Forrester Research Inc (FORR) 2008 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2008 Forrester Research earnings conference call. (Operator Instructions) I would now like to turn the call over to your host for today, Ms.Karyl Levinson, Vice President of Corporate Communications. Please proceed.

Good morning and thank you for joining our fourth quarter and full-year 2008 call. With me today are George Colony, Forrester's Chairman of the Board and CEO, Charles Rutstein, Chief Operating Officer and Mike Doyle, the Chief Financial Officer. Mike will open the call and operate detail on our financial results for the quarter. George will follow Mike and provide a strategic update on the business, and our role based strategy. After George completes his review we will open the call for Q&A. A replay of this call will be available until February 18, 2009, and can be accessed by dialing 888-286-8010. Please reference the pass code 40138075. This call is also available via web cast and it will be archived in the investor section at forrester.com.

Before we begin, I would like to remind that you this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expect, believes, anticipate, 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 involves 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 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. I will now hand the call over to Mike Doyle.

Thanks, Karyl. I will now begin my review of the financial performance for Forrester's fourth quarter and full-year results, the balance sheet at December 31, our fourth quarter metrics, and the outlook for the first quarter and full year 2009. Please note that the income statement numbers I'm reporting are pro forma and exclude the following items. Amortization of intangibles, noncash stock-based compensation expense, professional fees related to the stock option investigation and restatement of the Company's historical financial statements, and net realized gains from securities and non-marketable investments. Also, we continue to book an effective tax rate at 39% for pro forma purposes. The actual effective tax rate for 2008 is approximately 35%. For the fourth quarter, Forrester met its pro forma guidance for earnings per share, exceeded our operating margin guidance, and fell slightly short of our revenue guidance for the quarter. This performance came in what was an extremely difficult quarter for the global economy which adversely impacted many of our customers. Our positive performance on many fronts continues to demonstrate the success of our role-based strategy. That said, our softness in revenue indicates we're not completely immune to the effects of a global economic downturn. With today's release, we are reporting fourth quarter 2008 revenues of $62.9 million, and pro forma operating margin of 23%. Revenue increased 8% versus prior year, including the impact of foreign exchange. Operating margin performance was two points above the upper end of our guidance and two points above prior year. Pro forma earnings per share came in at $0.38 per share, within our guidance, and up 3% versus year ago. For the full-year ended December 31, 2008, we are reporting revenues of $240.9 million, up 14% from the same period a year ago. Pro forma operating margin increased 1.5 points to 19% for the 12-month period ended December 31, from 17.4% during 2007. Pro forma earnings per share were at $1.32, an increase of $0.16 from 2007.

Now, let me turn to a more detailed review of our fourth quarter results. Forrester's fourth quarter revenue increased 8% to $62.9 million, from $58.4 million in the fourth quarter last year with approximately 4% of the growth attributable to Jupiter offsetting 3% decline attributable to exchange rates. Fourth quarter research services revenue increased 18%, to $41.2 million, from $34.9 million last year. Research services revenue comprised 65% of total revenue for the quarter, versus 60% in the fourth quarter of 2007. We are pleased with the healthy increase in our research services revenue, which is in line with our objective of driving a higher percentage of our total revenue from research services, what we call Q, during 2008. Fourth quarter advisory services and other revenue declined 8% to $21.7 millions from $23.6 million, in the fourth quarter of 2007, and represented 35% of total revenue for the quarter. International revenues were 29% for the fourth quarter, unchanged from 29% in Q4 of last year.

I would now like to take you through the activity behind our revenue and review progress for each of our products starting with with research. In the fourth quarter, 453 new research documents were added to role RoleView. The top three research roles are applications development and program management professionals, with 5,986 clients, enterprise architecture professionals, with 5,876 clients, and business process and applications professionals with 5,337 clients. We hosted 96 teleconferences in the fourth quarter. With a total attendance of 4,894 participants. All 19 roles were represented. Forrester leadership boards, our peer offering for senior executives, continues to grow in a tough economy, achieving year-over-year revenue growth of 42% in the fourth quarter of 2008. The six boards focused on IT roles now have a total of 918 members. Our technology industry boards now have a total membership of 352, and finally, the marketing and strategy boards have a total membership of 282. At the end of the fourth quarter, the Forrester leadership board had 1,552 members, an increase of 6%, from September 30, 2008.

