The American Lawyer reports on law firm financial performance for the first nine months of the year, concluding that for the first time this year, law firm revenue growth outpaced expense growth, according to a recent report by Citi Private Bank’s Law Group. The Citi results, based on a sample of 190 firms including members of the Am Law 200 and boutiques, showed that revenues grew at 5.1% for the first nine months of the year, compared to 4.1% from just the first half. The bulk of that increase stems from higher rates, which grew 4.7%, compared to demand, which grew 0.9%.

“While the first nine months of 2019 saw slower revenue growth than we saw through the same period in 2018, there are several positive trends in the results. Demand growth continued to gain momentum. Rate growth has been strong. Expense pressure has moderated, easing margin pressure. Dispersion and volatility remain but are less acute than we saw earlier in the year,” notes Gretta Rusanow, research co-author and head of Citi Bank’s advisory services. “Looking ahead, inventory levels are high. The biggest challenge to a strong year-end is the continued lengthening of the collection cycle. If firms are able to collect on strong inventory levels, 2019 should end well,” she adds.

The report also revealed that law firms headquartered in Chicago and the Midwest matched or exceeded the revenue growth across the legal industry for the first nine months of 2019. Law firms headquartered throughout the Midwest reported their revenue is 7.8% higher this year when compared to last year, the report found. “Demand is up 1.6%, which is higher than the industrywide average of 0.9%, and rates have gone up 5.8%—more than anywhere across the United States,” Rusanow notes.

“Chicago is one of the most popular legal markets in the country. From a revenue point of view, they’re matching where we’re at for the industry. On top of that, they’re sitting on pretty healthy inventory levels going into year-end,” Rusanow adds. “I’m pretty optimistic about what the top-line stories will be for Chicago through the end of the year,” (as quoted in The American Lawyer).

See highlights from the full article on The American Lawyer.

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The American Lawyer reports that law firm demand in 2018 was the highest on record since 2011, according to a recent report by Thomson Reuters. Further amplifying evidence that law firms, especially the largest, reached new financials highs in 2018. Another report, conducted by Citi Private Bank’s Law Firm Group, found that revenue growth was up 6.4 percent at the 191 firms surveyed by the bank. And in the last two weeks, Wells Fargo reported average law firm revenue growth at 5.9 percent and average net income growth at 7.6 percent, the strongest numbers since before the Great Recession.

Thompson Reuters report specifically revealed that law firm demand, billing rates and lawyer productivity all rose during the year. According to the analysis, demand, measured as the number of hours billed, rose 1 percent for the year among all firms. Among the Am Law 100 firms, that number was 2.8 percent. Am Law Second Hundred firms and midsize firms saw demand growth in 2018 of 0.4 percent and 0.2 percent, respectively. The Am Law 100 was the only segment of firms that saw demand growth in all four quarters of the year, the report found, (as quoted in The American Lawyer).

Fortunately for smaller firms, rate growth was more evenly distributed, the report notes. The Am Law 100 saw rates grow 3.8 percent in 2018, compared to 2.9 percent for firms in the Second Hundred and midsize categories. The report also notes that Am Law 100 firms were the only segment of firms to show positive full-year growth in productivity, which measures hours worked per lawyer. The 100 largest firms by revenue grew productivity in 2018 by 0.8 percent, while that figure was flat at Second Hundred and midsize firms, (as quoted in The American Lawyer).

Mike Abbott, a Thomson Reuters vice president for enterprise thought leadership and content strategy, said that while 2018 was a banner year for law firms— especially the nation’s largest—there remains uncertainty around 2019, especially after the fourth quarter was somewhat softer than earlier quarters. “Whether the tailwinds will continue in 2019 remains to be seen, as client rate pressure and a shifting competitive landscape for legal services continue to pose challenges,” Abbott said in a statement. “And while the entire market was improved in 2018, we saw an increasingly segmented market where the very largest firms gathered the lion’s share of the gains last year.”

See highlights from the full article on The American Lawyer.

