高德納諮詢公司 (IT) 2007 Q1 法說會逐字稿

Good morning, ladies and gentlemen, welcome to Gartner, Inc.

earnings conference call for the first quarter of 2007.

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 June 3rd, 2007.

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 24657554.

This call is being simultaneously webcast and will be archived on Gartner's website at 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 this 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 results or events may differ materially.

The company encourages you to read its SEC filings including its 10-K for the period ended December 31st, 2006 which discuss important factors that could cause actual results to differ from those made in 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 normalized EBITDA, and normalized EPS.

Please refer to the press release in the footnotes of the financial statements for full definitions of those terms.

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

Hall.

Please proceed, sir.

Thank you, operator.

Good morning everyone and thanks for joining us.

At our Investor Day in March, we detailed the four key initiatives of our strategy to drive long-term profitable growth for Gartner.

These four are delivering extraordinary research, expanding our sales capability, producing innovative offerings and providing world class service.

The [sell] of progress can be in each of these areas contributed to another successful quarter.

Generating extraordinary research is critical to our success.

Our 650 analysts are at the forefront of delivering the insight the IT leaders need.

This has been always been our core strength, and we remain focused on providing the thought leadership that is most important for our clients' success.

As an example, our research and events organizations worked together over the last several months to deliver 150 new conference sessions in several formats at our recent symposium ITxpo in San Francisco.

The focus event was on emerging trends in technology and deliberate on our committment to provide clients with indispensible advice in an engaging format.

As you've heard me say before, a key strategic initiative is increasing our sales capability.

In Q1, we added 53 net new salespeople.

This brings the total size of our sales organization to 716 which represents an increase of 144 quota-bearing salespeople over the same quarter last year.

We also continue to improve our onboarding and training programs in order to reduce the time it takes for a new salesperson to become productive.

Additionally, we've targeted our sales organizations to grow our most profitable business, research.

This focus led to another quarter of double-digit growth in contract value.

Our third strategic initiative is to create highly different tiered offerings through continuous innovation and relevant timely, actual information.

In Q1 we strengthened several products in our existing portfolio and launched a cadre of new products and services.

As a result, Gartner IT leaders had another quarter of strong sales as Chris will describe in greater detail.

In January, we launched a new suite of products for professionals in technology and service provider companies.

This product is called Gartner for Business Leaders.

Like the strong start we saw from our products end of the end user market [slice], that is Gartner [Protege] Leaders, at this time this time last year, these role-based offerings have also enjoyed early success.

Providing world class service is the fourth strategic initiative we talked about at Investor Day.

In Q1, we launched a new client on-boarding process.

It's been designed to demonstrate to new clients how they can receive the maximum amount of value from their relationship with us.

We also continued the improvement of inquiry timeliness and quality.

These two efforts contributed to our improved retention numbers for the quarter.

The successful development execution of these strategic plans and programs drove up our performance in Q1 and continues to demonstrate that our strategy is working.

To give you a flavor here are a few key metrics.

Our research contract value set a new record level at $668 million.

Revenue for the quarter is up 14% year-over-year, led by revenue growth in research of 16%.

EBITDA increased 7% compared to this time last year.

Client retention was 82%, and [wallet] retention achieved a new high for Gartner at 104%.

I'll now turn it over to Chris for additional business unit highlights and our detailed performance for the quarter.

Thank you, Gene, and good morning, everyone.

At our Investor Day in March, we reiterated our focus in executing the strategy Gene just discussed, and that we first shared with you in February of 2005.

A strategy with the financial objective of accelerating growth, expanding margins, and improving profitability.

Our continued successful execution of this strategy delivered the results we report today.

We have begun 2007 with solid year-over-year growth in revenue, and our particularly pleased with the strong revenue and contract value growth in our research segment.

Our first quarter performance establishes the foundation to deliver against the targets in our financial road map, and we now expect 9 to 12% overall revenue growth in 2007.

Recall that our three year financial road map targets revenue growth between 8 and 11% by 2008, and between 11 and 15% by 2009.

We are well-positioned to achieve these objectives.

