Forrester Research Inc (FORR) 2017 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. Mike Morhardt, will follow George to discuss sales. Mike Doyle, will then follow Mike Morhardt, to discuss our financials. We'll then open the call to Q&A.

A replay of this call will be available until March 10, 2017 and can be accessed by dialing at 1 (888) 843-7419 or internationally at 1 (630) 652-3042. Please reference the passcode 8392738#.

Before we begin, I would like to remind you that this call will contain forward-looking statements with 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 as 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 George Colony.

Thanks for joining our first quarter call for 2017. I will give a short brief on the quarter. I will then hand the call over to Mike Morhardt, who will outline the state of the sales and the customer engagement model, our new go-to-market structure. Mike Doyle, Forrester's CFO, will give a financial review of the quarter, and then the 3 of us will take questions.

In the Age of the Customer, companies must move closer to their buyers, and this maxim also applies to Forrester. In 2017, we are working to drive engagement, increasing client usage of our products through improved responsiveness, ease of use and value.

To this end, we are pursuing 3 initiatives: one, rolling out a new selling model; two, doubling down in digital to make our products increasingly accessible; and,three, expanding how we work with our user clients.

Successfully executing these efforts will enable the company to increase renewal rates, expand enrichment levels, win new business and ultimately lay the foundation for revenue and EPS growth.

I would like to start off with a high-level review of the rollout of our new selling structure, what we internally call the customer engagement model. As you remember, our model splits accounts into 2 segments: core, our smaller clients that purchase a limited set of products; and premier, our largest clients that deploy complex solutions. Most of our core accounts will be served with an inside sales force based in Nashville, Tennessee. Our premier accounts are served with a client executive focused on expanding the account, a solutions partner configuring the right products to solve the customer's problems and a client success manager devoted to working with the account to ensure that it is getting their highest possible value from its investment.

In the fourth quarter of 2016, we beta-tested the premier selling motion, and I reported on the last call, that we experienced better-than-expected results. In the first quarter, we launched 3 new premier teams, and we experienced an increase in year-over-year renewal rates and in year-over-year wallet share. And Mike Morhardt, will give you more detail in a few moments.

We're on schedule to launch 4 additional premier teams in Q2, hiring and training plans are on track, and we will complete the full North American transition by the end of 2017. Client feedback of the new model has been very positive. A large North American transportation company that had 23 empty research seats, had those seats filled within 1 month after having been transitioned over to the new model.

On the core transition, we are on pace with hiring in Nashville, adding approximately 5 new associates per month. We have signed a lease for permanent space in the city, with a move-in date in the October/November time frame. So I'm very glad to report that our sales transition is proceeding on schedule, with early good results.

In addition to the customer engagement model, we are continuing to improve our business technology. This is the technology, systems and processes, to win, serve and retain clients.

As I reported for the fourth quarter, 2 products that we digitized in 2016, experienced faster sales and performance than expected. This was the Customer Experience Index in digital reprints, and that trend continued into the first quarter.

Over the last 30 days, our new digital communities grew by 10%, increasing client engagement with Forrester advisers and with peers. We've launched a second generation of research apps for the iPad and iPhone, a universal interface that operates seamlessly across the 2 platforms. This app will be available on Android later in 2017.

To increase engagement, we introduced the new website experience actually earlier this week, that enables clients to more quickly access research which is most relevant to their projects and challenges. A second iteration of this site will be launched in mid-May, which will unite and connect all of Forrester's products in 1 place, data, research, Leadership Boards, consulting and events.

Forrester's weekly podcast, and it's called What It Means, is now available on iTunes, Sound Cloud, TuneIn, Stitcher and Google Play. Each podcast runs for approximately 30 minutes and features analysis from a Forrester Research leader. And I would urge listeners on this call to check it out if you want to get a window into some of our most provocative findings and advice. What It Means has had over 9,500 unique downloads since its launch.

