Forrester Research Inc (FORR) 2011 Q4 法說會逐字稿

Thank you for joining 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'll then open the call to Q&A. A replay of this call will be available until February 23, 2012 and can be accessed right dialing 1-888-286-8010 or internationally at 1-617-801-6888. Please reference the passcode 47888750.

Before we begin, I'd like your mind 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 uncertainties that could cause future activities and results of the 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 will now hand the call over to Mr. George Colony. You have the floor, sir.

Thank you, and I'd like to welcome everyone to the call. Thank you for joining us today. I will give an overview of Forrester's business followed by a financial review from our CFO, Mike Doyle. Charles Rutstein, Forrester's COO will then join us for questions and answers. As you know, Forrester focuses on three business imperatives. These are one, moving our role-based strategy forward; two, the expansion of the company sales force; and three, our continued efforts to increase the percentage of our business that is syndicated. And for this call, I would like to comment on our progress on the imperatives in 2011, and then I would like to give a look ahead to 2012.

Now, we will start by reviewing our progress in roles. We devoted much work in 2011 to moving our role-based strategy forward in events, in [client-facing] technology and in our social offerings, and these habits will be intensified in 2012. I would like to start first with events. Our bench business continues to move from generalized events to role-focused events, a trend that is increasing relevancy for attendees and enabling sponsors to target with greater precision. In 2011, we staged 20 events, with 75% being fully role-based. Paid seat attendance was up 16% in 2011 over 2010. In 2012, we are expanding to 28 events, all focused on unique roles. It is noteworthy that our highest attended event in 2011, the Forum for Customer Experience Professionals, was exclusively for one role. Accordingly, this event will be held in two locations in 2012 -- New York City and Los Angeles.

Forrester's social technologies continue to widen our value for executives in their roles. By year-end 2011, the Company offered a dedicated social community for each of the roles we serve. At year-end, those communities had 33,000 members, and that is up 213% in the year. Our blog portfolio for roles showed high growth in 2011 as well. Page views increased 82% in the year with 470,000 reads in Q4. This work in social sets the stage for the rollout of other significant client-facing technologies in 2012. In the first half of the year, the Company will begin offering a new site that seamlessly combines research, data, tools, social, and a wide variety of other content. Clients will be able to answer questions faster, base decisions on the best combination of analysis and data, and learn from the experiences of other executives in their role. And I will be speaking in more direct terms about this initiative in future calls.

Forrester goes to market by roles, because it offers the shortest path to relevancy. Accordingly, the Company continued to refine its role research offerings in 2011, offering new products like Benchmarking and Tech Marketing Navigator. We will intensify this effort in 2012 as we restructure our research offerings around playbooks, programmatic packaging that addresses each step of key client projects. Playbooks will methodically help clients solve problems and operate effectively, guiding them to the best possible answers and solutions. This approach will not only yield better client value, but it will also increase the productivity of Forrester's research staff. Playbooks will roll out in phases throughout 2012. Again, I will be addressing this change in more detail on future conference calls.

I would now like to turn to our second business imperative, expanded Forrester's sales force. Our long-term goal is to expand the sales force by 15% to 20% per year. And in 2011, the sales force grew by 16%. In our efforts to expand its productivity, we have reorganized the sales force for 2012. Previously, three sales teams operated worldwide. Each focused on a specific set of roles, the eight roles in business technology, seven in marketing and strategy, and four roles found in technology vendors. While this organization offered high role fluency for the salespeople, it meant that multiple Forrester sales teams operated in client companies, and this at times confused the customer.

Productivity suffered because salespeople had to continually navigate overlapping territories and internal competition for clients. As of a Q1 2012, individual client companies are managed by individual reps, a more client-friendly direct approach. Salespeople have fewer accounts, enabling them to be more engaged and in tune with customer problems. This will put them in the best position to increase the number of roles within those accounts. We believe that the simpler approach will result in higher productivity and lower organizational friction in the sales force. Clients have reacted very positively to the change, relieved that they now have a single point of contact at Forrester.

