Forrester Research Inc (FORR) 2013 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; Michael Morhardt, Forrester's Chief Sales Officer; and Mike Doyle, Forrester's Chief Financial Officer. George Colony will open the call. Mike Doyle will then follow to discuss our financials. We will then be joined by Michael Morhardt and open the call to Q&A.

Please note that this call is being recorded. A replay of this call will be available until March 14, 2014, and can be accessed by dialing 1-888-843-7419, or internationally 1-630-652-3042. Please reference the pass code 9233923 #.

Before we begin, I would like to remind you that this call will contain forwarding-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates, or similar expressions, are intended to identify these forward-looking statements. These statements are based on the Company's current plans and expectations, and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Some of the important factors that can cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

I will now hand the call over to George Colony.

Good afternoon, and thanks for joining Forrester's Q4 and full-year 2013 conference call. In my segment of the call, I will outline the Company's plans for 2014. Following my remarks, Mike Doyle, Forrester's CFO, will give a financial review of the fourth-quarter and full-year 2013. And Mike Morhardt, Chief Sales Officer, will join for the question-and-answer session.

In 2013, we strengthened Forrester's foundation. The Company reorganized, creating one research organization and a professional product management group. The Company introduced a new website, making it easier for clients to find and consume research.

The Playbook portfolio neared completion, enabling clients to manage technology through a full life cycle. And, finally, the sale force continued its voyage to improve skills, talent and market knowledge. The 2013 changes have established solid ground that can support the plan for 2014 and subsequent years.

I want to spend time this afternoon on four topics. One, the shift in our strategy towards the Age of the Customer. Two, the build-out of our project consulting group. Three, Playbooks. And finally, four, sales.

And I want to start off with the go-to-market strategy shift. We are in a unique era, what some refer to as the Age of the Customer. Because of the amount of information customers now have at their disposal, the collective power of their social networks, and the multitude of devices they use to engage with brands, it's clear that power has shifted to the customer.

Just being customer-focused, which companies have talked about for many years, is really no longer enough. Forrester's clients need to be customer-obsessed to compete and win in these times. And that means investing in customer insights, and meshing their technology, marketing and customer experience strategies.

Because of this power shift, large companies are rethinking their technology priorities. As an example, by 2017 we expect 30% of total marketing spend to be digital, centered in technology. This represents a doubling in a five-year span to $90 billion in the US alone.

A similar shift is under way in the technology management groups within large companies. When you examine the spending of the CIO and his staff, our data shows that systems of engagement -- and this is technology for winning, serving and retaining customers -- will grow by 13% this year, far outpacing the 4% growth expected in back office and infrastructure spending.

We routinely survey large enterprises to identify their top technology priorities. And five of the top six applications for this year are client-facing, centered in sales, marketing and field service. In fact, 90% of Forrester's CIO clients have told us that a top strategic priority is to improve their company's customer experience.

I have visited with many clients worldwide over the last six months and they have framed the challenges they face in the Age of the Customer. The CEO of a large Asian airline said that, while he's able to provide excellent customer experience on his planes, his company was falling behind his competitors in providing a commensurately high-quality experience in the digital world. And this deficit is beginning to threaten his market position.

The CIO of a large US investment bank told me that, while his IT budget -- that is, money for internal infrastructure -- was under cost pressure, he had unlimited funds for his business technology budget, the systems that win, retain and serve the customers.

I chaired the technology panel at the World Economic Forum this year in Davos, and customer technology was prominently on display. Marissa Mayer of Yahoo! talked about mobile apps. John Chambers of Cisco outlined how the Internet of Things would connect companies to customers. And Marc Benioff outlined sales' efforts to put advanced technology in their consumer products.

The Age of the Customer demands that CMOs work hand in hand with the CIO to create the best possible solutions for customers. Because Forrester serves both marketing and technology executives, and we have worldwide data on customers, we are uniquely positioned to help companies in this new era. Forrester's newly-simplified structure, with one research organization serving both marketing and technology management professionals, will enable us to help our clients with the systemic challenges of delivering a synchronized marketing and technology solution that can win, retain and serve.

