Forrester Research, Inc.

Good afternoon, and thank you for standing by. Welcome to Forrester's fourth quarter and full year 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 today's conference is being recorded. I would now like to turn the conference over to Vice President of Corporate Development and Investor Relations, Ed Bryce-Morris. Please go ahead.

Thank you, and hello, everybody. Thanks for joining today's call. Earlier this afternoon, we issued our press release for the fourth quarter and full year 2023. If you need a copy, you can find one on our website in the investor section. Here with us today to discuss our results are George Colony, Forrester's chief executive officer and chairman, Nate Swan, chief sales officer, and Chris Finn, chief financial officer. Carrie Johnson, our chief product officer, is also 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 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 certainties 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 a result of new information, future events, or otherwise. Lastly, consistent with our previous calls, today we will be discussing our performance on an unadjusted basis, which excludes items affecting comparability. While reporting on an unadjusted basis is not in accordance with GAAP, we believe that reporting numbers on this adjusted basis provides meaningful comparison and an appropriate basis for our discussion. You will find a detailed list of items excluded for these adjusted results in our press release. And with that, I'll hand it over to George.

Thank you for joining Forrester's Q4 and full-year earnings call. Joining me today are Forrester's Chief Sales Officer, Nate Swan, and our Chief Financial Officer, Chris Finn. Following my remarks, Nate and Chris will provide sales and financial updates. 2023 was the penultimate year of our Forrester decisions transition. This change, coupled with the uncertain macroeconomic environment and technology market unevenness, contributed to a challenging year for the company, but one that we navigated and managed. In my remarks, I'd like to cover four key themes. Number one, the progress we made in 2023. Two, our Q4 and 2023 fiscal year financial performance. Three, product and technology enhancements. And finally, number four, 2024 guidance and the road ahead. We entered 2024 having achieved a major milestone in our product transition. As I've stated in previous calls, our North Star for 2023 was migrating two-thirds of our contract value, or CV, into the Forrester Decisions platform. I'm happy to report that as of January 1, 2024, we have hit that goal. While our short-term performance has certainly been impacted by this journey, we are progressing on our long-term goal of consistent contract value growth based on the Forrester Decisions platform. With the exception of a small number of accounts, we will complete the final transitionary phase of this change in 2024. In 2023, we made two other strategic moves that are difficult in the short term but will serve us well in future years. The first was sharpening the target audience for Forrester decisions. The product was built to primarily serve C-level executives and their teams in large user organizations, and our sales force is successfully pivoting to these targets. Selling higher and focusing on user companies with more than $1 billion of revenue allows us to land and expand across functions, ultimately making our business more resilient and scalable. The second move was the refocusing of consulting and events to help drive contract value. These non-CV businesses are becoming a smaller fraction of our overall revenue mix. In 2023, 70% of total revenue was in research services, and we expect this share to increase in future years. Our contract value portfolio is more predictable, scalable, and profitable, so over time, the changing mix will improve the overall quality of our business. Turning now to our fourth quarter and full-year performance. CV declined 4% in 2023. While we are not pleased with our CV growth, we did exceed consensus estimates on revenue for both Q4 and the full year, and we hit the full year consensus for operating margin and EPS. In another bright spot, Q4 demonstrated the ongoing stabilization of our non-CV businesses, led by content marketing. Our events business saw an annual growth in attendance, with a record number of C-level executives attending our Q4 events. In research, we saw Forrester Decisions' wallet retention dip slightly in Q4, down to 87%. Expanding wallet retention is one of our top priorities in 2024. Nate and Chris will provide more detail on the plans to increase renewals and enrichment in the year. We continue to enhance and improve our research power platform, Forrester Decisions. To reiterate my remarks in previous calls, the product is successfully delivering on its value proposition of enabling business and technology executives to align, plan, and execute their most pressing initiatives to accelerate growth. And as an example, I was in Amsterdam in December visiting with the chief marketing officer of a major European B2B healthcare company. and he recounted how he has used our research to build the demand marketing engine of his company. He and team have used our demand marketing waterfall model to increase generated leads, convert leads to sales opportunities, and ultimately convert opportunities into closed one business. In addition, he has used our B2B marketing models and frameworks to structure the company's marketing group and align it more closely with the sales and product organizations. We remain on our client's side and by their side. In 2023 alone, we conducted approximately 15,000 guidance sessions with clients. These sessions are now more precisely focused as we debuted what we call client initiatives and outcomes in 2023. When a Forrester Decisions client onboards, we document their critical priorities and what business objectives they are seeking to achieve from those priorities. These initiatives and outcomes become the fulcrum of the Forrester relationship, laser focusing our customer success managers, analysts, and consultants on what our clients are trying to get done. Over 85% of our Forrester Decisions clients now work with us this way. Our goal is to reach 95% by year end. Improvements to our research platform are driven by our Voice of the Client program, a systematic means of testing proposed product changes with our customers. In 2023, this effort yielded 6,500 client inputs, originating from survey data, user testing studies, and qualitative interviews. Two prominent new product features that derive from this system were our weekly client-only Forrester takes and the rollout of a new research theme focused on high-performance IT. This idea helps technology leaders better match their information technology with their business goals. Now, unsurprisingly, GenAI was a major focus of our research in 2023, as we published more than 80 reports on the topic. Our analysts continued to look past the hype and noise in the market, providing clients with practical GenAI guidance. In 2024, we will launch new Forrester waves focused in the generative AI market. As I stated on the Q3 conference call, Forrester's client-facing generative AI tool, Izola, represents the most significant step forward in delivering content to our clients since we launched our website 30 years ago. We expanded the scope of our client beta in Q4 and plan a general release in Q1 for all Forrester Decisions clients. Clients subscribe by Zola as useful and fast and appreciate the tool's direct link to relevant research. While Izola is focused on our clients, we are developing five other Gen AI tools that are built to improve internal efficiency. I now look to turn to our 2024 guidance. Given the bookings challenges we encountered in 2023, we anticipate declining revenue in the upcoming year. We will continue to be diligent in controlling costs to maintain margins, laying a foundation for sustainable growth in 2025. Accordingly, the company reduced its workforce today by 3%, a move that we do not take lightly but which is necessary to keep expenses aligned with revenue. Chris will provide more details on 2024 guidance in his remarks. So to summarize, I believe that 2024 will be remembered as an inflection point for Forrester as we complete our product migration and our go-to-market strategy overhaul. Technology has never been more challenging for large companies to manage, and a new tech era is dawning, driven by generative artificial intelligence. Forrester was built for just these types of moments. When new technology arrives, our clients look to us to help them understand the future, make complex decisions, operate efficiently, and win and serve their customers in new ways. I will now turn the call over to Nate Swan, our Chief Sales Officer. Nate.