Forrester Research, Inc.

Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO, Kelly Hipler, Forrester's Chief Sales Officer, and Mike Doyle, Forrester's Chief Financial Officer. George will open the call. Kelly will follow George to discuss sales, and Mike Doyle will discuss our financials. Carrie Johnson, Forrester's Chief Research Officer, will then join the presenters, and we will then open the call to Q&A. A replay of this call will be available until August 30, 2020 and can be accessed by dialing 855-859-2056 or 404-537-3406. Please reference the conference ID 742-8859. Before we begin, I'd like to remind you that this call will contain forward-looking statements. within the meanings 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 involves 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, future events, or otherwise. I'll now turn the call over to George Colony.

Thank you for joining the Forrester Second Quarter 2020 Investor Call. I will give a summary of the quarter and then Kelly Hipler, Forrester's Chief Sales Officer, will update on tables. CFO Mike Doyle will conclude with a financial review of the quarter, and then Kelly, Mike, and I will be joined by Carrie Johnson, Chief Research Officer, for questions and answers. The pandemic is creating unprecedented challenges for Forrester and its clients. That said, we are moving forward with a definitive mindset. Number one, as a company, we will financially manage our way through these times, whatever they may bring. Two, The pandemic is accelerating digital transformation across all industries, and this is directly in Forrester's strike zone. 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 engines. In Q2, we exceeded guidance for revenue and earnings per share, beating revenue by $5 million and EPS by $0.31. Much of this performed The pandemic is opening up what I call the golden age of research. In times of uncertainty, large organizations historically turned to research to help them find new ways of working, new tactics, new models, and reformulated strategies. We are seeing increased engagement with our research, led by our reports on pandemic management, the future of work, digital execution, and the alignment of sales, marketing, and product. In June, readership increased 13% year-over-year, and for the full second quarter, readership was up 7% over Q2 of 2019. A note I received from a client last week sort of summed up the moment, and I will now quote from her. She said, I have referred to Forrester over the years in my prior roles at two large European consumer goods firms, and I now need Forrester more than ever as I embark on another digital transformation journey for a global US-based CPG company. Forrester's research leads our portfolio of contract value businesses, products that are continually used by our clients through the year and then renewed on an annual basis. We have recently enhanced the research product to include data forecasts and insights. And this gives clients now the ability to access more than 50 market-leading data forecasts covering consumer trends, digital marketing, and e-commerce. These forecasts provide valuable data insights to help clients make strategic planning decisions. And examples of these forecasts include our COVID-19 Retail Scenario Planner. That's a global forecast. and the 2020 advertising forecast that's U.S. only. In addition, we rolled out enhancements to our research portal in the second quarter. A new personalized homepage moves clients to the most relevant insights based on user preferences and activity. In our research portfolio, the Serious Decisions product line showed improved progress relative to Q1. Companies are using the service to sharpen demand marketing and sales operation during the pandemic. is fortunate to grow its contract value businesses in 2021. Research will lead that effort. Our consulting business performed well in the second quarter. Our reprints business had a record quarter as vendors sought new ways of generating leads. Reprints grew 10% year over year. Our content marketing business grew 11% year over year, again, driven by the need of vendors to engage their customers digitally. and finally certification group 68% year over year. Companies are using this time of working from home to increase the aptitude and skills of employees, particularly in customer experience in B2B marketing. Our third business line, events, was an important part of the second quarter story. Instead of canceling or delaying our events as our competitors did, we pivoted quickly to paid virtual events. The Forrester Serious Decisions North America Summit attendance equaled 2019 levels. We had more than 115,000 views of our sessions, and by the end of the summit, we had resigned 35% of our sponsors for Summit 2021. CX North America had 57% more attendees than in 2019 and 22% more than the capacity that the physical venue would have allowed. While revenue was down considerably from 2019 due to reduced sponsor revenue, both CX North America and the North American Summit exceeded profit expectations. And perhaps most surprising, attendee scores for the event showed strong performance across the value, content, experience, and keynote speakers, averaging a score of 4.1 out of 5, and these are records for the company. We will run our second half events virtually. CXAsia and SummitAsia will feature sessions with simultaneous Mandarin translation, a way to expand our audience into mainland China in a time of restricted travel. So to conclude on product performance, our research content is relevant and it's driving higher client engagement. The consulting business is generating digital content, which is helping our vendor clients drive leads. And finally, we are innovating in events, attracting record audiences with relevant sessions and content. Going Virtual has enabled the company to keep its flagship summit and forum brands activated and alive in 2020, and that sets the stage for extended events in 2021. I'd like to highlight a few client wins from the second quarter. The first is a large European bank looking to drive customer centricity across its organization, and they're going to be putting 1,000 of their employees through Forrester's CX certifications. The second client win, a large wealth management company in the U.S., is using Forrester to build and implement a customer segmentation program. We assembled a $250,000 multi-product solution across research, consulting, and events for this client. Turning now to Forrester's financial position, we continue to retire debt incurred with the Serious Decisions acquisition. We have $68 million in cash. Year to date, we have generated $25 million in cash, and we expect to have positive cash flow for the year. While we are financially strong, we are still managing through widespread uncertainty in the worldwide economy. We are being directly impacted by three factors. One, revenue in our events business has been greatly reduced due to travel restrictions. Two, 10% of Forrester's clients are in industries that are directly impacted by the pandemic. Hotel, Airline, Retail, and Automotive, and finally, General Macroeconomic Headwinds. So, to conclude, I wanted to reiterate my earlier points. We will find a way to manage our way through this recession. Companies are accelerating digital transformation, and this is Inforager's sweet spot, and we will come out of this recession in a stronger position. In particular, we will look to expand our contract value in 2021. None of this would be possible without the amazing people of Forrester who have courageously adapted to working at home, juggling family care and their jobs, and staying client-connected using every channel available. I'm very glad to report that our tech stack has been phenomenal, enabling all of us to work seamlessly and effectively. We all feel very fortunate that we can do our jobs even though we are all working from home. So I hope that you are all staying well and that your families are safe. I'm now going to pass the call over to Kelly Hipler, Forrester's Chief Seals, Officer Kelly.

