the financial and real estate markets the pace and the timing an consummation and integration 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 the most recent Form 10-K and in 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 confirm 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 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 the 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 businesses we acquire or anticipate acquiring. 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 income are included in the tables that accompany today’s press release available at www.fticonsulting.com. With these formalities out of the way, I would like to turn the call over to Jack Dunn, President and Chief Executive Officer; Jack, please go ahead.

[Jack Dunn:]

Thank you, Eric. Good afternoon and thank you for joining us to discuss our third quarter 2009 results. These were released this afternoon right after the market closed and I hope you’ve had a chance to review them. If you have not, they are available on our website at www.fticonsulting.com. With me this afternoon on the call are Dennis Shaughnessy, our Chairman; Jorge Celaya, our Chief Financial Officer; David Bannister, our Chief Administrative Officer; and Dom DiNapoli, our Chief Operating Officer. This afternoon I’ll begin with an overview of some of the investments we’ve made in our company since we last spoke, review the quarter and then talk about the share repurchase program authorized by our board today. Finally as always we’ll be happy to take your questions. Before I begin, however, I know many of my fellow employees join us on these calls. So before I’d anything else, I would like to thank them for their great work both this year and this quarter. While the economy is a mess and by anybody’s measure has not caught up with the stock market and the average S&P 500 companies has seen revenues fall almost 13% this year, we’ve grown almost 19%. This following a year, when the S&P revenues grew 5.3% and we grew at 29%. As I said, this is attributed to our people, and they’re intellectual capital their stature in the marketplace and to our gain plan to provide a balance portfolio of products and services that has built not only to last, but it’s built for all seasons. Within the context of this tough economic environment and the anticipated third quarter seasonality that increasingly affects our company and our seasonal results. We produced record third quarter results. While the world is trying to find a bottom we’ve continued to grow and revenues, EBITDA and EPS exceeded any results for our third quarter in our history. Our revenues in the quarter increased 7.1% from $325.5 million a year ago, to $348.6 million. EBITDA increased 19.4% from $65.2 million, to $77.9 million and EBITDA margins, even in light of our continuing investments in talent and brand building, increased 230 basis points over the third quarter last year. EPS increased from $0.48 last year to $0.70 in the recent quarter including the onetime effect of the buyout of a German joint venture and strategic communications and certain tax benefits. In the quarter, once again as in recent quarters, the restructuring environment remains robust driving the results in our corporate financing restructure segment. Just as important however, we also began to see stability in growing momentum in some of the more pro-cyclical businesses. In particular, economic consulting has started to grow into its investment with financial economic in antitrust activity and looks forward to a good fourth quarter. We’ve seen the beginning of some green shoots in our capital markets driven businesses such as transaction advisory and strategic communications, and while general commercial litigation activity continues to be slow, FLC has done a good job of managing through the slack environment, and has won the best assignments at least there are to be had. Through the window of economic consulting, we are beginning to see more signs of regulation in regulatory activity picking up. Our ability to convert our operating activities into cash remained out standing this quarter. We generated $120 million in operating cash flow in the quarter, more than double the $51 million of last year, driven by higher net income and strong receivable collections. Managing our receivables has been a focus for us and our average DSOs in the quarter were 74 days down from 85 days in the same quarter last year. As a result of higher net income and working capital management, we ended the quarter with cash and short term investments of $314 million up from $213 million three months ago and $192 million at year even 2008. That number stands now at about $336 million. So between our cash, borrowing power and future cash flows, we believe we’re in a very good financial position to continue to invest in all the dimensions of our growth. We will continue to pursue opportunities for geographical expansion, increased breath of service and industry domain expertise, while funding from cash on hand and internally generated cash flow, the sizable share repurchase that our Board has just authorized. Speaking of investments in our future, during the quarter we were very active in investments that will bear fruit both now and then the future. We staked out a position in the robust market for International Arbitration services. This is an area, where FTI’s unique capabilities of bringing together damage assessment, accounting, economic, statistics, finance, industry, and global footprint make it an excellent partner for clients dealing with International Arbitration issues. Our new International Arbitration Group, representing another FTI cross segment solution will consist of senior individuals across FTI’s operating segment with the presence in each of the major financial and political centers of the U.S., the U.K., Canada and Europe. We’re very excited about the prospect for this group. The quarter also saw us open an FLC office in Paris, which will compliment our successful strategic communications office there. The office will further support the work we do for our clients and the world’s fifth largest economy and expand our geographic footprint in one of the world’s leading political and financial centers. Along with strengthening FLC’s reach and reputation in a key market, the office will also coordinate with economic consulting and supporting the effort of the International Arbitration Group. We launched a restructure practice in Munich, buy-out the joint venture partner in our strategic operations in Frankfurt and expanded our international investigations business with the opening of an office in Panama. We further extended our real estate capabilities with the creation of EdgeRock Realty Advisors, this joint venture will allow us to participate in the capital raising aspects of transactions in real estate, thereby leveraging our already leading position in real estate structure and strategy advisory. The R&D resources from our technology segment were also busy, adding an exciting new product in Ringtail QuickCull, and most recently we also added significantly to our SEC practice with the hiring of a Boston base team of 20 professionals, with the five senior people and the team behind them doing what we believe is already the best talent in the industry. They bring stellar reputations, long 10 years in the market. Strong relationships and extensive experience in complex accounting issues to our leading practice under Marty Wisinski, Ernie Ten Eyck and their team in complex accounting choose to our complex and fraud related investigations and business intelligence. Finally during the quarter, we continued to make key hires across our businesses to take advantage of our position as employer of choice, to increase our market share. Now to our operating performance for the quarter, activity in the Corporate Finance/Restructuring segment remained robust with high levels of activity on a broad range of industries. Organic growth for the quarter remained over 38% the same as for the nine months. As we have come to expect, revenue growth and margin performance were excellent. Revenues grew 39.2% to $127.8 million and EBITDA grew 71%, to $43.6 million with 34.1% of revenues. Our U.K. practice again almost doubled its revenue year-over-year of Canada and Latin American activity made significant contributions to revenues for the quarter and the nine months and our new German practice that we launched in the quarter just began to get traction. We’re very pleased that our Canadian professionals are working consistently with their colleagues in the U.S. on matters that cross several boarders, and our new SMDs in Munich are being integrated into our international practiced based in London. We had an active campus recruiting season this year and as a result brought a large crop of new associates on board. While this had a dilutive impact on utilization in the quarter, as they got up to speed and deployed. Good news was increase in chargeable hours. While as we predicted the rate of new case opening somewhat debated in the quarter, we did maintain our track record of helping clients in mark key assignments, such as evidenced by our announce rule in CIT. Additional as noted in The Wall Street Journal yesterday after declining for two months, the number of business bankruptcies jumped again in October up 24% from October a year ago. Results from the Forensic and Litigation Consulting segment of the quarter were stable in light of the summer seasonality and the slow environment for routine commercial investigations. Revenues of $65 million were approximately flat year-over-year and with the second quarter, and as we saw continued contributions from several financial fraud investigations in our domain expertise practices such as intellectual property, contributed to its results as well as our Latin American investigations practice, which also remained strong. EBITDA on the quarter of $14.9 million and EBITDA margins of 22.9% were again almost the same as last year. For the quarter, utilization of FLC was 73%, up from 68% a year ago. For the nine months utilization was 74% compared to 72% a year ago. We think that’s an investigation with increase in market share, as signs in the general legal market and certainly the results of some of our competitors highlight a soft market. Revenues in our technology segment were $48.7 million in the quarter, compared to $55.4 million in the prior year as continued contributions from large investigation cases were more than offset by a lack of large antitrust second request matters, and a decline in revenues from a large product liability engagement. We also face some continue pricing pressure in our on demand business. Segment EBITDA was $15.2 million down slightly from a year ago with improved operated efficiencies is cost controls is mostly offset the decline in revenues. The EBITDA margin of 31.3% compares to 27.8% a year ago, revenues in EBITDA were down sequentially compared to an extraordinary performance in the second quarter. As I mentioned, an important strategic development was the release of our Ringtail QuickCull technology. The corporate market is an important focus for us, and we believe this product goes a long way toward helping our corporate clients reduce cost and streamline their In-house E-Discovery processes. This is important especially in an environment like the present. While at the same time this provides us with the opportunities to mend our relationships with them through multiple long term client agreements. We anticipate the release of additional cost effective innovative solutions for decline in the near future. Our economic consulting segment had another record quarter. Revenues increase 5.6%, year-over-year to a record $59.6 million and were at $2.5 million sequentially from quarter two. We were up against a difficult comparison last year when revenues grew 23%. The offices we recently opened in New York, LA and London continue to develop business and we are beginning to usefully utilize new hires. We ended the quarter was 302 revenue generating professionals 19% more than we had at the end of the third year last year and up from 290 at the end of the prior quarter. As we continue to invest if our talent to address anticipated higher demand. On the good news front the number of active matters ECON was working on increased 10% to 11% compared to a year ago, but during the quarter they also opened about 43% more matters than in the third quarter of 2008. So we’re clearly seeing more opportunities. Recent demand has been strong for M&A and our network industries practices working flat out. Most importantly the large number of case that’s we call financial economic cases, which includes securities litigation, international commercial arbitration and commercial litigation have begun to ramp up after we telling you that we had open the large number of them and they had not. We may believe they will have a very good fourth quarter in 2010. On our last call with you we noted that professionals in our strategic communications segment believe their market had begun to stabilize and they were beginning to show signs of improvement. On a year-over-year basis, revenues and EBITDA were down from a near record results in the 2008 quarter to $47.5 million in Q3 ‘09 due to the sharp decline in global M&A and IPO activity. Pressure on discretionary spending on our clients and the stronger dollar against other currency notably the U.K. pound, as most the global segment the strategic communications segment feels the impact of foreign currency strongest with the 4X impact more than $3 million in the quarter that accounted for more than a third of the total revenue decline for the segment. The capital markets rally seems to have encourage some up tick in overall M&A activity in certain markets compared to early on the year and pressure on retained fees appears to be debating somewhat. As a result segment revenue was sequentially higher at $47.5 million, compared to $44.6 in the second quarter and $42.8 million in the first quarter. Our practices in France, Germany, Latin American and Australia had good performance during the year. Similar to the revenue increase EBITDA of $6.6 million in the quarter was higher than the first and second quarters. Margins have improve somewhat from prior quarters this year due to the higher revenues and actions taken the manage cost and bring headcount inline with the business base. So all told there’s reason to believe that the market drivers here have begun to stabilize somewhat and we may have seen worst. In the meantime the division still maintains their start in the M&A market again leading the major market, global M&A lead tables for a number of transactions year-to-date. Some Marquis assignments they worked on are crisis communications for readers digest in connection with its bankruptcy in the US. Final camps proposed acquisition of new farm, out of China and Australia and in the U.K. ford and review of its Volvo ownership. During the quarter as we mention we purchase the remaining 50% interest of AB financial dynamic our 50/50 joint venture in Germany with AB Communication Group. We’ve had a long and successful relationship with A& B and FD will now be able to extend its service offerings in Germany beyond financial communications to a full range of communications services. We are delayed to increase our participation in one of the largest European markets and where we have recently also launched a restructuring practice. Looking forward a moment to 2010, as we said in our press release we believe there are indications that the world is moving from the transition stage between the panic and paralysis of this time last year and at least optimism to possibly even confidences. If this is true no one will be happy over reaching this point than those of us at FTI so it will bring about reflection point for us in 2010 that will benefit all of our businesses and corporate finance restructuring, they will nearest the already growing canal transactions support business that we’ve seen over the last two quarter and drive management, plus complementing the strong were also continuing cases, in cases that we will open over the next two years as bankruptcy and restructuring lagging indicators remain strong. A return to longer capital markets our strategic communications businesses and even further invigorate our all these stronger economic consulting business. In return to any kind of normalcy in business activity will board well for our disputes and investigation practices in both FLC and technology. Given this se scenario we would fully expect to resume or normal annual growth targets and revenues of 10% to 12% in 2010. It is with this confidence that our Board today approved an increase in our stock repurchase authorization to $500 million, which we will begin with a $250 million accelerated stock buyback working with Goldman Sachs beginning as soon as we finalize the details hopefully next week. With that, I’d like to open it up for your questions.

