Forrester Research Inc (FORR) 2002 Q2 法說會逐字稿

The following web cast is a service of CCBN. Please stand by. Good morning and welcome to the Forrester Research second quarter earnings release conference call. At this time all parties have been placed on a listen only mode and the floor will be open for questions and comments following the presentation. I would now like to hand the floor over to your host, Mr. George Colony. Sir, the floor is yours. colony: Thanks very much. Good morning and thank you for joining our second quarter 2002 conference call. With me today are Warren Hadley, CFO and Kim Maxwell, Director of Investor Relations. Today's call is in 3 sections. I will start off with a review of the second quarter; Warren will then detail our financial results. I will return to update you on Forrester's plans for the third quarter followed by questions.

But before we begin, Kim Maxwell will read from the safe harbor provisions. Kim.

this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates, or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Some of the important factors that could cause actual future activities and results to differ are discussed in our reports and filings with the Securities and Exchange Commission. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Thanks Kim. I would like to summarize our financial results. Revenue for the second quarter was 25.4 million; pro forma net income was 3 million. Pro forma EPS was 13 cents per share and our cash position, as of June 30 was 204.1 million. In reviewing the second quarter I will cover the following areas: an overview of the business environment and its impact on Forrester, the progress of Whole View research, Q2 forms and summits, a review of Forrester's integrity policy and update on Forrester's influence in this economy.

Turning first to the business environments. Technology spending continued to remain tight in the second quarter. We expect this condition to persist. Forrester's business techno graphic's March 2002 benchmark data, which is a scientifically significant survey of e-business spending and global 3500 corporations show that overall expenditures will decline 14% compared with last year. Most large corporations will curb the number and types of technology products this will consider buying in 2002. The tight economy continues to have an impact on Forrester, specifically, in the second quarter we experienced weakness in our overseas businesses. Europe, Asia and South America appear to be entering a state similar to the U.S. a year ago. Approvals for research contracts is taking longer, CFOs are entering the approval process, budgets are being closely scrutinized. In general, the difficult economic environment means that our forward-looking metrics such as deferred revenue and have not yet started to turn.

We continue to watch our expenses to keep them closely aligned with the revenue. To that end we reduced our head count by 21 positions, or 5% today. Head count was reduced primarily in support positions. The move was toward increased efficiency, not in reducing the size of production engine. In spite of the challenges in the marketplace, I see several positive signs. Our global and North American operating groups, which together comprise approximately 75% of our revenue, had improved sales activity in the second quarter. In particular, North America showed strength in renewals and new business.

We measure client satisfaction every four months with a survey of approximately 1000 clients. We surveyed in September 2001, December 2001, and most recently in May. From December to May the percentage of clients who said that they were very satisfied or satisfied with the Forrester services rose 8% to 82%. The jump in satisfied was driven by 3 factors; number 1 - the simplicity and richness of Whole View, number 2 - improved customer service and number 3 - improved relevancy and value of Forrester's research. The usage of research is also up. There was 35% more usage of our research in Q2 as compared with Q1.

We had important wins during the quarter. Traditional clients renewed in Q2 including Adobe, eCom 3, Fed Ex, IPG, JP Morgan Chase, , , and Washington Mutual. In addition, we added or won back new clients during the quarter, including 24 Hour Fitness, , Capital One, , General Mills and Reynolds and Reynolds.

And a last thought here, I will restate what I have said on previous calls. A major backlog of technology products continues, projects continues to build. There is a lot of water behind the dam. As technology innovation regains its momentum in spaces like web services and as legacy systems age, companies must ultimately expand budgets, commit to new systems and move forward. I saw the pressure of many places in Q2 from GM, who was preparing for a major CRM push to Ford's preparation for a significant overhaul of their data systems to KLM planning a 2 year effort to rebuild their ticketing systems.

