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 Ipler, Forrester's Chief Sales Officer, Mike Doyle, Forrester's Chief Financial Officer, and Scott Chenard, Forrester's Chief Accounting Officer. George will open the call. Kelly will follow George to discuss sales. Then Mike and Scott will discuss our financials. We'll then open the call to Q&A. A replay of this call will be available until March 17th, 2021. and can be accessed by dialing 855-859-2056 or 404-537-3406. Please reference the conference ID 907-9797. 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 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 risk 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 uptake 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 Colley.

Thank you for joining the call. After my overview, Kelly Hipler, Forrester's CSO, will summarize sales results and progress. Mike Doyle, our CFO, will give an in-depth financial review of Q4 in the full year. Scott Chouinard, Forrester's Chief Accounting Officer, will conclude with guidance for Q1 and for full year 2021. We will then take questions. Our remarks are in two sections. Number one, I will summarize 2020. And two, I will look ahead to our plan for 2021, in particular, the expansion of contract value. Turning first to 2020. In the fourth quarter, we beat revenue guidance by $4.6 million. and EPS by one cent. Our bookings velocity increased sequentially in Q3 and Q4 with a very strong finish in December. Client count increased in the fourth quarter. Enrichment was up from the third quarter, and agreement value increased quarter over quarter. Now, it was not the year that we had planned for, but if you had told me on March 20th that we would end with these results, I would have been quite happy, given the uncertainties of the early pandemic. Fortunately for the company and its investors, Forrester is a business that's fully productive in the virtual world. And given that the pandemic challenged companies to accelerate their technology efforts, our research gained value during the crisis. Challenging times stimulate demand for research as companies struggle to quickly adapt to new facts on the ground and new customer behavior. And I have called these times the golden age of research. as our clients turn to us for how to win and retain customers during the pandemic, how to shift their workforces to be virtual, and how to prepare themselves for a post-pandemic digital world. I would now like to give a few highlights across our three areas of business, research, consulting, and events. In research, active client readership increased year over year. Webinar attendance was up 88%. Analyst inquiries, these are the 30 to 60 minute client meetings conducted by analysts, were up 6%. So a good year in research. Our consulting business performed well in 2020. The consulting portfolio revenue grew 27% in the fourth quarter. The total economic impact consulting product grew by 38% year over year in Q4. Overall, the entire consulting portfolio grew 16% in 2020 compared to 2019, highlighting our ability to balance capacity across teams and geographies and deliver growth during economic uncertainty. As you know, all Forrester events in 2020 were delivered virtually. We did not cancel any scheduled events, and we delivered our full portfolio of 11 global forums and summits. Paid attendance at our virtual events was 14% higher than it was for our 2019 physical events, and feedback scores outpaced in-person events. In the year, there were over 200,000 views of streamed sessions. Employee attrition in the year was at historically low levels. This is a positive signal for our business in 2021 as we enter the year with the highest number of ramped sales reps and tenured analysts and consultants in our history. Forrester placed number 32 among large U.S. companies on Glassdoor's annual best places to work list, a score that will help our talent acquisition efforts in the coming year. I want to turn now to 2021. The biggest change for the year will be the company's laser focus on expanding contract value, the value of Forrester's annual recurring revenue from research. We define CV products as services that our clients use periodically over a year's time and renew on a yearly basis. In 2021, we are planning to grow CV bookings by double-digit rates. The consistent expansion of contract value is attractive to investors as it results in predictable and profitable revenue streams. In past years, we have tracked syndicated revenue and agreement value for investors. These are being replaced by the more conventional and simpler There are four components to CV growth. One, current CV is renewed at high levels. Retention of contracts forms the base for growth. Two, additional CV services are sold to existing clients. This is what we formerly referred to as enrichment. Three, new clients sign on with Forrester. And four, Forrester requires other companies adding those contracts to our portfolio And, of course, the latest example here is serious decisions. The delta between starting and ending CV is CV growth or net contract value increase. The terminology and concept is familiar to investors who follow the research and SaaS spaces. Now, how will CV growth improve the long-term prospects of Forrester and drive shareholder value? As CV grows, earnings in free cash will increase. We will invest this cash in, one, the sales and marketing engine, two, research products, and three, acquisitions. A more powerful sales engine, coupled with enhanced CV products and acquired contracts, will enable Forrester to grow CV at faster rates, generating increased cash, which we will then reinvest, continuing the cycle. In 2021, we will be introducing three new metrics for investors. One, CV growth. This is the year-over-year value of all active subscription-based contracts at a specific point in time compared to the prior year. And we'll be reporting on this quarterly. Two, wallet retention. The total contract value of current clients who were clients a year ago divided by the total contract value from the prior year. And finally, number three, CV client retention, the number of current CV clients who were clients a year ago, divided by the total number of CV clients in the prior year. In 2021, the company will take a number of actions to drive CV growth. During the year, we will roll out a new CV research service that we spent much of 2020 developing. And I'll be updating investors on this product in future calls. In addition, we will be enhancing existing research products with new value and new digital features. Forrester now has six internal and two outsourced digital development groups dedicated to creating and enhancing our CV products. We will intensify the cross-sell between the serious decisions in the Forrester client bases, accelerating wallet retention. Our serious decisions research product for B2B marketing, sales, and product management rebounded in the second half of 2020 as cross-sell increased and the full sales force was able to show the synergy between the vision and strategy research of Forrester and the execution research of Sirius. The sales force is structured to achieve the company goal of double digit CV bookings growth in 2021. Sales compensation, awards, and incentives are now focused on achieving CV targets, and we have a large