Forrester Research Inc (FORR) 2012 Q4 法說會逐字稿

Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO. Mike Doyle, Forrester's Chief Financial Officer, and Mike Morhardt, Forrester's Chief Sales Officer.

George will open the call. Mike Doyle 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 March 27, 2013 and can be accessed by dialing 1-888-843-7419. Or internationally 1 603-652-3042. Please reference the pass code 5077393 pound key.

Before we begin I would like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates, or similar expressions are intended to identify these forward-looking statements. These statements are based on the Company's current plans and expectations and involve risks and uncertainties that could cause future activities and the results of operations to be materially different from those set forth 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 the policy in any forward-looking statements. Whether result of new information forward events or otherwise. I will turn the call over to George Colony

Thank you for joining the call. I will give a quick recap of 2012 followed by a look ahead to 2013. I will then introduce Mike Morhardt, Forrester's new Chief Sales Officer who will say a few words about sales, and following Mike's remarks Mike Doyle our CFO will give a full financial update. We will then take questions.

I would like to start off by quickly summarizing 2012. As I talked about on the Q3 call, we took the Company through a series of transitions last year. While many of these changes positioned Forrester for long term success there were execution miscues, primarily in sales. Revisions to sales compensation, territories, and accounts increased sales force attrition and lowered productivity, ultimately resulting in attenuated sales results.

We undertook some complex changes too quickly generating internal friction that ultimately slowed down not only sales, but associated elements of the business. These moves lowered our bookings in 2012, and as you know those results now flow through to the 2013 plan and guidance. Despite the problems of the year our renewal rates remained strong throughout 2012.

We continue to have impressive new business wins including Johnson Controls, Ralph Lauren, and Random House. Large companies continue to need what Forrester creates. Technology and marketing executives remain challenged by emerging dynamics like the web-to-app transition, mobile engagement, and integrated customer experience. At the world economic forum in January, I was once again struck by how many global CEOs know Forrester and use our research in their operations.

So yes, there were some bumps in 2012 but we are addressing our challenges and fixing our problems. The opportunity remain large and the brand remains strong.

I would now like to turn to our plans for 2013. More specifically I want to address four areas. Number one, company leadership. Two, growth. Three, differentiation, and finally, four, the use of capital.

Turning first to leadership. For 2013 we have streamlined the executive team to speed up operations. Tom Pohlmann, the Company's Chief Marketing and Strategy Officer has dedicated his team tone insuring that we say aligned to our long-term goals, and continue to build out the role-based strategy. His efforts will sharpen our decision making and our execution.

Mike Morhardt, who you will hear from in a few moments has taken control of the sales organization. Mike has decades of experience in the syndicated research business and has a strong vision of how Forrester will build a world class sales force. He has done much in his first 90 days at the Company.

Mike Doyle who many of you know personally has expanded the CFO role to become a more active player in the day to day operations of the Company. I'm energized and excited to be directly leading the Company again and I feel very well supported by operationally strong heads of strategy, sales and finance.

I would now like to turn to areas of growth in the Company in 2013. While revenue is expected to grow just 1% based on 2012 sales, we are planning to increase bookings by 8% to 10% in 2013. Head count in the sales force will expand by 10% and that is lower than our long-term rate of 15% to 20% but exceeding our increase of 6% last year. Growth in sales this year will shift revenue upward in 2014.

The Company will grow its technology and social footprints this year. Following the launch of the new Forrester.com in March of 2012 traffic downloads and return visits trended upward throughout the year. There were nine new releases of Forrester.com in the last nine months.

We are intensifying the update schedule to make the site easier to use and more valuable to our clients. This will drive increased visits and usage. We are also planning continued growth for our social technology.

Analysts' blog posts had over 592,000-page views and over 33,000 user recommendations in the fourth quarter of 2012. There are now 102,000 members of Forrester's role communities and that is up 213% in 2012. Our goal is to aggressively promote social membership in 2013.

