Forrester Research Inc (FORR) 2004 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Forrester Research Fourth Quarter 2004 Financial Results Conference Call. At this time, all participants are in a listen-only mode and the question and answer session with follow the formal presentation. If you should require operator assistance during the conference, please press "star" "zero" on your telephone keypad. As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Ms. Kim Maxwell, Director of Investor Relations for Forrester Research. Ma'am, you may begin.

Good morning and thank you for joining our fourth quarter 2004 conference call.

With me today are George Colony, Chairman and Chief Executive Officer, and Warren Hadley, Chief Financial Officer. A replay of this call will be available until Wednesday, February 16, and can be accessed by dialing 877-660-6853. Please reference the confirmation ID 136573 and the confirmation account, 2147. This call is also available via webcast and will be archived in the investor section of forrester.com until Wednesday, February 16.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expect, believe, 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.

Now, I'd like to turn the call over to Warren.

Thanks Kim, and good morning. Over the next several minutes, I will review Forrester's fourth quarter results, 2004 full-year results, the balance sheet at December 31, our fourth quarter metrics, and the outlook for our business in 2005.

Please note that the income statement numbers I'm reporting are pro forma and exclude the following items; amortization of intangibles, reorganization costs, and integration costs related to acquisitions, and gains and impairments on sales of equity securities and non-marketable investments. Also, we continue to book an effective tax rate of 35% for pro forma purposes. The actual effective tax rate for 2004 is 33.7%.

I am pleased to report that Forrester's fourth quarter results met guidance we provided on our third quarter conference call. Forrester's fourth quarter revenue increased 7% to 38 million from 35.3 million in the fourth quarter last year. Net income -- excuse me -- net income was 3.9 million and earnings per share were up 6% to $0.18 on diluted weighted average shares outstanding of 22 million, compared with net income of 3.9 million and earnings per share of $0.17 on 23 million shares outstanding in Q4 last year.

Fourth quarter research services revenue increased 3% to 24.8 million from 24.1 million last year. Research services revenue comprised 65% of total revenue for the quarter. Fourth quarter advisory services and other revenue increased 18% to 13.2 million from 11.2 million in Q4 of 2003 and comprised 35% of total revenue for the quarter. We held four events in the fourth quarter last year. We expect advisory and other revenues to comprise approximately 35% of total revenues in 2005.

International revenues were 34% for the fourth quarter and 33% for the full year, in line with our expectations. We expect international revenues to comprise 32 to 35% of total revenues in 2005. Operating expenses for the fourth quarter were 32.6 million, up from 30.1 million in Q4 last year and operating income was 5.3 million or 14% of revenue compared with 5.3 or 15% of revenue last year.

Turning to full year results, 2004 total revenue increased 10% to 138.5 million from 126 million last year. Net income increased 10% to 12.8 million from 11.7 million last year and earnings per share for 2004 were $0.57 on diluted weighted average shares outstanding of 22.4 million, compared with $0.51 and 22.8 million shares last year.

2004 operating income was 16.9 million or 12% of revenue, compared with operating income of 14 million or 11% of revenue in 2003. This is in line with our long-term goal of growing operating margin back to the mid-teen levels. We plan to increase operating margins by approximately 1% each year for the next three plus years to meet that goal.

Now, I would like to review the balance sheet. Our balance sheet remains strong. Our cash and marketable securities at December 31 were 127.4 million. We generated 18 million in cash from operations for the full year, and in 2005, we expect to generate about 20 to 25 million in cash flows from operations.

During the fourth quarter, we used 5.1 million of cash to purchase shares on the open market pursuant to our stock buyback program. Over the past three years, we have spent 50 million to purchase a total of 3 million shares. Today we announced that our board of directors has authorized an additional 50 million to purchase shares on the open market. We plan to continue to buyback shares on an accretive basis in 2005.

Accounts receivable at December 31 was 39.2 million compared to 40 million last year. Our future AR balance, which are amounts to be invoiced -- excuse me -- in the future for clients with two year deals or scheduled payment terms increased from 18.8 million at 12/31/03 to 25.9 million at 12/31/04. Our days sales outstanding at December 31 was 66 days, down from 69 days last December 31. And AR over 90 days was 7%, up from 6% last year, but still in good shape. The increases in AR over 90 days are primarily due to the increase in proportion of our business in southern Europe where payments typically come in slower.

