高德納諮詢公司 (IT) 2005 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Gartner, Inc.’s Earnings Conference Call for the third quarter of 2005.

Our speakers today will be Gene Hall, Gartner’s Chief Executive Officer; and Chris Lafond, Gartner’s Chief Financial Officer.

Following their remarks, we will open the lines for Q&A.

A replay of this call will be available through November 27th.

The replay can be accessed by dialing 888-286-8010 for domestic calls, and 617-801-6888 for international calls, and by entering the pass code 25053490.

This call is being simultaneously web cast, and will be archived on Gartner’s website on investor.gartner.com.

And as a reminder, this call cannot be taped or otherwise duplicated without the Company’s prior consent.

The Company would like to remind everyone of the cautionary language about forward-looking statements and projections contained in it’s press release and periodic filings with the SEC.

The same language applies to any forward-looking statements made by Gartner Management during today’s call.

The company cautions you that these statements are just predictions, and that actual events or results may differ materially.

The Company encourages you to read its SEC filings, including its 10-K for the period ended December 31, 2004, which discuss important factors that could cause actual results to differ from those made on any forward-looking statements.

These filings can also be found on Gartner's website and other financial information sites, including www.sec.gov.

Please note that, throughout the call, the speakers will refer to financial measures, including EBITDA and normalized EPS.

Please refer to the press release and the footnotes of the financial statements for full definitions of these terms.

Now, I would like to turn the call over to Mr. Hall.

Good morning, everyone.

I'll begin this morning with a quick overview of our results and a brief update on the progress we’ve made on our strategic initiatives.

Chris will then follow with a more detailed discussion of our overall results and the performance of our business segments as well as review our guidance for the rest of the year.

We’ll then open the call up for your questions.

During the quarter we continued to make progress on our strategy to accelerate growth and improve profitability.

Revenues from research, our largest and most profitable segment, grew by 11% from the third quarter of last year as we continue to benefit from the META acquisition and our success in renewing META contracts.

In addition, both our consulting and events business continued to perform well reflecting the increased total headcount and stable utilization rates in our consulting business, the strength of our events brands, and the competitive advantages these businesses enjoy from having direct access to our industry-leading research staff and content.

We have now completed two quarters since the closing of the META acquisition on April 1.

From an internal perspective, the integration of META is complete.

The sixty META research analysts, 45 consultants, and 84 sales people who joined us from META are now fully integrated with their Gartner teams.

They are providing us with increased breadth and depth in our sales coverage and are allowing us to optimize our research product offering.

We’ve also quickly and successfully integrated our back office systems without any client disruptions.

In addition, the acquisition is meeting our financial targets.

When we undertook the acquisition, we knew we’d lose business with overlapping clients and built this into our financial plan.

We’ve now transacted on approximately 55% of META’s total contract value and have retained over 60% of that transacted value.

These results exceed our original expectations.

Our success in renewing META contracts is reflected in the strength of contract value for the quarter.

Research contract value was $567 million representing a 16% increase over Gartner’s standalone contract value for the third quarter of 2004 and a 3% increase over combined Gartner-META contract value for the same period.

In addition both wallet and client retention rates remain at high levels.

Finally, we’re well on target for our goal of achieving $70 to $80 million in annualized cost-savings from the acquisition.

At the same time we continue to implement the initiatives we outlined at our investor day in February to drive growth in our core research business.

These initiatives include optimizing our research content, rationalizing our product portfolio, strengthening our pricing, increasing the effectiveness of our sales teams, and reducing cost while retaining top talent.

We’ve taken a number of steps toward optimizing our research content and rationalizing our product portfolio.

The acquisition of META served as a catalyst for further improving the organization of our research content.

Since the acquisition closed on April 1, we have updated our research methodologies to improve the overall consistency and quality of our market research deliverables.

The updated methodology has incorporated the best practices from both Gartner and META and represents another benefit from the acquisition.

We’ve also continued to expand global relevance of our research through increasing analyst resources in markets where our clients have indicated strong demand.

In terms of our product portfolio, we’ve taken steps to ensure that all of our products meet our benchmarks for growth and profitability.

Over the past several months we’ve consolidated Gartner Chris Lafond: and the industry content from our core research product with META’s industry offerings into a new product, Industry Advisory Services.

We’ve divested Gartner Custom Research will allow us to focus greater attention and resources on growing the more scalable traditional core segments of our business.

In addition, we’ve continued to take steps to improve the ease of use of our products.

