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Huron Consulting Group, Inc. (NASDAQ:HURN)

Q4 2008 Earnings Call

February 24, 2009 11:00 am ET

Executives

Gary E. Holdren - Chairman, Chief Executive Officer

Gary L. Burge - Chief Financial Officer

Daniel P. Broadhurst - Chief Operating Officer

Mary M. Sawall - Vice President of Human Resources

Analysts

Tim McHugh - William Blair & Company

Tobey Sommer - SunTrust Robinson Humphrey

Jim Janesky - Stifel Nicolaus & Co.

Andrew Fones - UBS Securities

David Gold - Sidoti

Dan Leben - Robert W. Baird & Co., Inc.

Paul Ginocchio - Deutsche Bank

Kevane Wong - JMP Securities

William Sutherland - Boenning & Scattergood

Operator

Good morning ladies and gentlemen and welcome to the Huron Consulting Group’s webcast to discuss results for the Fourth Quarter and Full Year 2008. At this time, all conference lines are on listen-only mode. (Operator Instructions) And I would now like to turn the call over to Mr. Gary Holdren, Chairman, Chief Executive Officer of Huron Consulting Group. Mr. Holdren, please go ahead.

Gary Holdren

Good morning. And thank you for joining us for today’s webcast to discuss Huron Consulting Group’s fourth quarter and full year 2008 results. Before we begin, I would like to point all of you to the disclosure at the end of our news release for information about any forward-looking statements that may be made or discussed on this call. We have posted a news release on our website.

Please review that information along with our filing with the SEC for disclosure of factors that may impact subjects discussed in this morning’s webcast. Also on this call, we will be discussing one or more non-GAAP financial measures. Please look at our earnings release and our website for all the disclosures required by the SEC including reconciliation to the most comparable GAAP numbers.

Joining me on the earnings call today are Gary Burge, our Chief Financial Officer; and Mary Sawall, our Vice President of Human Resources.

This morning, I would like Gary Burge to start by covering our 2008 results as well as our 2009 guidance.

What you will see in our press release this morning is that our fourth quarter revenues were not in line with our forecast. Gary will share with you, where those short falls were.

However, you see our net income and EPS for the fourth quarter and 2008 were within the range we previously gave you.

It was very important for Huron as a growth company; to deliver consistent growth of revenues but what is equally, if not more important is to deliver consistent and predictable net income and EPS.

We are going to share with you this morning, how and why we are able to do that and how we will concentrate on delivering a more predictable, consistent growth and net income while at the same time, growing our top line.

We believe Huron will be able to deliver predictable net income for several reasons. First, Huron provides a balanced portfolio of service offerings, all capable of delivering very solid profit margins at the segment level.

Second, we have the pay-for-performance compensation model, where our professionals don’t receive bonuses without delivering reasonable revenue and profit growth.

Third, Huron’s variable labor cost models were our V3locity and CFO solutions business give us bottom line protection, if revenues do not meet our forecast.

Lastly, we will manage our SG&A cost to be the best in our peer group. These are the reasons, we think our ability to deliver and predict net income and EPS will be easier than predicting revenues in these current economic conditions.

We recognize the critical need demands at bottom line and deliver superior cash flow from operations, during this time of uncertainty to you as share holders.

After Gary’s remarks, I want to share with you our outlook regarding demand for each business segment and how we are going to be profit zealots in 2009. So, we can deliver results that will benefit both our employees and our shareholders. Gary?

Gary Burge

Thanks, Gary and good morning everyone. I’ve got a lot to cover with respect to the quarter and guidance, so let me get right into it. Some of the financial highlights included revenues of $164 million, were up 20.6% compared to last year’s fourth quarter with consolidated organic growth of 4%.

Excluding the financial consulting business, the combined organic growth rate for the remaining three segments was approximately 29%. EBITDA rose to $38.6 million, up about 32% from EBITDA of $29.2 million in Q4 2007. And our adjusted EBITDA, excluding share-based compensation, rose approximately 29% to $45 million.

Year-over-year, fourth quarter EBITDA margins improved 200 basis points to 23.5%, and adjusted EBITDA margins improved 180 basis points to 27.4%. Operating income increased nearly 23% to $28.5 million for the quarter from $23.2 million last year. And fourth quarter operating margin was 17.4% in 2008, compared to last year’s 17.1%. Without rapid amortization, operating margins would have been 19.1% in 2008, compared to 18% last year.

SG&A expenses for the quarter included a $2.5 million write-off of a specific client account, which was deemed to be uncollectible. Write-offs totaled $2.7 million for the quarter, which was unusually high as such write-offs typically average no more than $200,000 in any one quarter.

I also wanted to comment on the $1.9 million loss in other income for the quarter, which is comprised of approximately $1 million in net foreign currency exchange losses and an approximate $900, 000 loss, due to a decline in the market value of the investments that are used to fund our deferred compensation plan liability.

There was however, an off set to this $900,000 loss that served to reduce our direct expenses in the quarter. As our deferred compensation liability to employees also decreased at the same time. So net-net, the $1.8 million loss in other income translates into only $1 million loss at the pretax income line pertained to this foreign currency exchange loss with the deferred compensation plan items just being [noise] in our P&L.

Net income increased to $11.8 million in the fourth quarter of 2008 and diluted EPS was $0.59 compared to $0.63 a year ago. Revenue shortfalls and other cost and expenses noted above were somewhat mitigated at the bottom line to our variable labor and compensation cost models as well as SG&A cost management.

Now, for some comments on regarding each of our businesses. The Health and Education Consulting segment, which represented almost 55% of total revenues for Huron during the quarter, continues to be a bright spot for us as revenues were $90.1 million for the fourth quarter of 2008 increasing better than 80% from $15 million in the fourth quarter of 2007.

Organic revenue growth for this segment excluding Stockamp was in excess of 34%. We remain very pleased with the strength of the Health care practice has displayed in the hospital market. Both Wellspring and Stockamp having performed very well during the quarter. And our Higher Education and PhRMA health plan practices also performed well.

In total, the Health and Education segment operating income was outstanding, increasing more than 95% to $41.6 million from $21.3 million during the same period a year-ago, even with $2.7 million increase in rapid amortization costs from a year-ago.

Revenues for the Accounting and Financial Consulting segment were $26.5 million for the fourth quarter of 2008 a decline of about 43% from $46.7 million in the fourth quarter of 2007.

Revenues for both our disputes and investigations and CFO solutions practice came in short of our forecast for the quarter, as the segment experienced a combination of project delays and deferrals as well as higher provisions for fee adjustments.

We do feel that we have been and currently are in a down cycle, as it relates to regulatory and litigation matters. This cycle as well as the economy has had a meaningful impact on demand, as well as some pricing pressure for this disputes and investigations in our CFO solutions project based services.

