Forrester Research Q1 2009 Earnings Call Transcript

| About: Forrester Research, (FORR)

Forrester Research Inc. (NASDAQ:FORR)

Q1 2009 Earnings Call

April 30, 2009 11:00 AM ET


Karyl Levinson - Vice President - Corporate Communications

Michael A. Doyle - Chief Financial Officer and Treasurer

George F. Colony - Chairman and Chief Executive Officer

Charles Rutstein - Chief Operating Officer

George Colony


Brian Murphy - Sidoti & Co.

Vincent Colicchio - Noble Financial Group

Laura Lederman - William Blair & Company


Good day ladies and gentlemen and welcome to First Quarter 2009 Forrester Research Earnings Conference Call. My name Francine and I will be your coordinator for today. At this time, all participants are in listen-only mode. We will conduct a question and answer session towards the end of this conference. (Operator Instructions). I would now like to turn the presentation over to your host for today's call, Ms. Karyl Levinson, Vice President of Corporate Communications. Please proceed.

Karyl Levinson

Thank you and good morning. Thank you for joining our first quarter 2009 call. With me today are George Colony, Forrester's Chairman of the Board and CEO, Charles Rutstein, Forrester's Chief Operating Officer, and Mike Doyle, Forrester's Chief Financial Officer.

Mike will open the call and provide detail on our financial results for the quarter. George will follow Mike and provide a strategic update on the business and our role based strategy. After George completes his review, we'll open the call to Q&A.

A replay of this call will be available until May 7, 2009 and can be accessed by dialing 888-286-8010. Please reference the pass code 98034661. This call is also available via webcast and it will be archived in the investor section at

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as, expect, believe, anticipate, intends, plans, estimates, or similar, expressions are intended to identify these forward-looking statement. These statements are based on the company's current plans and expectations and involves risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statement.

Some of the important factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission. The company undertakes no obligation to update publicly any forward-looking statement whether as result of new information, future events or otherwise. I'll now hand the call over to Mike Doyle.

Michael A. Doyle

Thanks Karyl. I will now begin my review of the financial performance for the Forrester's first quarter 2009 results, the balance sheet at March 31, our first quarter metrics and the outlook for the second quarter and full year 2009.

Please note that the income statement numbers I'm reporting are pro forma and exclude the following items, amortization of intangibles, non-cash stock based compensation expense, reorganization costs associated with the previously announced reduction in force and facilities consolidation cost, professional fees related to the stock option investigation and restatement of the company's historical financials and net realized gains from securities and non-marketable investments.

Also, we will book an effective tax rate at 40% for pro forma purposes. The actual effective tax rate for the first quarter of 2009 is approximately 41%. For the first quarter 2009, Forrester exceeded its quarterly guidance for revenue, pro forma operating margin and pro forma EPS. This performance came in what was a difficult quarter for the global economy, which adversely impacted many of our customers, but demonstrated our ability to effectively manage our cost to deliver strong business results.

That said, our softness in some of our metrics, deferred revenue in particular, indicate they were not completely immune to the effects of a global economic downturn and remain conscious about the second quarter and full year 2009. Therefore, despite exceeding guidance in the first quarter, we're reiterating our full year 2009 guidance consistent with our call in February.

Now let me turn to a more detailed review of our first quarter results. Forrester's first quarter revenue increased 3% to 56.4 million from 55 million in the first quarter last year, with growth attributable to the Jupiter acquisition being offset by the adverse impact of foreign exchange rates.

First quarter research services revenue increased 9% to 39 million from 35.9 million last year. Research services revenue comprised 69% of total revenue for the quarter versus 65% in the first quarter of 2008. We are expecting research services revenue to increase at least two points or more for the full year, which is inline with our objective of driving higher percentage of our total revenue from research services, what we refer to as Q.

First quarter advisory services and other revenue declined 9% to 17.4 million from 19 million in the first quarter of 2008 and represented 31% of total revenue for the quarter, which is reflective of the decline in the demand for our advisory and consulting services driven by the global economic slowdown as well as our strategic decision to focus on growing our syndicated business.

International revenues were 29% for the first quarter of 2009, up from 28% in the first quarter of 2008. Our business outside the U.S. continues to improve despite the adverse impact of foreign exchange rates. I would now like to take you through the activity behind our revenue and review progress for each of our products starting with research.