[Operator:]

(Operator Instructions) Your first question comes from Paul Ginocchio - Deutsche Bank.

[Paul Ginocchio:]

If you go into a little more detail on the technology side that’s would be most helpful to get my indication. How much was that product liability case? What was the change from segment to decrease size on that and maybe give us a little more color? Then you didn’t make any details by your full year guidance, should we assume it’s still in place? Thanks.

[Dennis Shaughnessy:]

The liability case is the largest case we’ve ever had and it’s slowly started burning off in this year and significantly dropped Q2 to Q3. So it was a sizable number, but we don’t want to go into an individual case by case, but it was significant. We feel very comfortable with our earnings guidance that we put out. So we have no change to that. Clearly we were underneath the assumption that a lot of you made on revenues and we’ll have to hustle to make our revenue number, but we feel extremely comfortable on the evenings.

[Paul Ginocchio:]

I think it’s implying it, I think around $0.71 for the fourth quarter to midpoint?

[Dennis Shaughnessy:]

Again, we are very comfortable with the range that we gave you.

[Paul Ginocchio:]

Finally if I can sneak in, with the buyback does that mean your Q acquisitions will come…?

[Jack Dunn:]

The question with “The buyback would we anticipate fewer acquisitions?” I think the answer to that is no. We have substantial cash flow. We have a credit line of $175 million. If we find, we don’t buy things that typically aren’t accretive and don’t have substantial cash flow and we’re assured by our banking sources on that kind of deal and a combination between our equity and being able to use the additional debt because we would buy thing that have cash flow, that we would be able to continue our acquisition program, absolutely.