Accounting and Financial Consulting operating income of $4.4 million decline significantly from last year’s fourth quarter as profitability fell due to a combination of lower revenue yields and utilization short falls. We continue to monitor demand for this segment closely and will take steps that are necessary to improve the utilization of our full-time professionals.

The CFO solutions variable labor pool will provide some bottom line protections for us. So, we are strongly focused on driving better top line results for that practice.

As Gary will detail in a few minutes, we continue to be optimistic about the future of disputes and investigations in our CFO solutions businesses.

Moving on to Legal Consulting segment, revenues were $27.6 million for the fourth quarter of 2008, increasing nearly 35% all organic from $20.4 million in fourth quarter of 2007. While, we expected our V3locity revenues to decline from the very strong third quarter, we were disappointed that the revenues fell short of our lowered forecast due to some unanticipated project delays and slowdowns.

Having seen a similar third quarter to fourth quarter downward revenue trend last year, we may perhaps be subject to more of fourth quarter seasonality and V3locity, than we thought. We do not however; see if there has been any fundamental change in the demand for our V3locity product.

Despite the sequential decline in fourth quarter 2008 revenues, we cannot forget that fourth quarter 2008, V3locity revenues nearly doubled from the fourth quarter of last year, which would suggest that we remain on target in terms of meeting the e-discovery needs to the market place with the V3locity solution. The fundamental demand drivers, the general counsels’ need to lower discovery costs remain intact for this business.

Demand for our core legal consulting services was somewhat weak during the quarter, as we feel that the economy had an impact on discretionary spending by the general counsels. Segment operating income decreased slightly to $5.4 million in Q4 2008 from $5.8 million during the same period a year ago.

Operating margins in this segment decreased to approximately 20% from 29% a year ago reflecting the fact that we can expect some volatility in both revenues and margins as this business matures. Particularly, when you continue to invest a meaningful amount in sales, marketing and other infrastructure investments.

V3locity’s operating margins did meet our expectation on a year-to-date basis. And we feel that this will continue to be a 30% plus margin business on a go-forward basis. We know that there is a very large market for our legal services, however; we need to have some patience with the lumpiness of our revenues to the event driven nature of V3locity and our other e-discovery offerings.

Revenues for the corporate consulting segment were $19.9 million in the fourth quarter of 2008, increasing about 6% from $18.8 million in the fourth quarter of 2007. Quarterly operating income increased significantly more than 80% to $5.1 million from $2.8 million last year.

Operating margins for this segment also improved dramatically to nearly 26% from 15% a year ago reflecting the segment-wide improvement and utilization and improved margin contributions from each of the restructuring and turn around utility consulting and Japan practices.

As we’ve said many times, our balanced portfolio serves us well, giving us the ability to manage to through fluctuating markets. The strategy proved its value again this quarter as strong results in our health and education and corporate consulting businesses, helped mitigate revenue short falls that we had in the event-driven Accounting & Financial Consulting and Legal Consulting segments.

I also want to provide you some color on our fourth quarter income tax provision. Our fourth quarter effective tax rate of 46.1% raises our year-to-date effective tax rate to just under 46% this year from 44.5% last year. This provision increase is driven by additional start up losses that can’t be yet tax benefited on the international side and also reflects some current foreign tax credit limitations.

Now for a few more data points, DSO came in at 57 days at the end of the quarter, improving from 69 days at the end of the third quarter 2008.

Despite difficult economic conditions, we were very pleased with our strong fourth quarter collection results. We also very pleased by our generation of nearly $57 million in cash flow from operations during the fourth quarter, which brought cash flow from operations for the year to $101 million with $81million in free cash flow.

Finally, our return metrics remained strong with return on assets of approximately 6.9% and a return on equity of 16.7% over the last 12 months.

Now for guidance. For 2009, we have decided to provide you with only annual guidance. The event driven nature of some of our services combined with the timing of contingent fee revenue recognition can make quarterly guidance a challenge. We have a better comfort level with annual guidance at this stage, as we can rely in our ability to assess macro business trends rather than trying to estimate short-term quarter-to-quarter revenue fluctuation.

Guidance for the full year 2009 is projected to be a revenue range of $730 to $770 million, EBITDA in a range of $162 to $173 million, operating income in the range of $132 to $143 million and diluted EPS in the range of $3.10 to $3.40.

A number of companies including some in our peer group have foregone giving guidance for 2009, we feel confident that we have a meaningful organic growth in this company for this year even in a difficult and somewhat predictable economy.

The aforementioned revenue range reflects organic growth in the mid-to-high teens, based upon existing backlog in the pipeline of new proposal opportunities we have in front of us. We feel confident at this stage, that we have set a revenue range at a reasonable level despite all the turmoil and uncertainty that is being presented by this economy.

You will note that we have a tighter EPS range and you might expect it for the revenue range that we have given you, the reason for that is that we are focusing a lot of attention on managing our cost during these uncertain times and our variable labor and comp structures, can help us manage to net income margins in the 9% range even with a fairly wide range in revenues.

For modeling proposes, even though we’ve not given you quarterly guidance, you can assume that revenues will be somewhat back-end loaded again this year primarily, due to the timing of some of our larger healthcare projects including the recognition of contingent fees on those projects, as well as a forecast of increased demand for V3locity in our other e-discovery services as the year progresses.

As a result, we would suggest that first quarter revenue will trend up only slightly from the quarter of 2008 and then trend up gradually over the course of the year with somewhere in the neighborhood of 55% of our total revenues for the year coming in the third and fourth quarters.

Full year share-based compensation cost is estimated to be approximately $30.5 million and we are also forecasting that average utilization rates will approach 73% for the full year.

And, we expect the average hourly bill rates of approximately $275 for the full year. Assuming the mid point of our revenue range for the year full time billable headcount will approximate 1525 professionals for the year and average full time equivalents for the year FTE’s will be about 975. Weighted average diluted share counts for 2009, are estimated to be approximately 20.7 million shares for the full year.

And finally, with respect to taxes, you should assume an effective tax rate of approximately 45% for the full year.

I’ll now turn the call back to Gary Holdren for his commentary on 2009.

Gary Holdren

Thanks, Gary. Now, that you heard about 2008 results and our 2009 guidance. I am sure you are trying to determine, how realistic is it for Huron to get those 2009 numbers? And can they deliver the net income in these difficult economic conditions. What I want to do now is discuss with two months under our belt, how we feel about the 2009 market demands for each segment and why we believe, we can make these numbers.

Our $730 to $700 million revenue range assumes organic growth rate in the mid-to-high teens for 2009, as Gary just said.

