International Business Machines Corp (IBM) 2010 Q4 法說會逐字稿

Greetings and welcome to the Kenexa Corp Fourth Quarter 2010 Earnings conference call.

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

A brief question-and-answer session will follow the formal presentation.

(Operator Instructions).

It is now my pleasure to introduce to you, your host Don Volk, CFO for Kenexa Corp.

Thank you, Mr.

Volk.

You may begin.

Thank you, Shay.

With me today is Rudy Karsan Chief Executive Officer, and Troy Kanter, our President and Chief Operating Officer.

Today, we will review Kenexas' fourth quarter and full year 2010 results, followed by our current guidance for the first quarter and full year 2011.

We'll then open the call for questions.

Before we begin, let me remind you that this presentation may contain forward-looking statements that are subject to risks and uncertainties associated with the company's business.

These statements may contain, among other things, guidance as to future revenues and earnings, operations transactions, prospects, intellectual property, and development of products.

Additional information that may affect the Company's business and financial prospects, as well as factors, that would cause Kenexa's performance very from current expectations of the law on the filings with the Security Exchange commission.

Also, I'd like to remind you that today's call may not be reproduced in any form without the expressed written consent of Kenexa.

We may refer to certain non-GAAP in financial measures on this call.

I will discuss the reconciliation of adjusted numbers to GAAP numbers, and reconciliation schedule showing GAAP versus non-GAAP, is currently available on our website, www.kenexa.com.

With the press release issued after the close of market today.

I'll now turn the call over to Rudy Karsan ,

Thanks, Don and thanks to all of you for joining us on the call.

We're pleased with the company's performance in the fourth quarter which was highlighted by revenue and profitability that is better than our expectations.

Fourth quarter represented a strong close to a successful year for Kenexa.

In the face of challenging economic environment, we return the company's total revenue to solid organic growth, expanded our market opportunity and value proposition, with the acquisition of Salary.com, and increase the investment in sales, marketing and R&D to position Kenexa as continued market share gains as the economic environment improves.

As we start 2001(sic), we have become slightly more positive on the economic environment and hiring outlook.

And, as Don will discuss in more detail in a moment, we have meaningfully increase in our revenue in our forecast is compared to initial views we shared last quarter.

At the same time, we continue to believe that now is the time to invest in the business to capitalize on improving demand environment and connects us highly differentiated market position.

Taking a look at the results for the quarter, total non-GAAP revenue was $64.1 million, which was above our guidance and represented a year-over-year increase of 64%.

From a profitability perspective, non-GAAP operating income came in at $7.4 million, which was also above our guidance.

We also generated adjusted non-GAAP cash flow from operations, excluding nonrecurring payments associated with the Salary.com acquisition, of $11.5 million during the fourth quarter, bringing a full year total to $34.1 million.

Kenexa had a number of important accomplishments here in 2010, that we believe position the company well for the future.

First, we restored strong growth in our total revenue run rate.

While Kenexa software offerings continue to grow throughout the downturn, our total revenue run rate declined in 2008 and was stable through 2009.

Kenexa total revenue grew a solid rate in each quarter during 2010.

And, excluding contributions of Salary.com, October revenue run rate grew by over 40% over the course of the year.

We believe this is the best indication of the growing momentum of our business.

During the fourth quarter in particular, each aspect of our business contributed to the strong revenue performance and the upside.

Second, our RPO business stabilized and returned to growth.

This was the hardest hit area for our business during the recession.

We not only found the bottom during 2010, but our RPO business also grew by over 50% from that bottom over the course of the year.

We continue to believe RPO provides Kenexa with strategic domain expertise advantage compared to our competition, and its transaction based nature provides the Company with greater outside leverage when the hiring market improves.

As an example, during the fourth quarter, over $0.5 million of the revenue upside versus our guidance related to our RPO offering.

Third, we continue to have growing success with large global organizations where there is priority of offering, global footprint, domain expertise and ability to serve as a strategic partner to help customers implement best practices.

We believe Kenexa's unique combination of strong technology, content and services, positions Kenexa well to meet the sweet spot of where we see customer demand evolving.

