FTI Consulting, Inc.
Q3 2013 Earnings Call Transcript

Published: 7 Nov 2013

[Operator:]

Good day, everyone. Welcome to the FTI Consulting Third Quarter 2013 Earnings Conference Call. As a reminder, today's call is being recorded. Now for opening remarks and introductions, I would like to turn the conference over to Ms. Mollie Hawkes of FTI Consulting. Please go ahead.

[Mollie Hawkes:]

Good morning. Welcome to the FTI Consulting conference call to discuss the company's third quarter 2013 results as reported this morning. Management will begin with formal remarks, after which, we'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 21 of the Securities Exchange Act of 1934 that involve risks and uncertainties. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events, future revenues, future results and performance expectations, plans or intentions relating to financial performance, acquisitions, business trends and other information or other matters that are not historical, including statements regarding estimates of our future financial results. For a discussion of the risks and other factors that may cause actual results or events to differ from those contemplated by forward-looking statements, investors should review the Safe Harbor statement in the earnings press release issued this morning, a copy of which is available on our website at www.fticonsulting.com, as well as other disclosures under the heading of Risk Factors and Forward-looking Information in our most recent Form 10-K filed with the SEC on February 28, 2013, the current report on Form 8-K dated May 21, 2013, and in our other filings with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on any forward-looking statement, which speak only as of the date of this earnings call and will not be updated. During the call, we will discuss certain non-GAAP financial measures such as adjusted EBITDA, adjusted segment EBITDA, total adjusted segment EBITDA, adjusted earnings per share and adjusted net income. For a discussion of these and other non-GAAP financial measures, as well as our reconciliation of non-GAAP financial measures to the most recently comparable GAAP measures, investors should review the press release and the accompanying financial tables we issued this morning. With these formalities out of the way, I would like to turn the call over to Jack Dunn, President and Chief Executive Officer of FTI Consulting. Jack, please go ahead.

[Jack B. Dunn:]