Turning now to Whole View and its progress, since launching in January, Whole View has significantly increased Forrester's value proposition, attracting win-backs and helping with retention. Whole View has been particularly attractive with vendors. At a relatively low price point, we are helping them understand their market, the customers of their customers and how they can improve product development. We are finding that clients who spent less than $75000 with Forrester prior to Whole View are renewing at or above their previous contact levels, with the increment being driven primarily by the addition of unlimited analyst access. Whole View's strong differentiation and distinct value are striking a cord. An example is Grenada, PLC, a $1 billion television company in the UK, who renewed this month. Grenada uses the consumer research in Whole View to understand mobile and device penetration in the European markets, the technology analysis in Whole View to drive better decision in IT and the strategic research in Whole View to test new business models. Grenada renewed because it found Whole View to be comprehensive, simple and easy to use through one integrated website.

UAA, or unlimited access is on the right track as well. UAA is an add-on to Whole View which enables clients to speak directly with Forrester analysts to get the research questions answered quickly. Approximately 30% of our client companies are presently using UAA.

Our research remained on point in the quarter. In the customer space consumer techno graphic, Europe issued a new report entitled "Europe's Multi-device Brand Battle." Europeans recognize and own many tech brands. Multi-device consumers are demanding new brand and a little cocktail party fact here for you; Sony and Phillips were the most trusted electronic brands in Europe. AOL and Dell were among the least trusted brands in Europe.

In the tech market, one of the hottest reports of the quarter was "Enterprise Content Management Delusions." The delusion in the title refers to the idea that a single system will handle all content management needs. The report pointedly concluded that this is not going to happen. Accordingly, should continue to scale back and focus on its core strength, web content management, while Interwoven needs to leverage its collaboration tools and knowledge expertise to gain momentum.

Finally our financial services group issued research entitled "Right Channeling Financial Transactions". The report found that right channeling, getting consumers to use the appropriate channels for transactions and interactions will deliver superior experiences, retain customers and lower cost.

Turning now to events; we had two forums and two summits during the second quarter. I mentioned on our Q1 call that I just attended the forum in Europe and Amsterdam, and that we had a sell-out crowd there. The site design summit was a near sell-out. Content scores were the highest of the year. The telecom summit covered the impending displacement of traditional telecoms. Speakers included Richard , President of Business Sales at Sprint, and Dan , Senior Vice President at Multimedia. The finance forum in New York City was a near sell-out. Speakers included , CEO of eTrade, Harvey , former chairman and CEO of American Express, and Charles Gifford, President and CEO of Fleet Boston.

Given the times that we are living in I wanted to say a few words about integrity, and there are two elements here; number 1 - Forrester's general integrity in its accounting and business operation, and number 2 - Forrester's research integrity. On the first item I can assure you that Forrester's traditional conservative approach to our business and accounting practices remain intact. As it has since its founding, Forrester operates as an open and ethical business. In Q2 we spent time reviewing and updating Forrester's research integrity policy. This policy states that objectivity is critical to our business model. The company does not do editorials. We do not take direct shares. We do not take reimbursement from vendors for research travel. We do not take stock positions in companies that we are analyzing. As always we are closely guarding our objectivity and avoiding any potential conflicts of interest.

I want to finish the Q2 review by talking about how Forrester continues to build influence in a difficult market. We were quoted over 2100 times in the media in Q2. Emily Green, the Managing Director for North America, spoke at the fourth annual Michigan IT summit, which is a high level targeted event keynoted by Scott . Michael , Research Director of North America, participated in the World Economic Forum USA Summit, Forrester's second time participating with the WEF. And I participated in two events, the CEO Magazine Round Table on Trust in New York City, and then in Nantucket Technology Conference.

The Video-views, which are video summaries of our reports, continue to gain popularity. There were over 14,000 viewings of the videos in Q2. Video-views along with first look first look, augment our efforts to make Forrester research widely available and easy to consume fast forms.