[Dennis Shaughnessy:]

Before recommending it to the Board, we did extensive market checks and our availability. The credit markets availability to us and we feel extremely comfortable that the buyback will not inhibit our acquisition policy.

[Operator:]

Your next question comes from Tobey Sommer - Suntrust Robinson Humphrey.

[Tobey Sommer:]

I appreciate the commentary that you made around 2010 and being able to resume your organic growth targets. I was wondering if you could comment about perhaps the different opportunity within the segments not in terms of guidance, but maybe rank order which ones are the best and which ones maybe a little bit of a question mark as to how things will turn out? Thank you.

[David Bannister:]

I’ll start off. I mean, we have a significant backlog in corporate finance that will continue well into and through 2010. We anticipate that being augmented by the normal year end or first quarter filings that you experience as company’s wrestle with the warm covenants on calendar year numbers. I think that we would anticipate the European practice in corporate finance to continue to grow, again most of that being driven by debt to equity swaps that we’re seeing as sort of the preferred solution for the banking issues over there and we are very actively involved in those. As Jack said in his speech, we’re look for a very strong year in HECON. It’s now, starting the capacity increases and the noted economists that we’re able to recruit and bring in are now really starting to payoff in the quarter. We’re seeing a lot of the engagements that were booked are now actually being activated. So on the complex litigation side, where those were somewhat dormant and they’re now activated and without a doubt, you’re seeing in the newspaper everyday now, the M&A marketplace is heating up and the antitrust enforcement marketplace, all are what you’ve been reading about, Europe thinking about the Sun Deal is heating up. So overall, I would say clearly towards the anticipate having extremely good years next year, would be one, corporate finance continuing and then two, a return to sort of normal growth rates and margins and benefiting from the increased capacity would be ECON. We’re going to see a turn around in strategic communications, I think they feel that they bottomed out sometime in the third quarter and started seeing a return of capital markets activities again a return of M&A engagements for them and a stability in their retained base. I think with the increase of it attention now being paid to the equity markets rather than fleeing them, more companies are trying to get their message out, trying to position themselves for 2010, and so we’re just seeing a general up tick in activity there. So we would look for them to have a good turnaround year, and they’ll again benefit from, improving economy and certainly frothier capital markets. We think tech will benefit because there is a whole series of releases that are schedule starting with quick call that’s out. Several more that are imminent and we think these new products will get traction, and we think they could have a significant impact on the tech numbers especially, in the second half of next year. I think finally, eventually people have to start suing each other on the civil litigation. I think it’s not going to stay pent up forever. It clearly has been demonstrated at least on the civil side it’s a discretionary spend by companies, but I think, we’re seeing, as the economy improves the testosterone will start flowing again and people will start, up, litigating. In the specialty areas, the SEC investigation, as we said, we’re very happy to bring in a very large group of renowned practitioners in Boston. We think that’s all ready busy and will continue to be busy. I think as we’ve said for the prior two quarters, our IP business is going flat out, because in there, you really can’t defer enforcement of your IP rights. It’s too jugular to the enterprise value. So you know, that would be sort of the way we see the year unfolding. You have the activism by the state Attorneys General in terms of looking at the pay for play scandals. You’ll have the progeny of galleon there will be more and more hedge fund cases. We believe the SEC is going to be very active in those types of investigations. So I think what we’ve been looking for is starting to come together.

[Tobey Sommer:]

I was wondering if you could make a comment on what you’re seeing in terms of the hiring environment over the last several quarters you’ve been kind of a basing of stability and maybe attractive as we start to move into an expansionary period, maybe what you’re hearing more recently as you’re recruiting, and then a preliminary expectation as far as what you would think about bill rates in this kind of environment headed into an expansion. Do you think there’s an opportunity to continue to raise them at the normal intrinsic rates?

[Jorge Celaya:]

I think like other companies, in some of our businesses that are pro cyclical that will be beneficiary the change in economy we’ve lien down, so we’re going to enjoy that for a while, so we’re hoping that if we return to our growth targets as we talked about, that perhaps there’ll even be some leverage in that because, we have always believed that a point of utilization is worth its weight in gold, so we live and manage by that rule. That being said, you saw that we opened up our Munich office, you saw that we have hired the folks in Boston. It seems to be a target rich environment for us. We would expect that certainly in our restructuring economic consulting with the type of activity we’re seeing there that the pricing would be advantageous. It should be better in FD as we grow back, because they have taken the brunt of the discretionary spending so probably this year.

[Dom DiNapoli:]

This is a very talent rich environment and we’ve been fortune enough to attract a lot of talent from other practices that become available. In addition, we are on campus, we’re pretty hot now, I think the brand building that we’ve done over the last year with Padraig Harrington, and the ads that replaced have put a lot of attention to FTI and people are interested in this story and we are as Jack said in, many of the best cases the most interesting, intellectual challenging cases out there. I think this year, it may have been one of the easiest years to attract, and upgrade talent that we have in place, that maybe it’s time for those people to move on. As far as bill rates right now we we’re not planning anything different than we’ve done over the last three or four, five years in most of our segments. We raise our bill rates we really look at the market. We are always towards the top end of market because we feel that our talent commands that level of, that bill rate, and right now we have no plans to change our prior policies on that.

[Operator:]

Your next question comes from Arnie Ursaner - CJS Securities.

[Arnie Ursaner:]

My question relates it your corporate expense line. I’ve looked back over the last 3 or 4 years and there’s no number anywhere close to the 16.2 that you showed this quarter. Was there one time in there and how should we think about it on the go forward basis?

[Jorge Celaya:]

No, that there isn’t anything specific to highlight I think we’ve been doing some pretty solid cost controls and discretionary spending. We on the corporate line, if you look at SG&A in total for the for FTI, you would also notice that SG&A is down, part of that is due to lower bad debt expense. Our receivable collections have been very, very good. The quality our receivables have been pretty good. So, that’s reflected in our lower bad debt and that not has driven some of the reduction in SG&A in the third quarter and that along with the lower discretionary spending and some lower comp expense is what caused it. Now I would expect at least for now until we give guidance at the beginning of next year, that people should think about our SG&A at about 25% of revenue, maybe a lower and sometimes it may fluctuate a little bit off of that, but that’s probably a good place to put us take in the ground.

[Dom DiNapoli:]

If you remember last year, we acquired a lot of companies, and we left the redundancies in. As we, integrated the companies and, we’re now, taking advantage of the scale and eliminating the redundancies, eliminating the excess G&A.

