Factset Research Systems Inc (FDS) 2009 Q2 法說會逐字稿

Welcome to FactSet Research Systems' second quarter fiscal 2009 quarterly earnings conference call.

At this time, all participants are in a listen-only mode.

(Operator Instructions) Today's conference is being recorded.

If you have any objects, you may disconnect at this time.

And now I will turn the call over to Mr.

Peter Walsh, Chief Financial Officer.

Sir, you may begin.

Thank you, operator, and good morning, everyone.

Welcome to FactSet's earnings conference call for the second quarter of fiscal 2009.

Joining me are Phil Hadley, Chairman and CEO, Mike DiChristina, President and Chief Operating Officer, Scott Beyer, Head of our nonUS Operations, Kieran Kennedy, Director of Investment Banking, and Mike Frankenfield, Director of our US Investment Management Business.

This conference call is being transcribed in real time by FactSet's callstreet service and is being broadcast live via the Internet at factset.com.

A replay of this call will also be available on our website.

Our call will contain forward-looking statements reflecting Management's current expectations based on currently available information.

Actual results may differ materially.

More information about factors that could affect FactSet's business and financial results can be found in FactSet's filings with the SEC.

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

Today, we'll divide our time among three areas.

First, I'll review Q2 results.

Then I'll cover guidance for the upcoming third quarter.

Finally, we'll close by addressing your questions.

Before we discuss the details of the second quarter, it's valuable to touch on three areas we control that has our current focus.

One, our market share.

Even in a market that's contracting, share increases drive revenue growth.

The fact that our ASV change was positive, we believe indicates our market share is increasing.

Two, reinvesting in our product suite.

We estimate our opportunity is still more than 10 times our current size even after adjusting for the market downturn.

FactSet is operating from a position of strength because we ratcheted up our product investment before the market turmoil and had the financial flexibility to maintain it while the market resets.

Please do not lose sight of the fact that our EPS is growing in double-digits, even while we execute on major investments such as FactSet fundamentals.

Three, our Company is well organized and has the skill to implement operational efficiency.

This is a topic that historically we haven't covered in great deal.

It's more relevant now because strong execution on this fronts funds our investment and growth ideas while helping support our operating margins.

Let's turn to the review of the second quarter.

We're in the midst of a once-in-a-lifetime set of economic conditions.

Despite this environment, FactSet today announced robust top and bottom line results.

Revenue growth was 12%.

Operating margins rose to 33.2%.

EPS increased 20%, exceeding street expectations.

We have performed against the backdrop of a harsh business climate for our clients.

ASV grew $4 million organically.

But more importantly, it was positive.

FactSet is the only firm in our industry that offers clients the ability to adjust service levels on a monthly basis.

We believe that the fact that our ASV grew during the past three months is a clear testament from clients how relevant and integrated our products are in the work flow.

As time progresses, FactSet expects to benefit as costs -- as client cost savings initiatives focus more on firms who offer annual contracts.

Let's begin the highlights of the quarter with free cash flow.

Free cash flow captures all the balance sheet and P&L movements.

As a reminder, we define free cash flow as cash generated from operations which includes the cash cost for taxes and changes in working capital less capital spending.

During the last 12 months, free cash flow rose 24% to $143 million.

Free cash flow was generated during the second quarter were $29 million, up 23% over the year ago quarter.

Free cash flows generated in the first half of 2009 exceeded last year's total by 88%.

Drivers of free cash flow during Q2 were record levels of net income and higher noncash expenses partially offset by a decline in working capital.

The decrease in working capital was caused by a $10 million increase in accounts receivable and the timing of US Federal estimated tax payments.

There are three reasons why we are very comfortable with the quality of our accounts receivable.

One, as we reminded listeners on last quarter's call, every second quarter we issue annual invoices for services to be provided over the calendar year.

This year, annual invoices aggregated to $11 million.

Accordingly, this annual invoice process increased accounts receivable and deferred revenues.

Two, it's normal for our receivables to rise during Q2.