Thank you, George. Q2 was one of the most challenging quarters for the Forrester sales organization and company history, given the macroeconomic conditions stemming from the COVID-19 pandemic. With that said, we performed better than forecasted with a relatively strong close in June. I want to reiterate George's sentiments in expressing our gratitude to Forresterites across the globe who have continued to put our clients first, and have focused on helping them to navigate in these uncertain times. Not unexpectedly, we're seeing increased selling challenges in industries like retail, travel and hospitality that are the hardest hit by the pandemic. Smaller high tech clients are also struggling financially. In addition to these industries in the US, we've seen some softness in some geographies like India, while others including China, Singapore, Hong Kong, UK and Ireland, and the Nordics are all performing in line with expectations. Given this challenging environment, we pivoted quickly in the following four ways that contributed to our relatively stronger close in Q2. Number one, we shifted focus to strongest market opportunities. In late March, we pivoted to shift new business and cross-sell focus, resources and headcount to markets and industries that are less impacted. High-tech and government are two examples that are performing stronger than other industries. We helped one of our premier high-tech clients build a lead generation program using digital Forrester and serious decisions content to replace pipeline that they had lost due to the cancellation of a major industry event. We continue to partner with multiple government agencies to assist with the modernization of their IT stack. In Q2, we want a consulting project to help support one of our government clients with its cybersecurity strategy. Number two, move to all virtual events. George has addressed the great success we had with moving our events to all virtual. Not only did this enable us to run profitable events in Q2, but it also gave us a platform to increase client engagement during these unprecedented times. Events play a central role in strengthening the overall relationship that clients have with Forrester. Our Q2 virtual events gave us the opportunity to connect with clients and showcase our thought leadership with positive results. Our events are accelerating pipeline building and helping to secure renewals. Number three, conducted more sales training. During Q2, we took advantage of the fact that our sales teams were not traveling to provide more training. We hosted best practice sessions twice a week for both new and existing sales team members. The result is that our teams are increasingly more sophisticated in their ability to demonstrate how the Forrester and Ceres Decisions portfolios deliver value to serve client needs as demonstrated by an increase in the number of deals cross-sold in Q2. And then finally, number four, we drank our own champagne. We have been making a concerted effort to leverage our research and frameworks to improve alignment across our organization. Aligned with our own models, Forrester has shifted to become more audience-centric and has identified a number of key buying centers of personas that we serve. This has driven tighter alignment across sales, product, and marketing, and it will make it easier to enable our sales force and to ramp new hires as we move forward. We have just conducted the Series Decision Sales Activity Study which will provide insights into how we can make our sellers more productive and efficient. We are also leveraging the serious decisions sales planning methodology as we begin to turn our attention to 2021 and have built a bottoms-up capacity model and are calculating lifetime value and client acquisition costs to guide us as we make future investments. Looking ahead to the remainder of the year, our key priority is client retention and protecting the base. Our core value proposition of helping business and technology leaders create customer-obsessed organizations that drive growth continues to resonate in this environment. Our own research shows that customer experience differentiation is the key to post-pandemic success and we are helping our clients to build strategies and execute programs to differentiate their brands based on customer experience. With that, I will turn the call over to Mike Doyle.