For the first quarter, total revenue was $264 million, a 14% increase from the first quarter of 2006.

Net income was $8.2 million or $0.08 per share versus $0.07 per share last year.

Normalized EBITDA for the first quarter of 2007 was $30.7 million, compared to $28.7 million in the first quarter of 2006.

Paring for the details of our P&L's for the quarter, cost of service expense when compared to last year relates to events expense associated with the timing of our conference schedule.

We held 12 events in the first quarter of this year, as compared to six last year.

And the annual merit increase of approximately 4%, non-cash stock based compensation expense under FAS 123-R and the impact of foreign exchange.

The increase in SG&A expense relates to the continued investment in our sales organization.

As Gene noted, we added 144 direct quota-bearing sales associates since the first quarter of 2006 and 53 associates since December.

As of March 31, we had 716 direct quota-bearing sales associates, 25% more than a year ago.

From a G&A perspective, we continue to leverage our infrastructure with the goal of reducing G&A as a percent of revenue.

Continuing down the P&L, depreciation is flat from the same period last year.

We will continue to focus our capital spending on projects that support our strategic growth initiatives and improve operational effectiveness.

As previously stated, we expect capital expenditures of between $20 and $25 million for 2007, compared to $23 million in 2006.

The year-over-year decline of amortization of intangibles relates to the valuation of intangible assets acquired through META.

The majority of this non-cash amortization was completed in 2006, and as we told you, we expect approximately $500,000 of amortization expense on a quarterly basis for the remainder of 2007.

Net interest expense in this quarter was $6.3 million, reflecting the interest on the $405 million borrowed against our credit facility.

We have hedged the floating term rate portion of our debt at a rate of 5.06%.

And finally, our tax rate for the first quarter was 33%.

Next, I'll highlight the results for each of our business units, beginning with research.

Contract value end of the first quarter at $668 million.

Once again this quarter, the highest in the company's history and an increase of 19% from the same quarter last year.

Excluding the effect of foreign exchange growth in contract value was approximately 16%.

Our retention rates reflect the success of and positive reaction to enhancements and new product launches across the entire research portfolio, including Gartner for IT Leaders.

Client retention increased three points over last year to 82%, and [wallet] retention increased 16 points to 104%, exceeding 100% for the first time.

And new business, a key metric for our research segment increased over 60% from Q1 of 2006.

These results are reflected broadly across our entire research product portfolio, all client segments and all geographies.

We are capturing the benefits of our investments in new products and sales capacity.

Contract value for executive programs which is reported as part of the research segment increased to $168 million, this is up 14% year-over-year excluding the impact of foreign exchange.

We have approximately 3600 members in our various executive programs.

All of this led to a research contribution margin of 63% in the first quarter, a significant improvement in the research margin from its low point of 59% in 2005.

Now turning to events, revenue from events was $26.9 million for the first quarter, compared to $14.5 million in the same period last year.

We held 12 events with almost 7400 attendees compared to six events with 4200 attendees last year.

Four events were previously held in Q2 moved into Q1 this year.

And as discussed at Investor Day, the shift in the calendar means that Q1 delivers a higher percentage of the full-year revenue, and Q2 a lower percentage than seen in previous years.

Our ongoing events experienced continued growth in revenue driven by healthy increases in both attendees and exhibitors.

And our contribution margin increased to 53% for the quarter demonstrating our ability to effectively select and launch new events with strong first year margins.

Moving on to our consulting business, revenue was $76 million in the first quarter, flat from last year.

This result is consistent with the seasonality we expected and the guidance we provided.

As discussed at Investor Day, we can and do shift our sales efforts between our products and services, and since sales is our most profitable segment, we have focused our incremental sales capacity on growing research.

As a result, and as planned, this is why contract value is growing faster than consulting revenue.

But importantly, our contract optimization service line increased significantly over Q1 of last year with the change in sales incentives that we put in place after the fourth quarter.

Our focus in the consulting segment remains on improving productivity, launching new benchmark products and improving sales channel alignment.

Demand for our consulting services remain solid with backlog ending the quarter at 107 million.

This represents between four and five months of future revenue.

