Forrester Research Inc (FORR) 2014 Q3 法說會逐字稿

Good afternoon and 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 will open the call. Mike Morhardt will follow George to discuss sales. Mike Doyle will then follow Mike Morhardt to discuss our financials. We will then open the call for Q&A.

A replay of this call will be available until November 28, 2014 and can be accessed by dialing 1-888-843-7419, or internationally, 16306523042. And please reference the passcode 9233923#.

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 reports and filings with the Securities and Exchange Commission. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

I'll now hand the call over to Mr. George Colony.

Thank you for joining Forrester's Q3 2014 conference call.

Our agenda will be as follows. After I give my commentary on the quarter, Mike Morhardt, Forrester's Head of Sales, will give his update on the continued improvements in the structure and performance of the selling organization. Mike Doyle, our CFO, will present the financial summary of the quarter. And finally, Mike, Mike and I will take questions.

Forrester holds a unique position. We are the research company that focuses on helping companies win, serve and retain customers. This is a fast-growing market. Our research projects that business technology -- this is the technology systems and processes that companies deploy to win customers -- will grow twice as fast as traditional IT over the next 5 years. In 2015, half of all new spending on technology in large corporations will be devoted to BT.

Our strategy to serve this burgeoning market is well-supported by our product and delivery teams, and I want to update you on their progress.

The research organization, under the leadership of Cliff Condon, continues to generate a widening portfolio of research that helps our clients come to grips with the demands of the Age of the Customer. As part of this effort, Cliff's team has accelerated the production of research. Research reports created in the third quarter increased by 48% over the third quarter of 2013.

Most importantly, 90% of Forrester's research created over the last 9 months clearly targets the technologies, decisions and actions the executives and large corporations must address to succeed in an era when customers are taking power from institutions.

I wanted to call out a few examples of reports that Forrester's issued to clients over the last week to give you some flavor. For application development professionals, a report entitled Win Funding For Your Customer Service Project; for marketing leaders, the new Mobile Mindshift Index Australia, and this report helps clients target demographic segments at (inaudible) based on their shift to mobile; and then a final report, this one for the CMO, Chart A New Course For A Connected Brand Experience.

In addition to this content pivot, research has begun to update its portfolio of 60 playbooks for 2015. Playbooks, as you remember, are collections of reports that make it easy for our clients to understand complex issues throughout their life cycle. Playbooks are what we call living research, continually updated throughout the year, and all playbooks will be fully updated by January of 2015.

While it has taken four quarters to complete, research has successfully transitioned its output to fully serve customer-obsessed enterprises, and this pivot sets the stage for the buildout of the consulting organization.

Now as I've mentioned on previous calls, the construction of the consulting organization remains on track. The project consulting group has grown to near full force and continues to build out its specialized offering, what we call research-based consulting.

We have made significant progress in the transition of project consulting to our new professional consultants, with over 20% year-over-year growth in revenue delivery. Most importantly, the project consulting group is 100% designed to deliver engagements that help our clients meet the challenge of serving empowered customers. Out of the box, it's matching our strategy.

Several recent projects exemplify consulting's focus and I wanted to feature them here. We're engaged in a project for one of the largest global hotel groups on how to build an agile CRM strategy that is capable of keeping up with dynamic and continually-changing customers. We're in the middle of a project for a large US-based telecom company to transform their customer experience and systematically measure the progress of that effort. A final example is a project to help a large logistics and package delivery company build a world-class mobile offering.

So while research and consulting have navigated transitions to support our strategy, all new products are designed on day one to address our target market. We launched the Forrester Customer Experience Index in the third quarter, adding to our portfolio of syndicated products. The Forrester CEx Index scores 700 global brands for value, enjoyability, ease of use and loyalty. But most importantly, it gives clients specific actionable advice and direction on how they can systemically raise the quality of their customer experience.

In my travels, I've experienced extraordinary interest in the Customer Experience Index from a wide array of executives. Last week in the UK and Germany, I visited with a luxury clothing brand, a large multinational bank, an operator of rail systems in Europe and a very large multinational chemical company, and all of the leaders from the CEO to the CIO to the CMO in these companies are all highly intrigued with they can use the index to drive the quality of how they work with their customers.