The increase this year was 14% which is comparable to the 12% and 14% sequential increases during Q2 in 2008 and 2007 respectively.

Three, 88% of the AR increase relates to invoices sent in January and February, 2009, so the quality of our receivables on an age basis remains very high.

DSOs at quarter end was an impressive 48 days.

Our free cash flow in Q2 was -- was distorted due to estimated tax payments.

On our last earnings call I spoke about how FactSet remits two estimated tax payments for the first half of the fiscal year during the second quarter.

This additional payment reduces Q2 free cash flow.

Estimated tax payments during Q2 were $29 million, of that total, $14 million related to Q1.

Our ending cash and marketable securities balance was $132 million, up $8 million from November 30th.

During Q2, we invested $17 million to repurchase common stock and paid a quarterly dividend of $8 million.

Including the $100 million increase to the share repurchase program announced today, there's $145 million remaining in repurchase authorization.

Capital expenditures during the quarter were $6.4 million.

Expenditure for office space was $4.9 million, and the remainder was for computer equipment.

Moving now to the P&L.

Revenues were $156.5 million, up 12% versus a year ago.

Operating income advanced 20% to $52 million.

Net income rose 17% to $35 million.

EPS was $0.71 per share, up 20%.

Let's take a look at the revenue drivers.

ASV increased $4 million organically during the quarter.

The ASV change in the quarter included $7 million related to the annual price increase for US investment management clients.

As a reminder, we define annual subscription value or ASV as a forward-looking revenue for the next 12 months from all subscription services currently being supplied to our clients.

While it's difficult to be pleased with the overall quarterly ASV change compared to our history, we believe it represents very strong relative performance and a gain in market share.

Buy-side firms join sell-side firms in scaling back expenses emphasizing savings over spending.

Cost cuts were significant due to the decline in asset values and almost every major firm made reductions.

We're encouraged that the ASV change was positive and that the net client change was comparable to last quarter.

As you know, FactSet offers clients the opportunity to reduce services monthly.

Our policy is the most flexible in the industry and results in higher cancelation rates in the early part of a downturn.

As time progresses, FactSet should benefit as client cost savings initiatives focus more on firms who offer annual contracts.

ASV was $624 million at February 28th.

ASV advanced $49 million over the last 12 months, a growth rate of 9%.

FactSet's investment management business represents 80% of the total ASV.

The remainder relates to services used by M&A investment bankers and sell-side equity research professionals.

The number of clients declined during the quarter by 12 to 2,067.

This was comparable to the net loss of six clients in Q1.

Users were 38,700 at February 28th, a decrease of 1,500 during the last three months.

At quarter end there were 5,773 users of portfolio analyst work stations and from 652 clients.

Please allow me to add color to what we see from our client base.

Most buy-side clients implemented significant expense reductions.

Many reduced professional headcount, although not close to the rate of decline in asset values.

This action negatively impacted our user count.

Products supporting quantitative and risk strategies were significantly scaled back.

This reset also reduced subscriptions to content.

Although the number of PA users declined by 94, the fact that our PA client count was positive indicates to us that the economic downturn forced this outcome rather than competitive pressures.

Finally, the lack of available credit adversely impact the number of M&A transactions completed.

Sell-side firms continue to scale down headcount in this area to match their very near-term business opportunity.

There are also several positive growth trends that are noteworthy and important to underscore.

First, Marquee is flourishing.

It's a product that services the real-time news and quotes needs of a global investor.

Its deployment is ramping nicely with user growth of 41% on a year-over-year basis.

The need for real-time news in quotes is universal, and we have a product that delivers.

Marquee was released in 2002, and so during the last downturn we could hardly meet clients' real-time needs.

Seven years later, thanks to a lot of hard work, we can properly service the largest firms in the world.

This keeps us viable, relevant and competitive and this opens up a realistic opportunity to double our user count.

Our fixed income portfolio analytics team closed several large installations which is no small feat in this market.

This area is a greenfield opportunity where we feel our product is beginning to reach critical mass.

