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Edited Transcript of FORR earnings conference call or presentation 26-Jul-17 8:30pm GMT

Thomson Reuters StreetEvents

Q2 2017 Forrester Research Inc Earnings Call

CAMBRIDGE Aug 12, 2017 (Thomson StreetEvents) -- Edited Transcript of Forrester Research Inc earnings conference call or presentation Wednesday, July 26, 2017 at 8:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* George F. Colony

Forrester Research, Inc. - Founder, Chairman, CEO and President

* Kelley Hippler

Forrester Research, Inc. - Chief Sales Officer

* Michael A. Doyle

Forrester Research, Inc. - CFO

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Conference Call Participants

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* Allen R Klee

Sidoti & Company, LLC - Senior Equity Research Analyst

* Timothy John McHugh

William Blair & Company L.L.C., Research Division - Partner and Global Services Analyst

* Vincent Alexander Colicchio

Barrington Research Associates, Inc., Research Division - MD

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Presentation

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Operator [1]

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Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO; Kelley Hippler, Forrester's Chief Sales Officer; and Mike Doyle, Forrester's Chief Financial Officer. George will open the call, Kelley Hippler will follow George to discuss sales and Mike Doyle will then follow Kelley Hippler to discuss our financials. We'll then open the call to Q&A.

A replay of this call will be available until August 25, 2017, and can be accessed by dialing 1 (888) 843-7419 or internationally at 1 (630) 652-3042. Please reference the passcode 6823061#.

Before we begin, I'd like to remind you this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

Some of the important factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, current -- future events or otherwise.

I'll now hand the call over to George Colony.

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [2]

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Thanks for joining our second quarter call for 2017. I will give a short brief on the quarter. I will then turn the call over to our new Chief Sales Officer, Kelley Hippler, who will outline her go-forward vision and give an update on the customer engagement model. Mike Doyle, Forrester's CFO, will give a financial review of the quarter and the 3 of us will then take questions.

I'd like to update investors on the 3 initiatives I outlined in Q1: Sales; the ongoing digitization of our products; and three, expanding our user business.

Now I want to move to sales first. Many of you know Mike Morhardt and the good work he has done for Forrester and its clients over the last 4 years. Mike is a person of great integrity, and I want to thank him and wish him the best on his next voyage.

I made the change in sales leadership to increase the consistency of performance. As we have discussed in previous calls, 2016 sales bookings started strongly and then became less predictable through the second half of the year. As we have reported, I have promoted Kelley Hippler to the Chief Sales Officer job. Kelley is a 19-year veteran of Forrester. She has had many assignments during her career at the company, including running our vendor sales organization, leading client services and publishing and directing sales operations. She was Interim Head of Sales in the third quarter of 2012, and she was an early candidate for the top job in the search that yielded Mike. She has most recently been running the rollout of the customer engagement model and has been a member of the executive team since January of 2017. I believe that Kelley has the skills, knowledge and ambition to complete the customer engagement model and bring consistent performance to the newly structured sales force. She is a clear, decisive and fast-moving leader, who, throughout her career, has exceeded her goals and has been a catalyst for progress and change at the company. She has accomplished much in her years at Forrester, but I believe that her greatest victories lay ahead.

I want to turn for a few moments toward digital. As you know, we have fully digitized the deliverables for the Customer Experience Index, enabling clients to engage in real time analysis of their scores and data. In the fourth quarter, we will be rolling out the digital versions of 3 other data products: Consumer Technographics, Business Technographics and ForecastView. This upgrade will enable clients to access the data and comparisons they need without the intervention of a Forrester data specialist. It will increase the ongoing value for clients and also lower the cost of delivering these products for Forrester.

And while I'm on the topic of data, I'm happy to report that in Q2, we hired a new Head of our Data business, [Mike de Jesus], who joins Forrester from IHS.

We are launching digital assessments in the second half of the year. This is a tool that helps clients understand where they are on transformation voyages and what steps they must take next, and more on this on the Q3 conference call.