We will continue to invest in quota-carrying headcount in 2012, growing that number by double digits. We expect to see significant leverage in management and support staff headcount. The vet segment of the sales force will not appreciably increase in size. In addition, a segment of the 2011 sales headcount will be shifted to the delivery organization in 2012 to provide better service to our clients. The net result of this new organization is that, while quota-carrying headcount in sales is increasing by 10% to 12%, total sales headcount will increase by only 2% in 2012. Beyond 2012, after the organization is complete, we expect to return to 15% to 20% headcount increases in the total sales force.

Our third business imperative is to increase the percentage of our business that is syndicated, a metric that we call [queue]. It is more efficient for us to produce syndicated renewable products, so we are continually managing the business toward a queue of 70%. Our queue target in 2011 was 67.1%, and for Q4, it was 66.9%. I'm happy to report that we came in above plan in each case, with 2011 at 67.6% and Q4 at 67.7%. We are achieving higher numbers through a combination of sales compensation and a continued effort to develop new queue products. We expect to see continued upward movement in queue for 2012.

To summarize, just as we invested in 2011 in new facilities, we are investing in new technology, new products, and organizational changes in 2012. We believe that these investments best position Forrester for the long-term, propelling a role-based strategy forward and improving the client experience. For the target market of $12 billion and a potential client pool of 2.8 million executives worldwide, it is important for the Company to position itself to take full advantage of this opportunity. With the continued disruptions of cloud, mobility, social, physical-to-digital and other technology changes, executives at large companies have never been more challenged. We want to ensure that Forrester is fully prepared to answer the call for its clients.

I am pleased with our performance in 2011, and I'm very excited about the changes we are making in 2012. I am confident that they will position the company for continued success. I look forward to being on the road in the first quarter with Mike seeing investors, and I look forward to seeing many of you. Thank you very much, and I'd now like to pass the call over to Mike Doyle, Forrester's CFO. Mike?

Thanks very much, George. I will now begin my review of the financial performance for Forrester's fourth quarter results, the balance sheet at December 31, our fourth-quarter metrics, and the outlook for the first quarter and full year of 2012. Please note that the income statement numbers I am reporting are pro forma and they exclude the following items - - amortization of intangibles, stock-based compensation expense, duplicate lease costs, reorganization costs, acquisition and integration costs, and net gains from investment. Also, we continue to utilize an effective tax rate at 40% for pro forma purposes. The actual effective tax rate for the fourth quarter of 2011 is approximately 37%.

For the fourth quarter, Forrester met revenue guidance and exceeded its quarterly guidance for pro forma operating margin and earnings per share. Our key customer metrics continued to perform at historically high levels, and our midyear acquisition of Springboard Research continues to perform well. In addition, our balance sheet remains strong, with 2011 cash flow from operations exceeding expectations. On the strength of our balance sheet and operating cash flow, this morning, Forrester announced the initiation of a quarterly dividend of $0.14 per share. On an annualized basis, this represents approximately 24% of our 2011 operating cash flow. We believe this move will enhance shareholder value and still leave us well-positioned to invest for growth and pursue M&A opportunities.

In our third quarter call, we indicated we are reserving some choppiness in our sales activity, with some segments underperforming expectations. Our fourth-quarter bookings activity did pick up relative to our third-quarter performance, and while it did not meet our aggressive internal targets, we are very encouraged by the results. Now, let me turn to a more detailed review of our fourth-quarter results. Forester's fourth-quarter revenue increased 11% to $74.7 million from $67.1 million in the fourth quarter last year. Fourth-quarter Research Services revenue increased 11% to $50.5 million from $45.4 million last year. Research Services represented 68% of total revenue for the quarter. Fourth-quarter advisory services and other revenue increased 11% to $24.1 million from $21.7 million in the fourth quarter of 2010 and represented 32% of total revenue for the quarter.

