Factset Research Systems Inc (FDS) 2002 Q3 法說會逐字稿

Ladies and gentlemen, please continue to stand by, your conference will begin momentarily.

Once again, please continue to stand by.

Ladies and gentlemen, thank you for standing by.

Welcome to the Sacramento FactSet Research Systens third quarter conference call.

During the presentation all participants will be in a listen-only mode.

Afterwards you will be invited to participate in a question and answer session.

At that time, if you have a question, please press the one followed by the four on your telephone.

As a reminder, this conference is being recorded Tuesday, June 11, 2002.

I would now like to turn the conference over to Mr. Ernest Wong, Chief Financial Officer.

Please go ahead, sir.

Thank you.

Good morning, ladies and gentlemen.

I would like to welcome all of you to our conference call.

Phil Hadley, our CEO and Mike DiChristina our President are here with me today in our Greenwich office.

Before we begin with the review of our operating and financial performance for the third quarter of our 2002 fiscal year, let me first attend to some legal formalities.

Throughout this conference call, there will be certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

These statements are based on Management's current expectations and beliefs and are not guarantees of future performance.

And involve certain risks, uncertainties and assumptions which are difficult to predict.

Therefore, actual results may differ materially from what is expressed or forcasted in such forward-looking statements due to changes in economic business and or competitive factors.

More information about these and other potential factors that could effect FactSet's business and financial results are in FactSet's annual report on Form 10K for the year ended August 31, 2001 and quarterly reports on Form 10Q for each of the quarters ended May 31, 2001, November 30, 2001, and February 28, 2002.

All of which are on file with the Securities and Exchange Commission.

FactSet undertakes no obligation to publically update any forward-looking statements as a result of new information, future events, or otherwise.

I'm delighted to report to our shareholders that FactSet achieved another record quarter in revenues and profits for the fiscal third quarter of 2002 which ended on May 31st.

Revenues rose 15 1/2% to $52.4 million.

Operating income advanced 24.1% to $16.1 million, and net income grew 20.8% to $10.4 million, yielding an EPS of 29 cents, up from 25 cents in the third quarter of fiscal year 2001.

For the first nine months of the fiscal year, our financial performance also showed comparable results.

Revenues increased 17 1/2% to $151.8 million.

Excluding nonrecurring items recognized in earlier quarters, operating income rose 21.9% to $45.5 million.

Net income increased 18.8% to $29.3 million, and diluted earnings per share advanced from, advance to 84 cents from 71 cents for the same period a year ago.

As you're all aware, the global financial markets continue to be characterized by a fair amount of uncertainty during the past three months.

Rationalizations, among a number of our investment banking clients, resulted in a small reduction in total client work stations for the fiscal third quarter to 21,900 work stations as of May 31st compared to 22,600 work stations as of February 28th.

Nonetheless, we continued to maintain our better than 95% retention rate and expand our market presence with an addition of 19 net new clients during the quarter, bringing our total client count to 899 as of May 31st.

Commitments totalled $213 million at the end of the quarter, an increase of 14.7% over the past 12 months.

This translates to an average commitment of $237,000, up from an average of $230,000 a year ago.

As a reminder, we define client commitments as representing forward-looking annual revenues from all services currently being supplied to our clients.

Revenues from our domestic clients grew 15.7% to $42.3 million for the quarter.

Largely from continued penetration of the investment management market.

Incremental subscriptions to databases and applications, as well as additional clients fueled this growth.

Demand for our portfolio analytics applications continued to increase.

And at the end of the fiscal quarter, there were 310 clients representing 2100 users who subscribe to these services.

This compares with 240 clients and 1700 users a year ago.

As we noted in the last quarter, the growth of our international operations has similarly been impacted by the continuing volatility of the international financial markets.

Total international revenues rose 15% in the quarter to $10.1 million.

By region, revenues from our European and Pacific Rim operations grew 17 and 8% respectively.

International commitments now total $41.2 million, representing 19% of our total commitments.

On the expense side of the P & L, we have focused much attention on our cost structure to sustain our level of profitability.

The net result is that our operating margin has actually increased to 30.8%, up from 28.6% a year ago.