I want to turn now to our user business. The company is changing the way it works with its user clients, to increase user renewal rates and new business. Firstly, we are focusing on the 12 vertical markets that are most impacted in the Age of the Customer, and we call this our ideal client profile.

Secondly, we have intensified our research coverage of the critical business technologies that companies must master to win customers. Forrester's output of Waves, this is our methodology for evaluating technologies, increased 21% in 2016.

In our work for clients, we analyzed over 400 technology categories, ranging from martech, to security risk management, to Internet of Things, to artificial intelligence. In 2017, we will evaluate over 800 vendor offerings through our Wave technology, and that's a 50% increase since 2014.

Finally, we are closely tracking user company engagement, with the goal of stimulating usage. Levels of report download, webinar participation, inquiry usage and event attendance, can have a significant influence on renewal and enrichment rates.

And I'm pleased to report that user company engagement rose appreciably in the first quarter for those companies served by the new customer engagement model teams. While it is still early in our efforts, user renewal and enrichments rates both improved in the first quarter.

So to conclude, our goal for 2017, is to add value through every client engagement across every product line. The indicators are good. Our new selling motion is resonating with both employees and clients. Our digital products are stimulating usage and engagement targets are having a positive impact on our user business. While there is the work to be done, I believe we are setting a solid foundation for growth throughout 2017.

I'd now like to hand the call over to Mike Morhardt, Forrester's head of sales. Mike?

Thanks, George. In Q1, Forrester's sales organization made progress across our 2 key focused areas for 2017: hitting targets and migrating to the new customer engagement model.

From a performance perspective, we hit our Q1 target and saw a solid performance in Asia-Pac, Europe and our international partners. In North America, we had mixed performance, with a strong performance in our vendors and small user client teams. Our large user client teams had mixed performance across the various regions.

Our second area of focus in 2017 is the customer engagement model. We made significant progress in migrating our sales and service organizations into the new model, based on the strong results we saw in our Q4 beta-test.

Our first goal for Q1 for the customer engagement model was to move 3 additional teams into the model. North America has a total of 13 premier user teams, 4 are now stood up, 4 will be added in Q2, and we'll add 2 more in July and the last 2 in October. Based on the results of the beta, we have accelerated our plans for the year.

In late February, we added the 3 additional teams to the model. The results continued to be promising. For the team that entered the model back in September of 2016, we saw a continued improvement year-over-year in every metric, bookings, retention, wallet share, enrichment bookings and pipeline conversion. With a dedicated person, the customer success manager, focused on engagement and retention. The salesperson now has more time to grow their clients in conjunction with the solution partner. The 3 other teams started their migration at the end of February. While their metrics, in many cases, were better year-over-year, we expect a 3 to 5-month ramp to see the kind of results we saw in the beta team.

The North American transition to the new model will be completed by the end of the year. As George mentioned, we're on track from a training, hiring and overall implementation perspective. We will be following the same process for Europe and Asia, and we'll focus more efforts on these geographies in the second half of 2017 and into 2018.

We also made significant progress in our core client segment. In Q1, the team met expectations across hiring, training and bookings performance. We are currently tracking to our goal to have 40 to 50 inside sales professionals in our new office by the end of the year.

Finally, we ended Q1 at our planned headcount of 535. Based on our plan, we will be increasing net new hires in Q2, with a planned goal of growing the sales organization by 7% to 10% by the end of the year. Attrition was lower in Q1 than expected, so we feel confident we can hit this goal by the end of 2017.

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

Thanks very much, Mike. I'll now begin my review of Forrester's financial performance for the first quarter 2017, including a look at our financial results, the balance sheet at March 31, our first quarter metrics and the outlook for the second quarter and full year 2017.

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 2017, we continued to utilize an effective tax rate of 40% for pro forma purposes.

For the first quarter of 2017, Forrester was at the upper end of guidance for revenue and pro forma operating margin and exceeded earnings per share guidance. As we indicated in our February call, 2017 will be an investment year, growing sales and consulting headcount, continuing our investment in product digitization and opportunistically using our balance sheet to enhance shareholder value.