Based on what we know at this time, we feel that this revenue range is achievable but balanced with an appropriate level of caution. Our forecast also targets net income at approximately 9% of revenue.

For the reasons that I previously discussed, we believe that we can deliver 9% of net income or 9% net margin over the complete range of revenues we’ve given you in our annual guidance.

With respect to our revenue outlook, let me start with our Health and Education Consulting segment.

This includes our higher education practice, permanent health plans and our healthcare provider business, Wellspring and Stockamp. This segment will represent between 50% and 55% appearance total revenues for 2009. These combined businesses will have an organic growth rate of approximately 20% for 2009.

Our Health and Education business produces very solid profitability and has more hard backlog than any other segment. We have more visibility with this segment than any other and therefore we feel very good about them making their forecasted revenues.

Many of you have asked questions about the higher education practice and as whether it will have a downturn in 2009. This is because of all the press, the U.S Universities have gotten about their financial troubles, loss and endowment income, lack of access to capital markets, cost increases, tuition fees, because in funding at the state universities.

While we have seen some universities express the desire to cut back on their spending, I need to remind you that many other services provided by our higher education practice focus on the billions of dollars of research money that universities rely on, as well as compliance and risk management associated with clinical research. Both basic and clinical research are critical from a funding perspective and universities will not cut back on services that help support and protect these key areas of funding, particularly at these current economic conditions.

In addition, more and more universities are asking Huron to help them deal the forecast budget and funding short falls. Our higher education practice leader Jim Roth is in the Middle East today and is working with our newly acquired resources from Nextmove to pursue the numerous opportunities that we see in that region of the world.

Our higher education business is very solid for 2009. The integration of our Wellspring and Stockamp business couldn’t be going better. They are going to market together in winning very important and large engagements. Some of you have asked whether hospitals will have to stop spending money, so much money on consulting since financial conditions continue to get worse. We are seeing just the opposite. What we are seeing is large hospital systems, many of whom have been historically very healthy, now calling us as they have begun to see morning lights go off during these difficult economic times.

These hospitals would not have called us a year ago. Many of these hospitals are now worried about meeting debt covenants and therefore have a new sense of urgency in terms of improving their cash flow and operating results.

Positives for us include the fact that the sales cycle has shortened due to this increase sense of urgency and the size of the engagements are giving off larger. Bottom line, the number of assessments have underway combined with the better backlog that we had a year ago at this time, makes the general state of our healthcare business better than it was a year ago.

And the addition of Stockamp has made things even better for us in terms of new assessment and strong backlog. Our healthcare business is in very good hands.

Let me now turn to Corporate consulting, which includes our strategy business, restructuring and turn around, utilities in Japan, which will represent 10% to 15% of Huron’s 2009 business and it should produce very solid segment profitably this year, because of the strength of our strategy and restructuring by businesses. Both are currently very busy and their backlogs are strong.

Our strategy offering is in high demand to help large corporations improve shareholder value and our restructuring business is winning many mid-size restructuring jobs in the auto and manufacturing industries.

We just recently won an engagement to help a major Telco manufacturer. We expect our legal consulting business to represent about 10% to 15% of Huron’s 2009 business. Our V3locity product should have a 25% organic growth rate in 2009. As we had mentioned, this business can be choppy due to its driven nature, but this is a great business with a lot of demand. We continue to win master service agreements at major companies and we continue to be told by clients that we had the best review product at the best price in the industry.

We feel confident that the forecasted growth rate fromV3locity is achievable based on existing matter backlog combined with new relationships that we have established with law departments in some of the largest companies in the United States. In our core Legal Consulting business, we are only anticipating modest growth in 2009. We are seeing corporate legal departments not spending as much money on systems and other process improvement work.

We are seeing more corporate general counsels wanting help with discovery and cost reduction that’s our optimism with respect to our V3locity product. We will manage our core legal consulting head count to ensure that we deliver reasonable profits at the level of revenues we achieve.

Turning now to our accounting and finance consulting business, which represents about 15% to 20% of Huron’s 2009 business. As you know, we would ask Dan Broadhurst who is been our COO to oversee this business and then allow Tim Hurt who leads disputes and investigation and Mike Dray who leads CFO solutions. Their 2009 goals are to aggressively attack this market and start a strategic plan that will let us get this practice growing again and improve this profitability.

We believe this practice is positioned to grow, but to be conservative and practical. We have forecasted this business to have zero growth in the 2009 guidance we have given you. We believe that our CFO solution business is positioned to win work with Federal agencies, because we have an experienced contract work force that we can deploy to address financial services industry needs at very favorable rates.

We believe the Federal government is going to be a big buyer of our services over the next several years. With the financial service industry in this rate, banking barriers, money management fraud such as Metoff and Stanford. An increased regulation and restrictive reinforcement from SEC, we are seeing more opportunities today than we saw three or six months ago.

However we are not going to forecast an increase of revenues from this segment until we know that the backlog is there and it can be sustained. We will continue to improve segment profitability while we aggressively attack the market place with our talented resource. This is a business front that needs to be into [inaudible] and this is the segment that will again make a meaningful contribution to Huron’s results.

So, let me sum up this morning’s conversation. We know this is going to be a very challenging year and we’ll have to be in the market place everyday delivering value solutions to our clients. But, we believe we’ve made a very balanced assessment in giving you 2009 guidance. We are very comfortable that we have good demand and visibility for about 75% of our revenues, with our health and education consulting business, V3locity and our Corporate Consulting business.

In our Legal Consulting and Accounting & Financial business, we believe it is revenue upside in both businesses. And we will be aggressively in a market place everyday helping clients solve problems. However, we are forecasting no growth for this 25% of our business.

We will also aggressively manage our SG&A cost and other costs as well as to continue and manage our cash flow in order to deliver bottom line results that will meet the needs of both our share holders and our employees.

Thank you for your time today. And I can only tell you all of us at Huron, will do every thing in our power to deliver 2009 results that are comparable what you’ve grown to expect from us.

Now, we will open it up for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). And our first question will come from Tim McHugh - William Blair & Company.

Timothy McHugh – William Blair & Company

First I wanted to know if you gave a few comments about the first quarter just being up sequentially, I was wondering if you could talk a little bit about what you’ve been seeing in the Financial Consulting as well as Legal Consulting and then I know early in the year it’s a big time of the year for the assessment piece of healthcare and how backlog is kind of building as through January and February?

Gary Holdren

Yes, Tim. So, let’s start with you, we’re right now if you look at our daily run rates for economic and financial consulting there is no improvement from Q4. Our Legal Consulting business is probably about the same. We are seeing a huge amount of assessments and huge improvement in our healthcare business even over Q4.