Net property and equipment decreased to 6.4 million at December 31 from 8.3 million at the end of 2003. Our capital spending for the year was 3.7 million and our capital-spending plan for 2005 is 2.5 million. Deferred revenue at December 31 was 72.4 million, up 5% over December 31, 2003. If you include future accounts receivable, deferred revenue grew 12% when compared to 12/31/03.

And now I will review Forrester's fourth quarter metrics. Agreement value, the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized or is yet to be recognized was 137.1 million at December 31, a 9% increase from last year. On December 31, Forrester's retention rate for client companies was 76%, up from 66% last year, and our dollar retention rate was 85%, up from 78% last year. Both rates are calculated on a 12-month rolling basis and both are within our target ranges.

Our enrichment rate was 107% for the 12-month period ended December 31 compared with 99% for the 12-month period ended December 31, 2003. At the end of the fourth quarter, our total for client companies is 1,866, up 54 over the 1,812 we had at 12/31/03. And for headcount, at the end of the fourth quarter Forrester had a total staff of 593, up 6% from 560 a year ago. Current headcount includes a research staff of 202, up 9 from 12/31/03 and sales staff of 195, up 5 from the end of 2003.

The last topic I would like to cover today is our business outlook for Q1 and full year 2005. Our pro forma guidance for Q1 and full year 2005 excludes the following; amortization of identifiable intangible assets, which we expect to be approximately 1.1 million in Q1 and 3.5 million for the full year 2005; gains and impairments on sales of marketable securities and non-marketable investments; and any stock based compensation.

As we invest in our business to shift from stabilization back to growth, we expect our quarterly operating margins to have a steeper ramp than we have experienced during the past couple of years and which will mirror previous growth periods. With that, for Q1, we are aiming to achieve total revenues of approximately 32 to 34 million, and operating margins of 8 to 10%, interest income of approximately 700,000, a pro forma income tax rate of 35 to 36%, and pro-forma diluted earnings per share of approximately $0.10 to $0.12.

For the full-year 2005, we're aiming to achieve total revenues of approximately 148 to 253 million, a pro forma operating margin of 12 to 14%, interest income of 2.7 to 2.9 million, a pro forma income tax rate of 35 to 36%, and pro forma diluted earnings per share of $0.62 to $0.67. We have provided guidance on a GAAP basis for Q1 and full- year 2005 in our press release and 8-K filed earlier this morning. Thank you. I will now turn the floor over to George.

Thanks, Warren and good morning everyone. I am going to summarize the fourth quarter 2004 and I also want to give a brief look ahead to 2005. After my remarks, Warren and I will take questions. As Warren pointed out, the quarter-to-quarter improvement in our business continues with 40% of our contracts expiring in Q4, I'm pleased to report that clients renewals were strong. That included Best Buy, BP Oil, Colgate-Palmolive, General Motors, Pfizer, and Teradata.

New business also continues to show improvement in the quarter. 30 new 1B-plus companies became Forrester clients including Harvard Pilgrim, McDonald's and Talbot's. Clients continue to increase their spending with us, and Warren pointed this out, as we recorded enrichment rate of 107% in Q4. Now higher enrichment and cross sell is being driven to great extend by the broadening suite of Forrester products. And there are really four segments now in our portfolio.

Number one, syndicated research, what we call WholeView2. Number two, Data, and this includes custom consumer research, Technographics Data and Services, and the Ultimate Consumer Panel. Number three, Consulting, which spans projects as short as one day and all the way up to multi-month projects, and finally number four, community, and this includes our event business and the Oval Program. We often refer to this portfolio internally as RDCC, Research Data Consulting and Community.

Our move away from offering a narrow slice of services, that's really where we stood in 2001, to offering a portfolio was driven by three factors. Numbers one, Forrester has moved from push research, this is research, which is purely syndicated to pull research which offers increased client customization and relevancy. Number two, our effort to increase plan engagement through consulting and inquiry. And point number three, Forrester's strategy of servicing multiple functional groups within large companies, marketing IT business groups as well as multiple titles within these groups, CIOs, CMOs, strategists, and others.

