Forrester Research, Inc.

Good afternoon, and thank you for standing by. Welcome to Forrester's first quarter 2023 conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. Please be advised that these conferences are being recorded. I would now like to turn the conference over to the Vice President of Investor Relations, Tyson Seeley. Please go ahead.

Thank you, and hello, everyone. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the first quarter of 2023. If you need a copy, you can find one on our website in the Investors section. Here with us today to discuss our results are George Colony, Forrester's Chief Executive Officer and Chairman, Chris Finn, Chief Financial Officer, and Nate Swan, Chief Sales Officer. Carrie Johnson, our Chief Product Officer, is also here with us for the Q&A section of the call. 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 risks and insurgencies that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission, and the company undertakes no obligation to publicly update any forward-looking statements whether as a result of new information, future events, or otherwise. Lastly, consistent with our previous calls, today we will be discussing our performance on an adjusted basis, which excludes items affecting comparability. While reporting on an adjusted basis is not in accordance with GAAP, we believe that reporting numbers on the adjusted basis provides a meaningful comparison and an appropriate basis for our discussion. You can find a detailed list of items excluded from these adjusted results in our press release. And with that, I'll hand it over to George.

Thank you, Tyson. I would like to welcome everyone to Forrester's first quarter investor call. As I noted in the 2022 Q4 presentation, the company is navigating through two challenges, an uncertain economy, particularly for technology, and our product transition to Forrester decisions. These two factors are having a higher than expected impact on our business, and we expect that they will persist through the remainder of the year and potentially into 2024. Accordingly, we announced a restructuring today that will downsize our headcount by 8%, and we are issuing new guidance for 2023, which Chris will take you through in a few moments. Despite these challenges, we remain confident in where Forrester is going. Our strategy to drive customer-obsessed growth for business and technology leaders is resonant with clients. We have a new product that delivers proven high value to the large companies we serve. We have over 2,600 global clients, and the brand remains well-known and respected. Business and technology have never been more complex and fast-moving. Our clients need Forrester's guidance and data more than ever as they seek to be increasingly digital and grapple with new technologies such as generative AI. Our team is prepared to weather this storm and get the company back on track to grow contract value. I would like to review a few key numbers from the first quarter. In the first quarter of 2023, revenue declined 9%, adjusted operating margins of 7% were down 4 points versus the prior year period, and EPS was $0.27, a 40% decline from the prior year. Total contract value for the quarter was $347 million, and wallet retention declined two points quarter over quarter to 92%. Given our results, the natural question is, what has changed since we last reported? And there are two factors I will call out. Number one, since the last earnings call in February, the macroeconomic environment has worsened. In addition to the ongoing banking crisis, inflation continues to remain high, and the uncertainty around the duration and depth of a potential recession has intensified. These conditions are affecting Forrester, our clients in the technology industry, and our large user clients, in particular, financial services. If I had to summarize the environment, I would characterize it as a waiting game with budgets restricted and spending sitting on the sidelines. Over the last year, the technology sector has been one of the hardest hit. We saw initial rounds of layoffs in the back half of last year, and they are continuing. Now, this directly affects us, whether it's because a key contact has moved on, overall budgets are constrained, or buying decisions are being delayed. The second factor is the transition of our research contract value over to foreshore decisions, an effort that has not come without pains. While this product has been well received, it is taking time to move our base to this new platform. As you will recall, nine months ago we made the decision to move faster on the transition based on high early adoption rates and positive client feedback. Accelerating the transition was the right decision to make even though it is causing the delay of some renewals. And this has been compounded by my first point where making a transition in a time of uncertainty We are doing two hard things simultaneously. So let's spend a few minutes digging deeper into the transition. As a result of the decision to move faster, we're seeing a slowdown in our new business as well as longer sales cycles overall. Now, this should be temporal. Under the leadership of Nate Swan, our Chief Sales Officer, we are enabling our sales force to call hiring companies and for salespeople to more precisely articulate the value of Forrester decisions. We're going to hear from Nate in a few moments. Now, given these challenges, why are we confident moving forward? First and foremost, we believe that Forrester decisions holds great promise in our effort to grow contract value at double-digit rates. The metrics around the product continue to be strong, and they are outpacing metrics for our legacy research products. At 87%, client retention for forester decisions is 13 points higher than our legacy products. Wallet retention for forester decisions remains higher than our legacy product at 93%. Its 16 discrete services will drive cross-sell. We believe wallet retention for forester decisions will ultimately run above 100%. Client engagement continues to outpace our legacy research. Clients spend 35% more time on the Forrester Decisions platform. Client scoring of our guidance and inquiry sessions, these are central features of the product, is averaging 6.6 on a 7.0 scale. And these are some of the highest client satisfaction scores we've had for any Forrester product. At the end of Q1, 44% of our CV has now moved over to Forrester Decisions. This is up 12 points from year end. We've made a good start in achieving our goal of moving two-thirds of CV to Forrester Decisions by the end of the year. And a final note on Forrester Decisions, the total economic impact team at Forrester has recently completed a TEI study of the product. 46 current clients reported that Forrester Decisions has had four impacts on their businesses. One, it increased the success rate of transformations by 25%. Two, it speeded up transformations by 50%. Three, it increased the revenue stream for new products by 4%. And four, it saved executive time. Clients report a return on investment from Forrester Decisions of 259%. This TEI study is available on the Forrester Investor Portal. The second reason that we remain confident, despite the economic moment, is that we continue to stay on offense to improve our business. And these include, one, moving our sales force and go-to-market from good to great by improving enablement, process, and sales methodology. Nate will give more detail shortly, but I wanted to report that he's been an excellent add to the team, especially given his deep prior experience in the research business. His plan for leveling up sales is simple, powerful, and market proven. Nate has used our reduction in force to get a head start on building an optimized sales structure. Two, we are engaged in continuous innovation to improve Forrester decisions and add new features to the product. This includes beta testing two new research artifacts that will be operational by the end of the second quarter. And unsurprisingly, we are investigating how we could use generative AI to make it easier for clients to access our research and data. We see this technology as a game changer for our business, unlocking higher value for our clients without requiring human intervention. Three, as I noted above with sales, we are using the restructuring to optimize research and our functional teams to put us in the best position to get the highest return from Forrester decisions. These moves include improving the client onboarding process, sunsetting non-critical products, fine-tuning marketing to drive the quality and quantity of leads, and investing in better sales technology. We want to move faster and simplify the business, and we are using the restructuring to do both. So in conclusion... We continue to expect 2023 to be a difficult year, not only for Forrester, but for the market and for the customers that we serve. Yet, we remain confident and we are pushing forward to build a CV growth engine that can generate double-digit growth as it did in 2021. Even in recession, companies must see the future, make better decisions, and execute if they're going to win, serve, and retain their customers. Forrester helps them do just that. I would now like to hand the call over to Nate Swan, Forrester's Chief Sales Officer. And following Nate's remarks, Chris Finn will give a financial update, and then we will take questions. Over to you, Nate.