Let's look at mobility as an example. Forrester can array the research and advice that informs everything from mobile commerce to mobile branding for the CMO in her organization, to mobile app development and mobile security for the CIO in his organization. Then you add our data products -- Technographics and ForecastView -- and we alone can provide deep insights into the attitudes, behaviors and conversations of both consumers and business buyers globally.

In the 30-year history of Forrester, there have been three, maybe four opportunities as important or rich as the Age of the Customer. It doesn't matter if you're in financial services, insurance, cars, healthcare or energy, the increasingly powerful customer will change your business. And Forrester will be there to insure that our clients can thrive in this new era.

I now want to switch gears and say a few words about consulting. As I've mentioned over the past two quarters, we continue to hire consultants who are dedicated to performing projects for our clients. And, as a reminder, we're doing this to, number one, focus our analysts on improving the quality of syndicated research; two, to improve the quality of our project consulting offerings; and, three, to make it easier to scale our consulting business to match demand.

I'm very pleased to report that the new organization is performing beyond our expectations. Consulting client satisfaction, as measured by our customer experience index, has reached new highs.

Project consulting ran ahead of expectations in the fourth quarter 2013 and it has gotten off to a very strong start for 2014. Collaboration between research and consulting as an area of potential conflict has been well navigated by Cliff Condon, Head of Research, and Victoria Bough, Head of Consulting.

Finally, we have been able to attract highly talented consultants in our first year of hiring. And this wave has accelerated the professionalization of our nascent practice.

The growing team is able to take on larger projects. And it has widened our bandwidth to perform breakthrough work in the Age of the Customer space. As an example, the group recently completed a project for a major US consumer package goods company that assessed its mobile offerings and recommended how it could build technology for intensifying interactions with customers.

As of year-end 2013 consulting headcount was at 60. The numbers plan to grow to 79 people at the end of the first quarter, putting us on track to have a full roster of 114 professionals by the end of 2014.

I want to take a moment to update you on the progress around Playbooks. As you know, Playbooks are sets of research that take our clients through the life cycle of a challenge. And this research product is unique to Forrester. The 13 reports that encompass a Playbook give clients direction on how to discover, plan, act on and optimize technology projects.

We currently have 64 play books live on Forrester.com, double the amount we had at this time last year. Of the eight different types of research, clients consistently ranked Playbooks as the number one or two most helpful. Playbooks help Forrester's clients navigate the Age of the Customer. Examples include the Customer Loyalty Playbook for customer insight professionals, and the Contact Centers For Customer Service Playbook for application development professionals.

We now enter the second stage of our Playbook content strategy. All Playbooks will be updated on a continuous basis. They are designed to be living reports. Every year a small number of Playbooks will be retired, replaced by a new line-up of relevant entries. We expect to have a total of 72 Playbooks live by the end of 2014.

Turning to sales. At this time last year, Michael Morhardt had just taken control of the Forrester team. While his work is certainly far from being complete, he has made significant strides in 2013 to improve his group's performance.

Under Mike's leadership, attrition in our quota-carrying sales reps has dropped from 29% in 2012 to 24% in 2013. This is still not where we want to ultimately operate but we are on a path to our target.

Discounting has dropped significantly in 2013, a manifestation of Mike's strong control over sales procedure and discipline. Mike has changed the hiring profile to insure that his new reps are located close to their customers. And we've already seen this tactic improve the productivity of this new wave of salespeople.

So, in summary Mike had a busy but productive first year. His experience and operational expertise are just what Forrester required, and I'm excited to watch his performance in 2014.

As a final note, I'm happy to report that we purchased $118 million of shares in 2013 and that's up from $30 million in 2012 and $18 million in 2011. Our share count has fallen from 22.3 million at the end of 2012 to 19.8 million shares at the end of 2013.

We have reduced the amount of cash and investments on our balance sheet from $243 million in 2012 to $155 million at the end of 2013. And we continue to make progress toward our goal of ultimately carrying $100 million of cash on our balance sheet.