Fixed income portfolio analytics is a complicated challenge, well suited to FactSet.

Success requires superior data integration and a flexible reporting platform to analyze output.

These are proven competencies of FactSet, and we believe client adoption rates of fixed income in PA are validating our lead in this area.

Revenue from FactSet fundamentals exceeded our expectations in Q2.

We were pleased with the adoption rate of both new and existing clients.

This opportunity remains very large and will play out over several years.

Nine out of 10 existing FactSet users currently subscribe to fundamentals from another source.

Demand continues to increase for FactSet estimates.

We are very pleased with how our investments have paid off to expand coverage globally and add textual research from sell-side firms.

Please don't overlook that FactSet fundamentals and estimates provide us a huge opportunity.

We didn't have proprietary content in the last downturn that began in 2001, and we do now.

Our current clients spend $100 million on fundamentals accessed over FactSet.

The amount spent on estimates over our platform is also sizable.

These off-market conditions will help clients commit to change to capture savings consolidating on FactSet.

We used to just consolidate applications, now we consolidate everything, applications and data.

Annual client retention was greater than 95% of ASV and 90% of clients.

This indicates to us that our service supports core activities that continue on at our clients every day regardless of the economy.

Taking a look at geographic performance, our US business produced revenues of $107 million in the second quarter, an increase of 10%.

On the international front, revenues were $50 million, up 16% including currency.

By region, quarterly revenues from our European and Pacific Rim operations were $40 million and $10 million respectively.

Subscriptions by nonUS-based clients were $198 million representing 32% of the Company-wide total.

Before moving to Q2 operating expenses, it's important to summarize reductions to FactSet's annual expense base.

FactSet's annual expense base was reduced by $26 million during the first half of fiscal 2009.

The drivers of the expense decrease were favorable currency rates and streamlining FactSet's operations.

The US Dollar strengthened during the first half of fiscal 2009 reducing FactSet's overall annual expense base by $16 million.

Since 96% of the Company's revenues are built in US Dollars, this improves FactSet's profitability.

Currency improved operating income by $3 million in Q2 compared to the year ago period.

And operating margins increased by 2%.

In the summer of 2008, the Company embarked on initiatives to locate operational efficiencies.

More than 40 ideas have been or are in the process of being implemented.

Recurring annual expenses thus far have reached $10 million.

The ideas implemented cover a range of operational areas.

For example, efficiencies include implementing more cost-effective means to collect clients to our data centers, renegotiating terms with data vendors, our review of usage data for royalty base payments, implementing an approval process for FactSet interoffice travel, reducing ex-Patriot assignments, trimming our marketing spend and using the capabilities of a laptop to eliminate the need to purchase a phone for every employee.

What is important regarding our efforts to locate efficiencies is that we started early and leveraged the brand power of a talented work force.

These types of ideas have a lead time to implement.

And for a well-organized Company our size, the annual savings per idea normally comes in six figures, not seven.

Accordingly, it also takes time to reduce your annual expense base by an attractive number like we have accomplished.

These cost savings are not one-time benefits and will help FactSet into the future.

Most importantly the savings were captured without impacting the quality of our service.

Now moving to expenses for the second quarter.

Operating expenses were $105 million.

Operating margins expanded 20 basis points from Q1 to 33.2%.

These results include our investment in FactSet fundamentals.

FactSet fundamentals generated an operating loss of $2.6 million and reduced operating margins by 2%.

Cost of sales as a percentage of revenue declined 30 basis points over the prior year.

Drivers behind the decrease were lower compensation and communication costs, offset by higher data and communicate-- and computer-related expenses.

Lower compensation was caused by currency, and incremental expense in the prior year period related to performance-based options.

The decrease in communication costs was caused by implementing more cost-effective means to collect clients to our data centers.

Higher data costs were driven by FactSet fundamentals collection effort which was not in operation last year.

The increase in computer-related expenses relates to last year's transition to HPs integrity mainframe machines in our data centers.