Cost of sales as a percentage of revenues declined 190 basis points compared to the fiscal third quarter a year ago, largely due to decreases in clearing fees, depreciation on computer-related equipment and computer maintenance expenses as a percentage of revenues.

The decrease in clearing fees and computer maintenance expenses have been the result of successful renegotiations of our vendor agreements.

Partially offsetting these improvements were increasing, increases in data costs.

Depreciation on our computer equipment has remained relatively flat due to the lower level of CAPEX spending this year.

Selling, general and administrative expenses, as a percentage of revenues declined 20 basis points for the quarter, relative to the same period a year ago.

Improvements in travel, promotion and professional fees were largely offset by increases in occupancy expense and miscellaneous fees at a percentage of revenues.

With respect to capital spending, the Company's capital expenditures totalled $2.3 million for the quarter and $7.1 million for the first 9 months of the fiscal year.

A little over half of the funds have been used so far to purchase equipment for our data centers and communications network.

The remainder has been used for acquiring furniture and funding leasehold improvements for the expansion of our global facilities.

Our CAPEX forecast for the full year continues to remain at approximately $15 million, and most of the remaining $7 million is earmarked for upgrading equipment at our data centers.

In this morning's press release, we also announced the initial limited release of Marquis.

A new application on FactSet that provides streaming real time use end quotes.

We believe that Marquis will further enhance the importance of FactSet to our clients, especially those who value the ability to integrate real time data with our traditional functionality.

As we indicated in the press release, Marquis is initially being released to a limited set of client users, with a gradual roll-out throughout the remainder of this calendar year.

Economic and market conditions have made the business environment particularly challenging over the past year.

We believe, however, that the results of our performance this past fiscal quarter, once again, demonstrates the strength of our business model.

The profitability and cash flow generated from our business remain very strong, and have allowed us to continue investing in technology and product development throughout this difficult period.

Our pipeline of new products and enhancements, such as Marquis, should position us favorably in the market place as the economy improves.

Last quarter, I concluded my prepared remarks with a review of some of FactSet's most basic policies and positions.

I believe that it doesn't hurt to repeat these policies, especially in light of the continuing turmoil and sensitivity in corporate America today regarding accounting practices and disclosures, off balance sheet transactions, conflicts of interest and the like.

First of all, as I've mentioned regularly in the past, the accounting policies we employ at FactSet are very conservative.

As you are aware, we utilize a subscription based revenue model.

Revenues are recognized as they are earned and billed in arrears.

We don't capitalize any software development costs, and all of our technology assets are depreciated over a three-year period.

Other than real estate, all of our assets are owned.

We have no other operating leases, nor do we utilize any other off balance sheet vehicles.

We don't utilize any derivatives or any complex trading instruments.

The investments that you see on our balance sheet consist solely of highly rated fixed income securities with a maturity greater than 90 days.

As you know, we have no debt, and our off balance sheet liabilities are limited to a number of stand by letters of credit.

We have a simple corporate structure consisting of six subsidiaries all of which are wholly owned and consolidated in our financials.

We have made only two acquisitions in our nearly 24 years of operation and both of those have been fully disclosed.

Our outside audit firm, Price Waterhouse-Coopers does not perform any consulting, corporate tax work or internal auditing for FactSet.

Several years ago, we made the decision to have the tax compliance and tax planning activities to be performed by another Big Five firm.

And this separation of activities, I believe, has served the Company well.

We do not retain or utilize the services of any firm affiliated with our board members.

And finally, as many of you are aware our business model, historically has provided excellent visibility.

We don't see any reason why that should change in the future.

The growth of our revenue and earnings streams is consistent and not subject to great volatility.

The result is that we have a very strong balance sheet, and a great franchise.

At this time, we welcome any questions you might have.

Ladies and gentlemen, if you would like to register a question for today's question and answer session, you will need to press the one followed by the four on your telephone.

You will hear a three-tone prompt to acknowledge the request.

If your question has been answered and you would like to withdraw your registration you may do so by pressing the one followed by the three.

If you are using a speaker phone, please lift the hand set before entering your request.

One moment, please, for our first question.

Peter Apert from Deutsche Banc, please go ahead with your question.

