Forrester Research Inc (FORR) 2014 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; Mike Morhardt, Forrester's Chief Sales Officer; and Mike Doyle, Forrester's Chief Financial Officer.

George will open the call. Mike Morhardt will follow George to discuss sales. Mike Doyle will then follow Mike Morhardt to discuss our financials. We'll then open the call to Q&A.

A replay of this call will be available until August 29, 2014 and can be accessed by dialing 1-888-843-7419, or internationally, 1-630-652-3042. Please reference the pass code 9233923 pound.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expects," "believes," "anticipates," "intends," "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 could cause actual results to differ are discussed in our report 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 turn the call over to George Colony.

Good afternoon and thank you for joining Forrester's Q2 2014 conference call. After I give my commentary on the quarter, Mike Morhardt, Forrester's head of sales, will update on the improvements in the effectiveness and performance of the sales force. Following Mike's remarks, Mike Doyle, our CFO, will give a financial summary of the quarter. And, finally, we will all take questions.

While we still have much work to do, there are indications that our efforts to return the Company to traditional growth and profitability levels are gaining traction. As in the first quarter, bookings and revenue continue to strengthen, highlighting improvements in the selling and delivery organizations. At midyear we are running ahead of our plan.

Due to the gradual improvement in our business we are increasing our full-year revenue and EPS guidance. Mike Doyle will give more details on these changes in his remarks.

The foundation of Forrester's recovery is our strategy of helping large companies succeed in the age of the customer. Our research focuses on supporting the efforts of our clients to win, serve and retain their increasingly demanding and empowered digital customers. This unique strategy is elevating our relevance with clients and increasing our market profile.

Evidence of this traction was front and center at our Board of Clients meeting held in June. From IBM to United Healthcare to Met Life, the pressures of demanding customers are pushing large corporations to rethink their organizations, product development and go-to-market tactics. Empowered customers are causing revolution within corporations and they're turning to Forrester to help them navigate these turbulent waters.

I'd now like to update you on segments of our business, starting with sales. The largest groups in the sales force, North America West, North America East, and premier accounts, are having good years, propelled by customer-related challenges within our clients.

On the international front, sales in Asia-Pacific remain strong, although Europe weakened for us in the quarter, reflecting continued execution challenges for us in that region.

New business showed an amazing surge late in the quarter, indicating that this side of the business is recovering and is poised to show improvements in the second half of 2014. Of the eight sales regions, five met or exceeded their Q2 plan.

To capitalize on our market opportunity we are hiring new sales people in key territories ahead of plan. Local reps are showing higher productivity and the ability to ramp faster than remotely-located sales people.

Turning now to research, our age-of-the-customer strategy is transforming both the process and content of our analyst teams. At the end of 2013, 35% of our research content focused on winning, serving and retaining empowered customers. By the end of Q2, 75% of all new content transitioned and we are on track to raise this to 95%, including Playbooks, by the end of 2014.

In addition to the shift in our content, we are increasing document production. The number of documents produced has increased 69% from Q2 of 2013. This, as you might imagine, is increasing viewership of our research, and we saw this trend continue in the second quarter.

The expansion of research outputs and the transition in focus is being driven by two factors: number one, the disciplined operational work of Cliff Condon, the Chief Research Officer, and, two, the shift in consulting from analysts to the growing team of dedicated professional consultants. While the transition of the Organization is still a work in progress, Cliff is on plan to build a research engine that can address the broader array of challenges that our clients are facing in the age of the customer.

Our move to build out a professional consulting organization also remains on track. The team now consists of over 140 full-time members and over 30 -- 30 of which have been hired since April of this year. This rapid scaling of the business has led to consecutive quarters of overperformance on both consulting bookings and revenue, and our consultant-led delivery totals grew by 145% year over year in Q2.

The team headed by Victoria Bough is designing a standard operating model for research-based consulting. This is the unique style of projects that leverage Forrester's extensive content and data. By the end of 2014 research analysts will no longer be providing consulting projects. The project consulting group will have full responsibility for that work.

I'd like to spend a few moments and pricing. As many of you know, for the past seven years Forrester has used its Customer Experience Index, also known as CXi, to benchmark how customers rated their interactions with hundreds of brands in the US, Europe, and China. CXi has become an important metric for brands that are comparing themselves against competitors and also against world-class performers.