I would now like to turn to the Company's differentiation and this is manifested on several levels starting with data. As you know, Forrester's research is uniquely based on nearly 20 years of consumer research and we brand this as consumer techno-graphics. We fielded 43 surveys in 2012 with a total of 330,000 completed responses and that is a number we expect to increase to 420,000 in 2013.

Our consumer data now covers 21 countries in North America, Europe and Asia. Our research now extends to urban China, urban India and also to Russia. Techno-graphics data informs many research streams.

As an example, Forrester's customer experience index, or CXI, rates 154 brands across 14 industries for quality of experience. Hotels and retailers ranked highest with internet service providers and health insurance providers ranked lowest. Customer experience professionals, CMOs and other roles use this research to refine products and to benchmark against competitors.

In 2013 we are focused on enhancing and adding to our proprietary data models. Specifically, we are launching consumer online communities to gather qualitative insights from buyers, you'll need more of the why behind their behavior and attitudes. Because Forrester possesses decades of longitudinal data our uniqueness in the consumer data space cannot be replicated.

A second area of differentiation lies in our play book approach to solving clients' problems. Unlike reports which give a snapshot in time, play books uniquely guide companies through each phase of an initiative, discovery, planning, acting and optimizing. Examples of currently available play books include the marketing mix optimization play book -- this helps CMOs coordinate media platforms -- and the CIO's mobile engagement play book, step-by-step advice for the CIO on how to implement an effective mobile strategy. 39 complete play books are now live.

Our library of play books will double in 2013 and the number of tools associated with play book reports will expand by 50% during the year continually increasing the value and application of play books to clients specific challenges. And unlike traditional research content, play books will be continually update and refreshed keeping them relevant at all times.

A third area of differentiation is our ability to help executives in technology and marketing working together. Challenges like mobile and customer experience require the synchronized actions of technologists and marketers in large companies. Only Forrester is positioned to facilitate this collaboration.

I would like to finish up now with a short discussion of Forrester's use and management of capital. As you know, our business model yields healthy levels of free cash flow. Over the last several years we have taken steps to return excess cash to shareholders in the form of stock buybacks, a one-time dividend and an ongoing dividend.

Our goal is to do -- our goal has been to increase shareholder value through more efficient management of our assets. Our cash position at year end 2012 was $243 million. On the Q3 call we announced that our board had approved a $100 million buyback to be executed over a 12 month period. The board has now increased this authorization by $50 million.

We are now revising our time table and we expect through an accelerated buyback strategy to purchase between $100 million to $150 million of our shares by the end of the second quarter. Our goal is to build a balance sheet that typically carries between $50 million and $100 million in cash. These funds will be used for ongoing operations, new initiatives and acquisitions.

In addition we expect to continue to deliver cash back to shareholders through our ongoing dividend and share buybacks. So to conclude, while our financial guidance for 2013 may be modest, we are making many of the right moves to position the Company to achieve its long-term goal of 15% to 20% revenue growth and a sustained operating margin of 17% to 19%. This year will be one of stabilization which will put us in position for accelerating growth in 2014 and 2015.

I'm now pleased to introduce Mike Morhardt. And Mike is the new CSO at Forrester. Mike has a very distinguished record in research sales and I'm very glad that he has chosen to join Forrester and to lead sales for the Company. Mike?

Thanks, George. As George mentioned, I joined Forrester in mid November. I joined the firm for many reasons. But chief among them is my belief that the brand, the products and the IP are incredibly strong.

The market opportunity is enormous, but the execution specifically within the sales organization was sub par. I viewed it as an opportunity to impact a business based on my previous experience. Since I have joined, my belief in the organization and the market opportunity has not changed.

We have a target rich environment to improve sales productivity. Clients need us and the market opportunity is as big as ever. We are making the necessary changes with more to come. Shortly after I joined we began to work on some of the challenges we faced in 2012.

I would like to highlight some of them and how we are addressing them. They are sales attrition, client transition and territory design. First off, sales attrition. In 2012 the sales force attrition was a serious issue.