Our international revenue mix was 31% for the period ending December 31, 2011, which is up 3% versus prior year. The increase reflects the impact of the Springboard Research acquisition and performance in the Asia Pac region. Operating expenses for the fourth quarter were $59.6 million, up 4% from $57.2 million in the fourth quarter of 2010 as a result of higher compensation and travel expenses due to increased headcount, primarily in research and sales, as well as increased rent and depreciation expenses associated with our new office locations in San Francisco and Cambridge. These increases were partially offset by reduced variable incentive compensation. Our fourth quarter is our largest renewal quarter, and we typically set a high internal performance bar. While operating performance was strong for the quarter, we fell short of our internal expectations, resulting in a zero bonus payout for the quarter, which is unusual for Forrester. This incentive adjustment favorably impacted our margin by more than 5 points.

Total company headcount increased by 130 or 12% as of December 31, 2011 compared to the year ago period. Included in the 12% growth are 52 employees from Springboard Research, the company Forrester acquired during the second quarter of this year. Most of these employees are focused on research. Operating income was $15 million or 20% of revenue compared with $9.9 million or 15% of revenue in the fourth quarter of 2010. Favorable year-over-year performance was driven by revenue growth and reduced incentive compensation. Other income for the quarter was $357,000, up from a loss of $29,000 in the fourth quarter of 2010. The increase is primarily due to significantly lower foreign-exchange losses.

Interest income for the quarter remains low relative to historical performance as the interest rate environment over the last few years remains challenging. Global interest rates remain at all-time low levels, and the opportunities to invest our cash safely have been restricted. We continue to maintain a policy of investing our cash in safe investments, and many of the investments vehicles we utilized in the past, like certain state and municipal tax free bonds, no longer meet our investment criteria. Net income for the fourth quarter was $9.2 million, and earnings per share was $0.40 on diluted weighted average shares outstanding of $23.1 million, compared with net income of $5.9 million and earnings per share of $0.26 on $23.1 million of diluted weighted average shares outstanding in the fourth 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 fourth quarter, 328 new research documents were added to RoleView. The top three research roles are the technology marketing professional with 6,509 members, market insights professional with 5,544 members, and the analyst relations professional with 4,597 members. We hosted 57 teleconferences in the fourth quarter with a total attendance of 2,233. Forrester Leadership Boards, our peer offering for senior executives, continues to improve, achieving year-over-year revenue growth of 14% in the fourth quarter. The Business Technology Leadership Boards now have a total of 1,044 members. The Technology Industry Boards now have a total membership of 291. And finally, the Marketing and Strategy Boards have a total membership of 582. The end of the fourth quarter, the Forrester leadership boards had 1,917 members, up 12% from December 31 of 2010.

In our data business, we continue to add and renew an impressive list of clients, including the addition of 20 new 1B plus companies in the fourth quarter, including ABN AMRO, Aetna, Aflac, AstraZeneca, Bell Canada, the Boston Consulting Group, CVS General Motors, Geico, and Yahoo. Consulting revenue for the fourth quarter of 2011 grew to 17% compared to the year-ago period and reflects our continued focus on the needs of our clients in their roles. Our events business continues to be profitable and a vital part of our role-based strategy. We had a busy fourth quarter, posting 7 events including two MNS role-based events, the Consumer Forum, North America, and the Marketing and Strategy Forum in [EMEA]. We also hosted 4 business technology role-based events, Sourcing & Vendor Management Forum in both North America and EMEA, the Infrastructure and Operations Forum -- North America, and the Security Forum -- North America and Business Process Summit in EMEA.

In 2012, we are repositioning our events to more closely align with our role-based strategy. In addition, we are shifting the timing of our events during the year. In the first quarter of 2012, we are hosting 1 technology industry role-based event, Technology Sales Enablement Forum in North America, as compared to 5 events in 2011. As we look ahead to the full year, we will hold 28 events in 16 locations in 3 regions as compared to 20 events in 2011. And now I'll review Forrester's fourth-quarter metrics to drive 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 is yet to be recognized, and with $221 million as of December 31, 2011, an increase of 9% from the fourth quarter of 2010. At December 31, 2011, Forrester's retention rate for client companies was 80%, down from 81% from September 30, 2011. And our dollar retention rate during the same time period was 90%, a1% decline from the previous quarter. Both metrics remained well above historical levels. Our enrichment rate was 101% for the period ending December 31, 2011 versus 104% at September 30, 2011. We calculate client and dollar retention rates and the enrichment rates on a rolling 12-month basis due to the fluctuations which can occur between quarters with deals that close early or slip into the next quarter. The rolling 12-month methodology captures the proper trend information.

