Forrester Research Inc (FORR) 2013 Q2 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, Michael Morhardt, Forrester's Chief Sales Officer, and Michael Doyle, Forrester's Chief Financial Officer. George will open the call, Michael Doyle will follow George to discuss our financials, Michael Morhardt will then follow Michael Doyle to discuss sales. We will then open the call to Q&A. A replay of this call will be available until August 24, 2013, and can be accessed by dialing 1-888-843-7419. Or internationally, 1-630-652-3042, please reference the passcode 9233923 pound.

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 expert, believe, anticipates, intends, plans, estimates, or familiar 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 certain future activities and results of the operation 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 the reports and filings within 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 turn the call over to George Colony.

Good afternoon and thanks for joining Forrester's Q2 conference call. I will spend a few minutes reviewing the quarter, after which Mike Doyle, our CFO, will give a full financial update. Mike Morhardt, Forrester's Chief Sales Officer, will say a few words about sales, and he will then join Mike and me for questions and answers. While the Company exceeded its operating margin and EPS for the quarter, the work of streamlining and strengthening our business continues. The results of this effort will not be quick, and they will not be without periodic setbacks. Q2 proved this to be true as bookings were on target through much of the quarter, and then weakening towards its conclusion. Mike Morhardt's efforts to transform the sales force efforts continue, but much more remains to be done. His efforts are a work in progress.

There were bright spots in Q2, including Asia-Pacific and North American new business. In addition a Head of European sales is now onboard, an important step in uniting and motivating the EMEA region. I am pleased to announce a new edition to the team, Lucia Quinn has joined us as our new Chief People Officer. With 30 years of business experience, Lucia has led high-performing global HR teams, most recently at Boston Scientific, and at ConvaTec. At both companies she was a member of the Executive Committee reporting directly to the CEO. Forrester as you know, is a people-intensive business that requires a high level of hiring, development, and organizational division. Lucia has right portfolio of strategy and people management to guide the Company through its current transition towards a period of higher revenue and head count growth. Her positive impact is already evident within the Company.

I would like to turn to changes we are making in our consulting business. As you know, Consulting constitutes approximately 25% of Forrester's revenue. We sell two consulting products. Advisory Consulting, this is one or two days that typically accompany a RoleView contract, and Project Consulting, engagements this can last weeks or longer. Today both types of consulting are delivered by the analyst staff.

As our Project Consulting business has grown, it has absorbed a larger percentage of analyst time. As you look into expand this business over the next three years, it has become clear that the Company must billed a dedicated staff that will exclusively deliver project consulting. We believe that this will number one, focus our analyst staff on the creation of syndicated research, improving those products. Two, improve the quality of project consulting. Three, increase profitability in our consulting business and four, make it easier to scale our project consulting business to match demand.

In our new model, project consultants will carry subject matter expertise aligned to Forrester's role research teams. All projects will continue to be research-based building off of the ideas, analysis and data featured in RoleView. This strategic shift was planned in 2012, and the transition has been ongoing since January 1, 2013. Our plan is to have 21 consultants on board this year. We have hired 17 to date. This change will take place over a 24-month period concluding at the end of 2014. While Project Consulting will be performed by the new PC group, analysts will continue to perform advisory consulting. This transition is one example of how the Company is driving better alignment between lines of business and sales, and I will keep investors updated as the transition progresses.

On last quarter's call, I outlined four market imperatives that are shaping what Forrester calls the age of the customer. This is an era where empowered customers are engaging with businesses on their own terms. In this age, corporations must field brilliant customer experience. Forrester believes this is the best path to competitive advantage. Perversely, 90% of companies acknowledge that the customer experience is a top strategic priority. While our research and data show that only 3% of companies actually deliver excellent customer experience.

In June we hosted the largest event in Forrester's history. The Forum for Customer Experience Professionals which we held in New York City. Through keynote speeches and track sessions, attendees learned how to move their customer experience programs to the next level, whether they were starting from scratch, or in the midst of a transformation. Speakers included the Director of Customer Experience for Audi of North America, The Chief Marketing and Customer Experience Officer of Walgreens, and the Global head of Luxury at Lifestyle Brands at Hilton Worldwide.