We continue to enhance the iPad and iPhone apps that enable clients to quickly access Forrester's research and to receive snackable answers to their questions. The iOS apps will be joined by an Android version, which we'll be launching in August.

We have added a new product that is available only to clients who access Forrester via mobile. These are 1-minute audio clips of analysts outlining what breaking events mean to large companies. And finally, Forrester's launching a new blog platform later this month.

I want to end my remarks with a quick update on the expansion of our user business. This is a key priority for the company as I discussed on the Q1 call.

The company focuses on 12 vertical markets, and these are the market segments that are most impacted by the Age of the Customer. And I want to say a few words about how we are sharpening our events and research to deliver high value in these vertical markets.

Forrester's events business had a great Q2. Year-over-year performance was strong, achieving 29% growth in bookings and 6% growth in revenues versus the same period in 2016. Much of this overperformance is being achieved through a growth of the number of users attending our forums.

We had strong expansion in our digital transformation franchise of events, driving over 25% audience and 60% sponsor growth year-over-year. Our Customer Experience franchise was led by our flagship show in New York City that drew over 1,250 attendees and 40 sponsors, and exceeded plan by 5% overall.

In addition, we achieved our target goals of delivering a 70% user audience at Forrester Events in Q2, highlighted by the Consumer Marketing Forum, CX in Sydney, Australia and CX New York City, all exceeding 70%. And these numbers are up substantially from 2016.

Turning now to research. In the quarter, we hit a number of topics that are critical for users in these challenging times. Research's most read topics by users in Q2 were AI, automation, Martech and emerging technologies like chatbots and blockchain.

A very important report for users in the quarter was the end of advertising as we know it. And this forecasted CMOs will eliminate $2.9 billion from online display advertising spending in the next year. And the most read playbook by users in Q2 was the digital business transformation playbook.

So to conclude, at midyear, I feel good about how Forrester continues to double down on helping companies win in the Age of the Customer. If you're watching the retail world, it is obvious that the empowered customer is having a revolutionary impact on that industry now and other vertical markets that Forrester serves like automotive are close behind. The market is clearly pivoting to where Forrester is strongly positioned.

Over the last 2 days, we held our quarterly board meeting and I can report that our 3 new board members, David Boyce, Yvonne Wassenaar and Tony Friscia, have hit the ground running. They are already having significant impact on our thinking and direction. They are excellent additions to the Forrester brain trust.

So thank you for joining the call, and now I'd like to turn it over to Kelley Hippler, Forrester's Chief Sales Officer. Kelley?

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Kelley Hippler, Forrester Research, Inc. - Chief Sales Officer [3]

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Thank you, George. I'm excited and honored to be leading the sales and customer success organizations at Forrester. My goal is to build a world-class sales organization that delivers consistent results, which we will achieve by continually focusing on people, process and technology.

On the people side, we will be increasing our coaching efforts, especially with our newer hires, we will drive process improvement in the short term by refining our customer on boarding process and we will continue to look for ways to leverage technology to improve the efficiency and job satisfaction of our team.

Now turning to Q2 results. We continue to see solid results in our premier, core and European vendor businesses, along with double-digit growth in Asia Pacific. As George mentioned, we continue to focus on our end-user business.

In Q2, we accelerated our migration into the customer engagement model, our new strategy for how we will sell to and engage with our clients as we take a page out of our customer-obsessed operating model. The customer engagement model has 2 selling motions, premier and core. As you may recall from prior discussions, core consists of our smaller clients who buy a limited set of the Forrester portfolio and are largely sold to and serviced by our inside sales team based in Nashville, while maintaining a hub presence in both Cambridge and San Francisco for local clients. Premier is comprised of our largest clients, who deploy the more complex solutions that Forrester has to offer, and premier user represents 25% of our annual booking.

We stood up 4 additional North American user teams in the model last quarter and have added another in July, bringing us to 75% of all premier North American user teams. The North American stand-up will be completed in early October. Furthermore, we will be standing up our first European team in early September.