At the end of the fourth quarter, our total for client companies was 2,683, up 4% 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 December 31, 2011, there are 2.9 roles per client. For headcount, at the end of the fourth quarter, Forrester had a total staff of 1,208 versus 1,222 at September 30, 2011. Current headcount includes a research staff of 450 and a sales staff of 438. For the full year, our sales headcount grew 16%.

Turning to Forrester's full-year results. Total revenue for the 12 month period ending December 31, 2011 increased 13% to $283.6 million from $250.7 million last year. Research services revenue for 2011 increased by $23.1 million or 14% to $191.6 million from $168.5 million in the year-ago period. Research Services revenue represents 68% of total year-to-date revenue versus 67% in 2010 as we continue to progress towards our target of 70%. Our full-year 2011 advisory services revenue increased $9.8 million or 12% to $92 million from $82.2 million for the same period last year, reflecting the growth in both our consulting and event businesses.

Operating income for the 12 month period was $48.4 million or 17.1% of revenue compared with operating income of $40 million or 16% of revenue in the 12 months ending December 31, 2010. Net income for the 12 month period ending December 31, 2011 was $29.4 million compared to $24.8 million last year. Earnings per share was $1.27 on diluted weighted average shares outstanding of $23.2 million compared with $1.07 and $23.1 million weighted shares outstanding last year.

Now I'd like to review the balance sheet. Our total cash and marketable securities at December 31 were $227.6 million, up $11.6 million from our year-end 2010 balances. Cash from operations was extremely strong during the 12 months for 2011 at $55.4 million, which is up $16.8 million or 43% from prior year. We received $11.6 million in cash from options exercised and the employee stock purchase plan during the course of the year. In 2011, we repurchased 527,000 shares at a total cost of $18.4 million versus $21.3 million during the full year of 2010.

Accounts Receivable at December 31, 2011 was $81.4 million compared to $73.6 million as of December 31, 2010. Our Days Sales Outstanding at December 31 was 100 days down from 101 days at December 31, 2010. Accounts Receivable over 90 days was 5% at December 31, 2011 up from 4% at December 31, 2010. Our capital spending for the full year 2011 was $39.8 million compared to $13.4 million during the full year of 2010. The increase reflects investments in leasehold improvements associated with office relocations, primarily our new headquarters building in Cambridge. The Cambridge project was the last of four major office relocations that we have undertaken since the second half of 2010. These moves increased our office capacity by 60% and give us adequate space for future growth.

In addition, we continue to invest in customer facing technology which will be introducing in the first half of 2012. Deferred revenue at December 31, 2011 was $147.9 million, up 12% over December 31, 2010. Deferred revenue plus future AR, a key indicator of future performance, grew 13% year-over-year. Our future AR balances are amounts to be invoiced in the future for clients with multi-year deals or scheduled payment terms. Double-digit growth in deferred revenue in future AR lays the foundation for a strong revenue performance in 2012.

The last topic I would like to cover today is our business outlook for the first quarter and full-year 2012. In summary, we had a good quarter, and our full-year 2011 results are very positive. Operating cash flow was extremely strong, and the balance sheet remains healthy. Our customer metrics are positive, the integration of our Springboard Research acquisition has gone well, and we completed our major headquarters move. In addition, our 2012 guidance reflects the impact of some tax initiatives we have undertaken, and we reduced our effective tax rate by 1 point to 39%. We are continuing to work on initiatives in this area, and we will update you regularly as we progress.