In our data business, we continue to add and renew an impressive list of clients. We added or renewed 57 1B plus companies, including Wal-mart US Bank, Met Life and Barclay's. Demand for our consulting services, as I previously mentioned, declined from the previous year by 8%, in due to our increased focus on our syndicated business but primarily driven by the global economic slowdown. Many projects that were discretionary were deferred or eliminated. Our events business softened in the fourth quarter, reflecting the broader economic trends with many of our clients reducing travel spending. As said, our event attendance, while down from expectations, was still at levels that the events were both profitable for Forrester and rated highly by attendees. We hosted two IT role-based and three M & S role-based events in the fourth quarter.

For 2009, we plan to increase the number of events from 12 to 14, to continue to support the role-based needs of our clients. Operating expenses for the fourth quarter were $48.4 million, up 4%, from $46.3 million in the fourth quarter of last year. Operating income was $14.5 million, or 23% of revenue, compared with $12.1 million, or 21% of revenue last year. The improved margin performance year-over-year reflects tight expense controls which began in Q3 in anticipation of a slowing economy. Other income for the quarter was $152,000.

For Q4, 2008, other income reflects a net foreign exchange loss of approximately $1.4 million, resulting primarily from the remeasurement of certain inter-company payables and receivables. Previously, the remeasurement of these payables and receivables have been recorded in other comprehensive income as part of a cumulative translation adjustment of the net $1.4 million, $1.9 million is related to periods prior to fiscal 2008. Net income increased 3%, to $9 million, and earnings per share were up 3% to $0.38 per share on diluted weighted average shares outstanding of 23.4 million, compared with net income of $8.7 million and earnings per share of $0.37 on 23.7 million weighted average shares outstanding in Q4 of last year. Looking at Forrester's full-year results, total revenue for the 12-month period ending December 31, 2008, increased 14%, to $240.9 million, from $212.1 million last year. Excluding the impact of foreign exchange, revenue would have increased 13.5% for 2008.

For the full-year 2008, research services revenue increased by $24.2 million, or 18.4%, to $155.3 million. Research services revenue was 64% of total year to date revenue, up from 62% in the same period 2007. The two-point increase in our syndicated business is in line with our targeted increase for the year. Operating income for the full year was $45.6 million, or 19% of revenue, compared with operating income of $36.8 million, or 17% of revenue in 2007. Net income for the full year increased 13%, to $31.1 million, from $27.6 million last year, and earnings per share for 2008 increased 14% to $1.32 on diluted weighted average shares outstanding of 23.6 million, compared with $1.16 and 23.7 million weighted average shares outstanding last year.

Now I would like to review the balance sheet. Our balance sheet remains strong. Our total cash and marketable securities at December 31 were $259.9 million, up $11 million from our year-end 2007 balances, and up$ 5.9 million from September 30. A portion of our marketable securities relating to option rate securities continues to be classified as a long-term asset on the balance sheet. This is the result of the current liquidity issues in the option rate marketplace. We generated $43.6 million in cash from operations for the full year 2008, which is up $6.2 million, or 17% from prior year, due primarily to net income improvement and strong cash collections. We have also received $18.6 million in cash, from options exercise, and the employee stock purchase plan for the full-year 2008.

During the full year of 2008, we repurchased 1.1 million shares of the total cost of $30.4 million, and will continue to be active with the buyback. We currently have $29.1 million remaining on our repurchase authorization. Accounts receivable at December 31, 2008, was $64.2 million, compared to $69.9 million, as of December 31, 2007. Our day sales outstanding at December 31 was 95 days, down from 107 days last December. And accounts receivable over 90 days was at 6% at December 31, 2008, consistent with the prior year at 6% and in line with our targeted range. Our capital spending for the full year, 2008, was $3.7 million, which is slightly below our targeted full-year spending of $4 million. Deferred revenue at December 31 was $113.8 million, up 2% over December 31, 2007. Absent Jupiter, deferred revenue would have declined 2%. Our future AR balances or amounts to be invoiced in the future for clients with multiyear deals or scheduled payment terms. Deferred revenue plus furious AR grew 2% year-over-year with three points attributable to Jupiter. The decline in deferred revenue plus future AR is reflective of overall economic decline in the fourth quarter which impacted renewal and enrichment activity with existing clients as well as new business activity.