Thank you, Mollie, and welcome and thank you to everyone else for joining us. With me today on the call are Dennis Shaughnessy, our Chairman; Roger Carlile, our Chief Financial Officer; and Dave Bannister, our North American Region Chairman. This morning we announced our third quarter results for 2013. By now, I hope all of you have had a chance to review them. And if not, as Mollie said, they can be found on our website at www.fticonsulting.com. For the quarter, revenues increased 7% year-over-year to $415 million. Our record revenue results were led by continued strength in our Economic Consulting segment in both the North American and European operations and contributions from our Forensic and Litigation Consulting segment, which includes our Health Solutions practice. For the quarter, adjusted earnings per share of $0.72 increased 20% year-over-year. On a GAAP basis, the fully diluted loss per share was $1.29 for the quarter, including a non-cash goodwill impairment charge related to the Strategic Communications segment of $83.8 million and a special charge of $10.4 million. The goodwill impairment charge has no impact on the company's liquidity, cash flow, borrowing capability or operations. As is our practice, rather than recycle the press release, I will briefly give a few thoughts on what we believe are the key takeaways from the quarter, turn it over to Roger to discuss some of the financial aspects, and then most importantly, turn the call over to you for your questions. In the third quarter, Economic Consulting continued its strong performance. Third quarter revenues of $113.1 million increased 17% year-over-year, driven by continued strong demand across the board, including our antitrust litigation and financial consulting services in North America and EMEA and our international arbitration, regulatory and valuation practices in EMEA. In fact, Economic Consulting revenues in EMEA improved 31% year-over-year. In Forensic and Litigation Consulting, third quarter revenues of $113.1 million increased 13% year-over-year. The results included a large success fee in the North America investigations practice and increased demand in our Health Solutions practice, which grew 24% year-over-year. During the quarter, the segment recorded a special charge of $1.9 million related to headcount reductions to better align capacity with expected demand. And utilization improved to 67% in the quarter from 63% in the prior year. During the quarter, we saw positive litigation market trends emerge with securities litigations filings improving 34% year-over-year, and almost half of these involved some aspect of company accounting. We continue to benefit from the disruption occurring in the health care industry. Our Health Solutions practice revenue increased 24% year-over-year on stronger demand and success fees and 15% sequentially since the last quarter, as we advise clients from across the health care continuum on how to best achieve quality of care and value in this transforming industry. In addition to reporting record quarterly revenues results in both segments, I would like to congratulate the 28 expert witnesses in our Economic Consulting and Forensic and Litigation Consulting segments, as well as our Compass Lexecon subsidiary, who are named on Global Arbitration Review's International Who's Who of Commercial Arbitration 2014 list last week. FTI Consulting topped the list for the fourth consecutive year, with professionals from each of our 4 geographic regions represented, evidencing the global reach and expertise of our firm. This recognition is a testament to the world-class professionals who have honored FTI Consulting by making it their home. As today's complex matters increasingly involve not only international but multinational constituencies, international arbitration is fast becoming the forum of choice for leading global companies, and we appreciate that these companies are increasingly turning to the professionals of FTI Consulting to help them. In Technology, third quarter revenues of $51.2 million improved 2% year-over-year, demonstrating a very solid performance, given headwinds from the decline of a large litigation-related matter. During the quarter, we saw increases in global investigations related to FCPA and LIBOR investigations. We can trace Technology's performance in the quarter to strategic investments in our products, people and business development initiatives. Investments in sales and marketing contributed substantially to those results, particularly with clients who have initiated new technology matters year-to-date. Additionally, the market has responded very well to our product investments and launches. Last quarter, Gartner rated FTI Technology as the leader in its annual Magic Quadrant for E-Discovery Software report, and we continue to enjoy positive client and analyst feedback in response to the latest versions of our award-winning Ringtail software. Technology's global reach continues to be an important factor in distinguishing us from the rest of the field and in winning more complex cross-border litigation events and investigations. According to our clients, our depth and experience outside the U.S. allows us to address their needs rapidly and at the level of sustained execution they have come to expect from FTI. In Corporate Finance/Restructuring, third quarter revenues of $94 million increased 1% year-over-year. Our recently acquired businesses contributed $12.8 million of these revenues during the quarter. These revenue contributions were largely offset by continued weakness in our North America Bankruptcy and Restructuring business. During the quarter, we continued to see depressed levels of restructuring activity as a result of the strong high-yield debt financing markets and historically low U.S. corporate default rates. In light of the challenging bankruptcy and restructuring backdrop in North America, we took actions during the quarter to, one, reduce headcount to better align our capacity with demand. This resulted in a special charge of $6.3 million for the quarter. Two, focus on our go-to-market initiatives for our non-distressed product offerings, which now represent approximately 35% of the segment's global revenues. And three, continue to closely manage discretionary expenses in the segment. In Strategic Communications, revenues of $43.3 million declined 5% year-over-year. Revenues declined due to reduced pass-through revenues for certain EMEA and North America retained engagements and weak M&A activity, particularly in Asia Pacific. The segment did benefit by $1.6 million contribution from our acquisition of the C2 Group, and this acquisition has provided new impetus to our governmental affairs initiative, not only in the U.S. but internationally. The segment has continued to experience pricing pressure for certain discretionary communication services, including IPO support services, where there is now volume but also increasing competition. This has contributed in a change to the company's near-term outlook for this business. And as a result, the company recorded a goodwill impairment charge of $83.8 million during the quarter. Roger will discuss this charge in more detail in a minute. From a geographic perspective, Asia Pacific revenues increased 57% year-over-year as a result of revenue contributions of $11.2 million from acquired businesses in Australia, as this region continues to gain broader strategic significance for our firm. With the revenue contributions from recent Corporate Finance and Restructuring acquisitions in Australia, the segment represented 53% of our revenues in Asia Pac. Our Forensic and Litigation Consulting segment revenues in the region grew 10% year-over-year due to contributions from our global risk and investigations practice and our construction solutions practice. This experienced growth of 27% -- these experienced growth of 27% and 34%, respectively. Looking forward, we see real opportunities for our Forensic and Litigation Consulting services in the region. Our Forensic and Litigation professionals are just starting to benefit from the increased synergies created by the Corporate Finance and Restructuring acquisitions in Australia and have begun to organically enhance our offering in Australia. Outside of Australia, we see especially strong opportunities to enhance our position in Singapore. In EMEA, revenue increased 7% year-over-year, driven by a 31% increase in Economic Consulting revenue. With just over 1/3 of the revenues for the region, Economic Consulting was the largest revenue contributor during the quarter. EMEA continues to be an emerging bright spot for our Economic Consulting offering. During the quarter, we benefited from strength in our European international arbitration and antitrust practices, as our London-based economic consulting professionals were highly utilized. Technology revenues also contributed to the year-over-year revenue increase with improved revenues from LIBOR-related investigations. In North America, revenues increased 5% year-over-year. This increase was driven by a 19% and 15% top line improvement in our Forensic and Litigation Consulting and Economic Consulting segments, respectively. In Latin America, revenues decreased 17% year-over-year, resulting primarily from a decline in Corporate Finance and Restructuring revenues in the region. Brazil represented 29% of Latin America revenues during the quarter, and we realized year-over-year revenue growth in Brazil, despite a weakened macroeconomic backdrop. Brazil's economy posted its slowest growth of the year in the third quarter, as global uncertainties undermined activity in Latin America's largest economy. As we grow, it is a natural evolution for FTI Consulting to become more industry focused and we are keenly focused on industries with -- that are facing disruption or change. We are strong in areas such as telecom, media and entertainment, construction, real estate and retail. The outlook for these industries is attractive for FTI Consulting because providers of consulting services tend to thrive during these times of change. In addition to those areas listed above in health care, which we previously discussed, we have also seen great strides in the energy sector, which is facing an amplified risk environment and disruptive changes over the next 2 decades, which also play directly into our strengths. There are opportunities for each of our businesses in this attractive growth industry. For example, in Economic Consulting, we are seeing increasing interest for services that intersect engineering and economics expertise. Our professionals who have deep industry, operational and economic expertise, people who have held operational and compliance roles at energy companies, are in high demand, particularly in power reliability and cost allocation litigation engagements. Another area, insurance, is one of the world's largest and most important industries. And this industry is expanding rapidly as the standard of living rises in emerging economies and threats from natural and man-made issues increase globally. The market is undergoing constant transformation as a result of new and emerging risks emanating from technological advances, globalization and other business innovations. Our recent acquisition of certain insurance businesses formerly operating under the Distinct brand brings important additional capability to our insurance practice. These newly acquired businesses perform consulting services around the analytics of the insurance business, giving FTI Consulting a new skill set and enhanced geographic footprint in EMEA. These experts and consultants offer a highly specialized capability to deploy valuable results, focused solutions and measurable business improvement. We believe that adding these professionals and proprietary analytics tools to FTI Consulting's offering will bring an enhanced value proposition, not only to our insurance clients in North America and around the world, but also companies in other industries as we expand the group's analytical tools to address other areas of operational and process improvement. With that, I will now turn the call over to Roger to provide more color on our guidance, cash and capital allocation during the quarter and the goodwill impairment charge.

