Forrester Research Inc (FORR) 2009 Q1 法說會逐字稿

good day, ladies and gentlemen, and welcome to the first quarter 2009 Forrester Research earnings conference call. My name is Francine, and I will be your coordinator for today. (Operator instructions.)

I would now like to turn the presentation over to your host for today's call, Ms. Karyl Levinson, Vice President of Corporation Communications. Please proceed.

Thank you, and good morning. Thank you for joining our first quarter 2009 call. With me today are George Colony, Forrester's Chairman of the Board and CEO, Charles Rutstein, Forrester's Chief Operating officer, and Mike Doyle, Forrester's Chief Financial Officer.

Mike will open the call and provide 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'll open the call to Q&A.

A replay of this call will be available until May 7th, 2009 and can be accessed by dialing 888-286-8010. Please reference the pass code 98034661. This call is also available via webcast, 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 expects, 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 the Forrester's first quarter 2009 results, the balance sheet at March 31, our first quarter metrics, and the outlook for the second quarter and full year 2009.

Please note that the income statement numbers I'm reporting are pro forma and exclude the following items -- the amortization of intangibles, noncash stock based compensation expense, reorganization costs associated with the previously announced reduction in Forrester and facilities consolidation costs, professional fees related to the stock option investigation and restatement of the Company's historical financials, and net realized gains from securities and nonmarketable investments.

Also, we will book an effective tax rate at 40% for pro forma purposes. The actual effective tax rate for the first quarter of 2009 is approximately 41%.

For the first quarter 2009 Forrester exceeded its quarterly guidance for revenue, pro forma operating margin and pro forma earnings per share. This performance came in what was a difficult quarter for the global economy, which adversely impacted many of our customers but demonstrated our ability to effectively manage our costs to deliver strong business results.

That said, our softness in some of our metrics, deferred revenue in particular, indicates they were not completely immune to the affects of a global economic downturn and remain cautious about the second quarter and full year 2009.

Therefore, despite exceeding guidance in the first quarter we are reiterating our full year 2009 guidance consistent with our call in February.

Now, let me turn to a more detailed review of our first quarter results. Forrester's first quarter revenue increased 3% to $56.4 million from $55 million in the first quarter last year, with growth attributable to the Jupiter acquisition being offset by the adverse impact of foreign exchange rates.

First quarter research services revenue increased 9% to $39 million from $35.9 million last year. Research services revenue comprised 69% of total revenue for the quarter versus 65% in the first quarter of 2008.

We are expecting research services revenue to increase at least 2 points or more for the full year, which is in line with our objective of driving higher percentage of our total revenue from research services, what we refer to as [Q].

First quarter advisory services and other revenue declined 9% to $17.4 million from $19 million in the first quarter of 2008 and represented 31% of total revenue for the quarter which is reflective of a decline in the demand for our advisory and consulting services, driven by the global economic slowdown as well as our strategic decision to focus on growing our syndicated business.

International revenues were 29% for the first quarter of 2009, up from 28% in the first quarter of 2008. Our business outside the U.S. continues to improve despite the adverse impact of foreign exchange rates.

I would now like to take you through the activity behind our revenue and review progress for each of our products, starting with research.

In the first quarter 548 new research documents were added to RoleView. The top three research roles, again, consistent with our fourth quarter, our application development and program management professionals, enterprise architecture professionals, and business process and applications professionals.

We hosted 99 teleconferences in the first quarter with a total attendance of 4,108 participants, all 19 roles were represented.

Forrester Leadership Boards, our peer offering for senior executives, continues to grow in a tough economy. The six boards focused on IT roles, and now have a total of 929 members. Technology industry boards now have a total membership of 345, and, finally, the marketing and strategy boards have a total membership of 280. At the end of the first quarter the Forrester Leadership Boards had 1,554 members, a slight increase from December 31, 2008.

In our data business we continue to add and renew an impressive list of clients. We added or renewed 11 [1B+] companies in the first quarter, including Target, Whirlpool, Southwest Airlines, and [ESB Bank].