Our sales force is getting very positive early signals on this product. As an example, a financial services firm in the UK has contracted with Forrester for a large 6-figure project to help them improve the quality of their customer interactions using the Forrester Customer Experience Index.

In addition to research and consulting, I am happy to report that our sales force is also keeping pace with our strategy, and its support is manifested in three areas. Number one, the sales force is driving what we call cross-sell -- extending contracts to include the marketing and strategy roles like the CMO and the business technology roles like the CIO. The companies that are best at winning, serving and retaining customers engage in a concerted effort where the marketing and technology organizations collaborate to create a seamless customer experience. When Forrester connects with marketing and technology, our impact is magnified, and sales is working to ensure that we are working on both sides.

Secondly, the sales force has engaged in what we call Age of the Customer Selling -- challenging our clients and prospects to recognize and embrace the new challenges posed by empowered customers. This means that the sales force focuses its efforts on business technology -- this is the technology processes and systems to win, serve and retain customers -- not on information technology. That's a space well-served by others.

And finally, the sales force is embracing team selling -- the ability to cooperate with other important client resources at Forrester like FLB Advisors, consulting development directors and data specialists to render the best solutions for clients. The Age of the Customer strategy takes a village, and our sales force has become adept at coordinating those resources. And more on all of this from Mike Morhardt in a few moments.

We have certainly not completed our strategy change, but our transformation is on schedule. As Peter Drucker famously said, "Culture eats strategy for breakfast." I am glad to report that Forrester's culture is supporting and propelling our strategy, not impeding it. That is happening because of what I call strategic fit. We help our clients on three levels -- one, to understand their customers; two, to market and sell to those customers; and three, to build the technology to win those customers. And these three activities are highly-interlocked and related. While others may take on one aspect of that work, Forrester uniquely connects all three.

So to conclude, while I am pleased with our direction, we have not yet achieved consistent performance across all parts of the business. We still have work to do. However, I'm encouraged by our progress so far in 2014, most especially with the coherence and power and market [residence] of our strategy. And I believe that strategy will keep us on our steady long-term goal of achieving 15% to 20% growth rates and 17% to 19% operating margins.

Thank you very much. I'd now like to turn the call over to Mike, Forrester's Head of Sales. Mike?

Great. Thanks, George.

Q3 represented continued progress in our path to double-digit growth. We continued to see signs and results for each of the key areas of focus for Forrester sales.

As George mentioned, in Q3, four of our eight sales teams hit plan and five achieved year-over-year growth. We saw continued improvement and significant year-over-year growth in our largest accounts and our largest sales teams, Premier and North American East and West. After investments in the first half of the year, we saw improvement in our partner organization, or out international business development team, which is made up of non-direct sales team in our emerging markets. We saw continued gains in our key verticals, like government, financial services, health care, retail and our agency business. And as George mentioned, we saw more wins coming as a result of our Age of the Customer go-to-market strategy.

Key metrics also improved. Client retention rates were up for the third quarter in a row. Discounting was down for the seventh quarter in a row. Sales productivity is on track. And the overall percentage of reps hitting their plan for the first three quarters is up 17 points over 2013 and at historical highs for the past four years.

While we continue to see improvements in many areas of our business, we still have areas where we need to -- or where we're working to change the results. In Europe, we saw improved results in year-over-year growth, but still not at expectation levels. We are encouraged by the performance of the teams with the new sales leaders and also excited about our new Head of European Sales starting this past week. Our North American new business team continues to rebuilt after attrition losses from earlier in this year. We took the opportunity with these changes to improve our cost of sales metrics and coverage by introducing inside sales teams to both focus on our user and vendor markets. And sales attrition was up in Q3, primarily driven by our continued focus on performance management and also our annual compensation plan, which has encouraged low performers to self-select out. Sales expansion plans remain on track for the year. We did have a slowdown in July and August due to the accelerated attrition I just mentioned. While we were down for the quarter, this is just noise, as we expect to be on track for the year with more salespeople added in various geographies to get us closer to our clients. From recruiting to territory creation, the sales expansion engine is running as planned, and we continue to see improvements in sales rep productivity for those reps who have joined us over the past 18 months.