And now I will review Forrester's fourth quarter metrics. A Grievant Value, this represents the total value of all contracts of research and advisory services in place without regard to the amount of revenue that has already been recognized or is yet to be recognized. And was $222.5 million at December 31, a 13% increase from last year, of which six points is attributable to Jupiter. At December 31, Forrester's retention rate for client companies was 73%, a decline of four points from Q3. And our dollar retention rate during the same time period was 84%, a decline of three points from Q3. Our enrichment rate was 101% for the 12 month period ending December 31, 2008, which is down seven points from Q3. Client and dollar retention rates an enrichment rates are calculated on a rolling 12-month basis. While these metrics declined with somewhat during the quarter, they held up extremely well given the economic turbulence. At the end of the fourth quarter, our total for client companies was 2,643, up 175 from 2007, year end, but down 75 from the third quarter. 138 of those clients are attributable to Jupiter. As of December 31, there are 3.1 roles per client, down from 3.5 roles per client as of September 30, 2008. This decline is due to clients renewing but reducing the scope of their agreements, which is reflected in our enrichment rates. In addition it reflects the declined transition of other enterprise licenses to seat-based contracts.

For head count at the end of the fourth quarter, Forrester had a total staff of 1,048, up from 903 at December 31, 2007. Current head count includes a research staff of 409, up 73 from December 31, 2007, and sales staff of 353, up 45 from December 31, 2007.

Last topic I would like to cover today is our business outlook for the first quarter and full-year 2009. In summary, we made significant progress during 2008. We had an excellent first half of 2008, with strong revenue and earnings. We began to see indications of softness during the third quarter, and adjusted our business model appropriately. Reducing hiring activity, and eliminating discretionary spending. Our final 2008 results reflect that effort with both revenue and earnings per share up 14%. On the strategic front, we completed the acquisition of Jupiter research, a great addition to Forrester. We have made significant progress on our role-based strategy which George will discuss later in this call. We ended the year with $259.9 million in cash and marketable securities, which is slightly more than $11 per share, with no debt. In addition, we announced earlier this week the difficult decision to eliminate approximately 50 people representing approximately 5% of our work force.

We believe this action coupled with the strength of our balance sheet, prepares us for the economic challenges we will face in 2009 and allow us to be opportunistic in our M&A activities and continue our share repurchase.

Now let's look towards 2009. Our pro forma guidance for the first quarter and full-year 2009, reflects our view that the economic conditions that prevail during the fourth quarter of 2008 will continue for all of 2009. In addition, it assumes that the current low interest rate environment will continue, which, given our large cash balances, will adversely impact our interest income year-over-year. We currently estimate the decline in interest income to equate to approximately $0.08 per share for 2009. Our current guidance reflects these assumptions but we will, as always, update you quarterly on our guidance, and adjust if we believe our business outlook is changing. As a reminder, our guidance excludes the following. Amortization of intangible assets, which we expect to be approximately $600,000 for the first quarter, and approximately $1.7 million for the full-year 2009. And noncash stock-based compensation expense of $1 million to $1.3 million for the first quarter, and $4.5 million to $5.5 million for 2009. Costs associated with the reduction in work force of $2.5 million to $3 million, and any associated facilities-related costs, costs associated with the stock option investigation, and restatement of our historical financial statements, and gains and impairments on sales of marketable securities and non-marketable investments.

For the first quarter, with we are aiming to achieve total revenues of approximately $52 million to $56 million. This range reflects a 5% decline to a positive 2% versus prior year. Foreign exchange adversely impacts our year-over-year comparisons. On a foreign exchange neutral basis, revenues would range from down 1% to up 6%, versus prior year. Operating margins in the range of 10% to 13%, other income of approximately $800,000. A pro forma income tax rate of 40%, and pro forma diluted earnings per share of approximately $0.15 to $0.19. Our pro forma full-year guidance is as follows. Total revenues of approximately $215 million to $235 million. This reflects a decline of between 2% and 11% versus prior year.

On a foreign exchange neutral basis, revenues are between flat to down 8% versus prior year. Pro forma operating margins of approximately 15% to 17%. Other income of approximately $3 million. Pro forma income tax rate of 40%. And pro forma diluted earnings per share between $0.88 to $1.11. We have provided guidance on a GAAP basis for the first quarter and full-year 2009 in our press release, and 8-K filed this morning. Thank you. And I will now turn the floor over to George.