In the age of the customer, Forrester's opportunity is widening. I was with the CEO of a multi-national CPG firm in Paris several weeks ago, who told me that his biggest challenge is keeping up with his digital and increasingly demanding customers. And he was having a very difficult time aligning the marketing and technology functions of his business. In his case, an old line, IT-centered CIO was holding back change. These problems are not uncommon, and they are a directly in Forrester's strike zone. All of this demonstrates Forrester's distinct differentiated position in the market, helping marketing and business technology executives work together to win in the age of the customer.

I wanted to give an update on our Dutch auction which we held during the second quarter. Forrester purchased 2.1 million shares at a cost of $75 million. Since the auction terminated, the Company has purchased approximately 500,000 shares in the open market, at a cost of $19 million.. We have reduced our shares outstanding to 20.2 million shares. Forrester currently holds $188 million in cash investments on its balance sheet. In the absence of any other demand on our capital, such as an acquisition, we expect to continue to buy on the open market as we move toward our target goal of carrying approximately $50 million to $100 million of cash.

In conclusion, the age of the customer represents an extraordinary opportunity for Forrester. But taking full advantage will require the Company to stay dedicated to the tasks at hand, improving our leadership, sales, and our products. Streamlining and strengthening our business. We have much work to do, and as I noted at the beginning of my remarks, the path forward will not be linear or totally predictable.

Thank you very much for your time today. I would now turn the call over to our CFO, Mike Doyle, who will give a financial update for Q2. Mike.

Thanks, George. I will now begin my review of financial performance, Forrester's second quarter results, the balance sheet at June 30th, our second quarter metrics, and the outlook for the third quarter and full year of 2013.. Please note that the income statement numbers I am reporting are pro forma, and exclude the following items,Amortization of intangibles, stock-based compensation expense, reorganization costs, and net gains and losses from investments. Also for 2013 we will utilize an effective tax rate of 39% for pro forma purposes. The actual effective tax rate for the second quarter of 2013 was approximately 39%.

For the second quarter, Forrester met its revenue and exceeded its pro forma operating margin and EPS guidance, driven by continued strength in our M&S business and tight cost controls. In addition we completed a successful Dutch auction during the second quarter utilizing approximately $75 million to purchase approximately 2.1 million of Forrester shares. We had a number of positive developments during the quarter. However as George mentioned, our bookings activity started strong during the quarter, but softened towards the end of the quarter. You see this evidence by both AV and deferred revenue plus future AR down approximately 5% versus the prior year.

My experience with meaningful changes in an organization, is that they rarely follow a perfect upward trajectory. As you make process and organization changes, the realignment effort can result in periodic disruption. The changes we are making in our sales and consulting organizations will result in a more productive and dynamic sales engine for Forrester, and I am encouraged by the progress we have made.

Now let me turn to a more detailed review of our second quarter results. Forrester's second quarter revenue decreased 1% to $78.2 million from $79.1 million in the second quarter of 2012.. Second quarter research services revenue decreased 1% to $50.5 million from $51.1 million last year, and represented 65% of total revenue for the quarter. The decline was driven by a shift in our data business which has seen an increase in one-time revenue, and a decrease in syndicated revenue, excluding data, research services revenue is flat to prior year.

Second quarter Advisory Services and other revenue decreased 1% to $27.7 million from $28 million in the second quarter of 2012, and represented 35% of total revenue for the quarter. The variance to the prior year was mainly a result of growth in our M&S consulting business, offset by a slowdown in our BT consulting business. International revenue mix was 25% for the period ending June 30, 2013, which is down 27% in 2012 due mainly to ongoing sales challenges in Europe.

I would now like to take you through the activity behind our revenue, starting with research. We continue to make progress with developing playbooks, with a net of 7 rolled out in the second quarter bringing the total to 58. We plan to continue expanding the number of playbooks available to our clients, with a target of surpassing 80 by the end of 2013. In the second quarter, 244 new research documents were added to RoleView, and we hosted 51 webinars with a total attendance of 1,652. At the end of the quarter, the top three research roles were application development and delivery, with 6,882 members, market insights, with 4,625 members, and enterprise architecture with 4,399 members. Forrester leadership boards, our peer offering for senior executives, experienced a year-over-year revenue decline of 2% in the second quarter. As of June 30, 2013, Forrester leadership boards had a total of 1,886 members, down 4% from June 30 of 2012.