As we enter our Q4, our focus will be the same -- thoughtful geographic sales expansion and a relentless focus on improving productivity. We are pleased with the progress we've made for the first three months of -- first three quarters of the year, but we still have a long list of areas we need to improve. And we will turn our attention to those areas in Q4 and throughout 2015.

And with that, I will turn it over to Mike Doyle for the financial update.

Great. Thanks very much, Mike.

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

Please note that the income statement numbers I'm 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 2014, we are utilizing an effective tax rate of 38% for pro forma purposes.

In the third quarter, Forrester met revenue, pro forma op margin and EPS guidance. As you heard from Mike and George, we continue to see great results from our largest regions, and bookings and revenue continue to grow at a healthy pace as our Age of the Customer strategy begins to resonate with clients in a meaningful way.

In addition, we made significant changes to our consulting, research and product organizations last year. We are three quarters in to 2014, and we feel very good about the progress of these teams and their meaningful contribution to our financial results.

On the top line, Forrester's revenue grew by 8% in the third quarter, compared to the third quarter of 2013. We saw strong revenue growth in advisory and consulting, despite some growing pains with a new project consulting team. The buildout of our project consulting organization is largely complete, and headcount and revenue growth going forward will begin to moderate in this segment of our business.

Research services revenue grew modestly for the quarter, but we believe work being done in our research and product teams will begin to accelerate growth in our syndicated research offerings.

Regarding our capital structure, we remain active repurchasing our shares during the third quarter, spending $11.6 million to buy back approximately 300,000 shares.

Now let me turn to a more detailed review of our third-quarter results.

Forrester's third-quarter revenue increased by 8% to $75.4 million from $69.8 million in the third quarter of 2013. Third-quarter research services revenue increased 2% to $50.6 million from $49.9 million last year, and represented 67% of total revenue for the quarter. Although significant in our year-to-date results, the impact of sunsetting our Tech Marketing Navigator product was not a material factor in Q3 and has now largely run its course.

Third-quarter advisory services and event revenue increased 24% to $24.7 million from $20 million in the third quarter of 2013, and represented 33% of total revenue for the quarter, driven entirely by consulting and advisory delivery. Our project consulting group more than doubled its output compared to the same period last year.

International revenue mix was 26% for the period ending September 30, 2014, compared to 27% in the same quarter of last year. This reflects stronger growth in the US compared to our international markets.

I'd now like to take you through the activity behind our revenue, starting with research.

Within research, Forrester had 65 live playbooks at the end of the third quarter. Additionally, 428 new research documents were added to Roleview, and we hosted 32 webinars with a total attendance of 1,275 in the third quarter.

As of September 30, 2014, the top three research roles were the CIO with 7,302 members; application, development and delivery with 6,175 members; and enterprise architecture with 4,518 members.

Forrester leadership boards, our peer offering for senior executives, experienced a revenue decline of 2% year over year in the third quarter. First half bookings got off to a slower start than anticipated, resulting in some revenue pressure in the second half of 2014. As of September 30, 2014, Forrester leadership boards had a total of 1,720 members, down 7% from September 30, 2013, with declines in both BT and M&S.

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 B-to-C and B-to-B 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 5% for the third quarter, and while it was not material to the overall results, Tech Marketing Navigator did have a small impact on data product revenue, in addition to a slight decline in B-to-C syndicated revenue related to softer bookings earlier in the year.

In our advisory and consulting business, total revenue from the third quarter increased by 24% versus prior year, driven mainly by the expansion of our project consulting organization, as well as strong advisory performance by our research analysts. This ramp-up in delivery capacity has already afforded our research organization the opportunity to direct more time and resources to world-class resource production, as well as short-term advisory projects, and we're excited to realize the full benefit of this strategy going forward.