Demand for our consulting services declined from the previous year by 12%, in part 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.

In events, our events business continued to soften in the first quarter, reflecting the broader economic trends, with many of our clients reducing travel spending. That 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 three IT role based events in the first quarter. For the second quarter we will be hosting three IT role based events and two marketing and strategy role based events. We do expect the events business to remain challenging for the remainder of the year.

Looking at our first quarter expenses and operating income, operating expenses for the first quarter were $47.2 million, up 1% from $46.9 million in the first quarter last year. The operating expense increase was primarily driven by the higher net headcount in sales and research, which came about principally as a result of the Jupiter acquisition, offset by tight expense controls.

Travel, recruiting, as well as other discretionary expenses were down year-over-year. Our operating management teams continue to demonstrate excellent spending discipline.

Operating income was $9.2 million or 16% of revenue compared with $8.1 million or 15% of revenue last year. The improved margin performance year-over-year reflects continued Company focus on our higher margin syndicated business in addition to tight expense controls.

Other income for the quarter was $1.3 million for the first quarter 2009, down 39% from the first quarter in 2008. The decrease was due to the low interest rate environment in the first quarter 2009 as compared to the same period in 2008.

Net income for the first quarter was $6.3 million and earnings per share was $0.27 on diluted weighted average shares outstanding of 23.1 million compared with net income of $6.2 million and earnings per share of $0.26 a share on 23.6 million of weighted average shares outstanding in the first quarter of last year.

Now, I'd like to review the balance sheet. Our balance sheet remains strong. Our total cash and marketable securities at March 31 were $270 million, up approximately $10 million from our yearend 2008 balances. The portion of our marketable securities relating to auction rate securities continues to be classified as a long-term asset on the balance sheet.

We generated $20.7 million in cash from operations for the first quarter, which is down $9.8 million or 32% from prior year due to decreased cash collections, payments associated with the reorganization costs, and an increase in estimated tax payments.

During the first quarter of 2009 we repurchased 280,000 shares at a total cost of $4.9 million and will continue to be active with the buyback. As announced in our press release issued earlier today, Forrester's Board of Directors authorized an additional $50 million to be spent on share repurchase, and as a result we now have $74 million remaining on our repurchase authorization.

Accounts receivable at March 31, 2009 was $40.6 million compared to $50.9 million as of March 31, 2008. Our days sales outstanding at March 31 was 83 days, down from 95 days last March 31, 2008. And accounts receivable over 90 days was 12% at March 31, 2009, improved from the prior year which was at 21% and in line with our targeted ranges.

Net property and equipment increased by 21% to $8.2 million and is primarily due to leasehold improvements associated with our Cambridge Headquarters. Our capital spending for the first quarter of 2009 was approximately $2.5 million.

Deferred revenue at March 31 was $108.4 million, down 7% over March 31st, 2008. As you know, we consider deferred revenue to be one of the best leading indicators of our business, and the decline is reflective of some of the challenges we are encountering in the marketplace. Year-over-year comparisons for deferred revenue reflect the favorable impact of the acquisition of Jupiter Research, which was offset entirely by the adverse impact of foreign exchange.

Our future AR balances are amounts to be invoiced in the future for clients with multiyear deals or scheduled payment terms. Deferred revenue plus future AR declined 7% year-over-year.

As we referenced in our earnings release this morning, given the nature of our business model this decline in our deferred revenue will be reflected in our revenue numbers as the year progresses.

I'll now review Forrester's first quarter metrics. Agreement value, this represents 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, and was $201.9 million at March 31, a 3% increase from last year.

At March 31 Forrester's retention rate for client companies was 73%, in line with our fourth quarter and our dollar retention rate during the same time period was 83%, a 1 point decline from the fourth quarter.

Our enrichment rate was 101% for the 12-month period ended March 31, 2009, which is down 1 point from the fourth quarter.