And a final, several final points of building influence. Over 20 reporters covered the Finance Forum in June in New York City, which resulted in 6 American banker articles as well as Dow Jones coverage, which was picked up by the Wall Street Journal. Our guest speakers also received excellent coverage, which made Ken CEO of Bank of America say, "We can't wait to join your events in future and overall, I am happy that Forrester's maintaining a high profile even in a time when the news is dominated by non-technology stories."

I will now hand the call over to Warren who will give a financial review of the second quarter and guidance for the remainder of 2002. Warren.

Thanks, George. Over the next few minutes I will review Forrester's second quarter results, year to date results, the balance sheet at June 30th, our second quarter metrics, and the outlook for our business for the second half of 2002. Please note that the income statement numbers I am recording today are pro forma and reflect adjustments for the following two items. One, we have excluded a Q2 charge of 486,000 to write downs related to certain non-marketable investments and two, we have booked our effective tax rate at 30% for pro forma purposes. The actual anticipated effect of tax rates for 2002 is 8%.

As George has reported to you, Forrester's second quarter results are within the guidance range that we provided on April 24th, 2002. Second quarter revenue decreased 45% to 25.4 million from 46.4 million in the second quarter last year. Net income decreased 46% to 3 million from 5.7 million last year. Earnings per share were 13 cents on diluted rated average shares outstanding of 24 million compared with 24 cents and 23.7 million shares last year.

Second quarter advisory services and other revenues decreased 39% to 8.2 million from 13.5 million last year and comprised 32% of total revenue for the quarter. As George mentioned, we held two forums and two summits in Q2. In Q3 we plan to host 2 summit events and in the fourth quarter we plan to host 3 forums, including our executive strategy forum in Boston and two summits. We expect advisory and other revenues to comprise approximately 30% of 2002 total revenue and core research to make up approximately 70% of our 2002 total revenue.

On a geographic basis, 28% of Forrester second quarter revenue was derived from international sales compared with 29% in Q2 last year. This is in line with our expectations that international revenue will comprise 26 to 30% of Forrester's total 2002 revenue.

Operating expenses for the quarter are 22.6 million, down from 39.6 last year. We have been actively lowering operating expenses to match our revenue base over the past 4 quarters and our quarterly expense run rate is decreased by 17 million during that period. We are on plan with regard to expense statements estimated from the July 2001 and January 2002 work force reduction.

Operating income was 2.9 million or 11% of revenue compared with 6.8 million or 15% of revenue last year and in line with our target guidance of 10 to 12% for Q2.

We booked a pro forma effective tax rate of 30% in the second quarter and expect to continue using this rate on a pro forma basis for the remainder of the year. As I mentioned earlier, our actual effective tax rate will be approximately 8% for 2002. The 8% rate is due to our tax exempt investment income comprising a larger percentage of our pretax income when including the one time charges.

Now I'll turn to Forrester's year to date results. Total revenue for June 30th decreased 43% to 51.5 million from 90.1 million in the same period last year. Net income decreased 40% to 6.3 million from 10.5 million last year and earnings per share for the 6 months ended June 30th was 26 cents on diluted average shares outstanding of 23.9 million compared with 44 cents and 24.2 million shares last year.

Operating income for the six months ended June 30th was 6 million or 12% of revenue compared with operating income of 12.7 million or 14% of revenue for the same period last year.

Now I'd like to review the balance sheet. We continued to maintain a strong cash position. Our cash and investments at the end of the second quarter were 204.1 million. Despite the tough economic environment, we continue to generate positive cash flows from operations. Cash flows from operations were approximately 300,000 in the second quarter and 1.9 million year to date.

During the second quarter we used 4.4 million of cash to purchase 229,000 shares on the open market pursuant to our stock buy back program. We have purchased 413,000 shares for a total of 7.9 million spent cumulatively year to date. Our stock buy back program, which we announced in October of 2001, allows for the use of up to 50 million to purchase shares. We plan to continue to buy back shares in the third quarter.