During the first quarter, we made good progress on these objectives, growing sales and consulting headcount, launching the new Forrester homepage and universal iPhone, iPad app and repurchasing over 0.5 million of our shares.

In addition, as Mike mentioned, we continued to expand the customer engagement model in North America, with early results indicating we experienced in the productivity improvements we targeted.

While we're driving a number of initiatives across the company, we remained committed to delivering our targeted financial performance levels during 2017. The first quarter results were a good start to the year.

Now let me turn to more detailed review of our first quarter results. Forrester's first quarter revenue decreased nominally to $77.2 million from $77.4 million in the first quarter of 2016, and increased nominally on a currency adjusted basis. First quarter research services revenue decreased by 3% to $51.7 million from $53.2 million last year and decreased by 2% with constant currency and represented 67% of total revenue for the quarter.

First quarter advisory services and event revenue increased by 5% to $25.5 million from $24.2 million in the first quarter of 2016, and by 6% with constant currency and represented 33% of total revenue for the quarter.

Our international revenue mix was 22% for the period ending March 21, 2017, down compared to 23%, both as reported and on a constant currency basis.

I'd now like to take you through the activity behind our revenue, starting with Forrester Research. Forrester's published research and decision tools enable clients to better anticipate and capitalize on the disruptive forces affecting their businesses and organizations. We believe Forrester research provides insights and frameworks to drive growth in a complex and dynamic market.

In the first quarter of 2017, Forrester's research library included 60 playbooks, the addition of 409 new documents, and we hosted 39 webinars for our clients. As of March 31, 2017, the top 3 research roles were the CIO, with 8,082 members; Application Development & Delivery, with 5,201 members; and analyst relations with 4,931 members.

Onto our Forrester Connect offerings, which encompass our leadership boards and executive programs. The Forrester Connect offerings are designed to help clients connect with peers and Forrester's products and professionals and to coach executives to lead far-reaching change within their organizations. As of March 31, 2017, Forrester Connect had a total of 1,420 members, down 4% compared to last year.

During 2016, we worked hard to bring consistency and standardization to the product, improving the overall experience. As George mentioned, one of the focus areas in 2017 is expanding our user business and our connect product is an important part of that initiative.

Our data products and services are designed to provide fact-based customer insights to our clients. Clients can leverage our data products and services or choose to have us conduct custom data analysis on their behalf.

For the first quarter, revenue decreased by 9% due to a decline in Technographics. We are currently investing in a new digital platform for our Technographics business, which we expect to roll out later this year.

Forrester Consulting, which includes our advisory and consulting businesses, saw a total revenue for the first quarter increased 8% compared to the prior year. As we saw in the fourth quarter of 2016, we began the year with a very healthy backlog, and had another highly productive quarter. We do anticipate some moderation to this performance trend in the second quarter, but remain confident in our full year outlook.

Forrester Events had no events scheduled in the first quarter of 2017, pursuant to last year's rebranding and rescheduling of a number of forums. Bookings continue to grow at a healthy rate and we remain pleased with the rebound we've seen in our events business over the last year.

I will now highlight the expense and income portions of the income statement. Operating expenses for the first quarter were $71.8 million, up 1% from $71.3 million in the prior year and up 2% with constant currency. Cost of services and fulfillment increased by 1% and increased by 2% with constant currency due to higher headcount and partially offset by lower T&E.

Selling and marketing expenses increased by 1% and increased by 3% with constant currency, driven by higher sales headcount and partially offset by lower T&E. General and administrative cost increased by 1% and increased by 3% with constant currency due to higher headcount and recruitment fees, partially offset by lower professional services costs.

