Forrester Research Inc (FORR) 2012 Q2 法說會逐字稿

Good morning. 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 finances. We'll then open the call to Q&A. A replay of the call will available until August 9, 2012, and can be accessed by dialing 888-286-8010, or internationally 617-801-6888. Please reference the passcode 32235412.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "believes," "anticipates," "intends," "planned estimates," or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's currents plans and expectations and involve risk and uncertainties that could cause future activities and results of operations to materially differ 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 for joining the call. I'd like to update you on Forrester's three business imperatives and discuss the changes we are making to operations.

We are putting the company through a number of transitions, and these changes are the right thing to do, even though they may bring short-term disruption. On the call today, I will give you context for these changes.

I'll start with our first business imperative -- moving the role-base strategy forward. Most important of our role-based initiatives are playbooks. In the old world, we offered stand-alone reports, while playbooks are a programmatic set of solutions for clients. They help executives work through the full life cycle of a problem. We are creating between five and seven playbooks for each role. Every playbook addresses an important initiative like cloud computing, and it guides clients through the stages of discovery, planning, acting, and optimizing. Playbooks set the overall agenda for each role and will guide the content in consulting events, boards, and data. Playbooks will become the ultimate touchstones for our clients.

We have just launched our first 14 playbooks on forrester.com, with 35 planned for the second half of 2012. All roles will have their full complement of playbooks over the next four to six quarters. We regard the move to playbooks to be one of our many parallel efforts to reinvent the research business.

Now, just as playbooks are increasing the relevancy of research for each role, our events business continues to become more role focused. A recent example is our forum for customer experience professionals, which was held in New York City in late June. The event was Forrester's largest, with 1,100 people in attendance and 38 companies sponsoring the event. It also generated the most revenue of any event in Forrester's history.

At the event, Forrester introduced its fourth book titled Outside In, and this is the first to focus primarily on one role, in this case the customer experience professional. Outside In advocates that companies should put the management of customer experience on par with marketing, logistics, and other business disciplines. Forrester analysts Harley Manning and Kerry Bodine tell the story with tangible, actionable advice, and as with our playbooks, Outside In lays out a blueprint for creating a successful, high-return customer experience. Outside In will be available on August 28th, the first nonfiction book to be published by the new Amazon Publishing. We expect Outside In to broaden Forrester's profile with customer experience executives and increase our ongoing business with that role.

I'd now like turn the second imperative -- expanding the sales force. Last quarter, we spoke about the sales reorganization that Forrester implemented at the beginning of the year. As a reminder, under the new structure, single sales teams now have responsibility for all roles within individual accounts, and we made this change to simplify the client relationship and to increase the efficiency of sales. Our sales staff has worked diligently to move to the new structure. While we believe that all these changes are right for the long term, they have taken more time to implement than was planned, and two factors are at work here. Number one, there has been higher than expected attrition in the sales force, and secondly, sales people have taken longer than expected to adjust to new clients, managers, territories, and the compensation plan. These factors have tempered our ability to hit sales goals in the first half of 2012. As the year progresses, we are confident that sales people will continue to settle into their territories and attrition will, in fact, attenuate. For 2012, the sales force will grow between to 4% to 6%. Beyond this year, sales force growth will return to the 15 to 20% range.

Our third business imperative is to increase the percentage of syndicated sales. As investors know, it is more efficient, profitable for Forrester to produce and sell syndicated renewable products, and this is why the company pursues a long-term goal of 70% syndicated revenue. Our syndicated products are research boards and data. Non-syndicated products are consulting and events. The company continually seeks to improve and innovate its syndicated products, and playbooks are the most relevant of the current initiatives. Given playbooks and changes in sales structure, we expect to maintain our syndicated percentage at levels commensurate with 2011.

I'd like to talk for a few moments about the new forrester.com and our social sites. As I mentioned on the first quarter conference call, the new forrester.com launched in March. We are releasing new versions of the site every six weeks, continually improving its usability and performance. 88% of clients are returning to the site within 14 days of their last visit, and seven out of 10 client visits result in a document download. And that's up from three out of 10 on the old site. There were 1 million unique visitors to the site in Q2, and that's up from 750,000 in Q2 of 2011.

