infoGROUP Inc. Q4 2008 Earnings Call Transcript

infoGROUP Inc. (IUSA)

Q4 2008 Earnings Call

February 10, 2009 8:30 am ET

Executives

Lisa Olson – Senior Vice President

Bill Fairfield – Chief Executive Officer

Thomas Oberdorf – Chief Financial Officer

Analysts

Carter Malloy – Stephens, Inc.

Brett Buckley – Dolphin Partners

Robert Kirkpatrick – Cardinal Capital

Presentation

Operator

Welcome to 2008 infoGROUP earnings conference call. (Operator Instructions) I would now like to turn the presentation over to your host for today’s call Ms. Lisa Olson, Senior Vice President for infoGROUP. Please proceed.

Lisa Olson

Thanks to everyone for taking the time to join us. As you know, I manage the investor relations program for infoGROUP. Joining me this morning is Bill Fairfield, our Chief Executive Officer and Tom Oberdorf, our new Chief Financial Officer. Remember today’s call is being recorded.

Our comments include forward-looking statements, and I ask that you refer to the cautionary language in the earnings release for additional information concerning the facts that could cause actual results to differ materially from those in the forward-looking statements. Also, we ask you refer to the documents in the company files from time to time that we file with the Securities and Exchange Commission. These documents contain and identify factors that could cause actual results to differ materially from those contained in our projects or forward-looking statements.

In addition to disclosing results determined in accordance with Generally Accepted Accounting Principles or GAAP, infoGROUP also discloses the following non-GAAP measures, one, earnings before interest expense, income, taxes and depreciation amortization or EBITDA. Two, adjusted EBITDA, excluding the affects of the non-recurring charges outlined in the press release.

With that being said, let’s now get started on what you all called in for our 2008 fourth quarter earnings and year-end results. We will have a Q&A session at the conclusion of the remarks. It is now my pleasure to introduce our CEO, Bill Fairfield.

Bill Fairfield

A lot has happened since the last time we spoke on the third quarter call, so let’s get right to chatting about what we’ve done to move the company beyond the circumstances of last year and into a new era. Last time we spoke we were admittedly getting our house in order, and I’m pleased to recap that we’ve done a good deal of that in, I think, a short period of time.

Let me just talk a little bit about some of the accomplishments. First of all, of course we’ve settled the Delaware lawsuit with the plaintiffs and we’ve paid the fees associated with that settlement agreement. We’ve instituted broad new governance policies. We’ve added three new independent board members and you’ve probably read a little bit about them, but let me just talk to that or a minute.

Gary Morin joined the board in October of ’08. His extensive experience as CFO and COO of major companies like Lexmark International and Huffy Corporation has really brought a valuable viewpoint to the board. He also serves on the public boards of two billion dollar public corporations, Sealy Corporation and Citrix Systems.

Tom Thomas just joined the board in January of this year as an independent director. He has over 35 years experience as a technology executive with a broad background both in domestic and international business. Tom most recently was president and chief operating officer of GXS Inc, a leading worldwide technology provider of business-to-business EDI and supply chain integration software. And importantly to me he has also been a CIO at 3EM, at Palm and at Dell Computer. Tom will help give us extensive guidance regarding IT and what has worked at other major corporations.

Finally, Roger Siboni also joined the board in January as an independent director. Roger comes to infoGROUP with a solid financial background from his days at KPMG where he served as deputy chairman and chief operating officer, but also has a background in software customer relationship management solutions.

Most recently Roger was president and CEO and then later chairman of the board of Epiphany, a software company that provides customer relationship management solutions. Roger also serves as a director of numerous other boards. All of these are seasoned professionals with the time and the desire to really contribute to this company.

You’ve probably also read by now that Rob Chandra resigned from the board last week. Rob has been a really valuable member of the board and we appreciate everything he’s done for us. As you may know, Rob joined the board specifically to help with the special litigation committee, and in fact, ended up chairing that committee, which was a very time consuming and challenging task.

With the derivative litigation settled, new management in place and policies in place, and frankly, now that we have a clearly independent board installed, Rob felt it was time to focus his efforts on this primary business at Bessemer Capital. So we ask you to join us in thanking Rob for all he did for this board in the short time that he was on it.