These factors were the drivers to Kenexa having another strong quarter relative to winning competitive engagements with large enterprises.

For example, with respect to our talent acquisition solution we added [FC and Arden].

As it relates to our retention solutions, we won engagements with high profile customers such as United Health Group, Advantage Sales and Marketing and (inaudible).

With our comprehensive RPO service offering, we added programs of varying size customers such as HSBC, Air Products, Lockheed Martin, and DP.

Wins with customers such as these not only reinforce the strength of our solutions across our end-to-end suite, but they also provide us with a significant cross-sale opportunity from a long-term perspective.

We have a proven track record of growing our customer relationships over time, and our PQ metric which measures the average age of revenue from our top 80 customers was $1.2 million at the end of the fourth quarter, which is an increase compared to $1 million at the end of 2009.

In total, we added over 50 preferred partner customers across the globe during the fourth quarter, compared to over 30 preferred partner customers added during the year ago periods.

A majority of our preferred partner relationships continue to be multiple from elements of our end-to-end offering.

The fourth key accomplishment during 2010, was a build-out stressing of our global footprint.

We are now operating in over 20 countries around the world.

Approximately 50% of our employees are located outside the United States.

And, over 25% of our revenue comes from international.

With the growing mobility of talent in the global scale, it is coming increasingly important to large organizations that their vendors have domain expertise on a similar global scale.

China is just one example of where we have seen particular success in growing our presence.

It was one of the contributors to our better than expected revenue performance during the fourth quarter.

A relatively new engagement of the customer I'd like to highlight, that supports both the stress of our value proposition as well as the global presence, is our recent win with the YUM!

Brand, a fortune 500 organization that is the largest restaurant group in China.

They purchased the Chinese language version of our Kenexa 2x BrassRing offering and our related consulting services.

Kenexa has had a long-standing relationship with YUM!

Brand, who recently became a customer when they hired Kenexa to implement a 360 Feedback survey of the workforce, and now they are further leveraging the breadth integrated solutions with 2x BrassRing.

We believe the continued growth of this relationship, specifically, usage of our 2x products by a Chinese-based company, helps to propel Kenexa to a new level within the HR space in China.

The best key accomplishment in 2010 was a rebound of our customer retention rates.

Due to the negative impact of the economy, particularly in offerings that are closely linked to the consulting services, we saw our overall retention rates go from 90% plus level to the 70% range in 2008.

We saw improvements on that level in 2009 and more significantly in 2010, as we exited the year with renewal rates that were close to being back at historical levels.

Though there is still room for further improvement.

We believe Kenexa has weathered the worst of the economic storm with respect to our consulting related offerings, and during the fourth quarter these were also contributed to the revenue outside by approximately $1 million.

The sixth key accomplishment during 2010 was progress executing again the Kenexa 2x strategy.

We now have our core talent acquisition solutions and our 2x platform.

2x on board, and our award-winning first in market, 2x mobile solution.

We have received a very favorable commentary from industry analysts by the product releases and future road maps.

And, the strength of our offerings is one of the factors that has driven our success winning engagements with many large global organizations.

Finally, we completed the strategic acquisition of Salary.com during 2010.

And, we're pleased with the progress of our integration efforts after our first full quarter together.

Our top initial priorities were integrating the employee bases, retaining key employees, engaging with Salary.com customer base to understand the implementation status and future needs, as well as making decisions relative to the future of certain consultative offerings.

I'm pleased to share with you that we have made solid progress in each of these areas, and all the reasons that we moved forward to the Salary.com acquisition continue to be confirmed.

With the successful 2010 campaign behind us, our confidence is growing as we enter 2011.

This is partly due to the more constructive view on the macro environment as compared to recent quarters.

The unemployment rate is slowly improving, and recent industry reports suggest the employment rates will continue to improve by the end of the year.

In addition, there are several positive trends that we have seen within our business.

There are now less than 20% of our RPO customers that are operating at guaranteed minimal levels, which is indicative of the hiring improvement of the jobs market.

We continue to see increasing job activities giving our talent acquisition systems across a collective customer base.

We have also seen increasing demand for our Employment Branding services, which although a small component of our overall business, it is a sign that companies are starting to get ready to increase hiring at some point in the coming quarters.