So, in conclusion, 2013 was a year of hard work as we reinforced the foundations of the Company. We are all very excited to be moving to a year during which we will build on that foundation, helping our clients win the Age of the Customer, completing the buildout of our project consulting business, leveraging our Playbook advantage, and continuing the work of building a world-class sales organization. We certainly have much more work to do but we are confident that we are on the right path.

Thank you. And I'd now like to turn the call over to Mike Doyle, Forrester's Chief Financial Officer. Mike?

Thanks, George. I'll now begin my review of the financial performance for Forrester's fourth-quarter and full-year results, the balance sheet at December 31, our fourth-quarter metrics, and the outlook for the first quarter and full year of 2014.

Please note that the income statement numbers that I'm reporting are pro forma, and exclude the following -- amortization of intangibles, stock-based compensation expense, reorganization costs, acquisition-related costs, and net gains and losses from investments. Also, for 2013, we utilized an effective tax rate of 39% for pro forma purposes. The actual effective tax rate for the full year was approximately 36%.

For the fourth quarter and full year, Forrester met its revenue and exceeded its pro forma op margin and EPS guidance. Strong performance in our advisory services business drove revenue growth, while expenses remained in line with expectations.

More importantly, about one year ago, when I was reviewing where we stood after 2012, I indicated we had a lot of work ahead of us. I spoke about the adverse impact of the 2012 sales pivot, and how it would take 12 to 18 months to rebuild the sales organization. And gave guidance with caution for the full year of 2013.

I'm going to talk about the sales rebuild, which is showing real progress later in my comments. Relative to the full year 2013 guidance we gave back in February of last year, I'm pleased to report we're at the upper end of that revenue guidance, and exceeded the operating margin and EPS guidance we provided you back then. Given the busy year we had as a Company, with our new website, expansion of Playbooks, and the project consulting organization, as well as the headwinds we faced in Europe, it's a very satisfying result.

Bookings continued to improve in the fourth quarter relative to the fourth quarter of last year, with most of our markets maintaining the positive momentum we saw in the third quarter. We definitely saw our sales organization getting better traction in the second half of the year, with performance improving in five of our seven sales groups. We continue to see economic and execution headwinds in our European operations which are adversely impacting performance. Fortunately, growth in North America and Asia Pacific is helping to offset declines in that region.

We continue to remain active on the share repurchase front, although we experienced a slower rate of repurchase activity in the fourth quarter relative to previous quarters. That said, we completed a record year for repurchases of the Company, which I will discuss in more detail in a few minutes.

Now, let me turn to a more detailed review of our fourth-quarter results. Forrester's fourth-quarter revenue increased by 3% to $77.5 million from $75.2 million in the fourth quarter of 2013.

Fourth-quarter research services revenue decreased 1% to $51.4 million from $51.9 million last year, and represented 66% of total revenue for the quarter. The decline was driven by an expected contraction in our syndicated data business. Excluding data, research services revenue grew by 1% compared to the fourth quarter of 2012.

Fourth-quarter advisory services and other revenue increased 13% to $26.1 million from $23.2 million in the fourth quarter of 2012, and represented 34% of total revenue for the quarter. This was fueled by strong growth in BT consulting and advisory services, but also supported by more moderate gains in our marketing and strategy consulting and in our events business.

International revenue mix was 27% for the period ending December 31, 2013, which is down from 28% in 2012. US revenue increased by 5% for the period. International revenue, despite continued strong growth in Asia Pacific, only increased by 1%, driven by continued challenges in Europe.

I'd now like to take you through the activity behind our revenue, starting with research. We come into 2014, as George mentioned, with 64 role-based Playbooks live to clients. These Playbooks will be refreshed annually to insure the most relevant content is available to our clients.

Over the course of 2014 we plan to add eight more Playbooks based on this year's market imperatives, such as mobile mind shift. In the fourth quarter, 288 new research documents were added to Role-View, and we hosted 40 webinars with a total attendance of 1,007. At the end of the quarter, the top three research roles were Application, Development and Delivery, with 6,274 members; Enterprise Architecture with 4,376 members; and the CIO Council with 4,199 members.