We also hired a new Executive Vice President of Business Conduct and General Counsel, Tom McCusker. As you know, Tom reports directly to the board. We hired a new Chief Financial Officer, Tom Oberdorf, who you will be hearing from later. And we established a professional investor relations program, and I think you would all agree that we’ve made significant strides in opening up the lines of communications.

So before turning it over to Tom, let me just say the other element that we said that we were going to try to accomplish last year was, and I think we accomplished, we reversed the downward trend in earnings of last year while reducing debt and meeting the obligations of the derivative lawsuit.

So now that we’ve outlined our past and how we’ve moved the company forward since our last quarterly earrings call, let’s talk about the actual financial results and for that I would like to introduce our new CFO, Tom Oberdorf. Many of you have spoken to Tom but, for those of you who have not, we are pleased to have Tom join us in December from Getty Images in Seattle and, yes, he plans on moving his family here to Omaha.

Tom, I turn it over to you.

Thomas Oberdorf

After I review the details of the financials, I’d like to give you some insights into what I consider to be important issues and opportunities facing the company. You may have noticed the earnings release was laid out a little differently this time. Basically, we moved the table to the end, which is typical for other companies.

I know that on the last call there were questions about providing certain segment data and other information in the release, and we will assess this and see what we can do in the call versus what we provide in the subsequent 10-Ks and 10-Qs to follow the releases.

I would like to review the fourth quarter and then the full year results. Bill will then provide some additional commentary and then we’ll take questions at the end of the remarks. Now, let’s get to the numbers.

Fourth quarter, during the fourth quarter of 2008, infoGROUP delivered revenue of $178.1 million compared to $185.8 million for the same period in 2007 representing a decline of 4%. On an organic currency neutral basis, the company’s revenues declined 5%.

Revenue for the Data Group in the fourth quarter was $71.6 million as compared to $81.5 million for the same period last year, a decline of 12% and a 5% decline in an organic currency neutral basis after eliminating the first data license agreement, which was not renewed in 2008.

Revenue for the Services Group in the fourth quarter was $41.9 million compared to $37.2 million for the same period last year, an increase of 13%, but a decline of 4% on an organic basis when you exclude the results of Direct Media, which was acquired in 2008.

Revenue for the Marketing Research Group in the fourth quarter was $64.5 million compared to $67.1 million for the same period last year, a decline of 4%, but on an organic currency neutral basis, it was flat.

infoGROUP’s operating income for the fourth quarter of 2008 was $9.2 million compared to $24.7 million in the fourth quarter of 2007. During the fourth quarter of 2008, the company recorded $12.4 million in charges, which primarily include $10.5 million in non-cash accounting adjustments for the impairment and write-down of assets, $1.5 million for severance costs associated with the restructure of Direct Media, $300,000 for costs associated with facility closures and $100,000 in non-recurring costs related to the derivative litigation and special committee investigation.

When excluding these charges for 2008, and then non-recurring charges of $3 million for 2007, the decline in operating income was $6.2 million, which relates to lower small business and licensed profits and startup costs in Info U.K. infoGROUP’s earnings per share for the fourth quarter of 2008 was $0.03 versus earnings per share of $0.20 in the fourth quarter of 2007. When you eliminate the impairment and other costs noted above, EPS would be $0.17 for 2008 and $0.23 for 2007.

EBITDA for the fourth quarter of 2008 was $20.4 million versus $35.1 million in the fourth quarter of 2007. When excluding these charges noted earlier, the decline in EBITDA was $5.3 million.

Now, for the full year. Revenue for the full year was $738.3 million, an increase of 7% over revenues of $688.8 million in fiscal 2007. On an organic currency neutral basis, the company’s revenues declined 3%. If we look at revenue for the year on our organic currency neutral basis and adjust for the Naviant settlement in 2007 and the phase-out of our First Data Corporation revenue in 2008, our comparable revenue was up 1% over last year.

For the fiscal year 2008, revenue for the Data Group was $309 million compared to $330.5 million for the same period last year. Revenue for fiscal year 2007 included $9.9 million for the Naviant settlement and $13.3 million for revenue associated with First Data license agreement, which was not renewed in 2008. Excluding these items, growth for the year was 1%. Eliminating effective acquisitions and currencies, the Data Group revenues declined 1%.