Finally, our Kenexa Prove It test show our bottom during the second quarter.

All of these trends further re-enforced by the fact that we continue to execute against a strong pipeline of opportunities.

As we start 2011, there are a number of priorities that we have to further stress in our market leadership position.

First and foremost is the increased focused on Kenexa employee engagement to make sure we put into place proactive employee initiatives to retain our own talent, keep them engaged in their jobs, and optimize their capabilities.

Employee engagement is the extent to which employees are motivated to contribute to organizational success, and are willing to apply discretionary effort to accomplishing tasks important to the achievement of the organizational goals.

This is the primary area of focus for Kenexa considering the fact of the revenue run rate is over 60% higher than our employee base is over 50% larger exiting 2010 as compared to the beginning of the year.

With Kenexa research studies that have revealed a significant correlation between engagement and advocacy, customer satisfaction and sales, which impacts two important variables.

Annual net income and total shareholder return.

As the economy and hiring environment improves, employee engagement will become even more important for all companies, including Kenexa, and we're leading by example.

Another key goal for us in 2011, is to continue investing in sales and marketing.

We've invested heavily to expand the sales capacity and market awareness.We have a highly differentiated value proposition and business model, that we believe addresses the sweet spot of where customer demand is evolving.

As such, it is important that we continue to invest in our business to position Kenexa for market share gain as demand turns out.

We also continue to invest in R&D.

Our goal is to continue enhancing all of our solutions and we plan on bringing to market two major modules on Kenexa 2X Platform during 2011.

Perform For Sure, an assessment that's currently slated for that end of 2011and beginning of 2012.

We are able to win deal opportunities based solely on the strength of our technology, and Kenexa has clearly differentiated when taking our content and services into consideration.

Execution on our Salary.com acquisition will be another top priority for us during the year.

The market for compensation management solutions is a large opportunity that is highly synergistic with Kenexas existing product suite.

Now that the first stage of integration is largely complete, and we have started a new year, we're starting to train our sales organization on our expanded solutions footprint and capabilities.

We expect it will take several quarters for the training to result in increased pipeline activities and ultimately deal closures.

Combined with the fact that we have our routable revenue recognition model, it is likely that the cross selling benefits resulting from our training activities will be realized in 2012 and beyond.

But, it will be the efforts in 2011 that will be instrumental in our success in this area.

Finally we will continue to invest in the global organization.

We have sufficient coverage at this point with operations in over 20 countries.

But, we will continue to invest in going deeper within the region thus we have a presence, and where we have opportunities that are appropriate in our market.

In summary, we're pleased with the Company's performance during the fourth quarter, as well as the full year 2010, we have restored solid growth in the total revenue run rate and invested in our business to strengthen our leadership position, and enable Kenexa to gain market share.

We already have started to see the pay back on our investment, but believe much of the benefit is still to come.

With that, let me turn it over to Don to review our financials in more detail.

Don?

Thanks, Rudy.

Let me begin by reviewing our results for the fourth quarter starting with the P&L.

Total non-GAAP revenues for the fourth quarter was $64.1 million, above our guidance of $58 million to $60 million and up 64%, compared to last year's fourth quarter.

On a GAAP basis, including the deferred revenue write down of purchase accounting related to the Salary.com acquisition, our total revenue for the fourth quarter was $61 million.

Non-GAAP subscription revenue was $48.6 million, an increase of 46% compared to last year.

And, it represented 76% of our fourth quarter total revenue.

Our services and other revenue came in at $15.5 million, up 170% compared to last year, and 41% sequentially.

And representing the remaining 24% of our fourth quarter total non-GAAP revenue.

We continue to expect our subscription revenue mix to be in the upper 70% to 80% range from a long-term perspective.

From a geographic perspective, our non-GAAP revenue mix with domestic and international revenue for the fourth quarter was 7426, compared to 7228 last quarter.

Positive foreign exchange rates contributed $1.1 million to our revenue upside for the quarter.

During the fourth quarter, overall renewal rates for our suite of solutions continued to improve and approach the 90% level.