Tim McHugh – William Blair & Company

Okay. And then, did I hear correctly, you said Legal consulting would be 10% to 15% of revenue.

Gary Holdren

15 to 20.

Tim McHugh – William Blair & Company

15 to 20? Okay. And then, can you talk a little bit more, you kind of mentioned that Dan would be coming up with a plan to kind of write the ship within Financial consulting. Can you give any more detail in terms of what you are thinking there, are you taking out additional headcount at this point or is it more on the sales side that you think there is opportunity?

Gary Holdren

Yes and yes. We are taking out headcount, we taking out headcount. Huron is taking out at about $5 million of annualized pay roll costs in the first quarter with about $1 million of severance and we’ve got a plan to be in the market place everyday and Ben and Tim and Mike are working on a very strategic plan as to where we are going to take this practice.

Timothy McHugh - William Blair & Company

Okay, then lastly, in terms of uses of cash this year, as you think about the cash flow you will generate. Will it primarily be to pay down debt or will you be looking at additional acquisition opportunities?

Gary Holdren

First and foremost, we want to pay down debt. And if something comes along good it’s likely that, we probably would maybe do a stock deal if something came along. So, we want to pay our debt down, right now.

Operator

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

Tobey Sommer - SunTrust Robinson Humphrey

I was wondering, if you could give us some color on the joint pitches that you are able to make with either Stockamp or Wellspring together or perhaps the higher ed making some introductions for Stockamp.

Gary Holdren

I don’t know how to give you all the details, I don’t know if I can give you all the client names. But, what’s happened is, all of a sudden A rated and AA rated hospitals have been very healthy in the past big systems in the 12 to 50 hospitals. Now, are basically asking for help, but the fact that we have at Stockamp piece doing the revenue cycle along with the Wellspring thing, just makes us have such a better package to get better hospitals to give them better results and at the same time, we are not seeing probably as much in the higher ed helping, because the academic medical centers probably could potentially the first spending versus the stand-alone hospital that’s got their own debt ratings.

So, right now, more of the demand is coming from what I would say is the big systems that are worried about debt covenants in S&P downgrades. But that, we are just seeing huge opportunities, I mean, some people coming in shortening the assessment time maybe no assessments is bigger jobs and just the higher quality hospitals that we saw a year ago, just everything is increasing.

Tobey Sommer - Suntrust Robinson Humphrey

And then, I was wondering from a numerical standpoint, if the guidance that you’ve numerated on the call and in the press release, includes any kind of severance charges embedded in it or is that something you would exclude from the newer numbers you have given with us today.

Gary Holdren

We will cover all severance with any guidance numbers, we gave you.

Tobey Sommer - Suntrust Robinson Humphrey

And then, from an accounting standpoint, how should we think about success fee recognition throughout the year, is that something you are going to accrue for will it kind of be back-end loaded along with some of the revenues. Thanks.

Gary Burge

Hi, Tobey, Gary Burge here. In general, our contingencies we try to put milestones in place during the course of our projects orders in all back-end loaded, but as a practical matter these contingencies when projects are starting up for the most part in the beginning of the year will fall in the third and fourth quarters. So you can assume more contingency concentration in the back half of the year.

Tobey Sommer – Suntrust Robinson Humphrey

Okay. That’s helpful. In terms of the accounting and financial segment, perhaps eventually being able to see some revenue improvement. What kinds of either cases or business activity do you think could be a leading indicator of that in terms of your business portfolio. Do you look at V3locity seeing an acceleration as something that would anticipate more activity on the financial consulting side?

Gary Holdren

No. I wish would Tobey, I mean that is there would be nirvana if you got a V3locity job in all the segments an indicator. No we know the banks have got a lot of things going on clearly it’s a lot of stuff going through V3locity on banks. We also got M&A activity second request, which really won’t help business.

I think its just the calls that we are getting in the market place that all the scandals of Stanford, the financial services, at some point people are going to want to know where there money went and I think at some points you are going to see more enforcement and I think just the kind of calls we are getting from banks are looking at loan portfolios or what whether the government might want to hire people like Huron to help them with the things that are going to do.

I think as we start getting calls like that and as we are getting calls and just more activity. I think the one thing that to me is pretty obvious though and I don’t think it should be surprising.

If you are general counsel and you absolutely don’t have to start something today and you have $400 million budget, if you could just move that a couple of months and make that, so let’s just say it was a $480 million budget it is easy. You had $40 million a month and you can just move all that a little bit and get your budget down to $400 and you are going to be a hero with your CEO.

And I think unless it’s just your hair is on fire, crisis matter. I think we’re just going to continue to see a little bit differ and I think the other thing we’re going to fight this year and for however long is law firms. The law firms are short on revenue, so they are going to try their best to keep as much as fees for themselves before they give it to us.

So I think we really just need to see some wording of work, but not only a wording we need to start and be there stick and see it’s going to be there. I mean and I just can’t and I have been doing this a long time and I would just tell you right now, it’s everybody they ask you to come and you say yes, it’s a week, well it’s two weeks and it’s just the stretching out of the process and we just got to, I think we got to be prepared for that and know that it might continue to all of ‘09.

Operator

And your next question will come from Jim Janesky - Stifel Nicolaus.

James Janesky - Stifel Nicolaus

A couple of questions, first I would like to get an idea of your thoughts on the backlog and the projects within the health and education segment. What is the likelihood that once these projects are started up, that they could be cancelled mid-stream and could lower the visibility and the outlook that you have for 2009?

Gary Holdren

I guess, that’s a fairly good question, Tobey and I guess, the question.

James Janesky - Stifel Nicolaus

It’s Jim.

Gary Holdren

I mean Jim, I’m sorry, Jim. I think the most likely thing is that for whatever reason, what our guys do whether it’s weekly or every two weeks, they’re showing a progress report to the hospitals that show that where the cash flow is coming from and the improvements and as long as those improvements keep coming which should come from the assessment and you can see that you are going to get 4 times your EBITDA improvement for your fees.

We just don’t think, it’s that likely, right now that those things would be stopped, because of all the pressure that bond and shares S&P is putting on all of these debt covenants of all of these companies, unless all of a sudden the Federal government would just give these huge wind falls to the hospitals and cash could come in and they don’t need. But I guess, the question is we can continue to show them that they can make $4 of cash flow improvements, why would they stop the projects, I mean that’s sort of the way that our leaders think about it.

James Janesky - Stifel Nicolaus

Okay. And, have you seen any meaningful change, I mean historically you have indicated that about 75% of your assessments turn into fairly large scale consulting engagements, some times on a magnitude of an order of 10 times. Have you seen any change there, Gary?

Gary Holdren

I was with Dave Shade Saturday and he talked about the ratio going between 80% and 90%.