[Roger D. Carlile:]

Thank you, Jack. When we provided our updated fiscal 2013 guidance in August, we guided for revenues of between $1.62 billion and $1.65 billion and adjusted earnings per share of between $2.10 and $2.20 per share. Our current expectation for the second half of fiscal 2013 is consistent with our prior guidance. During the third quarter, we earned certain success fees, including a large success fee in the Forensic and Litigation Consulting segment, which improved our third quarter results. However, these success fees will not recur in the fourth quarter. The lack of these success fees in the fourth quarter and our normal seasonal slowdown around the Thanksgiving and end of year holidays are expected to reduce our fourth quarter results as compared to our recently completed third quarter results. Lastly, turning to our third quarter results, including a goodwill impairment charge in our Strategic Communications segment, under generally accepted accounting principles, we are required to test the book value of our goodwill on an annual basis or any interim reporting period if a triggering event causes us to believe that the current book value of the goodwill is less than its fair value. This test is performed for each reporting unit within the company, which in the case of FTI Consulting, are our 5 business segments and our health solutions practice, which is aggregated within FLC. This is a point-in-time analysis, which requires companies to assess the fair value of recorded goodwill using standard valuation techniques such as discounted cash flow models and market comparisons. The Strategic Communications segment has continued to experience pricing pressure for certain discretionary communication services, including IPO support services, where there is volume but also increasing competition. This has compressed segment margins and contributed to a change in the company's near-term outlook for this business. Given the cyclical nature of this business, the company must assess the fair value of the segment's goodwill, based on the current and expected business conditions. Given the difficulty in predicting the timing, magnitude and improved profitability of this segment, the company's view was that it was not likely these conditions would improve materially in the near term. As a result, the company determined there was a triggering event during the third quarter, which required a goodwill impairment assessment for this segment as of September 30, 2013. Based on this assessment, the company recorded an $83.8 million goodwill impairment charge to reduce the goodwill in the Strategic Communications segment. This charge represents approximately 7% of the company's consolidated goodwill balance and applies only to the Strategic Communications segment. This is a noncash charge and has no impact on our operations, cash flows, financial covenant compliance or borrowing capability. With that, I'll turn the call back to you, Jack.