Our data business continues to be a critical part of our value proposition. Our continually-refreshed data now covers more than 80% of global GDP and technology spending. This gives our B-to-C and B-to-B clients current and actual insights on 1,400 brands and 300 attributes. It also gives our analysts the most time accurate and timely facts they need to drive their research forward. On a year-over-year basis, revenue increased by 1% for the second quarter. Our consulting business declined by 3% versus prior year in the second quarter, driven by softness in BT consulting, and was partially offset by continued strength in M&S.

The second quarter continues to be the busiest time for our events business. We hosted 13 events across four locations in the US and Europe. These included our largest and fastest growing event held the Forum for Customer Experience Professionals held in New York, which experienced a 20% attendance increase this year. Our Forum for Marketing Leaders in Los Angeles, and our CIO Forums held in Washington, DC and London rounded out our events calendar. We have implemented many changes into our event business already in 2013, with the intent to significantly enhance the client experience. We will continue to focus on better and bigger events, with a total of 23 Role-based Forms now scheduled for 2013.

I will now highlight the expense and income portions of the income statement. Operating expenses for the second quarter were $67.4 million, up 2% from $65.8 million the prior year,due mainly to increased compensation from higher head count and bonus payouts returned to planned levels in comparison to the second quarter of 2012..

Overall head count increased 2% as of June 30, 2013 compared to the same period last year. At the end of the second quarter, we had a total staff of 1,235, including a research staff of 442, and a sales staff of 469. Research head count was flat versus prior year, and also as compared to March 31, 2013. Sales head count increased 7% versus prior year and was up 2% from March 31, 2013, as we continue to build out our sales team. Adding to this positive trend, sales attrition has come down from peak levels in 2012, even as we have become more diligent about managing performance.

Operating income was $10.7 million, or 13.7% of revenue, compared to $13.3 million, or 16.8% of revenue in the second quarter of 2012. Other income for quarter was approximately $300,000, which was up from $100,000 in the second quarter of 2012. Net income for the second quarter was $6.7 million, and earnings per share was $0.31 on diluted weighted average shares outstanding of 21.7 million, compared with net income of $8.2 million and earnings per share of $0.36 on 23 million diluted weighted average shares outstanding in the second quarter of last year.

I will now review Forrester's second quarter metrics to provide more perspective on the operating results for the quarter. Agreement value,this represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized. As of June 30, 2013, agreement value was $211 million, a decrease of 5% from the second quarter of 2012. As of June 30, 2013, our total for client companies was 2,451, up 9 from the first quarter, but down 4% compared to the second quarter of 2012. Client count, unlike our retention and enrichment metrics are a point in time metric at the end of each quarter.

Forrester's retention rate for client companies was 76% as of June 30, 2013 which is a decrease of 1%, one point from the March 31st, 2013, and our dollar retention rate during the same time period was 89%, also down 1 percentage point from the prior quarter. Our enrichment rate was 95% for the period ended June 30, 2013, unchanged from the first quarter. 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 the next quarter. The rolling 12-month methodology captures the proper trend information. As of June 30, 2013, there were 2.2 roles per client, a decline of 16% from first quarter, driven by the role consolidation that George previously announced in first quarter calls. This which reduced our total roles served from 17 to 13.

Now I would like to review the balance sheet. Our total cash and marketable securities at June 30 was $187.6 million, down $55.1 million or 23% from our year end 2012 balances, which reflects healthy operating cash flows offset by a significant repurchase of our shares totaling $92.1 million for the first six months of 2013. For the quarter we generated $1.8 million in cash from operations, which is down from $4.5 million in the prior year. We received $9.1 million in cash from options exercised and our employees stock purchase plan for the second quarter of 2013. We also paid a dividend in the second quarter which amounted to $3.1 million, or $0.15 per share.

Accounts Receivable at June 30, 2013 was $39.8 million, compared to $47.5 million as of June 30, 2012. Our Days Sales Outstanding at June 30, 2013, was 47 days,down from 55 days at June 30, 2012.. And Accounts Receivable over 90 days was 5% at June 30, 2013, which is flat compared to the same period of prior year.