Client and dollar retention rates and enrichment rates are calculated on a rolling 12-month basis. While these metrics declined somewhat during the quarter, they held-up reasonably well given the economic turbulence.

At the end of the first quarter our total for client companies was 2,585, down 58 from yearend. As of March 31st there are 3.2 roles per client, up from 3.1 roles per client as of December 31, 2008.

For headcount, at the end of the first quarter Forrester had a total staff of 993, down from 1,048 at 12-31-2008, due to the impact of the previously announced reduction in force. Our current headcount includes a research staff of 389 and sales staff of 332.

The last topic I'd like to cover today is our business outlook for the second quarter and full year 2009. In summary, we've effectively managed our expenses and eliminated discretionary spending during the first quarter, allowing us to exceed our pro forma operating margin and earnings per share for the quarter.

Our balance sheet is in excellent shape, which will allow us to be opportunistic in this market, pursuing acquisitions, new business, and continued share repurchase.

We continue to remain focused on our role based strategy and have begun implementing the next key component of this strategy, repackaging, which George will describe in further detail in his remarks.

However, in the near term our business remains challenged by the current economic environment as evidenced in our declining deferred revenue and other metrics and remain cautious in our outlook for the second quarter and the remainder of the year.

Our pro forma guidance for the second quarter and full year 2009 continues to reflect our view that the economic conditions that prevailed during the last few quarters will continue for all of 2009.

As a reminder, our guidance excludes the following -- amortization of intangibles, which we expect to be approximately $700,000 for the second quarter and approximately $2 million for full year 2009, and noncash stock based compensation expense of $1.2 million to $1.7 million for the second quarter and $5 million to $6 million for all of 2009.

Reorganization cost of $3.1 million related to the previously completed reduction in force and office space consolidation. Costs associated with the stock option investigation and restatement of our historical financials, and gains and impairments on sales of marketable securities and nonmarketable investments.

For the second quarter we're aiming to achieve total revenues of approximately $60 million to $63 million. This range reflects a 1% to 6% decline versus prior year. Foreign exchange adversely impacts our year-over-year comparisons.

On an FX neutral basis revenues would range from down 1% to up 4% versus prior year, operating margin in the range of 19% to 21%, other income of approximately $800,000, a pro forma income tax rate of 40%, and pro forma diluted earnings per share of approximately $0.33 to $0.37.

At this time, we are reiterating our pro forma full year guidance which 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, a pro forma income tax rate of 40% and pro forma diluted earnings per share of between $0.88 to $1.11.

We have provided guidance on a GAAP basis for the second quarter and full year 2009 in our press release and 8-K filed this morning.

Thank you, and I'll now turn the floor over to George.

Thanks, Mike.

I'd like to welcome everyone to Forrester' Q1 Investor conference call. In my remarks I will address three topics. Number one, how Forrester is managing during the recession. Two, a change in how Forrester packages its research. And, finally, three, an update on the Company's three business imperatives.

Turning first to Forrester and the recession, as evidenced by yesterday's economic data, the recession continued in full force in the first quarter. Forrester estimates that tech spending will fall 6% to 10% in 2009, with the largest impact felt in computer and communications equipment.

So how is Forrester managing in these times? As Mike has highlighted, the Company is carefully watching and controlling expenses. Between the slowdown in hiring and the first quarter's reduction in force, Forrester is right sized for 2009's economic environment.

The recession has impacted Forrester's sectors unevenly. While our business for IT and technology industry roles has decelerated, demand from our seven marketing and strategy roles beat plan. And this is due to three reasons.

Number one, the Jupiter acquisition has enhanced our offerings for marketing and strategy roles. Two, much less competition in that segment as compared to IT and TI. And, finally three, the marketing and strategy roles are markedly challenged in these times of social computing, the collapse of advertising, and the movement of media from print to digital.

Our consumer data products had a good quarter as large companies shifted spending from custom surveys to Forrester's syndicated technigraphics research.