This attrition had significant impact on Forrester reaching our sales productivity and bookings goals. The primary driver for the sales force turnover was an overly complex sales compensation plan that was put in place at the beginning of 2012. While some adjustments were made mid year of 2012 the damage was already done. Open head count drove poor productivity which led to poor second half results.

To address this attrition we needed to fix the comp plan. So shortly after I joined we were able to pull together a group of key personnel to review the different sales compensation options. The result was a new, simpler comp plan that was well received by the sales organization.

The sales force now has a detailed understanding of how they will be paid and how to [overchieve] their number. Very early indications are that attrition has fallen in every area of the sales organization. We will need to do more to ensure that we continue at these levels. The second challenge we faced in 2012 was client transition.

As George mentioned the sales organization went through a major reorganization in 2012 which led to roughly 55% of our clients and prospects being transferred between sales people. This caused issues around our retention, enrichment, and new business results.

To address this issue we eliminated all client transitions unless approved by me. The rules surrounding client transitions are now in place and the number of transitions since I have joined has dropped into the very low single digits. This will allow sales people to develop stronger relationships with their existing clients, improve retention and enrichment opportunities. This will also allow sales people to develop over time stronger more predictable new business pipelines.

The third immediate challenge that we faced was the deployment of our sales headcount. Territories were not designed to drive optimal amounts of growth per sales person. Essentially we were not placing our bets on the best opportunities for growth. We have now adopted a process to review each and every head count and to begin to deploy our sales talent in the markets with the greatest opportunity. This will be an ongoing process that we will dedicate a significant amount of time and resource.

In closing the market for Forrester's services is as strong as ever. Our results in 2012 reflect the sub-optimized strategy and execution that led to poor performance. The silver lining here is that the result of this performance was the result of self-inflicted wounds that are correctable. We are focused on stabilizing the sales organization and building out our team to take advantage of this tremendous market opportunity.

I want to thank you for your time and I would like to turn it over to Mike Doyle.

Great. Thanks very much, Mike. I will now begin my review of 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 2013. Please note that the income statement numbers and reporting of pro forma and 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 utilized an effective tax rate of 39% for pro forma purposes. The actual effective tax rate for the full year of 2012 was approximately 19.3%. For the fourth quarter Forrester met revenue pro forma operating margin and EPS guidance.

Our key customer retention metrics continue to perform at healthy levels and our balance sheet remains strong with cash and marketable securities increasing 7% from December 31, 2011. As George and Mike mentioned in their comments the ambitious changes we implemented with the sales organization in the beginning of 2012 were not executed effectively, resulting in heavy sales attrition in the first half of 2012. The impact of losing experienced sales reps has a predictable impact on our business in the form of reduced bookings activity, which results in reduced revenue.

The tale on revenue loss can run 12-18 months as new reps ramp to their full potential. The good news is that attrition appears to have peaked in the second quarter and sales hiring has picked up. Our brand and products are strong as evidenced by our client and dollar retention metrics.

Mike has brought stability and discipline to the sales team and we are confident we are back on a path to growth. As we enter 2013 our energy and efforts are focused on sales execution as we believe we have the right products for our clients and the market is healthy.

Now, let me turn to more detailed review of our fourth quarter results. Forrester's fourth quarter revenues increased 1% to $75.1 million from $74.7 million in the fourth quarter. The fourth quarter Research Services revenue increased 3% to $51.9 million from $50.5 million last year and represented 69% of total revenue for the quarter.

We continued to see growth in our largest syndicated products RoleView and leadership boards. Fourth quarter advisory services and other revenue decreased 4% to $23.2 million from $24.1 million in the fourth quarter of 2011 and represented 31% of total revenue for the quarter. The variance of prior year was due to consulting shortfalls resulting from an analyst attrition.

