Operator: Ladies and gentlemen, thank you very much for standing by, and welcome to the SM&A Fourth Quarter 2007 Conference Call. During today's presentation, all parties will be in a listen-only mode and following the presentation, the conference will be open for question and answers. (Operator Instructions). As a reminder, this conference call is being recorded Wednesday, March 5th, 2008. I would like to turn the conference over to Doug Sherk. Please go ahead, sir.

Doug Sherk: Well thank you, operator, and good afternoon everyone. Thank you for joining us this afternoon for the SM&A conference call with webcast to review the financial results for the fourth quarter ending December 31, 2007. If you haven't received a copy of the results and release that was issued at market close this afternoon and would like one, please call our office at 415-896-6820 and we'll get one to you immediately. We have arranged for a tape replay of this call which may be accessed by phone. The replay will be available approximately one hour after the call's conclusion and will remain in effect for seven days. The number to access the replay is 800-405-2236 and the international number is 303-590-3000. The pass code for both replay numbers is 11109556 followed by the "#" sign. In addition, this call is being webcast live, is available as an archive at SM&A's website at www.smawins.com. Before we get started, during the course of this conference call the company will make projections or other forward-looking statements regarding future events and the company's beliefs about its financial metrics and results for the full year ending December 31, 2008. We wish to caution you such statements or predictions that involve risks and uncertainties, actual results may differ materially. Factors that may affect the actual results are detailed in the company's filings with Securities and Exchange Commission including the company's most recent filings of Form 10-K. Additional factors underlying the company's forecast are dynamic and subject to change, therefore, this forecast speaks only for the date as given. Now, I would like to turn the call over to Cathy McCarthy, President and Chief Executive Officer of SM&A.

Cathy McCarthy: Thanks Doug, and good afternoon, everyone. Thank you for joining us. With me today is Jim Eckstaedt, our new CFO, who joined us in January and we are very pleased to have him here onboard at SM&A. Today, Jim will begin with a review of our fourth quarter and full year financial results. Then, I will provide an update on our market strategy and current business initiatives. Jim will offer our early views of 2008 outlook, and then will open the call for questions. Jim?

Jim Eckstaedt: Thank you, Cathy, and good afternoon everyone. As Cathy mentioned, I'd like to start with a review of financial performance for the fourth quarter and full year 2007. We reported revenue of $24.1 million during the fourth quarter, an increase of 28% from 2006. Our acquisitions of Project Planning Incorporated or PPI and Performance Management Associates or PMA along with our legacy product offerings contributed approximately $9.8 million or roughly 10% of total revenue. Included in the $9.8 million is SM&A's scheduling product, offering revenue of about $1.3 million. Fourth quarter net income increased 30% to $983,000, or $0.05 per diluted share, compared with $754,000 or $0.04 per diluted share in the prior year. Included in net income was $958,000 in expense, reflecting the amount earned by the principal of PPI as part of the acquisition. I'd like to walk you through this accounting transaction in some detail. As part of our acquisition of PPI in February 2007, we agreed to an earn-out provision with the Principal of PPI. Under the agreement, he may receive earn-out payments payable over three years upon the successfully achieving certain revenue target in each 12-month period following the acquisition date. As part of the agreement, he is required to continue his employment with SM&A, in order for these payments to be earned. As part of acquisition due diligence, we always seek the input from legal and accounting professionals, with our intention that the earn-out would be included in purchase accounting and be recognized as part of goodwill on the balance sheet; because of the continuing employment provision in the agreement, however, we are required to report this earn-out as an expense item to our income statement for the fourth quarter. This accounting treatment had no impact on prior quarters. Excluding this adjustment on a tax effective basis, net income was $1.6 million for the fourth quarter. Additionally, the earn-out represented $0.03 per share. Without the earn-out, earnings per share for the fourth quarter were $0.08, on par with analysts' consensus estimates. I would like to quickly reiterate that PPI has been a very good acquisition for the company. It has allowed us to augment the range of program services that we offer to our clients. We are pleased with the growth and the acquisition was accretive in 2007. Now turning to our revenue growth; revenue from aerospace and defense clients was $17.1 million for the quarter, an 18% increase for the same quarter of 2006. Revenue from non-aerospace and defense clients totaled $7 million, or a 63% increase from non-A&D revenue in the fourth quarter of last year. Non-A&D revenue represented 29% of the total fourth quarter revenue, compared to 23% a year ago. During the quarter, our top five customers accounted for 71% of our total revenue, compared with 67% a year ago. Competition Management revenue increased slightly to $12.5 million, compared with $12.2 million in the fourth quarter of 2006. Competition Management represented 52% of total quarterly revenue in the recent fourth quarter, compared with 65% a year ago. Program Services revenue during the fourth quarter increased 75% to $11.5 million, the same record level set in the third quarter. Program Services are a stable, predictable, incremental component of our revenue growth. Our gross margin was 40.2%, a nice improvement from last year's 38.7%, and reflected a higher level of success fees earned, as well as revenue mix. SG&A expenses were $8 million for the quarter. This includes $958,000 in PPI expense. Stock-based compensation expense was $430,000 in the fourth quarter of 2007, compared with $319,000 in the fourth quarter of 2006. Excluding stock-based compensation, and other acquisition expenses not related to PPI expense, SG&A for the quarter was approximately $5.7 million, unchanged from the prior year. For the full year 2007 revenue grew 28% to a record $98.3 million. Net income was $6.3 million, a 73% increase over 2006 net income of $3.6 million. Earnings per diluted share were $0.33, compared to $0.19 per diluted share in the prior year. Excluding the PPI expense taken in the fourth quarter, and the expenses associated with management transition in 2007, earnings per share would have been $0.40 per diluted share. We ended the year with $16 million in cash and investments. Now I would like to turn the call back to Cathy.