While it is still early days, we are encouraged by the initial results we are seeing on the engagement front. When comparing the Q2 performance of the teams in the model over prior year, we have seen a 7% increase in both renewal retention and share of wallet for this population. In addition, we saw a modest increase in conversion rate.

For our core selling motion, we added 12 headcount in Q2, bringing our year-to-date total in Nashville to 23 quota carriers and 37 total employees. We are on pace with our headcount target for Nashville in 2017, and we are looking forward to opening our permanent office space in Q4. To support the transition into the 2 new selling motions, we have been accelerating our training efforts with the creation of a 90-day professional development plan for all roles.

With that, I would like to turn the call over to Mike Doyle to review our financial results from Q2.

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Michael A. Doyle, Forrester Research, Inc. - CFO [4]

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Thanks very much, Kelley. I'll now begin my review of Forrester's financial performance for the second quarter of 2017, including a look at our financial results, the balance sheet at June 30, our second quarter metrics and the outlook for the third quarter and full year 2017. Please note that the income statement numbers I'm reporting are pro forma and exclude the following items: stock-based compensation expense, amortization of intangibles, reorganization costs and net gains and losses from investments. Also for 2017, we continue to utilize an effective tax rate of 40% for pro forma purposes.

For the second quarter of 2017, Forrester exceeded revenue, pro forma margin and earnings per share guidance. Results reflects solid revenue growth, particularly in content marketing and strategy consulting, where we saw a double-digit year-over-year growth.

We continue to make product -- progress on our product digitization initiative. As George mentioned, we introduced a number of new products -- product enhancements and improvements to our digital clients experience. Kelley took us through the progress we've made in our customer engagement model, with strong performance improvement for teams in the model with a target to complete the rollout of the remaining North American teams this year.

Our plan is to continue our investments in product digitization and the customer engagement model during the second half of 2017.

We continued aggressive share repurchase activity during the quarter, which, coupled with better-than-expected financial performance, resulted in strong earnings per share performance for the second quarter and the first half of 2017.

Now let me turn to a more detailed review of our second quarter results. Forrester's second quarter revenue increased by 2% to $89.7 million from $87.8 million in the second quarter of 2016 and increased 3% on a currency adjusted basis.

Second quarter research services revenue decreased by 1% to $54.6 million from $55 million last year. On a constant currency basis, research revenue was flat and represented 61% of total revenue for the quarter.

Second quarter advisory services and event revenue increased by 7% to $35.2 million from $32.8 million in the second quarter of 2016 and by 8% with constant currency and represented 39% of total revenue for the quarter.

Our international revenue mix was 22% for the period ending June 30, 2017, down compared to 23% last year, both as reported and on a constant currency basis.

Now I'd like to take you through the product activity behind our revenue, starting with Forrester Research.

Forrester's published research and decision tools enable clients to better anticipate and capitalize on disruptive forces affecting their businesses and organizations. We believe Forrester Research provides insights and frameworks to drive growth in a complex and dynamic market.

In the second quarter of 2017, Forrester's research library included 59 playbooks, the addition of 296 new documents and we hosted 46 webinars for our clients.

As of June 30, 2017, the top 3 research roles were the CIO with 6,337 members, Analyst Relations with 4,290 members and Application Development & Delivery with 4,160 members.

Onto our Forrester Connect offerings, which encompass our leadership boards and executive programs. The Forrester Connect offerings are designed to help clients connect with peers and Forrester's products and professionals and to coach executives to lead far-reaching change within their organizations. As of June 30, 2017, Forrester Connect had a total of 1,430 members, down 2% compared to last year and up 1% compared to the first quarter of 2017.

Our data products and services are designed to provide fact-based customer insights to our clients. Clients can leverage our data products and services or choose to have us conduct custom data analysis on their behalf.

For the second quarter, revenue decreased by 7% due to some softness in our Technographics business. As George mentioned in his remarks, we brought on a new leader for our data business and plan to launch digital versions of 3 of our data products in the fourth quarter of this year.