James Janesky - Stifel Nicolaus

On the success fees, I know that you folks have talked about trying to spread out I think, Gary Burge you said, you are setting mile stones to try to spread out and smooth the success fees, yet there is still going to be somewhat back-end loaded, I have two questions I mean, you mentioned that the profit or the revenues are going to be back-end loaded to the tune of about 55% in the third and fourth quarter. Will the success fee expectation mean that earnings per share or EBITDA will be even more than 55% back-end loaded?

Gary Burge

Yes to the extent. Gary Burge here, Jim. To the extent, there is a back-end loading of the contingent fees those translate right into a higher EPS, there is no question about that. So, you should expect probably somewhat higher than 55% of the EPS coming in the second half.

Gary Holdren

Jim, another thing that you should about as well is that, if you think about just the size of the engagements and the assessments. The other reason this thing is back, sort of back-end loaded. We do these assessments that just barely covering cost. So, once when Wellspring doesn’t do that much.

So, that the jobs now that are sort of combined Stockamp, Wellspring and such are in there bigger. Those would just be getting bigger as we get to the year, not because of continued piece but just because we’ve gone from assessment implementation. Where we go from sort of cost based rates to our poor profit rates.

James Janesky - Stifel Nicolaus

Sure, okay. And is there, is this just something that you will have to live with over time or do you think that the 2010 and beyond you could smooth out the success fees a little bit more over this, yes, just as from an accounting treatment, we will always be back-end loaded?

Gary Holdren

Well, I think the way its working right now and I don’t know whether don’t change it, you think about it it’s when you do your assessments. A lot of it comes and if you started an assessment in like say July, the success fee could be in April. Then, you could be front-end loaded. But for whatever reason it seems like most of our assessments get started in the beginning of the year versus the mid year.

Gary Burge

And Jim, I’m Gary Burge, again. In addition to just that timing, we’ve also got these milestones are based on saving identified and generated and it just takes a while during the course of an engagement to identify those opportunity is an have them translate into savings, that then the hospitals will pay you a contingent fee.

James Janesky – Stifel Nicolaus & Co

Okay, thank you. Now, shifting gears to the V3locity product, how much of the weakness would you attribute to on delays in the startups meaning that all you have done is shifted the expectation for the startup of the project from 2008 into some time in 2009. And then, how much of the short fall would you attribute to a tougher economy or increased competition on pulling market share away from V3locity?

Gary Holdren

I think, it’s a level that we’re talking about Jim that we talked about. If you look at it, whether the 25 and somewhere around $95 or $100 million. I don’t think, I think that’s just all shift, we had hoped and I had hoped, we’d have a lot bigger business than what we’re forecasting. I think, what happens in this business and as we continue to see, is lawyers they started arguing over discovery terms.

So all of a sudden, we were doing a project just last week 150 reviewers and attorneys were saying, “oh we are going to argue now about search terms” and the players what more search terms than we were doing. So all of a sudden they say “you got to stop, because if we got to go back and we don’t want you to keep doing this we have to redo it all again if we got to do more search terms”. And so then all of a sudden we are sometimes we are waiting for data to come and it’s to going to come and then somebody there is a glitch in something there is a quarter.

There is just a lot of sort of because, the two parties are fighting. And there is a lot of sort of advertorial nature to discovery I think it’s all basically because of the starts and stops versus the lack of demand. I think we continue to sign master service agreements. We know these companies have big needs, we know that they were either the number one or two provider. I just hope that the business would be a lot bigger than it is, but the demand now that we have given you guidance I think to answer your question. It’s just a shift it’s not a pricing condition or lack of demand.

James Janesky - Stifel Nicolaus & Company

One last question for Gary Burge what amount of intangible asset amortization do you expect for 2009, I know it’s going to be a dramatic decline versus this year?

Gary Burge

Yes, the rapid amortization will be about zero for 2009 and we have some ongoing longer range amortization its down in that depreciation line.

James Janesky - Stifel Nicolaus & Company

Okay. So it’s almost going to go, you are saying that the intangible asset amortization from the acquisitions is going to be very close to zero?

Gary Burge

Yes. Rapid amortization it’s up in the direct cost line yes.

Operator

And our next question will come from Andrew Fones - UBS.

Andrew Fones – UBS Securities

I thought it worth spending another moment on V3locity and just asking that question from a different angle. It sounded from the examples you gave that the reasons for the delays haven’t been due to pull backs in discretionary spending, but just coming from other factors would you agree with that?

Gary Burge

Yes.

Andrew Fones – UBS Securities

Okay. I just wanted to be clear on that. And you mentioned the large project rolling off in the fourth quarter and gave us some visibility into that, but can you tell us roughly how much of the sequential decline I think it’s roughly $10 million was from the large contract rolling off just kind of all this smaller items?

Gary Holdren

I’m not sure we completely understand it.

Gary Burge

Andrew, Gary Burge here. You are referring to the fact in the third quarter we had a large project we talked about. We didn’t disclose how big that project was, but I can assure you that was meaningful, in terms of the revenues that were not replaced in the fourth quarter because of that project winding down.

Gary Holdren

But, we and when we gave guidance, we knew that was happening. And what happened Andrew, is just the, there was other projects that we were supposed to start, I mean that’s for whatever reason I think, there is a lot of various reasons and that I could give you I got to list a fifteen reasons of why jobs didn’t start when they were supposed to start in V3ocity. But then the fact is, as I think that there is a story for all of them and I think in Gary’s comments that he gave out that, some of it could be around seasonality.

How many people wanted actually work between Christmas and New Years and do all those kind of stuff and may be we got a bigger that and then I think a lot of different factors that really had nothing to do with the demand side of the equation.

Andrew Fones – UBS Securities

And then, just on Stockamp, I was wondering, obviously that in Q3 and Q4. I think you said that you acquired it, that we could expect that they wouldn’t be accruing a full rate on the incentive fees. Were you in fact below full accrual in the fourth quarter and can you give us any sense of perhaps say far below the run rate you were? Thanks. What, we might think is a normal run rate. Thanks.

Gary Burge

Sure, Andrew, I’m Gary Burge on that one. Stockamp back in the end of the second quarter when we gave an overall guidance on Stockamp, I can tell you that they came in right, where we thought they would be on both regular fees well as contingent fees. You did see an increased level of contingent fees in the fourth quarter for Stockamp as we expected.

And we’ve said that business historically and probably on a go-forward basis, somewhere in the neighborhood of 40% or so of their total fees are contingent fee related and that should continue going forward.

Andrew Fones – UBS Securities

Okay. So, as we think about that the kind of the shift here into doing more of the assessment work in the first half and particularly in this first quarter and so if you like it’s been a seasonally slower quarter for incentive fees. How should we think about that, relative to you having not accrued Stockamp at a full right in the fourth quarter?

