Factset Research Systems Inc (FDS) 2002 Q4 法說會逐字稿

Good morning, all participants for the FactSet Research Systems please stand by your call will begin shortly.

Again, please stand by.

Your call will begin shortly.

Ladies and gentlemen, thank you for standing by.

Welcome to the FactSet Research Systems third quarter conference call.

During the presentation, all participatants 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, you will need to press star one on your touchtone phone.

This conference is being recorded.

If anyone has objections, we ask that you please disconnect at this time.

I'd like to turn the call over to Ernest Wong, chief financial officer.

Welcome to our conference call.

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

Before I begin with a review of our operating and financial performance for our fiscal 2002 fiscal year, let me first atend to some legal formalities.

Throughout this conference call, there will be certain forward-looking statements within the meaning of the private litigations reform act of 19 the 5.

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.

There therefore, actual results may differ materially from what is expressed or forecasted 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 affect facts of business and financial results are reported on form 10-K for the year ended August 31, 2001 and quarterly reports on form 10-Q for each of the quarters ended November 30th, 2001, February it 8th, 2002 and may 31, 2002, all of which are on file with the Securities and Exchange Commission.

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

The fiscal year that ended this past August 31st marks the completion of FactSet's 21st (ph) year of operation.

I'm pleased to report that we established another record-setting quarter and year in the company's financial performance.

The conditions are far more challenging than we have ever encountered.

For the 2002 fiscal year, revenues were $205.9 million, up 15.5% from the prior fiscal year.

The $409,000 relocation charge and a nonrecurring tax benefit, both of which were recognized in the first quarter, operating income grew 23.4% to $62.8 million.

That income advanced 21.3% to $40.5 million and EPS on a fully diluted basis rose from 96 cents to $1.16.

Including the nonrecurring items operating income and net income were $61.9 million and 40. $8 million, up 21.6% and 22.3% respectively.

And EPS was $1.17.

For the fiscal quarter that ended on August 31st, revenues rose nearly 14% to $54.1 million.

Operating income was up 27.5% to $17.3 million, net income grew 28.3% to $11.2 million and diluted earnings per share was 32 cents, up 7 cents from the fourth quarter of last year.

FactSet's financial results for the past fiscal year affirmed the strong demand for our product offerings, even in a very difficult environment.

Although we had to deal with a prolonged recession, a sharp decline in the stock market and significant cutbacks on Wall Street, we were able to grow our business and add a total of 78 net new clients over the past 12 months.

These new clients as well as incremental subscription to applications and databases by our existing clients were the primary drivers of our revenue growth.

As of August 31st, there were 912 firms who were clients of FactSet.

Total commitment as of the end of the fiscal year were $219 million, a 12% gain over the $195 million that we performed a year ago. -- commitments at a given point represent forward-looking revenues for the next 12 months for all services currently being supplied to our clients.

I'm pleased to report that our client retention over the past year has continued to remain above 95%, making it 12 straight years that it has been at this level.

Year-over-year the number of FactSet work stations declined by approximately 3500 to 22,000 as of August 31st.

This can be attributable to the investment banking side of our business, not at all surprising given the large-scale personnel reductions that have occurred in the past year.

While it remains to be seen whether there will be more belt-tightening among investment banks, work station account did stabilize in the fourth quarter and increase modestly over the third quarter.

As we've indicated in prior quarters, the number of work stations subscribed to by our investment management clients remain fairly constant throughout the last 12 months.

Revenues from our domestic clients grew 16% to $166.4 million for the year.

Virtually all coming from further penetration of the investment management market.

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

Demand for portfolio anaylitics application has continued to rise.

And at the end of August, there were over 320 clients representing 2200 users who subscribe to the services.

This compares to 250 clients and 1,900 users a year ago.

Although the international side of our operations this past year was also affected by the continuing volatility of the financial markets, international revenues rose 17% to $39.5 million.