Clients have taken time to adjust to the very different experience of the new forrester.com, but once acclimated, they appreciate the quick access to research and the ability to customize. One client told me recently, "I'm loving the experience. It feels like it's my site tailor made for how I want to do my work." While it took two years to build, we now have a platform that combines social traffic, third-party content, and Forrester's proprietary research, yielding a far more comprehensive experience than we previously offered.

Now, as clients have become more used to our new web experience, Forrester's social footprint continues to grow. There are now 72,000 members of Forrester's communities, and that's up 49% from Q1. Our blog platform continues to grow as well. There was 680,000 pages of Forrester blogs in Q2, and that's up 44% from Q4 of 2011.

I'd like to finish up with our forecast for tech spending, and I will specifically focus here on Europe. We are all familiar with the economic problems ongoing in the EU, and Forrester's most recent IT spending forecasts reflect that story. Our analysts are predicting 6.7% growth in IT spending in the United States in 2012 and 6.2% growth in Asia Pacific, but tech spending in Western and Central Europe is predicted to drop by 5.7% this year. This factor has impacted Forrester, and Mike will briefly address this issue in his remarks.

In conclusion, Forrester is making many important changes, from playbooks to a new website to a simplified sales structure, and we believe that these shifts will ultimately drive revenue and profit growth for the company. These investments will take time, but they will all ultimately result in a better experience for our clients and improved financial results.

As you may know, IBM surveys 1,700 CEOs every two years. These are CEOs found worldwide. IBM recently published survey results for 2012. CEOs now believe that technology is the most impactful external force on their company, and that's up from number two in 2010 and number six in 2008. This bodes well for Forrester because companies, as acknowledged by their CEOs, cannot escape the powerful force of technology change. Forrester is in the business of helping companies cope with and thrive on that change.

Thank you very much. I'd now like to pass the call over to our CFO, Mike Doyle. Mike.

Thanks, George. I'll now begin my review of financial performance for Forrester's second quarter results, the balance sheet of June 30th, our second quarter metrics, and the outlook for the third quarter and full year of 2012. Please note that the income statement numbers I'm 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 investments. Also, for 2012, we will utilize an effective tax rate of 39% for pro-forma purposes. The actual effective tax rate for the first half of 2012 is approximately 35%.

For the second quarter, Forrester met revenue guidance and exceeded its quarterly guidance for both pro-forma operating margin and earnings per share. Our key customer metrics continue to perform at historically high levels, and our balance sheet remains strong, with cash and marketable securities increasing 8% from December 31, 2011. We achieved these positive results during a particularly active first six months of 2012.

As George mentioned in his opening comments, we've embarked on a number of initiatives and organizational changes in 2012, which are designed to better serve our clients and accelerate our ability to grow the business. Within our sales organization, we changed our structure to better service our clients by having one account owner for each client. We changed our sales territories and compensation plans to improve sales productivity and allow for greater sales opportunities for each sales rep. We changed our client group structure, combining our three client groups into two organizations -- Marketing and Strategy and Business Technology.

Lastly, we've made and plan to make changes to our customer facing and customer supporting technology. We launched our new website in March and are preparing to move to a new CRM system in the third quarter. As with all changes, there's a near-term impact to results, usually in the form of lower productivity and increased employee attrition. We planned for some level of productivity shortfall and increased attrition during the first quarter of this year, with an assumption that we would have an improvement in both areas in the second quarter. Our attrition levels did not improve in the second quarter, which impacts bookings and consulting revenue in the near term. Sales productivity did improve significantly in the second quarter for our North American sales teams. However, it remained at low levels in our European business, which in large part reflects negative macroeconomic headwinds. We expect to see performance improvement going forward as the organization digests these changes. As we move into the second half of 2012, we will continue to invest to grow the size and the skills of our sales organization. As George mentioned, we rolled out 14 playbooks in beta form and plan to continue expanding the number of playbooks available to our clients.

Now, let me turn to a more detailed review of our second quarter results. Forrester's second quarter revenue increased 8% to $79.1 million from $73.5 million in the second quarter of last year, with foreign exchange adversely impacting growth by approximately two points versus prior year. Second quarter research services revenue increased 8% to $51.1 million from $47.3 million last year. All of our research products experienced year-on-year growth, with leadership boards showing double-digit improvement. Research services revenue represented 65% of total revenue for the quarter. Second quarter advisory services and other revenue increased 7% to $28 million from $26.1 million in the second quarter of 2011, and represented 35% of total revenue for the quarter. This increase in revenue was primarily attributable to timing in our events business. Our international revenue mix was 27% for the period ending June 30, 2012, which is down from 29% from 2011.