I would now like to review Q4 starting with research. In research, we published over 450 research reports in WholeView2. And here are a few conclusions from the research in the quarter. Number one, there will be a battle for the digital home with 10 industries competing. We believe that PC companies, gaming companies, software and cable companies are favored in this fight over the long term. The consumer electronics companies are becoming like Sony, retail and satellite TV companies are in the worst position to compete in the digital home.

Moving now to the enterprise side, on the tech spending -- for tech spending in 2005, we believe that tech spending will increase around 7%, that's up from 5% in 2004. So tech, we believe, continues to recover. A final word on the business of research, undoubtedly WholeView2 continues to be the most challenging part of our business and we expect continued stabilization in this product in 2005.

Our data business doubled in 2004. Custom Consumer Research had a strong quarter with average deal size growing more than 40%. Techonographics Data and Services added 30 new clients in 2004 -- and finally the Ultimate Consumer Panel, launched in the third quarter, added eight new clients in Q4. We now have more than half of the top credit card issuers as clients of Ultimate.

Consulting had a strong quarter as well. Our average project deal size grew about -- grew for the fourth straight quarter and nearly doubled over last year. And here are a few examples of the projects we did in the quarter. The Radio Advertising Bureau turned to Forrester Consulting to understand how new technology that could potentially change radio industry over the next five years. A leading software provider signed on with us to develop and execute an ongoing monthly customer satisfaction benchmark study of their client base.

And finally, a large government agency relied on Forrester Consulting for advice and tactics on managing the cost of their overall project -- overall contract with a major software provider. Under community, the Oval program continues to grow. The CIO group, our network and technology leaders, now has 143 members. Tech councils, these are the three boards for technology titles below the CIO now have a total of 135 members.

The Oval selection and marketing council added members for a total of 113 and finally the CMO group and the other marketing councils, the database marketing council, the email marketing council, ended the year with 52 marketing Oval members. At the end of Q4, the total level of membership for the eight programs reached 443, this is up year-to-year from 290 members. New members in Q4 that we got from Cox Communications, Direct TV, The Gap, and Hallmark.

We hosted four forums in Q4, two were held overseas, the Finance Forum Europe, and the Consumer Forum Europe. The Emerging Technology showcase was held in Scottsdale, Arizona in December. And finally the Executive Strategy forum was held in Boston with speakers including Rick Wagoner, Chairman and CEO of GM; Kevin Rollins, CEO of Dell; and Mike Eskew, CEO of UPS.

Turning to our plans for 2005, in research, we will continue to drive client's choice, this is a feature whereby our clients vote at what areas Forrester's should cover. Ten percent of our total research output by year-end 2005 will be specified by client choice. Our data business will be in heavy execution mode in 2005, widening the Ultimate client base and expanding the scope of Technographics and custom consumer research.

We expect average contract sizes to expand in Consulting in 2005 as well. By the way we will closely watch our percentage of consulting businesses as a proportion of our total business to ensure that we maintain business leverage. In community, we will launch between two and four Ovals in 2005. And we will host nine forums worldwide including the Automotive Summit in Q1 of 2005.

So to conclude, after a strong finish to the year we are feeling optimistic about 2005. We expect that the differentiation and depth of our product portfolio will continue to increase cross-sell, as well as drive enrichment. We also believe that industry consolidation gives Forrester great opportunity to win a new set of clients. We will be hosting Investor Day at our headquarters here in Cambridge on Friday, February 11th. The three Operating Presidents will be present as well as the operational leaders of our product lines. Please contact Kim if you like to attend. We also plan to be on the road visiting with investors during the quarter. We hope to see some of you this month or in March. Thanks for listening to the call. Warren and I will now take questions.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question and answer session. If you would like to ask a question, please press "star" "one" on you telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press "star" "two" if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the "star" key. Once again if you would like to ask a question at this time, you may press "star" "one" on your telephone keypad. Please hold while we pool for questions.