Our international revenue mix was 28% for the period ending December 31, 2012 which is down from 31% in 2011 due to a soft macro economy in Europe and sales changes. I would now like to take you through the activity behind our revenue starting with research. We continued to make progress with developing play books with nine rolled out in the fourth quarter bringing the total to 39. We plan to continue expanding the number of play books available to our clients with the target of 80 plus by the end of 2013.

In the fourth quarter, 260 new research documents were added to RoleView and we hosted 45 webinars with a total attendance of 961. At the end of the quarter the top three research roles were the Applications, Development and Delivery with 4,826 members, Market Insights with 4,719 members, and Technology Marketing with 4,043 members. Forrester leadership boards are a peer offering for senior executives achieved year-over-year revenue growth of 5% in the fourth quarter.

At the end of the fourth quarter, the Forrester leadership boards had 1,874 members, down 2% from December 31 of 2011. As George mentioned our data business continues to be a critical part of our value proposition. Our continually refreshed data covers more than 75% of global GDP. This gives our B-to-C and B-to-B clients current and actionable insights on 1400 brands and 300 attributes. It also gives our analysts the most accurate and timely facts they need to drive their research forward.

In our consulting business we saw growth in the total pool of business booked but not delivered. Despite that, we saw consulting revenue decline 6% for the fourth quarter of 2012. The decline in revenue is due primarily to the attrition of analysts. We continue to focus attention on our consulting productivity and structure moving forward.

For events in the fourth quarter we hosted 8 events in the US and Europe. These included three M&S role based events the E-business and Strategy forum in the US, our first Customer Experience forum on the west coast and our first European Customer Experience forum.

We also hosted four business technology role-based events targeting application development and delivery professionals in the US and EMEA as well as forums for business process professionals in the US and EMEA. And finally we hosted a forum for CIOs in the US. During 2013 we will be making a number of changes to our events business with the goal of significantly improving the client experience. We will focus on fewer, better and bigger events with 19 scheduled for are 2013.

I will now highlight the expense and income portions of the income statement. Operating expenses for the fourth quarter were $65 million, up 9% from $59.6 million in the fourth quarter of 2011, due primarily to employee bonus payments which were zero in the fourth quarter of 2011 and reflect a partial payout in the fourth quarter of 2012. Total headcount increased 1.5% as of December 31, 2012, as compared to the fourth quarter of last year.

As of December 31 we had a total staff of 1,236 including a research staff of 432 and a sales staff of 451. Research head count declined due primarily to analyst attrition from our former TI group as well as M&S client group. In M&S, much of the analyst attrition is due to the popularityof the segment and the clients' desire to add staff in-house.

Operating income was $10.1 million or 13.4% of revenue, compared with $15 million or 20.1% of revenue in the fourth quarter of 2011.

Other income for the quarter was approximately $0.4 million which was consistent with the fourth quarter of 2011.

Net income for the fourth quarter was $6.4 million, and the earnings per share was $0.28 on diluted weighted average shares outstanding of 22.7 million compared with net income of $9.2 million and earnings per share of $0.40 on 23.1 million diluted weighted average shares outstanding in the fourth quarter of last year.

Now, I will review Forrester's fourth 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.

As of December 31, 2012 agreement value was $220.4 million, a decrease of 0.3% from the fourth quarter of 2011. For client metrics, as a reminder we streamlined and improved our client count methodology beginning in the second quarter of this year.

Our refined system counts as a single client the various divisions and subsidiaries of a corporate parent and eliminates duplicate references to the same corporation. The system also aggregates separate instrumentalities of federal, state and provincial governments which differs with the past practice for government entities. The change resulted in the combination of entities that were previously treated as separate clients. At the end of the fourth quarter our total for client companies was 2,462, a decline of 1% versus the fourth quarter of 2011.

Client count unlike our retention and enrichment metrics, is a point-in-time metric at the end of each quarter. At December 31, 2012 Forrester's retention rate for client companies was 77% which is down 1% from September 30, 2012 and our dollar retention rate during the same time period was 90%, also down 1% from the prior quarter but remaining at historically high levels. Our enrichment rate was 95% for the period ended December 31, 2012 versus 96% at September 30, 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 closed early or slip into the next quarter.