Billable headcount for the quarter was 516 versus 507 for the first quarter of 2006.

Utilization averaged 67% for the quarter.

The revenue per billable headcount remains above 400,000 and our average engagement size is now approaching 250,000.

Consulting contribution margin for the quarter was 37%, in the range of our financial road map target of 37 to 40%, and up five points from the fourth quarter of 2006.

As we expected, the decline in margin is compared to the first quarter of 2006 was driven primarily by the impact of our world wide consulting meeting that is held every few years, and was not held in Q1 of 2006.

In addition to the cost of the meeting, revenue and utilization were also lower over the prior period with our consultants being nonbillable during that week.

In addition, costs associated with FAS 123-R and the investments made in senior level resources that are key to our sales channel strategy in this segment are reflected in these results.

I will now turn to our balance sheet and cash flow.

Our first quarter cash flow is seasonally the lowest each year as prior year bonus and commission payments are made.

We continue to expect cash flow from operations to be between $130 and $150 million for the full year, up from $106 million in 2006.

During the quarter, we repurchased 1,056,000 shares of our stock at a cost of approximately $23 million under the $200 million share repurchase program announced in February.

We ended the quarter with approximately 108 million fully diluted shares outstanding.

As a result of the strong first quarter performance, we've revised our guidance for 2007.

We now expect total revenue to grow by 9 to 12% over last year, to approximately $1.060 billion to $1.087 billion for the full year.

Projected revenues by segment are as follows.

Research revenue of approximately $647 to $657 million, a 13 to 15% increase from 2006.

Consulting revenue of approximately $317 to $327 million, a 4 to 7% increase, events revenue of approximately $188 to $193 million, an 11 to 14% increase, and other revenue of approximately $8 to $10 million.

We are also increasing our EBITDA guidance for the full year by $4 million over the guidance previously provided.

We now expect normalized EBITDA for the full year to be between $193 and $203 million, an increase of 24 to 30% over 2006.

This excludes the non-cash expense associated with FAS 123-R which we estimate to be between $25 and $27 million.

We are expecting an average, fully diluted outstanding share count of between 106 and 108 million shares for the year.

Given this guidance, GAAP EPS for 2007 is expected to be between $0.70 and $0.77, a 40 to 54% increase over 2006.

Importantly, we expect to deliver this revenue and profit growth while continuing to invest for the future.

We are building on the foundation established last year for sustainable, profitable growth.

Our investments during the remainder of 2007 include product development enhancement efforts in growth and sales capacity and capability.

In February of 2005 we established a three year financial road map.

We have consistently reiterated our commitment to that road map and increased our growth targets in March at our annual Investor Day.

Our solid first quarter performance continues to demonstrate our strategy is working, and we remain confident in our ability to achieve these objectives.

And with that, we'll now open up the call for your questions.

Operator.

Ladies and Gentlemen, if you wish to ask a question, (OPERATOR INSTRUCTIONS.) And your first question comes from the line of Peter Appert, representing Goldman Sachs.

Please proceed.

Thank you.

Gene or Chris, can you help me better understand the impact of the timing issue on the events business, and specifically, Chris, you referenced this, but some measure may be of what same store growth would have been in that business?

Hey, Peter, it's Chris.

Let me answer the first one first and then we'll talk about the timing.

If you look at the six ongoing events, those events all grew nicely at double-digit, you know, above 10% across, you know, those six events.

The three events that we shifted from Q2 into Q1 also grew nicely.

In fact, those events grew even faster than those other events.

So overall, events that were held in a prior year and were ongoing events had really nice growth.

And again, growth both in attendees, revenue and exhibitors, so across the board.

Okay.

Great.

And, Chris, what was the -- can you quantify the FX impact on operating income for the quarter?

The FX impact on operating income is negligible, as we talk about normally our revenue and cost of reasonably matched around the world, and so as a result, impacts on either one kind of offset at the operating expense line.

Got it.

Or operating income line, excuse me,.

Have you quantified what the plans are for the balance of the year in terms of further additions to the sales force?

What we have said, and obviously I'll let Gene comment on, our goal has been to add around 120 salespeople this year.