Our first question will be coming from Sandra Notardonato of Adams, Harkness & Hill.

Hi, how are you guys.

Good.

Okay. My first question is what percentage of your clients are buying the WholeView2 product in comparison to the IT View or the Business View?

The WholeView2 product is about -- is 90% at this point versus 10% for the other two and they're split roughly equally.

Okay.

So it applies to the final research.

Okay. Great. And then a question on deferred revenues. With growth that wasn't as strong as I thought it would be coming into the quarter, and I was wondering if that had to do with the revenue mix now that you are seeing a little bit more on the advisory side? If you could walk me through that, that would be helpful?

Yes, we were -- well, if you include the future accounts receivable in that balance, it's up 12% from a year ago. So I don't think the advisory has any impact on deferred revenue, the mix, that is.

Okay.

Other than the fact that there may be some clients coming out during the year so there could be a little bit of a mix as a result of that.

So do you have clients that are solely buying advisory services from you or does that come along with the subscription based research contract?

It primarily comes along with the research contracts, but we do also sell standalone deals or advisory deals.

But it's very few deals.

Okay. So is this the new ideal mix then? 65/35? George, you mentioned that you want be conscious of how big consulting gets, is that as big as you will get?

Yes, I mean, 65/35, 70/30, that seems like a comfortable place to be in the portfolio. I was at Davos last week and I was with Steve Mills from IBM who runs all software at IBM. He was saying he really -- he likes the fact that he can come to us now for research. But he also likes that he can come to us for projects. It feels to be a good mix.

Okay. And do you have a sense of what -- how much time one of your analysts is -- the average analyst is putting on a consulting project? Your sense of utilization in the quarter, I know it's not a consulting business per se, but any kind of metrics would be helpful.

Not really. I mean it varies from project to project and analyst to analyst. But the great thing about the business here is that our analysts are working on a consulting projects rather than sitting on a bench, if you will. They're out there writing research, delivering speeches, speaking at events, etcetera.

Like a consulting firm, Sandra, we have an X number of consultants on the beach or on the bench. That's not true here. Because if the analysts are not doing consulting, they are writing research and as Warren said, they are speaking at forums. So it really works quite well.

Okay. I have a couple more questions.

Yes.

One of the other companies in the industry that provides best practices Research didn't see as much growth in prices this year as it had been over the past four or five years. I'm wondering if you had any commentary on the pricing that you are able to sell the Oval Program at and if you can talk a little bit about the competition there.

Is there price pressure?

It seems like it. It was up less than 2% for the full year '04 and it has averaged over the past 5 year 5 to 6%.

Warren Hadley I would say it was flat, much more of a sample size here, obviously, but flat for the year. So no increase or decrease in discounting from a pricing standpoint with regard to Oval or any of our products for that matter.

Yes, I don't -- and I am speaking very impressionistically here saying -- I don't -- we did not see price pressure in Q4.

Okay. And are most of the companies that are in or most of the members that are in the Oval Program also members of the corporate executive board or is it still one or the other?

There is probably 15% overlap and it's very -- I'd say small and getting smaller.

And then my last question. What was the bump up in DNA this quarter, Warren, can you tell me what that was all about?

The bump up in depreciation?

Yes.

It was...

Sequentially?

Just on the fixed asset purchases over the last -- I mean we spent 3.7 million this year so some of that kicking in essentially.

Okay. So is that the base I should use for March?

Yes. I think the number that we have in there, it should be roughly flat for the next year.

Okay, perfect. Thank you very much.

Thanks Sandy.

Once again ladies and gentlemen, if you do have a question, you may press "star" "one" on your telephone keypad. Our next question will be coming from Charles Trafton of America's Growth Capital.

Is the range in -- how much of the 10 cent in EPS or 5 cent range between 62 and 67 in pro-forma EPS is due to -- you don't know how may shares you are going to buy next year?

No, we don't know how many shares were going to buy. That's right.

Right. But does that account for most of that range or what else is involved there?

Well it's a higher margin. 12 to 14% for the range, so potentially a higher margin in 2004.

Okay.