We continue to expect renewal rates to improve to the 90% plus range from a long-term perspective as the business environment improves.

Turning to profitability, we'll be providing non-GAAP measures for each fourth quarter 2010 expense category, which excludes the aforementioned $3.1 million in deferred revenue write down related to the Salary.com acquisition, As well as $1 million a share based share based compensation charges associated with FAS 123R.

$3.2 million of amortization of acquired intangibles, and $3.6 million of expenses associated with closing the Salary.com acquisition.

All comparisons will be using the non-GAAP current period results.

Non-GAAP gross margin of 67% was consistent with a year ago period.

And, up from 65% last quarter.

From an operating expense perspective, non-GAAP operating expenses of $35.3 million were up about $6.7 million on a sequential basis and up from $22.9 million in the year ago quarter.

The sequential increase in operating expenses was driven primarily by the inclusion of Salary.com's operations during the quarter.

This led to non-GAAP income from operations of $7.4 million, above our guidance of $6.0 million to $6.9 million and representing a 12% non-GAAP operating margin.

Non-GAAP income from operations grew to over 100% compared to the year ago.

Non-GAAP EPS was $0.23 for the fourth quarter of 2010, above our guidance of $0.19 to $0.22 and up 77% on a year-over-year basis.

Turning to our results on a GAAP basis, the following were expense levels determined in accordance with GAAP.

Cost of revenue, $21.6 million, sales and marketing $15.6 million, R&D $4.2 million and G&A $15.9 million.

For the fourth quarter, loss from operations is $3.6 billion.

Net loss allocable to common shareholders is $6.9 million, resulting in $0.30 net loss per share.

The reconciliation of non-GAAP to GAAP expenses and income from operations can be found in our press release and current report on form 8-K filed with the SEC.

To briefly summarize our result on a full year basis, our non-GAAP revenue for 2010 came in at $199.4 million, up 26% compared to 2009.

Non-GAAP operating income came in at $17.6 million or a margin of 9%.

Non-GAAP EPS came in at $0.62, consistent with the prior-year.

While GAAP loss per share was $0.25, compared to a loss per share of $1.38 in 2009.

Turning to our balance sheet.

Kenexa has cash and cash equivalence of $52.5 million in December 31, 2010, a decrease from $90.4 million at the end of the prior quarter.

The primary driver to the decrease in cash was the result of closing the Salary.com acquisition.

We generated non-GAAP positive cash flows from operations of $11.5 million excluding nonrecurring payments and fees related to the Salary.com acquisition.

On a GAAP basis, we reported cash flows from operations of $3.3 million.

Accounts receivable DSO were 65 days at the end of the quarter within the normal range of quarterly fluctuation.

And, our deferred revenue at the end of the quarter was $76.1 million, up 31% from the end of the third quarter, and up 52% from the end of the fourth quarter of 2009.

I'd now like to turn to guidance, starting with the full year 2011.

We are raising our full year 2011 guidance to reflect the strength of our business exiting 2010.

And, our slightly increased optimism regarding the economy and jobs market.

We expect total non-GAAP revenue to be $248 million to $256 million, where our low end is above the high end of our original $235 million to $245 million guidance range.

Our raised guidance also represents year-over-year growth of 24% to 28%.

On a GAAP basis, we expect total revenue to be $240 million to $248 million.

We are slightly narrowing our full year 2011 non-GAAP operating income to $21 million to $27 million, from our initial view of $19 million to $27 million.

Our targeted operating income reflects continued investment in our growth initiatives which we believe is appropriate at this stage in the market rebound and share focus.

Our guidance also assumes legal expenses will continue to depress our non-GAAP operating margins by approximately 200 basis points in 2011.

Assuming approximately $1.5 million in interest expense related to the debt raise for the Salary.com acquisition, an effective tax rate for reporting processes of approximately 20% and approximately 24 million shares outstanding.

Non-GAAP net income per diluted share expected to be in the range of $0.62 to $0.82.

Turning to our guidance for the first quarter, we are targeting non-GAAP revenue in the range of $60 million to $62 million.

Last quarter, we discussed the fact that we expected our first quarter revenues to be down sequentially due to winding down some Salary.com related projects, and the timing of other service-based engagements.