A few data points from the 2014 CXi results: In the US Southwest is the highest rated airline, USAA the highest rated bank, and Kaiser leads healthcare providers. Tmall has the highest Customer Experience Index of Chinese retailers; dm-drogerie mrkt leads German brands; Marks & Spencer leads UK brands; and E.Leclerc is the top French brand.

Until now CXi was available as part of our marketing and strategy Worldview product. We announced at our Customer Experience Forum in New York in June -- and by the way, this was the largest forum in Forrester's history -- that Forrester will be offering CXi as a new and separate product featuring an updated methodology. It will be available late in 2014.

CXi is expanding from being a simple metric into a framework that delivers deeper insights into what matters most in the CX loyalty equation. Companies can use this new framework as a foundation for their CX measurement programs and as a tool to inform all aspects of their CX efforts. I will be periodically updating investors on this new product over the next few quarters.

And, finally on products, on July 1 the Company rolled out a 4% to 6% price increase across all products. This is in keeping with the Company's customary pattern of increasing prices at midyear.

Turning now to capital structure, since 2013 we have purchased approximately $173 million of outstanding shares and our share count has been reduced to just under 18.5 million shares. While this has been an important effort to rightsize our capital position, our priorities, in order of importance, remain: number one, to reinvest in the business; two, acquisitions; and, three, returning value to our shareholders via buybacks and dividends.

As a note, our portfolio of acquisition targets has been growing over the last two quarters and we remain very proactive in the M&A markets.

So to conclude, our recovery plan is well under way and I'm pleased with our results for the second quarter. That said, there is still much work to be done and I anticipate that we will continue to have periodic setbacks punctuating our advances. But through all of this, our north star will continue to be helping our clients win in the age of the customer.

Thanks very much, and I would now like to turn the call over to Mike Morhardt, Forrester's head of sales. Mike?

Great. Thanks, George. We continued to see positive signs on the sales front in Q2. Each quarter we are making progress on key areas of the sales organization and introducing new initiatives to improve our results.

As George mentioned, in Q2 five of the eight sales teams hit plan and achieved year-over-year growth. We saw an acceleration of growth in our largest accounts, saw strong and now consistent performance in North America and Asia-Pacific.

We saw continued gains in our key verticals, like government, financial services, retail, and our agency business. And we also saw a rebound in our new business organization.

Key metrics that we track also showed good signs of continued progress. Sales attrition was up a bit, but it was driven by planned increased of consistent performance management. Discounting was down for the sixth quarter in a row. Sales productivity was on track and sales headcount was up 5% since the first of the year. The overall percentage of reps hitting their first half plan has improved by 20 points.

As we mentioned in the last call, we are encouraged by the results in the key metrics, but we still have work to do. For example, our European business had mixed results, with some teams performing above expectations and some below. This continues to be an area of focus and we are encouraged that the changes that we made in Q4 of 2013 and Q1 of this year are starting to take hold.

One key area of focus for Forrester in the sales organization in Q2 was capitalizing on the age of the customer opportunity. The entire sales organization was certified on our market position and product portfolio in Q2. The sales team is now armed and our clients are responding to our messaging.

Sales expansion plans remain on track, with more sales people added in various geographies to get us closer to our clients. From recruiting to territory creation, the sales expansion engine is running as planned. We continue to see improvements in sales productivity for those reps who have joined us over the past 18 months.

Finally, our efforts to improve client renewal rates are gaining steam. With the adoption of our client engagement model we are seeing signs that clients are more engaged, which leads to stronger renewal and accelerated enrichment opportunities.

Our focus remains the same: thoughtful geographic sales expansion and a relentless focus on improving productivity. Q2 represented progress in both fronts. But for every area we improve, there are many others that we will turn to in the second half for focus.

With that, I'll turn it over to Mike Doyle for the financial update.

Thanks, Mike.

I'll now begin my review of Forrester's financial performance for the second quarter of 2014, including a look at our financial results, the balance sheet at June 30, our second-quarter metrics, and the outlook for the third quarter and full-year 2014.

Please note that the income statement numbers I'm reporting are pro forma and they exclude the following items: amortization of intangibles, stock-based compensation expense, reorganization costs, and net gains and losses from investments. Also, for 2014 we're utilizing an effective tax rate of 38% for pro forma purposes.