Forrester Leadership Boards, our pure offering for senior executives, achieved a revenue increase of 1% year over year in the fourth quarter, with healthy growth in M&S Leadership Boards partially offset by declines by BT Leadership Boards. As of December 31, 2013 Forrester Leadership Boards had a total of 1,755 members, down 6% from December 31, 2012. Declines in BT membership were partially offset by growth in marketing and strategy membership.

Our data business continues to be a critical part of our value proposition. We survey over 400,000 consumers in 21 countries representing 80% of global GDP, and over 60,000 businesses in 10 countries representing 66% of global IT spending.

This data provides our B2C and B2B clients with actionable insights on issues ranging from enhancing social media strategies, to developing and deepening brand equity, to aligning sales and marketing with customer demand. It also gives our analysts the most accurate and timely facts they need to drive their research forward.

On a year-over-year basis, revenue decreased by 6% for the fourth quarter due mainly to the phasing out of our Tech Marketing Navigator product. Elements of this product will be incorporated into our Foresights product in 2014.

In our consulting business revenue for the fourth quarter increased by 12% versus prior year. BT advisory, BT project consulting and M&S project consulting all experienced double-digit growth for the quarter due to analyst productivity improvements and achievement of our plan and consulting headcount additions, which George mentioned earlier.

Turning to our events business, Forrester hosted five forums in the fourth quarter. In the US, we held a joint forum for CIOs and CMOs, and events for application development and delivery professionals, e-business and customer experience leaders. We ended the year with a sold out European customer experience forum in London. Despite holding fewer events, increases in total attendance and sponsorship resulted in a revenue increase of 9% compared to the fourth quarter of 2013.

I'll now highlight the expense and income portions of the income statement. Operating expenses for the fourth quarter were $71 million, up 10% from $64.5 million in the prior year, due mainly to increased compensation from higher headcounts in sales and research. Overall headcount increased by 4% as of December 31, 2013 compared to the same period last year.

At the end of the fourth quarter, we had a total staff of 1,288, including a research staff of 475 and a sales staff of 485. Research headcount was up 10% versus prior year and up 2% as compared to September 30, 2013.

Our sales team continues to expand, with headcount increasing by 5% versus prior year and by 2% compared to September 30, 2013. Sales rep headcount increased by 9% compared to the fourth quarter of 2012, though fully ramped sales rep headcount grew at only 7%. This reflects an increased level of late hiring compared to 2012.

Sales attrition achieved its lowest level in the last eight quarters, though we remain diligent about managing performance. Although we got off to a slow start, we were successful in achieving targeted headcount levels in sales and in research by the end of the year, including our planned additions to our project consulting team.

Operating income was $6.5 million or 8.4% of revenue, compared with $10.6 million or 14.2% of revenue in the fourth quarter of 2012. Other income for the quarter was $32,000, down from $404,000 in the fourth quarter of 2012.

Net income for the fourth quarter was $4 million. And earnings per share was $0.20 on diluted weighted average shares outstanding of 20.3 million, compared with net income of $6.7 million and earnings per share of $0.30 on 22.7 million diluted weighted average shares outstanding in the fourth quarter of last year.

I'll now 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, 2013, agreement value was $216.5 million, a decrease of 2% from the fourth quarter of 2012.

As of December 31, 2013, our total for client companies was 2,471, down 9 from the third quarter, but up 9 compared to the fourth quarter of 2012. Client count, unlike our retention and enrichment metrics, is a point in time metric at the end of each quarter.

Forrester's retention rate for client companies was 73% as of December 31, 2013, a decline of 3 points from September 30, 2013. And our dollar retention rate during the same time period was 86%, also down 3 points from our prior quarter. Client retention was adversely affected by shortfalls in our European and data businesses.

Our enrichment rate was 97% for the period ending December 31, 2013, up 2 points from September 30, 2013, which is encouraging. 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 December 31, 2013, there were 2.4 roles per client, unchanged from September 30 of 2013.

Now I'd like to review the balance sheet. Our total cash and marketable securities at December 31 were $155.1 million, down $87.5 million, or 36%, from our year-end 2012 balances, which reflects a significant repurchase of our shares totaling $118.2 million during 2013.