Hi.

Good morning, Ernest.

Actually I have two questions.

Number one, I think you or Phil outlined on the last call a strategy to migrate the lowest price point product up to a higher price point.

And I was just wondering if you could review with us sort of the dynamics of that process.

Where you stand in that, sort of the mix of business and what the new entry price level is.

And then two, any incremental insights you can offer on the Marquis product in terms of pricing, the timing of the broader rollout and how significant you see that in terms of being a potential driver of revenue growth over the next 12 months?

Thanks.

Good morning, Peter, it's Phil Hadley.

Hi, Phil.

Just to review, you know, the pricing effects, that, in, I'll speak in cash terms, it's the most common for our client base.

We started selling a premium work station, a work station we called a premium work station, three years ago at $5400 that had an enhanced set of services in it.

For a smaller client with fewer users that actually is a lower priced product.

Meaning that we forgo some of the access fees that we would charge for that typical client.

At the beginning of this year, we instituted the policy that all current clients, in addition to what had been all new clients, that that's the only work station for new work stations available.

They can continue to subscribe to the old work station that was $3240.

In that premium work station is included the Marquis product.

Okay.

It is part of that product.

It obviously hasn't been there historically.

There have been other value points.

That was why it was really an optional choice up until that point.

So going forward it's really part of that strategy.

As far as where we are in the client base at this point, I don't think we have chosen to actually disclose how many clients choose, have chosen one work station or the other.

Our intention is at some point in time in the future all 20 some thousand work stations would have this product.

But at the moment, if I'm setting up as a new user today I have to take the $5400 product?

If you were a client, and no longer, never subscribed to FactSet, your third work station would be a $5400 work station.

Right.

Ok.

But an existing client who has $3200 stations can still buy at that price point?

They could not buy a new work station at that point, but they can continue to have the ones they have.

I see.

Has that strategy, can you speak to any higher level of client attrition because of that?

None to my knowledge.

I think it's one of those things where, you know, our philosophy has always been not to use price as a mechanism, try and use value as a mechanism.

In this particular case, you know with the release of Marquis and, you know, the additional functionality that a client is able to get in the product, it is a better deal for the client.

Then lastly, Phil, how significant do you view the Marquis product?

It does move you into a different nitch here in terms of who you are competing with.

Well, as Ernest illustrated, it's something where, you know, you need to walk before you can run.

We're being very cautious in making sure that we release a product that matches our cliens expectations.

It's one we felt for a long time and had been requested by our clients we add that functionality to the user base we already have.

It is not a replacement for a, you know, a trader.

You know it's definitely targeted towards the analyst and portfolio manager and our current client constituency.

But, obviously it's something we've made an investment in and feel will enhance our position in the long run.

Right.

I think it will open us up to seats that weren't available to us before.

Right.

Great.

Thank you.

James Wright with CS First Boston.

Please go ahead with your question.

Yes.

Good morning.

Of the 19 new clients added this quarter, how many were from the financial or investment management side of the business?

And also to split it another way, how many were domestic versus international?

And then secondly, can you comment on how your nonfinancial clients, meaning, excluding investment banks and buy side, how they are doing in the current market and what trends you are really seeing in terms of pass words and product penetration?

I'll take the first part of your question with respect to the 19 net new clients that we had.

The bulk of them were by region in the United States.

We had roughly a third of them coming from overseas.

By type of clients, probably three-quarters of them were investment management clients.

Which would be roughly the profile of our client base today.

And then in terms of your, you know the nonbank clients, any comments there on forward trends?

For us that's really not a material part of our revenues.

I mean, if you are referring to nonbank, noninvestment management, noninvestment bank, that's less than five percent of our total revenues.

That includes institutional as well?

The corporate side?

Correct.

Correct.

Thank you.

Douglas Arthur with Morgan Stanley, please go ahead with your question.

Good morning.

It's actually Craig Huber.

A few questions.

First you guys have that 120 million in cash and cash equivalents on the balance sheet.

That's up from 95 million three months before.

What's sort of your plan for that?

You guys look forward for the next 12 months.

And then also, could you guys give us the number of employees, sales and marketing personnel and also the number of consultants you guys have on hand?