In the second quarter Forrester met revenue, pro forma op margin, and EPS guidance. As George mentioned in our press release and his comments, we maintained our positive momentum on top-line performance as bookings and revenue continued to grow year over year in the second quarter. As a result, we are raising our full-year revenue and EPS guidance. I will address each of these points in more detail in my commentary.

Regarding Forrester's top-line performance, revenue growth continued to accelerate, with overall revenue growing 5%, driven by double-digit growth in advisory and event services revenue. We are beginning to realize the benefits of the additional consulting headcount we added both last year and at the beginning of this year.

In addition, with the continued increase in sales headcount, we expect to see accelerating growth in research services revenue in the second half of 2014.

We remained active repurchasing our shares during the second quarter, spending $25.2 million to buy back approximately 684,000 shares.

Now, let me turn to a more detailed review of our second-quarter results. Forrester's second-quarter revenue increased by 5% to $82.9 million from $79 million in the second quarter of 2013.

Second-quarter research services revenue increased 2% to $52.3 million from $51.3 million last year, and represented 63% of total revenue for the quarter. Excluding declines in data revenue, which were driven mainly by our discontinued Tech Marketing Navigator product, research services revenue grew by 3% compared to the second quarter of 2013.

Second-quarter advisory services and event revenue increased 11% to $30.6 million from $27.6 million in the second quarter of 2013, and represented 37% of total revenue for the quarter. The continued expansion of our project consulting organization is helping to fuel the growth in delivery on project engagements and advisory.

Combined, our research and consulting organizations accounted for 14% advisory and project consulting revenue growth, while nonsyndicated data and events revenue again experienced healthy growth in the quarter.

International revenue mix was 25% for the period ending June 30, 2014, unchanged compared to the same quarter last year. Excluding the positive impact of FX, international revenue mix was down, with strong performance in Asia-Pac offset by weaker performance in Europe.

I'd now like to take you through the activity behind our revenue, starting with research. During the second quarter, Forrester's Playbook count remains unchanged at our targeted level of 63. In the second quarter, 423 new research documents were added to Role View and we hosted 41 webinars with a total attendance of 1,433. At the end of the quarter the top three research roles were the CIO group with 6,338 members; application development and delivery with 6,074 members; and the enterprise architecture group with 4,338 members.

Forrester Leadership Boards, our peer offering for senior executives, achieved a revenue increase of 3% year over year in the second quarter, driven by growth in our marketing and strategy boards. As of June 30, 2014, Forrester Leadership Boards had a total of 1,656 members, down 12% from June 30, 2013, with declines in both our BT and M&S groups.

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 customers 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 7% for the second quarter, driven by a 64% decline in our Tech Marketing Navigator product. Excluding the impact of Tech Marketing Navigator, data revenue was flat on a year-over-basis.

In our advisory and consulting business, total revenue for the first quarter increased by 14% versus prior year, driven mainly by the expansion of our project consulting organization, as well as strong advisory performance by our research analysts.

Now, turning to our events business, which had a very busy quarter, we hosted five forums in the second quarter of 2014: the Forum for Marketing Leaders in the US and in Europe, the Forum for Technology Management Leaders in the US and Europe; and we culminated with our largest event in Forrester history, as George previously mentioned, the Forum for Customer Experience Professionals in New York.

I will now highlight the expense and income portions of the income statement. Operating expenses for the second quarter were $73.1 million, up 8% from $67.4 million the prior year. Cost of services and fulfillment increased by 9%, reflecting the continued expansion of our project consulting organization over the last 18 months and partially offset by lower incentive bonuses.

Selling and marketing expenses increased by 7% due mainly to the continued growth of our sales force and a higher commissions expense as our reps achieved better results compared to the second quarter of 2013.

General and administrative costs increased by 13%, driven by higher recruiting costs to staff our consulting and technology organizations as well as increased occupancy costs.

Overall headcount increased by 6% as of June 30, 2014 compared to the same period last year. At the end of the second quarter we had a total staff of 1,306, including a research and consulting staff of 489 and a sales staff of 500. Research and consulting headcount was up 10% versus prior year, but a 1% decrease compared to March 31, 2014.

Total sales headcount increased by 7% versus prior year and by 2% as compared to March 31, 2014. Sales rep headcount increased by 12% compared to the second quarter of 2013, while fully ramped sales rep headcount grew by 7% over the same period.