Operating expenses for the second quarter were $65.8 million, up 8% from $61 million in the second quarter of 2011, due predominantly to increases associated with our real estate moves and website investments, as well as the timing of our events. Total company headcount decreased by five, or less than 1%, as of June 30, 2012, as compared to the second quarter of 2011. Operating income was $13.3 million, or 17% of revenue, compared with $12.4 million or 17% of revenue in the second quarter of 2011. Other income for the quarter was $130,000, up from $4,000 in the second quarter of 2011. The increase is primarily due to lower foreign currency losses in 2012. Net income for the second quarter was $8.2 million, and earnings per share was $0.36 on diluted, weighted-average shares outstanding shares of 23 million, compared with net income of $7.5 million and earnings per share of $0.32 on 23.2 million diluted, weighted-average shares outstanding 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. Our top three research roles were market insights professionals with 5,393 members, our technology marketing professional with 4,751 members, and our analyst relations professional with 4,535 members. We hosted 46 teleconferences in the second quarter with a total attendance 1,515. Forrester leadership boards, our peer offering for senior executives, continues to improve, achieving year-over-year revenue growth of 10% in the second quarter. At the end of the second quarter, Forrester leadership boards had 1,969 members, up 7% from June 30, 2011.

In our data business, we continue to add and renew an impressive list of clients with the addition of 26 new 1B-plus companies in the second quarter, including Johnson & Johnson, Office Depot, the Clorox company, and WebMD. Consulting revenue increased 4% for the second quarter of 2012. Our events business continues to be a vital part of our role-based strategy. I mentioned during the fourth quarter call, we are repositioning our events in 2012, to more closely aligned with our role-based strategy. In addition, we are shifting timing of events during the course of the year. In the second quarter of 2012, we hosted 15 role-based events. These events were organized into six co-located venues, allowing our clients the flexibility to attend multiple events if they desire and helping Forrester be more efficient in delivering the event experience to our clients. In the third quarter of 2012, we are hosting three role-based events for business technology professionals in Asia Pacific. These events will take place in Singapore, Sydney, and New Delhi.

Now I'll review Forrester's second-quarter metrics to provide more perspective on the operating results for the quarter. Agreement value 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 and was $221.5 million at June 30, 2012, an increase of 7% from the second quarter of 2011.

In preparation for our transition to a new CRM system, we've streamlined and improved our client count methodology this quarter. We have moved to a system that counts as a single client the various divisions and subsidiaries of a corporate parent and eliminates duplicate references the same corporation. The system also aggregates separate instrumentalities of the federal, state, and provincial governments, which differs from our past practice for government entities. This change results in the combination of entities that were previously treated as separate clients, which has the effect of bringing down our overall client count. It does not, however, change the overall trends, and we'll provide prior period data in our second quarter 10Q filing. At the end of the second quarter, our total for client companies was 2,546, 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. At June 30, 2012, Forrester's retention rate for client companies was 79%, which is down one point from March 31, 2012, and our dollar retention rate during the same time period was 91%, up one point from the prior quarter. Client and dollar retention metrics continue to remain at historically high levels. Our enrichment rate was 98% for the period ending June 30, 2012, versus 99% at March 31, 2012. We calculate client and dollar retention rates and 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 next quarter. The rolling 12-month methodology captures the appropriate trend information.

As of June 30, 2012, there are 2.7 roles per client, down from 2.9 on March 31, 2012. In the second quarter, we consolidate our offering from 19 to 17 roles. If we were to calculate roles per client ignoring the consolidation, the figure would have been approximately 3.0, a slight increase.

For headcount at the end of the second quarter, Forrester had a total staff of 1,206, versus 1,204 at March 31, 2012. Current headcount includes a research staff of 440 and sales staff of 437.

Now I'd like to review the balance sheet. Our total cash and marketable securities at June 30th were $246.1 million, up $18.5 million from our year-end 2011 balances. We generated $39.4 million in cash from operations during the first six months of 2012, which is up from $38.1 million or 3% from prior year. We received $6.6 million in cash from options exercised in the employee stock purchase plan in the first six months. During the first six months of 2012, we repurchased 517,000 shares at a total cost of $17.1 million. In the first half of 2011, we repurchased 13.4 million of our shares. We also paid our second dividend from the quarterly dividend program approved by our board in April, which amounted to $3.2 million or $0.14 per share in the quarter. Year to date, we have paid $6.4 million in dividends.