Thanks.

I guess cash is good.

We don't have any plans for our cash, but other than to continue to invest it.

And, I mean we are opportunistic when it comes to opportunities and if something makes sense, we'll do it.

But at this point, there are no stated plans for our cash.

As far as the sales and marketing ploys, Ernest?

In terms of the sales and marketing employees, looking at the last quarter we've got roughly 272 employees that are in sales and consulting.

Is it possible to break that apart?

Or no?

There were about 74 in sales, the remainder in consulting.

I'm sorry, back up.

Sorry, I'm looking at the wrong column here.

There were 110 sales and 211 consultants for a total of 321.

Okay.

Then I guess the final question.

Just going back to Marquis.

You guys thoughts as you look out over the next 12 to 36 months with the Marquis product and the real time stock quotes and news wires and so forth.

Do you envision a migration of people that would have your existing FactSet product and also have any bridge or iox potentially dropping the separate quote system and be able to use your FactSet product as well as the analytical abilities?

Is that kind of the goal here?

I think it's certainly a possibility for some clients depending on what their user profile is.

You know, it's not going to be the equivalent functionality, but in many ways it will have some functionality that is very unique in the market place.

I have not actually seen the product yet, at least.

But do you envision for the average buyer sell side analyst that it would have the minimum functionality that you would need so you wouldn't need an iox or bridge on your work station?

Or do you think that's a couple versions later you may get to the level?

I think it really depends on the user.

That's a very personal thing.

I think it's unrealistic to believe that we could build something that would replace every feature of products that have been in the market place for 20 or 30 years.

But, I think we can certainly attack the major value points that exist.

For certain profiles, I think we will do well.

For others, we probably won't.

But, you know, it gives us opportunities to go forward.

Great.

Thank you.

Brett Manderfeld with US Bankcorp Piper Jaffray, please go ahead.

Good morning Phil and Ernest.

Just so I completely understand the Marquis product.

The premium product is $5400.

Right now I think you mentioned that, Phil.

Will the Marquis product, will there be incremental costs above and beyond that to turn that system on, or is that included as part of the premium package?

Right now it's included as part of the premium package.

Obviously with the exception of exchange fees which are normal in the industry to be outside of the cost of the product.

And that's, you know, for the data, right now we have a domestic U.S.

Quote system.

Whether the global version of it is slightly different, we haven't gotten that far yet.

Is it fair to assume that we shouldn't be modeling any incremental revenue for next year from Marquis or do you plan on changing the pricing strategy?

No, I mean, really the strategy is the $5400 work station.

$5400 bucks.

Migration of the clients from the $3240 or where ever they are to the $5400.

How many are still yet to change?

Do you have about half or is it pretty equal?

Can you comment on that?

We haven't commented on that at this point.

I guess, final question on the Marquis.

Any new content partners that you have added as part of this package?

Um, actually, no.

I mean, we've been in, I mean we've had delayed quotes on our system in a product we called Market Monitor probably for the last five years.

We already have, you know, Dow Jones as part of the package and First Call Notes and many of the news letters already built into the package.

Maybe one final question for Ernest.

Great to see the gross margin continuing to expand.

Is there more room there to renegotiate vendor agreements?

I think you mentioned clearing fees and maintenance.

Is that the plan still or should we expect stable gross margins where they were the last couple quarters?

Thanks.

I think as we indicated in our guidance that the margins are probably be stabilizing at around the 30% range.

Okay.

Thank you very much.

Dewey Toma with Boston Partners please go ahead with your questions.

Hi guys.

Just a couple of questions.

First one is, just wanted to talk about the revenue growth.

It looks like it's been coming down.

Last year it was in the 30's and it's trended down, year-over-year growth.

Based on your guidance on the high end we are looking at 14.7% which is even more deceleration.

On the low end it's 10 percent.

So I'm just wondering what you are looking at for say a two to three-year revenue growth number?

And, how do we get there?

Um -- I guess I can try to answer the question in two parts.

One is really a macro factor for the market.

We are part of the financial community.

Our clients are affected by how the financial markets are doing.

So our opportunity certainly reflects sentiment and trends in the marked place.