Computer maintenance expenses rose because they commenced one year after a mainframe is deployed.

Depreciation also increased because no machines became fully depreciated during the quarter.

SG&A expenses expressed as a percentage of revenues declined 2.1% year-over-year.

This decrease was driven by lower compensation and G&A expenses.

Lower compensation was due to favorable currency movements and a one-time expense last year related to performance-based options.

G&A was lower due to a decrease in the cost per trip and a judicious approach to FactSet inter-office travel.

FactSet's headcount was 2,150 up 96 employees during the quarter and 216 employees in the last six months.

Excluding FactSet fundamentals, the increase in employees over the last six months was 58 or 3%.

Our annual effective tax rate for the quarter was 33.8%, down slightly from last year's rate of 34.2%.

EPS advanced to $0.71 per share, up 20% year-over-year.

This includes dilution of $0.03 per share from FactSet fundamentals.

Let's move to our outlook for the third quarter of fiscal 2009.

We simplified our forward-looking guidance to cover revenues, EPS and CapEx.

The EPS guidance is also a new addition to the guidance provided.

The projected revenue range for Q3 is $153 million to $157 million.

This includes an ASV reduction from the merger of Bank of America and Merrill Lynch that we estimate will be significantly less 1% of ASV.

EPS guidance for Q3 is $0.72 to $0.74 per share.

This guidance represents a double-digit percentage increase in EPS at all points in the range and includes $0.03 per share dilution from FactSet fundamentals.

The 2009 guidance for capital expenditures net of landlord contributions has been lowered by $10 million.

The range is now $22 million to $28 million.

In summary, we've made great strides over the past few years.

We have consistently delivered on revenues and EPS while investing for the future.

Certainly, the size and scope of the current economic dislocation is unprecedented, but due to our small size, our opportunity remains enormous.

We invest-- we have invested aggressively in our product over the last three years and have the financial flexibility to maintain it through the downturn.

Take our product and combine it with an experienced workforce that we should have just the formula to march forward and continue to grow our share in this down market.

Thank you for your participation in today's call and we're now ready for your questions.

Thank you.

(Operator Instructions) Our first question today is from Kevin Doherty from Bank of America.

Great thanks, guys.

I guess just to kick things off maybe based on some of the conversations you're having with your customers, how are you thinking about the subscriber count relative to where it's at right now?

And really I guess is there anything out that there that suggests we shouldn't see some of these sequential declines of 1,000, 1,500 users maybe over the next few quarters?

How are you doing, this is Phil.

I think what we do here at Fact is just focus on what we can control.

And as Peter was describing the product line we have and where we're headed in the marketplace, they're just awesome things for us to focus on.

Our clients opportunity when it comes to Marquee is quite positive.

And we have even though on a net basis you saw a net decline in clients and a net decline in users, on the positive side we've had lots of positive experience in the client base.

From a marketplace perspective I don't know what the future holds.

But I think it's important for us to just continue on as what we see as opportunity.

Okay.

And maybe just to follow that up.

If we're going to do some sensitivity analysis, when you do lose an existing user, how much revenue is lost kind of relative to what you'd get from that marginal new user for work station, that $6,000?

And also relative to kind of the Company average ASV of about 16,000 per user per year.

Just trying to get sensitivity not really that, not just the new customers you're not bringing on, but when you're talking about an existing customer that would go away or existing user, that would go away.

Okay.

So we're fortunate that we have a business model where the seat part of our revenue is significant to less than half of our total revenue.

So it certainly is not a one to one relationship between the percentage of seat lost in our ASV subscription.

And the subscriptions vary dramatically client-by-client depending how large the installations are.

But I think if you're to characterize this cycle versus last cycle, I don't think anybody on this call would argue that we're in a much more difficult environment than we were last time.

And as you can see, I think that as a business we're doing quite well in this part of the cycle.

Okay.

And if I could just get one more in, could you just drill down a little more in some of your streamlining efforts?

I know you mentioned the $10 million run rate right now.

Did most of that really occur over the last couple of quarters?