Gary Holdren

How should we think about that in terms of the ‘09 guidance?

Andrew Fones – UBS Securities

Yes, like what should we expect Stockamp’s to be up sequentially in Q1 versus Q4?

Gary Holdren

No. I would not expect that would be the case at all. They had meaningful contingent fees in the fourth quarter. They’ll have some in the first quarter, but as I said in my comments expect just a very gradual increase in the first quarter revenues, a very small in the first quarter relative to fourth quarter and then we’ll see trending up in the subsequent three quarters.

Gary Burge

If you look at Andrew, you are going to see about a $19 million at quarter-end higher than in Q1 and a lot of that is because of just the rate and the growth. And I think if you go back and look at Q1 of ‘08 of the health and education business and back out Stockamp, you will see a pretty rapid increase because of what. So I think that with Gary’s point of view it’s hard to make Q1 much better than Q4, but have continued to see a ramp up of that segment as we go Q2, Q3, Q4.

Andrew Fones – UBS Securities

That helps a lot. The cost cutting, is that mostly in financial consulting that you mentioned?

Gary Holdren

Its going to be everywhere, I mean we’re going to look at every aspect to cost. Every practice I mean, we owe it to all of our really good employees to make sure that we’ve looked at all our employees. We look at all of our functions, we are looking all of our SG&A costs, we look all of our internal departments. Gary and Lisa and a few others, we went line-by-line the other day. So we’re going to be zealots on the cost side of the business.

Andrew Fones – UBS Securities

And I am not sure if you’ve taken any actions yet, but so whether or not the current headcount gives us some sense of where you might land.

Gary Holdren

No. We definitely are going to land in certain practices, we are going land probably less than what you would see in Q4. But you can imagine in the head practice there can be lot more people with our Stockamp and Wellspring and our higher education businesses. So it will be a mixture. I would say that you will see if things, if things need our guidance you’re going to see reduced headcount over the year and accounting and financial consulting and you will see reduced headcount in our quarterly legal consulting business if revenues don’t pick up.

Andrew Fones – UBS Securities

And then finally can I get the number that you think Q4 and Q1. Thank you.

Gary Holdren

I think 60 and 63. Something like that.

Gary Burge

I think 60 days. 60 and 63 in Q1.

Gary Holdren

Effective business states we had 57 in the fourth quarter. Now it’s down from probably 59 or so in the third quarter, first quarter ought to be 60.

Gary Burge

He is talking about effective business base, Andrew.

Operator

And our next question will come from David Gold - Sidoti.

David Gold - Sidoti

I wanted to follow-up a little bit on some of the variability that you spoke about Gary. For one, can you speak a little bit to whether there was a pretty significant fourth quarter throughout say why by way of may be cancelled bonuses given business. And then two, can you give us some more color on sort of how variable things might be is that an exercise that we would go through quarter-by-quarter, is that something that really takes till the end of the year for throughout?

Gary Holdren

We look at it quarter-by-quarter. We look at the segment performance, we look at the profitability and clearly because of our revenues in our results in Q4, clearly they were less bonuses then people would have expected, had we made our guidance. So, we did make as you can see and we said, we had reduction in bonuses, we had reduction in SG&A cost and so all of M&A. We had less variable, our labor cost on our V3locity and CFO solutions. So, was a combination of all those and that’s the same thing you will see each quarter, as we measure the revenue performance and the margin that we expect from each of our segments will do bonuses the same way each quarter.

David Gold – Sidoti

But for, say for 2008 was there a significant reversal in the fourth quarter of prior year accruals?

Gary Burge

David, Gary Burge here. We did have a reversal on the fourth quarter but as Gary said, we look at our plan and how our results look relative to our forecast each quarter and we will adjust bonus accruals that are necessary. Without a doubt, we were disappointed in the financial consulting results and V3locity results and with the consulting results in the fourth quarter.

And so those two segments took bigger hits to their bonus accruals, then for example higher education and healthcare who did just fine and met expectations.

David Gold – Sidoti

And then, can you speak just a little bit more color on presumably your guidance as we look at your Legal and Financial, a lot of folks, myself included I guess reason to believe second half of that you see decent ramp up perhaps nothing else for regulatory environment.

And so just sort of curious how that tend to jells with the guidance presumably if you look for zero growth say from financials, have to say weakness in the first half, may be a pick up in the second half or is it more would be in conservative until we actually see business pick up.

Gary Holdren

Well, I mean, as you can see we got a $40 million range of guidance right. So we got from 770 to 730, but I think our expectation now is that I think, you just don’t. We’ve got a little bit built in for our Q2, Q3 and Q4 but it’s very, very minimal. Lee. I just don’t think it be prudent right now to think that we’re going to do substantially better in Q2, or second half of ‘09 than we did in the first half. We are just not going to do that, we are not going to fall on that trap again.

David Gold - Sidoti

Okay. I mean presumably do you sort of agree with the thesis though that from a regulatory standpoint I mean thinks could be much better in the second half or in another words is it, presumably a function being conservative or is a function of do you think that there is now that thesis doesn’t sort of work?

Gary Holdren

I question that thesis. I question whether it will ever come back to the level or be what we think it is in ‘09.

David Gold - Sidoti

Okay. And then just I guess one last one on that note when we look at financial and they are presumably part questioning with thesis and if I ever will go back to it. Is that to say that right now we’re looking at that business to potentially reposition it?

Gary Holdren

Repositioning in what way?

David Gold - Sidoti

Well, reposition it, you’ve moved I guess Dan and Mary made some earlier comments about potentially, some changes and so question being if we don’t think the business comes back let’s say from some of the regulatory stuff. We have to look at other revenues to grow it right?

Gary Holdren

Well, we either do or downsize right? So I think both are on play.

Operator

And our next question will comes from Dan Leben - Robert W. Baird.

Dan Leben – Robert W. Baird & Co., Inc.

Just looking at the health and education business on a sequential basis, the costs were down pretty significantly. Could you talk about any kind of one-time expenses or rapid amortization or what not that was in the third quarter that helped that out?

Gary Holdren

Dan sorry, you are looking for one time expenses that may have come in the fourth quarter?

Dan Leben – Robert W. Baird & Co., Inc.

Yes. We are actually in the third quarter I am just looking at the expense level in that segment going from $55 million down to $48 million and just trying to get a sense of what the deltas were there?

Gary Holdren

I am sorry Dan, what segment you are breaking up little bit?

Dan Leben – Robert W. Baird & Co., Inc.

The health and education segment.

