Mid-market law firm Frost Brown Todd has reported a drop in revenue and profits in FY2018 compared to the year before.
Gross revenue declined 1.4 percent, from $223.6 million in FY2017 to $220.4 million in FY2018. Revenue per lawyer fell 3.4 percent, from $503,000 to $486,000 over the same period, while profits per equity partner dropped from $501,000, to $453,000—a decline of 9.6 percent.
The number of equity partners remained the same at 159, but the number of nonequity partners increased from 141 to 146. And the total number of lawyers at the firm rose from 445 to 453—a 3.5 percent jump.
Robert Sartin, the firm’s chair, said the profit decline stemmed partly from the need to make certain internal investments at the firm and he sees it as a temporary drop. The on-boarding of new members and associates is a lengthy process, he said.
“It takes somebody a good 30-45 days to get onto the platform, get files cleared, and start working. The revenue replacement doesn’t show up until after they’re on-boarded,” Sartin said.
The firm also made further investments over the past year.
“We took some of our profits and put them into testing various types of AI and other things we’re going to need to be more competitive in the marketplace,” Sartin said.
In addition, the firm took on a number of transactions in 2018 that didn’t close by the end of the fiscal year, Sartin said, so the profits from those deals are not reflected in the reported totals, even though they are significant and profitable engagements for the firm.
One of the law firm’s mainstays, its commercial litigation practice, did not underperform in 2018, Sartin said. Rather, a number of cases that could have gone to trial instead settled out of court.
“On the transactional side, the financial services, syndicated lending, commercial banking, and CMBS practices of our law firm performed very well,” Sartin said.
Looking to the future, Frost Brown’s leadership has also been in planning mode, Sartin said.
“We have been working on a strategic plan that charts the course of the next five to ten years for the law firm. To develop a plan takes some billable hours off the table, and those become internal investment hours,” Sartin stated.
That strategic planning has not included merger talks, but Sartin said the firm will evaluate all opportunities.
“As a part of our strategic plan, we’ll evaluate all opportunities to grow, to make us a better law firm. If that might lead to a combination, then, like any business, of course we’ll take a look at it,” Sartin said. “We’re not looking to expand geographically for its own sake, but we will probably enter new markets so that we can better serve our clients.”