Recently we implemented several improvements to our Dataquest product, which provides market share forecasts, trend analysis, and user surveys for suppliers of IT and telecom technology and services.

These improvements, which include simplified pricing structure and more targeted content, produce greater market penetration as well as increased usage among existing Dataquest subscribers.

We’re taking actions to strengthen our pricing.

First, as a result of our focus on pricing, average discounts have been decreasing each quarter.

In addition, on November 1, we will be implementing an across-the-board price increase of 3% to 5%, the first pricing increase for many of our products in five years.

Gartner’s strong value proposition, augmented by the additional META content, more than supports this change.

While these are obviously positive steps, the impact of these initiatives will take time to flow through to contract value given the timing of renewals in our contracts.

We are also making additional changes to improve the effectiveness of our sales force.

As I’ve noted, the team from META has significantly boosted our coverage in the field.

These individuals are producing in line with our expectations.

We expect to see additional improvements in 2006.

Overall sales productivity is improving.

When I spoke to you at investor day, I noted that approximately half our sales force was growing contract value while the other half was shrinking contract value.

Improving this metric is a major focus for us.

I am pleased that we’ve seen improvement in each quarter.

Currently about 65% of our sales people in the field are growing CV compared to the 50% that grew CV in 2004.

We expect to see continued improvement during 2006.

In addition to the actions we’re taking in core research, we’ve made progress in our growth strategies and our other business lines as well.

In Executive Programs we continue to successfully drive to our goal of being an indispensable partner to CIOs and other senior IT executives.

This success is reflected in the fact that CV from Executive Programs grew 34% year-over-year during Q3.

We’ve been very successful in transitioning members to Signature, our high-end product, and our focus on onboard and customer service has resulted in continuing increases in retention.

In consulting we continue to enhance the value delivered to clients and increase the performance of our practice through implementing the strategies outlined in February – focusing on fewer accounts; selling larger deals through integrative solutions; and enhancing economics through improved resource management.

Our average deal size has increased over $140,000.

In Events we’re continuing to leverage Gartner’s industry-leading brand and research content to build a franchise that is at the upper end of the industry.

We’re scheduled to hold over 65 events this year, including 10 new Gartner launches.

Attendance year-to-date has exceeded 21,000, which represents a 20% increase year-over-year.

I just returned from Orlando Symposium where there were over 6,000 clients including 600 CIOs.

I had the opportunity to talk with several of you at the event and would strongly encourage others who are interested in learning more about Gartner to come to future events.

Before turning the call over to Chris, I want to note two new management appointments.

Eric Consolazio, Senior Vice-President and Chief Information Officer; and Ken Davis, Senior Vice-President Strategy, Market, and Business Development.

These are both talented and experienced executives and round out the management team you met last February.

I’ll now turn the call over to Chris who will provide more detail on our financial results for the quarter and guidance for the year.

Chris.

Thanks Gene.

Good morning everyone.

As Gene highlighted during his comments, our focus on the initiatives discussed at investor day in February is having a positive impact.

Our third quarter financial performance reflects the progress we have made executing on these initiatives and specifically our primary objective to grow the research business.

For the third quarter, total revenue was 225 million, a 12% increase from the third quarter of 2004.

Excluding the impact of the META acquisition and foreign currency, total revenue grew by approximately 4% from the third quarter of last year including 4% growth in research and 12% growth in consulting.

For the first nine months of 2005, total revenue was 700 million, an increase of 10% from the same period in 2004.

Again excluding the impact of META and foreign currency, total revenue for the nine-month period grew by approximately 4% over last year.

This solid top-line performance reflects both organic growth across all of our segments and the benefit from the META acquisition.

Excluding the impact of META and foreign currency, year-to-date revenue was up over 3% in research, 6% in consulting, and 8% in events.

For the third quarter of 2005, Gartner had a loss of 1.7 million or $0.02 per share.

This included the following pre-tax items – 3.4 million of non-cash amortization of intangible assets acquired with the purchase of META; 2 million of previously announced META integration costs (the remaining META integration charges will be essentially completed in the fourth quarter); and a $6 million cost related to the completion of the employee stock option buyback approved in our last proxy.

I’ll talk more about this transaction in a moment.

Normalized EPS for the third quarter, excluding the above charges, was $0.06 compared to $0.05 last year.

Turning to the details of our P&L, the change in cost-of-service versus 2004 relates to the addition of over 130 META associates and the actions taken earlier to restore employee compensation to competitive levels.