Mike alluded to sales attrition spiked in the second quarter, driven primarily by ongoing performance management.

Operating income was $9.9 million, or 11.9% of revenue, compared with $11.5 million, or 14.6% of revenue in the second quarter of 2013.

Other income for the quarter was $79,000, down from $255,000 in the second quarter of 2013.

Net income for the second quarter was $6.2 million and earnings per share was $0.32 on diluted weighted average shares outstanding of 19 million compared with net income of $7.2 million and earnings per share of $0.33 on 21.7 million diluted weighted average shares outstanding in the second quarter of last year.

Now I'll review Forrester's second-quarter metrics to provide more perspective on the operating results for the quarter.

Agreement value, which 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, 2014, agreement value was $225.5 million, an increase of 7% from the second quarter of 2013.

As of June 30, 2014 our total for client companies was 2,439, down 32 from December 31, 2013 and down 12 compared to the second quarter of 2013. 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 75% as of June 30, 2014, an increase of 1% from March 31, 2014. And our dollar retention rate during the same time period held steady at 87% compared to the previous quarter. Our enrichment rate was 97% for the period ending June 30, 2014, also unchanged compared to the prior 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 appropriate trend information.

As of June 30, 2014 there were 2.3 roles per client, which held steady compared to the previous quarter.

Now I'd like to review the balance sheet. Our total cash and marketable securities at June 30 was $133.7 million, down $21.4 million from $155.1 million at the year end 2013, with the reduction due to the success of our share repurchase program, which totaled $54.9 million of stock repurchased during the first half of 2014.

Cash from operations was $2.3 million for the quarter as compared to $1.7 million in the second quarter of last year. We received $2.6 million in cash from options exercised for the quarter, as compared to $7.9 million in the second quarter of last year.

We also paid a dividend in the second quarter, which amounted to $3 million, or $0.16 per share.

Accounts receivable at June 30, 2014 was $49.1 million compared to $39.8 million as of June 30, 2013. Our days sales outstanding at June 30, 2014 was 45 days, which is down slightly from 46 days at June 30 of last year. And accounts receivable over 90 days was 6% at June 30 of this year compared to 5% at June 30 of 2013.

Our capital spending for the second quarter of 2014 was $200,000 compared to $300,000 during the second quarter of last year.

Deferred revenue at June 30, 2014 was $143.9 million, up 6% over June 30, 2013. Deferred revenue plus future A/R, a key indicator of future performance, was up 3% compared to the prior year. Our future A/R balances are amounts to be invoiced in the future for clients with multiyear deals or scheduled payment terms.

I want to close my discussion with some comments on capital structure and pro forma guidance. Over the last 18 months the Company has repurchased approximately 4.8 million shares at a cost of $173.1 million. In addition, during the same time period we have paid $18.5 million in dividends, which has resulted in returning $191.6 million to our shareholders over the last six quarters.

With $133.7 million in cash on our books as of June 30, 2014, and with $26 million remaining on our share repurchase authorization and a continued expectation of dividend payment, we expect to be close to the targeted $100 million in cash that George mentioned in his comments by the year end of 2014. We embarked on these actions as we were rebuilding the business to ensure we were maximizing shareholder value with our actions. We feel we have made significant progress managing both the operational and capital structure aspects of our business.

In closing, we have made significant progress in the first six months of 2014. The changes and enhancements to the sales, consulting, research and product organizations have taken hold, and we are seeing the results in both our top-line and bottom-line performance. Given this momentum and the positive view we have about the market environment and our ability to add value to our clients, we are increasing our revenue and earnings per share targets. In addition, we are increasing our 2014 hiring targets for sales and consulting headcount.

We're increasing our full-year EPS guidance despite absorbing a few unplanned costs, which included the following: hiring of the additional sales and consulting heads just mentioned, which will total approximately $500,000; two one-time items that impacted expenses by approximately $600,000 -- a depreciation adjustment to correct prior-year error, and exit costs for terminating a partner relationship in Europe; increased candidate acquisition costs, primarily in sales and consulting, which total approximately $800,000; and, finally, as we previously shared with you, we are implementing a new CRM system at Forrester.

The core system is in place and running and we're enhancing its functionality with a number of additional modules. We changed our approach for implementing one of the more significant modules, which has resulted in a greater percentage of costs hitting operating expense versus being capitalized. The impact of these costs is approximately $2.3 million.