In addition, our other revenue was a significant contributor to the revenue upside in the fourth quarter and is more variable on a quarter to quarter basis.

On a GAAP basis, we expect total revenue of $57 million to $59 million.

We are targeting the first quarter non-GAAP operating income of $4.4 million to $4.8 million.

First quarter operating income is typically at its lowest level as there are increased payroll and other related employee expenses that kick in.

Assuming a 20% effective tax rate for reporting purposes, and 23.5 million shares outstanding, we expect non-GAAP net income to per diluted share to be $0.13 to $0.14 for the first quarter.

In summary, we are pleased with the company's performance in the fourth quarter and full year 2010.

And, our optimism and confidence are growing as we start the new year.

We'd now like to turn it over to the operator to begin the Q&A session.

Shay?

Thank you.

We will now conduct a question-and-answer session.

(Operator Instructions)

One moment please while we poll for questions.Our first question comes from Peter Goldmacher from Cowen and Company.

Hi, guys.

I'm sorry Rudy, I missed the first couple of minutes of the call.

I was on another call.

Could you talk a little bit about where we are with the big deals, the bigger deals and can you talk a little bit about how the addition of Salary is helping, or the impact it is happening on the competitive environment, because now you have -- you are still competing against the more point product buyers and how a broader offering is helping?

So, from a big deal environment perspective, most of our big deals are RPO wrapped around with others solutions.

We usually announce those deals on a press release.

Last quarter I think we announced Pepsi and [Darwin] in terms of kind of major deals that we wrote in 4Q.

If I look at the advantage that Salary brings about, it is going to bring about advantage in three main areas as we start to integrate that solution into the bulk of our 2x suite.

In the performance management side, it is going to give us an edge because your going to get the compensation data which is a linchpin of all performance management.

On the talent acquisition side, the ATF side, it is going to give recruiters a unique tool that would be a significant competitive advantage for us because we are the ones that have the data.

Then, for our service offerings, we can provide added consulting services around engagement related and tied into compensation.

So, some of the evolution of those products are right now going to the product management and product development, and we should start seeing some wins in the back half of the year, as we start to pitch it.

Any -- I was hoping for some commentary around the competitive landscape when you guys are in pitching a more comprehensive data solution beyond just software.

Do you feel like that is giving more advance or helping you compete more effectively?

Hi Peter, this is Troy.

That is a good point.

Current customers and prospects really see the additional analytics on the compensation side as a real significant differentiator and a value add.

Not only to their current decisions around their compensation purchase decisions, but also on the other product categories that Rudy mentioned.

When we wrap that data, especially into a lot of the larger more strategic RPO initiatives that we're seeing in the pipeline, when you combine that with -- that data with our advanced analytics, the assessment components, the technology as well as the branding, it is really -- it's been a really great differentiator for us, as the size of these tournaments continues to grow, as unemployment's dropping and these large corporations globally are really firing up the hiring engines again.

Okay, thanks guys.

Thank you, our next question comes from Mark Murphy from Piper Jaffray.

Yes, thank you.

Congrats on the nice execution here.

Rudy, I wanted to ask you, we've seen data suggesting that US firms, plan to augment their work forces by up to 2% this year.

I guess as you look at your pipeline, and maybe consider the tone of discussions that you're having with customers, is that type of a large employment increase within the realm of possibility or do you still feel that, that's more of a stretch scenario?

I think -- the easy answer -- I think it would be tough to increase it by 2%.

That is a huge number.

I am trying to think historically in any given year where I've seen that kind of massive increase.

No year comes to mind.

That doesn't mean it's not going to happen this year it's just I have not seen it.

Having said that, if it does happen it will be fairly buoyant, and would be great use for Kenexa

Okay, and then, also I wanted to ask you or Troy, what exactly are customers indicating you, that would explain why they are re-engaging on the RPO activity as rapidly as they are.

I guess assuming that, that is happening quite rapidly.

Do you look at this as just -- this is normal -- a kind of melts away quickly and it re-engages quickly, or is there something going on that kind of supersedes what is typical?

This is Troy.

I think we are seeing, it is not typical.