[Arnie Ursaner:]

Well, again I’m still struggling a little bit I know in my model I’ve got corporate expense close to $90 million next year building in some decent size increase, if it’s even close to a level sustainable around 17, 18, 19, there’s quite a bit of room in the model for next year, so it would be something, I think we’d all like a better clarification on as you go forward. The other question I have is just simplistic math, if I don’t change anything else in my model and take the interest income on the cash that you’re earning, which is minuscule, and look at the repurchase and assume you do it at a price as high as $45 on an ASB you do lock into a price almost immediately, that would be at least 10% accretive for EPS for next year. So two questions, one is that a reasonable way to think about it, and I think you were asked before, historically should we view the acquisition of the stock in lieu of the acquisition of other businesses?

[Jorge Celaya:]

Answer to the first question is yes and answer two the second question is no, I think it’s certainly at a minimum will be 10% accretive. I think that’s the way we’re modeling it. I think that from a point of view of we’ve got 300 I think in 30 odd million in cash sitting on the books today. Our first step to implement this is the $250 million accelerated stock buyback, hopefully will take place next week. We’re generating fourth quarter is always one of our best cash flow quarters. So we’re going to come out of the year even after it with, very high cash balances and we think next year will be a record year for us and, we are very comfortable with the cash flow we have, already as well as, we’re very under levered against EBITDA right now I think we’re like on a net basis, 1 to 1 or something. So we have, great he’s to access to capital markets as I said, we clearly market checked this before we took it to our board for the recommendation to make sure that if we did see something that came upon us we work going to get caught without enough funds and I think we’ve been assured by more than one investment bank that we would have no problem accessing the capital markets and then finally, look one of the reasons we’re doing this is we think this stock is cheap based on the visibility we have next year. The stock we’ll respond to some of these efforts and it will become a more effective meaning of exchange versus using the acquisitions. Right now in our honestly to make an acquisitions to stock, where it is right now, it would be expensive to use the stock. We think it’s too cheap.

[Arnie Ursaner:]

If I can ask a follow-up, I’m sure you’ve got a lot of people in the queue, but one that perhaps you can answer in response to other people. You were broadly asked before about kind of Delta as you think about next year that could drive a fair change in estimates and we built it that way previously, but two questions I have that relate to that and you can perhaps again address them in a different way. In Forensic and litigation, utilization will make enormous difference in profitability and again you were pretty flat this quarter, you’ve added a very sizable number of professionals. So perhaps you can speak to that and how would effect there? The other you’ve written about in you’re prepared remarks is on the communications business. Where you indicated in your remarks you intend to remain its professionals to meet an expected increase in demand, but your 800 basis points lower than where you were in 2008? So how long will you allow these growth initiatives to impact margin? Again I’m sorry. It’s a long question. Maybe it will be part of your answers to other questions.

[Dennis Shaughnessy:]

The group from Boston that is coming over with this size and book of business already in place and again without going into a lot of details there, they’re productive company out of the gate, Arnie. So the professionals that we have in the communications, we are now seeing, as Jack said in his opening remarks, traction there. We are seeing activity pick up. I mean, clearly if it would turn then what would happen obviously is, we would have to make an adjustment there, because we would feel it there first, but then we would see significant increase in demand on corporate finance and while we’re going to model corporate finance on a very good year, we’re not trying to model it to have a year it’s happening right now. If you go back into a [daubier] to where the capital markets go away, to where strategic communications really gets challenged again. You wouldn’t make the personnel adjustment there to right size in the face of that kind of an economic turn down, but you would really benefit from a significant increase in demand in restructuring.

[Operator:]

Your next question comes from Tim McHugh - William Blair.

[Tim McHugh:]

You highlighted The Wall Street Journal comment about the business bankruptcies in October. I was wondering if you could comment beyond the seasonal weakness you saw in August. How the restructuring business going to, I guess maybe more broadly the business performed as you move beyond that seasonal weakness in August?

[Jack Dunn:]

Again you put you’re finger on the quarter issue. June, July, August typically relatively soft compared to the rest of the months of the year. Things usually start picking up in the fourth quarter again. We were fortunate to land some large cases, fewer in number, but individual they were larger including as recently announced we’re working in the CIT matter working with the company. So we see a lot of activity there, not as many cases and larger cases. To the extent that the restructuring slows down a little bit, that will probably mean what the transaction advisory practice will be picking up, because that will mean the economy is getting better. So we’ll move people around like we’ve done in the past. So we don’t see the huge influx of cases that we saw in Q1. We think that things have slowed down a little bit as far as new cases coming in, but we think that it will come 2010. We should see a recovery in the number of cases coming over the Trans in, particularly in retail, which, depending upon the holiday season this year. There could be a lot of retailers that will need our services. In addition in 2010, ‘11, ‘12, ‘13, got a significant number of speculative debt issues that are coming due. So the maturities of those debts over the next five years exceed $1.4 trillion. So I think that will keep the practice busy for quite a while.

[Dennis Shaughnessy:]

As the article noted and it was our experience before that, it’s a funny, it’s a barbell market. If you’re very good or very bad, you can probably get financing, but remember that the bulk of our business while we want to be involved in the mark key cases, we are very much in middle market firm and those people are still finding financing very difficult to get from the credit line on down. So again, we believe that we’ll be somewhat of a lagging indicator and that there will be plenty of cases for us to working on.

[Jack Dunn:]

I’d like to say, I’d like to point out one other thing that I think people don’t always understand about the corporate finance segment. Roughly $200 million or so of the revenue are in our specialized practices there, they’re not in core restructuring. Those business would be the TAS business, the healthcare business, the SMG business and increasingly the international business, where we think regardless of the economic cycle all of those businesses will have a better operating environment next year than they had this year. So, there were some pretty strong growth underneath that business, regardless of the restructure market, but $300 million or so of the business is core restructuring. We also think, that should be a good business, but I think people have the perception that we’re more dependant on that on just that core bankruptcy work than is the case.

[Tim McHugh:]

Your comment about the 10% to 12% growth for next year, I don’t know if you’re just referring back to kind of your longer term guidance or if you meant to be more specific, but would that be inclusive of currency trends or would that be, just kind of your long term constant currency type of target?

[Jorge Celaya:]

It’s both, I think we feel comfortable, we wanted to use that as the benchmark, because you guys are very familiar with that’s our five year target and it is inclusive in, we feel very good about that.

[Tim McHugh:]

Well currency should actually be a small benefit at least based on currency right now?

[Jack Dunn:]

We didn’t account our currency benefit in. I was going to say, facetiously that if currency is your headwind, again next year that has some implications for the dollar that would probably mean, there wouldn’t be enough restructuring people in the world, but with we agree, that if anything, it should probably be a little bit of a help next year.

[Jorge Celaya:]

Also with all these refinancings coming due over the next five years, there will be a need for some strategic M&A and that should clearly help our ECON practice on the strategic side. They’re the ones that deal with many of the antitrust issues that have to be wrestled with for these combinations to occur.

[Operator:]

Your next question comes from David Gold - Sidoti.

[David Gold:]

A couple questions on the litigation side, the competitor spoken about sort of trends picking up a little bit in September and that certainly carrying through the October, I was curious, if you might be able to comment on if you’re seeing similar trends there?