In the first quarter, 548 new research documents were added to role view. The top three research roles again, and consistent with our fourth quarter, our application development and program management professionals, enterprise architecture professionals and business process and applications professionals. We hosted 99 teleconferences in the first quarter with the total attendance of 4,108 participants. All 19 roles were represented.

Forrester leadership boards, our peer offering for senior executives, continues to grow in a tough economy. The six boards focused on IT roles now have a total of 929 members. Technology Industry boards now have a total membership of 345. And finally, the Marketing and Strategy board have a total membership of 280.

At the end of the first quarter, the Forrester leadership board had 1,554 members, a slight increase from December 31, 2008. In our data business, we continue to add and renew an impressive list of clients. We added or renewed 11 1B plus companies in the first quarter including Target, Whirlpool, Southwest Airlines and DSP Bank.

Demand for our consulting services declined from the previous year by 12%, in part due to our increased focused on our syndicated business but primarily driven by the global economic slowdown. Many project that were discretionary, we deferred or eliminated.

In events, our events business continued to soften in the first quarter, reflecting the broader economic trends with many of our clients reducing travel spending. That said, our event attendance, while down from expectations, was still at levels at the events were both profitable for Forrestor and rated highly by attendees. We hosted three IT role-based events in the first quarter. For the second quarter, we will be hosting three IT role-based events and two marketing and strategy role-based events. We do expect the events business to remain challenging for the reminder of the year.

Looking at our first quarter expenses and operating income. Operating expenses for the first quarter were $47.2 million, up 1% from $46.9 million in the first quarter last year. The operating expense increase was primarily driven by the higher net headcount in sales and research, which came about principally as the result of the Jupiter acquisition offset by tight expense controls.

Travel recruiting as well as all other discretionary expenses were down year-over-year. Our operating management teams continue to demonstrate excellent spending discipline. Operating income was $9.2 million or 16% of revenue, compared with $8.1 million

or 15% of revenue last year.

The improved margin performance year-over-year reflects continued company focus on our higher margins syndicated business in addition to tight expense controls. Other income for the quarter was 1.3 million for the first quarter 2009, down 39% from the first quarter in 2008. The decrease was due to the low interest rate environment in the first quarter of 2009 as compared to the same period in 2008.

Net income for the first quarter was 6.3 million and earnings per share was $0.27 on diluted, weighted average shares outstanding of 23.1 million compared with net income of 6.2 million and earnings per share of $0.26 a share on 23 million -- 23.6 million of weighted average shares outstanding in the first quarter of last year.

Now, I'd like to review the balance sheet. Our balance sheet remains strong. Our total cash and marketable securities at March 31 were 270 million, up approximately 10 million from our year-end 2008 balances. The portion of our marketable securities relating to auction rate securities continues to be classified as a long-term asset on the balance sheet.

We generated 20.7 million in cash from operations for the first quarter, which is down 9.8 million or 32% from prior year due to decreased cash collections, payments associated with the reorganization cost and an increase in estimated tax payments.

During the first quarter of 2009, we repurchased 280,000 shares at a total cost of 4.9 million, and will continue to be active with the buyback. As announced in our press release issued earlier toady, Forrester's Board of Directors authorized an additional $50 million to be spent on share repurchase. And as a result, we now have 74 million remaining on our repurchase authorization.

Accounts receivable at March 31, 2009 was $40.6 million compared to $50.9 million as of March 31, 2008. Our day sales outstanding at March 31 was 83 days, down from 91-- 95 days last March 31, 2008. And accounts receivable over 90 days was 12% at March 31, 2009, improved from the prior year, which was at 21%, and inline with our targeted ranges.

Net property and equipment increased by 21% to 8.2 million, and is primarily due to leasehold improvements associated with our Cambridge headquarters. Our capital spending for the first quarter of 2009 was approximately 2.5 million.

Deferred revenue at March 31 was 108.4 million, down 7% over March 31, 2008. As you know, we considered deferred revenue to be one of the best leading indicators of our business, and the decline is reflective of some of the challenges we are encountering in the marketplace.

Year-over-year comparisons for deferred revenue reflect the favorable impact of the acquisition of Jupiter Research, which was offset entirely by the adverse impact of foreign exchange. Our future AR balances are amounts to be invoiced in the future for clients with multi-year deals or scheduled payment terms.