As I've discussed on past calls, the events business is the most fragile product in our portfolio, being susceptible to [TV] cuts in times of recession. While we did contemplate cancelling events for the year, we did not do so, and this has worked out well.

While the events are certainly smaller than years past, with careful expense control they are still profitable. Role relevancy is delivering high scores from attendees and we are continuing to build our events brand, which is going to pay-off for us as the recession smoke clears.

We are also using this time to innovate. We have several internal efforts to create new products and services, and this is a strategy that we employed in the 2001 to 2003 recession when we launched project consulting in our Forrester Leadership Boards and these are now significant revenue and profit contributors.

So as the recession continues we are staying disciplined, true to our role based strategy, client focused, and innovative. Yes, this is a difficult time but we are using it to build the foundation for strong recovery in the post recession era.

I would like to turn now to the changes we are making in our research packaging. Now, as you all know, the Company is on a long term voyage to become fully role based. And that means going to market by addressing the challenges, decisions and lives of our clients in their individual roles.

Forrester is now opening a new chapter in the execution of the strategy by changing how our core research product is packaged. We are transforming RoleView into three discrete products -- IT RoleView, TI RoleView for technology industry roles, and M&S RoleView.

The IT sales force at Forrester will exclusively sell IT RoleView to its eight roles. The M&S sales force will sell M&S RoleView to its seven roles. And the TI sales force will sell TI RoleView to its four roles.

All roles in each cohort will have access to all research within each product, so as an example an enterprise architect who is a IT RoleView client would have access to research tailored to EA professionals and all research for the other seven roles in IT. This is a very important feature because the cohort roles share many of the same challenges and organizational imperatives.

Now, to help clients that may have interests behind their cohorted roles, we are providing several free insurance policies that will guarantee flexibility -- courtesy views and courtesy inquiries. In addition, we are adding a new feature for all of our research called [Click-and-Share], and this is a feature which enables our clients to share a limited amount of content with their colleagues, and this is a feature which our clients have often requested.

So why did Forrester undertake this packaging change? There are five reasons. Number one, to increase the relevancy of our research to a specific audience of roles. Number two, to enable our clients to pay for just what they want and need and no more. Three, to specialize the Forrester sales force. Four, to enable us to reach more roles within existing accounts. And, finally, number five, to maximize the return on investment of acquisitions, while ensuring that only the roles that benefit from new acquired content pay for it.

Now, this repackaging move has been planned for nearly 18 months and it would have been impossible without our role focus. In our studies we found that most clients rarely read research outside of their cohort of roles, and in these days of tight budgets clients only want and should only pay for the research that is relevant to them.

I'd now like to give an update on Forrester's three business imperatives, and they are -- number one, completing the build out 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, while there are certainly advancements towards roles on many fronts within the Company the biggest change is repackaging, which I've just discussed. And this is a very important move because it further aligns our sales force with specific roles. It sharpens the research team's role focus, and it is a big jump forward in improving our relevancy. Now more big moves lie ahead in the role based journey, but we're going to look back on repackaging as a major milestone.

Turning to the growth in our sales platform, our long-term goal is to increase the size of the sales force by approximately 15% per year, a number that we achieved in 2008.

As I reported on the last conference call, our plan is to hold the sales headcount constant through 2009, given the recession. As we move deeper into the year we will be reviewing our sales headcount growth plans with the potential to begin growing again in the fourth quarter depending on economic conditions.

Our final business imperative is to increase the quotient of our business that is syndicated, what we call Q. now, as you know, we increased Q by 2 points in 2008 from 62% to 64%, and as Mike reported our first quarter performance puts us on track to achieve at least another 2 points of Q in 2009. We believe that the repackaging of research will increase relevancy and more relevant research will enable higher Q.

And so to conclude, while remaining disciplined in spending, Forrester is not standing still during this recession. We're making important changes in the business, as evidenced by the move to IT, TI, and M&S RoleViews. We have committed dollars, time and attention to innovating new products. And, finally, we are intensifying our efforts in mergers and acquisitions, proactively searching and vetting potential targets that will bring more content to our existing roles or bring us new roles. The environment for acquisitions remains very promising.