Accounts receivable at June 30th was 12.2 million, down from 24.5 million at the end of 2001. We had another strong collections quarter with cash received totaling 20.5 million in Q2. Our days sales outstanding at June 30th was 62 days, a decrease from 69 days last June 30th and down from 79 days in Q1, 2002. At AR over 90 days was 8%, up from 6% a year ago in Q1 but still within our target range.

Net property and equipment decreased to 15.4 million from 21.3 million at the end of 2001. Our capital spending in the second quarter was approximately 700,000, which brings us to just under 1 million of capital spending year to date. Our capital spending plan for 2002 is $2 million. Deferred revenue at June 30th was 45.9 million compared with 76.1 million at the end of June, 2001, representing a year over year decrease of 40%.

And now, I'll review Forrester's second quarter metrics. Agreement value is the total value of all contracts for core research and advisory services in place without regard to how much has already been recognized or is yet to be recognized as revenue. Agreement value is 81.6 million at June 30th, a 47% decrease over last year. Forrester's average contract size for core research in the first quarter was 47,200, a decrease of 10% from 52,400 last year. Forrester's retention rate for client companies at June 30th was 52% compared with 50% in Q1, but below our target range of 74 to 76%. Our retention was 66%, also below our target range of 75 to 80%. These retention rates are calculated on a 12 month rolling basis. And both rates have stabilized and are now moving in a positive direction. At the end of the second quarter, our total for client companies was 1200, a year over year and sequential decrease. However, this is the lowest quarterly decrease we have experienced in the past 6 quarters.

Finally, for head count at the end of the second quarter, Forrester had a total staff of 421, down from 581 at the end of last year. Current head count includes a research staff of 141, down from 191 at the end of 2001, and a sales staff of 127, down from 184 at the end of 2001.

The last topic I'd like to cover today is our business outlook for Q3, Q4 and the full year 2002. we were cautious and conservative with our previous guidance. However, current market conditions and diminished expectations for the economy we are revising our operating plan and guidance for the year. Despite the difficult environment, Forrester remains committed to driving operating profit, earnings, and cash flow. As part of that commitment we eliminated 21 positions, or 5% of our work force today. These cuts were mainly around gaining efficiencies. 62% of the cuts were in G&A, while 14% were in sales and 24% were in research. As a result of these head count reductions, we expect to record a one time charge of approximately 1 to 2 million in Q3 and more importantly, we anticipate additional annual savings of approximately 2.5 to 3 million as we move forward.

Our guidance for Q3, Q4 and the whole year of 2002 is as follows. For Q3 we're aiming to achieve total revenues of approximately 20 to 22.5 million, an operating margin of 8 to 10% and pro forma diluted earnings per share of approximately 8 to 10 cents. For Q4 we're aiming to achieve total revenues of approximately 22 to 25 million, an operating margin of 10 to 12% and pro forma diluted earnings per share of approximately 10 to 12 cents. And for the full year 2002, we are revising all previously issued guidance. Our new guidance for 2002 is as follows. Revenues of approximately 95 to 100 million, a pro forma operating margin of 9 to 11%, and pro forma diluted earnings per share of 45 to 50 cents. Thanks and now I'd like to turn the call back over to George.

Thanks, Warren. I'd like to conclude the call by talking about the third quarter and where Forrester is headed in the second half of the year and I'm going to cover four areas. Number 1 -- tech rankings, number 2 -- the Forrester Wave, number 3 -- strategic services and then finally, events.

On the new product front we will be rolling out two tech rankings categories during Q3, business process management and business intelligence platforms. By the end of the third quarter we will have 10 tech rankings categories in force. In addition to the two launched in Q3, we are covering application servers, enterprise portal servers, commerce platforms, e-procurement applications, content management, integration servers, customer service applications, and marketing automation applications.