Our ongoing goals are to do that, at least that, and up to, you know, around a 20% increase in our sales force moving forward.

So, that's kind of our long-term goal and objective.

So, I would expect for this year that that 120 number will be achieved and possibly higher.

As you've seen from our expenses and we talked about Investor Day, we've been very aggressively hiring, so we're a bit ahead of where we originally planned, which we're comfortable given our performance.

So, we're going to take on as many salespeople as we can hire.

It appears based on the numbers, particularly the contract value growth that you are getting good productivity, and ramping the productivity pretty nicely with these new sales folks.

Any risk that as you get further along in this process there's some diminution in productivity for the new folks?

Hey, Peter, it's Gene.

Basically, we track productivity of our salespeople by tenure, by geography, by role, and we're watching that very closely, and in each of those categories, things are going quite well.

And in fact, I actually think we're going the other direction there, which is we're getting better in terms of the training that we have, our training programs continue to get better.

Our sales support programs, like campaigns we run that help make our salespeople more efficient when they call, help them to improve their productivity, and then the enhancement we have to service also improve the sales productivity.

So actually, if I look at the numbers, I think we are getting better at recruiting people, and we are getting better at getting those people, those people who recruit into market sooner, and more productive sooner, and there's a big focus in our sales team in doing that.

And then we're again, tracking very carefully by role, by geography, by tenure where the best productivity bump is and then we are trying to, you know, focus our growth in the most attractive roles.

But again, I think we have momentum on the other side of that, which is actually we're getting better.

And that's why you see, for example, the reason we've hired ahead of plan is, we've built up a great recruiting and training machine that now is really performing very well in terms of getting salespeople on at a very timely rate.

And we're very comfortable doing that, because as you've heard me say before, one of the big constraints to our growth is our number of salespeople, and so, as long as we can attract the right people and get them productively employed, we're very comfortable with even, going over our 20% growth rate per year target of number of quota carriers.

Right, that's great, and certainly evident in the operating metrics, so, congratulations on a great quarter, thanks.

Thank you, Peter.

From the line of JPMorgan with the next question, we have Fred Searby.

Please proceed.

Yes, thank you.

I wondered if you could breakdown that 14% pre-FX contract value growth, which is a wonderful number, but into new products.

Gartner for IT Leaders, pricing at the legacy accounts and then entirely new accounts into the components of that, and then secondly, looking at the obviously, the operating leverage that you should be getting at research is not showing up because of the sales force expansion and this stock option, this jump in stock option expense.

But can you give us some sense of how much these 144 salespeople added to your SG&A over the last course of the last year so we can strip that out and look at where margins really are trending, thank you?

Hey, Fred, it's Chris.

So, let's go through those two questions.

First, the contract value increased at 16% on a FX neutral basis, a little better than the 14 you said, so I just want to make sure everybody has the right number.

Let me give you some color around that.

First, if you look at kind of new business growth, or growth from either existing or new clients, we're getting kind of, roughly balanced increase there.

So kind of, roughly half the growth you're seeing is coming out of existing accounts, half is coming from new accounts, and that new business growth number was really strong for us for the quarter.

If you look at that across the geographies and across various client segments, whether that's size of client or industry, again pretty consistently balanced across a pretty broad section of our, you know, of our clients and products.

Also, I would say that that growth is really coming out of essentially every part of our product portfolio, so we're seeing growth in the end-user segment, growth obviously in the CIO segment, growth in our vendor technology company segment, so across the board we're seeing really good strength.

Certainly we're seeing continued good uptake in Gartner for IT Leaders.

From the numbers we reported at Investor Day, we're continuing to see good growth there ahead of our expectations for the first quarter, so we feel good on that as well.

And Gene mentioned some of our new product launches in the technology provider side of the business have started out well as well.

So across-the-board we feel really good on the contract value growth side.

It's not one thing, it's pretty broad based.

On your other question, on the operating leverage, what I would say is if you look at the operating leverage from research and you look at our segment, research segment contribution, you'll actually see in that segment about 70% of the revenues are flowing through to margin.

And so as a result, we are absolutely delivering the leverage that we said we would out of the research side.