By region, revenues from European and Pacific Rim operations rose 20% and 8% to $30 million and $9.5 million respectively.

International commitments now total $42.6 million, representing 19.4% of our total commitment.

On the expense side of the P&L given the level of uncertainty in the operating environment, we focus much of our attention on cost structure to sustain our level of profitability during the last 12 months.

The net result is that our operating margin increased to 30.1%, up from 28.8% in the previous year.

Cost of sales as a percentage of revenues declined 190 basis points compared to fiscal 2001, primarily due to decreases in recurring fees, appreciation on computer-related equipment and computer maintenance expenses as a percentage of revenues, offsetting these improvements were increases in data problems.

As I indicated at our last conference call, the decrease incurring fee and computer maintenance expenses have largely been the result of successful renegotiations of some of our vendor agreements.

Appreciation on our computer equipment, a percentage of revenues declined as a result of lower cap ex spending this year.

In general and administrative expenses as a percentage of revenues rose 20 basis points for the year relative to a year ago.

Increases in conversation expense and occupancy expense were partially offset by improvements in travel and promotional expenses.

With respect to capital spending the company's capital expenditures totaled $10 million for the fiscal year.

Approximately two-thirds of the cap ex was used to purchase IT and communications network equipment.

The remainder was used for acquiring furniture and funding leasehold improvements for the expansion of our global facilities earlier in the fiscal year.

At the end of the last quarter, we had given guidance of cap ex spending for this fiscal year would be about $15 million.

The $5 million shortfall is largely due to timing.

Of various hardware which we originally anticipated to acquire during the fiscal fourth quarter are now expected to be purchased during the first half of this year.

The deferral on these purchases has no negative impact on systems performance.

As we indicate in our press release this morning, we believe that our cap ex spending in fiscal 2003 will be approximately $12 million.

Economic and market conditions have made the business environment particularly challenging over the last 12 months.

The results of our performance this past fiscal year, however, demonstrate once again the strength of our business model.

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

Our product line of new products and enhancements to existing applications such as Marquee, portfolio anaylitics, institutional ownership, our economic contents suite and data warehousing should position us favorably in the marketplace as the economy improves.

Issues of corporate governance and the reliability of corporate financial statements continue to be of great concern and, once again, I do feel the need to address these issues as they apply to FactSet.

First of all, we have always employed accounting policies that are conservative.

Our revenue model is subscription based, meaning that revenues are recognized as they are earned on a monthly basis and reported accordingly.

Software development costs are expenses incurred are not capitalized.

All of our technology assets are depreciated over a three-year period or less.

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 complex trading instruments.

The investments you see on our balance sheet are highly rated mixed income securities.

W we have no short-term or long-term debt.

We have 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 on financials.

We've made two acquisitions in our 24 years of operation and both of these have been fully disclosed.

Price water house does not perform consulting, for FactSet.

Another big five firm has provided us with tax compliance and tax planning services.

Under separation of activity in our view has benefited the company.

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

As a final point, all retirement and other benefits provided to former -- to retired former senior executives of the company have been fully disclosed.

The manner in which we've operated our company and our business model has provided us a financially strong enterprise and a great franchise.

Although the current environment does provide significant challenges to us, we continue to remain very optimistic about our opportunities in the years ahead.

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

If you do have a question, at this time, we ask that you please press star one on your touchtone phone.

I will announce you prior to your question.

Again, please press star one.

Our first question is Brian Nigut (ph) from Thomas Weisel Partners.

Brian Nigut (ph): That's Brian Nigut (ph).

With portfolio analytics remaining very strong with 320 clients, can you give us a sense of what you feel that penetration rate might be at this time?

Thank you.

Brian (ph), how you doing?

This is Phil Hadley.

I guess there are many different ways to define penetration.

Within the client base that we currently have and the opportunity that exists in the marketplace.

In our current client base, we're at even, I would say, 25% penetrated.

I'm using a very rough number as far as the number of seats that are available to us to continue to sell to.