Results within the project consulting teams were mixed. Some of our legacy project consulting offerings exceeded target, while our new role teams experienced some growing pains and missed targets, despite delivering encouraging results. Overall, project consulting performance exceeded targeted levels for the quarter.

In our events business, we hosted four forums in the third quarter of 2014 -- the Forum For CIOs in Australia, Singapore and India, and our first Marketing and Strategy Forum in Australia.

I'll now highlight the expense and income portions of the income statement. Operating expenses for the third quarter were $68 million, up 8% from $63.1 million in the prior year. Cost of services and fulfillment increased by 9% compared to the third quarter of 2013, driven mainly by headcount additions in project consulting and our products organization, to a lesser extent; merit increases; and partially offset by lower headcount in our research group and lower incentive bonuses.

Selling and marketing expenses increased by 8% due in part to the growth of our sales force, merit increases and higher commissions expense as our reps continue to achieve better results versus plan compared to prior year.

General and administrative costs increased by 7%, driven by merit increases, headcount and professional fees to support cloud-based software implementation and recruiting costs to staff critical positions in our consulting, products and technology organizations.

Overall headcount increased by 4% as of September 30, 2014, compared to the same period last year. At the end of the third quarter, we had a total staff of 1,316, including a research and consulting staff of 511 and a sales staff of 494.

Research and consulting headcount was up 10% versus prior year and up 4% compared to June 30, 2014. Total sales headcount increased by 4% versus prior year but decreased 1% as compared to June 30, 2014. Sales rep headcount increased by 10% compared to the third quarter of 2013, while fully-ramped sales headcount grew by 4% over the same period.

Operating income was $7.4 million, or 9.8% of revenue, compared with $6.7 million, or 9.6% of revenue, in the third quarter of 2013. Other income and expenses for the quarter was $232,000, up from negative $71,000 in the third quarter of 2013.

Net income for the third quarter was $4.7 million, and earnings per share was $0.25 on diluted weighted average shares outstanding of $18.5 million, compared with net income of $4.1 million and earnings per share of $0.20 on $20.7 million diluted weighted average shares outstanding in the third quarter of last year.

And now I'll review Forrester's third-quarter metrics to provide more perspective on the operating results for the quarter.

Agreement value -- this represents the total value of all contracts for the research and advisory services in place, without regard to the amount of revenue that has already been recognized. As of September 30, 2014, agreement value was $226.9 million, an increase of 8% from the third quarter of 2013. As of September 30, 2014, our total for client companies was 2,452, up 13 from June 30, 2014, and down 19 compared to the third 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 76% as of September 30, 2014, an increase of 1% or 1 point from June 30, 2014. And our dollar retention rate during the same time period grew 2 points to 89% compared to the previous quarter. Our enrichment rate was 97% for the period ending September 30, 2014, 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 proper trend information.

As of September 30, 2014, there were 2.4 roles per client, which increased slightly compared to the previous quarter.

Now I'd like to review the balance sheet. Our total cash and marketable securities as of September 30 was $112.4 million, down $42.7 million from $155.1 million at year-end 2013, with the reduction due to the success of our share repurchase program which totaled $66.6 million of stock repurchased during the first three quarters of 2014.

Cash from operations was a negative $7.4 million for the quarter, as compared to a negative $4.9 million for the third quarter of last year. We received $2.6 million in cash from options exercised for the quarter as compared to $4 million in the third quarter of last year. We also paid a dividend in the third quarter which amounted to $2.9 million, or $0.16 per share.

Accounts receivable at the end of September 30, 2014 was $39 million, compared to $37 million as of September 30, 2013. Our days sales outstanding as of September 30, 2014 was 48 days, which is down slightly from 49 days at September 30, 2013. And accounts receivable over 90 days was 7% at September 30, 2014, compared to 4% at September 30, 2013.

Our capital spending for the third quarter of 2014 was $200,000, compared to $800,000 during the third quarter of 2013. Deferred revenue at September 30, 2014 was $129.4 million, up 3% over September 30, 2013. Deferred revenue plus future AR was up 2% 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 terms.