We expect the total impact of these items will be $0.13 per share for the full year. We've made a number of reductions in other areas to help offset the impact of these expenses. And as I previously mentioned, we plan to raise our full-year revenue and EPS guidance.

Let me take you through the specifics of our guidance for both the third quarter and full-year 2014. As a reminder, our guidance excludes the following: amortization of intangible assets, which we expect to be approximately $500,000 for the third quarter and approximately $2.2 million for the full-year 2014; stock-based compensation expense of $1.9 million to $2.1 million for the third quarter and $7 million to $7.5 million for the full-year 2014; reorganization costs of approximately $1.9 million for the full-year 2014; and any investment gains and losses.

For the third quarter we're aiming to achieve total revenues of approximately $73 million to $76 million. We expect pro forma operating margins in the range of 9% to 11%, a pro forma income tax rate of 38%, and pro forma diluted earnings per share of approximately $0.22 to $0.26.

For the full year, as I previously mentioned, we're raising our revenue and EPS guidance as follows: Total revenues of approximately $310 million to $315 million; pro forma operating margin of 9% to 10%; pro forma income tax rate of 38%; and pro forma diluted earnings per share of between $0.95 and $1.01.

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

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

Thank you. (Operator Instructions) Tim McHugh.

This is Matt Hill in for Tim McHugh this afternoon. Just a question on the guidance. It sounded like it was a general better outlook for the second half of the year than what you initially expected. Was there anything in particular in the second quarter that led you to do that? Is there any type of split between maybe the research and consulting that is exceeding your expectations at this point?

Matt, this is Mike Doyle. Yes, I would say a couple of things. One -- and I think you've hit on both of them. While we don't give bookings, you can see both in [AB] and deferred revenue. We've been happy with what's been happening in our bookings performances, ahead of what we had expected, which tends to sort of highlight that we'll probably pick up some better performance in syndicated revenues back half of the year. And both consulting and advisory and events continue to exceed our targeted levels for them.

So I think all of those factors, despite some of the comments Mike made about specific regions, I think overall we're getting just really strong performance out of those areas that I just mentioned and strong performance out of some -- most of our sales group. So at this point we felt comfortable bringing up revenue guidance for the full year.

Okay. And you also mentioned increasing your hiring expectations on the consulting side and on the sales force side. Is there any more color you want to give on that, just the pace of hiring or specific regions or areas that you're really interested in adding more capabilities in?

I'll give some preliminary comments. I'll let Mike get to specifics, although I don't think we've gotten as granular on the regional piece. But with our business, I think when we laid out the year -- and I don't recall if we put this in our up-front call -- but we always felt as though if we got momentum going by midyear and we were confident in what we were seeing, we would begin hiring ahead.

And the hiring is going to come primarily in sales. But given if you think about the nature of our business, Matt, where we if we hire now it's going to take us, let's say, six months to get people ramped up. That says by early next year they're out and they're producing for us. So it's just good business sense.

And, again, what we're seeing in the marketplace and some of the things George mentioned, we like what we see in the marketplace. We like our capability to help satisfy clients' needs. And so I think we felt very bullish on moving forward to try and bring on some more headcount.

Yes, Matt, and I'll just add on the sales front the planned hires are across every geography, across every market segment, from our largest accounts to our inside sales model. And we're really just targeting those particular territories that we feel are going to be the most productive. And so we've prioritized those and we've just been sort of running that play for the last 12 months.

Okay, great. Those are my questions. Thank you.

Bill Sutherland.

I wanted to just get a couple of clarifications to start. George was talking about the consulting project group (inaudible) to Mike as far as the headcount, being ahead at 6/30. So I'm not sure what the number was that you all said you'd reached in project consultants.

Right. I think we did a good job, though, of not giving you a number, but that was not by design. So I apologize on that front. If we stay with our traditional definition here, project consulting as a group is sitting at 133. So that's up 18 from just the prior quarter alone. So that continues to sort of move forward. And we've been happy about that. I think George has done a good job sort of pushing that group to get to targeted levels. Because it was critical for us to almost get ahead there, because if you think about the transition that's going on, that we want our research analysts out of project consulting, just doing advisory, writing great research, speaking at events, doing inquiries. So there was a real push to get those folks in as soon as possible. And I think fortunately we've been able to do that and the people we've brought on board are absolutely fantastic.