Revenue for the Services Group for fiscal 2008 was $163.8 million as compared to $136.8 million for the same period last year. The Services Group growth was 20% and 1% on our organic neutral basis, which relates to the Direct Media acquisition.

Revenue for the Marketing Research Group for the year 2008 was $265.5 million compared to $221.5 million for the same period last year. The Marketing Research Group growth was 20% and 3% on our organic currency neutral basis.

For the full year, infoGROUP's operating income was $25.3 million compared to $86.5 million in 2007. During fiscal 2008, the company recorded $34.3 million in non-recurring charges related to the legal expenses and professional fees related to the shareholder litigation action and severance payments primarily to the former CEO of the company.

Excluding these non-recurring charges of $34.3 million, the operating income for the full fiscal 2008 year would have been $59.5 million compared to an operating income for 2007 of $80.3 million, which excludes the Naviant settlement and non-recurring charges related to the shareholder litigation action.

During the fiscal year 2008, the company also recorded approximately $14.7 million in charges, which related to non-cash accounting adjustments primarily for the impairment and write-down of assets of $11.1 million, $2.1 million costs associated with facility closures and $1.5 million for the severance costs related to the restructuring of Direct Media. Excluding all of these charges and the benefit of Naviant settlement in 2007, operating profit declined $6.1 million year-over-year.

For the full year, infoGROUP's earnings per share was $0.08 as compared to $0.73 in 2007. Adjusted earnings per share for 2008, excluding the non-recurring charges of $34.3 million, was $0.45. Adjusted earnings per share for 2007, excluding the non-recurring income of $9.2 million from the Naviant settlement and charges of $3 million related to the shareholder litigation action, was $0.66.

EBITDA for the full year 2008 was $69.8 million versus $126.7 million in 2007. Adjusted EBITDA for 2008, excluding the effects of the non-recurring charges of $34.3 million, was $104.1 million compared to an adjusted EBITDA for 2007 of $120.5 million, which excludes the effects of the non-recurring income of $6.2 million.

As I mentioned to you earlier, I'd like to touch on a couple of points, which I know are of interest to all of our shareholders. First, we get a lot of questions regarding our bank covenants. The adjusted EBITDA, which we reconciled for you in our releases, is not the measurement we use in calculating bank covenants.

In addition to the $34.3 million in non-recurring charges, which primarily relate to the severance of the former CEO and litigation costs, we are also adding back approximately $15.2 million in other restructuring and other non-cash items. Our coverage ratio for the 12 months ended 2008 is approximately 2.52. I will look at how we present this going forward to insure there’s good visibility on this measure that we carefully measure.

Second, we have not discussed our net worth covenant, and in today's environment of significant goodwill impairments, we review this very carefully. At this time we do not have a goodwill impairment and we will continue to monitor this on a quarterly basis. An impairment in excess of $64 million on an after tax basis will impact this covenant.

Third, we paid off $12 million of debt in the fourth quarter and we expect to continue to pay down debt throughout 2009. And no we're not going to project year-end debt levels, but I can assure that this is our number one priority.

Fourth, we are hearing all companies talk about headwinds in the economy, and with that in mind we continue to implement cost reduction initiatives to insure we maintain good cash flows. This goes hand-in-hand with our ability to accelerate that pay down.

In the past, Bill discussed with you costs that were immediately taken out of the business in 2008 as a result of cutting inefficient marketing spending, eliminating corporate expenses related to the CEO's office and winding down non-recurring costs we've experienced in 2008.

We see real opportunity to take costs out both on a short-term as well as a long-term basis, and let me be a little bit more specific. In the short-term, and I mean the next 12 to 18 months, we believe we can reduce spending and produce real savings in the range of $15 to $20 million of annualized costs. Now that's not all in 2009 cost savings, as there will be some one-time costs to achieve this, but it will be real costs taken out of the business.

In the longer view, there's still some more costs to be taken out and we're working on that right now. This relates to the costs we will achieve through standardization and consolidation of many of our back-office efforts and processes. I do not have a number on this yet but it's sizable.

We want to assure you that we are taking costs out of the business every day. Being new to the company, I see many areas of cost reductions that will not impact the way we service or deliver the products to the customers.