Earlier this week, we announced the Forrester Wave. The Wave is a branded research graphic that quickly and simply shows how vendors rank in their markets. The Wave evaluates vendors on three axes - current offering, strategy and market presence. And the Wave hits three marks -- number 1 -- it is a simple language making it easier and faster for our clients to figure out which vendors to choose. Number 2 -- it creates a standard methodology within our research staff for grading vendors. This injects efficiency and rigor. And then finally, 3 -- it drives Forrester's influence. The Wave now becomes a critical market metric media, vendors and users will use the Wave to get the most current Forrester take on markets.

We will be introducing two new strategic services in the third quarter. The technology strategy development program or TSDP, helps senior executives with large scale technology decisions. These tested projects have been outside of the scope of Forrester's traditional advisory program. The extended advisory of TSDP is typically delivered in a one to two month window. The product will be in a start up phase in the third quarter, staffed by a small team. The projects handled by TSDP have all involved technology strategy to date. For example, the launch of a next generation product, adoption of a corporate CRM perspective, entry of a technology product into a new market, and organizational design.

As of the end of Q2 TSDP had 6 global 3500 clients. Two clients including are from the pharmaceutical and medical devices industry. Two are among the largest hardware companies in the world. One is a major software vendor and the final client is one of the largest health insurers in the US.

We have also launched techno graphics data and services. This program provides clients with unlimited access to a dedicated data specialist for customized data cuts enabling clients to target specific consumer groups. In addition, clients will have access to a 3 year data archive and the use of a portfolio of segmentation models. We are taping in primary research budgets for this program. This is really a new area for Forrester. Clients of this service include American Honda, Bank Boston, , General Mills, Michelin, Oracle and Bank.

Turning to third quarter forums and summits. We will host two summits. Both will cover new topic areas this year. The tech ranking summit in Salt Lake City is geared toward IT executives and business managers involved in portal selection. Users will learn which vendors they should bet on and how to drive portal usage to save costs. The TV summit in New York City will analyze how networks, advertisers, cable and satellite operators and producers will adapt to on-demand TV. Outside speakers include Robert , senior VP of technology operations at HBO, and Michael CEO of .

To conclude the call, I will say that the market remains challenging. There is no doubt about that. I characterize it as a one good week, one bad week world. The macro economic environment is limiting our visibility. However, I believe that Forrester is positioned for the second half of the year. We have a differentiated and rich product in Whole View, our North American and global businesses are showing signs of stabilization, we are launching new products against new budget sources, customer satisfaction is improving, we are continuing to gain market share in events and we are closely aligning our expenses with revenue. Forrester remains proactive, innovative, focused on our clients, and focused on our business.

Warren and Emily Green, managing director of North America will be presenting at the Adams, Harkness & Hill conference on August 7th in Boston and Warren and I will present at the Pacific Crest conference on August 12th in Vail, Colorado. Thank you for listening in on our conference call. Warren and I will now take questions.

Thank you. The floor is now open for questions. If you have a question or a comment at this time, you may press the numbers 1 followed by 4 on your touch tone phone. If at any point your question is answered, you may remove yourself from the queue by pressing the # key. We do ask while you pose your question that you pick up your handset to provide optimum sound quality. Please hold while we poll for questions.

The first question is coming from Sandy Notardonato, from Adams, Harkness, Hill. Please pose your question.

Thank you. My first question has to do with the break out between advisory services and events. Warren, if you have those numbers could you share them with me please?

The break out between advisory services and events?

Right.

We don't typically give that information out. We lump that as one line item on our income statement.

Can you give me a sense in what the trend has been over the last couple of quarters? Just trying to get a sense of how the more nondiscretionary spending advisory services is going in this marketplace?

On a percentage basis?

Sure.

Yes, I can do that actually.

Advisory is headed up here, Sandy.

Sure. I'm sorry, say that again, George.

Yeah, advisory is moving upward in the market. What we're finding is people want more customized work and they want -- that's more appealing in this marketplace.

OK. And are you having to -- how are you pricing the advisory services to clients, currently? I know that they are part of the contract, but are you discounting it at all in order to increase their appetite for some of this customized work?