Revenues growing 7 to 11%. Interest income should be roughly flat and that would depend again on the shares we bought back as obviously more shares you buy, the less interest can you have.

Right. And you're driving down for interest income next quarter from 1.1 to 700,000. So is it fair to say you've been active during January?

Yes, interest income for Q4, it was about 700,000.

Okay, so flat.

Yes, flat, that's right.

Okay. And how much of -- now that your revenue is growing again and it seems like organic growth is back...

Yes.

How much of the incremental profits are you reinvesting that if you're in harvest mode you wouldn't? It's a tough thing to quantify, but it seems like sales and marketing is getting a push here?

Yes, well there is reinvestment going on here at Forrester certainly. Oval's an area we're investing is AP, you know, Asia Pacific type area.

Yes.

There are some other internal marketing efforts that are underway that we're investing in...

We just launched a magazine actually -- investing for this year.

So there is money being put back into business to support future growth in '06 and beyond. It's probably shared equally with the increase of end margin if you will.

(inaudible) I think that '05 really is more of a harvest year than a planting year.

Right.

We tend to go about three-year cycles of planting and harvesting and this is -- although we certainly make investments in '05, it tends to be more of a harvesting year, more of an execution year.

'05 is?

Yes.

And back on Sandy's question about pricing in the Oval and the community services and products, price pressure, I mean you only entered that business really in the last year-and-a-half.

Yes.

Is it fair to say if there's some price pressure in that market that is probably because of you as a new entrant?

We're very small compared to the incumbent here.

Right. Growing quickly though.

Yes. And they offer us a nice price floor because they only raise prices so aggressively. But truthfully, in that business Charles, no one is buying on price.

Are you making an attractive margin on the way you're pricing it now?

Absolutely.

Yes.

We track all margins internally for all products and it's specifically a good margin product. Now getting into the growth mode so we were investing back into it, but even in growth mode even in investment mode we're making good margin.

So it seems like if you're in harvest mode in '05, and organic growth is going to be in the 10% range, earnings would grow a little bit faster than you're talking about. That's why my question about how much you are reinvesting. It looks like this year is, kind of a half investment year and half growth, but you're talking harvest.

Well, we're harvesting some of the planting that we did two, three, four years ago.

Right.

At the same time we're continuing to plant for the future.

It's all relative, in terms of -- when I say harvest, no, but it's not pure harvest.

Yes, relative.

Obviously.

Relatively it's more harvest than plant, but we are producing planting this year as well.

Okay. I'm not going to say harvest any more because.

Okay. Good.

I just heard of like seven times. Forget it. Okay. Good. Thanks. Good numbers.

Charles, thanks very much.

Our next question will be coming from Robert Straus of Sidoti and Company.

Good morning. I just want to touch again on this whole pricing question. With Gartner's impending acquisition of Meta, does that give you guys perhaps, the ability even to raise prices going forward?

We haven't really thought in those terms yet. I mean the real Meta Gartner impact, we think is that it causes a lot of uncertainty in the marketplace. We're hearing from a lot of clients that they feel uncertainty out there. And we go into the year with a very stable executive team, very stable set of products, and we feel very solid going into the year, we'll benefit from that.

The pricing at all.

We haven't really talked of -- you may be right, Rob but we haven't talked about that one yet.

Okay. Great. Thank you.

Thanks Rob.

Gentlemen, there are no further questions at this time.

Okay.

Operator, I see a few more in the queue.

I assume they've just entered the queue, would you like to take them.

Yes, please.

Our next question will be coming from Terry Lally of Cramer Rosenthal.

Hi good morning. George, can you follow up on your plans about the Garner Meta deal, particularly this client uncertainty? And what type of share gains you think you can get and did it impact Q4 at all or are these initial inquiries?

I would say it is all very tentative at this point and we're feeling more vibrations now in real data. So, we feel a lot of uncertainty out there, especially on the part of some Meta clients. And we think we can benefit from that but again it's all very impressionistic at this point, Terry.

If you look at the combined customer base, what percentage of clients was their overlap, where do you see their being an opportunity to be the second source, now that they are one entity?