Accounts receivable at June 30, 2012 was $47.5 million, compared to $47.6 million as of June 30, 2011. Our day sales outstanding at June 30, 2012 was 54 days, down from 59 days at June 30, 2011. Accounts receivable over 90 days was 5% at June 30, 2012, flat from June 30, 2011 levels.

Our capital spending for the second quarter was $800,000, compared to $15.4 million during the second quarter of 2011. Capital spending for the first six months of 2012 was approximately $3.2 million, versus $26.1 million in the first six months of 2011. The 2011 capital spending reflects the investments in lease-hold improvements associated with office relocations, primarily our new headquarters building in Cambridge. Additionally, the prior year spending includes the investment related to our new website and other customer-facing technology.

Deferred revenue at June 30, 2012 was $134.5 million, up 3% over June 30, 2011. Deferred revenue plus future AR, a key indicator of future performance, grew 8% year over year. Our future accounts receivable balances are amounts to be invoiced in the future for clients with multi-year deals or scheduled payment terms.

The last topic I'd like to cover today is our business outlook for the third quarter and full year of 2012. As I discussed at the beginning of the call, we have implemented a number of significant initiatives and organizational changes. We expected they would have an impact on our first-quarter performance and would then see meaningful improvement in the second quarter. While we did see some improvements in segments of our business during the quarter, we are still not where we want to be at this point, and our first-half sales performance fell short of our aggressive targets. The result, we expect to have a softer second half than originally planned, resulting in full-year revenue being three to four points below our original guidance. Recognizing this new revenue projection, we've been working to manage our expense profile for the back half of the year. We have tightly managed discretionary spending for the second half of 2012 and into 2013. We are, however, continuing to invest in expanding and improving the effectiveness of our sales organization. This includes funding for key technology investments, including our CRM upgrade. We do not anticipate a change in our operating leverage due to this revised revenue projection and as a result do not expect a material change in our operating margin in the second half. As a reminder, our guidance excludes the following -- amortization of intangible assets, which we expect to be approximately $600,000 for the third quarter and approximately $2.4 million for the full year of 2012, stock-based compensation expense of $1.4 million to $1.6 million for the third quarter and approximately $5.3 milllion to $5.6 million for full year 2012, reorganization costs of $1.4 million for the full year of 2012, and investment gains and losses.

For the third quarter 2012, we're aiming to achieve total revenues of approximately $68 million to $71 million. This range reflects a -2.5% to +2% change versus prior year. Revenue in the third quarter reflects the repositioning of our events resulting in a revenue decrease of approximately $1.1 million. Pro-forma operating margins in the range of 10% to 12%, a pro-forma income tax rate of 39%, and pro-forma diluted earnings per share of approximately $0.19 to $0.22.

At this time, we are revising our pro-forma full-year guidance as follows. Total revenues of approximately $295 million to $300 million, down from our original guidance of $308 million to $316 million. This revision reflects an increase of between 4% and 6% versus prior year. Pro-forma operating margin of 13.5% to 14.5%, down about a 0.5% from our original guidance. Other income of approximately $700,000. Pro-forma income tax rate of 39%, and pro-forma diluted earnings per share of $1.09 to $1.15, down $0.07 from our original guidance of $1.16 to $1.22. We've provided guidance on a GAAP basis for the third quarter and full year 2012 in our press release and AK filed this morning.

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

Thank you. (Operator instructions) Your first question comes from the line of Bill Sutherland, representing Northland. Please proceed.

Thank you. Hey, guys.

Hey, Bill.

See if I can get a little bit more color on the situation in Europe for you all and maybe just aggregate between the backdrop there and your sales force transition.

First, Bill, I would say, as we look at our business, and as I briefly mentioned in my comment, what we saw particularly in Q2 was a nice pick-up in our North American reps. Both productivity and aggregate per rep was up in a meaningful way, and our business has been up. So we grew our business in aggregate, and we're up in both in North American and Asia Pacific. Europe, on the other hand, is down year over year, and that's, I think, primarily due to macroeconomic headwinds. And they're a little bit more severe than I think we had anticipated. We assumed going into the year that we'd begin to see some movement in a positive direction in Europe, not huge but in a positive direction. And so we continue to move forward with our selling organizations there, and frankly, we believe it's the right thing to do for the long term. It's just in the near term, I think they're really feeling the headwinds there. And as a result, you look at bookings per rep there being down year over year. But again, I think primarily driven by the macroeconomic headwinds they're seeing.