Deferred revenue, plus future AR, declined 7% year-over-year. As we referenced in our earnings release this morning, given the nature of our business model, this decline in our deferred revenue will be reflected in our revenue numbers as the year progresses.

I'll now review Forrester's first quarter metrics. The agreement value; this represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized or is yet to be recognized, and was 201.9 million at March 31, a 3% increase from last year. At March 31, Forrester's retention rate for client companies was 73%, inline with our fourth quarter. And our dollar retention rate during the same time period was 83%, a one point decline from the fourth quarter.

Our enrichment rate was 101% for the 12 month period ended March 31, 2009, which is down one point from the fourth quarter. Client and dollar retention rates and enrichment rates are calculated on a rolling 12 month basis. While these metrics declined somewhat during the quarter, they held up reasonably given the economic turbulence. At the end of the first quarter, our total for client companies was 2,585 down 58 from year-end. As of March 31, there are 3.2 roles per client, up from 3.1 roles per client as of December 31, 2008.

For head count, at the end of the first quarter, Forrester had a total staff of 993, down from 1,048 at 12/31/2008, due to the impact of the previously announced reduction in force. Our current headcount includes the research staff of 389 and sales staff of 332.

The last topic I'd like to cover today is our business outlook for the second quarter and full year 2009. In summary, we've effectively managed our expenses and eliminated discretionary spending during the first quarter, allowing us to exceed our pro forma operating margin and earnings per share for the quarter. Our balance sheet is in excellent shape, which will allow us to be opportunistic in this market, pursuing acquisitions, new business and continued share repurchase.

We continue to remain focused on our role based strategy and have begun implementing the next key component of this strategy, repackaging which George will describe in further detail in his remarks. However in the near-term, our business remains challenged by the current economic environment as evidenced in our declining deferred revenue and other metrics and we remain cautious on our outlook for the second quarter and the remainder of the year.

Our pro forma guidance for the second quarter and full year 2009 continues to reflect our view that the economic conditions that prevailed during the last few quarters will continue for all of 2009. As a reminder our guidance excludes the following; amortization of intangibles, which we expect to be approximately $700,000 for the second quarter and approximately $2 million for full year 2009. And non-cash stock based compensation expense of 1.2 to 1.7 million for the second quarter and five to six million for all of 2009. Reorganization cost of 3.1 million related to the previously completed reduction in force and office space consolidation.

Costs associated with the stock option investigation and restatement of our historical financials and gains and impairments on sales of marketable securities and non-marketable investments.

For the second quarter, we're aiming to achieve total revenues of approximately 60 to 63 million. This range reflects a 1 to 6% decline versus prior year. Foreign exchange adversely impacts our year-over-year comparisons. On an FX neutral basis, revenues would range from down to 1% to up 4% versus prior year. Operating margin in the range of 19 to 21%, other income of approximately 800,000, our pro forma income tax rate of 40% and pro forma diluted earnings per share of approximately $0.33 to $0.37.

At this time, we are reiterating our pro forma full year guidance which is as follows; total revenues of approximately 215 to 235 million. This reflects a decline of between two and 11% versus prior year. On a foreign exchange neutral basis, revenues are between flat to down 8% versus prior year. Pro forma operating margins of approximately 15 to 17%, other income of approximately three million, a pro forma income tax rate up 40%, and pro forma diluted earnings per share are between $0.88 to $1.11. We have provided guidance on a GAAP basis for the second quarter and full year 2009 in our press release and 8-K filed this morning.

Thank you. And I'll now turn the floor over to George.

George F. Colony

Thanks Mike. And I'd like to welcome everyone to Forrester's Q1 investor conference call. In my remarks I will address three topics. Number one, how Forrester is managing during the recession, two a change in how Forrester packages its research and finally three an update on the company's three business imperatives.

Turning first to Forrester and the recession; as evidenced by yesterday's economic data, the recession continued in full force in the first quarter. Forrester estimates that text spending will fall 6% to 10% in 2009 with the largest impact felt in computer and communications equipment.

So, how is Forrester managing in these times; as Mike has highlighted the company is carefully watching and controlling expenses. Between a slowdown in hiring and the first quarter's reduction in force, Forrester is right sized for 2009's economic environment. The recession has impacted Forrester's sectors unevenly. While the business for IT and technology industry roles has decelerated, demand from our seven marketing and strategy roles be planned.