Now two dates to note -- the Forrester Investor Day will be held at our Offices in Cambridge on June 16th from 9:00 a.m. to 12:30 p.m., with lunch to follow. Please contact our Investor Relations Department if you would like to attend. We will also be live webcasting this event.

In addition, Mike and I will be in New York City on May 27th, hosting a breakfast and a lunch with Boenning & Scattergood at the Peninsula Hotel. Please contact Investor Relations if you would like to join us for an expensive croissant or a cup of coffee.

And thanks 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.

(Operator instructions.)

Our first question comes from the line of Brian Murphy of Sidoti. Please proceed.

Hi, thanks for taking my question. George, could you give us some color on how the repackaging initiative might affect pricing?

Brian, it's Mike Doyle. I think I'll tackle that. It's our expectation that the impact for 2009 is going to be net neutral. We, as with every pricing decision, this one cuts across all three client groups, and so there's puts and takes in each of those situations. So it is included and was included in the guidance that we projected for full year in February, and it's our expectation this year is that that's going to be net neutral for us, Brian.

Okay, and could you talk about the timing of when I guess this initiative gets launched or rolled out, so to speak?

Sure, Brian. This is Charles. So this packaging is now in the marketplace for all contracts in Q2. In fact, we started it with new business deals at the tail end of Q1, so it's sort of from here on forward.

Okay, I mean I imagine that this kind of thing would certainly improve client retention and it seems like client retention held-up pretty well in the first quarter. One question is how is the new business environment, did you see any improvement there in the March quarter? And with this new repackaging initiative have you seen any impact yet that you can talk about?

Sure, so let me take those questions in sequence. It's Charles, again. First, with respect to new business within the quarter I would say we were pleasantly surprised by the new business performance across much of the Company. Previous downturns have made us concerned about what the new business performance might be but, in fact, new business held-up very well.

With respect to the go forward and what we expect on the new packaging and, of course, the pricing that goes with it, as Mike said it's net neutral for the year, but we think it gives us some real advantages going forward, it gives us the ability first to differentially price by customer segments and price as the market will bear in those respective segments.

It allows us, as George mentioned, to monetize any acquisitions that we might do, rather than dumping it into the mix that everybody gets at the same price. It also allows us, also as George mentioned, to specialize the sales teams and, therefore, to make them more effective. So I think you're going to see a lot of downstream impact from this.

Okay, thanks, I'll jump back into queue.

Thanks, Brian.

(Operator instructions.)

Your next question comes from the line of Vincent Collicchio of Nobel. Please proceed.

Nice quarter, guys, in a tough environment. Mike, can you remind us how much of employee compensation is variable so we can better understand your ability to withstand shortfalls in revenue?

Yes, we haven't given a precise range, Vince, but I want to say that it's typically, if you weigh in -- because all Forrester employees are on a variable compensation of one form or another. For the sales employees it is commission based. For all non sales, all of us are on what -- it's a matrix, which there's really two axis to that. One is bookings activity and the other is operating profit.

So and it works out, I want to say what we've said in the past is that that can be in the neighborhood of I want to say 10% plus or minus of variable and it leverages up or down, but figure in the range of 10% to 15% is a good range to use, and that that again fluctuates as bookings and operating profit. So but again our broad range if you want to look at all employees, if you go sales comp you can be as low as 5% to 10%, as high as 30% when you start going into the -- what I consider the meat of our employees.

And generally speaking the more senior the employees the more leveraged they are.

Right. And that matrix is paid on a quarterly basis, Vincent.

Now, is there any -- regarding guidance for the rest of the year, I can appreciate your interest in assuming the similar economic scenario to the 4Q period and putting your guidance out there. Who knows what the economy holds, but it does appear to be bottoming out, and it appears that it will bottom out through the rest of the year if the consensus forecasts are right. Are there any lessons we can take from previous recessions in terms of during a bottoming out period, your ability to see some improvement in top line?