number of ramped and tenured reps who are skilled at placing contracts. Our customer success organization, which is now 180 strong, gives us leverage to increase retention rates, and Kelly's going to give more color in her remarks. Forrester's consulting and events businesses are focused on leveraging their activities to increase CV growth. Clients that use consulting renew their CV services at 15% higher rates than the average client. Prospects that attend a Forrester forum or summit convert to a CV contract at 14% higher rates than average. And finally, feedback now, Forrester's venture to enable companies to measure and improve customer experience in real time is poised to grow its CV in 2021. We have developed touchless smiley boxes for the post-pandemic world, and we have quickly sold out of these devices. The new regime of cleanliness and customer feedback, which will not abate when the pandemic is over, is driving demand for real time, and we are prepared to deliver this year. We just signed the largest FeedbackNow deal ever, a multimillion dollar contract with a large government agency. And a final note on CV, because of the challenges posed by the pandemic in 2020, CV growth will ramp from low to high as we move through the year and replace contracts that were lost in 2021. Mike and Scott will give more detail in their remarks. I want to end by summarizing Forrester's financial position. In 2020, we generated over $47 million of cash from operations, allowing us to increase the cash on our balance sheet by over $22 million, while paying down over $23 million of debt. We currently have $90 million of cash and we expect to continue to generate strong cash flow in 2021. So to conclude, Forrester successfully managed its way through the pandemic in 2020. We are laser focused on growing contract value bookings by double digits in 2021 through a CV-tuned sales engine and new and improved CV products. In short, we stayed in the offense in 2020, and that mindset continues into 2021. The pandemic is not yet over, and the global economy remains uneven, so we will remain fiscally vigilant. That said, Forrester is in a strong financial position, and we are ready to resume our voyage to $1 billion in revenue. The post-pandemic world will be more digital, favoring our value proposition of helping business and technology leaders use customer obsession to accelerate growth. So I hope that you are all staying well and that your families are safe. And now I'm going to pass the call over to Kelly Hipler, Forrester's Chief Sales Officer. Kelly.

Thank you, George. I want to reiterate how much we appreciate the efforts of our global Forrester team to focus on our clients first. We've been by our client's side and on their side, helping them navigate change, innovate, and grow throughout the COVID-19 pandemic. As George said, Our clients need Forrester's insights now more than ever, and we are proud and honored to be their trusted strategic partner. Today, I want to spend a few minutes discussing two things. Number one, our strong 2020 close, and number two, our laser focus on driving double-digit contract value bookings growth in 2021. So number one, our strong 2020 close. The Forrester sales team showed tremendous resilience throughout 2020. This culminated in a strong Q4 bookings performance of 8% growth versus the prior year. Several key performance indicators improved over prior quarter, including agreement value, 12-month rolling enrichment, client count, and average ramp rep productivity. I'll highlight a few examples of our Q4 wins and renewals. Several end-user clients renewed contracts worth over $1 million, which highlights the value of and need for Forrester's research across multiple disciplines. We also continue to secure long-term contracts. One example is a three-year $7.2 million renewal with a large U.S. financial services company who's been leveraging Forrester's research to help guide its digital transformation. New business was also strong in Q4 as we closed several six-figure new business deals including a three-year deal with the IT department of a healthcare provider worth over $630,000. We saw strong performance across our sales organization, which sells to high-tech companies under $1 billion. With our sales force fully ramped, they increased the number of joint Forrester and Sirius Decisions contracts. We grew the contract value, or CV, of one of our long-standing software clients by 67%, over $270,000 by including both product lines. In addition, our pipeline conversion was 4.8 points higher than prior year, and we halved our attrition rate on quota carriers from 2019 levels to set us up for success in 2021, which brings me to number two, our laser focus on driving double-digit contract value bookings growth in 2021. As George discussed, Forrester is aligning the entire organization to drive contract value growth. That requires some changes to how we operate, and within sales and customer success specifically, we're prioritizing four imperatives to accelerate our CV growth mission. Number one, improve client retention. The single greatest lever to drive contract value is improving our client retention rates. The transformations that clients look to Forrester to help guide our multi-year journeys. we will continue to position multi-year deals as our standard model for engagement. We've also been working to automate a number of our client journeys to expedite the onboarding process so we can deliver value sooner in the customer lifecycle with Forrester. Number two, increase client acquisition. We are partnering with marketing on demand generation aligned to key buying centers across technology, marketing, customer experience, sales and product functions. Our audience-centered approach, coupled with a WinPAC program that is targeted to clients lost during the pandemic, will drive contract value by increasing our client count. Number three, enhance digital selling and engagement. We continue to leverage our tech stack across sales and customer success to effectively engage with clients and prospects. As we evolve our outreach, we continue to engage on a more personal level to support our clients' most important initiatives to help drive business results and their personal success. And finally, number four, drive ecosystem alignment. Our serious decisions research shows that companies with alignment across sales, marketing, and product grow 19% faster and are 15% more profitable. To that end, we have implemented the serious decisions demand waterfall internally. The demand waterfall is a serious decisions strategic framework that defines a shared view between marketing and sales of the lead management process and the health of new business-related activities. Waterfall analysis measures the efficiency, velocity, and throughput of leads. This insight is leveraged in marketing and sales activities to help model, measure, and improve our marketing campaigns and lead management processes. As we focus on double-digit contract value growth We will deliver on our core value proposition of helping business and technology leaders create customer-obsessed organizations that drive growth. Our own research shows that customer experience differentiation is the key to post-pandemic success, and we will continue 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.