And this is due to three reasons. Number one, the Jupiter acquisition has enhanced our offerings for marketing and strategy roles. Two, much less competition in that segment as compare to IT and TI; and finally three, the marketing and strategy roles are markedly challenged in these times of social computing, the collapse of advertising and the movement of media from print to digital.

Our consumer data products had a good quarter as large companies shifted spending from custom surveys to Forrester's syndicated techno graphics research. As I've discussed on past calls the event's business is the most fragile product in our portfolio, being susceptible to teeny cut in terms of recession.

While we did contemplate canceling events for the year, we did not do so. And this has worked out well. While the events are certainly smaller than years passed with passed with careful expense control they are still profitable. Role relevancy is delivering high scores from attendees and we are continuing to build our events brand, and move that's going to pay off for us as the recession smoke clears.

We are also using this time to innovate. We have several internal efforts to create new products and services. And this is the strategy that we employed in the 2001 to 2003 recession, when we launched project consulting in our Forrester leadership boards and these are now significant revenue and profit contributors. So as the recession continues, we are staying disciplined, true to our role-based strategy, client focused and innovative.

Yes, this is a difficult time, but we are using it to build the foundation for strong recovery in the post recession era. I would like to turn now to the changes we are making in our research packaging. Now, you all know, the company is on a long-term voyage to become fully role based. That means going to market by addressing the challenges, decisions and lives of our clients in their individual roles.

Forrester is now opening a new chapter in the execution of the strategy by changing how our core research product is packaged. We are transforming role view into three discreet products, IT role view, TI role view for technology industry roles and M&S role view. The IT sales force at Forrester will sell, -- will exclusively sell IT role view to its eight roles.

The M&S sales force will sell M&S role view to its seven roles. And the TI sales force will sell TI role view to its four roles. All roles in each cohort will have access to all research within each product.

So, as an example an enterprise architect, who is an IT role view client, would have access to research teller (ph) to TI professionals and all research for the others seven roles in IT. This is a very important feature because the cohort roles share many of the same challenges in organizational imperatives.

Now to help clients that may have interest beyond their cohort of roles. We are providing several free insurance policies that will guarantee flexibility. Courtesy views and courtesy increase (ph). In addition, we are adding a new feature for all of our research called click-and-share. And this is a feature, which enables our clients to share a limited amount of content with their colleagues. And this is a feature which our clients have often requested.

So, why did Forrester undertake this packaging change; there are five reasons. Number one, to increase the relevancy of our research to its specific audience of roles; number two, to enable our clients to pay for just what they want and need, and no more; three, to specialize the Forrester sales force; four, to enable us to reach more roles within existing accounts; and finally number five to maximize the return on investment of acquisitions, while ensuring that only the roles that benefit from new acquired content pay for it.

Now this repackaging move has been planned for nearly 18 months, and it would have been impossible without our role focus. In our studies, we found that most clients rarely read research outside of their cohort of roles. And in these days of tight budgets, clients only want and should only pay for the research that is relevant to them.

I'd now like to give an update on Forrester's three business imperatives, and they are; number one, completing the build out of our role based strategy; two, growing our sales platform; and three, increasing the portion of business that is syndicated.

Turning first to our progress in role based. While there are certainly advancements toward roles on many fronts within the company, the biggest change is repackaging, which I've just discussed.

And this is a very important move because it further aligns our sales force with specific roles. It sharpens our research team's role focus. And it is a big jump forward in improving our relevancy. And a more big moves lie ahead on the role based journey but we're going to look back on repackaging as a major milestone.

Turning to the growth in our sales platform, our long term goal is to increase the size of the sales force by approximately 15% per year, a number that we achieved in 2008. As I reported in the last conference call, our plan is to hold the sales headcount constant through 2009 given the recession. As we've move deeper into the year we will be reviewing our sales headcount growth plans with the potential to begin growing again in the fourth quarter depending on economic conditions.

Our final business imperative to increase the quotient of our business that is syndicated what we call Q. As you know, we increased Q by two points in 2008 from 62% to 64% and as Mike reported our first quarter performance puts us on track to achieve at least another two points of Q in 2009.

We believe that the repackaging and research will increase relevancy and more relevant research will enable higher Q. So to conclude, while remaining disciplined in spending, Forrester is not standing still during this recession. We are making important changes in the business as evidenced by the move to IT, TI and MS role views. We have committed dollars, time and attention to innovating new products. And finally we are intensifying our efforts in mergers and acquisitions, proactively searching and inventing potential targets that will bring more content to our existing roles or bring us new roles.