Forrester Consulting, which includes our advisory and consulting business, saw total revenue for the second quarter increase 7%, driven by content marketing and strategy consulting, as I mentioned in my opening remarks. We are pleased to see another productive quarter from our consulting organization, but we do see some moderation in backlog levels in this area of our business, tempering our expectations for the second half of 2017.

Forrester Events had 6 events in the second quarter of 2017. In Asia Pacific, we held our Customer Experience Forum in Sydney and our Digital Transformation Forum in Mumbai. In London, we held our Digital Transformation Forum. And in the U.S., we held our signature forum on customer experience and our forum on consumer marketing in New York as well as our forum for Digital Transformation in Chicago. Events revenue increased by 6% year-over-year despite the reduction of one event in the quarter.

I'll now highlight the expense and income portions of the income statement. Operating expenses for the second quarter were $77.1 million, up 4% from $74.5 million the prior year and up 5% with constant currency.

Cost of services and fulfillment increased by 7% and increased by 8% with constant currency, due to a higher headcount and partially offset by lower T&E. Selling and marketing expenses increased by 4% and increased by 5% with constant currency, driven by higher sales headcount and severance cost, partially offset by lower T&E.

General and administrative cost decreased by 1% and were flat with constant currency due to lower professional services cost, partially offset by higher headcount and recruitment fees.

Overall headcount increased by 3% compared to the second quarter of 2016 and remained essentially flat compared to the first quarter of 2017.

At the end of the second quarter, we had a total staff of 1,381, including the research and consulting staff of 521 and total sales force of 538. Research and consulting headcount increased by 5% compared to the second quarter of 2016 and by 2% compared to the first quarter of 2017. The total sales force increased by 2% compared to the second quarter of 2016 and 1% compared to the first quarter of 2017.

Operating income was $12.6 million or 14% of revenue compared with $13.3 million or 15.2% of revenue in the second quarter of 2016. This is a decrease of 5%, year-over-year.

Other income for the quarter was $93,000 compared to $473,000 in the second quarter of 2016. Net income for the second quarter was $7.36 million and earnings per share was $0.42 on diluted weighted average shares outstanding of 18 million compared with net income of $8.3 million and earnings per share of $0.46 on 18.1 million diluted weighted average shares outstanding in the second quarter of last year.

And now I'll review Forrester's second quarter metrics to provide more perspective on the operating results for the quarter.

Agreement value. This represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized. As of June 30, 2017, agreement value was $236.7 million, down 2% from the second quarter of 2016 and down 1% on a constant currency basis.

As of June 30, 2017, our total for client companies was 2,417, down 3% compared to last year and essentially flat compared to last quarter. Client count, unlike our retention and enrichment metrics, is a point in time metric at the end of each quarter.

Forrester's retention rate for client companies was 75% as of June 30, 2017, up 1 point compared to the first quarter and down 1 point compared to last year. Our dollar retention rate was 87%, flat compared to the prior quarter and down by 1 point compared to last year.

Our enrichment rate was 94% for the period ending June 30, 2017, unchanged compared to the prior quarter and down 2 points compared to 2016.

We calculate client and dollar retention rates and enrichment rates on a rolling 12-month basis due to the fluctuations, which can occur between quarters with deals that close early or slip into the next quarter. Our rolling 12-month methodology captures the proper trend information.

Now I'd like to review the balance sheet. Our total cash and marketable securities at June 30, 2017, was $125.2 million, which is a decrease of $12.9 million from $138.1 million at year-end 2016.

Cash from operations was $7.4 million for the quarter as compared to $9.9 million in the second quarter of last year. We received $2.1 million in cash from options exercised for the quarter as compared to $3 million in the second quarter of last year.

We repurchased $15 million of stock during the second quarter, and we also paid a dividend of $3.4 million or $0.19 per share during the quarter.