In closing, we've had a busy nine months. To highlight just a few of our major efforts, let's look at what we've done to date.

We've completed the staffing and restructuring of our product, research and consulting organizations. We rolled out our Age of the Customer strategy and embedded it in the fabric of our sales, research, marketing and product offerings. We are near completion of a significant enhancement to our CRM system. In addition, we've invested in training to enhance the usage of the tool throughout Forrester. We continue to return value to shareholders through stock repurchases totaling $66.6 million for the first nine months of the year and $184.8 million over the last seven quarters. In addition, we've continued to pay a dividend of $0.16 per share quarterly.

We've accomplished these things while continuing to grow our business and achieve targeted profitability despite the cost of these initiatives. As we head into the fourth quarter, we're tightening our guidance for both revenue and earnings per share. We've lowered our upper end of revenue guidance slightly to reflect potential variability with some consulting projects. We have slightly lowered the low end of EPS guidance to reflect revenue variability and potential opportunistic sales hiring. Both revenue and EPS guidance are within the range of the guidance provided at the beginning of this year.

Now let me take you through the specifics of our guidance for the fourth 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 fourth quarter and approximately $2.1 million for the full year 2014; stock-based compensation expense of $2.1 million to $2.4 million for the fourth quarter and $7.2 million to $7.5 million for the full year 2014; reorganization costs of approximately $1.8 million for the full year 2014; and any investment gains and losses.

Forrester is providing fourth-quarter 2014 financial guidance as follows -- total revenues of approximately $78.5 million to $82.5 million; pro forma operating margins of approximately 10% and 11%; pro forma effective tax rate of 38%; and pro forma diluted earnings per share of approximately $0.27 to $0.31.

Our full-year guidance is as follows -- total revenues of approximately $310 million to $314 million; pro forma operating margin of approximately 9% to 10%; pro forma effective tax rate of 38%; and pro forma diluted earnings per share of approximately $0.94 to $0.98. We have provided guidance on a GAAP basis for the fourth 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 over to the operator for the Q&A portion of the call.

Thank you. We will now begin the question-and-answer session. (Operator Instructions.) Our first question here comes from Mr. Bill Sutherland from Emerging Growth Equities. Please go ahead.

Thanks very much. Hi, everybody. Let's -- Mike Morhardt, if you maybe can talk about the hiring environment. It sounds like you're potentially going to accelerate a little bit this quarter?

Yes, Bill. I think coming out of the summer months we did see some people, as I mentioned in my comments, self-select out based on sort of the comp plan. We're on an annual comp plan where last year we were on a quarterly comp plan. And the opportunity right now for us to add headcount in specific geographies and also build out some of these inside sales team is terrific. So working with Mr. Doyle here to plan that out for Q4 and also get a good start on Q1.

So the inside sales effort -- can you give us a little color on kind of how that's focused and what you're trying to accomplish there?

Sure. I think one of the things we're looking to do is look for opportunities to reduce cost of sale but also improve effectiveness and coverage. And I have some history with inside sales teams and as we looked at Forrester's model, it's a perfect model for some of our clients. Some of the lower-revenue clients, whether it's on the user side or the vendor side, are frankly better-served with an inside model without as much travel and T&E and local support, and that helps us in a couple of different ways. It helps us to centralize the training and the expense associated with the sales team, but it also allows us to apply some of those dollars towards our sales expansion efforts. So we're trying to do those in combination.

Has the portion of fully-ramped reps as a percentage of your total increased at this point?

It's up 4%.

4%.

Year over year. But you're sort of chasing your tail a little bit. We're adding salespeople as we go along. As I mentioned, I'm really pleased to see the percentage of reps that are at plan and participating, and that's usually a good sign for improving our tenure, which is something that we were talking about a year ago is trying to ensure that we have a strong tenure as we go into next year. So -- yes. So the ramping's coming along. We're not -- we're improving, I think, on the speed of ramp, but it we still have a lot of work to do there as well.