The rolling 12-month methodology captures the proper trend information. As of December 31, 2012 there were 2.6 rollsper client, flat to the prior quarter.

Now, I would like to review the balance sheet. Our total cash and marketable securities at December 31 were $242.7 million, up $15.1 millionfrom our year end 2011 balances.

We generated $53.1 million in cash from operations during 2012 which is down from $55.4 million from the prior year. We received $11.2 million in cash from options exercised and our employee stock purchase plan for the full year 2012.

For the 12 months of 2012 we repurchased 943,000 shares at a total cost of $29.8 million. For the full year of 2011 we repurchased 527,000 shares at a total cost of $18.4 million. We also paid our fourth quarterly dividend which amounted to $3.1 million or $0.14 per share in the quarter. For 2012 we have paid $12.6 million in dividends.

Accounts receivable at the end of the year December 31, 2012 was $74.6 million, compared to $81.4 million as of December 31, 2011. Our days sales outstanding at December 31, 2012 was 59 days, down from 61 days at December 31, 2011. And accounts receivable over 90 days was 3% at December 31, 2012, down from 5% at the end of last year.

Our capital spending for the fourth quarter of 2012 was approximately $0.3 million compared to $6.6 million during the fourth quarter of 2011. Capital spending for the year was $5.1 million versus $39.8 million for 2011.

If you recall, the 2011 capital spending reflects the investments in leasehold improvements associated with office relocations primarily our new headquarters building in Cambridge. Additionally the prior year includes the investment related to our new website and other customer facing technology.

Deferred revenue at December 1, 2012 was $150.5 million, up 2% over December 31, 2011. Deferred revenue plus future AR, a key indicator of future performance, was up 1% 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.

Before I discuss our outlook for the balance of the year, I would like to talk about our capital structure and our plans to leverage our balance sheet. We believe the long-term prospects of this industry and company are extremely healthy. As such, our first priority remains continued organic investment. In addition to organic investment we continue active exploration of inorganic opportunities, but as we have said before, we believe in the importance of strategic fit and sensible valuation.

At present we believe our balance sheet is more than sufficient to support our short and medium term organic and inorganic efforts. The fundamentals of our business are strong and combined with structural changes we put in place this year to ensure long-term growth we believe our share price is undervalued based on recent performance. We believe that $50 million to $100 million on our balance sheet augmented by short-term borrowing when necessary will support ongoing investment in our business and allow for acquisition opportunities. In order to bring our balance sheet in line with these targets, Forrester's Board of Directors has increased the share repurchase authorization to $150 million, and ask that the Company engage an investment banker to explore alternative means to accelerate the Company's repurchase program.

Our 2013 outlook. Before I get into a more detailed review of the guidance I want to comment again on the impact of the changes implemented in early 2012 on the sales organization. At the beginning of 2012 we had 260 quota carrying sales reps. Of the 260 quota carrying reps, 239 were fully ramped, meaning they were on board completely trained and carrying a full quota.

At the end of June, 2012 we continued to have 260 quota carrying reps, however, due to attrition only 214 were fully ramped a significant change when an average fully ramped sales person carries a quota in excess of $1 million. By the end of 2012 we increased quota carrying reps to 274. More importantly, 239 of them were fully ramped reps, a significant bump from mid year and returning to prior year levels. This dynamic can't be underestimated as we look at revenue projections for 2013. We are continuing to build our sales team and attrition continues to decline which will result in stronger bookings and revenue as the year progresses.

Now, I would like to review our guidance for 2013. 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 $2.3 million for the full year 2013.

Stock-based compensation expense of $1.9 million to $2.1 million for the first quarter and approximately $5.7 million to $6.2 million for the full year 2013.

Reorganization costs of $1.5 million to $1.8 million for the first quarter and full year 2013. And investment gains and losses.