Thanks, Mike and I would like to welcome everyone to Forrester's Q4 investor conference call. In my remarks I will address three topics, number one Forrester's prospects during the recession, two, Forrester's three business imperatives, and finally, three an update on the acquisition of Jupiter Research. Turning first to Forrester and the economy, as Mike has referenced our business was not immune to the global economic slowdown in Q4. And as shown in our guidance we are expecting the recession to persist through 2009. I would love to claim that we could overcome exigencies of the overall economy but the fact remains that two-thirds of our business comes from 1B plus companies and it is their budgets to a great extent governs our prospects.

In addition, we are loosely tied to the tech economy. Forrester's latest forecast shows the global decline in tech spending when expressed in US dollars. However, we do expect a modest growth of approximately 3% in local currency. In the 2001 recession, there was significant structural changes in the tech economy. Y2K expenditures ended and the dot-com bubble popped. In this recession, Forrester does not expect wide swaths of the tech market to be eliminated as was the case in 2001 to 2003. While susceptible to the macro economy, I believe that Forrester is better positioned this time around. In fact, I see six strengths that we take into this recession that we did not have in 2001.

Number one, we are role-based. Our strategy is keeping us relevant and client focused. This should help us renew clients and sign on new companies. The executives in our 19 roles will wake up every morning and go to work, right through the recession. And we will be there to help them manage through their challenges. This morning, I looked through our recent reports and found three that highlighted this relevancy. Number one, for application development professionals, a report entitled "Five steps to building a recession-proof packaged application strategy". For IT infrastructure and operations professionals, a report, entitled "Why I.T. leasing makes sense in the economic meltdown." And for direct marketing professionals, "Winning e-mail subscribers in a down economy".

Our second strength is our balance sheet, which is stronger than it was in 2001.

Number three, we have fewer competitors. Therefore, we expect less pricing pressure than in the last downturn.

Four, we are more diversified. Since the 2001 recession, we have added project consulting and the board's business to our portfolio. This will enable the Company to tap into a wider range of revenue streams. Five, we have seven more years of maturity for our international businesses. Management has improved us out of the US, teams are stronger, and the Forrester brand is more imbedded. In Q4, the strongest sales performance came from teams based in the UK, Europe, and our global markets group.

And finally, number six, we've got experience navigating recessions. We know how to scale back the size of our events while retaining quality, we have a lot of familiarity with expense controls, and we know how to prepare for recovery. I feel much better about our business and our team than I did back in 2001. We all wish this recession would abate. But if we've got to go through it, I don't think we could be better positioned.

I would now like to give an update on Forrester's three business imperatives and they are, number one, completing the buildout of our role-based strategy. Two, growing our sales platform. And three, increasing the quotient of our business that is syndicated.

Turning first to our progress in role-based, we have now completed our second year in the role-based strategy. The Company has nearly concluded the strategy's buildup stage and is poised in 2010 to move into the more dynamic break through stage. As I have mentioned on previous calls, the move to role-based is not a two or three-year transition. It will take five to seven years for all of the benefits of this change to accrue to the Company. As the ever-impatient CEO, I wish that we were moving faster, but even I have to admit that we have made amazing progress in the last 24 months.

Now, I'm not going to delve into the details but our internal role report card which evaluates the strategy across all parts of the Company every quarter was at a B+ in Q4, and that is up from a B- in Q1.

A final element of the build-up stage is in the process of being launched, and we will talk about this change on the Q1 conference call in April. Forrester's second business imperative is to increase sales head count 15% to 20% per year. As Mike already noted sales head count increased by 15% in 2008, despite the deteriorating economy late in the year. Sales attrition did improve to 25% in 2008, down from 31% in 2007. Now we are making efforts to lower this number even further in 2009. As we look forward to 2009, we are planning to keep head count of sales flat for the year. As we backfill for attrition, we expect to tap into a very talent-rich pool of prospects.

Forrester's third business imperative is to increase Q or the quotient of Forrester's business that is syndicated. Our goal is to gain two points of Q per year for the next three to four years, so the ultimate goal of Q at 70%. Role-based is yielding higher quality, relevant research and that is moving the Company to a higher percentage of syndicated sales. In addition, sales competition plans continue to be modified to reward for syndicated bookings. These moves paid off in 2008 with Q moving up two points to 64% and our plan in 2009 is to move Q up by another two points.