Cathy McCarthy: Thank you, Jim. 2007 was a remarkable year for the company. We made significant progress in diversifying our client base and increase the number of solutions we offer to our clients. Most importantly, we are executing on our strategy. Our strategy for lifecycle success is a powerful combination of our offering, over the client's lifecycle, of pursuing, winning and performing. This lifecycle extends from an inception of client's strategy, through competition and the win, and execution of the resulting program for project, resulting in winning strategy, winning competition and winning execution through lifecycle success. Other companies may be positioned to assist clients with a portion of this vision, but only SM&A is positioned to deliver winning solution across the entire lifecycle. Also in 2007, we completed and successfully integrated two acquisitions allowing us to expand our Program Services offering to our client. We navigated through a difficult management transition, and we accomplished these important steps by generating record revenue and record net income. Most importantly, we continued to demonstrate to our clients that SM&A is a partner of choice, with a historical 85% win rate which continued through 2007. Our company has supported our clients in winning more than $340 billion in initial contract awards. We have supported over 1200 proposals and 160 programs. Our success in 2007 demonstrates that outstanding bases of client clearly understand the value proposition that SM&A provide. Clients hire SM&A because of our reputation for winning, the outstanding quality of our growing team of associates, and our highly developed solutions. Our team is widely recognized for its industry expertise, and its knowledge of our client markets and capability. We have demonstrated that we can bring real solutions to the table that address our clients' critical needs and help them with winning proposals and winning programs and projects. The result is that SM&A clients consistently outperformed their competition. Our lifecycle support includes upfront strategy. As we announced in January, we established SM&A Strategic Advisors under the leadership of recently retired General Peter Pace. We are delighted to have General Pace, the former Chairman of the Joint Chiefs of Staff, as an integral member of our management team. As the CEO of the Strategic Advisors subsidiary, he will be responsible for building our thought leadership and business intelligence capability for both our DoD clients and our outstanding new market. In addition, General Pace has joined our Board of Directors and his experience and insight will provide a valuable perspective to SM&A's strategic direction. During the year, we acquired two best of breed providers of specialized Program Services. In February, we completed the acquisition of Project Planning Inc. or PPI and in September we acquired Performance Management Associates. Both of these acquisitions went extremely smoothly and they are already making a significant contribution to our revenue, our bottom line and our strategy. We are also very pleased with the growth in two service offerings that were introduced a little over a year ago, Integrated Staffing and Milestone Success. Overall, Program Services revenues grew 62% in 2007, to a record of $43 million. During the past several months, we have been adding associates to support our continuing momentum in revenue growth. As we expand our solutions, it is critical that we expand our associates's knowledge of these solutions; so that we have a more expanded and diversified pool of talent. To ensure their success, we are making significant investments in training to achieve this goal. We are confident that this investment will have a substantial future payback as we continue to execute on our strategy. Along with our hiring and training efforts, we are currently upgrading several IT systems that are designed to help us with our internal planning and resource allocation. We are enhancing our Enterprise Resource Planning software system and we are installing a Knowledge Management System. The projects are expected to be fully completed by early part of this fall. For 2008, we intend to continue to implement our strategic plan, our strategy of providing full project and program lifecycle services to our client. We will look to expand our service offerings through internal development and acquisitions. We have only scratched the surface in terms of building our presence in industries outside of aerospace and defense, where there is a growing awareness of the need for SM&A's capability. We have an account executive team that is second to none in the business, a highly talented team of associates in the field supporting our clients, and the financial resources to support our growth. We look forward to another year of progress in 2008. Before I turn the call over to Jim, I would like to thank the SM&A employees for their part in producing these results. Our record results are a tribute to their talents and dedication and I sincerely thank them. I'd like to turn the call back to Jim to provide a preliminary thought on our expected financial results for 2008.