As far as the industry goes, you know, it's one of the market-leading products that drives new client relationships for us.

And I would say that [ Inaudible ] not even half of the opportunity -- that are not even to their clients yet.

Nigut (ph): Am I correct in assuming that there's other competitive products and if so, what do you think the real differentiating factor is for the portfolio analytics product?

There are some other products that do some of the features of EA.

The most significant factor is that it's calculating the attribution on the fly and allowing the end user to change benchmarks or groupings to be able to look at their performance on a real-time basis in the marketplace as opposed to a printed report that is either a day older or even a month old in some cases.

The rest of the software is just built into the flexibility and ultimately differentiates it from the few products in the marketplace that compete in that space.

Nigut (ph): Second, for the first time in a few quarters we saw the password number stabilize.

Can you give us a sense of, is that more or less just the bleeding that's been going on in investment banking front have subsided or are you seeing offset in strengthen the investment management business?

Thank you.

This is a two-part question.

You know, the investment management side of our business historically, I say that, in 17 years of experience, the fact that it's been a very stable segment for us for a very long time.

The investment banking side of the business, still very difficult for me to read and give a new market lows, it's hard for me to tell where the population is and where it ultimately will end up.

I think that the slight increase or change is that you have new summer analysts that are hired and the positive influences that hires obviously, at least for the quarter, are greater than the ones that left.

I still don't feel necessarily comfortable that we're at the bottom of the seed count on the investment banking side.

Nigut (ph): Lastly, you guys bought back 76,000 shares in the quarter.

I guess at what point would you get more aggressive?

Thank you.

That's something that Ernest and I evaluate on a regular basis.

The share buyback plan is new for us, so we are kind of taking the cautious approach.

But at the point where we feel the company will benefit and the intrinsic values of the shares are greater than they're trading in the marketplace, we're definitely buyers in the marketplace.

Our next question is from Douglas Arthur (ph) from Morgan Stanley.

Huber (ph): It's actually Craig Huber (ph).

On Marquee, how many paying customers do you have for Marquee right now?

And go through the pricing model for Marquee today including what the annual base fee is, and how that differs versus from the old price pricing model.

And I have a follow-up.

Thanks.

Marquee is part of the premium work station we've been selling for several years now.

Clients who subscribe to that get Marquee.

It's not a product that will have direct revenue associated with it.

In most cases.

So it's one that we won't probably disclose the actual seed counts that are in the product.

Ultimately, it will be the seed count, which is the number we already disclosed.

We pre-released the product in the last quarter.

We've gotten quite a bit of positive feedback.

There's a finer version coming out in the next couple weeks.

It will have broader distribution in the next six months.

Huber (ph): What about the pricing model there?

Just on the ...

I mean, the price of the work station is $6,000.

If somebody is subscribing to a $6,000 work station, they get Marquee.

Huber (ph): Unfortunately, you will not give us an idea of how many people are buying the enhanced version of the product now?

How many new customers are buying this thing right now?

No.

In fact, I don't have the number of how many premium seeds we have.

Just the normal work station at $6,000, I don't know what the answer is at this point.

Ultimately, the whole client base will have that product.

Huber (ph): Are you changing the annual base fee for it?

No.

Huber (ph): Okay.

And then one other question, if I could.

Could you help us break down -- I think roughly 70% of the revenues come from the buy side.

How many of that comes from the hedge fund community that manages 50 million or lower?

The 50 million or lower will be a small population.

That would be a -- not necessarily -- we would have many clients in that category, but not as a total number of investment management plans.

Huber (ph): What percentage of your revenues as a small part of the hedge fund community?

Oh, gee, we don't have the exact number here, Craig (ph), in front of us.

Wong (?): I'd answer the question probably immaterial.

Yes.

In that our products have always been to the high end, certainly on a revenue basis and even on a client count basis.

It's somewhat difficult in some respects to distinguish between traditional hedge fund anymore and a normal what used to be a plain old investment manager.