And finally, Mike, for you on Europe. Do you have a sense of how receptive that market's going to be going forward and do you sense any headwinds?

Yes. I'm sure there are pockets within countries, and you know more of the economic trends than I do, but from what I am hearing, it's -- our opportunity in Europe is large. It's a function of execution internally. Our message resonates over there. And I don't look at it materially differently than I look at the US. I think we were missing a key ingredient, and I think that is leadership. And so we're excited about our new Head of European Sales, and we've made some changes in leadership over there in the last year and continue to monitor that. And I think that's where the opportunity lies. I'm not worried about the sort of macroeconomic trends going on in Europe. We've got enough opportunity even if there was a little bit of a downturn.

Bill, I was there last week and -- [I should be there] twice more before Christmas -- and we talked about this at the board meeting yesterday. But it appears to us the UK is -- recovery continues to look pretty good. Benluck's good. Nordic's good. France -- a little bit (inaudible). Germany's the worry.

Yes.

Germany, as you know, was leading the continent, but it's -- they're at zero or a little bit negative right now. So Germany is the worry. Strangely enough, Spain appears to be recovering, Italy not as well. So it's -- it is sort of -- it's country by country at this point with the biggest worry being Germany. But our biggest market, as you know, in Europe is the UK.

So George, there's -- you've obviously gotten a lot of the plan in place here, at least what you've telegraphed to us. And you're showing some modest improvement toward those goals of the growth and the -- and getting back to the operating margins. So how should we think about the pace of that based on what you're seeing and with all the internal things going on?

Yes. We're not going to get there in 2015, Bill, but I think we'll make a good move in that direction in 2015. (Inaudible.)

Yes. No. I think, Bill -- it's Mike Doyle. We've got to get rid of the two-Mike thing, but I'm not going to ask you to choose right now because you might choose the other one. But I think that our goal next year is that obviously that we grow revenue faster next year than we did this year, that we get margin expansion, and obviously, as a result, we'll get, I think, meaningful EPS improvement. I know that's vague and we're obviously going to get more granular with the February call, but our intent is that next year we're going to continue to probably hire at a faster pace in sales than we did this year. So that's going to sort of bring more expense onto the P&L. We'll balance that with being smarter about our spending in other areas. And I think the challenge as you look at it with ramp headcount growing at 4% -- that's the headcount that's really going to drive growth in the first part of the year if you think about it. So that's key. We're going to continue to hire the folks who we bring on board the balance of this year and in early next year. We get some benefit of revenue-wise in the last half of the year, but more importantly, we're -- we look to see AV continue to sort of move up and move in -- because that'll -- it's a reflection of our bookings activity. So I think it's -- to George's point, I don't think -- we're not going to be back to 15% to 20% revenue growth next year and 17%-plus margins. But we want to make a good move next year towards getting us there. And then I think it accelerates at a faster rate as you get into healthy double-digit bookings because then revenue's moving at a faster pace. And with the exception of sales, the rest of the organization doesn't need to grow at the rates of revenue.

Sure.

Right now, we're sort of in this rebuilding mode and it's -- when you're in low single digit and you're rebuilding, it's tough to get traction. But that changes as we continue to accelerate next year.

Yes. If you're able to -- obviously you'll lift your -- it sounds like you're going to lift your sales hiring goals from this mid-single-digit level -- or the net growth in headcount and get more productivity. So -- alright. We'll wait for the details. I'll let someone else on. Thanks, guys.

Thanks, Bill.

Thanks, Bill.

Thank you. Our next question here comes from Vincent Colicchio from Noble Financial. Please go ahead, sir.

So Mike Morhardt, you've obviously made some nice progress. I'm just curious how far along you are in terms of -- maybe what inning is how you could put it in terms of transition to the local model.

With the seventh game tonight, that's a great analogy, Vince.

Yes.