Similarly, SG&A increased due to growth in our sales organization including the addition of over 80 sales associates from META.

Depreciation continues to decline reflecting our focus on disciplined capital spending on projects that support our strategic initiatives.

Capital spending for the first nine months of 2005 was 11 million, down from 19 million in the same period last year.

The change in amortization of intangibles versus 2004 is a result of the valuation of intangible assets acquired through META including intellectual property, databases, and customer lists.

The total value assigned to these amortize-able assets was 26 million and the majority of this non-cash amortization will be completed by the end of 2006.

The 6 million in other charges for the quarter related to the completion of the employee stock option buyback.

As previously announced, 6.4 million options were retired representing approximately 80% of the options eligible for tender.

This successful tender resulted in a significant reduction in option overhang, which is positive for future EPS.

Net interest expense in the third quarter was $3 million reflecting the interest on the 250 million borrowed against our credit facility.

Our normalized effective tax rate for the quarter was 31%, reflecting the impact of several reserve adjustments related to US and foreign audits.

We expect the effective tax rate for the full year to be approximately 35%.

Now I’ll highlight the results for each of our business units beginning with research.

As Gene noted, our research business performed well this quarter, particularly with respect to growth and contract value.

Contract value increased to 567 million, an increase of 78 million or 16% over last year.

Contract value for core research excluding executive programs was flat year-over-year excluding META and the impact of foreign exchange.

This is a significant improvement from the trend of the past few years and is continued indication that we have achieved stability in our research business.

Our new business is on track to achieve our yearly target of between 20% and 25% of opening contract value.

Contract value for Executive Programs, which is reported as part of the research segment, increased 138 million at the end of the third quarter, a 34% year-over-year increase.

We now have 3,450 members in our various executive programs.

Client and wallet retention also remained strong at 78% and 92% respectively.

These key metrics have been stable through the transition of the META client base.

We have now transacted on approximately 55% of the META contract value and retention is running slightly better than our original expectations.

Overall research contribution margins remained at 60% in the third quarter, again stabilizing the decline we have experienced over the past two years.

This result reflect the benefits of our cost reduction efforts offset by a change in mix between our higher-margin core research business and our high-touch executive programs business and the compensation increase I discussed earlier.

Revenues from events were 17 million for the third quarter compared to 19 in the same period last year.

In the third quarter this year we held 13 events compared to 15 events last year and 34 events in the second quarter of 2005.

We had over 5,100 attendees at our events this quarter compared with 4,500 in the third quarter last year.

Events contribution margin was 38% compared with 35% in 2004.

We continued to effectively manage the events portfolio during the third quarter.

We launched five new events including Asia PAC Security, which highlights our ability to successfully leverage our strong events through international expansion.

The outlook for our Events business remains strong.

In total we plan to hold 19 events in the fourth quarter.

We remain on track to hold over 65 events for the year.

Of course, we host our flagship event, Symposium IT Expo in Orlando, Cannes, Sydney, and Tokyo during the fourth quarter.

Moving onto our consulting business, consulting revenue was 73 million in the third quarter, a 21 % increase over last year.

Utilization has averaged 61% during the first nine months of 2005.

Billable headcount was 533 on September 30, up 13% from 473 at the end of the third quarter of 2004.

Our hourly billing rate remains over $300 per hour.

We ended the quarter with a backlog of 118 million, an increase of 15% over 103 million in 2004.

Consulting contribution margin increased to 41 % in the third quarter, up from 35 in the third quarter of last year.

During the quarter, we took several actions to simplify our capital structure and to help drive shareholder value.

As discussed during investor day, we continue to explore and execute on strategies that leverage our strong financial position to drive shareholder value.

First, as I noted on our last call in early July we combined our class A and B shares and eliminated our dual-class stock structure.

Since July 7, we have been trading under a single class of stock.

Second, we completed the tender offer for underwater stock options held by current and former employees.

As I mentioned earlier, we retired 6.4 million options at a total cost of $6 million.

This transaction eliminated almost 25% of the options outstanding prior to the tender, a significant reduction in stock option overhang.

Finally today we announced that our board of directors has authorized a $100 million share repurchase program.

This program will be funded from cash flow from operations and possible borrowings under the existing credit facility.

We are confident in our ability to generate strong, stable cash flow and are committed to delivering value for our shareholders.

Finally, we have tightened our guidance ranges for the year.

We now expect revenues for the full year of 2005 of approximately 972 to 984 million.

Details by segment can be found in our press release.