Gary Holdren

Now in the third quarter they would have had somewhat higher levels of rapid amortization that affected the direct cost line. And there wouldn’t have had anything else that jumps out of right now that would have significantly affected the operating costs for that segment. I can look into that though and if there is some thing that jumps out of me I can let you know.

Dan Leben – Robert W. Baird & Co., Inc.

Okay. So is the right level to think about that segment kind of that just under $50 million basis going forward and then growing that with as you grow headcount and so forth?

Gary Holdren

On the cost side, well the one thing that is coming out will be rapid amortization in the first quarter of 2009 and that rapid amortization in the fourth quarter was about little over a million bucks, a little over $1 million. So, the run rate on the cost will come down in the first quarter by that amount.

Gary Burge

So, if you look at that whole segment Dan, and whether it’s $390 or $400 million, it’s going to deliver a 45% gross margin. So, 55% of that will go into bonus and other things.

Dan Leben – Robert W. Baird & Co., Inc.

Okay, great. And then, could you just talk about during the quarter, you signed this outsourcing deal along with V3locity. Could you just talk about the rationale for doing that and kind of how we should think about how that impacts the model going forward?

Gary Holdren

Yes, I think what we are looking for is class, we are looking for as many possible channels you may have seen that we entered into something with a company called EP Dine and we sold UnitedLex thing in India, and then we had another thing with the company called DSL, earlier in the year.

We are just looking for as many different marketing channels to help sell the product and if we need a lower cost solution to be able to go to India with UnitedLex.

We believe we have been told that we have the best review product in the world and so if we’ve got then, we got to get it to it marketed.

Dan Leben – Robert W. Baird & Co., Inc.

And then last, could you just talk about the bill rate within Health and Education, if you exclude Stockamp with out the metrics you gave last quarter?

Gary Burge

Danny, Gary Burge here. First on the rapid amortization I gave a bad number, fourth quarter rapid amortization was about $2.7 million. And then on the average bill rates without Stockamp, they would have been a little bit of north of $300 in the fourth quarter versus the 250 that was reported. So as you can see Stockamp has a pretty significant impact on that and that primary reason for that is that Stockamp is much more leveraged, uses a lot more junior resources than does our Wellspring practice and that brings that average bill rate down pretty significantly.

Dan Leben – Robert W. Baird & Co., Inc.

Okay. And then, when we look forward into ‘09, when you get the full realization on contingency fees and so forth how should we think about that blended rate when we get into the second half of next year?

Gary Holdren

It will be something greater than $250 for higher education and healthcare. But I won’t suggest that it will stay north of $300 or have to get there and stay at that level. But having said that, Stockamp even at those lower average bill rates delivers 40% plus of operating margin so the leverage is the key in their business model.

Operator

And our next question will come from Paul Ginocchio - Deutsche Bank.

Paul Ginocchio - Deutsche Bank

Just a clarification question on that $2.5 million write-off, was that taken in a certain division and what division was that if I’m thinking about it correctly. And second, did you get any looks at some of those bigger forensic accounting investigations case that sort of broken in December and year-to-date.

And on the debrief, why didn’t you win the cases, if you’re not getting looks what you think is going to take to get looks at some of those bigger cases? Thanks.

Gary Holdren

Yes. Let me start with the looks because if you are talking about Madoff and I don’t know we didn’t the trustee had made a decision to hire. I’ll only tell you the one it broken in Huston, I don’t think its yet determined who is going to win it, but we definitely got a look in that one.

Paul Ginocchio - Deutsche Bank

So you see think your current forensic and accounting division has the ability to win those big cases?

Gary Holdren

Yes. I can tell you we got the ability to win them, it’s not a lack of talent, it’s not a lack of prudential. Some times unfortunately as small as we are, we even run into conflicts when we got the best resources. So we’ve had a little bit of streak of bad luck as well as that group.

Gary Burge

Paul your question on the write-off, again, runs through the SG&A line the majority of the write-off affected our corporate consulting segment about $2.2 million of it and the remainder was in legal consulting.

Operator

And our next question will come from Kevane Wong - JMP Securities.

Kevane Wong - JMP Securities

I guess starting with healthcare and ed. Sort of queries on the healthcare side obviously you are talking about getting larger engagements which is great. Are you seeing the change as far as in the healthcare space the bigger guy becoming obviously much more open and looking for help are you seeing in contrast smaller guys having more issues and not going for the help or is that also still holding up well or sort of curious if there is a bit of that economy in that space at ‘09

Gary E. Holdren

I talked to Dave Shade and Paul Kohlheim and Gordon Mountford about this last week, the question that I you know for me what I was a sort of wondering is all the big guys are coming in and basically taking all of our resources and are helping one. And what’s happened with all the once that used to give us business and where are all they and I think what probably is going to happen as we are going to probably just see a huge tsunami. In the next 12 to 18 months, these hospitals all of them just needing more and more help and it’s probably not enough healthcare resources out there to do all the work.

Kevane Wong - JMP Securities

Okay. So this is really from all segments of the healthcare space, it’s not just as fast as?

Gary Holdren

Yes, I mean, you just everything is going wrong for them. No access to capital business, because it’s going down, every thing is just, every curve that you can imagine is going the wrong way for a hospital.

Kevane Wong - JMP Securities

If it weren’t for bad luck they would have no luck at all right now. Switching over to the education, also sort of curious, a lot of those guys I understand have June fiscal years and looking at sort of their budgets at this point in obviously thought a difficult environment. Have you gotten, aside from this knowing where your position, have you also gotten sort of direct feedback from your clients on, “hey here’s our plan for next year already, I guess sort of walking in, or what’s happening as far as what the clients are communicating with our new upcoming fiscal year?

Gary Holdren

Well, I think the thing is that it’s probably hard for you all to, because we probably haven’t done a good job. It’s almost like that the higher education business is almost like it’s almost like an internal audit function in some ways, right. They need to stay in compliance, they need to get their research dollars and they just need to keep that recurring. So I think that, we’re pretty comfortable that that isn’t going to get cut.

And I will also tell you that like there is some universities that have asked us give an example what is something that we know is going to through 2009 and beyond these budget sort of this June first date. Any University that has an endowment, all of them have had substantial reductions in their principle in their endowment and their income from their endowment.

What they need to know, what they want to know is what that we sort of been helping them with is, are those endowment funds restricted for specific purposes or could we use them for something else, because we need to cash, we need a bad now. But we sure is that I can’t do something wrong or illegal.

So let’s say a university has 6000 endowment accounts, Dave one university has asked us to go look at all 6000 of those accounts to see whether we can help them determine whether they can free up some of those bonds. We think that’s a huge service that we can offer almost every university that has a large endowment, right now.

