K&L Gates was able to hold gross revenue flat between 2011 and 2012 thanks in large part to revenue gains in Europe and Asia while revenue fell in the United States.
The firm’s gross revenue in 2011 was $1.061 billion and came in at $1.06 billion in 2012. The largest bulk of that revenue — $924.9 million — came from U.S. operations in 2012. That was down 2.5 percent from the year before and K&L Gates attributed that to a 7 percent decrease in headcount in the Americas between 2011 and 2012.
K&L Gates had a strong year in Europe and the Middle East, increasing revenues in those markets by more than 17 percent from about $80 million to $93.8 million. The firm’s headcount in that region rose 13.4 percent year over year, including the opening of an office in Milan, K&L Gates said.
The firm’s Asia Pacific operations, which saw the addition of a new Seoul, South Korea, office in 2012, saw revenues grow 24.7 percent between 2011 and 2012 from $33.3 million to $41.5 million. Average headcount in those markets decreased 3.3 percent year over year, K&L Gates said.
According to the firm, lawyer productivity was generally consistent year over year among its practices. But K&L Gates did note the intellectual property practice saw a near 10 percent increase in productivity between 2011 and 2012.
K&L Gates restated its 2011 revenue per lawyer (RPL), and subsequently switched its method for calculating its 2012 RPL, to reflect the firm’s recategorization in 2012 of certain government affairs professionals from the category of "other legal professionals" to "lawyers."
K&L Gates’ RPL in 2011, as restated, was about $594,000. That figure rose 3.9 percent in 2012 to about $616,000.
K&L Gates offered data for its average profits per all equity partners as well as more specific data for profits per "fully participating equity partners."
The firm’s average profits for all equity partners rose 1.6 percent from about $627,000 in 2011 to $637,000 in 2012. In last year’s report for Legal affiliate The American Lawyer, K&L Gates’ per-partner profits were reflected as the profits for fully participating equity partners, which was about $890,000 in 2011. That figure rose about 1 percent in 2012 to about $900,000.
While average partner profits increased year over year due, in part, to a reduction in equity partners, the firm’s overall net income did not increase.
K&L Gates parsed out its net income figures based on total profits available to all equity partners and those fully participating equity partners. The firm said it maintained 22.1 percent of its gross revenue as net income in 2011, compared to 21.4 percent in 2012 when it came to net income available for fully participating equity partners. The firm retained 30.2 percent of its gross revenue as profits in 2012 when it came to profits available to all equity partners. That was a slight drop from the 31 percent net income available to all equity partners in 2011.
K&L Gates said that decrease was principally due to increased leasehold and IT expenses that were "largely offset by reduced employment expense."
K&L Gates Chairman Peter Kalis declined through a firm spokesman to comment on the firm’s numbers beyond the statement the firm issued. It is unclear what the firm meant by "reduced employment expense." The firm did see a drop in overall headcount.
K&L Gates said in the statement that, if the firm’s large contingent of income partners were not considered an expense but rather paid out of profits, the firm’s profit margin would have been at 41.8 percent in 2012.
K&L Gates said it had less cash on hand at the end of 2012 than it did in 2011 because of leasehold improvements, the paying off of a merger partner’s debt before combining with that firm and a decrease in the amount of partner discretionary capital.
While the total amount of required capital contributions increased between 2011 and 2012 from $169.4 million to $173.7 million, the amount of discretionary partner capital subject to withdrawal decreased from $200 million in 2011 to $187.8 million in 2012.
The total number of attorneys at K&L Gates dropped year over year. The firm had an average of 1,789 lawyers in 2011. That figure dropped by 3.9 percent to 1,720 attorneys in 2012. K&L Gates said headcount decreased as a result of attrition, but was partially offset by lateral additions and the decision to bring the fall 2011 class on board in September 2011 rather than the planned January 2012 start date.
The average number of equity partners in 2012 fell to 503 from 526 in 2011, a drop of 4.4 percent. The average number of fully participating equity partners fell by about the same margin from 264 to 253.
The percentage of the firm’s work attributable to matters generated in one office and performed in one or more other firm offices increased from 26.3 percent in 2011 to 27.5 percent in 2012. In 2012, 467 of the firm’s 500 largest clients used lawyers from two or more firm offices, and 15 of the firm’s 20 largest clients used lawyers in 10 or more firm offices. For the firm’s 100 largest clients in 2012, which generated 34.4 percent of annual revenues, the average number of offices engaged was 10.3, the firm said.
K&L Gates said no client accounted for more than 5 percent of the firm’s revenues in either 2011 or 2012.
K&L Gates’ 2012 financial metrics do not reflect the firm’s January 1, 2013, merger with Australian firm Middletons, which gave the firm an additional 287 attorneys across four cities. Also in 2013, K&L Gates opened a Houston office with a lateral hire. Houston makes for the firm’s fourth office in Texas.