[Jack Dunn:]

As we said in our specialty practices, I mean, our intellectual property practices, I hate to use the term sold out, but they’re extremely busy. Our investigations practices in South America are extremely busy. Our litigation practice kind of FLC practice in London has not been as busy. In sectors, New York has been extremely busy. So we are seeing some pick up in that. As I mentioned the focus on the pay for play, some of the investigations are beginning are reflecting that. Some of our competitors lump their economic consulting litigation with what would be, and call it litigation for as we separate, but if you look, if you included it in the litigation sensitive part of our economic consulting, we’ve seen a tremendous pick up.

[Jorge Celaya:]

Many of you may have seen today the announcement about the Intel antitrust claims. I think we see that as a possible precursor of IT activism extending Miami already good business we have there.

[Jack Dunn:]

Trial service has picked up a bit and that’s a relatively small practice within our FLC practice, but we’re encourage this quart by their results.

[Jorge Celaya:]

We were delighted to get this SEC group to augment again, an already busy group inside of there. So as Jack said, the specialties are doing extremely well and the general is starting to pick up.

[David Gold:]

Just on the hiring side, can you comment specifically as to where you’re most aggressively looking to add professionals, which practices?

[Jorge Celaya:]

We’re always looking for the best talent and [Kotzin] will continue to grow and add talent and we’re really trying to broaden our reach so we’ll be filling out offices around the world. We’ll be in Latin America., you may see some additions there. Europe we’re still filling out particularly in ECON. We’re also recruiting on the Kotzin inside in Europe and it’s at all levels at the extend we can find a good team like we did in Boston as Jack mentioned, those are the types of practices and individuals that we’d like to bring in. They’ve got their own book of business and they expand the services and the global reach that our existing practices can provide.

[Jack Dunn:]

Yes we’re also, from a kind of a specialty areas. You’re looking very broadly and aggressively in the healthcare area we have a wonderful practice there expense probably several hundred million dollars across our segments and we think there’s a real opportunity there. We’re looking for process improvement people. Our operational improvement people because we believe that coming out of this that’s a natural subway for the work we’ve done on restructuring to be able to service our good equity sponsor clients on the other side of what comes. So, those types of the insurance practice area is again one where we believe that, as we come out of this, they’re going to have issues and regulated industries because of financial people to help with banks and regulated industries. All those areas are areas we work very aggressively looking for people right now.

[Dom DiNapoli:]

We are engaged, David, as you can imagine, with other groups like, similar to the group in Boston, different disciplines, different geographies and it’s difficult to predict exactly how all those discussions mature, but they’re numerous discussions like that are running into parallel and again I think they’ll, we would view them as very complementary if we could bring some of these other large groups in with their books of business.

[David Gold:]

Even, the real estate side with our SMG practice to the extent the real estate market does return, we’ll be looking to add back there with called through that practice and right sized it for the current opportunity but I mean that was certainly be an area that would be adding talent to as that market returns?

[Jack Dunn:]

In terms of kind of getting for the next cycle as well, I think we have leading practices in M&A in Europe and Asia in our FD strategic communications subsidiary. We believe that’s going to be a vibrant area from everything we see coming through everything from economic and that’s an area we’d also, we think it’s the right time to hire on the value basis.

[David Gold:]

Looking at restructuring corporate for this summer or for the quarter, utilization having stepped down obviously there’s a seasonal aspect, but I’ve gone back season as far as 2000 I haven’t seen as sharp a step down. I guess the question there is it just really seasonality maybe it’s a larger base or is there, anything more to is there anything big rolling off or something like that?

[Jack Dunn:]

It was primarily seasonality, David, and, remember we working a lot of kids from colleges. We train them in two tranches one in July, one in August. We probably brought in 50 to 60 new hires in Corp 10. That’s a combination of kids right out of school and relatively any experienced hires, these are the really the entry level. So it takes some time to get them deployed. Get them trained and historically, the third quarter is the quarter you do that.

[Jorge Celaya:]

David and there’s also SMG has a couple of point effect that you wouldn’t see way back in the history and last year, it would have had less than an effect because they’re utilization was higher.

[Operator:]

Your next question comes from Andrew Fones - UBS

[Andrew Fones:]

Just first I wanted to do a claim up on the earnings in the quarter the $2.3 million nontaxable gain, was that just for the acquisition or that include the same of the tax benefits that you mentioned as well.

[Dom DiNapoli:]

That was just for the acquisition of the 50% of the joint venture.

[Andrew Fones:]

So and I would assume, we should continue to think about a 39% kind of normalized tax rate, would that be appropriate?

[Jorge Celaya:]

Yes I think going forward you should think about 39%, maybe a lower, that’s in the ballpark.

[Andrew Fones:]

Then could I get constant currency organic growth for Q3, do you have that?

[Jorge Celaya:]

Yes, constant currency?

[Andrew Fones:]

Well, I think currency probably at 2% positive impact for the quarter.

[Jorge Celaya:]

That’s correct. So without currency, it was about 6%.

[Andrew Fones:]

So and that’s organic, excluding acquisitions?

[Dennis Shaughnessy:]

Organic.

[Jorge Celaya:]

Excluding FX, would be about 6%.

[Andrew Fones:]

Then just to be clear, I wanted to just make sure we’re clear that the guidance that you’re giving is on a GAAP basis? I think there was a penny charge in the first quarter and it looks like you’ve got about $0.05 or a $0.06 gain in the third quarter?

[Dennis Shaughnessy:]

It’s GAAP, yes.

[Jorge Celaya:]

It’s GAAP and I don’t quite follow you. So maybe I can take it offline afterward.

[Andrew Fones:]

Okay. No, I was just trying to understand what you’re guidance is implying for the fourth quarter?

[Dennis Shaughnessy:]

After everything we got.

[Andrew Fones:]

That guidance, does it include your expected impact from the buyback in the fourth quarter?

[Jorge Celaya:]

We don’t anticipate much materiality from the buyback this year. The impact will be next year.

[Andrew Fones:]

Then finally just in terms of thinking about the use of cash. It seems as though, because I know you used to run with a much lower cash level than you currently have, in terms of how you’re going to use cash to do the buyback or initial buyback, probably free cash flow to continue the buyback beyond the initial amount and then if need you’ll tap the credit line if you see acquisition opportunities, how we should think about…?

[Dennis Shaughnessy:]

Again, I think it’s not linear or sort of a serial execution. I think things going to run in parallel. I think we can access the capital markets on a large amount if we wanted to. So that would be debentures or something like that. So I wouldn’t say we would use a line to do an acquisition if it was something that would be has interest to us, it would have some scale, we would access the capital markets that way and then I think clearly we’re going to look at how the stock performs over the period of time. Hopefully, it will appreciate and if that’s the case, then we’ll go back to our normal ratio of using stock as well. So we feel very comfortable, Andrew, with our cash flow. I mean, we’re producing a lot of cash. We have a lot of cash and next year we anticipate production even more cash. So we’re not worrying about the ability to fund acquisitions.