We anticipate normalized EBITDA for the full year 2005 of between 98 and 103 million and normalized EPS, excluding special charges, of $0.34 to $0.37 per share.

We continue to anticipate total charges in 2005 of between 49 and 51 million, including the cost of the stock option buyback.

The META intangible assets mentioned earlier will result in approximately 10 million in amortization for the year.

We are projecting interest expense of approximately 12 million and depreciation expense of approximately 25 million for the full year.

We anticipate GAAP EPS for the full year of minus $0.05 to minus $0.02 per share on approximately 113 million fully diluted shares.

With that I’ll open the call up for your questions.

Operator, can you open the phone lines please.

Thank you, sir. (Operator Instructions) Laura Lederman of William Blair.

Yes.

Good morning.

A few questions.

One, can you talk a little bit about the planned price increase and what sort of work you’ve done to understand the price elasticity of demand and how that would potentially affect business.

And also, could you talk a little bit about in general the competitive environment.

I guess it is down to just you and Forrester, so talk a little bit about pricing stability.

I imagine it has gotten better over the last few quarters.

Can you be a little bit more specific on that?

The third question is with 35% of the sales people still not going CV, any thoughts on letting some of them go and bringing in new people instead?

Thank you.

Basically we – the first question on the planned price increase, we’ve done market research to understand what the elasticity is.

The price increase we have is pretty modest.

We’re talking about 3% to 5% in terms of the ranges – the kind of increase we’re talking about, depending on the specific product and situation.

Our market research says we don’t think that will affect demand at all.

The demand is there for the product.

That is the answer to the first question.

The second question was on pricing stability.

Can you give me a little bit more information on that?

During the call it was mentioned that the pricing stability has been better – or the discounting has been better over the last few quarters.

Can you quantify the discounting and how it has gotten better?

Maybe give us a few metrics or talk a little bit around it so we understand it better.

We track the discounts that are realized by different customer segments over time.

In investor day I laid out a chart that showed both how that built up from the individual sales people.

As I said on the call earlier, we’ve seen continuing improvements each quarter.

I don’t really want to go into the exact amount of the improvement right now.

Just leave it that it has been material and improving each quarter.

Lastly you asked about the 35% of the sales people that are not growing CV.

I’d say two things on that.

One is that we are working with all of our sales people to make them as productive as we possibly can.

We have a long way to go.

We’re not tapped out by a long shot.

In addition to that though, like in any sales force, we have both voluntary and involuntary turnover.

The involuntary – both of those tend to be driven by people who are not performing well.

Our turnover has been in the range of 20%.

We’d expect that that is going to continue.

That 20% is highly weighted—highly skewed towards people that are not performing well.

So I think over time we’ll see improvements.

The kind of growth we’re already seen – every quarter has been improving – we expect that will continue on the sales force effectiveness as well.

Brandon Dobell of Credit Suisse First Boston.

Thanks.

Gene, you mentioned the 55% of the META contract value transacted on.

Over what timeframe is the remaining 45% going to show up?

Is it all in Q4?

Is that heavily skewed on a renewal basis?

Or is it stretched out over two or three quarters?

And I have some follow-ups.

The bulk of it will come due in the fourth quarter.

When we report fourth quarter and full year earnings, you’ll have a good picture of 90+% of the contract value from META having been transacted.

Last quarter you mentioned that you thought that some of the early, or low-hanging fruit that would have dropped off, would have done so early in the process.

Are you still comfortable with that perspective, which would imply that this last 45% might be people who are more prone to staying with you?

Or is that – has that perspective changed?

What we said last quarter was that META, towards the end of their existence as a standalone company, was doing a lot of contracts that had out clauses and ways for clients to get out.

I think we said that we felt that a number of those clients would have executed those.

In fact, we did see a number of clients do that last quarter and early on into their time as we moved over to Gartner.

We hope that the bulk of the people who wanted to do that, did that.

We’re seeing, as we mentioned during both of our conversations today, that the retention is running slightly better than we’d expected, so we’re feeling very good about what we’re seeing both in the third quarter and as we move into the fourth quarter.

Then one related question on the sales force perspective – I guess two related questions.

One, plans going forward for hiring more people beyond what you have picked up with the META deal.

Of the 65% or so that are growing CV – I am trying to get a feel for it, that it’s just a reduction in discounts, if it’s same customer growth, addition of new customers – trying to put those in different buckets to see where the trend is heading.

In terms of plans for hiring, as you know, we think that there is a very large untapped market.