From our perspective, if somebody subscribed to FactSet, for the most part, we'd think of them as a traditional style of investing.

Russell trading (ph) hedge fund trading (ph), all kinds of funds besides equities isn't typically a FactSet prospect.

We don't have what they're looking for.

Certainly as a percentage of newer clients, I think I see hedge funds -- firms that you would think of as hedge funds showing up.

But given the industry and the chance that you can -- if you were starting a firm that you could get higher basis points for your management fee and a percentage of carry on (ph), most of these are hedge funds.

Wong (?): The other way to ask the question, firms that have five or six or fewer employees or almost an immaterial percentage of your revenues.

Is that kind of what you're getting at?

It would just be, you know, as a percent of total, you know -- I don't know.

I can't -- I think we should do some research and get you some numbers.

I could easily be off by 5% or 10% on.

Huber (ph): It sounds small is that the bottom line?

Hadley (?): Yeah.

It's not something that -- when I looked at the demographic of the hedge funds that we had, most of them were multibillion dollar managers.

The reason for that is that typically a hedge fund is a more aggressive trading style.

They have to become much larger before they find the value in historical information.

As opposed to somebody who is a quantitative approach or just your traditional value or growth manager.

Huber (ph): Great.

Thank you.

Our next question is are from Brett Mandeffeld (ph) from Bancorp Piper Jaffray.

Mandeffeld (ph): Congratulations on the quarter.

The operating income numbers, the margin was strong this quarter.

Is there anything that has changed fundamentally in the business or your operating structure that would suggest that that 32% margin will continue going forward or is that just a scale factor, as you continue to build revenue?

Thanks.

Well, certainly the -- we were the beneficiary of many things coming together at the same time.

As Ernest mentioned, there were several factors in our margin improvement.

Some of those like Clearing, for example, as you get scale, you get better relationships that make that cost effective.

To some extent that's a one-time event.

But yet, the bigger you get, the chance you are to be in a position to renegotiate that or get a better deal.

It may not happen every year.

Other factors, the capital expenditures, you know, we were historically growing at a very fast pace.

I think on the IT side, somewhat under water with being able to optimize the technology for our clients.

We're able to take less and truly look at our software and make it much more efficient as well as optimize things in our system.

So even though our capital expenditures are down dramatically, our average system performance, the time it takes for a typical task is probably almost twice as fast as it was a year ago.

That's the objective.

We'll certainly spend what it takes to make it happen, but we've been able to do it without capital expenditures in the last 12 months.

Mandeffeld (ph): Do you have a bogey (ph) for cap ex this year?

The target number is $12 million.

Mandeffeld (ph) Does that include the $5 million that slipped (ph)?

Wong (?): Yes, it does.

On top of which I think we've also benefited from the fact that during the last six months and foreseeable 6 to 12 months, we don't anticipate much expansion in our facilities.

So rental expenses also flattened out and declined over time as a percentage of revenues.

We've also been fairly careful about miscellaneous expenses here.

Just on the other side, it's not really coming from the competition side of the business.

We've continued to invest our employees and head count year-over-year has gone from 612 to 685 this year.

We've been in expansion mode on the employee side.

Mandeffeld (ph): Okay, great.

One final question, I guess, related to the growth in clients.

Is it your sense that most of the new clients are coming from hedge funds or are you still seeing new additions from larger firms?

Are you still penetrating kind of that larger firm marketplace?

Thank you.

The demographic for the new client on the investment management side has been typical for the last several years.

Obviously we have a high penetration as you get to the top 100.

It drops off pretty quickly after that.

And, you know, you get big ones, small ones.

Some of the small ones grow up to be big ones.

Some of the small ones don't make it.

We definitely in the last year had a lot more churn in all sizes of firms for whatever reason.

Obviously, Robertson Stevens was a firm a quarter ago and they're not a firm today.

A large firm like USA down in San Antonio decides they're not going to manage money internally anymore.