There's no more discounting going on now that there was in the past, Sandy.

OK.

So, it's not like we're fire saling this advisory. And that's a highway to hell anyway, so...

Right.

There's physics involved in it.

To give you some data to back up George's numbers, advisory is going up as a percentage of our total revenue and in the events it's going to be coming down slightly as a percentage of our total revenue.

Not big differences but there are differences there.

OK. In terms of the customer base, can you give me a sense of when you're projecting the -- the to end? What are you looking for for the end of this year in terms of total client organizations?

We reported 1200 client companies at the end of Q2. For Q3 we could see a little bit more slipping. However, I think for Q4 that number will certainly stabilize and should start to come back and go in a positive direction by the end of the year.

Yeah, the loss in Q2 is the lowest loss in 6 quarters.

OK.

I think Whole View is having effect there.

I'm sorry. Say that again?

I think Whole View is having an effect there.

OK. Is there a sense in terms of the trend of the type of client that isn't renewing? I know historically it was the small technology vendor. Who is it today that isn't renewing?

That stands true today as well. Looking at global 3500 penetration; Today we're at 15%, which is down from 18% a year ago. However, if you look at our global 3500 clients as a percentage of our client base, it represents 44% of our client base today whereas year ago it represented 33%.

OK.

And those, it's amazing, where at the new numbers on this, but the global base is very, very stable. I don't know how to characterize it, but extremely stable through this whole period.

OK. And I know that you don't break out revenue by vertical nor by size of customer but can you give me some color on which verticals you see as stronger in this marketplace?

Yes, financial services has definitely hung in there through this period. That's one of -- actually is our top vertical. You know, then you have the tech side, which is also high, followed by media and manufacturing for the verticals. I 'm excluding the tech verticals there.

OK.

But, just, the non tech verticals would be financial services, media and manufacturing.

Great. The renewal rates in Europe. If you don't give a number out for that, can you give me how that has been trending and are you starting to see, well, you're saying that Europe is in bad shape. Are the renewal rates coming down faster this quarter than they did last quarter?

They're coming down slightly but not faster than last quarter and obviously, as we reported overall, the renewal rates for the company were up on a 12 month rolling basis of 52% at the end of June.

I think the disappointment in Europe, Sandy, was mainly on the new business side.

On the new business side?

Yeah, they felt like they had a good quarter lined up and then, you know, as I said on the call, there was, you know, the CFOs jumped in and you know, write-offs, sign-offs, the whole thing we had right here last year.

OK.

It was the new business that was mainly the factor there.

OK. And my last question has to do with the inside sales effort. Can you give us a little bit of color on how those initiatives are going when you're targeting the small to medium accounts?

Yeah, I'd say that, and I actually said this in the call as well. That vendors are being drawn to us by Whole View. So the side of our business, the small medium size business group which we sell to on in-house basis, they actually had a very good new business quarter in Q2. So that's been a success for us due to the inside sales force.

OK. You don't break out how much revenue you're getting from your inside force, do you?

No, we don't. I'd back of the envelope add it at, you know, 20%.

20%. OK.

Yeah. Somewhere in that range.

OK. Thank you and we'll see you soon.

OK. See ya.

Thank you. The next question is coming from Fred McCrea from Tom Weisel Partners. Please pose your question.

George, Warren, good morning.

Good morning.

Hey Fred.

How you doing?

Good.

I'd like you, George, if you could give us a little more color on the Forrester Wave in terms of how much time did you spend with the, you know, a kind of select inside group of customers setting it out and what's the reception been so far to date?

Yeah. It's been an effort, like a four, five month effort to build the Wave. We beta tested it with 25 vendors. The board of clients was actually here a couple weeks ago and we, we're beta testing it with them as well. So it's nothing we did in a week. It's been a long thought process that went into it. The methodology behind it is very deep. It's also -- the real difference in Forrester Wave is number one -- the methodology is deep and transparent, number one. It's mainly looking at emergent technologies, number two. And then number three -- it's also customizable. So our client can take the Forrester Wave, input different parameters and get different results. We think it's going to be -- we've had 15 ways of grading vendors at Forrester for years and this is -- now we're going to get down to one way to communicate with our clients on who's up and who's down in vendor space. So we think it's going to be a big benefit for our clients.