Cash from operations was a negative $1.6 million for the quarter as compared to a positive $10.4 million in the fourth quarter of last year. The decline is due to lower earnings year over year, as well as a lower accounts receivable balance entering the fourth quarter of 2013 as compared to the prior year.

We received $2.9 million in cash from options exercised in the fourth quarter of 2013. We also paid a dividend in the fourth quarter which amounted to $3 million or $0.15 per share.

Accounts receivable at December 31, 2013 was $77.5 million compared to $74.6 million as of December 31, 2012. Our days sales outstanding as of December 31, 2013 was 92 days, which is consistent with December 31 of last year. And accounts receivable over 90 days was 4% at December 31, 2013 compared to 3% at December 31, 2012.

Our capital spending for the fourth quarter of 2013 was $1.1 million compared to about $300,000 during the fourth quarter of 2012. Deferred revenue at December 31, 2013 was $152.9 million, up 2% over December 31, 2012. Deferred revenue plus future AR, a key indicator of future performance, was flat compared to the prior year. Our future AR balances are amounts to be invoiced in the future for clients with multi-year deals or scheduled payment turns.

I want to close my discussion with some comments on capital structure and guidance. As I mentioned earlier, we spent a record level to repurchase Forrester shares in 2013. During the year we repurchased $118 million of our stock, representing approximately 3.3 million shares. This is up from approximately $30 million in 2012 and $18 million in 2011.

We remain committed to driving shareholder value and are happy with what we accomplished during 2013. Our stock price rose over 40% during 2013. And when you include the dividend, the overall return was approximately 43%. This compares favorably to both the Russell 2000 and the NASDAQ for the same period.

In addition, today we announced that we will increase our ongoing quarterly dividend 7% from $0.15 a share to $0.16 per share. Despite this aggressive level of repurchasing our shares, we ended the year with approximately $155 million in cash, above our targeted level of $100 million. We will continue to be opportunistic with share repurchases going forward, as we look to drive our cash towards our targeted $100 million level. In addition, we have said before we will consider using our cash and short-term borrowing when necessary to support ongoing investment in our business and allow for acquisition opportunities.

As I mentioned in my opening remarks, we met our guidance for revenue for the quarter and full year, and exceeded our guidance for operating margin and EPS. To reinforce George's point, we're seeing real signs of improvement from the changes we made in 2013. I was encouraged by the progress made by the sales organization in the second half of 2013, with steady improvement from five of our seven sales teams.

The expansion of our project consulting organization and the transition of our research teams to focus on short-term advisory consulting has already had a positive impact. Both project and advisory consulting had solid performances in Q4 and performed above expectations.

We continue to demonstrate the ability to manage our operating expenses to fund the necessary investments in our business while delivering results in line with expectations. As we move into 2014, we've remained somewhat cautious with our revenue guidance as we complete the buildout of our consulting organization and enhance our data products. We will keep you updated as the year progresses and update our guidance quarterly to reflect the progress we are making with these important initiatives.

Now I'd like to review our guidance for the first quarter and full year of 2014. As a reminder, our guidance excludes the following -- amortization of intangible assets, which we expect to be approximately $500,000 for the first quarter and approximately $2.2 million for the full year 2014; stock-based compensation expense of $1.7 million to $1.9 million for the first quarter, and approximately $7.5 million to $8 million for full year 2014; and any investment gains and losses.

For the first quarter of 2014, we're aiming to achieve total revenues of approximately $70.5 million to $73.5 million, pro forma operating margin of 5.5% to 7.5%, pro forma income tax rate of 38%, and pro forma diluted earnings per share of approximately $0.12 to $0.16. For the full year, we're targeting total revenues of approximately $304 million to $312 million, pro forma operating margin of 9.5% to 10.5%, a pro forma income tax rate of 38%, and pro forma diluted earnings per share of between $0.93 and $1 per share.

We've provided guidance on a GAAP basis for the first-quarter and full-year 2014 in our press release and 8-K filed today.

Thanks very much. And now I'm going to turn the call back over to the operator for the Q&A portion of the call.

(Operator Instructions)

Timothy McHugh.

Yes, thanks. First, you mentioned five of the seven areas picked up sales. What didn't? And of the five that picked up, are any stronger than others?