That's part of the ebb and flow of the business.

I would certainly say - net new clients is the number we report.

The gross new clients we're getting is pretty high.

It just happens to be that we're much more thrifty.

Our next question comes from Steve Reesio (ph), Bear Stearns.

Your line is open.

Reesio (ph): I might have missed this.

I was off the call for a couple minutes.

Give me your updates on your international markets, your efforts there.

What in particular?

The growth?

Reesio (ph): Your sales efforts.

Is that still a slow go?

Are you seeing any type of incremental improvement?

Wong (?): I guess the color, if I were going to add any, Asia pacific has been choppy for several years.

Certainly it's affected many relationships.

I would say just in the last quarter that Europe definitely started to show signs of life that it hadn't for a year.

Whether that carries into the next quarter or not, I couldn't tell you. [ Inaudible ].

Reesio (ph): And is that skewed towards your U.K. client base?

No.

Reesio (ph): Pretty much across the board?

There's activity all over (ph) ...

Reesio (ph): Okay.

One other question regarding cash.

Now, obviously you guys started your buyback program.

Could you refresh my memory?

How much is remaining on that buyback program?

A million share program.

We bought back 76,000 shares.

Reesio (ph): So you have a ton left.

Okay.

And any thoughts on -- obviously you guys have a lot of cash on the balance sheet.

Maybe dividend?

Kind of which way are you leaning at this point?

Obviously you're always looking for acquisitions.

We have 20 cent dividends that we currently pay.

We'll review the amount of that.

At this point, really on an annual basis.

Acquisitions, we've made two small ones.

We're always looking for strategic opportunities for the company, but certainly you're not going to make an investment that we don't feel will give the shareholders the appropriate return.

Reesio (ph): So the primary, I guess, use of that cash right now is going to be the buyback program?

Yes, but at current levels, you know, the cash flow will probably far exceed that.

Reesio (ph): Okay.

One last question on a portfolio analyzer -- do you see that more or less, the recent strength as being a reaction to obviously the weak markets we've encountered?

I use PA2.

I found it's been helpful and managed my way through the last couple months here in terms of tracking with the benchmarks, so on and so forth.

Do you think that's a key driver for the product?

Absolutely.

Absolutely.

I think your screen will tell new green/red, good or bad.

But it doesn't tell you your basis point relative to the benchmark and which part of the benchmark is moving and what part is not.

It certainly makes it so that people like yourself, who are able to understand your returns and hopefully make better decisions.

Reesio (ph): And do you think -- I mean, potentially there could be any kind of weakening in that area?

Should we return to a more normalized sort of environment?

No.

That particular product is one that we continue to invest a great deal on the R&D side with new features and coming up sometime in the next year, we'll work hard to get other things into that product and use the attribution almost separately, but yet together so somebody can look at a balanced portfolio.

We'll continue to answer the product to expand our opportunity.

Reesio (ph): On the Marquee product, which demoed not too long ago, I thought it was fantastic.

I'm just trying to get a handle again on, I guess someone mentioned it earlier, in terms of potential impact to the top line for you guys?

I know it's part of the premium work station.

Is that right?

Yes, it is.

Reesio (ph): Okay.

And I mean, I imagine the approach is you go into the shops, you try to upsell them to the premium product.

Obviously because there's more increased functionality with the product.

But also potential savings with maybe turning off a Reuters or something like that.

Yeah, it certainly, you know, it's important for us to become more complete solution to our clients.

This is an integral part for every single one of our users at this point.

We're certainly excited about where the product is at this point.

It's still immature, in a sense that it's a young product and that it's missing lots of things that are obvious, but yet on the other hand, it does some things that you can't get done in any other product.

If you're a user like you are, your portfolio is available to you in that product.

You might have 20 portfolios where you just want to be able to look at the exact portfolio at that particular instant because you're talking to that particular client.

So I think in the next, you know 6 to 12 months, usage of the product will grow substantially.

