Forrester Research, Inc.

Good afternoon and thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO, Carrie Johnson, Forrester's Chief Research Officer, and Mike Doyle, Forrester's Chief Financial Officer. George will open the call, Carrie will follow George to discuss the research, and Mike Doyle will discuss our financials. Kelly Hipler, Forrester's Chief Sales Officer, will join the presenters and we will then open the call to Q&A. A replay of this call will be available until June 7, 2020 and can be accessed by dialing 855-859-2056 or 404-537-3406. Please reference the conference ID 7788755. Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expect, believe, anticipate, intend, plan, estimate, 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 statement. 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 obligations to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. I'll now hand the call over to George Colony.

Thank you for listening in on the Forrester Q1 2020 call. We're going to switch it up for this call. I've invited Carrie Johnson, Forrester's Chief Research Officer, to update investors on our product strategy. So I'm going to kick it off, then hand the call over to Carrie for her remarks. Then we're going to hear from CFO Mike Doyle, who will give a financial review for the quarter. Carrie, myself, and Mike will be joined by Kelly Hipler, Chief Sales Officer, for questions and answers. Now, a few points to start. Number one, Forrester will manage its way through this economic moment, whatever it may bring. Two, the pandemic will accelerate the need for all companies to build customer-obsessed digital capabilities, and that's Forrester's focus. And finally, three, Forrester will emerge stronger from this recession given its expertise in customer experience, employee experience, digital transformation, and building high-performing revenue engine. Now, much has changed since our last quarterly call in February. At that time, I reported that the year was launching as planned. However, the pandemic began to impact the economy in early March, changing the vector of Forrester's business for the quarter and for the year. We concluded the first quarter slightly below revenue guidance while still growing by 2% year over year. We dramatically exceeded our EPS target, but this was due primarily to cost reductions in March. Forrester has been working remotely since mid-March, and I'm happy to report that we have made the transition quickly and seamlessly. Our technology stack has performed admirably, and our collaboration across the company and with clients has moved forward unimpeded. We feel very fortunate to be a company that can operate at near peak levels while still being remote. Now, that said, the pandemic and the economic downturn will impact Forrester in three ways. Number one, revenue in our events business will be reduced by travel restrictions. Two, our clients in the hotel, airline, restaurant, automotive, and physical retail sectors have cut budgets. And three, some clients, including the technology sector, are reducing budgets because of the general economic slowdown. So as a result, we have taken actions to keep expenses aligned with revenue. And these include removing the company bonus for 2020, reducing hiring, and restricting non-essential travel. The company has weathered many economic moments in its history, a lot of turbulence in its history, including the 2000 dot-com crash and, most recently, the 2008 recession. And I can count at least five recessions that have occurred in Forrester's lifetime. Through all of them, we have flowed free cash, and our business model and market position was stronger as we moved into better economic times. We are now organized into three groups. Research, which includes all of our products, which are sold at yearly contracts. Consulting, which encompasses our project consulting and our content marketing businesses and events. Our research business includes Forrester Research, Serious Decisions Research, Analytics, and Community. Carrie Johnson runs research, and you're going to be hearing from her in a few moments. In times of turbulence and uncertainty, the need for research increases. and we can see this in our current engagement and readership metrics. Change is the fuel that makes the research business go faster as we've seen often in technology shifts like the move to the internet and also the move to cloud. We convened our board of clients several weeks ago and the overriding message was that innovation was accelerating at their companies and the imperative to be more digital was front and center. You can see this starkly as you compare online retailers that are thriving and the physical retailers who are, of course, shut down. The head of digital at a large New England bank commented that the projects that he couldn't get funded before the pandemic are now moving ahead at top speed. The CEO is now paying attention. So not to get too dramatic, but we believe we're entering the golden age of research in which the laggard companies will have to ramp up their digital customer experience to compete with the leaders. Our research organization has provided invaluable insights around the pandemic and will continue to deliver high-value to clients through Forrester's breadth of coverage. We will look to drive double-digit growth from our research products moving forward in 2021. Our second business, consulting, complements our research business. Companies that use Forrester's consulting renew at 17% higher rates than the mean. Consulting continues to be a strong performer in the Forrester organization, growing revenue by 10% year-over-year in the first quarter, led by the content marketing practice. Our third business, Events, complements and showcases Forrester's research. In the past, I have called Events our Apple Store, the place where we directly interact with our clients, where they can experience our findings, ideas, and data up close and personal. Events are important venues for technology vendors to showcase their products and efficiently generate leads in new business. As I previously mentioned, 2020 will be a challenging year for events. But unlike our larger competitors who have canceled most of their events, we have quickly moved to virtual events with really surprising results. Our largest event of the year, the Forrester Serious Decision Summit, concluded today with as many attendees as we had in Austin, Texas, in May of 2019. So, yes, they are not as profitable or as revenue-producing, but the virtual events are keeping the brand and community alive. I'm very proud of our innovation and speed as we have made this pivot. In future calls, we will be analyzing the business in the three segments, research, consulting, and events. I'd like to highlight a few client wins through the close of Q1. Our largest growth deal of the quarter came from a $1.3 million enrichment with the National Oceanic and Atmospheric Administration. Our new business teams have shown surprisingly strong momentum as we enter Q2. An example of a $100,000 win was Fairview Health Services late in Q1. Growing our multi-year deals has become a key priority of our sales organization. For example, Cognizant recently signed a multi-year deal for $1.2 million. And in the quarter, in Q1, we closed 45 different global deals with Microsoft for a total of $4.5 million. As a final note, I wanted to talk about Forrester's financial position. We continue to retire debt incurred with the serious decisions acquisition. In Q1, we paid the remaining $14 million on our revolver while maintaining full access to the $75 million facility. We have $70 million in cash. In Q1, we generated $22 million in cash, and we expect to have positive cash flow for the year. So to conclude, I wanted to reiterate my earlier points. One, we will manage our way through this pandemic and recession. Two, companies are accelerating digital transformation. This is in Forrester's sweet spot. and three, the company will emerge in a stronger position. I hope that you and your families are staying healthy and well through these times. And now I'm going to pass the call over to Carrie Johnson, Forrester's Chief Research Officer. Carrie.