You know, we've been in a tough market for at least a year now.

Your guess is as good as mine whether it's going to last another year, or whether it's going to last another six months.

I don't honestly know the answer to that.

As you can see, you know, when you are really looking at the quarter, two quarter numbers and, you know, it's been within a pretty tight range, pretty stable for the last year.

We have kind of found our current nitch based on the conditions of the current market place.

Our strategy has been to continue to reinvest heavily in the product.

Whether a good market or bad, you know, it's incumbent upon us to deliver value to our clients.

So almost every one of our product lines has gotten enhanced.

Whether we continue to add content, Marquis is a large investment for us.

Portfolio analytic products.

We have 100-plus databases and probably another dozen applications and have a product, you know going after investment banks, as well as investment managers.

We attack the market place from every dimension that we can find.

And believe that the best thing we can do is position ourselves for growth in the future.

So I think for me, you know, I can continue to execute on the products that we can produce and the value we can deliver, and the market place will give us what it's able to give us.

But, I think at this point, it's as much a macro, what's the market going to be in two to three years than it is what can we deliver at a product.

I do feel very comfortable that we've made some very good investments to put us in the best position possible.

Just a couple quick things.

How much of your revenues is from investment banking?

Roughly a quarter. 25 percent.

And what is that versus last quarter?

It's been pretty stable.

So it's been about 25 percent.

Okay.

The number of users has declined.

Any -- do you guys have any visibility on where that trend is going to go?

Um, I mean the vast, vast majority of the user change has been in the sell side, even particularly in the investment banking area.

You know, that, again, is whatever the right population is for investment banks going forward.

You know, somewhere between one and four and one in three investment bankers aren't working for the firms that we sell our product to anymore.

At this point, at least from our perspective, of which obviously they run their own businesses, every one of the banks has gone through, you know, some kind of downsizing or readjustment in the size of their user base.

Up until last quarter there still had been a few that held out a little bit.

So whether there are more rounds to come, that's really something that is beyond our control.

But, you know, we continue to have very strong relationships in those areas.

It's really just a head count decision on their part, and do well when they hire people and we don't do as well when they fire people.

But, they are hiring for the summer.

So, you know, we'll probably get some users back in the summer.

Whether they stay or not is up to the market conditions.

OK.

That's all I had.

Thank you.

Steve Gay with Thomas Weisel Partners.

Please go ahead.

Good morning guys, good quarter.

Can you comment on what's going on with Lionshare and the Spar products, what the uptake looks like there?

And who's buying that product?

What's your target market there?

Well, they are two very different products and where they focus in the market place.

Those products, I'm sorry.

The Lionshare products, a subset of that is actually available in the premium work station which is a benefit to all.

I continue to call it premium work station the normal $5400 work station the clients subscribe to.

The clients who are subscribing to the enhanced level of service are primarily the sell side firms and actually some clients that are out of our traditional client base on a more redistribution level.

It's certainly matching our expectations, if not exceeding where we thought it would be at this point.

The Spar product just got a new enhancement that really changes its functionality in the market place, manager versus peer universe.

Which takes the opportunity for that product and, triples, quadruples, really changes it to be a product that is very important.

That's primarily in the marketing client service component of a large investment banker.

Okay.

On Marquis, can you talk about, do you discuss this -- how do you pitch this on a total cost of ownership basis to potential buyers?

And also, does the fact that you provide a hosted solution, whereas some competitors do not, does that factor into how you pitch this to clients?

Well, it's a little early for us to know exactly how things are going to play out based on some client preferences.

But from the research we have done so far, we have a pretty elegant solution.

Actually, Mike, it's probably easier for you to describe this than myself.

Sure.

The Marquis application is a separate stand alone application that runs on user's pc and works in concert with directions.

So it's from the user's perspective they'll have two applications running.

We pass that back and forth so one can be doing, looking at a ticker list in Marquis and click on a ticker symbol and go into our company explorer product for example.

Additionally, any client that subscribes to our data warehousing capabilities, specifically within the portfolio managers' work station product where they have already a process each night to upload their portfolio holdings to our system will automatically be able to generate real time portfolio contributions to returns.