Capital spending for the second quarter of 2013 was approximately $300,000 compared to approximately $800,000 during the second quarter of 2012. Deferred revenue at June 30, 2013 was $136.8 million, up 2% over June 30, 2012. Deferred revenue plus future AR, a key indicator of future performance, declined 5% 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.

Let me talk about capital structure. As I mentioned earlier, we completed our modified Dutch auction tender during the quarter. We successfully repurchased approximately 2.1 million shares at a price of $36 per share. In addition, post the Dutch auction we repurchased approximately 500,000 additional shares with an average price of $36.20. We will continue to be opportunistic with share repurchases going forward, and remain committed to achieving our targeted cash level of between $50 million to $100 million by year end. Given our current cash levels, more likely we will be closer to the $100 million level. In addition we have said before, we will consider short term borrowing when necessary to support ongoing investment in our business, and allow for acquisition opportunities. We remain committed to enhancing our shareholder value.

As I mentioned in my opening remarks, while we met or exceeded our guidance on revenue or EPS for quarter, we are gaining traction at a slower than anticipated rate on the changes we have made to our organization. We had projected our bookings growth for 2013 to be in the range of 8% to 10%. However given the slower start to the first half, we are now projecting bookings growth in the low single-digit range for 2013. While transient agreement value and deferred revenue indicate that we still have work to do to return to growth, confidence in our sales leadership and our product differentiation strategy remain high, and we firmly believe that we were on the right track. Further cash flows and the balance sheet remain healthy, and we succeeded in returning value to shareholders through our Dutch auction.

Now I would like that 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 third quarter, and approximately $2.3 million for full year 2013. We expect stock-based compensation expense of between $1.6 million to $1.8 million for the third quarter, and approximately $5.7 millionto $6.2 million for the full year 2013. We expect reorganization costs of $1.9 million for the full year 2013. And our guidance excludes investments in gains and losses.

For the third quarter 2013, we are aiming to achieve total revenues of approximately $67 million to $70 million. Pro forma operating margin of 6.5% to 8.5%. A pro forma income tax rate of 39%, and pro forma diluted earnings per share of approximately $0.13 to $0.17. For the full year our guidance remains unchanged, and we are targeting total revenues of approximately $290 million to $298 million. Pro forma operating margins of 9.5% to 10.5%. Other income of approximately $800,000. A pro forma income tax rate of 39%. And pro forma diluted earnings per share of between $0.79 and $0.86. We have provided guidance on a GAAP basis for the third quarter and full year 2013 in our press release and 8-K filed today.

Thanks very much, and I am now going to call the call over to Mike Morhardt, Forrester's Chief Sales Officer.

Thanks Mike. As George mentioned, we continue to improve the sales organization methodically, building a more mature performance-driven culture marked by greater accountability and discipline. But more work needs to be done. After five months of solid progress, on this dip like we saw in the final month of Q2 was disappointing, but it is not unexpected. This had more to do with the lack of execution versus any market conditions. We know exactly where the problem areas are, and we are addressing them with both short-term and long-term fixes.

From the start, our sales strategy is centered around three key areas of focus. One, geographic sales expansion. Putting sales people where our clients are located to develop stronger relationships. Two, operational discipline,bringing more analytics and data into our decision making and driving consistent execution. And three, improving overall sales force productivity through a more robust training engagement and management. We continue to drive each one of these initiatives. Make no mistake, we are seeing progress. For example, discounting has dropped 3.9% year-to-date, and 5.2% in Q2 quarter-over-quarter and year-over-year.

Our geographic sales expansion continued, as we added local coverage in 7 new cities. After six months, we have hired two key leaders into the sales organization. In June, our Head of European sales, [Alex Harp] joined the team. Also in June, our Head of Sales Analytics John Thorsen came on board. Both will be instrumental in driving strong performance. We also launched a revamped new hire training program, and there is more training for existing reps in Q2. In Q3, we are launching more training for our tenured reps, and also a sales management training program.

Our evolution is well underway. But in some cases, we are developing new skills as an organization. From recruiting in new geographic markets, to embracing a more professional client engagement model, these processes require new organizational muscle memory. If you work out, you know that building muscle means putting in the hard work day-by-day, week-by-week, and month-by-month. We are on the right trajectory, we know what we need to do. We also realize that we cannot do this alone, so we are keenly focused on driving alignment across our research and consulting organizations. This alignment is a key focus for Forrester as a whole.