Jim Eckstaedt: Thank you, Cathy. Looking into 2008, we see continued growing demand for our services. As a result, we currently expect organic revenue growth from our core operations of approximately 10%. Gross margin is expected to be similar to 2007, between 39% and 40%. Excluding the impact of the earn-out expense from PPI, we expect SG&A expenses to decline as a percent of revenue. We expect to incur an additional earn-out expense associated with PPI during the year, the range of expense, based on achieving certain revenue targets, is between $850,000 and $2 million, or $0.06 a share. Some of this expense will occur in the first quarter of 2008, it could as high as $0.03 per share. Also included in first quarter expenses will be several items including management recruiting, an offsite sales meeting, and implementation of a major system enhancement, as well as a companywide offsite. These expenses are expected to total $1.4 million in the first quarter. Ongoing recruiting and training of new account associates, and the further system investments that Cathy mentioned during her comments, will constrain our net income growth during the first half of the year. In addition, SG&A includes amortization of intangibles of $445,000 from the two acquisitions completed in 2007. We anticipate earnings per share for 2008 to be approximately $0.34 per share. And now I'd like to turn the call back to Cathy.

Cathy McCarthy: Thank you, Jim. I would just like to reiterate that 2007 was very much a year of transition for SM&A, and through it all we made amazing progress. The first half of 2008 will continue to reflect some necessary investments that we are making to ensure a strong future for the company. In the back half of the year, however, we expect that we will be in a very good position to show the leverage capability of this business model, and drive much more to the bottom line. Now operator, we are ready for questions.

Operator: Thank you, Ma'am. (Operator Instructions). First question comes from the line of Tim Brown with Roth Capital. Please go ahead.

Tim Brown: Yeah, thank you. Just a couple of questions, just to follow-up on the guidance. When you said 10% organic revenue growth, can you give us just a base number you're using for 2007?

Cathy McCarthy: The forecast we had for 2007?

Tim Brown: Yeah, I am trying to kind of figure out what the organic revenue for 2007?

Jim Eckstaedt: It would be based off of our fiscal '07 full year results.

Tim Brown: Including PPI and PMA?

Jim Eckstaedt: Yes.

Tim Brown: Okay.

Cathy McCarthy: We may be confused. Are you asking what our organic revenue growth was in 2007 or US?

Tim Brown: No, I am sorry. I am talking about the guidance for 2008.

Cathy McCarthy: Okay.

Tim Brown: And I was just trying to figure out what that 10% was, what base that was off of?

Cathy McCarthy: Okay.

Jim Eckstaedt: It was off the full year. After the acquisitions are folded into the company, they are integrated. We start to lose some visibility out to the revenue derived directly from each of the acquisitions. So, our guidance of 10% organic revenue growth is off of full year results for 2007.

Tim Brown: So it will be off that $98 million?

Jim Eckstaedt: Correct.

Tim Brown: Okay. And then it looks like, just on the SG&A, it came in at 29% in 2007. Obviously, there are a lot of one-time charges and fixed expenses in there. Are you guiding for 29% in 2008 as well?

Jim Eckstaedt: Let me give some detail on that. And the SG&A actuals for the year, there is the $958,000 from the PPI expense. There is also $1.3 million for our transition expenses, which I'd consider one-time for the year of 2007. Our guidance is that we will be down from the current run rate, if you will, on a percentage basis.

Tim Brown: Okay. So as a percentage of revenues, SG&A is coming down in 2008?

Jim Eckstaedt: Yes.

Tim Brown: Okay. And I guess can you give us an idea of how? It sounds like first half your plan unseen higher expense levels and in the second half, more leverage and in terms of the revenues, how do you see those ramping up through the year?

Jim Eckstaedt: While we see steady growth, we see more growth in the third and the fourth quarter, so we achieved the 10%. In terms of the SG&A, our first quarter is heavily weighted on the SG&A because of the items that I mentioned.

Tim Brown: Right.

Jim Eckstaedt: The company offsite and the impact from the PPI expense, which will also impact the fourth quarter to some degree.

Tim Brown: Okay. I know we have three-question limits. Just can you copy this before or can you kind of give us an idea of the demand environment? How it is right now in Q1, and if you are seeing any sort of hesitancy among corporations for spending, what do you see out there?

Cathy McCarthy: First of all, generally the 2008 spending looked about the same levels as last year. I don't see any significant pullback in DoD and the IT spending appears to be adequate for the market for our services and the growth that we are looking for. The office, the budget and management for the DoD budget had some preliminary budget information out there that we've been looking at, and it appears. And so, I think we all know, the DoD spending will be at all-time historically high levels, with about $705 billion spent on DoD, including a bridge funding and supplement. However, the part we look at is as it relates to procurement is the RDT&E, which expected to be up 20%. If you look to the program side of the business, and you look at both the IT and DoD projects and programs that are out there, there continued to be a high number of both programs and projects on IT side that are being assessed and that are not demonstrating, in fact, that they can produce result, which is causing some programs to be canceled, and folks to be looking more closely at the program control and that feature IDN right into the market that we are addressing with our Program Services solution. So that's very good for us. So off course, the addition of General Pace coming to our markets from access at the senior levels, and developing strategy with our clients early on, that's very good for us. So all of the macroeconomic conditions for us, I believe, are very good. What's happening on the revenue side for us and 2008 is that, I think everyone is mostly aware that we had management transitions during the year in '07. And those transitions caused some disruptions and for some folks to not refocusing every day on the business, so to speak, and our pipeline going into the first quarter was not as strong as we normally would have it or as we anticipated. However, I would say that we are very pleased with how the quarter is developing and we believe that we will have even a stronger second quarter. And as the momentum grows on the Programs Services side of the business, which is doing quite well and integrating very well into the business, and our clients are understanding what it is our new strategy is and what it is that we are providing, we expect to continue to gain momentum. That's why Jim said that, he expects that as we see increase in revenues, we will be gaining it through the year. We are normally flat through the year, with a little dip once in a while in the third quarter. But we pretty much see growth in our revenues throughout the quarters. Not substantially different, but some growing momentum in the quarter. Well, I hope that helps.