And where might that run rate go if you continue to execute some of those initiatives you talked about?

Thanks, Kevin, it's Peter.

We started in the summer really focusing on how to make FactSet more efficient.

The real positive story for us is that we started early achieving these operational efficiencies.

It isn't easy, and it takes a Company-wide effort.

So our program is really sponsored by a wide level of our operational management and it really touches all parts of the Company.

We haven't executed on every idea that we have.

We feel that we've easily captured $10 million in savings.

But we continue to press forward on it.

And we feel like it's a really important thing to accomplish because it funds our growth ideas even in this down market and also supports our operating margin.

So we're fortunate that we have a well-organized Company that gives us the opportunity to execute on these items, and also an experience and committed Management team to support it.

And we're doing it in such a fashion that doesn't impact the quality of our service.

So we're very optimistic and positive about what we've accomplished so far.

But our work-- we still have work ahead of us.

Thank you.

Our next question is from Peter Appert from Piper Jaffray.

Thanks.

So Peter, just sort of a follow-up on the last one in terms of the phasing of the $10 million in spending, can you give us any color on that?

Or $10 million in savings, I'm sorry.

The $10 million in savings we've accomplished already as we enter into Q3.

But we continue to work on more savings initiatives as we press forward.

Okay.

So basically $5 million came out of costs in the first half.

$5 million plus could come out in the second?

Correct.

Okay.

How aggressively are you going to pursue the buybacks, Peter or Phil?

Do you step it up in the context of having so much cash and the market being so weak?

Well when we look at our Cap allocation process, I think it's important to first take a look at history.

Over since-- we've really had three things to focus on, whether it be our share repurchase, acquisitions or dividends.

Since August of '05 we've allocated about $160 million to acquisition.

We've been averaging about $100 million a year on share repurchases.

And we're about $35 million a year on dividends.

So we throttle one up or the other based on what's going to deliver the best accretion on a long-term basis to our shareholders.

On the share buyback, the one thing that when we look today is that we know it's incredibly accretive because returns on cash are so meager.

We have a very fortunate, high-quality problem in that when you take our free cash flow generation for the last 12 months and you add it to our-- our existing cash balance, we have about $275 million of capital to allocate.

Of course we need some cash to operate that from a week-to-week basis, so but it's still a significant amount and that's really what drove our decision to ask for a repurchase increase of $100 million.

So we'll -- we'll continue to allocate our capital to what we think is going to deliver the highest amount of EPS accretion.

And we'll continue to look at not only share repurchase but acquisitions and our dividend is also something in our process currently today.

Got it.

And just one other thing.

The-- can you remind me what the price increase was and then, actually two other things, the-- in terms of FactSet fundamentals, maybe Phil you could just explain to us a little how you sell the product.

How long you think it takes before the percentage of FactSet users that are using fundamentals gets to be I don't know whatever the benchmark is, 50% of the customer base?

So maybe I'll handle the first part of question then-- and hand it over to Phil.

So the price increase impact on ASV this quarter was $7 million.

A year ago it was $6 million.

So it-- is the impact on price we -- we're very positive that our pricing power held and was actually 16% higher than a year ago.

Okay.

When it comes to FactSet fundamentals, Peter, I think you'd really want to talk about all the proprietary content on FactSet.

And certainly we're a vendor where we distribute lots of data from some other suppliers on our system and we'll always continue to do so.

At the same time, the content team at FactSet's focus is to produce the best content possible for each of our clients.

We're obviously very early in the fundamental side of creating that product, but as you can tell by Peter's comments, the early successes are very strong and it's above our expectation so far.

As to predict exactly where it'll go in our client base, it's probably something we ultimately won't disclose.

But my view is that our proprietary content will continue to be very successful and a growth opportunity for us.

Why does the customer take FactSet fundamentals instead of Compustock?

I think that you have to analyze the end user and what their particular needs are.

But you want to go through on a feature-by-feature basis, both are standardized data bases, one's a global data base, one's a domestic data base, so the universe is substantially larger.