Yes, I would say that there are two pieces that impact our outlook for the year. The first is fundamental to our model, which as we -- George and I have been on the road a lot, we've talked about the nature of a deferred revenue model where effectively we look better in the beginning parts of a recession and typically the P&L, itself, looks a little bit worse for us as we come out, because if you think about our fourth quarter deferred revenue, it was down year-over-year, and our first quarter it's down year-over-year. That will play out in the P&L going forward, so that factors into looking at our full year guidance.

And the second piece is it's just somewhat unique economic circumstances, so we're only through the first quarter and we are cautious, and I think we want to see how it plays out. And I think we saw some things that were positive to the points Charles mentioned relative to new business, and that certainly is encouraging for us, but you look at our consulting revenues, we're off and down year-over-year, and that will have an impact so it's difficult to predict when that's going to come back.

So I think we remain cautious for the balance of the year for those reasons. We'll certainly be looking at guidance and updating everyone appropriately on each of the calls. We'll have a better peek, and I'm stating the obvious we'll have a better sense for 2009 as we close-out the second quarter and have a better sense of the balance of the year. I mean, yes, it feels like things are beginning to bottom out but, again, keep in mind because of our model that will lag for us, so if we have a good and strong third quarter and fourth quarter from a bookings perspective we reap the benefits of that more into 2010.

So we do down later than everybody else but we also come up later than everybody else. That's what happened in the last recession.

Okay, thanks. One other question. Mike, what should we be modeling for capital spending for the year?

I'm still comfortable being in our historical ranges of around $5 million, plus or minus. We had a -- obviously, the first quarter was higher than it typically is because of a series of leasehold improvements that occurred with our facility here in Cambridge, but I think the full year $5 million plus or minus is reasonable, Vince, I don't expect us to be outside of our norm.

Okay. Again, a nice quarter, guys. Thanks.

Thank you.

(Operator instructions.)

Our next question comes from the line of Laura Lederman of William Blair. Please proceed.

Yes, good morning. Thank you for taking my questions, and nice quarter considering the environment.

Can you talk a little bit about acquisition prices, and are they coming down or is there still sort of a disconnect between what companies think they're worth and the realities in the market?

The emotions of sellers are so strange, Laura, because now the thinking is, "Gee, I'm not going to sell when the price is low." So I don't think full desperation has really hit these guys yet and for some it may never hit during this recession. But I would say that we are nearing, let's say, reasonable pricing at this point. I'm not saying we're going to do a deal next week, but I think that we are attracted to the pricing at this point. We are getting to a good place.

Switching gears a little bit, turning to the drop in deferred year-over-year, what does the drop look like if you take out Jupiter? So sort of the same store sales?

Well, it's kind of interesting -- Laura, it's Mike. What's interesting is that the affect of Jupiter, which was favorable, was basically offset by foreign exchange, which year-over-year adversely impacted.

So what you get is pretty close to what we would consider to be a real sort of Forrester ex Jupiter number when you look at the absolutes. So the 7% decline that we gave you is pretty darn close to what it would have been if we didn't have Jupiter and foreign exchange were neutral.

And so what is the FX impact, what was it?

It's about 4 points.

Okay, moving along, if you look at the core research versus boards, which one is holding up better in terms of the new -- not new customers but, you know, bookings, if you will?

Well, bookings activity, which obviously we don't disclose, but I would say overall core research, they both were what I would call single digits, so I think that the range is dramatically different than what its been historically. I think historically we had this dramatic -- we had a consistent and very dramatic uplift, high double digits for our board business, and that slowed. And I think that's just again a reflection of George's what I will say prophetic vision about what Q1 would bring in terms of projections.

So the -- I think that we're looking at the numbers that have shrunk pretty much down to what I would call single digit movements now, and I think that's again they've stayed in a pretty tight band so they're moving more closely in parallel than they have historically where FLB was typically growing at very aggressive rates.