To be fair, I think there's -- we're probably in maybe the third or fourth inning here. I think there's lots of other opportunities. Right now, we're just putting people into specific geographies to gain a level of coverage, and we've sort of doubled-down in certain markets and certain cities where we're adding 2, 3, 4 additional people to gain some scale. The opportunity comes -- it gets greater as we can get to some scale within particular markets where we can start to focus on subsidiaries of some of our larger companies and start to look at them in a local way. So there's a lot more down the road. I'm really pleased with what we've been able to do and the speed we've been able to do it at relative to our geographic expansion. But now, as you start to build out these territories, you have to be really thoughtful about how productive they can be and how quickly we can get to that level of production. And we don't want to make any missteps as we go along to put too many people in one particular town before the town is ready for it.

Yes. And one comment here, Vince, and I don't know -- I don't recall if we talked about it on a call, but we've talked about it internally. When Mike came on board, what he told us was getting to regional was at least a 3 to 4-year proposition -- that you didn't want to move too dramatically because it would disrupt too many client relationships. So we always knew this part of the strategy would move a little slower. So it feels like we're kind of right where we thought we would be at this point.

And we're being opportunistic, too. As I mentioned before, we had some folks self-select out, which was fine, but if that does happen, that allows us to move in a direction of localization more quickly.

Has the feedback on localization been as positive as you would expect?

Yes. Across the board. From a client perspective, a client may have seen a particular Forrester salesperson two or three times a year. Given the circumstances, they might see them two or three times a week. So those relationships lead to better enrichment opportunities, stronger renewal conversations that allows for what George mentioned on the cross-sell side because we're leveraging those into cross-selling opportunities and reference selling. So when we're able to have that take place -- and it's great. The clients love it and we see it in our retention rates for those types of clients.

I was at a -- down in DC, Vince, at a large government organization and I went into the CIO's -- has a big floor there -- and there actually was a desk on the floor where the Forrester salesperson sits every week. So it's amazing to see that. And we can see the impact on those contracts.

In terms of leadership boards that you were down 2% -- do you expect that to rebound going forward?

Yes. I think, Vince, we saw soft bookings in the first half of the year, but I like what's going on with FLB right now. And I think, across the board in all syndicated products, I think we are working hard to -- and this includes both Roleview and FLB as well as data. We're seeing -- which you don't see yet -- but we're seeing more recent bookings activity moving back up, which is encouraging. So I think we're starting to get the right kind of traction there. And I'm with George. His comments about more work to do -- I think it's really in those areas. But progress already and that's where there's a pretty healthy sustained focus in the product organization on building those back. We put a lot of energy getting consulting up and running, and now a lot of that energy has shifted over to our syndicated products.

And Mike Morhardt, I'm sorry if I missed it. Did you say how you performed versus plan in all regions?

No I did not. As I mentioned -- well, I mentioned four of our eight sales teams --

Yes. And we typically don't talk about our performance to plan. We typically talk about it relative to prior year. So you can give some discussion --

Well, I think [every quarter] you were comparing it for all the regions versus the prior year then.

Yes. So five of the eight sales regions were above year over year. As I mentioned earlier, we're really happy to see what took place in Europe. They grew year over year, but again, not at levels we expected. We saw a slight miss in the Asia-Pac team, but that was really driven by some consulting deals, and I'm not overly concerned about that. I think Mike spoke a little bit about the events team which is one of the eight sales team. And then the final part was the North America new business team. As I mentioned, we're outrunning some attrition there. We rebuilt the team. We have a great group of people there. I think they will be back on track. But the biggest by far -- I think it represents the most -- the majority of our business -- the biggest sales teams, which is our -- kind of our global accounts organization, which is Premier, and our North American East group and West group -- are both growing very well year over year.

Yes. And Vince, just to give you a perspective, that's over 60% of our activity falls within those big three. And I didn't want to cut off Mike, but we typically don't give out detailed plan targets. I think overall we feel good about where we are, both versus prior year and our internal targets. It's just we typically don't get too specific on the individual regions.

Okay. Thanks for the color. I'll go back into the queue.

Thanks, Vince.

(Operator Instructions.) Our next question here comes from Mr. Matt Hill from William Blair. Please go ahead, sir.