It's a very high-quality group.

Yes.

So you're there as far as where you want that group to be, size-wise?

Another seven hires?

Yes.

We're almost there. But seven more hires between now and the end of Q3. And then we'll be at full staff.

Yes.

Yes. So we were running ahead of schedule but we're not all the way there to the final number, so. But we will be there.

Now, help us think about the relationship of this rapid -- and I realize some of this activity is displacing revenue generated previously by your research guys. But how do we think about this very rapid growth in the consultant headcount and the advisory revenue outlook, or at least the component of advisory that's project consulting? And then, actually, for clarification purposes, is that where that will all be grouped, Mike?

Pretty (inaudible).

Yes. So the -- in terms of if you think about our two revenue streams that we highlight, research is still our syndicated -- that bucket is still syndicated research. So it includes Role View. It includes FLB. It includes data. But within the advisory and event services bucket, advisory services and event bucket that we have, it includes both project consulting and our advisory.

And the end game, what you're seeing right now is we still have right now is what I call the hybrid situation where we still have analysts who do deliver project consulting. That world is shrinking dramatically, right? The project consulting folks we're bringing on are taking that on. The analysts will still do advisory consulting and our analysts have overperformed on the advisory consulting side of it. The short one- to two-day kind of experiences, they've overperformed.

So when it's all done, I think where we're going to get to, it's going to be more than sort of a one for one equals two. I think what we're seeing is better productivity out of the analysts. I think the project consulting organization will drive more productive project consulting. And I think we're going to see better utilization, even though we're going to a project consulting organization, because we have, in my mind, a better work stream to fill than a typical consulting organization. So the hope is that one plus one here is going to equal a little bit more than two on this, Bill.

And, yes, Bill, the big picture is that at the end of the day we're going to get better research --

Right.

-- and we're going to get better consulting out of the new equation we've built. And you see that research, right, that 69% increase in the number of documents. Readership is up, so the research is improving, more of it. It is better. And the customer sat research we're getting back from the consulting side shows that there's higher sat with the consulting projects we're doing. So it's good on both sides of the equation.

And I think -- and Mike can comment, but what we were finding before, Bill, is that our analysts were stretched so thin and we would get a great project consulting assignment and our ability to deliver that quickly with an analyst who was writing research and doing inquiry and maybe on something else was difficult. Whereas, by having a team I think there's a greater confidence level that we can move quicker and get to things. But I'll let Mike comment maybe a little bit on that.

Yes, Bill. All of those things that Mike mentioned, and plus the -- as George mentioned, the satisfaction is up. The size of the deals are up. Across the board the sales people feel very comfortable in selling consulting now, knowing that the resources are -- have the background of delivering consulting projects. And the clients are very satisfied with it.

Yes. You know, being an analyst I'm tempted to take your consultant headcount times a reasonable sales number. And it seems like you'd have incredible acceleration as these guys get productive. But -- and that's where I get fouled up knowing how much they're kind of just replacing with the research people that are handing it over.

There's definitely an element of that, Bill. And I will tell you, probably our own internal model is evolving. I would say that it is better than what we had expected. But there's no question there is a -- when you look at it theoretically you would say, all right, so they're picking up project consulting work that research folks used to do and therefore we've essentially just added a cost to deliver the same revenue we had before. Right? And that's a way to look at it.

What we're seeing, though, is we're expanding the amount of project consulting we can deliver. And, by the way, we're getting more advisory consulting out of the analysts we have. And then the intangible in all of this, which George was very direct about is -- as we write more research and higher quality research and we've got more [inquiry] and more touches, what's the impact on our Role View research in terms of greater readability, which we're seeing, and what does that translate into in terms of revenue?

And that's the intangible. It's harder to model, but it is very real.

Yes. Just a couple more. On events, I noticed you had a whole bunch more events last year's second quarter. Remind us, did you all eliminate some small ones, or move them?

What we did and it's a little bit of the (inaudible) methodologies, we did combine some to hold them at the same sort of venue. So what happens is it's not a direct drop in numbers of events. We probably did trim some tiny ones, but then we also are co-locating a number of events. So --

So what -- can you give us a rough idea of the year-over-year comp for event revenue?