Accounts receivable at June 30, 2017 was $51 million compared to $42.7 million as of June 30, 2016. Our days sales outstanding at June 30, 2017, was 52 days compared to 44 days at June 30, 2016. And accounts receivable over 90 days was 10% at June 30, 2017, compared to 4% at June 30, 2016. Deferred revenue at June 30, 2017, was $145.4 million, an increase of 5% compared to June 30, 2016.

In closing, we had a very good quarter, exceeding guidance for revenue, operating margin and earnings per share. For the first half of 2017, we are running ahead of our financial expectations, with revenue, margin and earnings per share performing above targeted levels while the organization has been busy with a number of initiatives.

As George and Kelley discussed, we made a lot of progress in our initiatives in the first 6 months. The customer engagement model continues to deliver the performance improvement we expected and the rollout of the model to the remaining teams continues at a good pace.

We continue to digitize our products and our client experience with more to come in the second half of 2017. We feel good about our first half performance, but still need to see meaningful improvement in our customer metrics and increased backlog in our consulting business to drive an acceleration in our revenue performance. We expect the expansion of our customer engagement model, along with the continued product investment, will begin to improve the key customer metrics of retention and enrichment, net new client growth and consulting backlog.

Based on our performance in the first half of 2017, we remain confident in our full year guidance, which remains unchanged.

Now let me take you through the specifics of our guidance for the third quarter and full year of 2017. As a reminder, our guidance excludes the following: the amortization of intangible assets, which we expect to be approximately $200,000 in the third quarter and approximately $800,000 for the full year of 2017; stock-based compensation of expense of $2.1 million to $2.3 million for the third quarter and $8.6 million to $9 million for the full year 2017; and any investment gains and losses.

Forrester is providing third quarter 2017 financial guidance as follows: total revenues of approximately $77.5 million to $80.5 million, pro forma operating margin of approximately 8% to 10%, a pro forma effective tax rate of 40%, pro forma diluted earnings per share of approximately $0.21 to $0.25.

Our full year 2017 guidance remains unchanged and is as follows: total revenues of approximately $324 million to $332 million, pro forma operating margin of approximately 10.5% to 11.5%, pro forma effective tax rate of 40%, pro forma diluted earnings per share of approximately $1.13 to $1.20.

We provide guidance on a GAAP basis for the third quarter and full year 2017 in our press release and 8-K filed today.

Thanks very much. And now I'm going to turn the call over to the operator for the Q&A portion of the call.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Tim McHugh.

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Timothy John McHugh, William Blair & Company L.L.C., Research Division - Partner and Global Services Analyst [2]

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First, I guess just on this change in sales leadership. Basically, I mean, I guess you said that the strategy isn't going to really be any different. It sounded like you're pleased with some of the progress you were starting to make on that. So if the strategy is not different, I certainly understand, maybe it's a different individual leading it, but I guess what are you really pushing on differently or emphasizing that is behind the change?

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [3]

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I'm going to -- it's really about 2 things, Tim, one was just consistency. I talked about 2006 (sic) [2016]. 2006 started well, but then the rest of the year was a choppy year. So that's really number one. Number two, I think that I'm looking to Kelley for really decisiveness, speed to move to decisions very, very quickly, which is really what's needed on the back half of the customer engagement model. So it's really about consistency and speed. Those will be the 2 reasons.

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Timothy John McHugh, William Blair & Company L.L.C., Research Division - Partner and Global Services Analyst [4]

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Okay. And then...

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [5]

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I'm sorry (inaudible).

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Timothy John McHugh, William Blair & Company L.L.C., Research Division - Partner and Global Services Analyst [6]

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No. And then you mentioned, I think, the consulting backlog weakening. Is there anything behind that? I guess, what would be -- is there something you see in the marketplace or staff or I guess, is it just normal volatility?