Looking at 2012, there are three factors that adversely impact our margin growth - - the year-over-year change in rent and depreciation associated with our new facilities; our investments in client facing and sales enabling technologies; and the impact of a reduced incentive compensation in 2011. These factors account for over a 5 point declined year-over-year. We have offset most of this with productivity improvements in both sales and G&A, which total almost 3 points of margin improvement. Let me take you through a little more detail around these points. First, in 2011 we completed the move to our new corporate headquarters in August of last year. The annualized impact of the rent and depreciation associated with the new facility is approximately 2 points on the margin line. Post 2012, we will see little increase in rent and facility related depreciation as we've added significant capacity for growth.

Second, George discussed investments in client facing and sales support technology. These investments, which will enhance the client experience and provide tools to our sales organization for improved productivity. These initiatives will impact operating margin by over 1 point in 2012. I mentioned earlier, we saw reduced incentive expenses as our bookings growth in both the third and fourth quarters of 2011 fell short of our aggressive plans. For 2012 planning, we assume achievement of plan in each quarter, which adds these costs back to our P&L, impacting margin by more than 2 points.

We're very excited about the investments we have made to improve the client and sales experience and pleased with the improvements we have made in productivity. These investments position us well for accelerating top line growth and sustained margin expansion going forward. As a reminder, our guidance excludes the following -- amortization of intangible assets, which we expect to be approximately $600,000 for the first quarter and approximately $2.4 million for the full year 2012. Stock-based compensation expense of $1.1 million to $1.3 million for the first quarter and approximately $4.5 million to $5 million for the full year 2012. Reorganization costs associated with the sales realignment of $1.3 million to $1.5 million.

Investment gains and losses. For the first quarter 2012, we are aiming to achieve total revenues of approximately $68.5 million to $71.5 million. This range reflects a 4% to 9% improvement versus prior year. Revenue in 2012 also reflects the impact of four events moving from the first quarter to the second quarter adversely impacting first quarter comparisons. The pro forma operating margin of 8% to 10%, the pro forma income tax rate of 39%, and pro forma diluted earnings-per-share of approximately $0.15 to $0.19. Our pro forma full year 2012 guidance is as follows -- total revenues of approximately $308 million to $316 million -- this reflects an increase of between 9% and 11% versus prior-year. Pro forma operating margin of 14% to 15%; other income net of foreign-exchange losses of approximately $800,000; a pro forma income tax rate of 39%; and pro forma diluted earnings-per-share of $1.16 to $1.22. We provide guidance on a GAAP basis for the first quarter and full year 2012 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 Instructions)

Dan Leben, Robert W.

Great, thank you. Just first off, could you talk a little bit more about some of the changes you saw in the fourth quarter, in terms of the selling environment relative to the third? You mentioned it got a little better, but the metrics all came off a little bit. Help us walk through some of the areas you saw in terms of geographies or verticals of products that did better or worse than the average.

I would say, in terms of the dynamics of the environment, there was really no change from the prior quarter. The overall results, as Mike mentioned, were certainly better. But we saw the same kind of choppiness. In other words, there was no single product line, there was no single geography that we would think -- that we would call out as being particularly weak. The sales cycles were about the same as we saw in Q3, no change, no change to the approvals required or any of that stuff. Just basically better performance against the similar environment.

Okay. And just a couple questions on the guidance to help us understand the flows through the year. The first one is on the incremental investments on technology. Are these largely weighted to the first half or, when you roll out these new client facing technologies, we will see some of that investment level come down?

You'll see a little bit of that, Dan. What is happening is these investments have a component of expense associated with them, which will be, in all likelihood, more front-end loaded. Then there is a component that is depreciation-related, which effectively will, as these projects are implemented, will move into the back half of the year.

So, you will see some operating expenses exclusive of depreciation that will be a little bit more front-end loaded, then the depreciation will be more to the second half of the year around these projects. So net-net, I don't you will see an appreciable difference between first half, second half as you think about these initiatives. It might show up in different lines, Dan. So, our depreciation line will probably be moving up a little bit as the second half of the year progresses, and the operating expenses around these initiatives will be coming down.

Okay. And then just a little bit more on the changing events business bumping up the number of events. Both help us understand how they're going to flow through the year and how that's different. You gave some good guidance on first quarter versus second quarter, but also as you created these eight new events, how many of these are kind of splitting for geographies or taking a current conference and splitting roles versus new Greenfield opportunities in the event space.

