Forrester Research Inc (FORR) 2015 Q4 法說會逐字稿

Good afternoon. Thank you for joining today's call. With me today are George Colony, Forrester's Chairman of the Board and CEO; Michael Morhardt, Forrester's Chief Sales Officer; and Mike Doyle, Forrester's Chief Financial Officer. George 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 to Q&A.

A replay of this call will be available until March 11, 2016, and can be accessed by dialing 1-888-843-7419; or internationally, 1-630-652-3042. Please reference the pass code 9533828#.

Before we begin, I would like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify those forward-looking statements. Those 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 these 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.

Good afternoon, and thanks for joining Forrester's Q4 and full-year 2015 conference call. I will comment on the Company's Q4 performance, full year 2015, and look ahead to 2016. Mike Morhardt, our Chief Sales Officer, will then give a briefing on his organization, followed by Mike Doyle, Forrester's CFO, who will give a financial review of the year and lay out 2016 guidance. And following our remarks, we will take questions.

As of year-end, the Company completed the second year in its new strategy: working with business and technology leaders to build customer-obsessed strategies that drive growth.

We engage with large corporations on three levels. Number one, helping them stay aligned with their increasingly powerful customers. Two, advising marketing and strategy executives on how to win those customers. And, three, guiding technology management executives as they construct their business technology agendas. In very simple terms, we are retained by our clients to ensure that they are positioned to win in the age of the customer.

For our clients, the stakes are high. The dynamism of customers poses an existential threat to large corporations: eroding market share, posing new competitive dynamics, destroying brands and disrupting product development. Whether you sell tires, banking services, plane tickets or energy, your customers will change the rules of your business over the next 10 to 20 years. And we can see early examples of this.

Throughout the 35 years of my business career, one company has been the paragon of unglamorous, but steady, growth, and that has been Walmart. And a month ago, the company announced that it was closing 250 stores. Now, why is that happening? Customers are inexorably shifting away from retail toward a blended retail-online approach, and Walmart is not evolving quickly enough to stay on pace.

I gave give a speech to 200 marketers at a large life insurance company two weeks ago in New Jersey. The company's CEO and CMO believe that their customers are seismically shifting, and they don't want to be caught on the defensive, especially as the technology disruption driven by FinTech emerges. We had a very spirited discussion on the changing customer and what it will mean to the life insurance business.

Three weeks ago, Delta passed United to become the number two airline in the United States by revenue. And this is a very long and complex story which I'm not going to go into here. But the primary driver of Delta's resurgence has been its five-year effort to improve and enhance its customer experience.

If you step back from all of this and ask the question, what is at stake, in a word, what is at stake is revenue. A Forrester report released in the third quarter of 2015 correlated improved customer experience with faster revenue growth across a number of industries. Those companies that scored high in Forrester's Customer Experience Index had much faster revenue growth over a five-year period than lower-scoring institutions.

Just to summarize, Forrester's strategy and focus is no longer about guiding companies to buy the right technology. We are about helping companies survive and thrive in an era of empowered customers.

Now, our strategy is beginning to have a positive impact on our business. Following modest growth in the first half of 2015, bookings accelerated in the second half and particularly in the fourth quarter. Renewal and enrichment rates moved upward in 2015. After two complete renewal cycles, buying transitions are, for the most part, behind us, and we are expecting renewal and enrichment rates to continue to improve through 2016.

Our sales performance in 2015, coupled with tight expense control throughout the year, drove increased operating margin in EPS for the full year. Despite lowering revenue and earnings guidance in midyear, we still met the top end of our original earnings targets. And I am very pleased with the way the year ended, and now we look to sustain momentum in 2016.

I would now like to give some color to our product portfolio performance in 2015. As I mentioned on the Q3 conference call, we introduced a new RoleView package late in the year, the age of the customer offering. This research seat, which is premium priced to the MNS and BT RoleView seats, gives access across all of the roles that Forrester covers. In a world where the CIO and the CMO must intensely collaborate to win customers, it is imperative that marketing and technology disciplines are widely shared and understood, and that is exactly what the AOCC affords.

We launched the AOC seat in September of 2015 and, year to date, it has exceeded expectations. The AOC seat is unique in the marketplace. It is the only core research offering that bridges the marketing, business and technology worlds, promoting increased cross-discipline collaboration.

Our customer experience business across all product lines continues to grow at over 20% per year. Inclusive of research, leadership boards, data, events and consulting, we believe that Forrester possesses one of the most complete customer experience practices in the world. And this segment of the business is showing no signs of slowing.

Our events business began to grow again in the second half of 2015. In the fourth quarter, John Sellazzo joined us -- joined as our new head of events. And John has spent his career in the business, most recently running events at IDG.

Seat and sponsorship sales were up in the fourth quarter, and we are excited to be hosting 13 events in 2016.

And then, finally, the Customer Experience Index, our newest product, attained plan for 2015. In 2016, we are expanding the index to 982 brands worldwide, with a rough breakdown of one-third of brands in the US, one-third in Europe and one-third in Asia. A digital version of the CX Index will launch in midyear -- at midyear 2016.

I would like to finish up my remarks with a few observations about the coming year. Firstly, a priority will be transitioning more of our products to be available in digital forms. In Q4, we introduced a digital version of our reprints -- of our reprint product, enabling clients to better track generated leads, location of leads and reprint uptake.

Early in the second quarter 2016, we will introduce our iPhone research app for clients, opening a new means of consuming Forrester's content. IPhone is the number one requested platform by our clients, and we expect it to be a complement to our iPad offerings.

A final theme in 2016 is our effort to increase sales force productivity. To this end, we will take three actions. Number one, sharpening the ideal customer profile, ensuring that we focus on the companies that are most challenged in the age of the customer. Secondly, segmenting our sales force by customer type. And, three, selling the right product to the right customer. And Mike will say more about this in just a few moments.

So to conclude, I am pleased with our progress in 2015 and especially with our performance in the fourth quarter. Our strategy is resonating. We have successfully transitioned our client base, and we are beginning to see results. There is still, of course, much work to be done, but we are confident that our momentum will continue into 2016.

I would now like to turn the call over to Mike Morhardt, Forrester's head of sales. Mike.

Thanks, George. Sales ended the year with solid momentum going into 2016. Our age of the customer market strategy continues to resonate with our clients, and the overall opportunity continues to grow. We saw a strong over-plan Q4 performance from our North American new business, Asia-Pac, premier global accounts, international partners and East teams. We also saw improved performance in our Western European teams, although not at plan levels for the quarter. For the quarter and the year, we saw all seven teams achieve year-over-year growth, currency adjusted.

As I have outlined in the last couple of calls, the age of the customer opportunity is significant, and our offer is strongly differentiated. Our clients are struggling to keep up with their rapidly changing buyers. They want to work with Forrester in a broader, more comprehensive way. Some of the adjustments we made to capitalize on this opportunity include refining our optimiza -- refining and optimizing our buying process. Through training, technology enhancements and new processes, we have made it easier for clients to buy from us and easier for salespeople to sell. Although we are just starting on this work, we saw some immediate dividends.

In Q4, we saw a significant 2-point improvement in pipeline conversion rates, reduced times for deals to book once they are received and overall improved deal flow across the quarter. George mentioned our ongoing effort to identify through market segmentation our ideal client profile. Through buying-behavior analysis, we have identified current clients and prospects that are more likely to engage with Forrester across our entire product portfolio. Segmenting our client and prospects based on buying behaviors will lead to improved customer experience, continued improvement in client retention and improved enrichment rates.

George also mentioned we saw an acceleration in the adoption of the age of the customer research offering. This offering, as a reminder, gives research and SLB clients both our BT and MNS research, and it is sold at a premium. Upon release, we saw immediate acceptance in the market from our clients, growth in our pipelines and competitive wins and client win-backs.

As I had mentioned in previous calls, we continue to focus on sales productivity and expansion. As a result of our work in the market segmentation, we increased the build-out of our inside sales model. Over 2015, the inside sales team headcount grew by 55%, and we continue to invest in these teams. We are pleased with both the results and the productivity we are seeing. Overall sales headcount came in at 3% year-over-year growth, with attrition at a five-year low. We purposely slowed our hiring in Q4 to ensure we focused the sales teams and the leaders on executing on results in our biggest quarter. As we approach 2016, we will continue to add headcount in areas where we are seeing the biggest ROI and productivity.

We are pleased with our performance and momentum coming out of Q4. The changes we have made to capitalize on the age of the customer market opportunity are starting to show results. There is still more work to do, but we are confident in the size of the opportunity, the differentiation in our offering and the level of engagement from our clients.

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

Thanks, Mike. I will now begin my review of Forrester's financial performance for the fourth quarter of 2015, including a look at our financial results, the balance sheet at December 31, our fourth-quarter metrics and the outlook for the first quarter and full year of 2016.

Please note that the income statement numbers I am reporting are pro forma and exclude the following items: stock-based compensation expense, amortization of intangibles, reorganization costs and net losses from investments. Also for 2015, we continue to utilize an effective tax rate of 38% for pro forma purposes. The actual effective tax rate for the full year of 2015 was 37.9%.

For the fourth quarter of 2015, Forrester's revenue met guidance, and pro forma operating margin and EPS exceeded guidance. Our revenue performance was near the upper end of our range despite continued headwind due to ongoing volatility in the global currency market. As Mike mentioned, our sales bookings performance was up year over year across all his sales regions on a constant currency basis. In addition, 5 of our 7 products achieved their targeted bookings plan for the quarter, and the two that missed targeted levels still grew at double-digit rates. We continue to manage operating expense in a rigorous manner, which helped drive EPS above guidance levels.

For the full year, of 2015, we achieved the upper end of the revenue guidance we set back in July and exceeded our EPS guidance. In addition, our EPS is at the upper end of the original guidance we set in February, despite lower revenues.

Now let me turn to a more detailed review of our fourth-quarter results. Forrester's fourth-quarter revenue of $81 million was essentially flat compared to $80.7 million in the fourth quarter of 2014, and grew at 3% on a constant currency basis. Forrester's fourth-quarter research services revenue decreased nominally to $53.6 million from $53.8 million last year and represented 66% of total revenue for the quarter. On a constant currency basis, research services revenue grew by 2%.

Fourth-quarter advisory services and event revenue grew by 2% to $27.4 million from $26.9 million in the fourth quarter of 2014 and represented 34% of total revenue for the quarter. On an FX-neutral basis, advisory services and event revenue increased by 4%.

And the international revenue mix was 23% for the fourth quarter of 2015 compared to 25% in the same quarter of last year. On a constant currency basis, international revenue mix remained unchanged.

And now I would like to take you through the activity behind our revenue, starting with research. Forrester had 60 playbooks at the end of the fourth quarter, and we added 452 new documents to our RoleView library. In addition, we hosted 29 webinars for our clients during the fourth quarter. And as of December 31, 2015, the top three research roles were the CIO with 10,215 members, application development and delivery professionals with 6,463 members, and any analyst relations professionals with 5,237 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 December 31, 2015, Forrester Leadership Boards had a total of 1,506 members, down 8% compared to the same time last year, reflecting both a geographic realignment of the business as well as a repackaging effort to clarify and strengthen the product value proposition.

Our data products provide our B2B and B2C clients with actionable insights to complement our research and consulting services in a way that cannot be duplicated. On a year-over-year basis, revenue decreased by 11% for the fourth quarter and decreased by 9% on an FX-neutral basis, driven by decline in custom data cuts revenue and partially offset by a growth in our CX Index offering.

In our advisory and consulting business, total revenue for the fourth quarter grew by 7% compared to the prior year, or by 9% on an FX-neutral basis. This segment of our business continued to strengthen as we further refined our consulting practices and drove increased value from advisory services through a price increase.

We held four events in the fourth quarter of 2015: our Age of the Customer Summit, customer experience forums in both San Francisco and London, as well as the digital business forum in Chicago. Event revenue decreased by 21% compared to the fourth quarter of 2014, with one fewer event held compared to the prior year and a decline in overall sponsorship revenue partially offset by higher ticket revenue.

I am now going to highlight the expense and income portions of the income statement. Operating expenses for the fourth quarter was $74.2 million, up 4% from $71.6 million in the prior year and up 5% on an FX-neutral basis. Cost of services and fulfillment increased by 2%, or 4% on a constant currency basis on higher annual bonuses as we adjusted our accrual to reflect better-than-expected performance. This was partially offset by lower salaries related to headcount reductions implemented in the first quarter.

Selling and marketing expenses increased by 3%, or by 5% on a constant currency basis, compared to the same period last year due to sales headcount growth and professional services fees related to selling and marketing effectiveness. And partially offset by lower commissions.

General and administrative costs increased by 14%, or by 16% on an FX-neutral basis, driven mainly by higher annual bonuses resulting from approved operating performance in the fourth quarter.

Overall headcount was essentially flat compared to the fourth quarter of 2014 and up 2% compared to the third quarter of 2015. At the end of the fourth quarter, we had a total staff of 1,345, including a research and consulting staff of 499 and a sales staff of 524. Research and consulting decreased by 4% compared to the prior year and increased by 2% as compared to the prior quarter. Sales headcount increased by 3% versus prior year and by 2% compared to the prior quarter. Sales rep headcount increased by 4% compared to the fourth quarter of 2014 and decreased by 3% compared to the prior quarter.

Operating income was $6.8 million, or 8.4% of revenue, compared with $9.1 million, or 11.2% of revenue, in the fourth quarter of 2014. Other income for the fourth quarter was $169,000, compared to $217,000 in the fourth quarter of 2014.

Net income for the fourth quarter was $4.3 million, and earnings per share was $0.24 on diluted weighted average shares outstanding of $17.9 million, compared with net income of $5.7 million and earnings per share of $0.31 on 18.5 million diluted weighted average shares outstanding in the fourth quarter of last year.

And now I will review Forrester's fourth-quarter metrics to provide more perspective on the operating results for the quarter. Agreement value -- this represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized. As of December 31, 2015, the agreement value was $237 million, up 2% from the fourth quarter of 2014. As of December 31, 2015, our total for client companies was 2,471, down 11 from September 30, 2015, and up 40 compared to the fourth 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 77% as of December 31, 2015, down 3 points in the prior quarter, but up one point compared to last year. Our dollar retention was 89%, down from 91% in the prior quarter and up by one point compared to last year. Our enrichment rate was 98% for the period ending December 31, 2015, up one point compared to the prior quarter and also 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. A rolling 12-month methodology captures the appropriate trend information.

Now I would like to review the balance sheet. Our total cash and marketable securities at December 31 was $101.1 million, which was a decrease of $3.4 million from the $104.5 million that we had at the year-end 2014. We generated $4.2 million from cash from operations for the quarter, as compared to $900,000 in the fourth quarter of last year. We received $400,000 in cash from options exercised for the quarter, as compared to $2.2 million in the fourth quarter of last year. We also paid a dividend in the fourth quarter which amounted to $3 million, or $.17 per share.

Accounts receivable at December 31, 2015, was $67.4 million, which was consistent with the 2014 balance. Our days sales outstanding at December 31, 2015, was 77 days, which was consistent with the prior year. And accounts receivable over 90 days was 2% at December 31, 2015, compared to 3% at December 31, 2014.

Deferred revenue at December 31, 2015 was $140.7 million, down 3% compared to December 31, 2014, and on a constant currency basis was flat with 2014.

In closing, as both George and Mike discussed, we finished the year with a strong fourth quarter. In addition to our revenue and earnings-per-share performance relative to guidance, our retention and enrichment metrics improved versus prior year. Agreement value, which typically indicates meaningful movement in bookings, grew at 2.3% versus prior year. However, foreign exchange adversely impacted this metric by 1.2%.

In addition, we normally have a small percentage of deals that booked in December with January 1 start dates. These deals are not included in agreement value or deferred revenue. In December 2015, we had an abnormally large number of these deals as compared to last year-end. If the net year-over-year change were included, these deals would have added approximately 2 points to growth in agreement value.

Our financial results and key metrics reflect what we are seeing in the marketplace -- that there was a growing demand for our products and services as our new and existing clients partner with us to develop and improve their customer-obsessed strategies. Our analysis continues to indicate that spending in business technology -- that technology that helps clients win, serve and retain customers -- is growing at double the rate of legacy IT spending. We think our AOC strategy positions us well to continue to accelerate our top- and bottom-line performance in the coming years.

George mentioned in his remarks we are continuing to invest in improving our customer-facing technology and in making our products more digital. We plan to mitigate the cost of these investments with targeted cost reduction efforts as we remain committed to improving operating margin and earnings per share. Our guidance for 2016 reflects that commitment.

Now let me take you through the specifics of our guidance for the first-quarter and full year 2016. As a reminder, our guidance excludes the following. Amortization of intangible assets, which we expect to be approximately $200,000 for the first quarter and approximately $900,000 for full-year 2016. Stock-based compensation expense of $2.3 million to $2.5 million for the first quarter and $8.7 million to $9.2 million for full-year 2016. And any investment gains and losses.

For context on our expense guidance, first, let me provide you our full-year organic growth rates on a constant currency basis. Revenue growth in constant currencies would be between 4% to 7% growth, and earnings-per-share growth would be between 7% and 14%. We expect foreign currency effects to reduce revenue growth between 1.5 to 2 points in 2016 and to reduce earnings per share by approximately $0.06.

In addition, we are increasing our pro forma tax rate from 38% to 40% to reflect the changing international tax environment.

The guidance that I am going to discuss now and that we also issued in our press release earlier today reflects our projected foreign currency rates for 2016, though it is not FX-neutral. We expect the following currency changes versus 2015: the euro to decline approximately 8%, the British pound to decline approximately 4%, the Canadian dollar to decline approximately 8%, the Australian dollar to decline approximately 11% and the Singapore dollar to decline approximately 7%.

Forrester is providing first-quarter 2016 financial guidance as follows: total revenues of approximately $75 to $78 million, pro forma operating margin of approximately 6% to 8%, pro forma effective tax rate of 40%, pro forma diluted earnings per share of approximately $0.16 to $0.20.

Our full-year 2016 guidance at is as follows: total revenues of approximately $322 million to $330 million, pro forma operating margin of approximately 10.5% to 11.5%, pro forma effective tax rate of 40% and pro forma diluted earnings per share of approximately $1.15 to $1.22. We have provided guidance on a GAAP basis for the first quarter and full year 2016 in our press release and 8-K filed today.

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

(Operator Instructions) Timothy McHugh, William Blair.

You alluded to strong bookings even better than the agreement value share. So can you just tell us the growth rate booking (technical difficulty) and then what the full-year (technical difficulty)?

Tim, you broke up a bit there. Is it possible you repeat the question?

You alluded to strong bookings (technical difficulty).

Tim, you have completely cut out. I think the question is about bookings in Q4. And I think -- so I will just give some color commentary on that. We don't release bookings, but one of the reasons why I tried to break AV down a little bit was to give you some sense as to where -- how we might think about it. And I think that the full -- what I would call fully adjusted AV, which reflects FX and the January 1 deals, is probably a closer approximation of where our actual bookings came out.

I am not sure if there was more to the question, Tim, because, again, you fell off a little bit at the tail end.

Just give a little color here, and maybe, Mike, you could give some color as well -- Mike Morhardt. But it just strengthened; and through November and December, just two very strong months. And so it was not a mad rush at the end of the year. It was just a very good, steady stream of business right through the fourth quarter.

Yes. Which is -- Q4 is our biggest quarter, so lots to transact on from a renewal perspective. But we were very pleased with not only the renewal rates, the enrichment rates, the conversion rates from a pipeline perspective, the new business numbers across the board. And, as I mentioned in my comments, the ability for us to execute and get all the deals through was one of our better quarters.

And some of the technology helped there, too, ATAS with the sales force.

Absolutely. Yes.

Okay. Thanks. That was my question. And then, I guess, from a global or a macro perspective, can you just -- given everything happening in the stock market and the things people are worried about, what are you seeing from energy customers? What are you seeing in Asia, I guess? European banks (technical difficulty) worried about right now. Is there any signs in your proposal activity or core booking indicators of anything related to that environment?

Sure. Tim, it's Mike. Yes, we -- so from an oil and gas perspective, we definitely saw some softness there, both in Canada and in North America and some of our international markets. Energy companies in general -- or if you look at utility companies -- actually did very well on the utility front. But the oil and gas industry definitely affected us.

From an Asia-Pac perspective, we did very well in Asia-Pac. In fact, extremely well. And so I know there was a slowdown in China, but China was one of our stronger performances for the quarter. And a lot of it had to do with the types of offerings we were talking to our clients about -- customer experience, that type of thing. And I haven't seen anything yet from a European bank perspective. I know there were some concerns around that. We seem to be going through our renewals, but Q4 -- it was not impacted by the European financial issues.

I was with a bunch of banks in Paris and also in London in December, Tim. And there is unsteadiness there, but this age of the customer discussions at -- where Forrester is entering those banks and where we're -- our discussion. It is in a very different place, then there is straight capital investment and capital expenditure. And it is really about their customers.

So -- and I'm not going to name the banks, but there is not a panic, but there's certainly they feel the pressure from the age of the customer, from those dynamic customers. So I am not saying it is insulating us from this, but I think that it is certainly elevating us in those discussions, which is a good help.

One other comment, Tim. It's Mike Doyle. The -- my comment about -- in Canada, Canada is affected two ways. One is their direct exposure to the industry. And then, they also had it when we have a big piece of government business up there. And I think, when oil and gas declined, it is such a big percentage of the government revenues, that put a squeeze on government spending. And it has really hurt us in the near term up there. I think that is ultimately going to settle out, but we have got to -- we got hit both directly and indirectly in Canada. And, I would say, of the sales regions, that is probably the one that felt it the worst.

That was in North America West weakness. That was reflected there. But we felt that all year.

Yes, we did.

Okay. And maybe last one. If bookings got better, I think the agreement value, even adjusted, is not quite what you would have talked about targeting a year or two ago. What is the bogie that you would shoot for or kind of hope for maybe by the end of 2016 as we are going into 2017 at this point?

You know, we talked about that, Tim. And I would -- this is Mike Doyle. I think when I gave out a perspective on 2016 in -- back in the middle part of the year, I think the piece that I probably underestimated, which actually, I think, to George's point, I think is completely flushed out this year was this is going to be a two-year conversion. And I assumed a decent amount was behind us, but we actually saw more of it in the third quarter and fourth quarter as we see clients who are transitioning to AOC. And for some of that, that means that they maybe trim some of the spend with us in the short term. Our retention rates held up, but we saw some trimming of spending. Now, I think that, for the most part, has transitioned out, but I think I misjudged what that impact was going to be in 2016 -- or in 2015; I'm sorry.

What we would be looking for, though, in the back half of 2016 is that we should be pushing double-digit bookings numbers in the back half. And so we rolled into 2017 with double-digit revenue numbers. So that is the game plan. And I think we have got a lot of that, what I call the AOC flush behind us in terms of people transitioning to AOC.

Just to say it another way, Tim, we thought that we would work through the client transition in 2014. But it took two cycles of renewals for that to really happen. And that surprised us.

That is a little bit of the story -- I mean, a lot of the story of the early part of 2015. But we are now through those two cycles so we feel like we have -- I guess, pretty much behind us.

Vincent Colicchio, Barrington Research.

Mike Morhardt, you mentioned that you refined the buying process through training, new processes, et cetera. Can you give us more color on exactly what you are doing there?

Yes. One of the things that is a little bit unique to Forrester is that we have taken customer experiences (inaudible) as other companies have in the previous years. But this year, that has changed pretty dramatically. And so we use some of our own methodologies around journey mapping to examine how our clients actually buy from us, and the experience inside, too, of the internal resources and how we work together. And it was eye-opening.

We found out that we could change some simple processes, some terms that we work with clients, certain contracts, and how we handle them. How a salesperson books a deal and the process that they have to go through. And this cross-functional team came together over about four months and started to make these changes in September and October. And it was a pretty dramatic effect on the business.

Normally, Q4 is crazy. It was. But it was manageably crazy. Usually the last day of the year, the team is here until midnight. We had booked most of our deals by 6 o'clock. And so it was a very thoughtful approach to approaching our clients that are dealing with very, very sophisticated buying processes themselves.

So it was a combination of some changes we made in technology around our booking systems, some process changes we made about how the workflow actually looked. And, then, some policy changes as well where we were able to be a little more flexible with certain clients working with the finance team to just make sure that certain paper were on certain contracts. We didn't have to go back to the client as frequently because we were able to get it the first time. And so all those things added up to a very smooth close and a very smooth quarter.

Thanks for that. And I don't know who this one will be for, but I know you have got new leadership with the -- in the board business and the event businesses. And they still continue to decline, if I heard, 20% decline on revenue on the event side. And the Leadership Boards, I guess the members are down 8%. Any early signs for -- to be positive there? And when do you see this thing turning around in upcoming periods here?

Vince, this is Mike. I am going to first comment on the financial performance and I think, then, George can probably give a better comment on overall leadership. But, interestingly enough, both our event and our board business beat their plan numbers in the fourth quarter from a booking standpoint. And I think we had projected that our board business was going to decline because we closed and consolidated some underperforming councils at the beginning of the year, so we expected this impact. So we actually -- we rebounded nicely in the fourth quarter. I was actually quite happy with the performance there.

And I think, as George mentioned, we have a new leader for the events business, a very experienced guy, and we have got a good team there now. And I think that is very much in the mode of building it back to growth in a very effective way. And the leadership -- on the leadership boards, we are close to making a decision on a leader there. In the interim, our head of products and research, Cliff Condon, has had an active hand on the wheel there, but I will let George give more color on that.

Yes. I would just say a few things here, Vince, about Cliff Condon. He took over in August. And he has had a palpable effect on the entire business as a leader for our product portfolio. And I don't want to say one person can make that much difference, but he has really, really changed the dialogue here around products and the collaboration of the executive team. He hired a great person, of course, to run events, and we are on the cusp of hiring a really good person who runs FLB.

So I think you're going to see -- we already saw in Q4 both of those products begin to really make a turn. So I think they are going to have a good 2016.

Bill Sutherland, Emerging Growth Equities.

The quota-bearing reps, just a number question, Mike. I didn't quite figure out what -- you talked about the change, and I am not -- it didn't make sense on my spreadsheet.

Yes. Let me give you some -- Bill, that was my mistake. Okay. I misread. So we are -- rep headcount -- sales quota count rep increased 4% compared to the fourth quarter of last year. It increased 3% compared to prior quarters. So our actual quota carrying count, I think, ended at 340, and that was up from 329 in the third quarter.

Right.

Okay. And that comparable number fourth quarter last year was 326. So I created confusion not intentionally, Bill, but I slipped (multiple speakers). I wanted to make Morhardt swim a little bit on some of these.

And so I'm thinking the quarterly cadence based on the fact that the transition away from the age of the customer -- or into the age of the customer product line just is -- I would think it is gradually worked through. And then -- because the revenue obviously in the first quarter is below that of the full year, and I am not sure how much of that is FX. But is that the right way to think about the year?

Yes, the first quarter, Bill, is interesting because we also -- we had one event last year and we don't have any events scheduled for the first quarter of this year. So that takes us down about $1 million. And then you do have some FX impact in there.

And I think coming out of the gate, we're always a little cautious. It is the beginning of the year; we have got a lot that is always going on. So obviously, our intent, as it is every quarter, is to try and beat that number. But we do have a structural change with the one event moving out of the first quarter into subsequent quarters.

Okay. And then, actually, if you guys wouldn't mind spending another minute on this transition, the product transition. And it has been an issue of ARPU declining before it goes up? Is that kind of -- because you -- a couple -- some products didn't get renewed and they didn't pick up at AOC immediately?

Well, I would say that -- and we knew -- to George's point, we knew when we were making this transition, Bill, we expected that some people -- in some instances, literally, we dropped coverage in certain areas. So you had people who were no longer buying seats in those areas because it didn't exist anymore. So we added some of that.

And so as you move out of that and you move out of what we consider older traditional board councils and moved into the new, some people were not ready to move into the new. They didn't leave this entirely; they just took down their spending, which pulled down our enrichment numbers a little bit. And I think when my expectation was that most of that would cycle through in 2014 and then 2015 would have a nominal effect, that wasn't the case. In actuality, it came close to our original forecast of erosion that we made three years ago and just happened to occur in 2015 as well. And so I think clients --

I think clients didn't believe us.

I think you are right, George.

In the first 12 months. It took two cycles before they would really wake up and say, okay, these guys are seriously moving their business.

And I think as content moved that way and our research and a lot of our actions moved that way, what we're seeing now is what I would call the healthy side of the transition. Yes, I think a lot of the noise is behind us. There may still be some noise ahead, but now it is a much more aggressive -- and, to Mike's point, enthusiasm around it in Q4, around people really embracing what is going on. So now it is a matter of how do we get that going at a faster rate.

Okay. Last question is on cash plans. As you look into the year, are you going to -- where's the authorization at this point?

We have got about $37 million left on our share repurchase authorization. And so the typical reset at the beginning of every year is George and the Board determining, okay, what do we think is the best use. We have got some internal investment that we're going to make -- M&A, and then share repurchase. So that cycle has started, and I think that we are still kicking around our plans to think about how we want to do that. We got feedback from the Board, and I think George is digesting and we will determine where we go from there.

I mean, it strikes me that you're kind of at an interesting cusp as far as an opportunity to bring in your shares at attractive levels and benefit shareholders that way. Just to get more aggressive here before your numbers really demonstrate kind of what you guys are suggesting is around the corner here fundamentally.

I would agree that it is certainly a big opportunity, Bill, and I think the other piece of it is, as the debate that occurs is that our AOC strategy takes hold, are there things that are interesting out there that would be good add-ons to help us accelerate the AOC growth from an M&A standpoint. And you weigh the two of those things in terms of which is going to enhance shareholder value more, and I think that is a little bit of the discussion that goes on now as well as the internal investment.

We are in consideration mode at this point, I would say.

And it appears we have no further questions at this time. I would now like to turn it over to Mike.

Okay. Great. Thanks, everyone, for joining the call. We expect to be out and hopefully see as many shareholders and potential shareholders as possible in the upcoming quarters. So we are looking forward to doing that and continue to talk more about where we are headed and the power of the AOC strategy. Thanks very much.

Thank you.

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