I remain very bullish about the market opportunity and the strength of the Forrester brand. After eight months in this role, I am more convinced than ever that we are in the position for growth. Thanks very much, and I am going to ask George and Mike to join me for the Q&A portion of the call. I will now turn the call back over to the operator.

Thank you. Operator: We will now begin the question and answer session. (Operator Instructions). We have Tim McHugh from William Blair on line with a question. Please go ahead.

Yes, thanks. First I guess just to drill into the comments about the sales activity late in the quarter. I think Mike you made the comment, you know where the problem areas are. Can you elaborate a little more? I guess specifically in terms of what were the problem areas? Is it concentrated by geographic area, or experienced versus new sales people, and any more color there would be helpful.

Sure, Tim. If I was to characterize what we will saw in June in particular, in one particular area we saw consulting demand actually outpace our ability to deliver on that demand. Our inventory of analysts and new consultants to be able to actually deliver on some of the consulting opportunities that we had in Q2, so those were pushed out, and in some cases we weren't able to deliver on bringing that bookings in. We did push some business both renewals and enrichment into Q3. And then I would say overall, we saw both on the new business and the enrichment side, some of the pipelines weren't mature enough for us to harvest those in June.

So there wasn't necessarily a major geographic change in performance. We saw some great performance in Asia pack. We continue to see under performance in Europe up about that wasn't a major contributing factor. And then in North America, it was pretty consistent across the board. From a ten-year perspective, I would say it was pretty consistent based on the demographics of our sales organization. We saw the more productive reps were more tenured, which there wasn't anything out of line on that level.

Okay. And I assume when you say you pushed out some stuff, that was the client driving that activity, not choices by your sales people?

On the enrichment and say the renewal pieces, that was the client driving it out, and some of the consulting issues were more that we had demand in specific areas of consulting, where we weren't able to deliver consulting proposals, or be able to execute on those consulting opportunities because we didn't necessarily have the inventory of analysts or consultants to deliver it.

Okay, thank you. On the new delivery model, or I guess partial new delivery model for the consulting in terms of the project activity, how widely are you looking to staff up that consulting base? Are you looking to be cover gamut of your research, or are you approaching this more so from the marketing side versus the BT side?

Tim, George here. The initial move in the first eight months is going to be into four roles. Two roles on the M&S side, two roles on the BT side. By the end, we will then move role-by-role following the first eight months. By the end of next year, we will have consultants in 12 of the 13 roles we will have full consultant staffs. We are choosing the roles with the highest demand to staff first.

Okay. And do you have a sense if you were to build this fully out, how many consultants would you be adding as part of this?

It will be between 65 and 80, in that range. We are currently at 17. The goal for the year is 21.

Okay, thank you.

Good, thanks Tim.

We have Vincent Colicchio from Noble Financial on the line with a question. Please go ahead.

George or Mike, I think you said, Mike, that Europe was down, international down was down 25%. Why was Europe as weak as it was? Is there any other color you can provide?

I apologize. I will clarify, Vince. Europe in general international is a percentage of our revenue mix, declined from being 27% of our mix to 25% in the quarter this quarter versus a year ago. It wasn't a 25% decline. Our softness is though, our softness is in Europe to Mike's point. I don't think it is out of line necessarily with what we have been experiencing but it certainly is the reason for our decline in our percentage of revenue coming outside of the US. Asia PAC is performing well for us to Mike's point. I think that you know what is going to happen is Alex Harp is on board, our new Head of Sales for Europe and gets settled in, we will work through it. Clearly our intent is to get the energy and growth back in our European business, and I think the market is there. I think we have opportunity, but I think it is still a work in progress very much in Europe

So Vince, George here. On Europe, there are sort of two downs and one up on Europe. I have been therea lot in the last quarter. The down is that Europe continues to tighten belts. Every company that I visit with, budgets are very tight. They are trying to get, Europe is trying to right itself by being very tight with its money, which I think is a mistake. We see that on the companies, that money is very tight and budgets very tight, that is the down. An up in Europe, is that all of the digital challenges that I talked about facing the customer areright in the faces of those companies, so there is just as much impetus for them to move towards digital in Europe, as we see in the US, so that is a good one for us. Then on the down side, Mike can probably talk about this in more detail, we just haven't had leadership in Europe, in European sales over the last two years

So as we mentioned, Alex has joined us. In fact he just left for Europe last night. We are going to be evaluating over the next couple of months our best approach, along with the other sales leaders and research and development leaders in Europe, as well as the best approach for targeting Europe. There has been some good news in Europe. We have seen retention rates actually grow in Europe with our clients, so that is a good sign, but we have a lot of work to do.