Fifth, you probably noticed some lumpiness in our effective quarterly and full year tax rate for 2008. For the most part these unique items that have hit either the year end or the quarter and we expect our effective tax rate to be around 40% going forward.

Sixth, we are not providing guidance for 2009 as we are seeing many companies pullback from this practice. When we look at 2009, we are positioning ourselves for a tough year, and as I stated before, we're building lower cost basis to address this. If we were to provide guidance, we would give a number below what we're budgeting and this would be too much of a worst case scenario.

Lastly, I want to just bring up a point that many of you has asked me on why did I join infoGROUP. In the short-term, I see lots of revenue opportunities, which will help to offset the current economic headwinds we're facing.

This company has not sold its collective suite of products but instead sells everything individually through each business unit. There are lots of opportunities in this area. The next is what I just mentioned and there are many areas where we can reduce costs, maintain good levels of cash flow and pay down the debt significantly. In short, I see real value that we can achieve here.

With that, I'd like to turn the call back over to Bill.

Bill Fairfield

Following a few remarks we'll be ready for Q&A, but let me just share with you and add to some of the things that Tom said in terms of our focus for 2009. And I'll enumerate several key strategic initiatives here that we're actively working on and they're in no particular order or priority.

First of all, as many of you know, the crown jewels of this company have been the leading position that we have as a data provider. And one of the things we're working on is really enhancing and leveraging that position. We believe there are opportunities to continue to enhance our leading position and with fresher records more content and at the same time, reduce the cost per record in terms of our production.

We also see significant opportunities and we're actively working on ways to utilize our data to create strategic alliances with other companies that are in the digital space where our data plus their delivery mechanisms can bring real value add.

Next, we're working on what we call cross-selling initiatives. As Tom indicated, we have numerous situations because of our unique business unit structure where we're selling just one of our products or services to any given company.

We see terrific opportunities to expand our breadth and depth within that corporation by breaking down the barriers between our business units and getting more cross-cooperation from business unit to business unit. And I'm pleased to say that's happening and being embraced enthusiastically by the organization.

Next, we're institutionalizing what I call product development and enhancement. We have pockets within the organization in different business units where we very successfully developed new products, Web-based solutions and digital solutions, which now by the way make up a significant portion make up a significant portion of our business and have grown, I think in 2008 something to the extent of 20%. So we’re really trying to move that whole situation forward and become a more active player in the digital space.

We’re working on a consistent go-to-market strategy. As you might expect with 31 different business units, we put a different face to the customer in numerous situations. I’m not going to suggest that we’re going to eliminate all of those various brands, but we’re working on ways to improve our go-to-market strategy and be more of a consistent face to the customer.

We’re also working on software as a service. In many instances we’re integrating our products onto the platforms of major CRM providers and onto client specific platforms to integrate with those installations.

As Tom mentioned, one of our biggest opportunities is driving more efficiencies without jeopardizing service, and in fact improving service. We have a lot of low-hanging fruit that will carry us through ’09, but we have to continue to rationalize the business and drive IT efficiencies.

We’ve hired a new CIO to coordinate those efforts. And while we don’t expect efficiencies overnight, nor do we think that this is going to be easy, we do anticipate a thoughtful and strategic workout of what we have and what needs to be done, hence creating IT efficiencies and savings to the bottom line.

And I want to emphasize, too, that I expect these initiatives to not only create long-term cost effectiveness, but to drive coordination and synergies in new product development resulting in more robust organic growth opportunities.

As all of you know, we have a classic portfolio management opportunity here at infoGROUP. Our task is to make sure we manage those businesses and products that are in a mature state so as best to optimize their return. We must then be good stewards of that cash generated to invest in growth opportunities within the portfolio or wisely create external partnership opportunities.

What do we see for the risks in 2009? Like everyone else in every business in the economy, we can’t predict how all of this is going to play out. But I can tell you that we have developed our plans assuming a difficult market environment and we are proactively managing the company accordingly.

So in closing, I hope you have seen progress in our efforts and results in spite of our unique situation that hopefully is behind us and, frankly, we can quit talking about. We’ve been concentrating on the blocking and tackling of our business and will continue to do so in 2009, but we feel we are well positioned to capitalize on the growing markets, such as the digital movement, as well as other markets.