We have made conscious decisions to reinvest some of those dollars, particularly in the sales channel in both capacity and capabilities, so we actually do believe we're driving that leverage, driving it in the [G] & A side, and that we're making the conscious effort, particularly in sales to reinvest.

All right.

Thank you.

Thanks, Fred.

Representing Lehman Brothers, the next question comes from Megan Talbott.

Please proceed.

Hi, good morning.

First on the events, just to follow up a little bit, I know you had said previously that you were looking for, to grow the total number of events this year by six.

It looks like some of the six came from pulling events forward and some were new.

So just to give us a sense looking forward, are there any quarters that you expect events, the number of events to actually be down this year?

How do you expect sort of the growth in the pure number of events to play out?

Yes, let me be clear in case we weren't.

First, we still do expect for the full year, our overall event portfolio to be around, I think, 80 events.

So, it is going to be up five, six events or so from the prior year, so we still absolutely expect growth, not due to timing of events but absolute increase in the number of events we hold during the year.

So, you know, think around 80.

In the -- as I talked about in my script and comments around that the number of events and the timing, we do expect in second quarter to have a fewer number of events held, because we consciously did move those for a number of reasons, and good business reasons into Q1.

So, when you look at the Q2 year-over-year compare, you will see a slightly smaller number of events.

Again, we did pull four events into Q1 from Q2 and so that's the bulk of the timing again.

You should still expect Q2 and Q4 to be our biggest event seasons, with our spring and fall symposiums occurring at those times.

Thanks, Chris.

That's a lot clearer.

Another follow up sort of on SG&A expense, your SG&A expense was up about 16%, off of around 25% growth in the number of salespeople year-over-year.

As I look forward throughout the year, on a dollar basis, should we expect that sort of mid-teens growth in total SG&A expense, or a little less than what you're looking for sales growth -- for salesperson growth, and how should that play out sort of quarter by quarter?

I think the way you need to think about the SG&A line on the P&L is keep in mind that in 2006, we hadn't really begun the significant ramp in our sales capacity.

That didn't really happen until the back half of the year, so Q3 and Q4 is when we really started seeing the big significant increase in our sales headcount and, therefore, what you're seeing early this year, kind of Q1, Q2 is a larger year-over-year kind of increase on the expense line because of that timing difference.

So what you'll see, I think in the early part of the years are, bigger increases in the cost base and towards the back half of the year that'll come down a bit and be consistent I think with the growth in the sales headcount.

Okay.

Great.

And then just one final quick follow-up.

In terms of contract value, do you have the dollar numbers, including FX for executives and core, just to to do an apples-to-apples.

If you -- so let me give you the numbers.

So from a -- let me give you the percentage numbers.

So, if you look at total contract value -- it

Yes.

-- it ended 668.

If you look at it a year earlier, it was 560.

16%, so that's a 19% increase.

3% of that, 3% of that growth was FX driven, so you're about 16%.

Yes.

From a core research perspective, about $500 million of contract value on March, '07.

That is 19% over last year and about 17% year end, 16%, so it's about the same kind of 2% to 3% FX.

On the executive program side, we ended March at 168, and on a FX neutral basis, that would be about 14%, I them it's about 19ish% on an actual basis, but about 14.

It's about a five point impact to executive programs because a bigger piece of our business in executive programs happens to be overseas.

Okay, great.

Thanks a lot.

Sure.

As a reminder, ladies and gentlemen, if you'd like to ask a question, (OPERATOR INSTRUCTIONS.) And the next question comes from the line of Laura Lederman, representing William Blair.

Please proceed.

Yes, thank you.

Follow-up on the earlier question, on adding head count.

How do you kind of mathematically think of it?

In other words, I realize your using a growth rate, but how do you think in terms of coverage and penetration?

What are some of the metrics you look at in terms of when you know that you're over salespeople, if you will?

Hello?

Yes, Laura, sorry.

We just wanted to make sure we understood exactly the question.

I think, let me try to play it back.

The question you're asking is, how are we tracking and measuring the productivity of our sales force?

It's really not productivity, Gene.