There will be a couple more versions that will pick up level two and some of the international feeds that will expand its opportunities as well.

Reesio (ph): And I'm assuming at some point that the sort of a bump up in price for the premium users?

You know, we kind of already did that.

And, you know, I think it's important for us to look at the value we're delivering versus what we're charging for the product.

Generally, at this point, in the market cycle, I think it's just important for us to be as kind as we can to our clients and give them a chance to actually save some money.

That's what we're trying to do at this point.

As you mentioned, if the user finds our product able to meet their needs, it may be something they're already paying for and they're able to save some money in a time they're looking to save some money.

Reesio (ph): Great.

Good job, guys.

Thanks a lot.

Our next question comes from Joe lamono (ph) with William Blair (ph).

Iamono (ph): First, do you anticipate any -- do you plan or anticipate any changes in pricing for any of your products in fiscal '03 versus '02?

At this time, we don't have any plans to change price.

Iamono (ph): The second question, can you break out the 78 net new clients in fiscal '02 between the gross number of new clients and the attrition?

At this point, that's not a number we've ever published.

Iamono (ph): Okay.

Would it be correct to assume from your earlier comments that the -- both numbers have gone up in effect, the number of new clients is going up on a gross basis and the number of clients you lost went up as well?

In this particular year, I couldn't tell you the exact number, I would probably nod and say yes.

Iamono (ph): Okay.

Thank you.

Our next question comes from Quinn Slattery (ph) from Colonial Fund.

Slattery (ph): Congratulations.

I came in late in the call.

I was curious about deferred revenues and DSOs.

DSOs this quarter was 59 days and the deferred revenue number was $11.7 million.

Slattery (ph): Thank you.

Our next question comes from Keith Gain (ph) Thomas Weisel Partners.

Gain (ph): Congratulations on the quarter again.

Phil, this would normally be a quarter where you would expect some password increase.

Was this slight uptick that you saw this quarter in this environment, was that about what you were expecting?

Yeah.

I mean, I guess if you'd ask me whether the summer hires versus the employees returning to college or leaving, I would have guessed flat.

So the fact that it's positive at all, it's probably positive to me.

That coupled with somebody like Robertson Stevens leaving the client base probably makes it actually a little bit more than it is.

Gain (ph): Okay.

You said in the next few weeks you'll have the finer version of Marquee at the higher price point.

What is the customer reaction to the pricing thus far?

They're getting more news and quote functionality.

Is that something that the client is receptive to in getting that additional functionality but getting a higher price for it.

Marquee is a component of the product that we are selling of the premium work station.

The premium work station existed for years before Marquee existed, called market monitor.

There is additional database access and news access that exists in that product.

I felt comfortable the value for the price we were charging was there before we put Marquee on top of it.

Gain (ph): Okay.

I felt that market monitor, given technology constraints we had at this end and the ability to meet what people's true expectations are with quotes was going to be the appropriate strategy on the quote side.

They'll end up with two quote services.

Some will use one, some will use the other.

But what we wanted, one of the two will cover their basis.

Gain (ph): Does improved news in quotes open up your user base at 22,000 if we look at some of the other news in quote, competitors, Bloomberg has 150,000 passwords out there.

Does that in your mind open up a much larger target base for you?

Yeah.

I think we certainly see it within our you current client base, that if we become the primary source, which we have in a couple cases, we absolutely pick up seats.

With the exception of the trading desk, it makes a firm sense to make a different as to what platform they're going to take.

If it happens to be ours, users that would have been marginal to us before, come into FactSet.

Gain (ph): Okay.

Finally, on the international front, 17% growth, probably not what you would -- you'd expect better long term.

Is that related to -- can you describe economic conditions in Europe vis-a-vis U.S. as well as the competitive situation in Europe for you?

At the competitive levels, I feel our product is very well positioned at this point with the addition of economic data.

Definitely provides a complete solution for somebody on the research side who would use FactSet for fundamentals, estimates prices and the market information we would provide.