[Jack Dunn:]

As a rule that we have never used our line for acquisitions, that’s there for a rainy day. So that’s, we probably would not use the line for that.

[Andrew Fones:]

Most of this cash is in the U.S., so I would imagine and it seems as though the bonus payments, cash bonus payments are not typically that great year end?

[Jorge Celaya:]

No most of our bonus payments are in early part of the first quarter.

[Operator:]

Your next question comes from Bill Sutherland - Boenning & Scattergood.

[Bill Sutherland:]

Most have been asked, but I was looking at the technology numbers again, and it seems like there’s some pretty dynamic cross currents that impacted this quarter quite different than second quarter. Dennis, I know you spoke to the outlook of new releases and so forth providing some growth drivers, but if you could maybe help us understand a little bit more or a little bit color on some of the demand drivers that have been moving the needle around quite a bit from quarter-to-quarter in that group? Thanks.

[Dennis Shaughnessy:]

I think you had a slow down in second requests over the summer and actually that’s starting to pick pack up. That’s driven predominantly by either M&A activity or by governmental investigation work and that’s now picking back up. We had a very large and product liability assignment, which may heat up again, but has slowed down dramatically, so it made a significant impact in that quarter. Again, it’s hard sequentially to replace that quickly, because they were so big. So I would say that the demand drivers will be again more up tick on the technology, which we’re starting to see. Second request work, which we feel is directly related to the increase in demand that we’re now seeing in ECON. So it runs somewhat in parallel and then finally as a lot of this litigation that’s sort of on the books. Dormant starts to mature as these cases get active you’re talking about a lot of discovery, document production, document management and we would anticipate, just a normal cycling to increase that, but this can be lumpy, we got sort of hit with some lumps in the third quarter last year, where we actually lost some clients, because of the financial trauma, and you get very big assignments in this big investigations that get very intense for two quarters, and then it will burn off, and then you acquire more. So I think the demand drivers that were missing this quarter slow down in second request, and then just one big case, that at least has gone into height us from a very hot utilization of our people and technology.

[Bill Sutherland:]

The issue that you also mentioned I think in the prepared remarks about the hosting pricing.

[Jorge Celaya:]

There is pricing pressure, I think we told you pretty consistently on the front end of the technology continue and there’s a lot of new entrance. We think some of our releases are going to along way towards solidifying our position, number one, and helping us grow that position, but there are a lot of new entrants trying to come in. There’s a lot of price competition and then simply we do see the impact of Moore’s Law. We obviously have a large amount of hosting business, it’s growing rapidly, but it’s offset by decline in pricing as everybody storage cost goes down with technological developments and diminishing of per gig storage costs, but that’s being offset to a certain extent and we would anticipate next year even more by growth in the amount that we’re hosting. So there’s price pressure that’s normal in storage and then it just depends on again new client acquisition, that’s very lumpy again, because when you acquire a new client storage it’s a big pop in what you have. It’s not sort of a gradual and then finally, there’s just a lot of price competition in part of the business right now.

[Bill Sutherland:]

Well some of that tech pricing is just a pass-through for you, isn’t it?

[Jorge Celaya:]

Not really.

[Jack Dunn:]

No, not really. We own the technology. We license it. I mean its profits. So people are doing stupid things in the marketplace temporarily to depress the pricing we’ll feel in the margins.

[Bill Sutherland:]

It’s pretty much the same either here or Europe?

[Jack Dunn:]

It’s more here, but it does exist in Europe.

[Operator:]

Your next question comes from Jim Janesky - Stifel Nicolaus

[Jim Janesky:]

When I look at even the low end of your guidance for 2009 nice sequential improvement from the September quarter this is on the revenue side. Can you kind of talk now that we have the benefit of three quarters behind us. Can you talk about kind of rank order, where the strength would be to get us to that sequential number? I mean, that’s some nice momentum in the business that looks like you’ve experienced since the summer’s over?

[Jorge Celaya:]

We don’t see any change in sort of the business drivers now that we haven’t sort of look forward to for next year. So I think in the fourth quarter, we’re hopeful that the capacity that we put in place in economics really starts to pay big dividends. We clearly are starting to see an improvement in utilization in corporate finance. One of the big question marks there is always going to be where do the success fees fall? If they fall as planned in the fourth quarter, then you’d see nice sequential growth if some of them slip into the first quarter, which they can, then you’ll see nice growth, but maybe not as much depending on how they fall. So that’s one variable, Jim, that just be conscious of in the fourth quarter on core bend, but the trends there is still very good. Trends in ECON we think are extremely strong. We would expect tech to come back just simply at a doldrum of the third quarter, because the big job starting to slow down and just an increase in activity and again I think we’ve hit the bottom on strategic communications, so we’re certainly looking for that to improve although it’s not going to dramatically move the dial in one quarter.

[Jim Janesky:]

You highlighted Jack the Wall Street Journal article talking about I think it was the 7% sequential increase in bankruptcy filings between September and October about mid 20% year-over-year. In some of the areas that you folk focus like retail and commercial real estate restructuring and then Dom kind of commented on, well, the cases are not necessarily as many, but they’re larger, CIT if you look at that 7%, mid 20% increases, are you at all experiencing that on a measurement basis I mean I know we’ve talked about how after Labor Day it seemed like, corporate finance restructuring in general as picked up.

[Jack Dunn:]

I didn’t track it by month. I think, I thought it was just indicative of what we’ve been talking in the market about, that there’s a seasonality to it and that you would typically see toward the this year period of year things, especially in retail we talked about people or determining from the back to school sales whether they made enough to survey or whether they made enough to go into bankruptcy. So, I think it was just kind of an indicative fact. I don’t think we have a data point that we’re up 7% or 24% at this point.

[Dom DiNapoli:]

Reading in the paper also about the amends and extends, so like in prior cycles, when the banks just don’t have the capacity or they don’t want to deal with some of the maturities because the company’s, the current operations can’t support a refinancing, we’re seeing a lot of, amends and extends to hopefully points in turns when these companies will be able to once, again service their debt to the extent they’re not able to, which unless the economy turns around pretty rapidly, I think it will be a lot more opportunities for firms like FTR to go in and work with the companies and/or their creditors to deal with the maturities.

[Jim Janesky:]

Then shifting gears to FLC, of late last year and certainly into early this year, you had some very high profile, what I would call fraud cases that came through, obviously we’d seen a very high profile hedge fund that is expected to shutdown. I would imagine is going to face a lot of litigation etc. In do you see those types of cases increasing and increase scrutiny on the hedge fund industry and is that at all work into your confidence of the FLC segment?