Sure. What I will do, Dan, is give you the mechanics and the flow of the events by quarter, and I will let Charles give color on location and strategy around them. As you think about our quarters for 2012, the event bucket -- the way it's going to break out is, you will have one event, as I mentioned, in the first quarter. We have 15 events in the second quarter, 3 in the third quarter, and 9 in the fourth quarter. And to give you comparison, Dan, we had 5 in the first quarter last year. We had 4 in the second quarter of last year, 4 in the third quarter and then 7 in the fourth quarter. That will give you some sense.

So, what you will see is a revenue impact in the first quarter this year versus last year that is north of $1 million to the downside. I think you'll see a revenue impact on the positive front in the second quarter that is going to be around the $2.5 million plus-minus kind of range. Then a third-quarter dip, probably about $1 million associated with revenue, and then fourth quarter will pick up somewhere in the neighborhood of $2 million plus or minus. That's sort of to frame it. Obviously, those numbers fluctuate a little bit based on actual activity, but I hope that helps directionally.

That's fantastic.

So Dan, with respect to the other part of your question, so we're going from what -- about 20 to 28? About two thirds of that is splitting up our existing events. Two thirds of that growth, I should say, is about splitting up the existing events. It's why you see such a steep ramp in the second quarter. We had some very big events in the second quarter that were multi-role events that are now going to be single role events and on top of that we are doing some new events, which are either geography extensions or net new events per role.

Dan, this is George. What I would say is what we learned 2011 was that an event focused on one role could be -- could have a lot of scale, and the Customer Experience Professionals Forum became our largest event in 2011. So that really showed is that the multi-events -- that was really a vestige of a pre-role Forrester world. That's why we're headed toward these single role events. We think they could be actually quite large.

Okay, last one for me. Just on the sales force reorganization, give us a sense of how much turnover there is in terms of typical sales force and how much of their accounts are turning over. Do you have half of what they had previously, or -- help us give us a sense of some of that dynamic.

Sure Dan. Turnover number in 2011 was essentially flat to 2010. It's a level where we're very comfortable. With respect to changing the territories, as you would imagine, as we go from two reps in each account to just a single rep, there is some churn that goes on there.

And so we are spending the early part of the year signing those new territories, getting those reps up to speed on those new territories and so forth. As George said in his comments, what we are trying to do is, we are trying to get many fewer accounts per rep, thereby allowing them significantly more time to understand those customers better.

Okay. And when you look at the internal productivity metrics around the sales force with this change, when do you expect those to kind of get back to 2011 levels and then kind of setting the base for improvement from there.

So, we are not actually looking for much of a dip here in productivity, Dan. I think what you have got is you've got in the aggregate, if you look at the sales force in total, you have productivity coming in because first off, we're seeing leverage in the management layer and in the support layer. As George said, we are not adding net 15% to 20% new heads this year. We're adding all of the quota-carrying sales reps we would be doing in any given year, but we are getting leverage out of the other parts.

So, that is one, is you see productivity as a result of that. Two, we expect to see productivity simply because of the effectiveness of this structure. It is simpler for our reps to understand; it is simpler for our customers to understand. We are not projecting a dip here.

Great. Thanks guys.

Robert Riggs, William Blair.

Hi, thanks for taking my question. Following up on the question on the sales force, in terms of what the task that you're working through, in terms of the realignment, how far are you along today with that, and kind of when is the expectation that all the changes will be made? Remaining cognizant that it is kind of an ongoing process.

I guess I should mention up front that we planned this with great care, as you would imagine. Much of the work behind the scenes was done at the tail end of last year. So that we were ready to hit the ground running on January 1. What that means is that everybody got their new territories within the first week or two in January.

They know who they were selling to, they know what they are selling, so all of that is in the rear view mirror. Now of course, they are spending time coming up to speed on those accounts and figuring out the account plans for the year. But, we think that most of that transitional effect is now in the rear view mirror.