Tim Brown: Yeah. And just when you talked about Q1, it sounded like things maybe were a little bit weaker. Do you still expect Q1 to be an up revenue from Q4?

Cathy McCarthy: I do.

Tim Brown: Okay.

Cathy McCarthy: I do.

Tim Brown: Thank you. I'll get back in the queue.

Operator: Thank you. The next question comes from the line of Brian Kinstlinger with Sidoti & Company. Please go ahead.

Brian Kinstlinger: Hey, good afternoon.

Cathy McCarthy: Hi, Brian.

Brian Kinstlinger: Asking only three questions is tough. Let me start with some of things Tim was asking because, you say 10% organic revenue growth, I think that's misleading. So I wanted to look at that, because unless I'm wrong, PMA which you bought, which was at a roughly $5 million run rate and you haven't gotten much in '07 from them, from the timing of that. So, your 10% includes the additional four or five, as long as they stay flat at $1 million, and that's organic revenue growth. Are you including that?

Jim Eckstaedt: Yes.

Brian Kinstlinger: Really total revenue growth, not organic revenue growth, that's how you guys are defining organic, right?

Jim Eckstaedt: Correct.

Brian Kinstlinger: Okay. Also in the first quarter, in the fall, you provided an earnings guidance, and that's obviously based on some sort of revenue. Could you give us some sort of range that you are thinking? $0.03, I guess?

Jim Eckstaedt: The $0.03 was determined based upon the anticipated shares outstanding and to the impact of the amount of expense we will incur related to the PPI expense. So it's just tax affecting that amount, with the anticipated shares outstanding to give that amount of earnings per share guidance.

Brian Kinstlinger: But you said you expect earnings to be $0.03 in that quarter, or did I misread it?

Jim Eckstaedt: I said that the impact of the PPI expense in the first quarter may impact the first quarter by as much as $0.03 per diluted share.

Brian Kinstlinger: So if we look at PPI, how do you determine what the earn-out is? I mean you’re saying that, in one case, that you can't determine its own revenue, so how did you determine the earn-outs and what are the remaining factors, each of the years that you're looking at, to determine where there is another payment or not?

Jim Eckstaedt: Sure. First of all the agreement is public. You can obtain it through Edgar B. What we've said is we can determine that we can calculate an estimate for what we believe the first quarter is, because we've been through January and all of February. But to pay the additional payments, they have to achieve certain revenue targets, and those targets may be lower or higher than what we have in our plans. But they have to achieve those targets, and we have to go through the calculation. We have given guidance for the full year, because I believe that we can estimate some of that.

Brian Kinstlinger: And so what did PPI produce in the fourth quarter, under how you guys estimate it?

Jim Eckstaedt: Well we don’t disclose the individual revenues of any particular business. But what I'm trying to provide you with is the guidance that the additional earn-out payment will impact our results for the fourth quarter and possibly -- I'm sorry the fourth quarter which we've given, the first quarter of 2008 and what potential impact it may have for the full year?

Brian Kinstlinger: Yea,h but inside that agreement, there is obviously a dollar value you are saying they had to do. So what was that value that they had to surpass?

Jim Eckstaedt: The amount changes each year based on the calculation and we don’t provide that level of detail

Brian Kinstlinger: But you said it was public, so, okay. Let me follow up that, because this PPI is very confusing. I thought it was annual, so you are taking a fourth quarter hit, a first quarter and a second quarter hit, I thought you mentioned there is only onetime payment of each of the 12 months?

Cathy McCarthy: The PPI contract, Brian, runs from the end of sometime in February to February. So that is why you are seeing a fourth quarter and first quarter.

Jim Eckstaedt: At the end of every February, for the next three years, we have to do a calculation that determines if they were in that payment. The reason I can’t give revenue amounts of what the goal is, because the goal changes based on some of the results that are achieved each year. But what I can do --

Brian Kinstlinger: Why don't we circle it after the call and discuss this.

Jim Eckstaedt: Sure.

Brian Kinstlinger: I think it is extraordinarily confusing. So we’ll do that afterwards. And so what is the potential expense in the second quarter? Is the difference between the $0.03, and did you give a dollar range of 850 to 2 million in the $0.03, the difference?