And I think that it will be able to evolve the feature set much quicker and much faster than we have been able to on S&P product.

Some of that will depend on what features they make available to us in the future.

But I think it is a very competitive product today.

And we can see it by client transition that's have occurred already.

Thanks, Phil.

Thank you.

Our next question is from John Maietta from Needham & Company.

Great, thanks very much.

Peter, with regards to the expense savings, I was wondering how should we think about -- is the preponderance of that coming out of the cost of services, or is it kind of evenly split between cost of services and SG&A?

John, the way we really operating FactSet is really at the operating income line.

I would say a lot -- if I was going to weight the percentages, it's a little bit heavier in the cost of services line, but it's not something that has our focus.

Yes.

Okay.

And then Phil, with regard to taking market share, does it feel like maybe you took a little bit more market share this quarter, or is that -- do you not have the metrics to maybe to get back to that level?

I would say the anecdotal evidence would be yes.

And at the same time I would say it was probably a quarter where the market itself shrank.

Okay.

Thank you.

Our next question is from John Neff from William Blair.

Hi, guys.

Maybe a question for Scott Beyer there.

International subscription value down sequentially while the US grew.

I was just wondering if you could speak to some of the dynamics you're seeing overseas?

Unfortunately we're nearing some of the comments Peter made earlier.

So I was not as enthusiastic as I'd like to be about work station growth and net client-- net new client growth.

But I'd offset that with the share gains that I saw driven primarily by Marquee, secondarily back to fundamentals and back to estimates.

And also I think Peter touched on it, as well, we were responsible for several of the wins in fixed income and any short-term risk models within the portfolio now that is proving rather popular right now.

Good.

I was wondering, there's never been a number you've disclosed, and I'm not expecting you to necessarily do it now.

But I was wondering if you could possibly speak to the percentage of your subscription value that's coming from proprietary content offerings today and maybe versus a year ago?

It's not-- it's actually not a number I could even-- that we even have internally.

And I think the biggest challenge in the business is we generate value in two different forms by integrating content, sometimes it's ours and sometimes it's third party.

And the third-- and the second piece is the applications that bring that content to life and trying to split the value between the two makes it very challenging internally.

I can tell you that it's a very positive trend.

But I couldn't give you a specific number.

And if you were to compare that back to 2001, the answer would have been essentially zero to a substantial portion of our business at this point.

Thank you.

Our next question is from Dave Lewis from JPMorgan.

Hey, guys.

Would you be able to quantify the percentage of revenues coming from fixed income content and analytics?

It -- it would be a positive area of growth for us, but still not significant enough to -- to really, truly be a big driver in our business.

But it's definitely one that we feel has got a great opportunity in the future.

Okay.

Thanks.

And can just talk a little bit more about the implementations that Peter mentioned?

Were those in primarily overseas, because I believe the opportunity there -- I guess initially is -- is easier in terms of adoption overseas than the US.

Certainly when you take a look at the market need, the nonUS marketplace has a higher need for fixed income analytics than the US market based on the way we currently sell our product.

If you look at the successes of fixed income PA on FactSet, it's really a global move.

We had both success domestically as well as international.

Okay.

And then the underlying content sets, estimates, fundamentals, thanks for the -- the more -- the details on that.

Can you give us an indication of what those content sets are growing?

They're being sold through both proprietary and what's sold through your platform on a normalized basis I guess today as well as what it is in a normal -- what it was two to three years ago.

I don't have those numbers for you, and it's -- and we don't get down to disclosing product by product what our revenue growth -- I think the only one that we really disclose at this point is, in a discreet way, is the PA client and seat count.

Okay.

And last one for me.

And I think, Peter, you cited the-- the (inaudible) you guys cite on a revenue basis-- revenue weighted basis client retention above 95%.

It went down to 90%, I believe this quarter, ASV is still above 95%.

But if clients barely budged, I'm just curious why is that down to 90%?

What am I missing there?

Okay.

The revenue-weighted client retention remained above 95%.