Great. Thanks. And can you provide some additional detail in terms of -- are you seeing more growth from your existing clients, or is it from winning just brand-new customers? And then against the backdrop of moving to this playbook strategy, how would that split kind of play out on a go forward basis?

In terms of our growth, clearly when you look at -- the idea is with the realignment, we have done a couple things. I think we have given fewer clients per rep with the intent that they are going to go deeper. I think you have heard George talk about this for a year as we think about, Robert, where do we think the greatest opportunity is. It is almost always lies with your existing clients because, at roles per client of three, we've got substantial opportunity to grow.

That said, we are not taking the pedal off the new business activity. We've got a group that is very focused on these emerging clients and folks that we can convert into much larger accounts. I think the realignment will get us smarter about getting business that comes in the door and sticks. So if anything, the hope there is we will see a little bit improvement over time in client retention. I think we're still going to be reasonably well-balanced between growth in existing and growth in new, but in the long run, it could get really interesting with this new realignment, in terms of the growth we get with existing clients.

Where playbooks comes into this, is that we expect playbooks to be quite differentiated in the marketplace and therefore -- and also to bring -- I don't want to use the term much higher, but higher value to the clients in helping them solve problems faster, so I think what it is going to do is -- I think it could accrete the renewal rates. And because it's differentiated, I think it's going to be attractive to new customers as well.

Great. Thank you.

Hope that helps.

Brian Murphy, Sidoti & Co.

Thanks for taking my questions. George, could you -- on the new integrated website or platform with research data tools, social, et cetera. Could you give us a timeframe for when that is going to be launched, and also is that going to have an impact on pricing or product packaging?

You will see product packaging being impacted by playbooks. As you know, we do pricing in the summer time, so the new platform will precede the new pricing. But of course, it is built for new packaging and new pricing. This is all of one piece. What I would say is the new platform is really first half, and I expect we will talk about it in more detail in Q1, and in great detail in the Q2 call.

Okay. And to follow up on the change in the sales force coverage model, have you guys employed this kind of named account coverage model in the past?

Yes.

Okay. And has there been a change in sales leadership?

There has not.

So, what is informing this switch back to the named account coverage model now?

Really, three things. Number one, our customers told us that they wanted this. They have been asking us for some time for a more simplistic approach. Second is simplicity for ourselves. We were dealing with a lot of complexity internally about orchestrating those multiple reps in the account, dealing with how they pass leads and share opportunities and so forth. This drive simplicity for us.

Number three, as we've alluded to several times here, is effectiveness. We think that by cutting the number of accounts that a rep has by roughly half, we will increase their client fluency in a material way. That is they will be more fluent in the needs of the customer. And we think that right now, that is what is needed in order to drive more productivity.

Okay, and I understand going forward, you are going to be making additional investments in sales force productivity technology. I think you have been making some investments there, and just looking at the anticipated growth for the total sales headcount versus the quota reps. Is it fair to say that you guys have been getting some benefit from those sort of sales force type technology investments that you've made so far?

I think we're starting to see a little bit of leverage there, but I think a lot of the leverage that you are seeing here is really due to the structure, as opposed to any of the underlying technology. As I say, because we are simplifying the structure, you need fewer managers, you can deal with the support staff in a different way, and so forth and so on. So, that is where I would say the majority of the leverage comes from.

I would also say that our sales force automation is now 10 or 11 years old, and we are now coming up on a renewal of all that technology, as well, which will happen this year.

I think the good news is -- I think this is more to come, in a positive way. I think the investments that we are making -- I would agree with Charles, I think the productivity that you are seeing in 2012 is primarily in the sales side, driven by the realignment. I think the productivity you are going to see in '13 and beyond is going to be driven by the tools that we put in place this year. And so that is encouraging.

That says we continue to expect to get productivity out of the sales organization -- in addition on the G&A side, we made some improvement this year, but the strategy and the game plan is to continue to invest in tools there such that you are going to see productivity again in '13 and again in '14 and so on. I think we're actually in a good place when we get through '12 to continue the momentum on the margin side without, certainly, the kinds of investment we made in the last couple of years.