As I said before, infoGROUP has excellent assets. Foremost among those are our employees and our future is promising. We will continue to keep our commitment of open and honest dialogue as we continue to move the company forward.

With that, I will now open up the phone lines so that we can take questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Carter Malloy – Stephens, Inc.

Carter Malloy – Stephens, Inc.

It’s understandable, I guess, I understand your reluctance not to give ’09 guidance, but can you give us a sense if you expect any revenue growth, or maybe even just if we assume a steady state economy if you would expect just stabilization off the 4Q ‘08 revenue run rate?

Bill Fairfield

Well, I’ll give you a non-quantitative answer Carter. By the way, welcome to the call and to your new position, looking forward to getting together with you. As I said before, this is perhaps the most interesting market that I’ve ever been through and, as those of you who have met me, know I’ve got a lot of grey hair and have been through a lot of markets. I’ve never seen so much of the proverbial fear, uncertainty and doubt, ever.

So we frankly don’t know what the business is going to hold. As Tom indicated and as I’ve indicated, we are planning for a very difficult environment. We’re planning for a no-growth scenario. Our feeling is that if we are aggressive, if we take the costs out, if we get ourselves lean and mean and if for some odd reason the market turns around and all that close to the bottom line, well that’s a good thing. I’m emphasizing what Tom said, it’s just too darn difficult to predict what’s going on out there.

Carter Malloy – Stephens, Inc.

I’m just trying to get a sense maybe if you assume a steady state economy if you guys could hold the line on the…

Bill Fairfield

I don’t know what you mean by steady state. If we got back to a more normalized market, and I don’t know, to be honest with you, what that means. But in a more normalized market, and I’ve said this in numerous discussions publicly to our investors, in a normalized market I think the business portfolio that we have could grow in the mid to upper single digits on an organic basis. But I don’t know when we’re going to get to that normalized market.

Carter Malloy – Stephens, Inc.

Also can you give us some color on the businesses within the Services Group? Maybe just the mix of digital versus traditional and/or any Yesmail growth in metrics?

Bill Fairfield

Well, as you might expect, the Services Group is an interesting phenomena. We’ve got a lot of very traditional businesses that are dedicated to traditional direct mail marketing, those kinds of marketing’s where you stick a stamp on something and send it out to somebody or you’re tied to the catalogue business. Those components are in decline, no question about it. And they faced a tough time in the fourth quarter, they’re going to continue to face a tough time.

Having said that, the services business also has been the most progressive in moving to web-based digital delivery mechanisms. If you add up what we’re doing in Yesmail and what Edith Roman is doing in terms of digital delivery, those are growing at 20% plus, so the challenge there for the management team is balancing all of that. Can we grow the digital faster than the traditional goes down? That’ll be the name of the game.

Carter Malloy – Stevens, Inc.

Tom, on the $15 to $20 million in cost saves, is that off of a 4Q ’08 expense run rate or the full year ’08 run rate?

Thomas Oberdorf

Say that question again, Carter.

Carter Malloy – Stevens, Inc.

So on the $15 to $20 million in cost saves you were speaking about in the call, is that off of the 4Q ’08 expense run rate or is that…

Thomas Oberdorf

Yes. The expenses I would say have started to execute on as late as December. Again, the first two tranches, I think, were kind of discussed with you guys on the last call. It’s kind of $8 million of cutting out the T&E, all the list of things that we had. And another $8 plus million, probably $8 to $10 million on advertising spent and then the remainder is really as we go forward.

Carter Malloy – Stephens, Inc.

Just one more and I’ll get back in the queue. Can you give us just CapEx of free cash flow in the fourth quarter?

Thomas Oberdorf

Sure I can, if I can find that sheet in front of me, which is right here. For the quarter?

Carter Malloy – Stephens, Inc.

Yes.

Thomas Oberdorf

It was $9.1 or $9.2 million free cash flow and CapEx was $5.2.

Operator

Your next question comes from the line of Brett Buckley – Dolphin Partners.