Economic level, it seemed like Europe was going through the same cycle we were going through here, as we went into recession, they got cautious.

In addition to the fact that any of the large firms are global at this point.

So everything that is happening in the U.S. happens around the world.

I did make a comment earlier that I felt in the last quarter I found positive signs in Europe, but cautioned that I'm not necessarily sure that's going to carry forward.

But the client ads were there that were European and ...

Gain (ph): Okay.

Thank you.

Our next question is from James Rye (ph) from Credit Suisse First Boston.

Your line is open.

Rye (ph): You mentioned the historical volatility on the sell side at least in terms of head count.

Are there any plans to diversify some of the risk by focusing your R&D on the developing buy side applications, like portfolio analytics?

Historically, we -- if you want back to the mid'80s, we were 100% a buy side product.

We didn't start moving into the sell side probably until the early '90s.

Our focus is to sell a product that's a productivity tool to the institutional market, which will always contest of the buy and the sell side.

Actually on the sell side, the most important thing for us to do at this point is to deliver as much value as we can.

We've got a team of people focus purely on the needs of the sell side institution, analyzing their work flow, trying to figure out how we can be of more value for them, especially when times are tough.

They're looking to get more value out of the products they have as opposed to purchasing new products.

We're focused on that market.

We will go through cycles.

If the cycle comes back ...

Rye (ph): One follow-up question.

Can you frame the pricing model of portfolio analytics for us versus some of the other premium applications and where it might stand in terms of the overall cost to a client?

Well, it's pretty simple.

It's $10,000 a seat.

There are some front-end costs depending on how the clients have their portfolio configured.

The first seat is more expensive than the additional seats.

There are some other applications that are like that.

The quantitative products.

Alpha testing is one that's sold by the seat.

Those are really the two that fall in that category.

And I think it works out very well.

I think probably relative to the value to most clients underpriced.

I think from a strategic level, we've always picked a price that we thought was appropriate and that would give us the market penetration.

It's working out very well for us.

Rye (ph): Great.

Thank you and congratulations on a good quarter.

Thanks.

Our next question is from Dan Favre (ph) with High Fields Capital.

Your line is open.

Favre (ph): Hi.

I wanted to review.

I apologize if you mentioned it -- what the forward-looking client commitment number was for the year, if you gave that out.

We don't give out the forward-looking commitment number.

What we did give out was the expectations for revenues for the next quarter.

And that number was basically 54 million today's $56 million.

Favre (ph): You're looking for the 219 at the end of the quarter?

Wong (?): Yeah.

That's the number.

19 is the number that was reported.

Favre (ph): Okay.

Thank you.

Our next question is a follow-up question from Morgan Stanley, Douglas Arthur (ph).

Huber (ph): It's Craig Huber (ph) again.

Every quarter you guys give us the number of consultants you have and in-house, sales and market of employees.

I was hoping you could do that again.

Craig (ph).

At the end of August, we had a total of 326 in sales and consulting and that broke out 109 in sales and 21 in consulting.

Huber (ph): Okay.

The other question, looking at the revenue, just a breakdown of commissions versus cash fees.

It's skewed differently this quarter versus prior quarters.

Is this because of a handful of clients that changed or is there a larger change going on?

I was waiting for that question.

I couldn't believe somebody wasn't going to ask.

It was more of a one-time event in that we basically accrue revenues the way the client tells us they're going to pay for the products.

Many clients will pay half in cash or half in commissions or mixed, depending on whatever they tell us.

We had very large clients decide they would pay us in commissions, but the revenue had already been accrued in cash.

It's a one-time event.

It's nothing more, really than a one-time event, I think.

Kind of a change in client base or anything like that.

Huber (ph): Okay.

Thank you.

I'm showing no further questions at this time.

Okay.

Well, thank you all for attending.

If you have any further questions, please feel free to call me directly.

Thanks, have a nice day.

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