We plan to keep adding to our sales force over time.

We’re going to be adding more people during the fourth quarter to set us up well for next year.

Then through next year we intend to keep adding people.

We think because of the very large untapped market we have and the number of prospects that we’re not calling at all today – you’ve seen some of my numbers in the past.

Even in terms of large enterprises, there is a large group that we don’t even call on.

So we think that once we get more sales people who call on people, they will actually buy from us.

We’re planning to add sales people through the end of this year as well as through next year.

That was on our plans for hiring.

On the 65% that are growing, it is really some of everything.

We’ve seen as we dis-aggregate it – it is equally split between more new business as well as higher renewal rates as well as getting more price for everything they sell.

Our sales person has really gotten the message that we need to cut our discounting down and has been doing a very good job, even with existing price structure, getting our discounting down over time.

The reason it gets down to again, clients see a lot of value.

I think we weren’t pricing it very – as well as we could be in the past.

Now we’re using this with a real focus on it to improve our tactical pricing.

Okay.

Thanks a lot.

Robert Skloff of Sidoti & Company.

Good morning.

A couple of questions just to build on some of the things we’re already talked about.

Can you give us some color on how things are progressing as far as – now that we’re one month into the quarter – on how renewals are going?

When you talked about the 3% to 5% price increasing, can you give us some idea of how the price increasing is for the META customers?

My understanding is that the contracts were quite a bit less.

I want to see how that is going and if there is any pushback.

Than I have one follow-up.

First the question on renewals in the fourth quarter.

We normally don’t comment mid-quarter on transaction activity.

What I can say is what we’ve been saying all year.

We feel very confident in the targets we’ve set for client and wallet retention and don’t see any dramatic changes as we continue to move forward.

The last question I have relates to the buyback.

Is there a timeframe for this?

You said that it might potentially come out of borrowings from the credit facility.

What interest rate would that be at?

A couple things.

First, on the stock buyback, our board did approve the Company spend up to $100 million on repurchasing our shares.

We have no definitive timeline in terms of establishing that, although we would expect over the next couple of years that we would do that.

It’s our intention that we would do that out of cash flow.

We certainly continue to expect to have very strong cash flow as we move out of this year with the charges that we taken and see those get behind us.

Our intention is that we don’t need to do any borrowings.

We still have ample room on our current facility to borrow should we decide that from time-to-time it’s an attractive opportunity for us to buy, depending on where the stock price moves.

That is the background of what we’re thinking.

I think in terms of answering your last question on what is the interest rate on our debt.

It’s today below 5% – just below 5%.

So it is a very attractive rate for us at this point.

Okay.

Thank you very much.

(Operator Instructions) James Pemm (ph) of CPE.

I have some questions to clarify your growth.

You mentioned earlier in the conference call, I believe, that you had 3% contract value growth without the effects of META and foreign currency.

How much of that was unit growth versus pricing?

Let me try to answer that.

Good question.

We didn’t put our price increase into effect – it’s not actually into effect until November 1.

We haven’t actually raised our prices on the list price level.

From the perspective of discounting, as Gene mentioned, we’re starting to see the improvement in our discounting, so effective prices are starting to go up.

Clearly that is starting to happen towards the back half of the year.

So, as you can imagine, we haven’t transacted on a significant book of business that we’re seeing that relate to yet.

Most of the growth is coming out of continuing to grow the business, adding new clients.

That is where the bulk of our business is coming from.

As you can imagine, as you can see from our results, the EXP growth is 34% and continues to be an extremely strong part of that portfolio.

That is truly lots of new business from new clients.

I would say the bulk of it is coming from that.

Let me ask this another way.

Right now we have a contract value that META business and Gartner business integrated of 567 million in terms of research.

Next year at this time we have everything integrated.

We have invested a lot of money into compensation and getting our organization straight.

What level would you be satisfied with in terms of contract growth?

At what level would you be disappointed?

What----?

I understand it.

I think if you go look – the answer to that question is we have set a clear set of objectives for us at investor day.

We set a three-year roadmap where we expected contract value to begin to grow in the high single-digits to 10%.

That is, I think, the range set for ourselves.

Underneath that, we’re still expecting significant growth in the high teens over time as the EXP program matures a little more and still grows nicely, but not at the levels we’re seeing today.

Then you really begin to get our research business growing in the mid-to-high single digits.

That is what we set as expectations for ourselves.

We certainly believe we can achieve that over the next few years as we start to get the full impact of all of the changes we’ve made and the investments we’ve made both in sales and through META.