For the first quarter of 2013 we are aiming to achieve total revenues of approximately $66 million to $69 million. Pro forma operating margin of 5% to 7%. Pro forma income tax rate of 39%. And pro forma diluted earnings per share of approximately $0.09 to $0.13.

For the full year we are targeting total revenues of approximately $290 million to $298 million. Pro forma operating margin of between 9.5% and 10.5%. Other income of approximately $0.8 million. A pro forma income tax rate of 39%. And pro forma diluted earnings per share of $0.79 to $0.86

We provided guidance on a GAAP basis for the first quarter and full year 2013 in our press release and 8-K filed today.

Thanks very much for listening. I will ask Mike to join George and me for the question and answer portion of the call. I will now turn the call over to the operator to begin our Q&A

Thank you. We will now begin the question and answer session. (Operator Instructions). Timothy McHugh from William Blair is on the line with a question.

Yes, thank you. First just to be clear that the updated guidance does not include, I'm assuming, the accelerated buyback that you might pursue the middle of this year?

That's correct, Tim. Our weighted average shares outstanding essentially assumes that we would continue normal open market purchases in a more aggressive way than we had done in 2012 but does not reflect anything that might occur as a result of engaging the banker and coming up with a more accelerated program.

Okay. And then, Mike, just wanted to ask if you could give us a little bit of view of what have you -- what have you come in that surprised you or what have you done that really changed the course -- some of the things you described are things, I think, we had heard from management in terms of needing to fix the comp model and have less cover exchanges for people. They had talked about that. Were they on the right path when you came in or are is there anything that you came in and said we should be doing differently?

I think there was multiple things that were a little bit surprising when I first joined. I think the thing that stuck out at me at first is they did make some material changes to the comp plan but I didn't think it went far enough. The core of this issue is sales attrition and for a sales person to be effective and to be happy they have to understand how they are going to get paid and it was even in its form at the second half of 2012 it was pretty complex. And we brought in a lot of the sales organization into the conversation so when we did release it we knew we were releasing it to a group that was knowing what they were going to get which was great.

There are pieces that around territory management and territory design that differ quite a bit from the way I have looked at things which is getting sales people closer to their clients, to ensure that they are able to build those relationships. There is a bunch of changes that we'llmake on the new business side and how we go after new business. So, those are some of the bigger things. A lot of those things have begun.

We are going to spend a lot more time making decisions based on actual analysis in the sales organization. I think it was done in other parts of the organization to be fair I think a lot of the decisions that were made were based on hunches and maybe some prior experience with another organization.

Okay. That's helpful. On the sales comp model I think the -- some of the thought process behind some of the old changes was that there wasn't enough variability between high performers and low performers and that people got compensated too much just for renewal activity. How does the new comp model look relative to that? Did you continue that kind of theme or along those lines what changes?

I think it may have just gone too extreme. Where an individual might work on a series of renewals that might represent of 90% of their overall territory and not get paid a dollar on it. Until you hit a certain threshold that was when you were going to get paid a greater percentage.

Depending on how your territory was laid out for the year you could run into some significant cash flow issues if you didn't have renewals set in a particular quarter it could cause some cash flow issues for the sales organization. We may have is smoothed it out a little bit. Make no mistake we are going to and continue to reward those reps that perform at the highest levels. They will make a great living. This was more about as they are trying to get through the course of the year the cash flow associated with this particular comp plan caused some big issues which resulted in the attrition issue.

Okay. And then just, the expectations for 2013, the bookings growth and the sales force growth were about the same implying you don't expect much of an improvement in sales productivity. I guess you are just hoping it stabilizes during the next year. Is that fair?

I'm hoping that it is going to get better. And I think some of the things we have already done around client transition, some of the things that we are doing as far as trying to move our sales teams closer to their clients, we will see results on that. But to be fair, I think one of the things we have to do is we have to do a more detailed analysis of where we are going to place our bets. We don't want to make some of the same mistakes of the past and place people where we think there is a good opportunity.