The environment for acquisitions remains very promising. There are two dates to note, the Forrester Investor Day will be held in our offices in Cambridge on June 16th, from 9 AM to 12:30 PM with lunch to follow. Please contact our Investor Relations department if you'd like to attend. We will also be live webcasting this event.

In addition Mike and I'll be in New York City on May 27th, hosting a breakfast and a lunch with bedding and scattered (ph) at the Peninsula Hotels. Please contract Investor Relations if you'd like to join us for an expensive croissant or a cup of coffee. Thanks for listening to the call. I would now like to welcome Charles Rutstein Forrester's COO to join Mike and me for questions. We will now take questions.

Question-and-Answer Session


(Operator Instructions) Our first question comes from the line of Brian Murphy of Sidoti. Please proceed.

Brian Murphy - Sidoti & Co.

Hi, thanks for taking my question. George could you give us some color on how the repackaging initiative might affect pricing?

Michael Doyle

Brian, its Mike Doyle. I think I'll tackle that. It's our expectation that the impact for 2009 is going to be net neutral. As with every pricing decision, this one cuts across all three client groups. And so there is puts and takes in each of those situations. So it is included and was included in the guidance that we projected for full year in February and its our expectation this year is that there's going to be net neutral for us Brian.

Brian Murphy - Sidoti & Co.

Okay, and could you talk about the timing of when I guess this initiative gets launched or rolled out, so to speak?

Charles Rutstein

Sure, Brian. This is Charles. So this packaging is now in the marketplace for all contracts in Q2. In fact, we started at with new business deals at the tail end of Q1, so it's sort of from here on forward.

Brian Murphy - Sidoti & Co.

Okay, I mean I imagine that this kind of thing would certainly improve client retention and it seems like client retention held up pretty well in the first quarter. One question is how is the new business environment? Did you see any improvement there in the March quarter? And with this new repackaging initiative, have you seen any impact yet that you can talk about?

Charles Rutstein

Sure. So, lets only take those questions in sequence, it's Charles again. First with respect to new business within the quarter, I would say we were pleasantly surprised by the new business performance across much of the company. Previous downturns have made us concerned about what the new business performance might be, but in fact new business held up very well.

With respect to the go forward and what we expect on the new packaging and of course the pricing that goes with it, as Mike said, its net neutral for the year. But we think it gives us some real advantages going forward. It gives us the ability, first to differentially price by customer segments. And price as the market will bear in those respective segments. It allows us, as George mentioned, to monetize any acquisitions that we might do, rather than dumping it into the mix that everybody gets at the same price. It also allows us -- also as George mentioned to specialize the sales teams and therefore to make them more effective. So, I think you're going to see a lot of downstream impact from this.

Brian Murphy - Sidoti & Co.

Okay, thanks. I'll jump back in the queue.

Michael Doyle

Thanks, Brian.


(Operator Instructions) Our next question comes from the line of Vincent Colicchio of Noble. Please proceed.

Vincent Colicchio - Noble Financial Group

Nice quarter guys in a tough environment. Mike, can you remind us, how much of employee compensation is variable, so we can better understand your ability to withstand shortfalls in revenue?

Michael Doyle

Yeah, we haven't we haven't given a precise range Vince, but I want to say that it's typically if you weigh in -- because all Forrester employees are on a variable compensation of one form or another. For the sales employees it is commission based, for non-sales all of this are on what, its a matrix, which there's really two axes to that; one is, bookings activity and the other is operating profit.

So, and it works out. I want to say what we've said in the past, is that that can be in the neighborhood of, I want to say 10% plus or minus is variable. And it leverages up or down. But a figure in the range of 10% to 15%, is a good range to use. And that again fluctuates as bookings and operating profit. So, but again our broad range; if you want to look at all employees, if you go sales comp you can be as low as five to 10% as high as 30%, when you start going into what I consider the need of our employees.

George Colony

And generally speaking, the more senior the employee is the more leveraged they are.

Michael Doyle

And that metrics is paid in a quarterly basis, Vincent.

Vincent Colicchio - Noble Financial Group

Are there any -- regarding guidance for the rest of year. I could appreciate your interest in assuming the similar economic scenario to the 4Q period, and putting your guidance up out there, who knows what the economy holds. But it does appear to be bottoming out. It appears that it will bottom out through the rest of year if the consensus forecasts are right. Are there any reference we can take from previous recessions in terms of, during the bottoming out period your ability to see some improvement in top line?