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Michael A. Doyle, Forrester Research, Inc. - CFO [7]

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Tim, it's Mike. I think that -- some of this is a little bit of normal volatility, some of this is we roll out the new model. It's trying to put in place the concept of solution partners, and so we're rolling it. That's one that's lagging a little bit, and I think that's the piece that we're putting in place. And I think it -- we're just I think being somewhat conservative. We look at the backlog. We're kind of in this position a year ago, sort of a similar place. So we're trying to be -- hedge our bet a little bit and be somewhat conservative. I mean the delivery side of consulting has gone exceptionally well. And so they've -- we've run ahead of that and depleted some of the backlog, probably a little bit quicker than we had thought. And so I think that the back half of the year is going to be focused, both in the part of the sales organization to build backlog and for the consulting organization to execute against, which they've done a great job on, by the way, in the first half of the year. So probably hedging our bet a little bit. But again, with consulting, sometimes it can be difficult to tell. So I think we're looking at a good back half, but it's going to take some work to build up that backlog.

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Operator [8]

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And our next question comes from Vincent Colicchio from Barrington Research.

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Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division - MD [9]

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Yes, it looks like you've had a nice turnaround in the event business. Should we expect that to be a consistent grower now going forward? And how large is that now as a percentage of revenue?

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [10]

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First, to your question, I think, Tim -- Vince, we've got one -- yes, we do expect it to be a consistent grower. I mean, I think we've done -- I think the leadership change and the discipline that's gone into the events business is going to allow us to continue to move forward in a very consistent, methodical way, and we're seeing the results of that. So yes, it's going to continue to grow. I think that our events business now is probably, I would say, around 4% of our revenue. It's what I would expect for the full year. And I -- in good years way back when, we sort of never broke 5% because we sort of capped the number of events we have. Maybe that changes. But everything about the events business right now has gone exceptionally well for us. It's a good team with a good leader, and they're delivering in a very consistent way.

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Michael A. Doyle, Forrester Research, Inc. - CFO [11]

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I think John Sellazzo who is leading it, Vince. I mean, he's a very ambitious guy. And I think what he has done more than -- better than anyone who's run it in the last 5 or 6 years is he's finding the hot spots quickly and going to hot spots there, going to hot spots immediately. Digital transformation is a new franchise we built this year, and it was just fantastic. And now taking us toward privacy, security and privacy, which is a very, very hot topic in the Age of the Customer as I talked about. So I think really 2 things here. One is he has the best nose for the events market that I've seen in that -- as a leader in that business, one. And two, he's done a great job on the sales side. He's brought in a very, very good group of people who are selling the events to sponsors, but also the seats. So I think we're going to have to keep him -- to keep this in the 5% range is going to be difficult, which we like. We like that ambition. We like -- obviously, we like the growth.

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Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division - MD [12]

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So I was wondering if you could provide some feedback on the premier rollout in the U.S. in terms of what you're hearing from clients. It sounds like you're happy with what you're seeing so far.

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Kelley Hippler, Forrester Research, Inc. - Chief Sales Officer [13]

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This is Kelley. In terms of client feedback on the customer engagement model, it's actually been overwhelmingly positive. With the installation of a customer success manager who is dedicated to the account to help make sure that clients are getting value day in and day out from their relationship, we're seeing really positive feedback. The CSMs are able -- because they know their clients' initiatives, they can anticipate what they need, connect them with the appropriate Forrester resources. And we're already seeing significant upticks in our engagement scores, which we know are early indicators of [where we know our retention] is going to fall.

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Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division - MD [14]

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And Kelley, could you give us some color, you have mentioned that Europe had a good quarter. What particular is working right there? And do you expect that to follow through in the second half?

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Kelley Hippler, Forrester Research, Inc. - Chief Sales Officer [15]

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Sure. So with regards to Europe, the vendor team had very strong performance in this past quarter. We are looking forward to putting the end-user team starting with our premier teams based in the London office into the model to help drive the user side up as well in September. So we saw a very strong performance there in the vendor side, and we're looking to drive up the end user business as we move them into the customer engagement model next.

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Vincent Alexander Colicchio, Barrington Research Associates, Inc., Research Division - MD [16]

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And then, Mike, one last one for you. Capital spending, what was that in the quarter?