We want hard data that tells us this is the optimal territory for this person to be successful. We are also -- I put a stop to hiring for a brief period so that we could take a look at our hiring practices and how we were sourcing these particular sales people that were joining us and wanted to ensure that who was coming through the door, one, they were the right people. Two, that we had the right training program. And three, that we could give them an opportunity for them to be successful. And some of those pieces were missing at various levels.

In fairness, Tim, the way our targets and guidance are built those assume I would say a modest level of productivity improvement. Not a significant jump and I think, frankly, that was one of the other things that we layered on to the sales team last year that added to the headache in addition to all of the other changes we did at the beginning of the year. The idea is go slow, focus on the execution. The momentum will build and ideally to Mike's point we beat that and the results get better. But think in terms of setting the stage the targets assume modest levels of the productivity and not dramatic improvements.

Okay, great. Thank you.

Dan Leben from Robert W. Baird is on line with a question.

Great, thanks. Again for Mike. Help us understand and reconcile the slowing client transitions with the proper deployment of sales people. Is the deployment issue more about new hires (inaudible) the current base and help us understand the central conflict there?

So, one of the things that the sales organization went through last year is that we talked about the comp plan but there was a material change in individual territories. And so it got them off to -- and that change didn't take place until after Q1 because they were allowed to call on their old territories for a period of time. And so is what we wanted to do is make sure we got off to a fast start so we didn't make any changes to individual territories. That remained stagnant so to speak so that they could -- the territory they had on December 31 was going to be the one that they were going to have on January 1 and allowed them to get it off to a fast start.

As we move forward we will start to change people's territories with the following caveats in place. Which is, if somebody should leave or if a territory becomes too largewe will introduce a new person into that particular market and that is not necessarily breaking any rules around client transition because if they were leaving or being promoted that is a natural transition that would take place. We also are trying to purify the types of accounts so that the sales people can become more effective in who they are calling on. Many of the reps right now have a combination of both users and vendors as part of their territories, and the more we can simplify it to one type of client that they are calling on the more effective they will be.

And so is as we approach some of these markets we are looking to purify that. And the conversation there would be a much more thoughtful transition for the client letting them know you have somebody specialized in their type of client and that we'd do it post renewal and we'd do it in a thoughtful way with the client aware of what we were trying to accomplish.

Great. And then just at a high level if I'm a sales person at Forrester and I want to end up with a good number for the year, how am I thinking about focus between going out and bringing in new clients and cross selling and improving enrichment versus maintenance. Do I have to do all the pieces? Can I really focus on one or the other? Help me understand what that dynamic looks like?

To be fair, people can do it a number of different ways and people do. The most successful reps realize it is easier to get an existing client to spend with you and to ensure that you get that renewal. You don't want those dollars going out the door. Most people approach it, and a more successful rep approach those renewals and make sure they are solidified and then look for opportunities within those organizations to enrich, whether new buying centers or additional products to the same buying center.

We do have a new business team that focuses on new logos, and we are in the process of reviewing those teams and how they are deployed and where they are most effective and over time there will probably be changes on how they focus on this new business opportunity. We want them focused where they will have the greatest impact and shortest sales cycle. There is different types of sales roles and how you get to your numbers depending on that role.

In most cases the sales people that have been most is successful realize that client retention is absolutely critical and that if you built that client retention you have a greater likelihood of being successful and hitting your number.

Great. And then for Mike Doyle I know you don't like to dig into the metrics too much but have you taken a look to see what the client enrichment and retention numbers look like in the 45% of the client base that didn't change sales reps?

Actually that is a good question, Dan. I would say a couple things. It is interesting if we look internally and I'm going assume this is a good surrogate for peeling back enrichment, but if we look at clients where are we had the best bookings growth and what the old space was, it was still primarily our vendor business which we didn't change much. The way the sales organization worked -- the emerging business which is primarily our vendors had a great year.

Kelley Hippler I think was on the last call that you guys heard from. She had a great year and I think a part of it was I think she is a phenomenal sales executive but is a piece of it is we had very little change in account reps and clients and I think that helped us a lot. That is where we saw our best metrics.