[Jack Dunn:]

I think it certainly over the longer term, though, I think the I doubt if anybody who’s a whistle blower that calls up about a hedge fund Ponzi scheme will be disregarded. They have wells notices scenario so that where we get when that investigation type stuff happens, that’s when we get called into play. So I think yes it will increase.

[Dom DiNapoli:]

A lot of hedge fund work that you’re going to see us doing is, is going to be civil in nature as well. A lot of big institutions are not happy with the conduct of hedge funds be it related to a made off or other things and so you’re going to see a lot of civil litigation as people try to go get their money back. I mean, the gates have been lowered on them, they can’t get out, they’re not sure that the fund managers have, acted the way they represented and so therefore they’re sort of coming out with guns smoking. So I’d think you’d see us, much more active there in all honesty than doing governmental work which tends to us to be more of an exception.

[Jim Janesky:]

Jorge, 74 day DSOs this quarter, can you remind us of what they were in the second quarter of 2009?

[Jorge Celaya:]

I think they were pretty much about the same.

[Operator:]

Your next question comes from Joseph Foresi - Janney Montgomery Scott

[Joseph Foresi:]

I know we’ve talk about all the positive stuff that we have kind of coming in for next year, but maybe you can just talk a little bit about any concerns you might have, any particular businesses or offerings that you’re going to continue to keep sort of an high on adding into, into 2010?

[Jack Dunn:]

I’ll start off. I think in our SMG group, which is really a prime front end real estate restructuring group. We are anticipating that they’re going to have a good year second half of next year as you get this articulation pricing and these projects refinanced in big commercial real estate projects around the country. If it doesn’t start happening sort of in the beginning of 2010, I mean I think that would concern us, because all the tea leaves seem to indicate that ought to happen. I think we will clearly be concerned if all of a sudden you see the capital markets activity that is now I hate to use the term green shoots, but because it’s more than that, but it’s what you’re seeing and reading about, we’re obviously seeing in the capital markets. If that would abate or somehow slam shut, then we would have to take some steps on the strategic communications side, because clearly they are directly linked at the hip with the capital markets and it clearly would influence in a negative way. The initial projections that we’re starting to develop there. Now the corollary of that is obviously, we will benefit to a greater extent and restructuring, because if you had no capital markets and everything, Dom was talking about the maturities, then you really don’t have a lot of ability to solve some of these problems without classic restructuring. So I think the quid pro quo, we would have a concern if we see capital markets activity really hit a wall again. We might probably, will benefit from it in restructuring and I think that we have tech risks whenever you’re in the technology business, you always have the risk of somebody coming out with some business, new product that isn’t anticipated. We think we’re well along that curve and understand it, that will be the ones introducing the products, but you never know and clearly it’s something we always have our ear to the ground there trying to figure out, what’s next, what’s new.

[Joseph Foresi:]

I think maybe you can just talk a little bit about, when you head in a particular quarter or particular year, what is the general level of visibility on sort of that quarterly number, that annual number?

[Jack Dunn:]

I think it depends on the division. I think in strategic communications in a healthy year the bulk of their business is retaining business and so it’s a lot more visibility there than you would normally have. In tech it’s lumpy, because we get these huge assignments. The Pure technology fees are easy to predict. The variable of the consulting on top of its much tougher to predict, because it’s driven by these very big assignments. Corporate in actually has pretty good visibility because you have big assignments, you can figure out fairly quickly given the complexity of what your working on, what the runway is going to look like on them. So I think there we would feel we have good visibility quarter-to-quarter on corporate in, not real good visibility, when you’re dealing in these huge assignments on tech, except for the technology fees themselves, much better visibility in normal times on communications, because it’s mostly retained rather than a time and materials business.

[Dennis Shaughnessy:]

FLC, it’s hard to predict case settling and that would have a negative impact on the core FLC practice as well as the trial services practice.

[Joseph Foresi:]

How that ECON…?

[Dennis Shaughnessy:]

ECON you have pretty good quarterly visibility based on the M&A assignment you’re working on and some of the complex litigation if it’s gets activated, but obviously the M&A assignments can be very quick. If you’re trying to get it’s very intense and you’re trying to get a deal done, so that may be one or two quarters visibility. The litigation it tends to last longer and the investigative work can be very pronounced depending on, whose doing it and how complex the assignment is.

[Jack Dunn:]

I guess the other thing that’s out there is that, we haven’t seen an indication of it yet, but people have done a tremendous job this year in terms of cutting back discretionary spending. We’ve got two more months to go. This stuff is backing up, the litigation stuff, all they need to do, but you judge us don’t know what the corporate mentality is going to be necessarily on some of the spending. They can’t hold back forever, but that’s just something that is a phenomenon of the fourth quarter this year that might not be in other years.

[Joseph Foresi:]

Just one last question, I know that you’ve guys have added nicely in some of your areas, added some new talent. Are you actively pursuing that talent or is it coming to you and do you feel like you’re paying or you’re tracking them with what type of caveat besides maybe just the standard is a very good company to work for type of situation?

[Jack Dunn:]

We will never be cavalier and just take for granted that people come to us. Part of the job of the people that run our business is to be actively on the look for talent and looking across the table when we do transactions and things like that, but and seeing whose out there that’s great. That being said, I think because of the position we’re in, we’ve been an aggressive higher this year when others haven’t. We haven’t had massive layoffs when others have, throughout the professional firms that I would like to think that these people who are looking after their carrier would obviously consider us as at least one choice on the horizon. So I think we have a great advantage and getting to see a lot of opportunities that way.

[Dennis Shaughnessy:]

We have the stability of being large and our diversified offering of services makes us attractive particularly at the entry level as well as the senior level that want to bring their practice over to FTI.

[Jack Dunn:]

Part of our brand building as Dom said, obviously it’s for business development, but it’s also to attract talent and I think we’ve seen that especially in the younger people and especially over in Europe, where we projecting the brand much more aggressively and we weren’t as well known over there as we have been once its inception here in the U.S.

[Operator:]

Your next question comes from Dan Leben - Robert W. Baird.

[Dan Leben:]

Since it’s running late, I’ll keep it to one. In the tech segment, if you exclude the large deal that worked off in the quarter. How does that business build as you went through the quarter? Is there some backlog building or you’re seeing some signs of visibility of things getting better in the fourth quarter?

[Dennis Shaughnessy:]

We’re seeing signs of visibility of things getting better in the fourth quarter. I think it would honestly to better for you to talk it in offline about sort of the specific.

[Operator:]

Your next question comes from Scott Schneeberger - Oppenheimer.

[Scott Schneeberger:]

I’ll be quick too. Just two questions, the quick one first, following-up on that last question. Do you guys still anticipate over the intermediate term a run rate margin in tech consulting in the mid 30s?

[Jack Dunn:]

Scott, I think we consistently said we think the best companies of this type run from 30% to 35% margins. We think we’re one of the best companies. I think we’ve been pretty consistent with that message over the last year or so and what Dennis said, when he was answering the different segments, I’ve said that tech is the lumpiest, you do have this big ramp ups. So you’re going to have one quarter of tech down does not make a trend by any means. You’re going to see this up and down in tech and I said in the last call, I think that the margins are going to be anywhere in the like, 31%, 32% range to as high in the high 30s. So you’re going to have a wide range and it is going to be correlated to the lumpiest on the revenue front.