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The American Lawyer reports that law firm revenue growth in the first nine months of 2018 was the highest it’s been since 2007, and the outlook going forward remains positive. According to a new report, released by Citi Private Bank’s Law Group, overall revenue grew by 6.3 percent and demand was up 2.5 percent during the first nine months of 2018 compared to the same period in 2017. Many firms showed wider profit margins as a result of demand and billing rates grew at a level that outpaced an increase in expenses, the report revealed.

The Citi Private Bank’s report found that among the Am Law segments, size mattered, with Am Law 50 firms outperforming the other market segments in both lawyer rates and demand. Smaller, niche firms saw the greatest growth in revenue at 7.8 percent, and the second-greatest growth in demand at 2.5 percent. Looking at firms by geographic reach, the report revealed that global and international firms posted stronger revenue, demand and rate growth than national and regional firms, (as quoted in The American Lawyer).

“More than likely, this will be a year of strong top-line growth for the industry, but also characterized by expense pressure and continued dispersion among market segments,” notes Gretta Rusanow, research co-author and head of Citi Bank’s advisory services. “As firms end 2018 and look forward to 2019, it will be even more important to ensure that continued growth is profitable, particularly as this extended period of growth points to a looming downturn at some stage. Further, while our dispersion results show that some firms are enjoying even greater success than the average results of 2018 are showing, it also suggests that some firms are struggling mightily. We would expect this phenomenon to lead to further and perhaps accelerated consolidation ahead,” she adds.

See highlights from the full article on The American Lawyer.

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Law firms had their best revenue growth in the first half of the year since the recession, with 5.5 percent growth in the first six months of 2018. That’s up from 4.9 percent in the first half of 2017, and the outlook continues to look good for rest of the year, according to a new report released by Citi Private Bank’s law firm group. In addition to revenue growth, law firm demand increased by 2 percent and lawyer billing rates increased by 4.5 percent. According to the report, improved demand (total timekeeper hours) and lawyer billing rate increases were the main drivers of growth.

The Citi Private Bank’s report found that among the Am Law segments, size mattered, with Am Law 50 firms outperforming the other market segments in the first half of the year. Smaller, niche firms had slightly stronger revenue growth, at 6.9 percent, than at those in the top group. Their demand was up 1.6 percent, and billing rates up 3.6 percent. Firms that have a dispersed geographic reach saw the strongest revenue performance, reaching 8.1 percent. Firms that had fewer lawyers outside the United States did less well, underscoring the strategy of the largest multinational firms which have numerous offices and a phalanx of lawyers spread around the globe, (as quoted in The American Lawyer).

The analysis also adds, however, that upward pressure on expenses–particularly from recent salary increases–could drag down profits. “Looking ahead, the revenue outlook for the rest of 2018 is very positive, with a solid buildup in inventory heading into the third quarter. The industry will need this, given the upward pressure on expenses we expect to see in the second half of the year as firms absorb the recently announced salary increases, ” notes research co-author Gretta Rusanow, the group’s head of advisory services.

See highlights from the full article on The American Lawyer.

Contact Bill Sugarman for more information.

As law firm billing rates are rapidly increasing overall, a new study shows that firms that raised their rates more slowly are starting to see better revenue growth. According to the report, released by Thomson Reuters’ Peer Monitor, law firms that increased their billing rates at a more gradual pace are experiencing an increase in demand from their clients. Although the demand for legal services overall is down, the study shows that some firms are getting a much higher volume of work than others. “Firms that are willing to take less of a rate increase seem to be doing better with demand,” said Leonard Lee, an analyst at Peer Monitor.

In the first half of 2015, Am Law 100 firms saw a drop in demand by 0.2 percent, similar to Am Law Second Hundred firms, which saw a decrease of 0.4 percent. However, mid-sized firms that benefitted from a softer increase of billing rates saw a 1.6 percent increase in demand overall. The report warned its readers that this is not a proven method to increase revenue, and there may be other factors to consider. “Over the last few years, a lot of work seems to be moving down market,” Lee said. He explained that the study gives averages and every firm is different, but the data shows a definite correlation between rate increases and revenue.

See the full report and article on The American Lawyer.

Contact Bill Sugarman for more information.