Jim Eckstaedt: Could be, essentially, another $0.03 during the course of the year. During the course of the year, it wouldn’t happen in the second quarter.

Cathy McCarthy: There would not be another expense triggered until the fourth quarter of '08. There would be a potential expense in ’08. There would be a potential expense again in the first quarter of ’09. And Brian, you realize, what’s happening here is that this is what I would say, in the past, when we were doing purchase accounting is purchase price would end up on the balance sheet. There is a treatment here that is requiring us, according to GAAP, to run this through our P&L. So it becomes very confusing because the treatment is different than what you normally see for an acquisition.

Brian Kinstlinger: Right. Yeah, I know there are, we worked there, sort of like compensation. Right.

Cathy McCarthy: Yes.

Jim Eckstaedt: Well, it's an expense. There is a defined calculation and the calculation -- it continues to grow based upon results in each of the prior years, and so that's why it's difficult to say what it will be throughout the term of this agreement. However, I had provided guidance as to what we believe will occur for 2008. We have a calculation we have to do at the end of February, which we've provided guidance for the first quarter. And based upon the formulas, I would anticipate that the person would not achieve the revenue threshold until the fourth quarter.

Brian Kinstlinger: Okay. And in future years, does this expense became a larger dollar figure as their business consider, or is it just $0.03 or $0.06 annually, no matter what happens and no matter how big you get?

Jim Eckstaedt: If the person doesn't achieve it in one year, it is cumulative. So the person does have an opportunity to earn what they may not have achieved in the prior year. However, the amount that they could earn is the largest in the first year.

Brian Kinstlinger: Okay.

Jim Eckstaedt: But if they don't achieve that, then it can roll over into subsequent period, but it is a -- in terms of the agreement which you can see, the amount possibly set earnings year, if they were to earn a 100% in each year, would decline and now would decline over time.

Brian Kinstlinger: Thanks.

Cathy McCarthy: And Brian I also want to be sure we understand, we did not structure this. This is compensation for him, additional compensation. We structured this when we negotiated this agreement to be part of the purchase price of buying this company, and of course when you a buy service company, and it's all about people, and it's certainly about in the senior leaders of that company, the best way to structure for the acquirer is some cash and some stock in the company, and also some ability to earn that purchase price based upon some continuing performance. So that, in this instance, SM&A has three years of working with the company in its leadership before they would actually earned the full purchase price. Because there is a provision, as we say in our press release, because there is a provision that says he has to be employed, GAAP is, my correction, GAAP is requiring.

Jim Eckstaedt: GAAP requires us to record that as an expense. So it's an expense on our books. It is not impacting individual recording of the transaction.

Brian Kinstlinger: Okay. Just want to touch on revenue. So last year, if I excluded what I assume was additions for PPI and PMA, you grew pretty fast on the top-line. Now if I exclude those or includes those, I don't carried away, but really if I exclude that which is not like to like, your top-line growth is extraordinarily slower, it's in the mid single-digit range. And so I am curious what the dynamics are? And is that coming more on the Competition Management side or Program Services side? And where do you see the growth accelerating or decelerating on those two segments?

Cathy McCarthy: Brian, we had 25% organic growth in 2007.

Brian Kinstlinger: Is that organic? Right, I am talking about '08 now.

Cathy McCarthy: So you're talking about ’08. Okay.

Brian Kinstlinger: In ’07 right, I don't know if that 25% organic growth includes, as you used organic differently than it sounds like in '07 or '08?

Cathy McCarthy: Without PPI and without PMA.

Brian Kinstlinger: Right. So, you grew 25% in '07, and I wouldn't expect that in any given year for you or hold you to that bar, but I’m curious why you're looking for mid single-digit growth on that basis? If you did, in '07, 25%, next year, where that is? In the Competition Management side more, or the Program Services side?

Cathy McCarthy: Well, we expect Program Services to grow faster than Competition Management. I also will remind you that at the beginning of '07, we forecasted, I think, 11% growth. Our business is hard to see past two quarters, and we are comfortable with where we are in the first quarter, and we're comfortable with what we're seeing so far in the second quarter. We are also developing and investing in solutions like we have in the past. Our long-term success solution that we rolled out at the beginning of '07, I think, ended up in January around $6 million worth of revenues for us. But it was hard to predict at what level that solution was when we rolled that out. How quickly it would be accepted and how quickly the clients would put teams, the people and how that would develop? So what we are giving you is our early guidance, based upon what it is that we are confident and seeing, and as we move through the year, and we roll out additional services, and I get a better view of the pipeline from the account executives, we of course will continue to update you on that guidance. I will tell you that there is a lot of activity in marketplace out there, and I'm feeling pretty good about the activity I'm seeing. PMA and PPI contributed 10% of our revenue in 2007 in the fourth quarte,r and PPI was acquired in February. So it's hard to strip out both of those and arrive at some single digit numbers.