I think over all revenue year over year is just down a bit, if I recall. (Multiple speakers) --

Okay. I know how they can move around from quarter to quarter.

Right. So actually revenue's up just a bit, 2%.

Okay. And then, Mike Morhardt, I was interested in the comment about Europe being stronger with some of the sales people and not -- so it's not a macro issue as far as you guys can see?

No. It absolutely isn't, Bill. We went to a different structure there, more of a regional structure, at the end of last year -- or beginning of last year and made some changes on the leadership front in Q4 and in Q1. We're starting to see the good signs of those changes that we've made. But our work's not done. But it's by no means a macroeconomic trend. The opportunity is there and as George pointed out, it's a question of the execution.

Okay.

The missing piece there, Bill, still is the head of sales in Europe.

That's correct.

Yes. Still (multiple speakers) --

Oh, okay. He's not in place yet. Okay. And then, I was just kind of looking at client totals every quarter going back. And they've been kind of flattish after having declined a bit after the downturn. But are you all kind of managing a little bit the retention of clients you want to retain, or focusing on those and -- I mean, are you doing a little bit of a sorting process, if you will, and that's one reason the clients are flat, why they -- (inaudible) obviously starting to tick up?

Bill, you're exactly right. That's exactly what we're doing. So the net new headcount that we've added over the last year has really been focused on moving these particular sales executives into regions so they can pick up accounts. So the overall account load, the number of accounts per rep, drops because we feel strongly that investing in the existing accounts is going to improve our revenues and our client retention. And that's proving to be true.

We haven't expanded our new business efforts at all over the last year, sort of maintained them. So over time we'll start to address that, but the opportunity is so great with our existing client base, we're looking to improve retention first and enrich those businesses -- and also bring on new clients, but not at same rate that we had done in the past.

Right. Okay. I think -- yes, that covers it. Thanks, guys. Good work.

Vincent Colicchio.

You said that five of your eight segments in sales, I think you said made or beat expectations. Anything that we should be concerned about on the other three, aside from missing? Is there any pattern of -- I think you've done fairly well with recent quarters. But anything you could say there would be helpful.

Yes, I guess reading between the lines I think, Vince, you can see the ones that we were a little worried about. So Europe continues to be an up and down story. As we mentioned, we're seeing some pockets of some really strong performance and then some others that we need to work on. New business, as we mentioned, we made some changes earlier in the year. We saw that rebound considerably in Q2. And they were just off a little bit at the end of the quarter.

And then we do have a group that focuses on our partner organizations. These are independent partners that we have. We created a group just to focus on them. It's not a huge part of our business, but we do count it as one of our sales organizations and they missed by a very small amount.

So a couple of groups, the new business part and the European part is the area that we're continuing to focus on. The partner piece I'm sure is going to come back. And it's not a material part of the business.

And in terms of transitioning the sales force, what portion of the sales force is now physically based where their accounts are located? And when do you think the transition will be complete?

That's a great question, Vince. I don't necessarily have the exact percentage. I would say over the last six months -- or for the first time in 2014 we have a decrease in the number of individuals here based in Cambridge where we had a lot of our sales force located. But we continue now, as we start to expand the sales organization, not necessarily targeting new cites. We do that. But it's doubling down in specific cities, whether it's Chicago or Denver or Seattle or LA, where we might have had a very small presence and now we're building a presence there.

So most of the new hires are taking place -- unless it's an inside sales executive, those hires are taking place in the field.

Okay. And George or Mike, I know that you mentioned that you have a nice pipeline on the acquisition side. I know historically you've had a hard time finding reasonably priced acquisitions. Has that changed at all?

I think we've been surprised by the number of and the -- I mean, pricing from our standpoint always feels unreasonable, Vince. It just does. But a reasonable look at reasonable pricing would say, they're really not bad right now. I mean, we have some good prospects out there. And I'm not announcing anything and nothing may happen. But there is -- I'd say our portfolio is looking pretty good right now, for the moment.

Okay. That's it for me. Thanks, guys.

And there's no further questions at this time. I will now turn the call back over to Mike Doyle.

Okay. Thank you very much. So thanks, everyone, for joining the call. Again, we're happy with the quarter but more happy that we're taking guidance up for both revenue and EPS. And we look forward to seeing a number of you when we get out on the road for the quarter. Thanks again.

Thank you.

Thank you.

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