For Howrey, 2009 was a rough year. In 2008, Howrey had what firm chairman Robert Ruyak said at the time was the firm's best year ever, based largely upon several large contingent payments. Last year, the firm didn’t have that bounce. Ruyak said that while the declines were dramatic they were "not entirely unexpected."
Howrey's gross revenue fell from $573.2 million to $480 million, marking a decline of 16.3%. Revenue per lawyer dropped by 19.2% to $702,782. Net compensation to equity partners slid 28.3% to $128.6 million. And PPP sank from $1.299 million to $846,053—a 34.9% drop.
Ruyak said the firm warned partners at the beginning of 2009 that PPP would probably be closer to $900,000 than the nearly $1.3 million they received in 2008. “We didn’t quite make that,” he said.
Ruyak said that as the firm enters into more alternative billing arrangements, there will continue to be fluctuations in year-to-year revenue. A Howrey spokeswoman said that in 2009, the percentage of the firm's business that was billed through alternate arrangements grew from 3% to 7%.
That said, even by stripping out the “extraordinary” income from contingency payments, gross revenues in 2009 still fell by 10.9% and PPP fell by 19.5%.
“It was a tough year. A lot of things changed, and we’ve had to make some changes to account for that,” Ruyak said. The firm paid nonequity partners $20 million less, he said. Howrey also required each department to cut expense budgets by 5%, and some staff positions were “trimmed” last year.
Ruyak also pointed to client payments coming in more slowly at the end of 2009 than they had in past years. “By December, we were behind by about a month,” he said.
Ruyak said the firm’s demand for commercial litigation work was up 8% to 10% in 2009, while its IP litigation practice was down about 6% and its antitrust practice was down about 4%.
Despite the economic climate, Ruyak said the firm decided to make several plays in 2009 that “could have some short-term impact on profitability, but place the firm in a stronger competitive position over the long term.” Among those were the December 2008 addition of a 40-lawyer construction practice from Thelen and the July 2009 addition of 26 IP lawyers from Day Casebeer Madrid & Batchelder.
Ruyak said the construction practice from Thelen performed “about 10% above where we had budgeted them to be.”
Howrey’s overall headcount went up 3.6% to 683. The firm added 14 equity partners and 1 nonequity partner in 2009.
Ruyak said that to offset some of the revenue drop, the firm has been making some headcount “adjustments” since the Am Law 100 cutoff date. In February 2010, the firm let go 29 associates and 65 staff members, which cut about 4% from expenses. The firm has also just finished its two-year review of nonequity partners, which Ruyak said resulted in some of those lawyers opting to leave the firm.
So far this year, Ruyak said the firm is seeing an increase in revenue over this time last year. “Not a significant amount, but some. It’s not going down, anyway, which is a good thing,” he said.
The firm increased its pro bono hours by 19.4%.