I'll start with the positive, Tim, instead of the negative, so we keep it on an up note. And then we'll cover the ones that slid a bit.

We have three groups within North America, all of which did extremely well -- both our new business teams as well as our East division and our West division. Both pretty much have been consistently pounding away, growing and growing. Then Asia Pacific, which has been strong pretty much all year long, they've really had a really great year. And then our events business which picked up really well.

I would say Europe had an up and down year. We had a good third quarter, and then the fourth quarter slid backwards. So, we're still fighting some headwinds there. And then, to a lesser degree, but some of our larger premier accounts, we had some activity in the fourth quarter that caused us to slip a little below what our expectations were.

So, I would say some of our larger accounts in Europe are the drag right now. And then the other five that I mentioned really have had some nice momentum in the back half. And some of those teams have had good momentum throughout the year.

And then is most of the bookings growth coming on the marketing side?

It's an interesting split, Tim. I would say that we highlighted, for example, on our FOB business that, yes, M&S versus BT, that's the case. I think, in general, that's the trend.

But what's interesting is if you look at consulting, and I think we highlighted more on the revenue front, but some pretty healthy activity on the BT side on consulting. So it's a mixed story. Still more shading towards overall M&S is stronger and is rebounding at faster rates than our BT business across the board. But within that, we're seeing some interesting signs of positive things in the BT business, as well.

Tim, this is George. If you look at the tech management space, our expectation is that, as Forrester focuses more closely in tech management on business technology -- that is, the technologies to win, serve, and retain customers -- that we will see a turnaround in that business in 2014 and 2015. As I said in my remarks, many of these CIOs and even with CEOs, they lean in when you start to talk in those terms.

The old IT infrastructure business, that's very critical to these companies, but that's an area of cost pressure and cost reduction. The area of BT is one of cost expansion, really. So, I think it's going to help it turn around in 2014 and 2015.

Okay, that's great. On the consulting side, given where agreement value finished, and then the expansion of the consultant base, is it fair that we should expect this year consulting to be growing faster? And I'm assuming you've embedded this in the margin but just to understand the dynamics, what's the margin impact differences as you see faster growth on the margin, on the consulting side?

First, I do think consulting is going to grow faster in this term. I think that in 2015, you're going to see that what I call shift again. The analogy George likes to use internally is that consulting is about six months to a year ahead of what we're doing on the product and research side.

We ended the year really well. And I expect that that's going to continue. And it certainly has impacted our margins in 2014 because we are continuing to hire aggressively in consulting. So, in aggregate, the headcount is going to almost double down again in consultants by the time we end the year. So you've got people ramping up producing towards the tail end so it does impact our margins in the near term.

I think, and our view is, in the long run this is going to be a much more efficient model. We're opening up our research teams who want to do a little bit more advisory, should they choose to do that. But, more importantly, build out their research content, and provide more support to sales.

So, our view is that we're going to get much better top-line growth. I think we're not walking away from our 70% target on syndicated. I think in the near term you're probably going to see us shift a bit towards the consulting and advisory side in 2014. But then I think it's going to turn itself back around in 2015 and we'll start marching back towards that 70%. But in aggregate, with the overall top line growing in 2015 and beyond at double digit rates, healthy growth in consulting and in research.

Is the target still to get to agreement value growth in the double digits by the end of the year? Or, given where you're starting in terms of new bookings, is that a stretch?

Our targets are still that by the end of the year we're going to see that we're going to move to high single-digit to double-digit growth in the back part of the year. Yes, that's still the game plan. The theory is we're going to start cautiously and slow, and momentum will build.

As I referenced in my comments, and I'm not sure it was clear enough, we got to our planned sales headcount but it was much more back-end loaded than we had originally hoped. So, those folks are still ramping in the first part of the year. So, I think where Mike's going to start getting some rhythm -- and I'll let him comment briefly if he wants -- but when he's going to start getting rhythm on that group that came in in the back part of this past year in 2013 is going to be in the back half of 2014.

Okay. And then last question, Mike. What did you assume in terms of share buybacks in the guidance? Is the share count is flat? Did you assume more buybacks?