[Scott Schneeberger:]

Then the other one have been some smaller tuck in acquisitions types, but nothing of size for a few quarters now. Could you speak, I know you’ve mentioned you’re still very open to that in addition to the share repurchase, but could you speak to what the pipeline’s looking like? How warm it is as far as things that are close to occurring and type size of what you’re doing? Thank.

[Jack Dunn:]

No. We’re not going to speculate on acquisitions we might do, Scott. It’s inappropriate.

[Scott Schneeberger:]

I mean, just the commentary, yes it is a large pipeline and an active pipeline?

[Jack Dunn:]

Yes. We have opportunities that are consistent with what we’ve been doing in the past to build the geographies out. We have opportunities that we’re especially interested in picking up new domain, expertise and we are constantly talking to people about larger deals, but as David said, we’re not going to speculate on our success in getting those.

[David Bannister:]

More and more as the brand is build especially overseas. There’s a lot of groups for groups for group hires or small acquisitions, where people’s as they tell us they’re choice is either the big four or FTI. So more and more we’re in this realm of that’s where they would want to go. So I think the opportunities are there, it’s just…

[Jorge Celaya:]

Well I think but realistically as the economy improves and going back to Jack’s statement this might be a good way of punctuating it if people move from, sort of optimism to some confidence, the people are willing to sell their companies then. I mean, when you don’t have a lot of visibility, people are very worried about selling their companies, they’re worried about, up being able to deliver, on performance and they don’t like low valuation that, markets that have no visibility or low visibility are going to yield.

[Jack Dunn:]

They don’t have anything to do with the money.

[Dennis Shaughnessy:]

Right you tend right you’re going to be compensated on cash. So they tend to sit on their the other opportunities and wait for betting times to come to market and I think it’s logical that you’ll start seeing, more and better opportunities as people get more confidences about their future and as they start to see some improvement in the valuation metric that people are putting on acquisition.

[Jack Dunn:]

I guess another way to loot at it to back up with in as say nothing traded away from us. We’ve competing for or that we’ve put a bid in, or that we covenant that we’ve seen go to anybody else. I’m not sure our competitors are out there volumes. I think it’s just exactly what Dennis said that’s the best proof that I have that’s been kind of a quiet marketplace out there.

[Operator:]

Your next question comes from Kevane Wong - JMP Securities

[Kevane Wong:]

Just keep it to two. So on the technology area I’ve been hearing sort of a lot of sort of enthusiasm on the new product any sort of looking at the pipeline there a lot of pipeline already built in for the new product will that be a material and benefit in the fourth quarter or it take longer to build up for what reason?

[Jack Dunn:]

It will be longer I mean, we’re pleased with the initial reception, what you’re hearing about, and I think, but it just takes some time to get the traction, literately are just rolling it out and then we’d expect you’ll see some other, exciting introductions that we’ll be bringing out, in the next two quarters, but again, from the time you get trial, to your broader acceptance, certainly takes some few quarters.

[Jorge Celaya:]

The importance of quick call product, is that the front end it provides the on freight to follow it all of our other services and all our over revenue streams this extend over months or years it’s really is a the tip of the sphere to get not corporate client so we’re very excited about the opportunity for it. As a stand alone product, it’s not a big revenue opportunity in the near term, but it can be a huge driver of future demand. Especially when you have the end to end offering that we’ve build I mean, I think that combination is really what makes it the most powerful.

[Kevane Wong:]

A little more foot in the door then and the second question I had, Botchy Group I understand had sort of an unusual circumstance, with non-compete being short of waived on that. Is there other opportunity like that in the market that you’re seeing or is that one off really exceptional sort of higher group.

[David Bannister:]

I think we’ll see more of those in the future. If you recall, we brought on our Canadian restructuring practice in pretty much the same way, work out tremendously well. We’ve got high expectations for the Boston group and we’re always in the market looking for, group grabs small acquisitions like that that if got their own book of business and they integrate nicely within our existing practices.

[Kevane Wong:]

One of it’s not a tendency, but one of the things that kind of helps us, is that if somebody joins us. The typical non-compete is not gaudily where you’re not allowed to work on anything. You’re not allowed to work on clients that were previous clients or matters. So we have a luxury of having a large, roster of matter that people can come here and during that kind of blackout period, they can work on other matters that we have, so we, it’s not a perfect solution but it does ameliorate the effect of a six-month or a year long kind of quarter. You make a judgment every time that whether, that it pays for itself during that blackout period and usually we can make it so.

[Operator:]

Your final question comes from Sean Jackson - Avondale Partners

[Sean Jackson:]

On the tech segment any discovery in particular you mentioned in price pressure seems like it’s been there for a while. It’s always attributed to new entrance in the space, I mean, at what point do these new interest, go away or some of that price pressure is abated, just because of the sluggish environment has makes this space not as attractive anymore.

[Jack Dunn:]

Well I don’t think they ever go away when you have, demand curves are being forecasted for this kind of business. I think you’re constantly seeing new entrance. A lot of them, I mean, individually they go away, because they get frustrated or they run out money, but they tend to be them replaced by a one off or something different. I mean, the way you move these things forward is by new technological developments, new offerings, and a more and more compact, offering that a lines better with the client, so that they don’t try unbundled these things and I think that’s our goal. So I think our goal is to move the mall to where, the impact, on some of this, unbundling isn’t that great, we just sort of change the game again and then will happen is, you’ll change that for a period of time, and then people will try to, come in with different type of offerings that will a align better with where you are as the leader and you’ll change it again. I mean, I think this is starting to run, much more true to a normal technology, growth curve where you see, rapid spears of growth you see a leveling out as the market matures a little bit then you see rapid spears of growth with new technology introduction into it, and new applications.

[Sean Jackson:]

Are you seeing any change in buying patterns in this space? Meaning that, using fewer vendors is that something that would help mitigates some price pressure?

[Jorge Celaya:]

If you, you look, we’ve actually put out a press release this morning out of our technology group would be worth looking at which talk about a survey we did of major law firms and corporate user of media discovery space and certainly one of the things that survey refilled was a reluctance to use smaller single point solution providers. A reluctance to use providers who wouldn’t be financially stable and so I think it’s a different way of answering your question but there was a fair amount of tone in that that would suggest because of the importance of these matters, because there are you now more mature providers available, because of the financial consequences of getting this right, that buyer will be looking for a fewer number of vendors who are financially secure.

[Operator:]

I’ll turn the conference back over to management for additional or closing remarks.

[Jack Dunn:]

Thank you all for joining us and we look forward to speaking with you the next time.

[Operator:]

That does conclude today’s conference we do appreciate your participation.