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Michael A. Doyle, Forrester Research, Inc. - CFO [17]

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Our cap spending, Vince, I want to say was -- I think around $3 million during the quarter. So we're up a little bit more than historical norms just because a lot of product investments we make were capitalizing those. So that's -- you've seen a bump up. If you go back probably 4 or 5 years, we typically would spend $3 million to $4 million in a full year. So up a little bit, and I think it's going to continue balance of year and probably into next year, plus we've got leasehold improvements. We're building out our national office, so you'll begin to see some spend there. Next couple of years will be a little bit different, not off the charts, but I think just at a higher rate than you've seen historically from us.

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [18]

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So meaning, more software spending, Vince.

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Operator [19]

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And our next question comes from Allen Klee from Sidoti.

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Allen R Klee, Sidoti & Company, LLC - Senior Equity Research Analyst [20]

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In terms of your sales force, it looks like you added [30] people sequentially compared to Q1. I think you said last quarter, you were going to -- the goal was to add around 5 (inaudible). So I just wanted to try to get an understanding, if you think that you're hiring at the rate that you're comfortable with and you're still comfortable with the 7 to 10.

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Kelley Hippler, Forrester Research, Inc. - Chief Sales Officer [21]

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Sure. So in terms of the overall hiring, we have brought on a fair number of new hires and we want to make sure that we successfully get those folks on boarded and to productivity. So we did slow down a little bit in this quarter because we want to focus on making sure that the headcount we've brought onboard is productive, ramps well and is successful. And we're also looking for other ways to drive productivity, including some of the process and technology improvements that we mentioned earlier as well.

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [22]

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I think relative to the full year target, we're going -- because Kelley has been in the role all of a couple of weeks, we're going to let her absorb and give us probably a new number, which we'll give you on the third quarter call. The answer is -- the short answer is sales headcount is going to grow. At what rate? I don't know where we'll finish out the year. I think Kelley has had some really good thinking about getting more productivity out of the reps that we have and getting to our targeted bookings number that way.

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Michael A. Doyle, Forrester Research, Inc. - CFO [23]

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Which is what the CEM should in fact yield.

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [24]

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Right. So I think that -- we'll update the headcount target for sales on the next call. If we feel comfortable sooner then, we'll certainly put something out, but certainly by the next call. I think Kelley will have a handle on, probably this year and how she's thinking about the next year as well.

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Allen R Klee, Sidoti & Company, LLC - Senior Equity Research Analyst [25]

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Okay, great. And then can you tell me how much stock was bought back during the quarter and what the share count was at the end of the quarter?

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [26]

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Well, we've got 18 million shares, I think, on a fully diluted basis. We spent $15 million to buy back shares, and that's probably, I'm guessing, I'm thinking out loud here, yes, around 400,000 shares.

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Allen R Klee, Sidoti & Company, LLC - Senior Equity Research Analyst [27]

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Okay, great. And then in terms of your guidance for next quarter, you're guiding to an operating -- a GAAP operating margin of 5% to 7%. This is a pretty big drop compared to this quarter and last year. And I'm just wondering kind of what's behind that. And then maybe just a bigger picture question of how you think about kind of how margins -- what the potential is longer term?

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [28]

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Okay. I think that a couple of things are happening. We -- this is -- we said it was going to be a year of investments. So the investment is going to continue to -- into next quarter. And we do normally see fewer events in the third quarter, and third quarter has always been somewhat an unpredictable quarter in terms of other activity as it relates to consulting and advisory delivery. So I think we've been somewhat tempered in terms of how we think about our revenue performance for the quarter. Meanwhile, we're making assumptions about a continuation of investment, both in product and in the customer engagement model. As we go forward, obviously, we haven't changed our guidance for the year. So we're still very comfortable with both the revenue and margin assumptions there. And as we think about next year, we haven't given guidance yet other than to say our target will be to expand margin, but we haven't gotten specific, Allen, in terms of specific targets. So that -- maybe we can give you more color on the next call. We just -- we haven't blown out our planning process. We finished up a lot of strategic planning work. We'll look more to do there, and then the annual operating plan work starts in about a month. So...