Good. In terms of the repurchase, any thoughts there in terms of accelerating or expanding?

Again, we repurchased 228,000 shares in the second share, up from 180,000 in the first quarter. We plan to continue to be aggressive in Q3. It's based on a number of different facts as you know, including the stock price, the market conditions, our financial conditions, etc, the quiet periods that we're locked into and locked out of so we plan to continue to be active in Q3.

We had a long discussion in the board meeting yesterday about this, you know, looking at all these factors.

Understood. Anything come out of it that would change your thoughts one way or another? Was there a substantive change there?

Well, again, it's worth it. It's a pretty complex issue. It's like, we're looking at like 7 parameters here. It's kind of a complex .

Understood. Warren, in terms of the level 1 and level 2 customer metrics, do you have any breakdown there in terms of size?

Yes, I do. At the end of the second quarter our level 1 partnered contracts, the average contract was for 169,100 and that's down 2% over Q2 of '01 and our level 2 partners, the average contract value was 86,600 which is up 23% from 70,000 in Q2 of '01.

OK. And off balance sheet, deferred?

Yeah, balance sheet deferred revenue is 10 million at June 30th.

And then --

We don't like that term off balance sheet anymore.

We use accounts receivable.

Understood. And then, in terms of -- George, you had mentioned on a previous question about renewal rates and the stabilization and the fact that Whole View was really starting to kind of kick in. Are there other strategic levers or initiatives that you think that are out there that you're considering that would have that type of, you know, that are going to be kind of core to the business in terms of stabilizing and then be able to --

Yeah, this is the season, Fred, where we get off site and really next year the budgeting process for next year, but mainly, in addition we think about the long term strategy and the medium term strategy of the company. So we're deeply into that right now. What's happening and I think you read the press release about the reduction in force, a moving product strategy out into the operating groups, so that's a big change for us. We usually plan strategy, well, product strategy on a central basis, we will now plan corporate strategy on a central basis and product strategy on a, within the operating groups. But that whole, you know, think session is going on right now. A lot of cool ideas are coming up. But I can't talk to you about it now.

And then, finally, in terms of the advisory services business, is that something, you know, clearly it's a larger portion of that line item, largely, you know, clearly by virtue also that, you know, you cut back on some of the events and so forth, but do you have a concerted effort or thought plan in terms of getting out there and ramping that up and really having the salespeople push that harder or is it just a function of less events business?

Well, the TSDP product I talked about, technology development strategy program, again, it's a fledgling effort. But, you know, so far, it's been -- we've got some very cool projects out of this and again, this is really what I would call extended advisory. It's in a space we didn't really play in before, Fred, because advisory, as you know, for Forrester is one or two or three days a year but there is some very cool programs -- our clients said, hey, we loved the research but how do we do this. Can you give us some more help here? And that what TSDP is doing. So why don't we say, and I won't get more specific here, but .

OK. But not really a wholesale effort really, to get into the consulting business.

Exactly.

Another factor contributing to the 30% on the advisory and other is the fact that UAA, which was launched in the beginning of the year, has taken off quite quickly and represents about 2 to 3% of our revenue for Q2 so it is picking up pretty good steam.

Understood. Thank you, gentlemen.

OK. Thanks, Fred.

Once again, if you do have a question or a comment you may press the numbers 1 followed by 4 on your touchtone phone at this time. There appears to be no further questions at this time. I'd like to turn the floor back to George Colony for any closing comments.

No closing comments except to say thank you for joining the call and we look forward to seeing you guys at the two upcoming conferences. Thank you very much.

Thank you. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.