[Jack B. Dunn:]

Thank you, Roger. Before we open up the call for your questions, I want to recognize that this will be Dennis Shaughnessy's last earnings call with us. Sadly, Dennis will be retiring from his role as Executive Chairman at the end of the year, and he will be sorely missed. As you know, perhaps the most important job of the independent members of the Board of Directors of any company is to select the leadership of that company. Accordingly, our board is taking the event of Dennis' departure as an opportunity to assess not only the combination of skills and vision required to lead us over the next several years and beyond but also the structure of that leadership, to face an increasingly evolving landscape of new and different competitive challenges while remaining mindful of developments and trends in good corporate governance. Our board is actively engaged in this succession planning process, and we expect it will be completed by the end of the year. With that, we'll now open it up for your questions.

[Operator:]

[Operator Instructions] We'll go first to Kevin McVeigh with Macquarie.

[Kevin D. McVeigh:]

Dennis, congratulations.

[Dennis J. Shaughnessy:]

Thanks, Kevin.

[Kevin D. McVeigh:]

You're welcome. I wonder if you could give us a sense, it looks like we did some headcount reduction in Cor Fin and in the FLC practice. Are we sized where we want to be at this point, just based on kind of what we're seeing in the near term as we position the business, number one? And then just how does that impact -- I know there's some fall hiring, things like that. Are we scaled where we need to be, based on where the fall hires came in?

[David G. Bannister:]

It's Dave Bannister. I think the short answer to that is yes. We did unfortunately have to take some sizing actions in both the businesses over the course of the year. But in terms of the macro sort of headcount, how we came into the fall hiring season, how we're looking at headcount next year, we think we're in reasonable shape at this point in time.

[Jack B. Dunn:]

And as is usually the case, we continue -- as you know, we did the acquisition of the Distinct businesses and things like that. We'll continue to add headcount in those areas that have industry specialization, where we think the market is really headed. So it's not -- your question -- we believe in terms of some of the generic capability to complete the work we have, but in terms of the intellectual capital, we're continuing to add to the roster.

[Kevin D. McVeigh:]

And in terms of kind of level of staff, was it kind of more junior or senior or a combination of both?

[Roger D. Carlile:]

Kevin, it's Roger Carlile. It varies, of course, in the businesses between -- I mean, when you look at the disclosure, the larger of the -- the greater portion of the special charge was in the Corporate Finance and Restructuring segment. And although it's a mixture, I would say probably it was a higher level of professional that we removed from the business in that segment. Whereas in FLC, which was a smaller portion of that, it was a broader mix across the segment. And of course, when you add up the segment levels, you'll notice that it won't reconcile the total. That's because there was a reduction in our EMEA business in corporate as well. So -- and that would have been a more senior individual as well.

[Kevin D. McVeigh:]

Got it. And then just any sense as just to sizing that success fee so we get a sense of what that impact would be as we think about Q4?

[Roger D. Carlile:]

Well, I think the way to think of that is that one success fee alone had impacted earnings -- adjusted earnings per share by about $0.06 to $0.07 per share.

[Operator:]

We'll go next to David Gold with Sidoti & Company.

[David Gold:]

A couple of questions, and I'll add my congratulations to you, Dennis, too.

[Dennis J. Shaughnessy:]

Thank you, David.

[David Gold:]

On the cost cut side, I was curious broadly on the 2 practices how to think about that and maybe the return that we'd expect on that, sort of how quickly can we see that return and what might we get out of that?