We assumed that we're going to see a slight down tick in overall share count. So what I used, the share count that I quoted was the fully diluted share count of 20.3 million -- the diluted weighted average shares of 20.3 million. I expect that that's going to drift below 20 million before the end of the year. The share count George used was just the basic weighted, the 19.7 million. But either way, we're going to march our way down. Not dramatically but we expect that it's going to continue to come down a bit.

Okay, thank you.

Vincent Colicchio from Noble Financial.

Yes, I'm curious, Mike. How large is Europe now to the Company? And you said in the fourth quarter you had some weakness with a few large customers. I'm wondering so far in the new year if you're seeing the environment improve at all, because some of the tech companies are saying they're seeing a better environment.

I'll just give you an approximate on Europe for us, Vince. And then I'll let Mike probably talk to the environment.

Europe, all-in, it's going to be a little north of 21%, 22% of our total bookings and revenue numbers. It's still a big piece of our world. So, as a result, we're actively looking to reenergize that in a big-time way. And there's a lot of work there.

I'll let Mike talk about where he wants to go and where he's headed with it. But it's still a good size of piece of business for us. I still think there's a tremendous amount of opportunity for us in Europe.

Some of the issues we have are of our own making. I think George has said that on previous calls. It's an execution-driven piece, some a little bit of economic headwind. That said, there's opportunity there.

But I'll let Mike maybe go a little deeper on how he's doing the prospects there and then larger accounts.

Sure. Vince, I think we've mentioned on previous calls we had a different type of go-to-market strategy for the sales organization. And specifically in Europe, we were aligned by market segment by size of client, and not necessarily regionally focused. And, so, in 2013, we made a ton of progress of aligning the organization on a regional basis.

In the last couple of months we've hired leaders to lead our German team, our French team. And we have all the leadership in place on a regional basis.

And, at the same time, one of the other missing characteristics of driving business in Europe was really strong alignment with our research and consulting peers. And over the course of the last four or five months we've been able to be much more aligned at where we're placing our bets, both from a sales perspective but also from a research and consultant perspective. So I think it's set up the right way and we're starting to see some nice signals from certain parts that have already been set up that way.

You had asked a question about some of our larger accounts and some of the softness there. That softness is also in Europe. And, so, while Mike mentioned we had a couple of different issues, we have a global accounts organization that has a lot of European accounts and that's where we saw that softness.

And so we're focused on implementing the plan around the regional sales model. That's in place now. We're focused on making sure we have our research and consulting peers right along side us. That's in place and going to be in place as we grow the consulting organization. And now it's a question of just execution as we go into 2014.

I'm expecting good things out of Europe. The macroeconomic issues I don't think are standing in our way. There's plenty of opportunity there.

Thanks for all that color. And, Mike or George, how long will the transition away from the Tech Navigator product continue to impact the Company in a meaningful way?

I don't think it's going to have a meaningful impact in 2014. I think we've taken our pain this past year. And I think the features to that product that we like are going to be incorporated into our business Foresights product.

Frankly, we're feeling pretty good about what we're doing with data. We're investing a lot in terms of data headcount so we feel pretty good about that. So, it's not going to be a drag on 2014 like it was in 2013.

Okay, thanks guys.

Bill Sutherland from Emerging Growth.

I just want to get clear on the consultant headcount because I couldn't quite hear George's tally as of year end. What was that number?

If we look at it, Bill -- and they show in our research number -- but within that, we ended 2013 with 60 consultants. And we plan to end 2014 with about 114.

George talked about -- we had a small group of core consultants in there -- I think George talked about the adds that were coming on top of that group we already had. So, I think this year we added, I think, 21 or something, George? -- to that group. That's the new hire group.

So, those are some of the numbers, BIll. But we plan to end the year at about 114 in our consulting organization.

So, I should think of those as separate and apart. It's unrelated to anybody doing research in that group, all 60 as of the end of year.

Correct.

Okay. I had the number -- and this is probably wrong -- at just 21 at the end of September.

21 -- and I think we probably created that confusion on the last call -- but 21 was what we had targeted to add to the existing group that we had, Bill, during the course of 2013. And I apologize for that confusion. That was the new group that was being added in. So I think that was what created the confusion.