What I'm thinking of is more, if I think of 35,000 feet if you add 20% to a year, you might be over covered.

So, how do you know that you've got too much coverage, too little coverage to the point when it starts that you get to a point where the market is saturated with salespeople and the productivity will fall.

How do you see that coming or know that that's not going to be a problem at a certain point?

Hey Laura, it's Gene.

Basically, what we do is, we look at all of the companies in each of the major markets in the world.

We target companies that have a $1 billion in revenue or higher, that's our target market, and government organizations that are of comparable size, because we think that's the most profitable market for us to serve.

So, that's our target.

We then go through in each of the major countries identify each of those companies, and there are, both between our own sales force and publicly available information, we've identified all of those companies and/or government entities that are $1 billion or more.

And then we look at where they each have locations and how many IT people they have at each of those locations around the world.

And then, we basically look at how we are going to go after covering those.

When we actually go through and look at all of those companies around the world, each of the major countries, and we look at, that are above $1 billion and more, we can see our way to, many more salespeople.

Think at least 2000 before -- 2000 grand total up from our little over 700 today.

Before we even get any semblance of reasonable coverage, and it could be as much as 4,000 salespeople that we need to cover that marketplace that we know about today.

And so the -- for all intents and purposes right now, based on that kind of bottoms-up analysis, we have, again, for all intents and purposes, we have an unlimited -- we can add a --, you know -- if we're going 20% a year, we're not going to bump even against the 2000 very quickly.

And again, we think actually it could be a lot more than 2000.

That's very helpful.

That's exactly what I was looking for.

Can you talk a little bit about overseas content, the growth overseas, what the opportunity you see there and also on a related note, any thought on acquisitions?

Honestly, META was brilliant.

There won't be so many things like that ,but just a sense of how acquisitions fit into the picture?

Well on the first one, in terms of growth overseas, basically, we do the analysis I just talked about, by country, companies in each -- and government entities in each country, and if you look at our penetration, our penetration is essentially, extremely low.

In fact, I showed this on Investor Day, our penetration is extremely low in the U.S., it's even lower when you get into Europe, and even lower than that when you get into Asia.

And so the -- but for all of our markets, in essence, the penetration is very low.

And so, as we grow our salespeople and as we grow our product, we're targeting both the U.S., as well as the other major countries around the world.

So, our opportunity in those countries is just as vast as it is in the U.S.

Is there growth keeping pace, or is it just harder to build there, if you look at the growth rate that you're seeing, how much is coming from the overseas markets and does it differ from the U.S.?

Yes, great question, and actually what we're seeing is, it's terrific.

As we're seeing growth in every one of our major markets, growth has been great and exceeded our expectations in the first quarter.

And so, we don't have any market where we saw our growth being below our expectations.

And --

In terms of geography.

Great.

And final question, acquisitions, and what piece that would potentially play?

So, acquisitions, if we -- we see acquisitions as a potential part of our strategy.

And we look at other companies all the time, and if we saw the right situation, like we did with META, we would certainly consider that as part of our strategy.

Is there really much out there, or is there just not really much to look at?

Again, we -- I don't want to be too specific, Laura, but let's just say we have a business development function.

We actively look at opportunities on an ongoing basis, you know, continuously.

Thank you, great quarter.

Thank you.

Thanks, Laura.

With Credit Suisse, you have a question from the line of Robert [Riggs.] Please proceed.

Good morning, thank you.

Just a couple quick questions.

At the Investor Day and then I think on the Q4 call, you provided us with some analysts productivity metrics.

Kind of how much research pieces there, putting out involvement in sales force.

Just wondering if there was any changes or updates to the way that you are evaluating your analysts?

Yes, Robert.

It's Gene.

Basically, we track on an ongoing basis in each of the areas of our analysts what their productivity is, we track the number of documents they produce.

Within that, we track the type of documents, so we have (inaudible) quadrants, which are a longer kind of an analysis, we have vendor ratings, which are a longer kind of analysis, we also have things like first takes that are much shorter.

So we track it by category of our offering, and then we also -- so in terms of written research.

We also track the inquiries that people do.