So the 3% growth – is that just because – that is what is going to be achieved this quarter.

Is that just because we’re early into the program and we are waiting for all the systems to kick in place and all the integration to have taken place?

We’re actually very pleased with where we are today.

As you can imagine, we’ve been spending a significant amount of energy in our sales force and across the organization migrating the META clients into the Gartner portfolio.

If you look at the META standalone – that 3% number, that includes META as you rightly mentioned.

If you look at META prior to acquisition, they were declining their contract value significantly over time.

That includes where it would have been and all of that transactional activity.

What we have done is managed to transact on and renew the META activity and not only, as we talked about, understood that there was overlap and we’d see reductions, but managed to overcome that and begin to show growth.

So we are very pleased with that.

And to your point, yes it is early on and all of those things going on at the same time.

We certainly expect to move into the kind of ranges that we’ve established in our roadmap.

Just to build on that point.

There is an important point there, which is as we talked about META we expected, because of overlapping clients, the META contract value to decline.

And it has.

Not as much as – it’s been a little better than what we expected.

When you compare year-over-year numbers, that is with META declining significantly.

We’ve had to sell a lot of new business to get to make up for that and to show overall growth.

Next year we won’t have the decline in renewing these META contracts that we’re facing now.

So we expect that will be a positive factor for us.

Okay.

We look forward to next year then.

(Operator Instructions) Lavon Von Redden (ph) of Hockey Capital.

My question is related to the sales force expansion.

The question I have is, given the research product is a fairly sticky product, why not focus the sales people more on adding additional accounts as opposed to adding sales people.

If you are going to add sales people, could you give me some sense as to what kind of rate you expect to add sales people as you move into ’06?

Let me answer the first question.

Over the last few years, we’ve been reducing our field sales force.

We’ve reduced it substantially during the past four years.

What we have gotten down to is we have enough – while the product is sticky, we have – with the number of sales people we have today and what is involved in renewing clients, we have just enough people to renew the existing base of business we have.

The reason we’re adding sales people is so we have capacity that goes beyond just our ability to renew people, but grow as well.

As we add new people, the way we think about it is, it’s adding capacity for growth exclusively.

It won’t be just those people, because they may get some existing clients.

But you can think about it in total.

If we add – every time people, we are really just increasing our ability – our share of people that can grow new business.

In terms of the number of people we’re planning to add, we’re planning to add between 40 and 50 people during – between now and the end of the year to get them in place so that when January 1 starts we’ve got them in their territories, already trained and productive.

Between now and the end of the year, 40 to 50 people – is that a reasonable timeframe to get them up and running and understand the products well enough?

Yes.

We didn’t start this today.

We’ve been working on this.

We’re in midstream.

It isn’t – this was part of our original budget for this year.

We knew that we were going to do this.

We actually started the recruiting of these people back probably at the beginning of the third quarter.

We’re – we didn’t just decide to do it and we’re starting now.

We’ve had them in the pipeline.

Some of them have already been hired.

We’re just finishing that out now.

Our objective is to have everybody trained and in territory January 1.

Obviously the new people will be new to Gartner, so they will be less productive in their first year than someone who has been here three, or four, or ten years.

They will be in their territory and trained and productive in that sense.

My final question relates to – you have a definition of wallet share.

I want to understand what you mean by that.

When you look at our two retention numbers, both client and wallet, it is a year-over-year comparison.

You look at the number of clients and/or the dollars that those clients had at a point in time, which is always a year-over-year view.

Then you do the mechanics of doing the calculation of exactly how much of those dollars of those clients are still onboard today.

In fact, we include that – if you look in our 10-Q – a definition of that.

Wallet retention represents the amount of contract value we’ve retained with our clients over a twelve-month period.

You calculate it on a percentage basis, if you want the real math, by dividing the contract value of the clients who were clients one year ago by the total contract value a year earlier.

Where are they now?

Where were they a year earlier?

As it continues to grow, it’s an indication of higher spending for our clients or increased spending with retained clients.

It actually could be a number that goes above 100%.

Alright, thank you.

Sure.

Ladies and gentlemen this does conclude the question-and-answer session of today’s conference call.

I would like to turn the presentation over to Mr. Hall for closing remarks.

I want to thank you for listening in on our results today and look forward to talking with you when we have our final results for the year when we talk next.

Thank you.

Ladies and gentlemen, thank you for your participation in today’s conference call.

This does conclude your presentation.

You may now disconnect.

Have a great day.