Because what we went through in '08 and '09, the beginning of 2010, when companies went to down size, the first jobs that were let go where from the shared services.

A lot of them came out of the HR department.

Now as companies and revenues are picking back up and their visibility is picking back up, they are making real strategic decisions about how they want to operate their human resource department.

Do we want to rebuild that from a headcount perspective, or do we want to bring in additional automation, really look differently in terms of the analytics and our ability to predict talents, understand utilization rates of our recruiting department, and do we want to bring in outside partners that can more efficiently and effectively partner with us to manage that.

I think a lot of what we are seeing is -- we are positioned to take advantage of a fairly significant strategic shift in the corporate world on how they want to manage their recruiting and hiring departments on a forward basis.

So, I think -- so even though hiring hasn't really fired back up globally the way we're, we'd like it to, but any uptick combined with companies trying to rebuild or re-purpose how they run their HR departments, I think has been good news for Kenexa

So, Troy, one quick follow-up.

If what you are describing is correct, does your gut tell you that the RPO cycle, if you kind of project forward, a couple few years is a little more sustainable, a little more durable than what you've seen in other economic rebounds?

This is -- again this economic rebound, we are still running at 9% plus unemployment in North America.

Just any uptick is good news from where we have been here over the last couple of years.

So, again given that we are seeing slight upticks in hiring, a -- again kind of a strategic shift in the way large global organizations are thinking about managing their human resources and their recruiting departments.

Again we are bullish on it.

Great, thank you.

Thank you,Our next question comes from Brendan Barnicle from Pacific Crest Securities.

Thanks so much guys.

On the margin side, should we assume that gross margins and operating margins sort of have an equal amount of improvement through the year or is it more weighted towards one and the other?

Well, Brendan, our first quarter on operating margins is always lower than our subsequent quarters in two, three, and four.

If you look at the pattern for 2010, in 2011, we should follow that similar pattern.

Okay, great that is helpful.

Then, you mentioned the hiring environment improving and that driving the upside and the improvement in the outlook.

Are you guys seeing any benefit or any indication of just the refresh cycle on HR applications in general that may have people looking at you guys?

There is a tiny bit of churn within the marketplace but, we are really experiencing more of our growth from companies that are running multiple applications around the world wanting to consolidate to one enterprise app.

Or, organizations that -- for example on the compensation side, our biggest competitor is Excel.

So, it is companies that are really looking at moving up a weight class or two in terms of their sophistication from a tech perspective.

Greenfield, consolidation of multiple apps and organizations, becoming a little more sophisticated, that is driving more of the growth than it is in terms of churning from other competitors.

When you do you see that churn, who does it tend to be?

Or is there any consistency there?

It is all over.

It really depends if it is a global enterprise or mid-market.

You know, at the enterprise level, it is a pretty short list of companies that we are competing against on the tech perspective.

And then when you move down into the enterprise -- or excuse me, into the mid-market level, again, on the recruiting side as well as the performance side, there's -- it's still a fairly long list of customers in that mid-market area.

Or excuse me, not customers but competitors.

Great, thanks guys.

Thank you, our next question comes from Jeff Houston from William Blair.

Hi guys, Jeff Houston in for Laura Lederman.

A few questions, to start out with.

How much revenue did Salary contribute in the quarter?

Salary contributed a little bit more than we expected.

We were talking about around $9 million and a little bit more than that.

Okay that kind of leads into my next question.

Looking for a breakout of the revenue out performance.

I know you gave a few metrics like RPO was $500 thousand above plan .

Consulting was $1 million above and foreign exchange was $1.1 million.

Can you provide us with the rest of

The rest of that was additional sales, unexpected.

Okay.

Last question, I know the Salary acquisition is still somewhat new.

But if you could talk a little bit about your acquisition pipeline?

What type of areas your targeting and if they're likely just to be small tokens for the next few quarters.

I think what we said last call still holds, that we are looking at small tokens.

Nothing too significant.

There isn't anything in the market or any specific needs that we believe that we are going to go after.

In terms of categories, you know we're still -- we're looking at all of the other HR type apps that exist out there that we would like to grow into.

Nothing big, nothing major.