I would like to update on the Jupiter acquisition. It has now been six months since Forrester acquired Jupiter Research. As I reported on the Q3 call, this has turned out to be an excellent fit in culture, people, clients, methodology, and process. Jupiter clients have been retained at Forrester rates. And the attrition of Jupiter employees has been substantially lower than our plan. And opinion milestone was crossed on January 17 when Jupiter's website was decommissioned and Jupiter's research archive was successfully integrated with Forrester .com. Forrester and Jupiter clients now have the same web experience with all reports searchable and categorized by the appropriate role. All Jupiter research staff are now working in role teams and the sales team has been integrated with marketing and strategy client group sales. Financially, Jupiter is now fully incorporated with the M&S, that is the marketing and strategy, 2009 plan, which means that we will provide no comparative data on a go forward basis. So to conclude, while the economy presents many challenges, Forrester is about as well positioned as we could be entering this period. To paraphrase Rahm Emanuel 's now over used quotation," We do not intend to let this crisis go to waste". We will specifically be focused on three areas of opportunity.

Number one, M&A. Taking advantage of our strong balance sheet and the low pricing of acquisition targets to add new roles or new content to our existing roles. Two, buying back our stock, taking advantage of a lower share price and and finally, number three, innovation. We intend to accelerate our efforts to invent new product, process, services, and events, that could propel our role-based strategy into the breakthrough stage in 2010. This was our posture during the recession of 2001 to 2003. As you remember, in that time, we bought Gigabyte Information Group, greatly expanding our research coverage in IT and we launched into the project consulting and boards businesses. These were important drivers of our post-recession growth. Mike and I will be traveling this quarter to visit with investors and hope to see you on one of these trips. We will be at the CSFD conference Arizona on the 23rd and 24th in February. And Mike will present at the Baird conference in Boston on the 25th of February. Thank you for listening to the call. I would now like to welcome Charles Rutstein, Forrester's COO to join Mike and me for questions. We will now take questions.

And the first question comes from the line of Laura Lederman. From William Blair. Please proceed.

I like that new last name. I like that.

Maybe we will get it write, Laura.

Thanks for taking my question. A few thoughts, one is if you look at the guidance, what is assumed while at retention, dollar retention at the high end and the low end? I'm trying to understand the assumptions behind the guidance. And also, if you could give us a sense of cash flow and kind of how that will look in 2009 as well and then I just have a few more.

Laura, it is Mike. The general assumption here is that, you know, for client and dollar retention I think we dipped in Q4, I think we will be able to sustain reasonably in those ranges that we're in right now. Again, that is assuming the 2009 plays out as Q4 2008. And as it relates to cash flow, clearly, we have a wide range on our revenue and earnings targets so what we're looking at as cash flow, operating cash flow, probably in the range of $20 million to $30 million. I know that is broad. We will try and refine that as the year progresses. As that compares to the roughly $43 million in cash, operating cash flow this year.

Can you talk a little bit about how the respective businesses are holding up, core research, versus the boards, versus consulting, versus events, versus data, just a sense of what is behind the two revenue lines and how each of the businesses is holding up?

Sure, Laura. It is Charles. So I will give you a high level commentary. As you might expect, the events business has been softer than it has been historically. That is largely tied to people's travel budgets being down. The overall syndicated business, which includes the research, the core research product itself, as well as the leadership board's product, as well as some of the data products, as you saw in the results, are growing faster than the Company overall.

That is, they're making up a larger portion of the bookings and therefore the revenue. So we're seeing strength there. I think that drives from -- that derives from two places. Number one, from, as George mentioned, the increasing relevance of that content, and two from the sales incentives that we have in place. The mirror image is probably true on the consulting side where we're seeing slower than Company growth rates. That is making up a smaller share of the business. I think that comes again probably from two factors, number one, those sales incentives working in the opposite direction. But also, to some lessened demand in the quarter for some projects that would happen at the margins, and some companies who might have been thinking about our Web site redesign or something like that, are probably deferring those projects.

What about some color on full research versus boards? With the growth, boards have been so strong. Has that slowed down? I realize corporate executive boards has issues of its own. But wanted to understand how that business is doing versus the core IT. research.

Sure. The leadership board's business continues to grow at a faster rate than the core research. Both are growing at rates which are slower of course than they did in the past. Part of that is probably due to the scale that we're starting to reach in the boards business. As you know we were growing that business 40%, 50%, 60%, year on year and that can't continue forever. Part of that is due also to the slowing of growth and the business overall. So I think that the fundamental dynamics, which underlie it more, which is to say we're seeing increasing interest in the board's products, they are role-based and therefore, the relevancy is very high, there is continuing tradeoff between those two in favor of boards that works in our favor, because of course, those products are higher priced. And those dynamics haven't changed.