Yes, the way we really feel about this internally is that if you are a large corporation making a very -- multimillion dollar may be, $20 million to $30 million technology decision, you're going to want to have two opinions here. We're one of those two opinions that are there -- to be have now. So that's good for us. And we're basically down to two major players and we are one of those two opinions and that we think we would get market share because of that.

Yes. Switching over to the Ovals, and I won't use the harvest thing terminology, but it seems like you're hitting a number of your milestones in the initial Ovals. Just refresh us on scaling that business, where do you cross the breakeven and the leverage once you cross that point.

Yes, the Oval is about 5% of our revenues in 2004, we're hoping to get that to be about 8 to 10% of our total revenues in '05. As you know we have several different programs within the Oval product suite, if you will and typically, they can go breakeven anywhere from 35 to 60 clients -- 35 to 60 clients were on board depending on how senior the people are in the programs that were actually servicing those clients. So...

It tend to be virtuous cycle business theory where to get the first 20 clients are difficult, but once you get the 50 or 60 to build a profile then it tends to go faster.

Yes, the -- you've got eight so far, you're adding two to four this year, what do you see being the number of that programs that you can run?

Ultimately you mean within two-year period or?

Yes, the markets that you've identified. What do you think -- what are the kind of opportunities you have on your short list?

There are 30 to 50 opportunities for us in this space, especially because the way we're -- the approach that we're taking which the Incumbent is not taking while going after a high title, a C title if you will and then taking the titles underneath those C titles. So there are 30 to 50 opportunities here. This is not an opportunity constrain business at this point at all.

Things look pretty positive there. I can't leave the call without making a comment that now that you've turned the corner and are getting the EPS leverage, great time to be buying back stock with all that free cash flow.

That's why we approved the $50 million.

Thanks.

Thanks Terry.

Our next question will be coming from Laura Lederman of William Blair.

Yes, hi. Just a few quick questions. Looking at the revenue growth for '05, I think you're looking for 7 to 10% on the top line, what would you expect the long term growth of Forrester to be, and if it's above that why is '05 different than what you'd expect in the long term? And then I have a few more questions.

Sure. Long-term revenue growth right now, we'd be looking at 15 to 20% range. The reason '05 is in 7 to 11% and not higher is obviously, our revenues are really impacted in the following year by how much we sell both as a deferred revenue coming into the year. So, essentially a big part of that guidance is really a result of our 2004.

Recovering between '03 and '04.

Correct. Yes. Our revenues tend to trail in our sales if you will in the given year along two to three quarters.

And can you talk a little bit about what would support the growth of 15 to 20% long-term? May be talk about the growth by WholeView data community, Consulting, what would the different pieces grow at or how you do get up to that 15 to 20?

Sure. If you look at the business today, research is about 60% of our total revenues, data is about 6, Consulting is in the mid to high 20s and then Community is about 8 to 10 including events. Longer-term -- you really are going to see the two fastest growing parts of the business will be data and Community. I think Consulting will hold steady but -- and the really big work for us to be done, I think, is to get the research back on track growing at 5 to 10% per year. That number has been flat over the last couple of years to down actually in one of the years. So we would need to get research growing at about 5 to 10%, and I think, we could manage at 15 to 20% growth with some of these other faster growing products out there.

And what was the Oval revenue for '04?

Oval was about 5% of our total revenues in 2004 approximately.

Okay. And FX, what impact if any does that have?

FX to the full year had about 2% impact on our total revenues.

What about in the fourth quarter?

In a fourth quarter it's also about 2%.

Thank you.

Thanks Laura.

That would be 2% positive.

Our next question will be coming from Sandra Notardonato as Adams, Harkness & Hill.

I have a couple of follow-up questions. First, did you sell any of your Greenfield Online shares, and if you havn't do you plan on selling those?

Yes, we do. We participated in the secondary. So, we sold that as part of gain it's in our interest statement of about $400,000.

Okay.

And we still have some shares remaining.

60,000 shares.

About 90,000.

90,000. Yes.

Okay. Great. And George, can you talk a little bit about what you're thinking on the acquisition front, I know that you're using the cash for the share buyback, but anything you can talk about their given -- it seems like the industry continues to consolidate?