Brett Buckley – Dolphin Partners

I just want to throw some numbers out for clarification and I think it’s basically adding up to what is effectively a more normalized EBITDA for the year 2008. If I take the press release, GAAP operating income was $25.3 million, CEO severance $10.7 add back, $23.6 million add back of legal and professional fees, $11.1 million of write-down of assets add back, $2.1 million of facility closure add back. And then again in the press release it stated $1.5 million of restructuring severance costs to be added back there.

And then, I guess, Tom mentioned in the prepared remarks that that’s not the EBITDA with respect to bank covenants. If you add $15 odd million back to the $104 that’s put in the table that sort of gets you to $120 million. And so if the numbers that I just –

Thomas Oberdorf

The best way to look at this $104, which we reconciled for you, is the adjusted EBITDA. And then take that extra $15 million, which again I think, when we say we adjust for bank purposes a lot of these costs, whether they’re asset write-offs or whether they’re shutting down properties or severance.

So that’s where we get to, and for purposes of Reg G, I don’t want to have an EBITDA, adjust EBITDA and a third EBITDA, but those are basically what we do for the bank. So, that would be the $15 million in addition, if you wanted to get to a modeling EBITDA.

Brett Buckley – Dolphin Partners

How about I’ll say that I am coming out at roughly, the way you look at it, roughly about $120 million of EBITDA. And some people do this, some people don’t. If you add back further non-cash stock base compensation…

Thomas Oberdorf

I think that gets to one of the questions where we had a lot of questions from analysts, and shareholders as well, that said look when I’m doing your EBITDA I’m worried about your bank convents and so I’ll try to get very specific for you guys to say here is where we are and here is what we add back.

Brett Buckley – Dolphin Partners

Then just also quickly on net debt, was reported at $295. I guess there is $4 million assets held for sale?

Thomas Oberdorf

I think that’s the long-term. There is a current portion of debt of $3 million.

Brett Buckley – Dolphin Partners

Then they are $4 million of assets held for sale?

Thomas Oberdorf

Yes

Brett Buckley – Dolphin Partners

I think down in the equity line, there’s $9 million in notes receivable, do the banks take that into consideration as having any e-value or is that not a calculation?

Thomas Oberdorf

I don’t think that comes into any calculation, I’m thinking as I’m speaking here, except for the net worth calculation, obviously.

Brett Buckley – Dolphin Partners

Just net worth, not covenant?

Thomas Oberdorf

There is a net worth covenant and that number will go down over time.

Operator

Your next question comes from the line of Robert Kirkpatrick – Cardinal Capital

Robert Kirkpatrick – Cardinal Capital

Couple of questions, one, Tom, when using the $64 million after tax number that you discussed for the maximum amount of impairments that goodwill can take, what tax rate should investors use in possibly determining that calculation.

Thomas Oberdorf

Forty percent.

Robert Kirkpatrick – Cardinal Capital

When you spoke of some one-time costs to the saving of the $15 to $20 million, can you quantify those one-time costs at all, so we can understand what the payback period is?

Thomas Oberdorf

I don’t have that in front of me, but I would say that most of it would be severance or writing off a lease if we’re getting out of a property. It would be those types of things so in those cases you get, the leases you don’t necessarily the payback unless you can sublease it. So I can’t give you a payback number on that cause I would have to look at individual leases. If it was severance related, you get a pretty quick payback.

I guess what I would want to give you direction to is, we are not going to come up with $15 or $20 million worth of savings and it would cost us $20 to $30 million worth of costs to get out of it. So I wouldn’t worry about that.

Robert Kirkpatrick – Cardinal Capital

In terms of conceptually speaking, your longer term ability to take out more through standardization, etc., is that fraction of the $15 to $20 million that you’ve already identified, do you think, or is that a multiple of the $15 to $20 million?

Thomas Oberdorf

It is not a fraction, and what I said is we are working on it today, and Bill has probably touched on this, and Lisa as well, in prior calls and conversations with you. We have separate accounting systems. Everything we touch is pretty much in silos, so as we combine those, there is a lot of efficiencies.

So we are working on it today, and you’ve seen this, it’s a lot harder to get immediate impact on those because you’ve really got to build and consolidate the systems to get those benefits. But I don’t see them as a fraction of the costs that we see in the short-term.