Smaller tokens and we will continue to execute on that plan.

Okay, thank you.

Thank you.

(Operator Instructions)

Our next question comes from Scott Berg from Feltl & Company.

Hi guys, nice quarter.

Just a couple of questions here.

First Rudy, on the improved environments, you've spoken a lot about hiring.

Talk a little bit maybe on the software side of the business, are pipelines stronger, more robust than earlier in the year or should we not assume quite so much?

It still continues to remain fairly robust.

When we were talking about the improvement in hiring, we were saying that, that's driving additional -- it's a better tailwind for software sales, as well as for services and for our content.

The software [piece] side of the business continues to outperform expectations and I think as Don mentioned earlier, some of the over performance in Q4 was due to the added software sales.

Okay great.

I guess for Don here, how much of the deferred revenue gain in quarter was related to the Salary.com acquisition?

Well the majority of it was.

But that Kenexa gain was still in the seven digits.

Okay.

And, then lastly before I jump in the queue, any chance you'll break down how much the total RPO contribution was for the quarter?

I think it was about -- it grew -- I don't have that number with me.

I think we can probably -- Don, do you have that number off hand?

Yes, we said 50% over the base quarter.

By what, $13 million-ish?

Right, $13 millionish.

Okay, fabulous.

Thank you much.

Thank you our next question comes from Steve Koenig from Longbow Research.

Hi guys, congrats on the quarter.

Thanks.

Quick housekeeping question, and then just wanted to fall on's.

On the housekeeping, this one is for Don.

Don, do you happen to have non-GAAP expenses for sales and marketing, R&D, and G&A for Q4?

Yes.

It's in the press release.

Steve, Non-GAAP -- it is in the tables reconciling.

Okay.

For some reason I thought I saw that [123R] in amortization and aggregated across the categories instead of broken out.

Yes, I can -- if you need that, I can give that to you off-line.

Okay.

Okay great thanks a lot Don.

So, first question, really on the Salary performance.

Remind me how does that split, does that mostly going into subscription revenue?

Yes it is mostly going into subscription.

There is a piece that does go into other.

Okay.

Then in terms of how Salary will do this year, two questions.

First one is, you know are we looking at still thinking about mid $30 million or are we thinking more like $40 million if you're able to say, kind of order of magnitude.

And then qualitatively, what is happening with that executive compensation consulting piece?

Is that going to wind down in Q1, Q2 or are you keep that going this year?

So, without breaking down the Salary revenue base, but our total guidance, moved from $235 to $245 to $248 to $256.

Some of the tailwind was due to being more constructive on the Salary business.

So, we are expecting slightly better uptick.

As far as looking at the various businesses, there are different parts of the business that we are looking at closely.

A lot of the final decisions having been made, we are discussing these issues with customers.

We are looking at the road maps, so, sometime through 2011 these decisions will be made and as soon as they are made we will let the street know.

Okay, great.

And then one last follow-up to you guys.

Is your investment plan for 2011, pretty much set and pretty much final, or are there sources of variability, particularly as we see revenues unfold throughout the year that would impact your investment plan and considerably your margins.

From a margin perspective, I guess the way I like to think about it, is there are three pressure points, if you will.

The first one is, what kind of calls -- what kind of audible calls do you have to make for either competitive reasons or client reasons through the year.

The second, is what kind of inflation pressures will you have, or macro conditions will you have?

If inflation climbs, there will be -- there will be expense related items.

And then the third is, where do you see the opportunities.

Those are the three things you are always trying to balance as you go through the year.

I don't want to say that our budget is cast in concrete.

But I do want to say that if we start to approach the higher end of our revenues, you will see the higher end of our -- we will start to hit the higher end of our earnings guidance.

(Multiple speakers) correlation there.

Got it.

Got it.That is it for me.

Thank you.

Thanks.

Thank you, at this time we have no further questions.

I would like to turn the call back over to Rudy Karsan for the any closing comments.

Thank you very much everyone.

Appreciate the time you spent with us and the support we've had from the street and we continue to remain somewhat cautious over the short term, but bullish over the medium and long-term.

Until next quarter.

Thank you this does conclude today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation.