Forrester Research Inc (FORR) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second quarter 2011 Forrester Research Incorporated earnings conference call. My name is Lanisia, and I will be your coordinator today. (Operator Instructions). I would now like to turn the call over to Ms. Karyl Levinson, Vice President of Corporate Communications. Please proceed.

Thank you, and good morning. Thank you for joining us on today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO, Charles Rutstein, Forrester's Chief Operating Officer, and Mike Doyle, Forrester's Chief Financial Officer.

George will open the call, Mike will follow George to discuss our financials, we will then open the call to Q&A. A replay of this call will be available until August 4th, 2011, and can be accessed by dialing 888-286-8010 or, internationally, 617-801-6888. Please reference the passcode 52058322.

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," "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 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 hand the call over to George Colony.

Thanks, Karyl, and I'd like to welcome everyone to the Forrester conference call. I'll cover five topics this morning, number one, progress on Forrester's three business imperatives, two, the health and future of the tech economy, three, an update on our performance in social media, four, the Company's springboard acquisition, and finally, five, a short discussion on the strategy underlying the three Forrester client groups.

I'd like to start by reviewing the three long-term operational priorities of the Company, and they are, one, moving the role-based strategy forward, two, expanding the sales force, and three, increasing the percentage of Forrester's business that is syndicated.

Looking first at the Company's role-based strategy, roles continue to lead the Company toward positive results. As Mike will tell you in a few moments, the Company has achieved historically high renewal rates, and deferred revenue grew 20%. We believe these numbers are driven by high relevancy, a product of the role strategy.

Work continues on our new web and mobile applications that will bring an improved customer experience for our clients in their roles, and, finally, the Customer Experience Professional Forum became the largest event in our portfolio, with 1300 people on-site. The high ratings, high interest and quality of sponsorship once again proved the power of going to market by roles.

Roles per account increased only slightly from 3.0 to 3.1 in the quarter. In our client accounts, there remains much opportunity for Forrester to tap.

Turning now to the continued expansion of our salesforce, each year, the Company seeks to expand the salesforce by 15% to 20%. In Q2, we grew the salesforce 5%. Year-to-date, sales has grown 16%, keeping us on track to meet or exceed our goal. We plan to continue hiring in Q3.

Sales attrition continues to run at historically low levels, continuing the pace that this company achieved in 2010.

Forrester's third business imperative is to increase the percentage of our business that is syndicated, and we call this metric Q. Our long-term goal is that 70% of our business will be syndicated on a yearly basis. In Q2, we set a target of 63% Q. We exceeded that goal this quarter, and are on track to meet our year-long Q goal of 68%. We will continue to move the needle on syndicated as we climb toward our long-term target.

I would like to talk for a few moments now about the tech economy. The Company was ready to publish the mid-2011 Global IT Market outlook this week until the deadlock over raising the federal debt ceiling caused Forrester's tech economist, Andy Bartels, to revise our tech market forecasts downward.

He is still reworking the numbers, but his preliminary estimates are that the US IT market, this does not include telecom services, will grow by 6% in 2011, down from his earlier forecast of 7.8%. Because of the dollar's weakness, the global IT market measured in US dollars will grow by about 9% in 2011, almost 2 percentage points slower than our June, 2011 forecast.

The fastest-growing IT markets by region are Eastern Europe, the Middle East, Africa, and Latin America, growing by over 12% in US dollars and around 8% in local currencies. The fastest-growing tech segments of the global IT market in 2011 will be software, IT consulting, and systems integration services. Computer equipment and communications equipment will grow globally by 8% in US dollars.

I would like to talk next about how the Company is using social media to serve existing clients and reach prospective customers. In the past few quarters, I have been updating you on our 18 role-focused communities, the places where our clients can digitally congregate and converse with our analysts and with each other.

These communities are valuable for two reasons. Number one, they bring our clients together, and give them another outlet to share their personal, role-focused expertise, and two, they help inform our own research by keeping our analysts in continuous touch with clients and practitioners, again, improving relevancy.

These communities grew 20% in the second quarter, bringing total membership to 27,000. These members started 446 discussions in the quarter, and posted 1316 comments. Our social outlet, the Forrester blog platform, continues to drive significant activity as well. Across all roles, our blogs generated 489,000 views in Q2.

I want to update you on our recent acquisition. On May 12th, Forrester acquired Springboard Research, a company that provides analysis of technology markets in Asia-Pacific. Springboard is based in Delhi, Singapore, and Beijing. Springboard expands the breadth of our research coverage, particularly for our clients in the vendor strategy role. The data and research that Springboard produces will help strategists plan, market and sell their technologies into the emerging markets of Asia and, to a lesser extent, Africa and the Middle East.

Indeed, the day we announced the deal, I noticed three Springboard reports on Forrester.com, "Cloud Computing in South Africa," "Cloud Computing in Egypt," and "Cloud Computing in Turkey."

As you all know, the art of the deal is not in the deal, it's in the integration. Two senior Forrester executives are working in Asia to oversee the integration, Ellen Daley in Delhi, and Ian Taylor in Singapore. Ellen and Ian have been quick to comment on the curiosity, imagination and hard work of the Springboard team.

In particular, they have noted that the DNAs of the two companies are highly aligned, and this is often a precursor of a successful integration effort. Because Springboard is adding a valuable new stream of research to the technology industry roles, pricing for research for those roles will increase 10% on average. Now that Forrester has a platform in Asia, the Company will look for opportunities to shift work to these lower-cost locations when appropriate.

I thought that I would conclude today by giving a very brief toe-dip into the opportunities of the three client groups, IT, marketing and strategy, and technology/industry. Each of the client groups address discrete sets of roles. The IT client group is responsible for the eight primary roles that operate information technology in large companies. Forrester differentiates through our focus on business technology, a more customer-centric and business-centric approach to technology management.

We bring success to our clients by helping them rigorously apply technology to their business. The marketing and strategy client group builds success for executives in seven roles. These executives in large companies are challenged by new entrants, new technologies, and a highly dynamic, continuously-morphing customer environment.

From Groupon to Google+ to Shopkick to gamification, there have never been so many new variables to sort through for these roles. This high rate of change is creating new opportunities at all levels for M&S.

Finally, the technology/industry client group, home to the four primary roles found in technology vendors, may have the most interesting opportunity. Obviously, technology executives want to influence Forrester to say good things about their companies, but with the coming of the role-based strategy, Forrester now works to make the tech executives themselves more effective in their jobs.

So, to conclude, despite economic turmoil and Washington's best efforts to roil the bond markets, Forrester has executed well in the first half of the year, and we are on-track to achieve our goals for 2011. Every day, week, month and quarter, we push on the role strategy, forever perfecting, innovating and honing our research, boards, events, consulting and data, to inspire our clients and guide them to make good decisions.

Our renewal rates and fast deferred-revenue growth are evidence that Forrester's role efforts are paying off.

Thank you very much. I now want to pass the call over to Mike Doyle. Mike?

Thanks, George. I will now begin my review of financial performance for Forrester's second quarter results, the balance sheet at June 30th, our second quarter metrics, and the outlook for the third quarter and full-year 2011. Please note that the income statement numbers I'm reporting are pro forma, and exclude the following items, amortization of intangibles, stock-based compensation expense, duplicate lease costs, acquisition and integration costs, and net gains from investments.

Also, we continue to utilize an effective tax rate at 40% for pro forma purposes. The actual effective tax rate for the second quarter of 2011 is approximately 43%.

For the second quarter, Forrester exceeded its quarterly guidance for pro forma operating margin and EPS, and was at the upper end of its revenue guidance. As with prior quarters, we continue to see strong financial performance, and key customer metric remain at historical highs.

In addition, as George mentioned in his comments, we completed the acquisition of Springboard Research. This is a strategically important investment for Singapore, giving us a presence in Singapore and China, and expanding our presence in India. In addition, we added a talented group of people to the Forrester team.

Now, let me turn to a more detailed review of our second-quarter results. Forrester's second-quarter revenue increased 14% to $73.5 million from $64.7 million in the second quarter of last year. Given our deferred revenue recognition model, we are continuing to see the positive revenue effects of our strong bookings performance in 2010. In addition, our events performance continues to remain strong.

Second-quarter research services revenue increased 16% to $47.3 million from $40.8 million last year. Research services revenue represented 64% of total revenue for the quarter, a 1 point increase versus year-ago.

Second-quarter advisory services and other revenue increased 9% to $26.1 million from $23.9 million in the second quarter of 2010, and represented 36% of total revenue for the quarter.

The international revenue mix was 29% for the period ending June 30th, 2011, which is up 2% versus prior-year.

Operating expenses for the second quarter were $61 million, up 17% from $52.2 million in the second quarter of 2010 as a result of higher compensations due to increased headcount, primarily in research and sales, and higher commission expenses due to increased sales. Total company headcount increased by 203, or 20% as of June 30th, 2011, compared to the year-ago period. Included in the 20% growth are 50 employees from Springboard Research, most of which are research-focused.

Operating income was $12.4 million, or 16.9% of revenue, compared with $12.5 million, or 19.3% of revenue in the second quarter of 2010. As planned, we are showing margin compression in the first half of 2011, as we invested heavily in our research and sales workforce in the second half of 2010 and into 2011. Our full-year guidance reflects year-over-year margin improvement in the second half of 2011.

Other income for the quarter was $4000, down from $1.1 million of income in the second quarter of 2010. The decrease is primarily due to lower interest income, reflecting lower global interest rates as well as a net foreign exchange loss associated with inter-company payables and receivables.

The interest rate environment continues to be challenging, as global interest rates remain at all-time low levels. We continue to maintain a policy of investing our cash in safe investments, and many of the investment vehicles we utilized in the past, like state and municipal tax-free bonds, no longer meet our investment criteria.

The impact of lower interest rates and foreign exchange losses year-over-year is approximately $0.03 per share. Net income for the second quarter was $7.5 million, and earnings per share was $0.32 on diluted weighted average shares outstanding of $23.2 million compared with net income of $8.2 million and earnings per share of $0.35 on $23.1 million diluted weighted average shares outstanding in the second quarter of last year.

I would now like to take you through the activity behind our revenue and review the results for each of our products, starting with research. In the second quarter, we added 401 new research documents. The top three research roles are technology marketing professional, with 5883 members, market insights professional, with 5254 members, and enterprise architecture professionals, with 4144 members.

We hosted 64 teleconferences in the second quarter, with a total attendance of 2597. Forrester Leadership Boards, our peer offering for seniors executives, continues to improve, achieving year-over-year revenue growth of 16% in the second quarter. The IT leadership boards now have a total of 1022 members, the technology industry boards now have a total membership of 306, and finally, the marketing and strategy boards have a total membership 516. At the end of the second quarter, the Forrester Leadership Boards had 1844 members, up 12% from June 30th, 2010, and in our data business, we continue to add and renew an impressive list of clients, including the addition of 23 new [1B+] companies in the second quarter, including Coca-Cola, Visa, Sharp Electronics, PriceWaterhouseCoopers, Aetna, Novartis, and the New York Times.

Consulting revenue for the second quarter of 2011 grew 6% compared to the year-ago period. Slower growth in consulting reflects our continued focus on growing our syndicated research business.

In events, our second-quarter events business continued to strengthen, due to strong attendee sales, and has shown year-over-year growth since early last year. The second quarter is typically one of the larger quarters for our event business. In the second quarter of 2011, we hosted two IT role-based events, the IT Forum in North America, and the EMEA and two M&S role-based events, Marketing Forum North America and Customer Experience Forum North America, which had record levels of attendance as our largest event so far this year.

In the third quarter of 2011, we are hosting three IT role-based events, the Application Development and Delivery Forum North America, the Business Process Forum North America, and Content and Collaboration Forum North America. Additionally, we are hosting the CIO, CMO Forum, a cross-functional event from our IT and M&S role offerance.

I will now review Forrester's second quarter metrics to provide more perspective on the operating results for the quarter. Agreement value. This represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized or has yet to be recognized, and was $208 million at June 30th, 2011, an increase of 10% from the second quarter of 2010.

At June 30th, 2011, Forrester's retention rate for client companies was 81%, an increase of 1 point from March 31, 2011, and our dollar retention rate during the same time period was 91%, which is in line with the previous quarter. Both metrics remain at all-time highs.

Our enrichment rate was 103% for the period ending June 30th, 2011, which is also in line with March 31, 2011. We calculate client and dollar retention rates and enrichment rates on a rolling twelve-month basis due to the fluctuations which can occur between quarters with deals that close early or slip into the next quarter. The rolling twelve-month terminology captures the proper trend information.

At the end of the second quarter, our total for client companies was 2647, up 2% from March 31, 2011, and up 5% versus the same quarter last year. Client count, unlike our retention and enrichment metrics, is a point-in-time metric at the end of each quarter. As of June 30th, 2011, there are 3.1 roles per client, which is a slight increase compared to the first quarter of 2011.

For headcount at the end of the second quarter, Forrester had a total staff of 1211, up from 1120 at March 31, 2011, as we continue to invest in our sales and research staffs.

Current headcount includes a research staff of 447, which reflects the addition of 38 from our Springboard Research acquisition, and a sales staff of 437, which reflects a 5% increase over the sales headcount last quarter and a 16% increase over our sales headcount in December 31 of 2010.

Turning to Forrester's six-month results, total revenue for the six-month period ending June 30th, 2011, increased 12% to $139.2 million from $123.8 million last year.

Research services revenue as of June 30th increased by $11.7 million, or 15%, to $91.9 million from $80.2 million last year. Research services represented 66% of total, year-to-date revenue.

Year-to-date advisory services increased $3.6 million or 8% to $47.3 million from $43.7 million for the same period last year, again, reflecting a continued focusing on growing our syndicated research business at faster rates.

Operating income for the six-month period was $20.6 million, or 14.8% of revenue compared with operating income of $21.9 million, or 17% of revenue for the first six months of 2010.

Net income for the six-month period ending June 30th, 2011 was $12.3 million, compared to $14.5 million last year. Earnings per share was $0.53 on diluted weighted average shares outstanding of 23.2 million compared with $0.63 and 23 million weighted average shares outstanding last year.

I would now like to review the balance sheet. Our total cash in marketable securities at June 30th worth $227.6 million, up $11.5 million from our year-end 2010 balances. We generated $38.1 million in cash from operations during the first six months of 2011, which is up $5.8 million, or 18%, from prior-year.

We spent approximately $7 million on the acquisition of Springboard Research and other activities. We held back approximately $2 million of the purchase price for retention and general indemnities. We received $6.4 million in cash from options exercised and the employee stock purchase plan in the first six months of the year.

Now, during the first six months of 2011, if we repurchase 371,000 shares at a total cost of $13.4 million versus $5 million in the first six months of 2010. Accounts receivable at June 30th, 2011, was $47.7 million compared to $39.8 million as of June 30th, 2010.

Our day sales outstanding at June 30th, 2011, was 59 days, up from 56 days at June 30th, 2010, and accounts receivable over 90 days was 5% at June 30th, 2011, down from 8% in June 30th of 2010.

Our capital spending for the second quarter of 2011 was $15.4 million, compared to $1 million during the second quarter of 2010. Capital spending for the first six months of 2011 was approximately $26.1 million versus $2.4 million in the first six months of 2010.

This increase primarily reflects investments in leasehold improvements associated with office relocations, in particular, our new headquarters building in Cambridge. During the second quarter of 2011, we completed the consolidation of our two California offices, and continue the build out of our new corporate headquarters in Cambridge.

The Cambridge project will be completed during the third quarter of this year, and will be the last of the four major office relocations we've undergone since last summer.

These moves will increase our office capacity by 60%, and give us adequate space for future growth.

Deferred revenue at June 30th, 2011, was $130.4 million, up 20% over June 30th, 2010. Deferred revenue plus future AR, a key indicator of future performance, grew 20% year-over-year. Our future AR balances are amounts to be invoiced in the future for clients who have multi-year deals or scheduled payment terms. The strong year-over-year increase reflects continued positive momentum in our business.

The last topic I'd like to cover today is our business outlook for the third quarter and full-year 2011. In summary, we had a very strong quarter. The acquisition of Springboard Research, along with the strong sales performance and continued expense-management discipline during the first half of 2010 allowed us to exceed pro forma operating margin and EPS guidance and perform at the upper end of our revenue guidance. In addition, performances on our key customer retention and enrichment metrics remain strong, indicating there is a strong demand for our products and services, despite an uncertain and sluggish economy.

Our balance sheet is in excellent shape, with cash flow up 18% year-over-year, allowing us to be opportunistic in this market to enhance shareholder value. Deferred revenue, a key indicator of future performance, was up 20%.

We will continue to invest in our infrastructure, including customer-facing and sales-enabling technology, as well as completing the buildout of our new headquarters in Cambridge. These investments will enable greater customer interaction and improved client service, as well as give us a significant capacity to grow.

As I mentioned in our first quarter call, our investment in office space represented-- represents a significant capital (inaudible) for 2010 and 2011, and our related rent and depreciation costs will increase.

However, we have significantly increased our capacity for growth. While these investments compress margin in the near-term, our operating leverage, excluding rent and depreciation, is increasing and will continue to increase. As we move forward to 2012 and beyond, this will accelerate as rent and depreciation level off in 2013.

As a reminder, our guidance excludes the following, amortization of intangible assets, which we expect to be approximately $700,000 for the third quarter, and approximately $2.6 million for full-year 2011, stock-based compensation expense of $1.2 million to $1.3 million for the third quarter, and approximately $4 million to $4.3 million for the full year of 2011, duplicate lease costs of approximately $900,000 for the third quarter of 2011 and approximately $3.9 million for the full-year 2011.

Duplicate lease costs for 2011 primarily represent a non-cash accounting charge for the time period that we have access to our new Cambridge headquarters for construction purposes up until the time that we occupy the facility for operations.

Acquisition and integration costs of $200,000 to $300,000 related to the acquisition of Springboard Research for the third quarter of 2011, and approximately $1.1 million to $1.3 million for the full year of 2011, and investment gains and losses.

For the third quarter 2011, we are aiming to achieve total revenues of approximately $69 million to $72 million. This range reflects a 15% to 20% improvement versus prior year. Pro forma operating margins in the range of 13.5% to 15.5%, pro forma income tax rates of 40%, and pro forma diluted earnings per share of approximately $0.24 to $0.28.

As a reminder, we typically see revenue decline from our second to third quarter as our advisory revenue declines, reflecting fewer scheduled events and reduced advisory activity. This is a normal trend for our business.

At this time, we are reiterating our pro forma full-year guidance, which was revised in May after our acquisition of Springboard Research. Total revenues of approximately $285 million to $291 million, this reflects an increase of between 14% and 16% versus prior-year. Pro forma operating margin of 15.5% to 16.5%. Other income net of foreign exchange losses to be approximately break-even.

Pro forma income tax rate of 40% and pro forma diluted earnings per share of $1.18 to $1.24. We provided guidance on a GAAP basis for the third quarter and full year in our press release and 8-K filed this morning.

Thanks very much, and I would now ask Charles Rutstein, Forrester's Chief Operating Officer, to join George and me for the Q&A portion of the call.

Operator?

(Operator Instructions). And the first question comes from the line of Dan Leben. Please go ahead.

Good morning. This is Mig Dobre for Dan this morning. Thank you for taking my question. I've got a couple of questions. First, on agreement value. I guess I'm looking at your guys's guidance, and it seems to me like it's implying research revenues for fiscal 2011 to be somewhere around $195 million for the year, and that would be about a 15% to 16% year-over-year growth there.

Can you sort of help us reconcile the high single-digit growth in agreement value on a year-over-year basis with research revenues maybe growing in the mid-to-high teens?

Well, Mig, it's Mike. I mean, my view -- my preference is still -- I focus more on deferred revenue, I think that's a better barometer for our business. There, you're looking at deferred revenue growth of 20% in the quarter. Agreement value tends not to track as closely, there's a whole bunch of things just -- partly because it's a point in time, and it captures full values, so I -- of agreements, whether or not it has been recognized in revenue yet or to be recognized, so --

My preference is deferred revenue, honestly, and I think that's a better indicator, and I think there is the relationship between what we're doing and what our numbers are from a research standpoint, it is more consistent.

Okay, then, switching to the advisory side of the business, can you give us a sense, and I don't know if I missed this in your comments, how the events business has performed on a year-over-year basis?

We didn't break out events specifically. I can tell you it has had very healthy growth, year-over-year. We typically have not broken that out on a percentage basis, but I would say that it is running at a slightly faster pace year-over-year than our consulting basis on a percentage basis.

That said, it's a smaller number, right? So, events typically runs about 5% of our total revenue, plus or minus.

It's been a good year for events.

Okay, great, thanks. Then the last one for me here is, can you provide any comments about the selling environment in Europe? I don't know with all the uncertainties over there if you are seeing any change in customer behavior?

Hey, Mig, it's Charles. We saw, within the quarter, I would say a mixed story coming out of Europe. We had some customer segments being very strong, in fact, stronger than they have been in a couple of years over there. Other customer segments were weaker, and I say customer segments because it was not geographically based, that is, within any particular country in Europe, sometimes we had piece of the business very strong and another weaker.

Could you give us a hint for perhaps some areas of particular strength and weakness?

I'd say the strongest piece of the business was in IT, in our IT business, so for whatever reason, we saw strength there, but one quarter is not necessarily indicative of a larger trend.

Thank you. I'll jump back in the queue.

Okay, thank you for the call -- for the questions.

And the next question comes from the line of Brian Murphy. Please proceed.

Hi, thanks for taking my questions. George, you mentioned that you did a pricing increase of about 10% for certain roles. Can you give us an idea for how many roles got price increases and maybe some color about which ones?

Yes, hey, Brian, Charles. I'll take that one. The pricing story, as you might expect, is a little bit complicated, given the number of geographies involved here, the number of customer segments and products and so forth. The wide sweep would say we took price up from -- in a range from low single-digit up to high teens. That would be the band.

On average, most customers will probably see a price increase from 2% to 6%.

Yes, what I was referring to, Brian, was that when we acquired Springboard, that added value to the TI roles, and therefore the average increase for research for the TI roles increased 10%, so that's a subset of what Charles just said.

Great, that's very helpful. And just -- so, following the Springboard acquisition, I'm assuming that M&A remains your priority use of cash. Is there a particular focus on Asia? Do you think -- are there more deals in the pipeline in Asia?

I would say that, following Springboard, we feel very well-prepared now to cover Asia, specifically China and India. That said, we're always open. I wouldn't say that it's our particular emphasis right now, especially following Springboard, but if there was a good deal there, we would certainly look at it very closely.

But we feel very good that Springboard is going to give us excellent coverage there.

Okay, and just to follow up on your comment about the expansion of roles per client, that seems to be moving up a little bit. Can you give us an idea of how far do you think that can go, and what, specifically, are you doing to drive that? Are the salespeople sort of focusing on fewer accounts, are there sales incentives? Any color there would be helpful.

Yes, so just to set the groundwork here, so for a user, the maximum number of roles would be 15, so for Proctor & Gamble it would be 15, for IBM it would be 19. I look at this number moving up at slow rates as an indicator that we have not fully come to grips yet with how to sell to multiple roles in accounts.

As you probably recollect, two years ago, we put multiple sales teams into single accounts, and I think we're still working on how to make that very, very functional. So, I think this discussion really is about how we're selling, how we're packaging, how we're pricing, and the news there is that we're spending a lot of brain cells on working in those areas right now, and when we do that, I think you're going to see roles per account move up fairly briskly, and if you want to add anything, Charles.

The only thing that I would add is that the gap between where we are and the potential numbers you showed indicates the opportunity that we have, George, one. Two, obviously, there is some relationship to the number of client companies that we bring on. Typically they come in with a fewer number of roles, and, of course, we saw a nice uptick in that metric this quarter.

We have, too, Brian, just to close it out, this past quarter, put a tool in the hands of our sales force that makes it easier for them to look at and see within -- particularly within their existing clients, where the opportunities are, so we have some great work from some folks in our internal technology group and marketing groups, and so I think they now have a tool in place they didn't have three months ago, so that's helpful as well.

That tool shows how many roles are in the accounts that they are selling to, and how many roles have not yet bought from Forrester.

Okay, yes, I see. That's good. Definitely. Mike, just one quick housekeeping question for you, how should we think about the tax rate looking out to 2012?

As we've talked, we are spending some money this year to take a hard look at how we can improve our tax structure. At 40%, we sit at an exceptionally high rate. So, at this point, I -- given where we're going, I'd like to see that move down a couple of points next year. We haven't sort of given firm guidance on 2012, but I think we can put some things in place that will allow us to move that down a couple of points next year, so that's how we're thinking about it right now, Brian.

Okay, thanks, I'll jump back in the queue.

Thanks, Brian.

(Operator Instructions). And the next question comes from the line of Vincent Colicchio. Please proceed.

Yes, George, I'm curious -- related to an earlier question, has there been any changes in sales cycles or other measures of client behavior in North America?

I would say North America is in very, very good shape here. I would say if sales cycles are doing anything, they are going down, at this point, here in North America. Definitely stronger than it is in Europe. So that's-- despite all the nonsense that's going on in Washington and the so-called slowdown in the economy, business feels pretty good here.

I don't know if you have any other color, Charles.

No, I think that's right.

I mean, our events are sold out and business feels really good here.

In terms of your client groups, I'm positive I missed this, but which groups performed the best -- which group performed the best this quarter? Was it marketing and strategy, and what does it look like for the balance of the year?

I think -- I may need your help here, Mike, but I think the marketing and strategy probably showed the fastest year-on-year growth, is my guess, probably followed closely by IT and TI. I mean, I don't think you should expect to see a material change in the segments this year. All three feel pretty healthy to us right now.

I think that's right, Charles. I mean, that would be my take here, I'm trying to pull up some of the detailed numbers, but I think that's still the right hierarchy. M&S, we set the most aggressive targets, but right now, they tend to be growing at the fastest clip.

The two client groups have different challenges. The challenge in the IT client group is that there is a very large and very well-run incumbent in that space, and the challenge in the marketing strategy client group is that they are still in the business of moving those roles to buy research and to see -- and to understand the value of a long-term stream of research.

So, it -- they both have sets of challenges, but are both growing well at this point.

And with a lot of untapped opportunities.

And I know you guys are often asked this question, but is there any way to give us more clarity on how the balance sheet will be addressed over the intermediate term?

Yes, Vince, I mean, the capital structure discussions continue with our board. Clearly, as we did last year, we've given it a lot of thought, and the goal is the same, which is, how do we best enhance shareholder value. I think that we, like probably everybody else right now, are trying to divine what's coming out of the mess in DC, and what that might mean, particularly as it relates to capital gains and/or dividend rates, things like that.

So, I think we'll wait and see -- we're continuing dialogue with the board, and it will occur again in the third quarter, and I think we'll make a determination -- the board will make a determination as to what they think is the best way to go from a cap structure standpoint at that point in time.

And one more for you, Mike. Could you give us some help in terms of the depreciation ramp through 2012 in terms of numbers?

Yes, I mean, the uptick right now in depreciation, if I look at it -- if I look at sort of a combo of rent and depreciation, I want to say the total of the two, year-over-year, Vince, the year-over-year delta is going to be approximately, say, $7 million, $8 million, in that range, and I will get you the breakouts in a second on rent and depreciation.

But, that's how I would think about it, so we've got a little bit of headwind, which we kind of knew going in. I think our game plan is that we still plan to grow our margins, it just says we've got a little bit more heavy lifting.

The cash component added is obviously smaller, depreciation is the bigger piece, so I think our EBITDA margins will expand a little bit faster than our just straight operating margin.

So, I think that's the way to think about it, as we finalize the buildout in April, or, in April, in August, I'm sorry, probably next quarter I'll be in a position to say specifics. So, if you look at it right now, I think we're looking at rent at a couple of million bucks, depreciation at about $5 million, is the way to think about it right now.

Okay, thanks. Good job on the quarter.

Thank you.

Thanks, Vince.

And the next question comes from the line of Robert Riggs. Please proceed.

Hi, thanks for taking my question. Just a quick question on Springboard. I think, at the time when you discussed the acquisition, that they had more -- they were a less syndicated product offering, but the expectation was to move that higher over time. Any idea of the framework of about how long that would take, and does it get to the sort of overall consolidated syndicated level?

Hey, it's Charles. So, first thing to recognize is that it is small relative to the rest of the Company, and therefore while it was less syndicated, it is not particularly dilutive to the overall syndicated ratio.

That being said, we have this tremendous opportunity to sell that content in a syndicated way. Of course, they were selling it to companies in the Far East. We are now taking that content and selling it not only there, but selling it to all of our domestic customers here in the US, as well as across Western Europe.

So, the conversion to a much higher syndicated rate happens just as quickly as we can sell it to customers here and in Europe, and that's proceeding quite quickly. So, all that by way of saying that it doesn't really change the macro story that we've been telling and continue to tell about our march to a 70% syndicated ratio.

Great, and sorry if I missed this, did you give the number of salespeople that were added from the Springboard deal?

No, we did not, but it was a handful. If you think of the bulk -- of the 50, the bulk were in research. The research folks were, like, 38 if I recall. So, I think what you end up with is 6 or 7 sales folks, and the rest are some administrative bodies when you break it down, Rob.

Thanks a lot.

Ladies and gentlemen, this concludes the question-and-answer session for today's call. I would now like to turn the call over to Ms. Karyl Levinson for closing remarks.

Thank you very much, and enjoy the rest of the day. Goodbye.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect.