Forrester Research Inc (FORR) 2015 Q1 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 will open the call. Michael Morhardt will follow George to discuss sales. Mike Doyle will then follow Michael Morhardt to discuss our financials. We'll then open the call to Q&A.

A replay of this call will be available until May 29, 2015, and can be accessed by dialing 1-888-843-7419, or internationally, 1-630-652-3042. Please reference the passcode 9233923-pound.

Before we begin, I'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 will now hand the call over to George Colony. You may begin.

Thanks very much. Good afternoon and thanks for joining the call. I will speak for a few minutes and give you an update on the start of our year. Michael Morhardt, our Chief Sales Officer, will give a short briefing on his organization. Mike Doyle, Forrester's CFO, will then give a financial review of the first quarter. Then the three of us will then take questions.

Our plan for 2015 is to expand the Company's operating margin, bookings, revenue, and earnings per share. I'm pleased to announce that we are off to a good start and on track to hit our goals for the year.

On a macro level, Forrester's strategy of helping our clients win, serve, and retain customers is resonating globally, and I wanted to give a little color from my recent travels. I visited a large US auto insurer last week that is looking to serve mobile customers. Forrester's helping the company identify, design, and implement what we call Mobile Moments, when customers need service and want instant connection through their mobile devices.

I was recently with the CIO and CMO of one of the top-rated financial services companies in the US. The company is using Forrester's research and consulting to increase the collaboration between its marketing and technology teams, a structure we often find in high-performing, customer-obsessed corporate cultures.

I was at a large bank in Singapore a few weeks ago that has extensively used Forrester's research to revamp and rebuild its customer experience, digital and in-branch. The bank has increased its growth rate and financial results as its customer experience has improved. The bank's chief executive officer told me that CX is one of its top three priorities.

The punch line in all of this is that Forrester's services are needed by leading companies as they use technology to expand market share. Our strategy has put us at the right hand of our clients as they transform to thrive in the Age of the Customer.

Now, in the first quarter we saw progress across the core segments of our business. The research organization, led by Cliff Condon, is hitting its stride, producing a consistent and rich portfolio of content for marketing, strategy, and technology executives. Research document production was up 50% as compared with Q1 2014. Readership was up 5% year over year, and we continue to see the RoleView business accelerate.

Research highlights from the quarter included a sober assessment of Salesforce.com's future prospects, advice to retailers to focus less on millennial buyers and more on shoppers over the age of 45, and a warning to marketers in China that they are woefully lagging consumer mobile adoption in that country.

Forrester's Customer Experience Index is our newest syndicated data product. It measures the brand experiences of 935 companies and governmental organizations across 18 industries in the US, Europe, and Asia. Importantly, our service built around the CX Index informs clients on which knobs to turn and which levers to pull to improve their customer experience relative to competitors and best-in-class companies.

The CX Index is entering the market at the right time, as customer experiences become an important priority for many companies. CEO's from Anthem, Blue Cross, Citibank, Delta Airlines, and Sprint reported on their customer experience efforts during recent calls with their investors. Companies with higher CX Index scores consistently outperform lower-ranked companies in stock price appreciation. Our consulting business grew double digits year over year. While we certainly have more to do tuning consulting operations, it is becoming an integrated part of our overall business.

As Mike and Mike will speak about in a few minutes, some of the basic measures of our business progressed forward in Q1. Quarterly and rolling 12-month retention rates on a Company and dollar basis both moved upward. In addition, our overall client count increased by 33 companies. Sales attrition dropped to its lowest level in four years, while the sales force is now larger than at any time in the Company's history. Our new business sales team beat plan in the quarter, as did our premier accounts group. Finally, sales through our worldwide partner channel remain strong, and this is a trend that has persisted over the last three quarters.

Europe continues to present its challenges, including FX, continuing sluggish economic growth, and our ramp of new sales leadership in the region. While Forrester is growing at double digits in Asia, the business environment in China remains complex as the government there continues to challenge multinational technology companies -- and many of them are our clients -- operating in that country.

So to conclude, we are off to a good start for the year. The sales force is growing and maturing, renewal rates are improving, and new business sales are increasing. We have recently rebranded the Company. Our unique value proposition now reads as follows. "We work with technology and business professionals to develop customer-obsessed strategies that drive growth." We are different, and we're pointed to where our clients most need research and advice.

I'm going to be out on the road this quarter with Mike Doyle, and I hope to see many of you over the next few months. And I'm now going to turn the call over to Michael Morhardt, Forrester's head of sales. Mike?

Thanks, George. In Q1, the sales organization continued to demonstrate strong progress towards our goal of consistent double-digit bookings growth. We continued to hear from our clients that the Age of the Customer go-to-market dynamic is changing their business models, and the need for Forrester products and services continues to expand.

Q1 is now our second-largest quarter for the year from a bookings perspective. For the quarter, we saw five of seven sales teams achieve solid year-over-year growth. We saw good performance in our large account team, the premier team, in our east group, and another strong performance in our partners organization. Our North American new business team had a very strong quarter, with significant improvement in year-over-year performance and logo acquisition.

We saw unbalanced performance in our teams in Europe and in Canada. In each region, we saw strong performances by some teams offset by under-plan performances by other teams that brought down the overall performances of these regions. Europe continues to be a work in progress under our new sales leader, Jon McNerney, while Canada experienced delayed deals that pushed into Q2 that should recover by the end of the quarter.

From a metrics perspective, we saw continued progress. Client retention was up again for the sixth quarter in a row. Sales attrition was down again, with the last two quarters being two of the lowest in recent memory. Sales productivity improved quarter over quarter.

We continued our sales expansion efforts in Q1, up 9% in quota-bearing headcount year over year. Our goal is to grow by 10% in 2015 and potentially accelerate that expansion if the opportunity presents itself. We are continuing to expand the sales organization geographically, which supports our goal of getting closer to our clients and prospects. We also believe that we are under-penetrated in most of our accounts, and by adding new salespeople, we're able to drop the average number of accounts per rep, which leads to better client retention, better cross-sell, and stronger overall account growth.

In 2015, as we mentioned earlier, our sales strategy is not changing. We are continuing to drive for improved productivity, focus on improving client retention rates, and expand our sales organization through localization strategy as well as an inside model.

With that, I'll 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 first quarter of 2015, including a look at our financial results, the balance sheet of March 31, our first-quarter metrics, and the outlook for the second quarter and full year of 2015. Please note that the income statement numbers I'm reporting are pro forma and exclude the following items -- stock-based compensation expense, amortization of intangibles, reorganization costs, and net gains and losses from investments. Also for 2015, we continue to utilize an effective tax rate of 38% for pro forma purposes.

For the first quarter of 2015, Forrester met revenue and pro forma operating margin guidance and exceeded the top end of our earnings-per-share guidance. This performance came despite significant foreign exchange headwinds and our organizational realignment in February, which eliminated approximately 50 positions to fund expansion of our sales and delivery resources. We're seeing healthy growth in our key sales regions and products, which is building the foundation for double-digit growth in revenue and pro forma operating margins in 2016.

Now let me turn to a more detailed review of our first-quarter results. Forrester's first-quarter revenue increased by 3% to $75.2 million from $73.1 million in the first quarter of 2014. On an FX-neutral basis, we grew at 6%. However, the continued strength in the US dollar resulted in a 3% negative impact to our overall revenue growth.

First-quarter research services revenue increased 2% to $51.9 million from $50.8 million last year and represented 69% of total revenue for the quarter. On an FX-neutral basis, research services revenue grew by 6%, driven by our research and data offerings.

Our first-quarter advisory services and event revenue increased 5% to $23.3 million from $22.3 million in the first quarter of 2014 and represented 31% of total revenue for the quarter. On an FX-neutral basis, advisory services and events revenue grew by 8%, led by our now fully ramped consulting group.

International revenue mix was 23% for the period ending March 31, 2015, compared to 27% in the same quarter of last year. Adjusted for foreign exchange, 25% of the revenue was generated outside of the US, reflecting higher growth rates in the US compared to Europe and Asia-Pacific.

I'd now like to take you through the activities behind our revenue, starting with research. Forrester had 59 Playbooks at the end of the first quarter, and we added 500 new documents to our RoleView library. In addition, we hosted 37 webinars for our clients during the first quarter. And as of March 31, 2015, the top three research roles were the CIO role, with 8,725 members; application development and delivery, with 6,137 members; and the CMO, with 4,406 members.

Forrester Leadership Boards, our peer offering for senior executives, remains a focus area following the reorganization effort that commenced earlier in the year. As of March 31, 2015, Forrester Leadership Boards had a total of 1,522 members, down 15% compared to the same time last year, with declines in both BT and M&S, driven mainly by our efforts to right-size geographically and to align our councils to the opportunity we continue to see in the marketplace.

Our data products provide our B2B and B2C clients with actionable insights that complement our research and consulting services in a way that cannot be duplicated. On a year-over-year basis, revenue increased by 4% for the first quarter and 8% on an FX-neutral basis, driven by our CX Index offering. We are very encouraged by the initial client response to this product, which continues to gain traction in the marketplace.

In our advisory and consulting businesses, total revenue for the first quarter increased by 8% compared to the prior year and 11% on an FX-neutral basis. Each quarter, an increasing amount of our delivery shifts to our consulting organization from our analysts. As George mentioned, the benefits of this strategy are becoming more visible in both the quantity and the quality of our research production and in the response from our clients to our new consulting practices.

In our events business, we held two forums in the first quarter of 2015 -- in Scottsdale, the forum for sales enablement professionals, and in Shanghai, the summit for marketing leaders. Events revenue declined on a year-over-year basis by 12% in the first quarter due to lower attendance at both events. As we had mentioned in our Q4 call, we brought in a new leader for the event sales team, and she has made changes which will impact near-term results. We are confident as we build this team, we will return to healthy growth rates in the event business.

I will now highlight the expense and income portions of the income statement. Operating expenses for the first quarter were $70.1 million, up 1% from $69.7 million in the prior year and up 4% on an FX-neutral basis. Costs of services and fulfillment increased by 4%, or 7% on an FX-neutral basis, due mainly to higher headcount in our consulting group, and also due to annual merit increases, higher incentive bonuses, and higher survey costs.

Selling and marketing expenses decreased by 1% but increased 2% on a constant currency basis compared to the same period last year. Higher headcount in sales, as well as annual merit and higher commissions, were partially offset by a non-recurring fee in Q1 of 2014 to terminate a contract with an independent sales partner.

General and administrative costs increased by 2%, or 5% on an FX-neutral basis, due to higher headcount, annual merit and hire incentive bonuses, and partially offset by lower technology and recruiting costs.

Overall, headcount was essentially flat compared to the first quarter of 2014, though it decreased by 3% compared to the fourth quarter as a result of reorganization that we previously announced. At the end of the first quarter, we had a total staff of 1,305, including a research and consulting staff of 485 and a sales staff of 508. Research and consulting headcount was down 1% year over year and down 6% sequentially. Sales headcount increased by 3% versus prior year, and it was essentially flat sequentially. Sales rep headcount increased by 9% compared to the first quarter of 2014 and by 2% sequentially.

Operating income was $5.1 million, or 6.8% of revenue, compared with $3.4 million, or 4.6% of revenue, in the first quarter of 2014. This is an increase of 52% year over year. Other income for the quarter was $282,000 compared to a negative $64,000 in the first quarter of 2014. Net income for the first quarter was $3.3 million, and earnings per share was $0.18 on diluted weighted average shares outstanding of 18.4 million, compared with net income of $2 million and earnings per share of $0.10 on 20.2 million diluted weighted average shares outstanding in the first quarter of last year.

And now I'll review Forrester's first-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's already been recognized. As of March 31, 2015, agreement value was $232.9 million, up 4% from the first quarter of 2014 and up 5% on a constant currency basis.

As of March 31, 2015, our total for client companies was 2,464, up 33 from December 31, 2014, and essentially flat compared to the first quarter of 2014. 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 79% as of March 31, 2015, up three points from the prior quarter and up five points compared to last year. Our dollar retention rate increased by two points to 90% compared to the prior quarter and by three points compared to last year. Our enrichment rate was 97% for the period ending March 31, 2015, unchanged compared to the prior quarter and compared to last year. 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 properly captures the trend information.

Now I'd like to review the balance sheet. Our total cash and marketable securities at March 31 was $111 million, which is an increase of $6.5 million from $104.5 million at year end 2014. Cash from operations was $16.3 million for the quarter as compared to $33 million in the first quarter of last year. The decrease in cash from operations was due primarily to three factors. As we discussed on our Q4 call, we shifted the renewal of approximately $10 million of contracts from December 2014 into the first quarter of 2015 due to the use of a-year-plus contracts back in December of 2013. This shift resulted in a push-out of the initial customer invoices related to these contracts and resulted in lower cash collections during the first quarter of 2015.

In addition, we had a degradation in our accounts receivable compared to 2014, and we also had tiny differences on certain employee benefits and other payments, which will reverse in later quarters. Overall, we're projecting cash from operations for the full year 2015 to be consistent with the amount generated in 2014.

Moving on to other cash flow activity during the quarter, we received $1.3 million in cash from options exercise and our employee stock purchase plan for the quarter as compared to $1.6 million in the first quarter of last year. We also paid a dividend in the first quarter, which amounted to $3.1 million, or $0.17 per share.

Accounts receivable at March 31, 2015, was $50 million compared to $49.1 million as of March 31 last year. Our days sales outstanding at March 31, 2015, was 60 days compared to 61 days at March 31, 2014. And accounts receivable over 90 days was 5% at March 31, 2015, compared to 4% at March 31, 2014.

Deferred revenue at March 31, 2015, was $150.4 million, down 6% compared to March 31, 2014. Deferred revenue plus future AR was down 4% compared to the prior year. Our future AR balances are amounts to be invoiced in the future for clients with multiyear deals or scheduled payment terms. The year-over-year decrease in deferred revenue plus future AR was due entirely to the effect of foreign exchange.

So in closing, this was a good start to 2015. As I mentioned at the beginning of my comments, there were a few challenges to overcome in the quarter. However, we still delivered revenue to the guidance levels and delivered operating profit at the upper end of guidance and exceeded earnings-per-share guidance for the quarter.

We continue to focus our energy on improving areas we've identified on in previous calls -- our European business, which is showing progress in key regions, and our FLB and event businesses, which we are realigning to accelerate growth. What's most encouraging, as both Mike and I highlighted, is that we continue to see improving customer retention metrics in our large sales regions, and our core products are delivering strong performance. The Age of the Customer strategy is clearly resonating with clients.

Now let me take you through the specifics of our guidance for the second quarter and full year 2015. And as a reminder, our guidance excludes the following -- amortization of intangible assets, which we expect to be approximately $200,000 for the second quarter and approximately $1 million for the full year 2015; stock-based compensation expense of $1.4 million to $1.6 million for the second quarter and $9 million to $9.5 million for the full year 2015; reorganization costs of $0.3 million to $0.5 million for the second quarter and $3.7 million to $3.9 million for the full year 2015; and any investment gains and losses.

Forrester's providing second-quarter 2015 financial guidance as follows -- total revenues of approximately $83.5 million to $86.5 million; pro forma operating margin of approximately 10.5% to 12.5%; pro forma effective tax rate of 38%; and pro forma diluted earnings per share of approximately $0.30 to $0.34.

Our full-year 2015 guidance is unchanged and is as follows -- total revenues of approximately $325 million to $333 million; pro forma operating margin of approximately 9.5% to 10.5%; pro forma effective tax rate of 38%; and pro forma diluted earnings per share of approximately $1.05 to $1.13. We've provided guidance on a GAAP basis for the second quarter and full-year 2015 in our press release today and our 8-K as well.

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

(Operator Instructions.) Tim McHugh, William Blair.

Can you just reconcile for me your comment around the overall sales number again that gets reported and then the sales quota headcount of 9%, I guess? What's the difference in the growth rate there?

Yes, Tim, it's Mike. We started to get into the habit of trying to break out quota carriers versus overall sales headcount, because as Mike adjusts and streamlines some parts of his operation, the primary driver for bookings and ultimately revenue for us is are we growing our quota-carrying headcount. So when you look at sales, that's how we break that out and try and draw attention to the fact that quota carriers are up net 9% versus a year ago and up 2% sequentially. And essentially, what it implies is that in the support areas and management side, that those are growing, obviously, are either flat or in some instances, down just a little bit.

Okay. And you talked about the Leadership Boards, and I guess you give us metrics that are helpful each quarter in terms of the, I guess the number of members. But how big of an impact, and how much of a drag is that in terms of the growth, the revenue growth that we're seeing now? I guess I don't have a great sense of how to size that relative to the rest of the business.

I can talk a little bit -- this is Mike, Tim -- I can talk a little bit about the FLB program in general. I think we've mentioned on previous calls that we are in the process of doing some pricing and packaging changes for our products. FLB is one of those. FLB previously was sold, in some cases, as a bundle. And as you know, an FLB has a fixed cost to it. And these bundles made the FLBs highly discountable. And so for those particular clients where we found a highly discounted FLB, we migrated those clients towards just our core product, our core RoleView product and just had them as members. So we saw a drop there, but in some cases it was picked up on the RoleView side.

So the idea is that, on a net basis to the total numbers, that's not something we should -- I mean, it's just moving it around?

It is moving it around. In many cases, we saw that migration where a client would move over to RoleView, and so the RoleView number would increase at the expense of the FLB number.

I know some of this -- this is George here, Tim -- some of this is about right-sizing FLBs in Europe. We had too many FLBs. I think we've gone from six to four in Europe. And this is a good thing. This is really a drive toward profitability, as is the move that Mike talked about. So it's looking to right-size FLB and it's looking to make FLB, put it on a more profitable path as we move forward.

Yes, and I will tell you, Tim, that it is -- look, we've factored in the fact that it is going to be a little bit of a pull on revenue for us for this year, and we assumed that, both for events and FLB, because of the work that we were doing. We assumed that that was going to -- you know, in some cases you shrink a little bit to grow more aggressively. So you take out some immediate revenues, you consolidate councils, to George's point, but then you concentrate, and ideally, that's going to accelerate in a big way. But in the near term, it's a little bit of a drag on revenue growth. That's why I say in the comments, our core products like RoleView and all are growing at, really, at a good pace, and that's what we want, so we're encouraged by that. And we're confident we're going to get the events businesses and FLB back on what we consider to be more acceptable, aggressive growth tracks.

Okay, and then lastly, just the guidance for the year. I get it, kind of the same. But I guess in particular on revenue, given the incremental drag on currency versus what you had assumed before and, I guess, looking at where Q1 and Q2 shook out, I guess as I model, maybe I'm not accurate here, but it feels like the middle (inaudible) is tougher given the currency trends you've had. So any comment, given currency, I guess where we should be looking within that full-year range for revenue?

Yes, I think that's a fair comment, Tim. We did wrestle with that, my team and I, which is -- that's the more difficult. And we have some offset. So earnings is a little bit easier because we have a little bit of a natural head with expenses in those countries. But I would say yes. I mean, I think that to try and think, to stretch to the upper end is going to be -- we're really -- like everyone else out there that has businesses outside the US, you're fighting an uphill battle, there's no question. But we're comfortable leaving full-year guidance where it is. I think yes, to try and get to the upper portion of that guidance, that's work, because you're really going to have to be working it a little bit of overtime to cover the downside, and the euro in particular, for us.

I think it's surprising everyone, Tim. I mean, the banks were in the one with the (inaudible) branch in the euro, and our board member from Europe -- we had a board meeting yesterday -- he said we'll be at parity by the middle of the year, end of the year. So it's surprising everyone.

All right, okay. Thank you.

William Sutherland, Emerging Growth.

Just following up on Tim's question, can you size the FX impact for the year, Mike, as you guys model it?

I think that as we looked at our guidance, and again, I will tell you this is, from my end, we're not FX experts. And what I'm realizing, by the way, is people who say they are, aren't either. I wouldn't carry that moniker myself. It's a tough deal. But I think that the first quarter in FX dropped much quicker than we had expected for the euro in particular and the Canadian dollar. I think that, as I look out in rates that we targeted versus what I look at, or what the experts have as full year, I think that probably the bulk of the impact is going to be more first half loaded, assuming -- and this is a big assumption, Bill -- that the euro settles in at $1.05 to $1.06, right?

Right, that's all you can do.

Right.

It could go lower.

Yes, so what battle are we fighting? Maybe for profit, it's maybe $1.5 million to $2 million that we're having to cover just due to FX and that effect of foreign exchange. And so that's how we think about it. As I look at our quarter, Bill, it was about, net to EPS was probably about $400,000 to $500,000. So it's difficult to predict, though, and I think that we're looking for a settling at some point. But to George's point, our Board member is a little bit more pessimistic than the current forecasts we have. So we'll see. For us, it's primarily the euro that has the biggest impact, but the pound and the Canadian dollar also are right up there in terms of their impact, both from a revenue and expense point.

The Australian dollar, too.

Yes.

Well, I mean, not to slice it too thin, but if I look at your second-quarter guidance, which is at the midpoint, pretty close to what you did in the first quarter, you do have a heavier burden in that quarter than first, don't you, from FX? So in other words, FX-neutral, you're starting to see a little pickup that quarter, and then -- because I think what everyone's wondering is about the big step up in the back half, just backing into the back half from the full year.

Yes, I mean, right, from a revenue standpoint, that's right. I think that our expectation is that -- and Mike's plan is built on continued growth in bookings so that we have, ideally, a good Q2 and we start reaping some of the benefits of that syndicated revenue in the back half of the year. And you're right -- we are fighting a little bit foreign exchange headwinds. So yes, absolutely.

I guess in your consulting business, you don't have an FX issue -- not much, do you?

Well, we still do. We do consult outside --

Sure, but it's low.

Yes, we consult outside the US.

I wasn't sure, actually. Okay, okay.

Yes, so we do. We do have a meaningful impact. I think for the quarter it was probably three points that impacted the consulting business when we looked at their revenue. So it is meaningful

Yes, what was the consulting growth? I missed it as you went through that.

Consulting advisory, I believe, Bill, it was 8%, and then on FX-neutral, it was 11%, was the number.

Okay. Did you add consultants again, or are you level, where you were on that?

Actually, in the near term, the pure consulting headcount from end of year to where we are today is actually down a bit as we right-size some of the groups or practices, candidly, where we probably over-hired. We over-anticipated demand. And then where we are now, I think, is the net effect is that we'll probably, you'll see us hire as we go now. And we'll be growing that business, just not nearly at the rate we grew it last year. Last year was, "Let's get them all onboard," and that was a very aggressive year. But if you look at just pure consultants, Bill, we're down about 15 heads from January of this year as we right-sized some areas that there wasn't enough demand there.

But Bill, we're at full headcount in consulting for the plant.

Yes.

Okay. And on the CX Index, is the pricing there or is the sale there more typically a bundle, or are you selling that standalone quite a bit?

It's coming in all forms, Bill. We have clients that buy the CX Index standalone. Sometimes they're looking at industry. And then many times, it's bundled in with consulting, sometimes analyst workshops as well. So it's coming in all different forms. We're not turning down any of it, but it depends on where the client is from a maturity perspective.

The good news is that, at least every company that I've visited with, and I think we're getting the feedback from the sales force as well, is it is a very needed product. There's a lot of customer experience work being done in these companies, but in particular the CEO will, and the CMO will ask the very good question, how are we measuring this, and exactly what is that benchmark today and what are we going to look like next year? And so it's a very germane product to every one of our, at least the accounts that I'm visiting.

Do you find as a benchmarking tool, that it helps drive the consulting?

Absolutely. I think we have a big consulting practice around CX and we also, the CX analyst group is one of the largest groups in the Company, so their advisory's also driven by this work. So we're also seeing very good synergy here.

We're also seeing that in FLB, in our events, in our research, all the different products and services we offer, CX is definitely hot.

I mentioned this in my remarks, but it's incredible to look at the top 20 CX scores, scoring companies, versus the bottom 20, and look at the stock price appreciation differential. It's just, it's extraordinary. I mean, I almost feel like launching a hedge fund.

That's not an announcement, by the way, Bill. (Laughter)

But it's an incredibly tight correlation.

All right, thanks, everybody.

Vincent Colicchio, Noble Financial.

Yes, I looked through your combined number for research and consulting, if I take out the consulting right-sizing, there still was a meaningful drop sequentially. Was there an increase in turnover, or was that a right-sizing to research as well?

Research as well was down a bit, Vince, from a headcount standpoint. Consulting was disproportionately larger than the research organization. The year-to-date change, I think, on our total research headcount was about five heads.

Yes, what's going here on the headcount of research, Vince, is that as more consulting moves over to the consulting organization, we're looking to fix, generally fix, headcount in research because it's a syndicated world there, obviously, and to get higher leverage from the research headcount. So if you look even into 2016, we don't see any appreciable bump-up in headcount in research.

Okay. And on the Playbooks, I missed the number at the end of the quarter. What was it?

59.

And that's versus 67. If I remember right, you're purposefully reducing the number. Is that right?

I don't think it was 67. Our target was --

It was in the 60s, Vince, that's right. So I think we are constantly looking at those Playbooks and evaluating. Again, they are targeted, so it's very much evaluating where we see customer need and demand. And in some instances, those are ones that are live. It doesn't necessarily include those that would be maybe in a refresh mode.

Yes, the goal here, Vince, is that each of the research groups will have approximately five Playbooks, so 60-ish is the number.

Okay.

That is stasis for us.

And then in your prepared remarks, you had mentioned that China's a tough market, and then Canada, you've had some headwinds. I'm a bit curious -- how large are those two markets as a percentage of revenue? I would imagine they're pretty small. Just wondering if I should be concerned about their impact.

I would say China, less so. Canada, as a percentage, look, it's still not dominating, but it's a good-sized market for us. Again, it's not something that's going to completely tilt us off the axis here. I mean, those are still markets that are just not that big. But China, I would not get overly concerned about right now. Canada, in part was they've been such a consistently good player. This was a one-off for us, so that the delta, the variance is what really threw us a bit.

That market was really shocked by energy prices.

Yes.

Sounds like you feel pretty confident about that delayed business coming back.

Yes, we do. We absolutely do. I think the team we have in Canada is a good team, and I'm comfortable that they're going to find their way back. I know they're getting a lot of prodding from Mike to get there quicker, and that's a good thing.

So one other quick comment, Vince, back to your -- and I did not capture this. But the other place, and because they're included in our research number, the FLB headcount -- that was a meaningful reduction in the February action. So you're right. I mean, research per se was not, but when you add the FLB team, the advisors, that was a meaningful number. So that's what's driving that.

Okay, so that's included.

Yes, it is.

Okay, okay. Thanks for that clarification. I'll go back in the queue. Thanks, guys.

We have no further questions at this time. I would now like to turn the call back to Mike Doyle.

Okay, great. Thanks, everyone, for joining the call. And as George mentioned, we will be out on the road, making appointments to meet with as many folks as possible. So we appreciate your interest, and we will talk to everyone soon. Thank you.

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