[Roger D. Carlile:]

David, it's Roger again. I think, obviously, this was one of the smallest charges we've reported as a special charge. And so for that reason, and based on the comments Jack made in terms of we're investing in new areas where the market's moving, I don't -- we're not really talking about savings being generated from that. Obviously, there will be -- the salaries of the individuals that are no longer here won't be incurred, but I don't think it's clear that we won't be reinvesting that into other areas that are growing. So I wouldn't think about savings really in respect of that charge.

[David Gold:]

Got you, okay. And then the Strategic Communications side, presumably, I think you commented a little bit the market has changed, particularly in North America with retainer values potentially going down. Can you give us some color on how we'd think about or what we do differently there, given that environment, to sort of return that business to growth?

[Roger D. Carlile:]

Well, it's Roger again. I think that we've been doing what we need to do in that. It's just not a -- you don't turn a carrier on a dime. So we've been investing in things in that business and have growth. So our public affairs and governmental affairs business, investing in our corporate communications business and working directly with corporates on issues that are outside of just, say financial-related matters or crisis-related matters. What is happening there is there has been -- in the third quarter, as we noted, there was more IPO activity then there was in the previous second quarter, but because the communications market and those markets, M&A markets and IPO markets, had been down for quite some time, the amount of competition for those projects is pretty severe. So notwithstanding that we're maintaining our market share of those projects, the value to us of the fees is less at this time because many people are competing, particularly for IPOs, to get the relationship for the carry-on work for the future. So I think we're maintaining our market share in our traditional markets. Those markets have proven to be a little less valuable in this environment, and we're also moving towards new areas of growth such as governmental affairs, public affairs, corporate communications, those types of things.

[Jack B. Dunn:]

I think, David, there'd be 3 areas that I draw to your attention where I think Strategic Communications is key, maybe 4 would certainly be the geographic footprint which we are forever beholden for being -- providing the platform which gives us enough critical mass to be able to hire people in the Middle East and in Europe and that kind of thing. But 3 other areas where they are important is, first, they were into industry specialization much before we were. And if you look at the industries that I mentioned, they're being driven in the work with between Economic Consulting and Strategic Communications and the energy area's staggering. We probably have built up almost 100 million, 115 million practice there in a year with the cooperation between new [ph]. Because the governmental affairs aspect goes hand-in-hand with issues of shale drilling and all that kind of stuff. In the health care area, we're making major new initiatives because the fact that with some of the health care problems, the hospitals can have the combined aspect of the IR and PR aspects along with the operational improvement. So it's -- with that spectacular growth you saw for us in health care, a lot of that is due to joint projects that they are working on. So that's a second area. The third area where I think you just -- we have the beginnings, the acorn of something is in this governmental affairs. And that's really the joining of C2 and the kind of spark that, that's provided, we now have active initiatives. Brussels, I think, is never been busier for us. So that's working out well. And then the fourth area that I think that we need to get, and there was a survey out yesterday, I think we really need to become a leader in the digital and social media area. I think that's an area where you're going to see companies and CEOs and the C-Suite become much, much more concerned. So those are areas that I think -- I think we'll see a change in that business over time. We are not just waiting for somebody in corporate America to decide, "Hey, it's time to pay more retainer work." I think we need to provide, increasingly, where the value is, which is in the interface with business in Washington and the interface with business in the public. So I think that's where we're headed.

[Dennis J. Shaughnessy:]

David, Dennis. One other thing, just to reinforce what Jack said at the beginning, because I think it's just a critical strategic factor. Just by reference, our other FTI operations in EMEA are now substantially larger than the Strategic Communications group. When we bought the Strategic Communications group, we had nothing from the other operations in EMEA. So the growth in that big market has really been enabled by establishing the platform and the credibility that we got from that. In Asia and Latin America, while we did have presence there when we bought the Strategic Communications group, clearly, they have accelerated our growth in those markets, especially Australia and parts of Asia Pacific, as well as in Colombia, Mexico and other parts of Latin America. And so, the real strategic benefit, besides simply the obvious earnings contribution of revenues we've gotten since 2005 when we bought the company, has been the platform that we gained and the ability to lever that platform on an effective cost basis rather than having to de novo open up operations all around the world and incur a lot of startup losses. So it's levered extremely well. And I think Europe is a perfect example, where now all the rest of the FTI businesses are much bigger than the Strategic Communications group.