Robert Kirkpatrick – Cardinal Capital

Bill, could you maybe discuss what’s going on in the U.K. and perhaps provide a quantification of startup costs that existed both for the quarter and for the year, please?

Bill Fairfield

Tom’s looking for the specific numbers. I think I can come pretty close though, Rob. Just for clarity sake, I want to make sure that when I talk about the U.K., we really have three elements here to talk about. The one you’re speaking about is sort of the database. I want everybody to understand that we’ve got a very successful operation in the U.K. as part of opinion research. Our OneSource Division also has a very successful operation in the UK. So all-in-all, that’s a good market place for us.

Having said that, in December of 2007 or January of 2008, we started compiling and verifying U.K. data, business-related data not unlike what we do in the United States. We’re largely addressing the same model that we enjoy here. We invested a lot of money over there and I think, I’m looking across the table at Tom, I think we were at a cost outflow basis of something like, he just handed it to me, $3.6 million for the year in expense, and in the fourth quarter that was about $1.4 million with little or no revenue at this stage of the game.

We’re taking a hard look at that business right now. The expense flow has slowed down dramatically. We now have a good portion of the database compiled. Most of the expense now is in verification. We do have some opportunities. I have no idea what probability to put on it in terms of some nice licensing revenue to flow against that, but whether it’s through increased revenue or dramatically decreased costs, I can tell you that the impact in ‘09 will be substantially more positive than it was in ‘08. Was that responsive?

Robert Kirkpatrick – Cardinal Capital

Yes, that was responsive, thank you very much. I understand your desire not to give specific guidance, but how should investors measure over the next year your ability to meet some sort of financial metrics goals? Should we be focusing on the gross expense line, help us find some way that we can track how you’re doing relative to some sort of plan? I think that not giving any type of financial metrics provides a very difficult situation for investors outside the company.

Bill Fairfield

I agree with you and I wish I could give you some guidance. Let me tell you the kind of metrics I’m looking at in the business unit reviews that we have every month. This is kind of the direction that I’ve given to the key execs and the business unit leaders.

My expectation is that regardless of the economy that we’re going to improve our ability to generate earnings. That could happen in one of three ways or a combination of these. Some businesses will actually improve their revenues, others will improve their margin, I’m talking gross margin now, and others will reduce their expenses as it relates to revenues. Some may have the luxury of doing all three.

I’m looking at all of our businesses in the following light, and that is their ability to manage the expense to revenue ratio. If for whatever reason, because of the economy, the revenues are going down I expect them to be ahead of the power curve in terms of getting expense out of the system.

We’re fortunate in this business to have a pretty high variable costs structure. We’ve got a lot of dollars tied up in advertising and marketing. Even after what we’ve already taken out, just in a normal run rate we’ve got a lot of dollars tied up in that. We’ve also got a lot of dollars tied up in people costs, and while none of us in this economy like the notion of reducing headcount, if that’s what we have to do in various business units, that’s what we will do.

So I would encourage you to see how we perform in that regard how we do in terms of managing the expense structure as it relates to revenue. If we’re fortunate enough to hold revenue or actually increase it, we’re still going to go after a good many of those cost reductions. And like I said, the best of all worlds would be if we get the cost out, the revenue would happen to pop up and that goes to the bottom line. But I can’t, Rob, forecast that for you.

Robert Kirkpatrick – Cardinal Capital

Thank you and then one final question here, you mentioned, or I believe a previous questioner mentioned, that there’s $9 million of notes receivable on the balance sheet. I assume that is the payment that is scheduled to come back from the former chairman and CEO.

Thomas Oberdorf

Yes. It is.

Robert Kirkpatrick – Cardinal Capital

Has that come down post the end of the year as it has been scheduled by the court order?

Thomas Oberdorf

Yes. It has. I believe there was a $2.2 million payment made in January and, forgive me I don’t know the schedules in the last filing, but, yes, that comes down as he pays that back, per the schedule.

Operator

(Operator Instructions) There are no further questions. I would now like to turn the call over to Ms. Lisa Olson.

Lisa Olson

Well, all of you thank you for joining us this morning. As you know, if you have any further questions don’t hesitate to email me or call me. Many of you have my number, if not, it’s on the website or [e-mail]. Thanks again. Have a good day.

Operator

Ladies and gentlemen that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.

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