Thank you, George, and good afternoon, everyone. As a quick introduction to me, I'm coming up on 22 years at Forrester, where I've served nearly every role in the research organization. including 10 years as an analyst covering digital retailing. I then went on to lead research teams on the content portfolio for all of our research. I've been part of most strategic transformations of Forrester's business, and I've led many clients through them as well, pivoting Forrester's research products and services in response to customers' needs. I'd like now to build on some of George's comments about engagement with our research. Although COVID-19 has negatively impacted businesses on a global scale, the pandemic has pushed many customer-obsessed transformations and initiatives into the spotlight for our clients, from remote employee and call center activation to digital transformation accelerations. Customer obsession right now is critical to survival for firms. Here are some examples of how our research and our event products are delivering high value for clients and where we're seeing increased engagement levels. First, our research product. As George mentioned, this is truly proving to be a golden age for research. Our research teams have had a fast, coordinated response to COVID-19, publishing our first guide to pandemic planning back in early March. Our security and risk team first wrote this pandemic research 10 years ago, Our expertise and experience is very deep here. We also launched a first-of-its-kind employee experience survey that we fielded every two weeks to take the pulse of business employees worldwide as they cope with this pandemic. We've used our new digital platform as a hub to publish short-form content daily to help our clients respond thoughtfully and quickly in critical areas like leadership, business continuity, customer experience, Collaboration Tech, Virtual Care, and, yes, Virtual Events. We're demonstrating the value of research and insight embedded into our clients' operations. The results have been higher than average engagement levels with our clients. What we're finding is that with clients at home, they're needing advice on working through this uncharted territory, and they're engaging with us at record levels. Here are some details. Site visits to read our research have increased year over year and they continue to rise. COVID-19 blog posts have led to a 40% increase in blog traffic. Posts on communications and then one by George on the four phases of the pandemic have led to the highest ever views in Forrester history. Demand for our time with our analysts has also increased. The pandemic has led to an increase in requests for inquiries. which are our 30-minute calls with analysts. And client attendance at our analyst-led webinars hit a record high in April. They're up over 100%. And finally, virtual sessions with our exclusive executive communities have seen a more than 50% increase in attendance. Now onto events. Our two biggest events are in Q2. One is North American Summit, which George talked a bit about, This is the must-attend event for sales, marketing, and product professionals. And the other is CX North America in June. As George said, rather than canceling, we decided to be bold, be customer-obsessed, and we pivoted fast to virtual events with innovative and immersive experiences. North American Summit concluded today, and the results are quite positive. George mentioned we matched the in-person attendance from 2019. The virtual North America Summit proved to be an engaging experience, hosting nearly 150 livestream presentations, including keynotes by Brene Brown and also a concert series featuring Adam Levine. We had a lively marketplace that had nearly 50 paid sponsors, many of which have already renewed their spot for our 2021 events. The virtual showroom floor saw 100,000 visits from attendees. Through this virtual marketplace and also our content marketing products, we've been able to enable clients to generate pipeline and replace demand that vendors in particular are losing when they've had to cancel their own in-person events. To summarize, Forrester clients need our help as they accelerate their customer-obsessed initiatives, and they're highly engaged with us. We believe that our Herculean efforts to be by our client's side with timely, relevant, and actionable advice every day will position Forrester well in the future. With that, I'll turn the call over to Mike Doyle.