Brian Kinstlinger: Last question and I'll jump back in the queue, because I have more, is how many people did you hire in 2007 and how many do you expect to hire in 2008.

Cathy McCarthy: I'm sorry, say that again, how many --

Brian Kinstlinger: How many consultant employees did you hire in field in 2007, and how many do you plan to in 2008 as of today's plan?

Cathy McCarthy: We hired 105 in 2007. And we're planning on hiring 168.

Brian Kinstlinger: 168?

Cathy McCarthy: Yes

Brian Kinstlinger: Great. Okay, thank you.

Cathy McCarthy: You're welcome.

Operator: Thank you. (Operator Instructions). The next question is a follow-up question from the line of Tim Brown with Roth Capital. Please go ahead.

Tim Brown: Hi, this is just a quick follow-up question. How many consultants? I think, last quarter, you guys told us your average consultants that were being utilized during the quarter? Can you give us that number in this quarter?

Cathy McCarthy: I will tell you one thing. I will tell you that, as we told you last time whenever we chatted, we had an all time high record and I can't remember the number of consultants that were in the field. But we have exceeded whatever number that was, because we currently have another all time high record of consultants in the field, of 270. Now, remember that early in the quarter, we're coming off the holidays, and a lot of programs were ramping back up. So January is a pretty slow start, and those numbers can move around within the quarter. I think the average I’m being told is about 245 in the quarter, last quarter, and we can hit 270, but two weeks from now, we can be down to 250,

Tim Brown: Right

Cathy McCarthy: It’s nice when you hit those peak figures, because it just shows that you are gaining momentum through the year.

Tim Brown: Cathy, is your bench now -- I know a couple of quarters ago, I think you said your bench was so thin, you couldn't really take on additional work. Where is the bench now?

Cathy McCarthy: Our bench is improving on the Program Services side. It's still thin on the competition management side. But I think you heard me tell Brian, that we are planning on hiring 168 people this year. So we are very aggressive on our hiring, and that means that there will be a lot of activity here at headquarters, and supporting both our growth and the hiring and training and report of the new associates coming in.

Tim Brown: Yeah, and what's the typical attrition? 168, it sounds like a huge number off of a 270 base.

Cathy McCarthy: Tim, I know that number, but I don’t know it off the top of my head. It’s somewhere around kind of 15%. But I am not sure, maybe --

Tim Brown: That’s okay. Maybe we can circle around on that question.

Cathy McCarthy: And you know what? We have to get back to you on that, because we have both what Anna, our Senior VP of HR calls, regrettable and welcome. And I am not sure if I am remembering the regrettable, or the welcomed, or the combined. So we probably should get back to you on that number.

Tim Brown: Okay. And then, is the PMA acquisition completely integrated at this point, the one you made in September?

Cathy McCarthy: I'm not sure what you mean by completely, but I would say, I would think of Kevin Reiners, who is here, he would say yes. But does that mean that we've gained all the momentum from that solution and those professionals that we can? As it relates to working with our account executive team and our clients and awareness of our capability in that area, I think we've just started. But from, operationally, understanding what it is they have and how it is that works together and from an accounting and HR perspective, absolutely.

Tim Brown: Okay. And could we possibly see this payout situation with PMA, something similar with what we working with PPI?

Cathy McCarthy: No, the issue with PPI is there was a requirement for a seller of that company to continue to be employed to receive those payments.

Tim Brown: Right.

Cathy McCarthy: That provision is not currently in the PMA.

Tim Brown: Okay.

Cathy McCarthy: It won't be in any future.

Tim Brown: Okay. And then, Cathy, just in terms of your outlook for acquisitions, is that something you would expect? Similar size acquisitions as PMA and PPI, you would be making in 2008?

Cathy McCarthy: It sure is our strategy, and we have a process by which we bet through the opportunities that are in the marketplace, and we are actively have been and are looking and we believe we have a roadmap for the solutions that we want to develop, all the way from strategy part of our business to procurements to proposal and program and we are out there looking for more best of breed companies. We were extremely pleased with PPI, PMA and their services have been welcomed not only by our account executives, but also by our associates and our clients, and we want to keep up the high quality services that we provide, because that's what going to build our reputation in the marketplace and continue the momentum. That's what going to attract people to come to SM&A, because they know they are coming to a company that only provides the best kind of quality solutions for the clients.

Tim Brown: Okay. And when, going back to the gains, I am just curious if you can tell us what contribution you expect from Strategic Advisors in 2008, just from a revenue perspective?