Hey, Laura, maybe just a couple of other comments. This is Charles. Number one is of course, the FLB business is now a much more substantial portion of the overall P&L and so you start to see dynamics on a percentage basis that will look more like the [ROB] line than they ever did before. You can't continue those 40% or 50% growth rates forever as the business scales.

A second bit is that obviously the boards are a very personal product, and so you see some discontinuities in the numbers I think in times like these because you have a lot of turnover in staff, you have layoffs and so forth across the economy. And when somebody loses a job, they're losing a board, you'll see an impact there much more quickly than you might in a traditional research seat which can be easily transitioned to somebody else. So I think you're seeing some of those dynamics in the numbers, but as Mike said, maybe similar behavior in the quarter.

Another quick question, and then I'll pass it on, you guys beat obviously revenue and earnings expectations rather dramatically. And obviously you didn't raise full year guidance, so I was wondering did we all kind of get the ratability wrong or had you just been really, really conservative for Q1 because you knew when you went into it that obviously the impact of deferred going down would have a delayed impact, as you explained articulately a few moments ago? So I was a little bit wondering about not changing the year and yet Q1 was so much better?

Yes, a little bit of conservatism there. I think what surprised us was new business, as Charles addressed. I mean the M&S did business and the IT and Ti business actually looked quite good in the quarter, and we had not expected that, Laura. So, maybe a little bit conservative here but some surprises, as well.

Yes, and I would iterate what George is saying, Laura, I think that, yes, we were conservative going into the first quarter because of the dramatic nature of what was happening externally, and so it was very difficult to predict where some very highly variable components of our business, like events and consulting, would fall out.

Events seems to be playing out sort of as we expected, although credits of events, seems -- it still remains profitable. Consulting, which halfway through the quarter looked really bleak, picked up towards the end, so we felt good about that. But again there's still enough uncertainty externally that it makes it difficult to predict.

So I'm with George, were we a little conservative? Absolutely. Are we still a little conservative? Absolutely. It's just it's a different environment right now, and I think we're, again, this is a mixture of good news and certainly some yellow lights flashing, as well, so we get a little bit of both.

Another area, Laura, where we might have been a little bit too conservative was you all don't see this but are the repackaging was a huge effort internally. There was retraining of sales that went on in Q1 and there was a tremendous amount of resources headed in that direction, and I think we maybe overestimated the impact there.

A final question, which is for you, George --

Yes.

-- you've been accurate on the economy, when it was going to weaken, and so I'd love to ask you when you think it's going to improve, and the same thing for IT spending?

I think it could --

Looking to your numbers, you've been very prophetic.

By the way, I want the Nobel Prize in Economics. I think that -- I'll be -- our major economist internally is Andy Bartels, and I've spent a lot of time with him in the last day or so. It's going to be a tough year in tech. I mean at least 6% to 10% down in tech spending worldwide, that's in dollars. And that's really quite a bit below how far tech was off in the 2001 and 2003 recession. So that's -- those are big numbers.

And now that all being said, we had our marketing forum last year, last week in Orlando, and I mean this is very impressionistic, Laura, but the vibrations that I'm feeling and the signals that I'm hearing is I think we're near the bottom here. It just feels like there's some stabilization out there.

I was with Zales, I was with a number of our clients in the consumer space last week who were feeling a little bit more hopeful, Chico's, some of the department stores, the Brooks Brothers, et cetera, and so they're feeling a little bit better.

So I at least just impressionistically think that we've reached the bottom and now I don't think we're going to get roaring aback here as an economy, I think it's going to be a very tepid recovery, maybe we get 1% growth in GDP in the fourth quarter or something like that. And maybe next year 2.3%, which is worldwide GDP growth is very low.

But the good news I think we've reached the bottom and now it's kind of our period of stabilization and then slow growth.

Thank you.

Okay.

And there are no further questions in the queue. I would now like to turn the call over to Ms. Levinson.

Thank you very much for joining us today.