Waiting on a sizable receivable and battling litigation demand that’s still down, Gibbons saw decreases in revenue metrics in fiscal 2017, though the firm, ready to make new equity partners, remains focused on the future.
The Newark-based firm’s $99.4 million in firmwide gross revenue was a 2.9 percent decrease from $102.4 million in fiscal 2016.
“It’s hard. Demand is still down,” managing partner Patrick Dunican Jr. said in an interview. After a decade of revenue growth leading up to the recession, “for the past three years, our numbers have been flat or down,” he said.
Indeed three years ago, Gibbons posted firmwide gross revenue of $110 million—though it did so with about 20 more attorneys, according to Law Journal data.
Over a five-year period, Gibbons has seen its gross revenue decline 13.6 percent, from $115 million in fiscal 2012, the data shows. But once again, the firm had more lawyers that year (210).
RPL, which was just shy of $550,000 those years, has generally improved since, though Gibbons did see a 1.4 percent decrease in that metric year-over-year, to $569,000 from $577,000 in fiscal 2016.
Dunican said the demand issue has led to decreases in head count and billable hours, and is to blame for the revenue backtracks. Client pressure means “accepting that you’re going to be paid on their terms, which is 60 or 90 days,” he said.
He added that clients will pay for time spent doing research, but “refuse to reimburse you for paying for legal research services.”
“They say that’s overhead, but that’s never been overhead before,” Dunican said.
When it comes to hourly rates, ”we do draw the line,” he said.
“With respect to new business, we take a very hard-line approach on the very lowest rate we’re willing to let a partner take,” Dunican said, though with old clients, he added, “of course you’re going to make an accommodation.”
“It’s all case by case,” he said.
Also affecting Gibbons’ financials, according to Dunican, is a large contingency fee receivable that’s been outstanding for some time, in the form of a judgment in a case involving the Internal Revenue Service that went before the U.S. Court of Appeals for the Ninth Circuit, In re DBSI. Dunican estimated that the sum, when it’s finalized, will be upward of $5 million.
Still, Dunican said he considers the firm well positioned: Gibbons has 34 lawyers with books of business of at least $1 million, and nonequity compensation increased last year, in part to compensate lawyers in that $1 million group.
The firm also plans to make several equity partners in the upcoming year. “It’s really a motivating factor for, say, late 30-something and early 40-something [lawyers] to see equity partners being made,” Dunican said.
Also, he said, there was a 3.1 percent decrease in expenses, primarily in the firm’s Gateway Center lease, in which it “gave up a little space” and is signed to 2030.
As for practice areas, Dunican cited intellectual property litigation as one that’s “booming,” and credited the products liability practice, too.
The firm for years now has leveraged financial metrics to track performance, and “it’s compensation that’s affected if someone is not as efficient as everyone else,” Dunican said. “Not every hour is equal. … You may have highly productive people billing 2,400 hours [per year], but if they’re billing $300 an hour versus $500 an hour, they’re working harder for less.”
The net loss of two in attorney head count (to 175 lawyers) represented a 1.1 percent decrease. Dunican said there were no significant lateral acquisitions last year—”a little bit of dating, but no marriage.”
The firm’s profit per equity partner (PPP) ticked up 0.6 percent, to $790,000 from $785,000. According to Law Journal data, that puts Gibbons’ PPP slightly ahead of McCarter & English ($750,000) and Cole Schotz ($777,000).
PPP, however, is likely to decrease when Gibbons makes a new crop of equity partners, Dunican noted.