content_image/139286.jpg
## Quarterly organic revenue growth steadily improved in 2010. 

<img src='content_image/139286.jpg'>

International revenue grew 22% and now makes up 28% of our revenue, up from 27% in 2009. We had strong results in the UK, Canada, and Australia. We continued our overseas expansion and started operations in Brazil, Chile, Mexico, and Luxembourg. 

Operating income declined 3% to $121 million. During the downturn, we sharply cut compensation expense, mainly bonuses and matching contributions to employee retirement plans. We restored some of those costs in 2010, which dampened earnings growth. Compensation accounts for about two-thirds of our total costs, and it grew faster than revenue last year. 

We also felt the effects of the end of the Global Analyst Research Settlement (which required 12 leading banks to provide independent equity research to their clients and ended in July 2009) and the loss of two large consulting contracts in 2008 and 2009. Together, these items previously made up about $40 million in annual revenue. This revenue loss helped reduce our operating margin from 26% to 22%. But as we generate revenue growth from our existing business, we should see operating income and margin improvement. 

Free cash flow—cash from operations less capital expenditures—improved in 2010 to about $109 million. We generated $123 million in operating cash flow and had $15 million in capital spending. The major capital costs were for our new facility in Shenzhen, China that has capacity for about 1,000 employees, as well as computer-related expenditures. 

The quality of earnings is high. Our $109 million in free cash flow compares favorably with our $86 million in net income. It’s worth noting that we had about $25 million of expense for intangible amortization in 

* Organic revenue is considered a non-GAAP financial measure. Please refer to page 144 for a reconciliation to consolidated revenue. 