Michael Doyle

I would say that well there are two pieces that impact our outlook for the year, the first is fundamental to our model, which as we -- George and I have been on the road a lot. We've talked about the nature of our deferred revenue model where effectively we look better in the beginning parts of our recession. And typically, the P&L itself looks a little bit worst for us as we come out. Because if you think about our fourth quarter deferred revenue was down year-over-year, and our first quarter, it's down year-over-year. That will play out in the P&L going forward. So that factored into looking at our full year guidance.

And the second piece is, it's just is -- somewhat unique economic circumstances. So, we're only through the first quarter, and we are cautious. And I think we want to see how it plays out. And I think we saw some things that were positive to the points Charles mentioned relative to new business. And that certainly is encouraging for us. But you look at our consulting revenues were off and down year-over-year, and that will have an impact. So, it's difficult to predict when that's going to comeback.

So, I think we remain cautious for the balance of the year for those reasons. We'll certainly be looking at guidance and updating everyone appropriately on each of the calls. We'll have a better peek -- and I know I'm stating the obvious we'll have a better sense for 2009 as we close out the second quarter, and have a better sense of the balance of the year. Yeah, it feels like things are beginning to bottom out. But again, keep in mind, because our model that will lag for us. So if we have a good and strong third quarter and fourth quarter from a bookings perspective, we reap the benefits of that more into 2010.

George Colony

So, we go down we go down later than everybody else, we also come up later than everyone else. And that's what happened in the last recession.

Vincent Colicchio - Noble Financial Group

Okay, thanks. One other question, Mike, what should we be modeling for capital spending for the year?

Michael Doyle

I'm still comfortable being in our historical ranges of around five million plus or minus. We had -- obviously, the first quarter was higher than it typically is, because of series of lease hold improvements that occurred with our facility here in Cambridge. But I think the full year five million plus or minus is reasonable Vince, I don't expect us to be outside of our norm.

Vincent Colicchio - Noble Financial Group

Okay, again nice quarter guys. Thanks.

George Colony

Thank you.


(Operator Instructions). Our next question comes from the line of Laura Lederman of William Blair & Company. Please proceed.

Laura Lederman - William Blair & Company

Yes, good morning. Thank you for taking my questions and nice quarter considering the environment. Can you talk a little bit about acquisition prices and are they coming down or is there still sort of a disconnect between what companies think they are worth and the reality to the market?

George Colony

The emotions in -- of sellers are so strange Laura, because now they are thinking is gee, I'm not going to sell when the price is low. So, I don't think full desperation is really has really hit these guys yet. And for some it may never hit during this recession. But I would say that when we're nearing let's say reasonable pricing at this point, I'm not saying we're going a deal next week. But I think that we are attracted to the pricing of this point. We're getting to a good place.

Laura Lederman - William Blair & Company

Switching gears a little bit, turning to the drop and deferred year-over-year. What does the drop look like if you take out Jupiter. So, sort of the same store stand -- same store sale sorry about that?

Michael Doyle

Yeah, what's kind of interesting Laura, -- its Mike. What's interesting is that the effect of Jupiter which was favorable was basically offset by foreign exchange which year-over-year adversely impacted us. So, what you get is pretty close to what we would consider to be a real sort of Forrester ex-Jupiter number when you look at the absolute. So the 7% decline that we gave you is pretty darn close to what it would've been if we didn't have Jupiter and foreign exchange were neutral.

Laura Lederman - William Blair & Company

Okay so, what is the FX and -- cap (ph) what was it?

Michael Doyle

It's about four points.

Laura Lederman - William Blair & Company

Okay, moving along if you look at the core research versus boards which one is holding up better in terms of new -- not new customers but bookings if you will?

Michael Doyle

For bookings activity well its obviously, we don't disclose, but, I would say overall our core research, they both were, what I would call single-digits. So, I think that the range is dramatically different than what it's been historically. I think historically we had this dramatic up we've had a consistent and very dramatic uplift, high double-digits for our board business. And that -- that slowed and I think that's just again a reflection of George's what I will say prophetic vision about what Q1 would bring in terms of projections.