Okay, that's good color. I didn't get this. I had to jump. What was the increase in your sales headcount at the end of the quarter, Mike?

Essentially when you look at our sales headcount, Bill, we're just up slightly year over year.

Okay.

And so I think quarter over quarter our sales headcount, if I look at it, just the aggregate sales headcount is essentially about flat to down a bit from quarter end March.

And the attrition has kind of settled out?

It did not in the second quarter. I think toward the tail end we began to see it slow, but we basically saw the same levels of attrition. Actually, it picked up a bit for the first two months of the quarter over Q1. So I think we saw a little bit of the cumulative effect of the change. That went longer than we anticipated, Bill, which has the effect of impacting bookings and also our consulting revenue. I think it's too early-- in candid, it's too early to say yes, it's coming back down. It has slowed recently, but I'm not ready to call that a trend. I think we're watching it extremely closely. We expect that it's going to settle. I think we expected noise in the first quarter. It continued and persisted into the second quarter. So we've done some things to help mitigate that. We made modifications to our sales comp plan in May, and we're looking to make some modifications as well in July that Charles and I are working through. The May effect seems to have worked a little bit, and I think that's the appropriate thing to do to adjust where we see macroeconomic headwinds, where we see things that don't quite match up to realities of the economy, and we expect that's going to bring the attrition rates back to normal levels.

Okay. George, I think you mentioned on the new forrester.com, the clients love it once they get up a curve. And are you all-- do you all have programs in place to assist that kind of client adoption of the site?

Hey, Bill. It's Charles. We do. We do the kinds of things that you would expect -- training on the website, in particular for new clients as they're coming aboard, but also for existing clients. We walk them through how to use the site, how to set up the site in a personalized way for them so they get the alerts and things automatically pushed to them that they want. So, yeah, there's a lot of work that we're doing there, and I think you can see in some of the customer traffic numbers that it is starting to take hold.

It was a pretty radical change, Bill, if you compare the two sites. We took a very big jump forward, and so it's taken a little bit more time for clients to really acclimate. But I think we're completely on the right track here, and as I said, if you heard the numbers, the numbers are showing far more engagement via the new site. So we're very happy with where we're headed here.

Right. I just didn't know if you wanted to kind of move the process along faster by actually going out. I don't know to what the degree the client service folks could go outbound to your client base.

A lot.

Yeah, okay.

A lot, Bill.

All right. I think that's it. Thanks, guys.

Thanks, Bill.

Thanks, Bill.

The next question comes from the line of Dan Leben, representing Robert W. Baird. Please proceed.

Thanks. Good morning.

Hi, Dan.

First, with the revised guidance, help us to think about the reduction in terms of research versus the advisory side in terms of where the pieces are coming from.

Yeah, I mean, as I think about it, Dan, I think we're going to see it on both fronts. I think the reduction for us is primarily due to the attrition levels we saw. It's our ability literally to have the right number of heads to continue [looking] business. So as it's going to be probably down a bit on both fronts versus probably what your original guidance and models have shown, more so probably on the non-syn front, non-syndicated front than syndicated, fortunately, as a percentage.

Okay. And then within the attrition, help us understand the some of the-- I guess the profile of where you're seeing the higher attrition. Is it the higher productivity type sales people? Is it people that were still ramping up the curve and didn't like their new roles? Help us understand what that mix looks like.

Yeah, sure. Hey, Dan, it's Charles. Let me try and set the context for you here briefly and then address that question. So as you may recall from our last quarter's call, we changed a lot of things in the sale force, so many of our sales reps got a new boss, they got a new territory, and they got a new comp plan, all within the first couple of months of the year. What that means is that a lot of people had a lot of dislocation. We expected that in the first quarter, as Mike said. It extended into the second quarter longer than we had anticipated, and that's why you're seeing the results that you are. In terms of where the turnover has been, I don't think there are any market trends with respect to geography, with respect to performance level, or even with respect to the types of clients they serve. Obviously, you see higher attrition among people who are down relative to their plan and are not making money. You tend to see, in general, a higher retention among people who are higher against plan, the higher performers, because they are making money. But overall that number was simply higher than we wanted it to be.