So there's a lot of value there in the synergies between Marquis and directions.

From from a technological perspective, we will probably see some of our smaller clients not have to install any FactSet hardware at their site, as you say, the hosted solution.

So the price value is going to be very high.

And in some cases we're going to be able to go side-by-side.

People will be more willing to test our capabilities without having to make any kind of investment in any kind of hardware infrastructure to see how FactSset does.

As they expand the presence of Marquis within the given client, we do have the opportunity to install our own site servers there and behave more like a traditional quote "vendor".

We have beta tests going out at a broad base of clients testing both of those technologies as we speak.

So, we're a, you know there's a lot of pent-up demand for it, and people are very, very excited.

The a, what we have to do is, we have to come through and prove to our clients that we do have the wherewithal to have a top-notch quote system that does not go down, and it is reliable as more traditional quote systems that are out there.

Hence, during the summer we are being fairly cautious, having a minimal roll-out keeping it down to a couple of dozen different clients and a relatively small number of users.

And if we do have success, we will, in the fall start to accelerate the process.

But we're going to be very, very careful going forward.

We have our, a very good reputation on the user community of being a very stable system, but this is an advancement in the technology and we have to make sure we know how things work before we really dive in.

Okay.

And Phil, on the user base, you commented on the sell side.

Can you comment on what the user base characteristics are currently on the buy side?

Um, it's actually, I mean, compared to the sell side, they're completly different.

It's really pretty stable.

There are some of the larger clients that have done some adjustments.

I would classify that almost more as fat trimming as opposed to population changes like it is in investment banks.

But, at this point it's kind of hit a normal stride like it had in previous times.

Okay.

Allright.

Thank you very much.

Alan Fornier from Penant Capital Management.

Please go ahead with your question.

Thank you.

Good morning.

Could you help me understand your depreciate line?

Have you changed any depreciation policies this quarter?

No, we haven't.

How is the depreciation dropping sequentially?

Reasonwise, depreciation has dropped simply because we depreciate our equipment fairly rapidly.

Our technology equipment gets depreciated over a three-year time frame.

Quite frankly our CAPEX has slowed down this year.

The source of the reduction.

If I look at your CAPEX over the last three years the bulk of the CAPEX is in the '01 year.

I think it just means that three years ago, in this quarter, we spent less in CAPEX than we spent this year, this quarter.

The other way around. [ laughter ].

We spent more three years ago at this time on CAPEX than we are in this quarter.

Okay.

Thank you.

Dave Faxel with Elm Ridge Capital Management please go ahead with your question.

Hi.

Most of my questions have been answered.

But, it seems like you are doing a great job on the operating and the gross margin side.

You said part of that was computer maintenance costs.

Can you sort of give the amounts there and sort of discuss how you are able to achieve that?

We have not disclosed the actual amounts, but what I can tell you is that we did work with our vendors in renegotiating the base contracts and were able to, essentially get a reduced rate for our basic maintenance for the larger machines.

What exactly is this?

Is it an outsourcing contract, what exactly the nature of the costs?

There's are contracts, maintenance contracts for our main frames, largely.

And this was renegotiated this quarter?

Um -- in the past year, basically.

Right.

And -- well, what are the other benefits you were mentioning?

You mentioned depreciation, you mentioned computer maintenance.

And clearing fees.

Clearing fees.

Right.

Okay.

And that was also something this quarter that changed this quarter versus previous quarters?

That's right.

OK.

Thanks a lot.

Ladies and gentlemen, as a reminder to register for a question please press the one, four at this time.

Daniel Paris with Argus Research, please go ahead with your question.

Good morning.

Congratulations on yet another good quarter.

I would like to circle back to the question before the last one concerning the capital expenditures.

If, indeed capital expenditures are moderating and have over the last four quarters, it looks like you have about an $8 million capital expenditure, 7, 8 million left this quarter to eat up the $15 million in guidance that you provided.

Is there something there beyond just regular maintenance of and replacement of equipment?

It really is the latter.

There's replacement of some of our disk storage at both of our data centers.

Mike, perhaps you might want to talk more about that.

Yes.

For the last year or so we have been doing some research on how to improve the scalability of our system as we get more and more users on the system, more clients.