[David Gold:]

Perfect. And then one last quick one. Can you give a sense for size on the health care business right now by way of revenue?

[Roger D. Carlile:]

It's going to be between $100 million and $110 million on an annual basis.

[Operator:]

And we'll go next to Joseph Foresi with Janney Montgomery Scott.

[Jeffrey Rossetti:]

This is Jeff Rossetti, in for Joe. Just wanted to get some more detail about the M&A life cycle. Obviously, it's impacting your antitrust work. Just wanted to see where you see the M&A life cycle. Is it -- do you see it start to impact your second request work and get more involved in FLC?

[David G. Bannister:]

It's Dave Bannister again. As you probably have seen in the last week or 2, the data on the M&A volume levels are actually a bit discouraging. The New York Times had an article last week suggesting that all of us, law firms, investment banks, people like us who live in that world were expecting a gangbuster M&A year in 2014. And the fact that, that has not come through -- we just had a senior fellow from the M&A department of Goldman Sachs, which is a friend of ours, in recently and he said, certainly, from their perspective, they're not seeing the business level they had hoped to see. So I think we're currently cautious about that market. We are very pleased with the market share we have particularly in our economics business but in other places, we're getting good work. You're seeing some trends in that in technology, in second request and so forth. But in terms of the robust demand environment, it's not there right now.

[Jeffrey Rossetti:]

Okay. And just -- did you mention at all the cuts that were made in FLC? Were those within the dispute advisory services? I'm sorry if I missed it.

[Jack B. Dunn:]

Well, it was not in the health care solutions portion because, obviously, they're growing. And one of their big growth restricters is getting people. It was spread across the businesses. It wasn't focused on any one, and it was spread primarily between their North American region and their EMEA region. So it was a little bit of all of their products just sort of tightening up what they had in capacity versus demand.

[Jeffrey Rossetti:]

Okay. And then as far as investing in health care, are there any kind of specific practices that you would be interested in through M&A to sort of build out that, because it's seeing such strength? Or is it something that you're just going to focus on building organically?

[David G. Bannister:]

This is Dave Bannister again. I would say couple of things on that. One is we clearly believe that the demand level there is such that we need to add capacity, and we are aggressively in the market looking to hire qualified people. As you probably understand from our business there, the nature of the folks that we're looking for there are quite broad. So for example, we have everything from clinicians to, literally, doctors helping run operating rooms to people who are more on the classic procurement or scheduling side. There are some other emerging areas that we think are going to be important there, including labor relations and employee management kinds of issues. But I would say across the broad spectrum of performance improvement inside of hospitals we're looking to hire. In terms of the M&A market, as you know as a company, we have been a reasonably aggressive acquirer over the last 5 or 10 years, but we also want to be prudent with our capital. It feels to us like the levels that are being paid for properties that have the words health care associated with them now are uneconomical for most acquirers. We are seeing properties trading at 12x, 15x EBITDA, and frankly, we are just not comfortable with those kinds of levels to pay for things generally. So we'll keep looking, we'll keep thinking about it. But I think we're going to be much more aggressive in trying to pursue an organic growth strategy there than deploying capital. It doesn't mean we won't find something, but I think right now, the pricing levels are such that we think it might be a bit of a bubble.

[Operator:]

We'll go next to Randy Reece with Avondale Partners.

[Randle G. Reece:]

I was trying to get -- first of all, I'm jealous of anybody who retires before I do. Congratulations.

[Dennis J. Shaughnessy:]

Thank you, Randy. I've been working longer than you have, though.

[Randle G. Reece:]

Yes. If you adjust it for hours, I don't know. I was trying to get an idea of kind of directions you're going in headcount entering next year. Not -- and just directionally, I'm not looking for exact numbers, but how the environment feels in terms of what you're going to need to prepare for demand, how much lead time you have to add people to meet it.

[Roger D. Carlile:]

It's Roger Carlile. I think, generally speaking, because we're, taking off of Dave's answer earlier, we think our headcount is generally where we want it to be, I think you would just look at headcount tracking revenue growth rates. A couple of areas where that might not be the case, we still have capacity in our corporate finance business. And so as revenue increases there, we wouldn't have to add headcount probably quite as rapidly as the revenue increase. And I think the same with Forensic and Litigation Consulting, still maybe a little bit of capacity in pockets there. But generally speaking, I think you'd look at headcount growth being in line with revenue growth.