One other comment, Laura, I would make, this is Mike, is that once we clear through this recession, I think that in aggregate, overall research will revert back to our long-term targeted rates of the 15% to 20% growth.

One final question, and then I will pass it on. I realize you're now breaking out Jupiter separately but could you still give us a sense of how much that adds to growth in the first half of next year so we can kind of get an apples-to-apples sense of I guess world for [09] for Q1 if you take out Jupiter?

I think for the first half, Laura, I think you should look that it is adding about three points to our growth numbers for the first half.

Thanks a lot. I appreciate it. Good job in a bad environment, guys.

Okay, thanks, Laura. Appreciate it.

The next question comes from the line of Andrew Thut from Blackrock. Please proceed.

Hi, guys. How are you?

Andrew, how are you?

Good. Of the $20 million to $30 million in cash flow, how much of that is typically, is going to be collected in Q1? About half?

Usually half. In this case, it could be a little bit more than half, Andrew. So typically, we get anywhere from, you know $20 million to say $25 million in the first quarter of the year. So we probably will see that down a bit, and we've also, because of the reduction in force, we will see some outflow of severance payments in the first quarter as well. But that said, it is still going to be more than half probably is going to come in the first quarter.

So at the end of Q1, we will have something north of $12.00 a share of cash on the balance sheet?

That is probably about right. Okay. Again, and usually first quarter, because it is so tight between quiet period, share repurchase activity, on a dollar basis, won't be quite as large.

And where would you -- you know, what kind of parameters would you buy shares up to? Where does it become accretive?

Well, at these levels, it is certainly accretive. You know, we were buyers of the stock in the high 20s, this past year. So you know, from our perspective, and particularly in this low interest environment, it is accretive up to -- we've never given our up-end targets, and we won't. But in this market, Andrew, you know, I don't suspect we are going to bump into the upper end frankly during the course of 2009.

We will be I'm sure happy buyers all the way through the year.

And the last question, just wanted to understand how low the bar is set here in terms of expectations for revenue and earnings. Did you feel like you took expectations down to a level that if you continue to see the trends that you saw in December, throughout the rest of '09, you know, you could continue to hit that guidance?

I think that the model we have on the economy for the year, Andrew, is one which reflects Q4. And we don't see any recovery in 2009. Hopefully we're wrong about that. But I think what you're seeing is our guidance reflecting the conditions in Q4, persisting through the year.

So essentially, when you back out the cash, you've got a $5.00 or $6.00 stock with a $1.00 of earnings power?

Right. That's exactly right.

Okay.

Clearly, our view is that we're, even in this tough market, we're probably undervalued but that's right.

Okay. All right. Thanks, guys.

Thanks, Andrew.

And again, ladies and gentlemen, that is star one to ask a question. The next question comes from the line of Brian Murphy from Sidoti & Company Please proceed.

Hi, Brian Murphy. Sidoti & Company Thanks for taking my question. Mike, I think you mentioned that some customers are renewing but maybe reducing the scope of their agreements and maybe moving from enterprise to seat-based agreements. Could you just give us a little bit more color on that in terms of how that might fit into any discounting that you're seeing out there and also maybe if you could just give us some more color on why you think you might see less pricing pressure this time around than in the last downturn. Thanks.

There is a lot in the question. I will turn a piece of it to Charles. And a piece to George. Just one overall comment, though, before Charles gets started, relative to just discounting and terms in general, I was actually quite pleased that both from discounting and payment terms, we actually saw no change, no material change in our activity there, and each though I would have expected -- even though I would have expected that we would have had more discounting pressure, I think that a credit to the sales organization, we showed good discipline in the marketplace in the fourth quarter, plus the nature of our client base, because it is a lot of one B plus, we didn't get huge pressure on the terms from.

And the bad deals.

And we are doing the right things there. And I will let Charles tackle a couple of other pieces relative to the retention and enrichment activities.

Sure. Brian, think there are a couple of dynamics that you put your finger on here. One is under our control. The other is less under our control. The one that is under our control is the with one that Mike alluded to with unlimited deals or enterprise deals and we have made an expression intention to change our posture on those in the last 12 months or so. We raised the bar considerably on the amount of money you have to spend with us in order to have one of those agreements, and in so doing, have reduced the number of such agreements pretty materially. So that is good for us and gives us much more upside on those accounts over the longer term.