Good afternoon. This is Matt in for Tim McHugh. I had a couple questions around the project consultants. I think you had mentioned that you expect with the headcount built out there could be a moderation in revenue. So I'm just wondering, going forward, how the pace of that is going to unfold over the next several quarters and how -- I think mentioned mixed results within some of the teams and how that might maybe impact the growth there as well.

Okay. Yes. It's a -- actually it's a really good question, Matt. So we -- we're basically near complete in terms of fully staffing out our project consulting organization. We've gone -- just to give you a perspective, the consulting group from year-end -- this is overall consulting -- has gone from a headcount of about 55 to 110. So it's essentially doubled. And we don't have that many more heads to add to that organization. So -- now if you think about what's happened during the course of the year, you have people coming on board and they ramp. So we're still going to get a lift next year because you're going to have fully-ramped consultants performing, as well as we're going to get productivity out of the folks who've been here just a bit. It's just not going to be at the kind of levels that we saw this year where you had this quarter -- you have a 25% or a 24% lift. That's going to be atypical. That -- I think that's more a function of increased headcount. And so next year I think what you're going to see is that that's going to temper a fair amount. We're still going to get a lift because we're going to get ramp improvement and sort of the full-year annualization, but overall, I think that you're not going to see that kind of growth. And ideally, we're going to push more on the research side. So --

Okay. And then with that growth, how -- is there any impact on the margins here that we'll see as this group gets a little bigger and starts sustaining more of the revenue?

Yes. I think that's -- look. I think that that's the challenge. Where our -- where we looked at this is we -- our operating proposition here was that by taking the longer-term project consulting away from our research analysts, it would open up their time to both write more and better research, and we're already seeing that occur as we speak. That, we think, is going to have a very direct effect on our Roleview product and ideally get that back into some very healthy growth rates. So there was a method to the madness because on the surface, you'd look at it and say, "If none of that happens, then we've added heads and, yes, there will be some margin erosion because it's just that many more heads delivering essentially consulting." It could have a margin erosion effect. We don't expect that to be the case. We expect that the benefits of this are going to be driving Roleview research, and our syndicated research is our most profitable product, period. And that's where we want to see the growth. And in order to get back to that, what we needed to do was open up the opportunity for our research teams to get away from project consulting. They still do advisory -- the short-term 1 to 2-day advisory -- but get out of project consulting. So we are still working through and managing the short-term margin challenges. It certainly was -- this year, as we added headcount, we had margin erosion. We'll expand margins next year, but it's still a challenge. Roleview -- as we continue to book business, the revenue gets reflected over time. So that will move back a little bit slower. So next year, we'll be feeling some margin pressure. We'll expand, but we'll expand in other areas. And I suspect you're going to see the full model settle in in 2016 in a reasonably good way.

Okay. And then one final one -- kind of what you were mentioning there at the end with the Roleview revenue coming through their syndicated research. Two quarters of agreement value kind of in the 7% to 8% growth range with research up about 2% revenue. When can you see those growth rates kind of come together a little bit?

I'd certainly like, Matt, sooner rather than later, right? But I think it's -- we'll start -- I think we'll start realizing the benefits of this. You should start seeing it as we roll into next year. A lot depends. We're coming up on our biggest bookings quarter. The fourth quarter for us is still about 40% of our bookings activity for the year. So we're coming up on a really important quarter. If we finish in a good way, particularly on syndicated research, you'll see AV move up in a meaningful way. Then we'll look for -- you'd start to see syndicated revenues start getting a little bit closer to that. Now I would say that, included in our AV numbers, we've got advisory units, so that does have an impact and those are reported on the advisory side. So a lot depends on the mix of advisory and syndicated research within the package that's sold.

Okay. Alright. Well, thank you very much.

Thanks, Matt.

Thanks, Matt.

And at this time, I am showing no further questions from the audience. I will now turn the call back over to Mr. Doyle for closing remarks.

Okay. Listen. Thanks very much, everyone, for joining the call, and we will be reaching out to each of you to set up some schedules to get out on the road. So thanks again and we'll talk soon.

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