So I think that Mike is absolutely spot on in terms of what our challenges are and by stopping this and bringing ourselves to sort of back to some sanity and not changing out clients we are going to get the kind of improvement and enrichment that we need, and retention. I think there is something to it Dan and certainly as we looked at it and peeled back better bookings about performance always correlates nicely with people who didn't transition at all.

Great, thanks, guys.

Thank you.

(Operator Instructions). Brian Murphy from Sidoti & Company is on line with a question.

Hi, thanks for taking my question. Mike, on the guidance for Q1, looks like the guidance implies the worst sequential decline in revenue since March of 2009. When I look at the, -- the numbers September to December of 2012 it looks like things stabilized and actually turned up a little bit in the fourth quarter and you had mentioned that the attrition had spiked mid-year. So I'm just trying to reconcile why things seem to be improving here in the fourth quarter and why they would start to deteriorate in the March quarter. Was there anything around the September quarter renewal cycle there?

No, I mean nothing -- not anything around there, Brian. I think where we are nervous a little bit on consulting at one time continues to -- we are I think taking a cautious posture there. It is always difficult to figure out how the first part of the year is going to play out. And no, I didn't see anything that in the fourth quarter that would suggest that is creating the issue. It is more as we look at it trying to play out our performance.

It's really just being a little cautious around consulting and one-time revenue and we will see where that plays out. We have given ourselves a little bit of a wider berth and it is -- it is a tough one to break. Syndicated is what it is. That is as we build out our targets particularly in the first quarter we have a pretty good handle on where that is going be. It is really around the [one] time.

Thanks very much.

Thank you.

(Operator Instructions). Vincent Colicchio from Noble Financial is on the line with a question.

On the research side is there anything you have done to try to address the attrition and should we expect that to improve early next year?

Good question, Vince. What we did, we did a number of things and similar to on the sales side we took a hard look at compensation as being the first place to look. And we did make changes to variable compensation for our research, for our analysts around a program we used to call pay-for-performance and we modified that I think in a way that has been well received by our research community.

So that went into effect beginning in January. So I think we absolutely have made moves there. And I think that is, frankly, going to pay some benefits. I don't know George in you have anything from the research front.

I think that the fact that the compensation for research is now more individual based and there is less risk, I think that is going to help. I also think that, just an uber view of this is just confidence in the Company. I think with Mike arriving a very good kickoff in January which many people in research were involved in. Think there is a general feeling of confidence returning to the research staff and I think that is going to help retention as well.

On the competitive landscape has there been any response to this from your competitors to try to take advantage as you go through this rough spot?

They take advantage --

As much as they he can.

Vincent, we used to grow -- when we were growing at 60% a year they were saying they are growing too fast and that is a disadvantage. You always expect it. This is not our first rodeo. We are -- we like to compete. We like to be competed against and it just comes with the territory

An observation I would have, and I will let Mike add to it. An observation I would have when I look at despite what we did to our clients in some respects by changing out a significant number of their sales reps the fact that the client retention metrics are so good speaks volumes to the brand and research and products that we deliver. I think from our perspective now with Mike coming on board and bringing stability and now a client is going to have a rep that they had a year ago and we continue to build that relationship. We have a lot of room to go. Not so say we don't have a very aggressive competitor, but the reality of it is even in our darkest moments our client retention metrics are still holding up extremely well. We're moving in the right direction and we will further solidify the relationships with what Mike is doing.

From my standpoint, I'm rather inspired by our competitors. They are all doing quite well. Our market is obviously healthy. There is great demand for the type of products that we create and we are in it a good business and so I appreciate that.

Thanks, guys.

Thanks, Vince.

We have no further questions. Mr. Doyle, do you have any final remarks?

No, thanks very much, everyone for joining the call. Obviously we will be out on the road and meeting with investors and trying to continue to bring more -- basically give you better view into what is going on for 2013. So thanks very much.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.