Okay. And last one on the guidance part, where there any impact from FX on the revenue revision?

Not meaningfully. Not meaningfully, Dan. I think that from our end-- and that's not to say-- I think trying to predict the foreign exchange market gets a little bit crazy for us, but we didn't see wide variability versus what we have. I think as we mentioned in the quarter it was about two points on growth, but the balance of the year reflects really current levels for both the pound and the euro, which are predominant currencies. We have some exposures in a smaller way in India to the rupee on the expense side and a little bit on the sing dollar and the Canadian dollar. But I think by and large we don't have huge FX impacts in the bank accounts forecasted.

Okay. And then when you look at Europe, if you were just to look within the retention metrics in terms of client retention and wall retention, et cetera, are those numbers pretty consistent, or are you starting to see some macro-driven weakness in those metrics?

I would say that the best way to look at it-- we don't typically break it out, but we are-- we're stronger in North America than we are in Europe from a pure selling standpoint, and you would see the same in the metrics. Although in general our client retention metrics have been pretty good across the board, so we're not seeing anything dramatic in Europe. I think where we're seeing it is more on enrichment and new business. And again, I think that's more of a macro piece than not, and that's where we get pulled down. I think we're frustrated with an interest rate of sub-100, but again, I think a big a part of that is the macro economy.

Yeah, there's no question, Dan, it's tougher sledding in Europe right now than it is in North America, new or renew.

Great. Thanks, guys.

Sure. Thanks.

Your next question comes from the line of Brian Murphy, representing Sidotti & Company. Please proceed.

Hi, thanks for taking my question. Charles, I was wondering if you could give us some sort of updated color on pricing and packaging. I think last quarter you talked a little bit about maybe making some changes there to address the way customers are consuming information. And specifically, I want to know, is there anything going on out there that would fundamentally change or put any sort of additional pressure on pricing, any sort of forces of commoditization out there, any changes at all?

Sure. Okay, Brian. So first thing's first, we did institute a price change a mid-year after the quarter close, so there was no impact in the quarter that we're just reporting. Those new prices took hold at the beginning of this quarter, and so we'll report on that, of course, in future quarters. Those increases, just so you can think about them for your model-- as has been our model in the past, they have been by segment and product. That is not uniform across the board, but selective price changes in various places. On average, those were between about 2 and 6%, and we expect those to hold. That's built into the numbers that we have. To date, discounting has remained in a very tight band, and we don't anticipate that changing.

And with respect to the broader issues about whether we're going to see much bigger pricing, structural changes, in the way that we go to market, I think we'll defer that question for now, but you should anticipate more on that from us in the future. We're doing some very deep thinking on that right now, more than thinking, modeling and discussing. So we'll have things to report probably some time next year. That being said, I don't think that we're seeing widespread commoditization. There's no massive downward pressure on the prices right now. There's no question, of course, that the world is changing and information is more available, but so far, the value of our product is holding up well.

Right. Obviously, if you're able to put through a 2% to 6% price increase, I think things are holding up pretty well. That's great. And just lastly, if you could just update us on your thoughts on capital structure. It looks like you guys are going to be able to consistently generate in excess of $50 million in cash flow from operations. So even with nearly $11 per share in cash and invests on the balance sheet here, you guys, it looks like, are going to continue to build cash. Any thoughts on maybe increasing the dividend, or just any help there would be good?

Sure. So first of all, the current movement, I mean in the last hour or two of stock, we will clearly be buyers of our stock at these price levels, so repurchase will continue, probably in a more aggressive way. The board is scheduled to take up cap structure as they do in the fall with our fall meeting to evaluate both current level of dividend and should we increase it as well as any other options from a cap structure standpoint. And again, as I've said before, they've really ruled nothing out. I think the board has remained open about this. So in the near term, I will tell you at these prices we will be buyers of our stock. The repurchase activity will continue, and the board will meet in our October meeting, and that's typically when we discuss cap structure because it's our first glance at plan and outlook for the next year as it relates to M&A. So it's a chance for them to look at all the pieces and then make some determinations.

Okay. Thanks very much.

Thanks, Brian.

Thanks, Brian.

Your next question from the line of Timothy McHugh, representing William Blair. Please proceed.