The latter dynamic is the less enrichment than you see and in some cases the trade down in accounts. Companies in particular who are in industries that have been most affected by this, in financial services, or in automotive, as Mike said, we were actually relatively happy with the retention of those clients, in some case, those clients traded down to a smaller number of seats in the quarter. And in reference to pricing in this recession, last time we went through, the '01-'03 recession, we had two additional public competitor, one was Medical Group and by Gartner and the other is Gigabyte owned by Forrester. And so there are fewer and more rational customers in the marketplace. Therefore, we think pricing will be pretty much maintained through this recession.

Okay. And in your guidance, are you assuming sort of roughly the same seasonality?

Yeah, we are, Brian, in terms of -- we expect the business to play out the same way it has in past years.

Thanks very much. Thank you.

The next question comes from the line of Vincent -- co from Noble Financial. Please proceed.

Vince Collicio That was a good try. The question on sales cycles. You're about halfway through the March quarter. Was it basically flat change with the December quarter? No material change there?

Vince, I'm not sure we're going to comment on the current quarter. I mean I can give you a little bit of color on the Q4, if that would be helpful.

Sure. So you know, perhaps it is no surprise, and I'm sure you heard from others, that there were longer sales cycles in the quarter, more approvals necessary, in order to get deals done, that in turn requires running the business differently androgen rating more activity androgen rating more leads and building bigger pipelines just to get to the same target numbers, so you know, those dynamics that we talked about on the previous call in Q3 were certainly in place in Q4 as well.

Okay. My other questions were answered. Thank you.

The next question comes from the line of William Sutherland from Boenning & Scattergood Inc.. Please proceed. Hi, everybody.

Hi, Bill.

I was a little surprised to see the event business being expanded in '09. I guess were you happy, you know, given the environment with the attendance and the ratings, but is this to fill product gaps? Is that the main reason for it or --

Well, think the reasons are two-fold Bill. Number one is a strategic reason, as you said. To fill out the portfolio of events for the roles that we serve. There is also of course an underlying financial story, the best way to think about that is that we make a commitment well in advance on these events and you can think about that as a cost and you have a choice at that point as to whether to, you know, to hold the event or not, in this environment, and if you choose not to hold the event, obviously you eat a big cost. We believe that in all of our models, even, you know, declines from where we are, we still think we can make money on those events, and we may be making less money than we had originally thought, when we booked those events a year or more in advance. But we still think they are positive contributions to the earnings line.

Okay.

In the last recession, Bill, we became quite astute at scaling the events to be smaller and more intimate and that actually works better now in the role-based world because everyone at those events is coming from the birds of a feather essentially and they do tend to work quite well, even in small sizes.

Okay. I was just looking kind of at the mix of revenue potentially in '09, based on the guidance. And if your research is relatively flat, or maybe because of currency down a bit, your Q will probably go up more than two points. Is that a possibility? Or is there something in advisory I'm not understanding?

No, I think your observation is correct, Bill. I mean we target to a point. I think that has been a stated objective actually I think from the end of 2007. But if things play out and the guidance breaks the way we expect, we should be north of two points on syndicated mix improvement.

So, and I actually wanted to ask a follow-up on that, because if -- I was curious, to what degree, as you look at your Q4 performance, that operating leverage improvement was mostly mix shift, and how much of it was, you know, you guys moving the levers, and controlling things?

This is Charles. I think it is a combination of the two. Obviously we see leverage out of that mix shift as you would expect, but we also put the brake, as Mike alluded to, on quite a bit of both discretionary spending, in the quarter, as well as slowing down the expected ramp. We expected to hire a lot more people than we chose to do in the fourth quarter. So it is a combination of those things.

Both in sales and research, Charles?

Across both, that's right.

And so the plan for '09 then is just to fill -- to fill in, as sales attrition occurs as opposed to any net increase?

That's correct. We're targeting roughly flat sales head count for the year at this point.

Okay. Great. Well, thanks for the Q&A.

Thanks, Bill.

We have no further questions at this time. I will now like to turn the call back over to Ms. Karyl Levinson. Please proceed.

Thank you very much for your time today. Enjoy the rest of the day. Goodbye.

This concludes the presentation for today, ladies and gentlemen. You may now disconnect. Have a wonderful day.