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Allen R Klee, Sidoti & Company, LLC - Senior Equity Research Analyst [29]

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Okay, great. And my last question, just anecdotally when you talk to your customers, what's the sense that you get about their willingness to spend more or the same or less?

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [30]

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You're talking about spending on tech in general or on Forrester?

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Allen R Klee, Sidoti & Company, LLC - Senior Equity Research Analyst [31]

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For Forrester, yes.

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [32]

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Well, I think, as you know, we've been challenged in enrichment over the last 2 years. Look, the market is not our problem. Our board member from the Netherlands was here over the last 2 days. I said how's business in Europe. He said business is terrific in Europe. But yes, you could see this in retail. I talked about in my remarks that retail is vastly challenged by the Age of the Customer. So these are challenging times, these are difficult times. There are times where there's a lot of opportunity for us, and I think this is really about customer engagement model. The ability for what we call the solution partners to move into an account, understand exactly where the challenges are and be able to sell a base product and then begin -- continue to add on to that product through enrichment. So the dollars are out there. We just have to go get them at this point. I don't know if you have any other ideas there, Kelley, but...

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Kelley Hippler, Forrester Research, Inc. - Chief Sales Officer [33]

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No, no, I would agree with that. And I do think, over time, as we're engaging with our clients on the issues that they care about most, so customer experience, digital transformation, we are fully expecting that the enrichment will follow.

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Michael A. Doyle, Forrester Research, Inc. - CFO [34]

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Yes, we just did a lot of research on our clients, and this was -- this is research we did where one set of the companies knew who we were. The other set was totally blind. And we asked what are the 2 largest challenges for your company, and these are some CEOs, CIOs, and CMOs. And challenge one was improving experience for customers and number two was digital transformation. So we are -- as I said in my remarks, we are definitely going where the market is headed. That's not our problem. And I think -- to close out to George's point, I think that, yes, customer engagement model, and what we're also seeing, which is encouraging, is where we make enhancements and changes to product. We're getting the kind of traction we wanted. We have more on the plate, more to come. And so I think engagement model, coupled with product changes, are going to start really unlocking the enrichment opportunities with our clients.

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Allen R Klee, Sidoti & Company, LLC - Senior Equity Research Analyst [35]

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Okay. Maybe I can sneak one other thing in. Any thoughts on -- just if you were to do an acquisition, what generically would you like?

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Michael A. Doyle, Forrester Research, Inc. - CFO [36]

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I would say that -- or historically, what we've said is that, obviously, it's M&A is sort of on our list before internal investment, but it -- what we said is geography, right? Product has always been a piece, and I think things that can expand what we have. But the other piece maybe is can we accelerate some of our businesses and get more digital products by buying into space we already play in, but maybe in getting digital traction as well. So I think there's things out there. We are, as George said on the last call, looking to do at least one a year because we're far enough along with some of the structural changes to the selling model. We're in a place where I think we can absorb an acquisition at this point and do good things with it. So...

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George F. Colony, Forrester Research, Inc. - Founder, Chairman, CEO and President [37]

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Another area we look to, Allen, is to buy more clients in the roles that we serve. So CIOs and CMOs as an example. And we just took a very long look at a company, which had I think over 700 CIOs -- excuse me, CMOs as clients. But we did not do that deal because we found in due diligence that the CMOs were not high level enough for us. They tended to come from companies from $500 million to $1 billion, and that's not where we're playing, we're playing above $1 billion. So to acquire additional clients in the roles we serve is also very big -- is an imperative for us.

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Operator [38]

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And we have no further questions at this time. I'll turn the call back over to Mike Doyle for final remarks.

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Michael A. Doyle, Forrester Research, Inc. - CFO [39]

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Okay, thanks, everyone for joining the call. We look forward to getting out on the road and meeting with each of you during the course of the quarter. And obviously, if you have any follow-up questions, please feel free to reach out to me directly. Thanks very much.

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Operator [40]

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Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating, and you may now disconnect.