Got you, okay.

What I cited.

And so what we really did is we added a -- just a client retention that isn't dollar weighted.

And it was the first time we disclosed that.

And we just wanted to add clarity given the current market conditions.

Okay.

Great.

Thank you.

Thank you.

Our final question is from [Eric Rittener] from George Weiss Associates.

Can you hear me?

Yes.

Yes.

I just wanted to understand when we look at your US and international revenues, how much of those revenues are coming from fixed income clients versus equity clients?

You mentioned that the fixed income is not really a driver of revenues, but what of that is a percentage of total revenues?

It's not something we disclose at this point.

I think if you went back and through history and looked at the acquisition we made of Derivative Solutions you'd get a feel for where it began and you can extrapolate from there.

Well, you -- but would you say that this is not a driver of the total Company, that the equity product is the primary product on the buy-side?

As a percentage of total equity part of our business was substantially larger than the fixed income piece.

As a growth area the fixed income piece has a higher growth trajectory than the equity side.

And if I were to ask you the following because you -- you've addressed it somewhat, but you didn't really quantify anything there.

If you look at the US and European base of equity products between market declines and withdrawals, the large-- larger accounts or larger clients are down between 40% and 60%, which obviously affects their breakeven and it obviously affects their employment levels.

Because your contracts have a delay vis-a-vis the decisions that have been made both January, would you help us understand how you're thinking about the outlook for those-- for that business?

Because clearly the performance is very, very good.

It is just-- it appears to be that your clientele is under significant pressure and they are laying off quite a few decision makers at the portfolio level and at the research level.

I think if you look at our performance and you -- and you listen to the way Peter described the way our business model works, I think it's a very important distinction for us relative to other players in the space.

And-- and that distinction is that our clients, for the most part, get to adjust the level of their service on a month-to-month basis.

So we're talking about results as of the end of February, beginning of March.

It's a real time disclosure in what's going on in our client base, there is no lag effect.

So the fall impact that the market had on our client base is something that you see very much real time in our revenues.

Even the fact that the market started out pretty poorly in 2009 is reflected in our revenues and client base.

I think that if you compare that to other services, clearly we're easier to adjust now.

The positive side of that for us is several fold.

One, when the market turns around our clients adjust their service with us faster in the positive because there's not a contractual obligation to the product.

Second, from a business perspective, I would much rather know what my revenues are and you as an investor would much rather know what my revenues are on a real-time basis not some pretend contract that I might have for a year or two our that is not really revenue because that client is no longer in existence.

And three, I think as a Company it's a better partnership with our client.

It requires us to be much more on our toes and deliver a higher level of service to our client.

And in return, I think it creates a much tighter bond between us and our users.

So though you can see that it allowed our clients to adjust their seat count down by 1,500 seats net this particular quarter, I really don't view it as a negative to our business model.

That was very helpful, thank you.

One last one.

You mention in your press release regarding the annual expense base.

And excluding the US Dollar effect, it looks like you've lowered your expense base by $10 million.

Can you help us understand what was the goal that you were trying to achieve, and whether this helps you or limits you in your ability to ramp up when your clients come back and ask for more services?

I think -- the approach we took was a very objective one in just looking at all aspects of our business.

And I think when businesses are running well in a great economy, you spend less of your time looking at expenses and your efficiencies.

And it's one of the, I guess, fortunate side effects of a downturn in that you truly analyze your expense base.

I think we're very judicious in how we approached it and feel very comfortable that the expense adjustments we've made so far have no impact whatsoever on the service level we deliver to our client and their future opportunity.

And in fact, most importantly, it allows us to continue to reinvest in the areas that we feel are growing.

As you can see from our release, our headcount is still growing and will continue to grow through the next 12 months.

So as a business I think it's important for us to continue to always focus on delivering more value to our clients.

And that's our objective every day and ultimately that will serve us well.

Thank you.

And I'm showing no further questions at this time, sir.

Thank you very much.

And this concludes today's conference.

You may disconnect at this time.