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Review of Subscription Research Advisory Companies

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Maturing market for IT research services: Overall spending on IT research lower ... Acquired Butler Research Group in early 2005. 18. Stock Performance Chart ... – PowerPoint PPT presentation

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Title: Review of Subscription Research Advisory Companies


1
Review of Subscription Research / Advisory
Companies
2
Outline
  • Overview of Subscription Research / Advisory
    Companies
  • Attributes
  • Operating statistics
  • Transaction values
  • Profiles of Publicly Traded Companies

3
Company Attributes
  • High value knowledge and information
  • Renewable retainer services
  • Inside the professional community
  • Client contact and advisory services provide
    feedback loop

4
Selected Industry Participants
  • Gartner Inc.
  • Forrester Research
  • The Corporate Executive Board
  • The Advisory Board
  • CoStar Group
  • Datamonitor PLC

5
Sector Overview
  • Maturing market for IT research services
  • Overall spending on IT research lower than
    2000-01 level
  • Modest annual revenue growth among large public
    companies
  • Spending on best practices research is healthy,
    growing and profitable
  • Corporate Executive Board and The Advisory Board
    Company continue to thrive
  • Other segments also show good vital signs

6
Acquisition Activity
  • Until mid-2001, participants made smaller, add-on
    acquisitions to broaden geographic reach and
    product mix. After a slowdown during 2001-2002,
    the past few years have seen consolidation
    through strategic acquisition among research
    firms specializing in IT

7
(No Transcript)
8
Transaction Values have Declined
  • Median transaction values until 2003
  • 2.4x Revenues
  • 14.7x EBITDA
  • Median transaction values 1/1/2003 till now
  • 1.2x Revenues
  • 10.0x EBITDA

9
Divergence of Results and Values
  • The public companies focused outside IT The
    Advisory Board Company, Corporate Executive Board
    and CoStar have shown sustained growth and
    profitability
  • Investors are assigning premium valuations to the
    companies exhibiting higher margins and
    consistent revenue trends

10
Financial data reflect the demand environment
  • IT research spending has been hurt by several
    factors
  • Tech bust
  • Substitution by corporate customers
  • Internet research
  • Business analytics software
  • More sophistication about IT among customers
  • Public companies report several statistics useful
    for gauging activity
  • Renewal rate
  • Contract value or agreement value

11
1 - Data from 6/04 2 - Exact data period during
year varies between companies because of fiscal
years and available information
12
Gartner Inc. (IT)
  • Profile
  • Largest provider of subscription based research
    and analysis on the information technology
    industry
  • Provides research advisory services, custom
    consulting and conferences/symposia
  • Founded in 1979 - Headquartered in Stamford, CT
  • Gartner has made over 30 acquisitions since going
    public in 1993, most recently acquiring META
    Group (12/04) for 162 Mil (1.2x revenue)
  • Several years of shrinking contract value then
    stabilized in 2004
  • Yet margins continue eroding
  • EBITDA margin, at 8.2 of revenue, is one third
    the level achieved in growth era

13
Forrester Research, Inc. (FORR)
  • Profile
  • Research and analysis on the impact of emerging
    technologies
  • Seeking to lead with ideas
  • Delivers research through advisory services,
    publications, on-line database and major
    conferences
  • Contract value has fluctuated dramatically
  • Renewal rate has recovered from a low of 50 to
    72, but still lags the non- tech firms (87
    90)
  • And EBITDA margins at 15 - are one third lower
    than previously

14
The Corporate Executive Board (EXBD)
  • Profile
  • Provides research and analysis on best
    practices for large corporations
  • lt Completed IPO in February 1999
  • 20 discrete subscription programs covering
    multiple functions incl. strategy, sales,
    finance, legal, banking, etc.
  • Deliverables include published studies,
    conferences, on-site executive education,
    customized research briefs and proprietary
    database
  • Continues to record significant year over year
    growth rates around 30 for each of the past
    six years
  • EBITDA margin is stable at nearly 30
  • Contract value a leading indicator continues
    upward trend

15
The Advisory Board (ABCO)
  • Profile
  • Best practices research and analysis for
    healthcare industry
  • Founded in 1979, became public in IPO in October,
    2001 with all shares sold by the principal owner
  • Membership business model with over 2,100
    hospitals, health systems, insurers, pharma and
    healthcare companies belonging
  • Offer 13 distinct programs of which 7 were
    introduced since April 2000. Renewal rate of 84
  • Revenue growth picked up since 2000-01
  • Averaged 24 in FY2002-04
  • But most recent 12 months growth has slowed to
    16
  • EBITDA margin improved from low teens to 26 27
    in recent years

16
CoStar Group, Inc. (CSGP)
  • Profile
  • Provider of commercial real estate information
    and analysis in digital format
  • Proprietary database covering 50 markets
  • Sells access to its database on subscription
    basis
  • Completed IPO in August 1999
  • Acquired leading competitor, Comps.com in
    November 99
  • Continued revenue growth (roughly 20 pa) in 03
    and 04
  • Improved margins as increasing revenue covers
    fixed costs
  • EBITDA margin in 2004 was about 17 - up from 7
    in 02 and negative before that

17
Datamonitor PLC
  • Profile
  • Provides global market research and analysis
    covering the technology, financial services,
    healthcare, consumer, energy and automotive
    sectors
  • Provides subscription products and services
    including Strategic Planning Programs and
    one-time Market Reports
  • Markets through its web sites and other
    distribution channels and through relationships
    with Reuters, Financial Times Ltd., Thomson
    Financial
  • Financial results improving
  • Growth rate of 16 17 in most recent two years
  • Profits reported after several losing years
  • Acquired Butler Research Group in early 2005

18
Stock Performance Chart
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