Cathy McCarthy: Well, that's a very good question, and it is easy to answer because it's so overwhelmingly successful already. What I would tell you is that I can't and won't and couldn't quantify what amount of revenues I expect. I certainly expect revenues to be created by the Strategic Advisors and programs and solutions that they will provide to our clients. But what's important about this is as we build out this whole lifecycle support for our clients, you are involved in helping them win competition, competitive procurements. So, if you are not involved in the upfront strategy, and you are not involved with very senior executives within company for looking at what is that that they're selling today, what is that that they're going to need to sell five years from now. We had companies, very large companies in our top four list, they're looking at what business are they going to be in 40 years from now, what their business can look like 40 years from now. And you have someone who had a view of the world and experiences that General Pace does as part of the organizations, and that means that he is invited into welcomes, and participates in those kinds of strategy and business intelligence discussions about where markets are moving and where the acquisitions are moving, both for this year, for the next five years, for the next 10 and next 40. We have got an incredible reception from our client base that General Pace is part of the SM&A organization. He has already had numerous meetings with our top clients, senior executives in those clients, and very large clients that we do not have a presence, we're being introduced to, in addition to a whole variety of, what we call, our tier 1 clients who are not the primes but are mostly the subs to the prime. He is now making aware of SM&A, what we do and our capacity. So, as I walk you through that, I hope you can hear my excitement about what can come out of that, but it's very difficult to quantify right now. We just know that we're moving in a very positive direction, and he is bringing to the company everything that we knew he would, from both an access point of view, from a reputation point view, and certainly our associates here at the company are extremely excited to have him as part of this organization and our board, and certainly I am. He's a wonderful partner for me.

Operator: Thank you. The next question comes from the line of George Sutton with Craig-Hallum. Please go ahead.

George Sutton: Most of my questions were answered, but I did have one related to the refueling contract that was just announced. There is quite a bit of discussion around the procurement process there. And I'm just wondering, do you expect any fallout, either positive or negative, with respect to the procurement process broadly? And then more specifically, how might it impact you?

Cathy McCarthy: I'll start with the last. Whoever is prevailing, because I don't know if there will be a protest, I know that a number of senior DoD officials have said that they hope there is not a protest because that will delay getting these tankers built and getting started with the procurement. But there is no way for us to tell whether or not that will happen. But whoever it is, and right now it looks like Northrup is the winner, has a very big program to now start to execute and to start up. And I know that these companies are very prepared for that. I'm sure they will prepare for the win and are very excited, but I also believe that it creates opportunity for SM&A, and we will take advantage of that opportunity. And if for some reason, there is a protest or wouldn't be returned, we would have the same opportunity with Boeing. So big programs like this do create, no matter who the winner is, do create opportunities for our business and the kind of solutions that we are developing.

George Sutton: Okay. Thank you.

Operator: Thank you. The next question comes from the line of Dominic Marshall with Scott Creek Capital. Please go ahead.

Dominic Marshall: Good Afternoon. Can you hear me?

Jim Eckstaedt: Yes.

Dominic Marshall: Okay. Most of my questions have been asked and answered, thank you, but I was hoping you could reconcile the guidance just a little bit more for me. If I heard you correctly, you were talking about 10% revenue growth, flattish gross margin percentage. I believe you said in answer to a question that you expected SG&A as a percentage of revenue to be down ’08 over ’07. So, I am a little bit confused on how you get the kind of flattish EPS numbers for the year, given those factors?

Jim Eckstaedt: When I talked about SG&A, there are some components in SG&A that you have to take out to get to the scene flat year-over-year, and one of those components is the PPI expense. And then we also had onetime expense that, I would call, onetime expenses in the first quarter for SG&A. And as we go through the year, our SG&A, excluding those, will come down as a percent of revenue to the $0.34 per share on a full year basis.

Dominic Marshall: Okay. So, obviously, you’re talking about a back-end weighted 2008, in terms of your guidance, because of those expenses and ramping.

Jim Eckstaedt: Correct.

Dominic Marshall: Revenue, looking at last year, assuming somewhere in the ballpark at flattish margins, you achieved 10% sort of operating margins last year. It sounds like you are expecting to at least exit 2008 with operating margins, at least a bit above, maybe significantly above, I don’t know how you want to term it, those levels, is that correct?

Jim Eckstaedt: It’s slightly in that range, yes.

Dominic Marshall: Okay. That's it for me. Thank you.

Operator: Thank you. Your next question comes from the line of Brian Kinstlinger with Sidoti & Company. Please go ahead.

Brian Kinstlinger: Yeah, hi. A couple of follow-ups. First of all, on strategic advisors, is General Pace functioning alone there? Has he recruited any, and isn't this in the first half or first quarter that, until it builds up, will be losing money, at least a little bit of money in the short-term?