[Randle G. Reece:]

There wasn't much of a wiggle in the headcount in CFR, even though the revenue went down some, the utilization rate shows a tick up.

[David G. Bannister:]

Again, we have to be a little bit careful there. We made several acquisitions in that space during the course of the year, 2 in Australia and 1 in a very specialized valuation practice in the U.S. So those all add to headcount, while at the same time, you saw reductions for headcount. So I think it's a bit of a reconciliation you have to go through there.

[Randle G. Reece:]

Yes, that's just optical, I guess. In the Technology area, I don't know if you addressed this earlier on the call, I got on in the middle, but I picked up a posting on a government website, said you want to contract with the Department of Treasury for Ringtail software deployment. What really caught my eye about that was that they decided to go sole-sourced. They didn't fully compete it. They considered 14 vendors, chose you on the merits of your technology and the fact that you were a single vendor and that gave them greater comfort about data security. Is this all as significant as it seems like to me?

[David G. Bannister:]

Again, it's Dave Bannister, if I may take that. There are different approaches to the market. There certainly are vendors who want to sell point solutions to point problems. We believe, and the experience of the company has been, that for certainly complex or important or critical matters, that having something that, using a euphemism, is more of an end-to-end solution provides many benefits. It provides efficiency benefits. You don't have to trade data between different platforms and different sets. It provides security, which is critical to many of the sorts of things we work on. And it provides, we believe, efficiency because you can run a project right on through to the end and get the results without having to relearn the various attributes of the case. So it's not necessarily the right thing for everyone. If it's a slip and fall accident in a mall operator who just wants to search his inbox for letters on that, that capacity may not be necessary. But on larger matters or on matters that are complex or on matters that have items such as security involved with them, we think an end-to-end solution makes sense.

[Roger D. Carlile:]

And Randy, I'm just going to add. I happened to be with our sales team the day that they closed that sale. And so I think it is significant for a couple of reasons. One, they got the deal closed -- this shows the quality of our people and our tools. They got that deal closed before the government shutdown. They worked very hard when they saw it was coming to make sure that they met the client's needs before the client was unable to act. Secondly, I think just to take a little pride in our technology team on the sole-source decision, I think when somebody sees you have a great product, they don't need to talk to everybody else about it. So I think they picked us for the reasons David said because we meet all those needs.

[Randle G. Reece:]

My understanding was they were under some pressure to comply with court mandates. Are there any other agencies in similar position?

[David G. Bannister:]

We have, historically, had that business at a number of relationships with government entities around the world. So for example, in Australia, we've been the vendor for their equivalent of the Department of Justice for years. Similarly in Canada. So yes, I think the answer is there is a reasonably good application for agencies that are data-intensive and have information needs that are complex and require information. We have what we believe over time, for example, that Brussels will become a potentially more important market as they become more like the U.S. in the way they approach antitrust and competition issues, that they're becoming much more data-intensive, and there's an opportunity there as well. So I think the broad answer is as data becomes more complicated, becomes harder to deal with, comes from multiple form factors and has to be addressable and searchable and protected, you need the sorts of solutions that our team has and will continue to develop to address those issues.

[Jack B. Dunn:]

Hats off to the team out there because I don't think there's been much of an argument about who has the most robust system out there. But now with the new release they have on Ringtail, we also have as user-friendly or perhaps more user-friendly interfaces with it than anybody else. So there's -- it really is a very, very safe choice to pick FTI and all its assembled capabilities there. So I think that's a major step that happened this year. It didn't get maybe as much press, but I think it's going to pay huge dividends for us, as we're starting to see now as they performed so well, even in spite of some of the cases rolling off from prior years.

[Operator:]

And with no further questions in the queue, I'd like to turn the conference back over to Mr. Jack Dunn for any additional or closing remarks.

[Jack B. Dunn:]

Great. Well, thank you all very much for being with us, and we look forward to chatting with you the next time.

[Operator:]

Again, that does conclude today's presentation. We thank you for your participation.