And why was the leadership, the Forrester leadership board business weak? Any color there would be helpful as well.

Sure. Vince, it is Mike. Basically we have got a split going on that we saw in the quarter, which is our M&S board business is very healthy and growing, and our traditional BT business is off for the quarter. And that is a work in progress. I think we are putting a lot of energy. It is a project that George is putting some time and energy against now to try to get that righted, so we are seeing great activity in the M&S boards, and BT is lagging a bit. We have got to get that revived.

General comment, Vince about BT and that is we very to show more differentiation in that space. We have a very smart and a very powerful competitor in that space. We have to show more differentiation. I would watch this space with us over the next couple of quarters.

George, a couple for you on playbooks. Number one, what kind of feedback are you getting? Also if you can remind us when the development will be complete? And I was curious if the changing of analyst activities will have any impact on the timing of the rollout?

The timing of the rollout has not changed. We will be fully complete by the end of this year, Vince. We will be at 75 by the end of the year. We are currently at 50, did you just give the number?

Yes, I did. It is 57-ish or 58-ish.

So we are on target, Vince to meet the full complement of playbooks by the end of this year. Feedback has been excellent around playbooks. Customer, we have a measure called CXi, which is how we measure customer satisfaction. It has shown very good uptake of playbooks. It is a good differentiation from our competition. It is as I have talked about it before on these calls, it solves kind of the big pile of research problem, where a client will search on a cloud, and we would get back 1,000 hits. Now we have very well-built playbooks, which can take the client through all aspects of the life cycle of implementing cloud. So very good feedback here. I don't know if there are any other comments in the room.

This is absolutely right thing to have done with our contacts.

Okay, thanks, guys.

Thanks, Vince.

(Operator Instructions). And we have Bill Sutherland with [EG] on line with a question. Please go ahead.

Thank you. The sales head count, do you have the number of quota bearing reps at the end of the quarter there?

I knew you would do that to me, Bill. (laughter).

I assume it represents most of the increase in sales staff?

Yes, and I think that is correct. I mean that has been our focus this year. Our quota carrying reps inclusive of advanced for the end of the quarter. Hold on one second.

While you are doing that, in general, Mike, are you thinking of getting to close it that 10% target, in terms of rep expansion for the year?

Yes, Bill, it is Mike Morhardt. Yes, we are. The first half the year if you are looking at sales head count specifically, and quota bearing head count, we saw a couple of things take place, you saw voluntary attrition actually drop, which is good new, we needed that to drop. We saw performance management actually increase. I think that was more a reflection as we ramp upour recruiting efforts and our sales expansion effort, managers were doing a lot more interviews, and provided a greater level of courage to have conversations with some of our lower-performing reps. So there was probably a little bit of a shift in the traditional amount of performance management we did in Q2.

That being said, we have ramped up our sales expansion efforts considerably. I mentioned an individual who was in charge of our sales analytics team. He is in the process of building our territories. We are targeting that 10% but we want to do it thoughtfully, and we want to make sure that we are not breaking client relationships as we do that

So Bill, just now that I have had the chance to shuffle through my papers, quota carrying reps are 280 in core, plus 13 event reps, 293 on the quarter. And to giving you the deltas, the event sales reps are up one, and our quota carrying that sits sort of directly in Mike's world went from 274 to 280. Okay?

Okay. How many total event reps do you have just, so I have the math right?

13 event sales reps. 280 quota-carrying reps that are non-event, but sit in.

Okay. Great. Mike Morhardt, you mentioned you added seven new cities. So how many markets are you covering now? I have guess that is just North America?