Kevane Wong - JMP Securities

And we are looking for resources, on the bill rate also, if I heard you right, I thought you said the for ‘09 you guys were thinking 275 for the average bill rates versus I think was 265 in ‘08. One of your peers earlier was really talking about a deflationary sort of environment as far as bill rates. Can you give us a little bit of color, why you think it would be up on the year just a particular segment that’s driving that well, while others might be down? What sort of driving that 275 figure?

Gary Burge

Kevane, Gary here. We did raise rates across all of our practice areas and we are not naive to think that the economy isn’t putting some pricing pressure out there, but we will on a full year effect, have some improvement in average bill rates in higher education and healthcare due to Stockamp having a full year affect of being able to enjoy contingent fees for the full year and not having the gap revenue recognition issue that they had affecting them in the second quarter. So, we see some lift in higher education healthcare and we hope we have some modest improvements in our other practices as well.

Kevane Wong - JMP Securities

That’s okay that makes sense.

Gary Holdren

And then one of the other point Kevane, restructuring in turn around is a business that is hot right now and they historically have always had the highest rates of any practice at Huron.

Kevane Wong - JMP Securities

That’s okay. And then one last one before for you also Gary Burge, is your next move, what should we be expecting as far as revenues from next move in ‘09?

Gary Burge

Well, we’ve the acquisition was small and we did not disclose any results on the next. But what we do know is that Jim Roth is looking at a business in the Middle East, we had some existing business there, we think next move can help us grow that business and Jim is looking at some thing in the neighborhood of total Mid-East revenues in the neighborhood of $10 million for calendar year 2009.

And we hope it could be bigger than that. He is over there right now, as Gary said in the Middle East and he is got some very interesting prospects he is looking at, right now.

Gary Holdren

And any of you have met Jim Roth, no, he does he doesn’t go to the Middle East four times in the last six months, hunting for mentors?

Operator

And our next question will come from Bill Sutherland - Boenning & Scattergood.

William Sutherland – Boenning & Scattergood

Gary, I was wondering about the ability in the cross salability from your healthcare practice to the restructuring group in those situation where the hospitals beyond, what Wellspring cal do?

Gary Holdren

I think there is a huge opportunity there right now, the issue right now is, there is no resources in either group to do much more. So, we got to continue to try to find them. But just clearly, it’s huge opportunities for synergies there. We’ve had them in the past, we’ve had some, I think we have had two hospitals in the last 18 months that Wellspring has brought our restructuring people into.

Bill Sutherland – Boenning & Scattergood

And can you move people from fronts to counting area where there is less activity over to either health care or restructuring, is there any function ability?

Gary Holdren

There can be potentially and we’ve got some people moving, I’d say below the major level but above that not nearly responsible.

Bill Sutherland – Boenning & Scattergood

I may have missed a couple of things earlier, if you don’t mind on the Legal, what’s the growth assumption for ‘09 Gary Burge. And then what part of that is V3locity?

Gary Burge

On for legal consulting we are assuming on V3locity but there could be certainly a 20 plus probably closer to 25% growth in V3locity as what we put into the guidance and then we’ve shown minimal growth for our core legal consulting business right now.

William Sutherland - Boenning & Scattergood

Okay and the assumption on V3locity in terms of seats and utilization?

Gary Burge

Well, we’ve indicated an increase in our FTE number for next year we gave you 975 for the full year which is up over where it is that currently and we will add seats as necessary it doesn’t take a long to build a doc review centers so the demand is there we will move quickly to do that, right now we’ve got plenty of capacity.

William Sutherland - Boenning & Scattergood

So there is no plan at this point?

Gary Holdren

No, we had a 1000 seats we’ve got a lot more capacity and we’ve in guidance.

William Sutherland - Boenning & Scattergood

And what’s the gross number for corporate revenue, Gary? I m sorry I may have missed that.

Gary Holdren

We didn’t really give it. But if you do look at you take 10% or 15% of what Huron is, so you take 750 and take somewhere in the middle of that you’ve sort of look at what that revenue number is and then compare to last year.

Gary Holdren

But also remember, we did exit one business that used to be in corporate consulting.

William Sutherland - Boenning & Scattergood

Right. That’s what I was getting confused.

Gary Holdren

Yes. It’s going to be a good growth rate for us.

William Sutherland - Boenning & Scattergood

Okay. And then a couple of really quick ones, CapEx did you give that Gary Burge?

Gary Burge

No I did not. But for ‘09 or ‘08?

William Sutherland - Boenning & Scattergood

‘09 please.

Gary Burge

‘09 will be at $25 million. Approximately 25.

Operator

(Operator Instructions) And our next question will come from Tim McHugh - William Blair & Company.

Tim McHugh – William Blair & Company

My question has been answered. I could jump out.

Operator

And our next question will come from the line as a follow-up from the line Tobey Sommer with SunTrust.

Tobey Sommer – SunTrust Robinson Humphrey

Just a detailed question, what’s the mix of revenue between V3locity and core kind of legal consulting, what’s the break down there?

Gary Burge

Tobey, Gary here, currently that number is that two thirds V3locity, one third core.

Tobey Sommer – SunTrust Robinson Humphrey

And then what’s your expectation for bill rate, kind of intrinsic bill rate increases as opposed to mix with the higher a lot of new graduates for the different segments and may be just in an overall sense?

Gary Burge

On overall sense, we raised rates 3% to 5% in January and then of course the mix issue, as you know can affect that average bill rate for a segment.

Tobey Sommer – SunTrust Robinson Humphrey

Would you consider any other additional incremental rate increase in healthcare and higher ed if these smaller hospitals come to market and need services and you are forced to ration services to an even an greater extent?

Gary Holdren

I don’t think Tobey, I mean we price these things basically on dollars of savings. So a lot of what we make is basically on how quick we can get the delivery of services. So, clients don’t even know what our bill rates are, all they know is how much we can save and versus how much they pay us.

Tobey Sommer – SunTrust Robinson Humphrey

Right, makes sense. And then my last question will just be on as far as incentive compensation within the organization in 2009, is there a shift in emphasize if that would either just proportionally emphasize revenue over net income or have there been any changes to the way that incentive compensation is going to be structured and paid out in ‘09.

Gary Holdren

We believe that you can only eat that income. So, everything around cash flow and net income, it’s how we are compensating.

Operator

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

Gary Holdren

Okay, thank you. And thanks all for having so much interest in us and listening to us today. In closing, I just want to thank all the employees of Huron for everything that you do everyday. And everybody in the internal operations for giving us the best consulting business in the industry. And so, we look forward to speak to all of you in April on reporting our first quarter results. Thanks, again.

Operator

Thank you for your participation in today’s conference. This concludes your presentation. You may now disconnect. Good day everyone.

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Source: Huron Consulting Group Inc. Q4 2008 Earnings Call Transcript
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