Yes, thank you. I just wanted to ask a little more on the sales force turnover. Can you give us either a qualitative or quantitative sense of exactly how much higher than normal it's trending right now?

Yeah, to give you some perspective, Tim, and then I'll let Charles give some color because he's probably to it, but in terms of raw numbers, in the last couple of years, last year in particular, we've been running 15 to 16% turnover in sales. So that's reasonable numbers. We expected a spike up to be in the 20s in the first quarter just as a result of change. I think it's reasonably predictable when you make changes like this that you're going to have some activity, and that's in fact what we saw. What we expected was it would settle back down, and what we're getting is attrition in the mid to high 20s that is only now starting to subside a bit, and that's not what we assumed. We assumed it would subside sooner than it did, so that's really the challenge we're facing. And the delta between a very high teams number and mid to high 20s in terms of reps and lost booking opportunity is where we're seeing the softness. And if you think about the way our model works, now we're hiring back sales, it takes some time to ramp. And so we can cover renewal activity with existing reps, but it's the new business and the growth aspect that we lose as a result of it. And that's what we factored into our guidance. And obviously we're aggressively looking to hire and build back up. In addition, as I mentioned earlier, Charles and I are working on other things we can do from a comps standpoint to, again, bring attrition down on the sales front.

And, Mike, it's Charles. Just to clarify the numbers that you're talking about are annualized numbers for turnover, so not year to date.

Fair point, that's right.

Great. That's helpful. And then just-- in the North American front you said you saw a significant improvement in the productivity. Can you just talk just from separating out the kind of ramp up or the normalization from the sales force turnover that you might have seen there versus the macro environment in North America? Has it become easier or harder to sell the product or to get a renewal?

First the raw data, and I'll let Charles give some more particulars. We were-- in aggregate our productivity for both North America and European reps was down in the first quarter versus prior years, and we expected that because there was so much change, we lost some time. To credit our North American reps, it roared back and closed in on 10% year-over-year growth in the second quarter for North American reps, which is really pretty amazing. They digested change, in my mind, in a spectacular way, and credit to them. And not to discount the European effort because I think they're facing a much more difficult road. They're still trending below prior year levels, Tim, and I think what they're fighting there, which I think almost everyone is aware of, is it's just a touch macro economic situation. And I think they're working as hard as our folks in North America, but it's just a tougher headwind. And I'll let Charles give a little more color there. But I'm happy with what's happened in North America, and I think Europe we're just going to have to be more patient with.

Sure. So I'll add a little bit of color here. I mentioned earlier that we changed quite a bit in the first quarter of the structure, people's territories, their comp plan. Some people got on board with those changes, and some people have not. Those who have not have largely opted out. I think it's important to note, though, that we still believe in all of those changes. As we did the analysis, we believed in it. As we've seen the results here, of course, in the second quarter it's caused us to go back and rethink it, and we've come up with the same answer that says the structure is right. The comp plan, which is all about rewarding growth, it's about rewarding productivity, to Mike's point is the right thing to do for the company. So what we are expecting is that this will subside. In the short run, though, basically you have this sort of bipolar effect. You have people who stayed on board, stayed in their territory, stuck with it. As Mike said, especially in North America, you saw meaningful productivity improvements. It's the aggregate number because of many of those empty chairs that is hurting overall.

Okay. So you're comfortable it's more of a timing issue as related to the sales force turnover than some sort of underlying change in the demand environment or the competitive environment.

Correct. That's our assessment.

Okay. And then last numbers question. Do you have a sense of events for the year now? I know you said Q3, but for the full year?

Yeah, we do. We are looking at 28 events for the year. That compares with 19 a year ago, Tim. One thing I'll factor in here, when we picked up Springboard last year, they run a number of events, smaller events, for Asia Pacific. So I always caution people not to look at it as a big proportionate bump. We picked up a number of smaller events last year. We picked them up mid-year. We now have a full year of those events. But we've ramped up events in a meaningful way. The bulk of those occurred in Q2, with 15 events. We dropped to three in Q3, and then we've come back up to nine events in Q4, just to give you some perspective.

Okay, great. Thank you.

You bet.

We have no further questions at this time. I would now like to turn the call back to Mike Doyle, Forrester's chief financial officer, for closing remarks.

Great. And thanks, everybody, for joining our call. George and I will be out on the road during the course of the quarter, so we look forward to seeing all of you. And thanks again.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.