So, the -- I think that we're looking at the numbers that have shrunk pretty much down to what I'll call single digit movements down. And I think that's again they've stayed into pretty tight band. So, they're moving more closely in parallel than they have historically where FOB was typically growing at very aggressive rates.

Charles Rutstein

Hi Laura, may be just couple of other comments; this is Charles. Number one, is of course the FOB business is now a much more substantial portion of the overall P&L. And so you start to see dynamics, on a percentage basis that will look more like the role view one and they (ph) ever did before, you can't continue those 14 or 15% growth rates forever as the business scales.

Second bit is that obviously the boards are a very personnel product. And so you see some discount annuities in the numbers I think in times like these, because you have a lot of turn over in staff, you've lay offs and so forth across the economy. And when somebody loses job there who is in a board you'll see the impact there much more quickly than you might in a traditional research seat which can be easily transitioned to somebody else. So I think you're seeing some of those dynamics in the numbers, is what Mike said may be similar behavior in the quarter.

Laura Lederman - William Blair & Company

Another quick question and then I'll pass it on you guys. Be it obviously revenue earnings expectations or rather dramatically and obviously you didn't raise full year guidance. So, I was wondering did we all kind of get the ratability wrong or had you just been really-really conservative for Q1. Because you knew when went into it that obviously the impact of just sort of going down would have a delayed impact as you explained are -- a few moments ago. So I was little bit wondering about not changing the year and yet Q1 with so much better?

George Colony

Yeah little bit of conservative in there. I think what surprised us was new business as just Charles addressed. I mean the M&S did business and IT new business actually quite good in the quarter, and we had not expected that, Laura. So, let me get a little conservative here, but some surprises as well.

Michael Doyle

Yeah, and I would reiterate what George is saying Laura. I think that yes, we were conservative going into the first quarter because of the dramatic nature of what was happening externally. And so, it was a very difficult to predict, where some very highly variable components of our business like events and consulting would fall out. Event seems to be playing out sort of as we expected, although credits and events seem its still remains profitable.

Consulting, which half way through the quarter, looked really bleak picked up towards the end. So, we felt good about that. But again there's still enough uncertainty externally that it makes it difficult to predict. So I'm with George. Were we a little conservative, absolutely. Are we still a little conservative, absolutely. It's just a its a different environment right now and I think we're again this is a mixture of good news and certainly some yellow lights flashing as well. So, we get a little bit above.

George Colony

You know the another area Laura, where it might have been a little too conservative was -- you all don't see this but the repackaging was a huge effort internally. There was re-training of sales that went on in Q1 and there was a tremendous lot of resources headed in that direction and I think we may be overestimated the impact there.

Laura Lederman - William Blair & Company

Final question which is for your George...

George Colony


Laura Lederman - William Blair & Company

You've been very accurate on the economy when it going to weaken and so I'd love to ask to you when you think it's going to improve and the same thing for the IT spending?

George Colony

I think, it's going to be a...

Laura Lederman - William Blair & Company

When we look to your numbers that you've been very prophetic?

George Colony

By the way I want the Noble prize in economics, so -- I think that -- I'll be quiet -- our major economist internally is Andy Bartels and I we spend a lot of time in the last (ph) day or so. Its going to be a tough year in tech, I mean its reached six to 10% down in tech spending worldwide. That's in dollars and that's really quite a bit below how far tech was off in the 2001 and 2003 recession. So, that's -- those are big numbers.

And that all being said we had a marketing forum last year -- last week in Orlando and I mean, this is a very impressionistic Laura, but the vibrations that I'm feeling and the signals that I'm hearing is I think we're near the bottom here. It just feels like there's some stabilization out there. I was with Zales (ph) I was with a number of our clients in the consumer space last week who were feeling a little bit more hopeful. Chico's, some of the departments was Brook Spells (ph) et cetera and so they are feeling a little bit better.

So, I at least just too impressionistically think that we've reached the bottom end now. I don't think its -- we're going to get roaring back here. As an economy I think its going to be a tepid recovery. May be that we get 1% growth in GDP in the fourth quarter something are like that and then may be next year 2.3% which is worldwide GDP growth is very low. But I -- the good news is I think, we've reached the bottom and now it's kind of a period of stabilization and then slow growth.

Laura Lederman - William Blair & Company

Thank you.

George Colony



And there are no further questions in the queue. I would now like to turn the call over to Ms. Levinson.

Karyl Levinson

Thank you very much for joining us today. Have a good day.

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