It is primarily North America. There was some addition in Asia PAC and Europe, but this was as we look at the transition of the sales organization where we were incredibly Cambridge-focused, we have seen expansion on the West Coast, both in LA and Seattle, in the Midwest, in the Southeast, we are looking to just try to move reps closer to our clients, and develop those stronger relationships, not only that but also have an effect on cost of sales.

So you don't really have a target, I mean it is just going to work according to whatever the sort of the client mix is, and how productive you guys are feeling the business is at that point?

We are targeting 10% as far as the growth, and where we are expanding is based on a massive number of amount of data that we are leveraging to find out the best territories possible. So what does the ideal territory look like relative to the amount of AV, amount of contracts that they cover, and amount of growth associated with it. So we are prioritizing those and hiring in those particular markets, but if somebody were to leave within the organization, we try to leverage that movement within the sales organization to add another territory, where we think it is going to what is going to drive the most growth

Right. And just so I understand this execution that you refer to, where June didn't come in where you wanted. That was mainly in consulting, right? Because it sounds like the renewal and enrichment delays, that was a client pushing, a pushout. Is that the way to think about it?

Yes, it was mainly in consulting, but make no mistake, we are keenly focused on our renewal rates, and when clients push business, we want to understand that. We are trying to get under the covers. The consulting piece, again those deals, some of them were, there was a great demand for, in particular areas specifically on the M&S side, and we weren't necessarily able to deliver on that demand, which we are trying to rectify right now. The second piece, yes, as clients move some of the business out, some of that will recover in July and August. But we introduced a client engagement model where we are trying to get much more predictable about our retention.

So I guess I am just trying to connect the dots. It feels to me like even though, a little air pocket in the booking department, it wasn't really A, it wasn't in syndicated research so much, and B, I feel like you are going to have the organization in place to a large degree to be ready for the big selling season, and I am curious why you pulled back the bookings target to low single-digit?

But from my end, Bill, this is Mike Doyle. We are doing the whole Mike thing. I think the mix piece in performance in the first half , as I look at it overall, I am just looking at it saying, okay, we are behind in the first half where we wanted to be. And I think I am sort of anxious to see, okay, so how quickly can we ramp, can we fill some of these voids on the analyst side of that would enable Mike to deliver on some of that? So I think I am trying to be cautious. We do not want to get ahead of ourselves, as we sort of work our way through this whole transition, and again I think we are doing all of right things. I think we are making the right kinds of progress but I am trying to keep from getting too far ahead of ourselves in terms of how we are thinking about the business. If everything goes right, and we are well lined up by the time we hit the fourth quarter, maybe that changes a bit but I can't change what happens in the first half. Year-over-year it is difficult to change what happened in the first half.

Sure. And then George, if the demand for consulting as you build out the project group, sort of grows accordingly, is there a revenue mix change that potentially occurs? As far as syndicated versus advisory?

Yes, not anticipated. Project consulting should grow at the rates commensurate with research. So our target is still 70% syndicated, 30% non-syndicated, Bill. To make sure everyone understand this on the call, that one of the reasons we are building the Project Consulting group is to give us more flexibility. Mike talked about the fact that there is so much demand for a lot of the M&S consulting at the end of the quarter we couldn't meet. Given the Project Consulting structure, we are going to have more flexibility to move people where the heat of light is.

But that all being said, we do not anticipate any change in the mix. I think the other benefit we get from is as you begin freeing up analyst time, Bill, Mike talked about enrichment. In our calls as we have said, we haven't been satisfied where that is headed. Analysts were an active part of helping us in that selling process, so it will actually help steer for more choices indicated, they would be freed up and have more time to do that. I agree with George, I don't think we're going to back off of our target which is the 70/30 split. I think what we hope to do is to be able to accelerate our growth as a result of this, and get back to what we can get back to a normal growth pattern.

Just to reiterate here. Very simply stated, we are doing this improve the quality of consulting, and to improve the quality of our syndicated products. We can get both by taking some structure.

Makes sense. Okay. Thanks, guys

Thanks, Bill.

And we have no further questions. I'll now turn the call over to Mike Doyle for closing remarks.

Okay. Thanks very much everybody for joining the call. We certainly appreciate it. We look forward to seeing you as we get out on the road over the course of the quarter, and share kind of our progress against the story. So thank you, and have a great day.

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