I mean, the capital spending dollars, particularly in '11, were unusually high for Forrester, and I think we're going to drift back down to a much more meaningful level. So, this year, I expect, we will be certainly probably south of $10 million and then going forward, that will probably be a little bit less. Again, we're planning to commit still to invest, but it won't be near at the level dollar-wise that you saw in the last couple of years.

Okay. And Mike, since you brought up the out years -- I mean, are you guys anticipating that you can get the operating margin back to maybe 2008 or 2009 levels?

Absolutely. As I think about it, Brian, from my perspective, I look at it and say we had an uphill climb going from '11 to '12, which you have a couple of points on the rent and the facility depreciation. That effectively going out for us is going to be flat line or minor increases. So, we don't have that huge delta there.

And I think the incentive compensation was another couple of points. And we typically don't see that. That is normally not an uphill battle and not one, frankly, we'd like to have. We have a year-over-year impact adverse bringing incentive comp back to targeted levels.

We won't see that again, so as I think about the five points I described in the call, that sort of drives margins south in 2012. Four of those, you're probably not going to see it in 2013. So, I look at those going away, I look at the three points we've got in productivity in '12 that's embedded in our plan, and figure there's going to be more to come in '13.

So, absolutely. If you think George is happy with revenue growth at 9% to 11%, you don't understand him well enough. We are going to be better as we go out. So, I think absolutely we are looking for margins to come back to those '08, '09 levels. That is where we are targeting as a company, and we certainly think it is doable. As George said, the opportunity is right out there in front of us.

Good stuff. Thank you very much.

Vincent Colicchio, Noble Financial.

I'm not sure who this question is for, but what portion of revenue came from Europe, and has there been any change in sentiment there, and sort of what is your outlook for the year?

We didn't give specific guidance on what came out. I'd say, Vince, we had roughly 31% of our Q4 revenue that was outside North America. Typically, the bulk of that -- so if you break it down, it is probably 25% or 26% of our revenues are from Europe.

And to Charles's point, again, you read the macro on Europe, and you think that the entire continent is going in the tank. We didn't see that. We had one segment that performed exceptionally well quarter-in, quarter-out all year long, double-digit growth.

And then we had others that struggled a little bit because we made some leadership changes during the course of the year. I don't think we are making a macro assumption for Europe as it relates to 2012 that says -- hey, you are going to grow at a dramatically lower rate because of the macro. I think there's certainly headwinds in Europe, but we look at it and believe there is some very real opportunities there, as well.

So I think, look, the -- our own internal tech guy, Andy Bartel says tech spending should be lower in Europe and in Asia. That said, there is still a lot of activity and a lot of change going on in companies that need our help. So, it's our view still that we used going to get growth out of Europe in 2012.

And Vince, this is George here. Our long-term plan is to increase our business outside the US faster than within the US

Okay, and then Mike, I know you had some opportunities to do some automation of operations. How is that sort of progressing?

I think we have made some progress on that front. And we plan more in 2012. I think you are going to see a lot of activity outside the sales organization that will begin to occur in the latter part of 2012 and roll into 2013.

If you think about how the head of our business technology group here thinks about technology, he's got a real busy plate to finish up customer facing experience and CRM tools. And at the same time, he's got some of his folks making progress on some of my back-office type equipment.

But we've got a lot more to go, and I think he will be able to sort of turn his full focus on that in the latter part of '12 and go into '13, so we're pretty excited about what is still to come on that front. So, we made some progress, but I would say there is still meaningful progress to be made in a good way over the next year or so.

And Vince, our new CBTO, that is Chief Business Technology Officer, Steve Peltzman has really brought a lot of fantastic ideas and expertise to us. We are -- Forrester as a business has really moved from IT to business technology, and you're going to see a lot of moves this month. They did a good job.

Thanks for answering my questions, guys.

Ladies and gentlemen, that will conclude the question-and-answer portion for our event. I would now like to turn the presentation back over to Mr. Mike Doyle for closing remarks.

Thanks very much to everyone for joining us, and enjoy the rest of the day, and we look forward to seeing you on the road in the first quarter.