Yes, the numbers we gave you today are better.

So, is this going to be pretty ratable, this march from 60 to, you said, 114?

It is, although the hope is that we plan to get them in sooner rather than later. The idea and the target is that we've got our research teams out of project consulting by the end of 2014. That's the target that we're setting. So, if you assume some ramp, the hope is that by the time we end the year every research analyst that's here in Forrester isn't worried about project consulting any more. They are focused on advisory and writing research, speaking at events, working with the sales teams. So, that's our target, Bill.

So, it's going to be a noisy number in terms of revenue per consultant, that kind of thing, until the --.

It will be. And we'll attempt to, when we come out with first quarter I think we're going to attempt to look at and break out more by ramp consultants so you can get some sense as to how the ramp consultants are producing. Just like we're trying to do with just giving you ramp sales count. We'll attempt to do the same on the consultant side so you can get a little bit more color in terms of how we're progressing. And, as George mentioned, the early performance has been really good. We've been really happy.

Any plans for events in terms of either numbers or size planned?

No, essentially, the event business, we're sticking with the philosophy we took last year, which is we scaled back the number of events but we're going with the fewer the bigger. There's no dramatic change of numbers of events between 2013 and 2014. I think the bigger task is, I think George's challenge was really more to build out the content and make these events just even a richer experience for our clients. So, we're staying pretty focused on numbers of events and trying to build them out in size with that foundation.

And that means, Bill, that not all roles will get events, but the larger roles will get very large events as we go forward in time. As an example, the customer experience forum in New York City, I think that's 1,400. We had a lot of people there. And success on the West Coast was a repeat of that event. And success in Europe with the repeat of that event. So, you're probably looking at five to seven core roles that will have large events and getting larger over time year to year.

Okay. Now, just wanted to also understand in terms of Mike's buildout, the sales force buildout, in terms of just total sales staff, it was up 5% year over year. I didn't know if that was the adjusted year-end target or whether the quota-bearing portion of that was up a greater percentage.

In 2013 the quota-bearing was up, I want to say, 9% in 2013 over 2012. And our target for 2014 is net he's going to be up 6%. And, again -- I'll let Mike give more color -- if our year is continuing to move out and we're getting good momentum that will change quickly.

Within that 6%, though, within ramped headcount we expect that group to be up 9%. So that's the ramping of the people that came in the back half of the year. So, net-net his ramped headcount will be up about 9% in 2014, is our target, similar to -- well, close to this past year.

Okay.

And, Bill, I'll just add, yes, from an overall sales organization, it was 5%. We tried to keep our eyes on management and sales support, keeping those levels stable, and focused on quota-bearing headcount. Most of that quota-bearing headcount came in in the second half of the year, in fact in Q4.

As I've mentioned on previous calls, we were building out the muscle memory around recruiting and building territories in remote regions, and got up to our goal of 12 new cities that we were looking to have coverage in. And, so, we're taking that into the first half of 2014. The engine is working, but we're keeping an eye on it as we get into the first half to see what signals we see, along with Mike, to determine whether we want to ramp that up.

Okay. And then, lastly, just if you can give us a little more color on that large account SAG that you saw in the fourth quarter, just to help us understand if it was very client-specific or a momentary pause as far as you can see.

There was a couple that had to do with reorganizations, which are never fun. And as the client goes through that reorganization we're in the process of now calling on different buyers. I'd like to think those revenues are stable and we'll bring those clients back in in Q1. That's the plan.

You never want to be surprised in Q4 on one of your larger clients when it goes through a reorganization. But we had two or three of those that surprised us. And so we put some plans in place to not have that happen again. And they were based in Europe primarily. We're after those to try to bring them back in Q1.

Okay, thanks guys, appreciate it.

Thank you. And we have no further questions at this time, so I'd like to turn the call back over to Mike Doyle.

Great. Thanks everyone and thanks for joining us for the call. We look forward to seeing folks out on the road over the course of the next quarter or two and keeping you abreast of the progress that we made. And we'll be talking to each of you soon. Thank you.

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