We identified as the disk io subsystem as a potential bottleneck for our growth.

So we've done some research on storage area networks to improve the scalability.

And we are just about done with that research.

Hopefully we will be making a decision here over the summer.

And it's going to be a multi-million dollar decision for us to roll in new some hardware on the back end and improve scalability.

In all likelihood we will have a multi-million dollar decision this summer that would account for most of that.

The rest of our budget with respect to CAPEX for FY '02.

You would be, if a decision's made this summer, though, would you be actually writing the checks before August 31st?

Yes, we would be.

Okay.

Thank you guys.

Yep.

Douglas Arthur with Morgan Stanley, please proceed with your follow-up.

Craig Huber.

Back on CAPEX if you are going to do roughly 15 million CAPEX this fiscal year, would you envision it jumping quite a bit in '03 or '04 as you have to replace some of the higher end pieces of equipment?

And I have a follow-up question.

I think our CAPEX levels are probably not going to deviate dramatically from where they are this year.

So as you guys look out a couple years you would not expect it to get back to 30 million like you had in '01?

Any time real soon?

I don't anticipate that.

The other follow-up question has to do with the seasonal patterns.

I mean, every year, obviously onto Wall Street a ton of MBA undergrads get hired on full-time.

You allude to Phil, they may not hang around long this year.

What is your current expectation what the hiring expectation would be this summer for full-time employees versus prior years?

I mean you usually get a nice seasonal bump of a couple thousand users and it kind of migrates from there.

Thanks.

I wish I could tell you I had a good answer for that.

The banks have been holding their cards pretty close to their vest this year.

But I just -- just from -- it is the season right now for the hires to start to come on.

I have seen some of the banks start to add them on.

You know, you guys actually sit in a much better position than I do working for investment banks to be able to answer that question, what your populations are going to be.

It seems like it's just a natural requirement to bring in the new clients.

You can't have an empty class.

So, you know, I think most of them have gotten to the right staffing levels, but you probably have a better feel for it than I do, honestly.

I just wanted to get a sense from the other investment banks on the street. [ laughter ].

You are requesting the questions for everybody else?

We could do that, huh, aggregate it all.

Is your sense, though it will bump along at the bottom here, the environment on Wall Street that you guys are selling into here?

I mean, that things aren't accelerating to the down side at least?

I have been pleasantly surprised they have not had a massive round of layoffs here on the sell side you know so far this spring.

Would you sense that we're just sort of bouncing along at the bottom here?

Yeah, I guess if I had to characterize it, it kind of seems like that.

Seems like that, it's really kind of been like that for the last six to nine months.

You know, I hope that's the answer.

But, you know, I'm pleasantly surprised that, you know, we report the net 19 which means that we are positive 19 clients.

We certainly have, you know, churn at the bottom end of the market where firms are going out of business, or, you know.

I think Enron probably was two or three clients directly and indirectly.

So, you know, on a quarterly basis we are probably still adding, how many -- you know, quite a few more clients than the 19 which just shows, you know, the need for our product in the market place and, you know, it's a tough environment and they are still stepping up and making major purchase decision.

And I think that it bodes well for us as I look forward.

And then final question.

How many undergraduates facts are you guys hiring starting this summer?

What's that number versus a year ago?

Thanks.

I think with respect to consulting class, we are going to be bringing in roughly 20 people this summer.

And on the engineering side, I think it's a net of about 25.

I don't recall off the top of my head what last year's numbers were, but I can get back to you on that, Craig.

Great.

Thank you.

Brian Nygard with Thomas Weisel Partners, please go ahead with your question.

Yes.

Just one housekeeping item.

Given the DSO's came in really good, 54 days in the quarter below your historic range of 64 to 70 days.

Where should we look for that number going forward?

I am hoping to keep the DSO number relatively constant.

So hopefully not back to the 64, but it may go up or down a little bit from where we are right now.

Okay.

Thank you.

I'm showing no further questions at this time.

Please continue with your presentation or any closing remarks.

Great.

Thank you all for listening in.

And, as usual, if you have any additional questions, feel free to give me a call directly.

Have a good day.