Cathy McCarthy: No. I don't see it at all as losing money. He had joined our organization, and he's very much involved with all aspects of what we do. He's also, I think as you know, Brian, on the board. So he is part of the senior executive team. Initially, the way we see it is, that he has over 400 associates reporting to him, just like I do, because he has the ability to reach into SM&A for any of our associates to help or work with him on a variety of things that he is doing or would like to do. We have an incredible talented pool of people, and they may be working on one specific solution today, but if you needed them to do something around another part of solutions that we deliver to our clients or strategy or research or a whole variety of things, we've got so many people that he can draw upon. So, initially, he is using the associates that we have. I would think that through the year and into next year, as we develop strategic advisors, that he will develop a core staff within that subsidiary. We also fully expect that he will be developing a group of thought leaders, probably no less than five, but maybe no more than a dozen, who are folks that he knows and can attract. That can help us with strategies, not only in certain capabilities, around VOD procurement. But it can also attract people who have high level domain knowledge, and are thought leaders in the new markets that we are entering. First, we are targeting healthcare, and we already have a couple of people who are working with us on our expansion into that market. I know he has many, many contacts as it relates to the healthcare agencies, which a lot of our clients are bidding into. So he will be able to attract to those kinds of people. So, long answer, don’t expect it to be a large expense at all. I expect it to integrate well within our client set, and I certainly expect that mid to long term here, it will help not only to raise our reputation with our clients, move us to the left side of the lifecycle from a strategic point of view, and have us being involved early on, and therefore our pipeline will be more visible over a longer period of time for our business. But we will also build a capability and an entity in and of itself around the market, strategic advise, strategic business intelligence, trends, et cetera. So we are really excited about what we create here, and we don’t think it’s something that will cost a lot of money to create. It’s just bringing to it all of the resources that we currently have.

Brian Kinstlinger: Thanks. And one of the verticals you mentioned was healthcare. We haven't really discussed that much. I think that you had mentioned in the last conference call in December, your one large contract was winding down. There was an opportunity for follow-on program management services. A, I'm curious if that was attained? And B, have you been able to further penetrate that market, or is it still right now an opportunity that you're going after, but yet to penetrate all that much?

Cathy McCarthy: Well, the procurement that we worked on last year does not get awarded until May. Meanwhile, we do have a couple of people who are still there working with that client, and we fully expect that when our client wins in May, that we will be helping them on the program side of that piece of business. With the strong qualifications we now have and one of domain expertise that we develop around healthcare and claims administrations, we have attracted a number of other clients in the healthcare areas who were bidding around changes that are taking place coming out of health and human services, in the places like the Center for Medicare and Medicaid Services, and a lot of things that were soul sourced over the years are being competitively bid. I think the trend, and this is why we're focusing on healthcare far more competitively, is procurements and services around all of those agencies at Veteran's administration, Medicare, Medicaid, et cetera, across the country that have been given soul sourced to sort of evergreen contracts, with all the attention on healthcare and cost and restructuring it. I fully expect there will be many, many, many more procurements there, and we are positioning ourselves very well in that market. Now understand, most of those are not $20 billion kinds of competition, though there will be greater number of smaller competition. But we understand that, and we are preparing to provide the resources to help clients win at lower level, but certainly capable of doing that, and there are some advantages for us in there in doing that as well.

Brian Kinstlinger: Last question I have, did you guys give the number of proposals and programs that you guys have historically reported and used in the fourth quarter?

Cathy McCarthy: We have that information. Hang on one second. We had it right in our script and we actually took it out, because we didn't think that people were really using those numbers, so we're.

Brian Kinstlinger: It's nice to see that if the numbers are going up, or if the dollar value for award or for service is going up or down, what those trends are, if you have them?

Jim Eckstaedt: Well, for Competition Management, there were 88 projects in the fourth quarter that drove our revenue, and in Program Services we had about 83 active projects.

Brian Kinstlinger: Thank you.

Operator: (Operator Instructions). This time there are no further questions. I'd like to turn it back over to management.

Cathy McCarthy: Okay. Well, I thank you all very much for calling in. I and the Board are very excited about the performance in the fourth quarter and certainly in 2008. 37% top-line revenue growth at the service company in my opinion is spectacular. And at the same time, we were able to grow with the adjustments that we made, our EPS by about 73%. And before this PPI transaction, our EPS would have grown by 89%. I'm pleased with the fourth quarter before accounting for the PPI transaction, our EPS would have grown by about 112% versus our revenue growth of 28%. So that, I think, is what our investors have been asking for and have been looking for. In addition to that, we believe that we can start to see some leverage in this model. If we go back and look at our expenses, and take out these one-time charges that we have been incurring, we have had really very little increases in SG&A over the last couple of years. So we think we've gotten ourselves back on track. And I know Jim is here and already working with the team, on where it is that we can save a little, so we can best in this hiring and training of 186 people this year to help drive our business. The strategy is working. We are implementing it well. The team and employees are excited about it, so is the board. And I hope that you can hear our enthusiasm and we will be happy to talk to you through the year. Thank you very much.

Operator: Thank you. Ladies and gentlemen, this does conclude the SM&A fourth quarter 2007 conference call. If you would like to listen to a replay of today's conference, please dial toll free 1-800-405-2236 or toll 303-590-3000. The pass code for this conference call is 11109566. Again if you would like to listen to a replay of today's conference call, please dial toll free 1-800-405-2236 or dial 303-590-3000. The pass code for this conference call is 11109566. You may now disconnect and thank you for using ACT Teleconferencing.