That is, when they talk to our clients and answer questions with our clients.

We track the number by analyst and we track the client satisfaction by analyst.

And then when our analyst give presentations at events, we track the attendance at each of those sessions and we track -- we actually ask people to write the session at each of those sessions and we track that.

And so we take each of those metrics and then we evaluate the productivity of each of our analyst and our analyst teams.

And, in fact, we compare them against each other, we compare them against absolute measures.

We also stack rank them against each other, so we continuously improve.

And in fact, our productivity in our analyst organization continues to improve in terms of any of those measures, number of inquiries per analyst, number of documents per analyst, the average number of inquiries per analyst, the satisfaction that clients have with those interactions, all are going the right direction, because our analyst team is very focused on continuous improvement.

Great.

And then it seems like you're very much on track if not ahead on IT leaders and your business leader programs.

Are there any other program product changes that we should know about it?

You're right.

Our -- the new product introductions we have had have been ahead of our expectations, which is always great.

And we have -- it's part of our strategy to have a continuous pipeline of new products as well as enhancements to the existing ones, so we do, but because of competitive reasons, I don't want to tell you exactly what the new products are.

We do have a, it is part of our strategy, and we do have a pipeline of products which will be introduced both later this year and next year.

Great.

Thanks a lot.

Thanks, Rob.

And your next question comes from the line of Jessica [Claire] representing [Areance] Capital.

Please proceed.

Hi, it's Ken [Cornick.] How are you guys?

The question on the contract value, just trying to understand the seasonality, because typically X'ing out the foreign currency factor, you're down Q1 over Q4.

Obviously, you were up this year.

Can you just help us understand what the gross level of sales were?

In other words, X'ing out the typical, seasonal churn so we can get a better understanding of what it should be if it was Q2 versus Q1?

We don't publicly report sales volumes so we report contract value.

You are absolutely right to note that our normal seasonal trend has been that in Q1 we see a slight decline and then build from there.

We have seen, as I said, great success across the entire portfolio.

So, our new product that we've launched, the enhancements that we've made to those, and we're seeing the benefits of the investment in the sales capacity we made last year.

So all of that is contributing to the fact that our kind of normal seasonal pattern of a dip didn't occur because we're seeing good strength early in the year with all of those things happening.

So, we feel that all of that stuff and the price increase that we've done over time, all of those things have contributed to playing a part in why the seasonal trend is positive versus a slight dip.

The next question is on the consulting above the line, above the gross margin line, the cost structure, it came down sequentially from Q4 but still running a little bit high.

Is there anything unusual in there?

What I talked about during my part of the talk was that we did have a -- we have every few years a world wide consulting meeting, where we bring all the consultants around the world together to do planning, strategy, training.

We did that in Q1 of '07, we did not do that in Q1 of '06, so there is a cost implication there.

That's not in SG&A though -- that's actually --

That's not in SG&A because it's part of the consulting delivery cost, so it's in that part of the business, so that's where that would be.

In addition, as we've talked about, we have over the last year continued to invest in the, what we call the managing partner sales channel, and there's some cost associated with that as we bring the right people in.

So, those would be kind of the two probably largest sources of change on a year-over-year basis in addition to foreign exchange.

Okay, and just a last question on the SG&A.

Was there anything unusual, similar to that consulting event in the SG&A side?

On the SG&A side the only thing that is really a dramatic difference -- well, there's two differences year-over-year.

One is recruiting cost.

Right.

As we continue to staff up our sales force, recruiting is going to be dragged along, so there's expense there.

And that's one, and second is FAS 123-R costs is up, and we've talked about that, so those are the two things that would be the larger portions of things that would have gone up on the G&A side of the SG&A.

Great, thank you.

Sure Ken.

Ladies and gentlemen, this now concludes the question-and-answer session.

At this time I will turn the call over to Mr.

Hall for closing remarks.

Thank you, operator.

I want to thank everybody for attending today, and we look forward to talking to you on the next quarterly call.

Take care.

Thank you for your participation in today's conference.

Ladies and Gentlemen, this concludes the presentation.

You may all disconnect, and have a good day.