Yes. I mean, I don't want to be -- obviously I can't get too specific here, so I will talk in long-term strategy and that is, always looking -- by the way, we are always looking here Sandy. And we have a very active internal group. Product line, great people, we will not buy into an organization that does not have strong financials, especially does not have a profit -- have it if essentially, and then geographical, we know those four. We bought G2 this time last year and that opened up France and Italy and the rest of Southern Europe for us, that was a great acquisition for us. So, I will only say that we are active, pricing is still good on this front. And I would expect more consolidation in the business.

Were you interested in data.

Obviously, we took a good hard look. We were interested.

So, it didn't work for you because of culture? Can you just give a little color there?

I'm not going to get too deep into this but probably two elements. One is, we felt it was Giga and Meta out there in 2003.

Yes.

And we really felt we bought the right company here. Culturally, less Consulting, more driven by syndication and we like their client base, we like their location, so we -- of the two -- we felt we bought the right company.

Okay. And one last question, do you have the turnover number on the research side in the quarter, and if you could breakout research and sales, actually, that would be great.

Yes, I do. And actually I have for the full year, it was 9% and sales turnover for the full year was 13%.

Perfect. Thank you, very much.

By the way Sandy, the research number was the lowest number we've had in, I think, five or six years. Which was kind a cool considering that we are in the second year of integration.

And how do you plan keeping that down considering how tight the labor market is getting?

You know we worry about it constantly. I think we intended to run historically in 12% to 15% range, but once you're compensation making sure it's a good place to work, we've that stuff all the time. Pertaining the labor market, I mean, you get -- this may be the impression that it's so nice to implement but it seems to -- it seems like it was tighter in the first half of the year, and then less tight in the second half of the year. So -- anyway, we will worry about it a lot and work on it a lot and pleased that would have 9% for '04.

Thanks again.

Okay. Thank you.

Our next question is a follow-up question coming from Charles Trafton of America's Growth Capital.

Hi. What is your thought process on deciding to buy back 50 million of stock versus initiating a dividend? That would be little over $2 a share, that obviously, not to do all in one year.

Yes. A couple of points, one is that George owns 36% of the company today.

Give yourself a raise.

A couple of other points too. It's not as tax efficient either way to create shareholder value if you will.

Okay.

And then, thirdly, I don't think it's really -- you start typically seeing in growing technology companies -- a little bit of a label to it.

Yes. As one of the directors said at the Board of Directors meeting given the last three years you wouldn't imagine us that we still think ourselves as a growth company but we do. We see this opportunity, we're talking about 15% to 20% growth, I see 20% to 30% growth long-term.

And your point about -- ownership is -- would that look too self-serving, I mean optically?

Why do you want to raise that issue. Well, I'll just put this in very personal terms Charles, as a large shareholder I believe that opportunity is -- an extraordinary opportunity given where technology is headed over the next 10 years and I want to be involved in a growth business and a not a business that is dividending.

Okay. On the growth question, how much revenue did you get from the European business that you bought this quarter? Is it like $1 million a quarter kind of business?

From G2?

Yes.

Incrementally over the year before it was about 2.5 million for the entire year.

For the whole year?

Incrementally '04. Because we had a in place where we were generating revenue prior to the acquisition.

Okay. So, you are almost at a point where your revenue growth does equal internal growth.

I would say with the exception of that 2.5 million, if you will, for that acquisition as well as currency factors which is about 2% for the year.

Right. And one extra month -- I guess, you've got two months of Giga in '03, that you didn't have in '04.

Correct, those two as well.

All right. Okay. Thanks.

Thanks Charles.

Once again ladies and gentlemen, if you do have any questions at this time you can press "star" "one" on your telephone keypad. Please keep in mind, if you're using speaker equipment, you may have to pickup your handset before pressing the "star" key. It appears there are no further questions in the queue at this time.

Okay. Thank you for joining our call and feel free contact me if you are interested in attending our Analyst Day on February 11th.

Thank you very much.

Thank you, ladies and gentlemen, for your participation in today's teleconference. You may disconnect your lines at this time and have a wonderful day.