Overall headcount increased by 4% compared to the first quarter of 2016 and remained essentially flat compared to the fourth quarter of 2016. At the end of the first quarter, we had a total staff of 1,375, including a research and consulting staff of 512 and a total sales force of 535. Research consulting headcount increased by 6% compared to the first quarter of 2016 and decreased by 2% compared to the fourth quarter of 2016.

As we transition into the new customer engagement model, we will no longer report on quota carrier headcount, as it's no longer a meaningful metric on its own, since new positions such as the customer success manager, are instrumental in directly driving sales but are not quota bearing. We feel the more appropriate headcount number to focus on is total sales force. The total sales force increased by 4% compared to the first quarter of 2016 and increased by 2% compared to the fourth quarter of 2016.

Operating income was $5.4 million or 7% of revenue, compared with $6.1 million or 7.8% of revenue in the first quarter of 2016, this is a decrease of 11% year-over-year. Other income for the quarter was $9,000 compared to a negative $328,000 in the first quarter of 2016.

Net income for the first quarter was $3.2 million and earnings per share was $0.17 on diluted weighted average shares outstanding of 18.5 million compared with net income of $3.4 million and earnings per share of $0.19 on 17.9 million diluted weighted average shares outstanding in the first quarter of last year.

I'll now review Forrester's first 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 March 31, 2017, agreement value was $236.6 million, down 2% from the first quarter of 2016 and flat on a constant currency basis.

As of March 31, 2017, our total for client companies was 2,427, down 2% compared to last year and essentially, flat compared to last quarter. 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 74%, as of March 31, 2017, down 1 point compared to the fourth quarter and down 3 points compared to last year. Our dollar retention was 87%, flat compared to the prior quarter and down by 1 point compared to last year.

Our enrichment rate was 94% for the period ending March 31, 2017, up 1 point compared to the prior quarter and down 3 points compared to the first quarter of 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 captures the appropriate trend information.

I'd now like to review the balance sheet. Our total cash and marketable securities at March 31, 2017, was $134.6 million, which is a decrease of $3.5 million from $138.1 million at year end 2016. Cash from operations was $19.5 million for the quarter as compared to $21.6 million in the first quarter of last year. We've received $2.7 million in cash from options exercised for the quarter as compared to $1.2 million in the first quarter of last year. We repurchased $21.5 million of stock during the first quarter, and we also paid a dividend of $3.5 million or $0.19 per share during the quarter.

Accounts receivable at March 31, 2017, was $55 million compared to $49.4 million as of March 31, 2016. Our days sales outstanding at March 31, 2017, was 65 days compared to 58 days at March 31, 2016, and accounts receivable over 90 days was 7% at March 31, 2017, compared to 5% at March 31, 2016. Deferred revenue at March 31, 2017, was $156.3 million, an increase of 1% compared to March 31, 2016.

In closing, our first quarter went as planned. We performed at the upper end of revenue and margin guidance and exceeded earnings per share guidance for the quarter. We made good progress against the initiatives we identified for 2017, continuing to expand the customer engagement model and sales headcount, expanding our consulting headcount, investing in product digitization and using the balance sheet to enhance shareholder value.

Our plan for the second quarter and the balance of 2017, will be to continue to focus in these areas as we believe they will build the momentum necessary to accelerate top line and bottom line growth.

Now let me take you through the specifics of our guidance for the second quarter and full year 2017. 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 $800,000 for the full year 2017; stock-based compensation expense of $1.8 million to $2 million for the second quarter; and $7.8 million to $8.3 million for the full year of 2017 and any investment gains and losses.

Forrester is providing second quarter 2017 financial guidance as follows: total revenues of approximately $86 million to $89 million; pro forma operating margin of approximately 10.5% to 12.5%; pro forma effective tax rate of 40%; and pro forma diluted earnings per share of approximately $0.30 to $0.34.

Our full year 2017 guidance remains unchanged and is as follows: total revenues of approximately $324 million to $332 million; pro forma operating margin of approximately 10.5% to 11.5%; pro forma effective tax rate of 40%; pro forma diluted earnings per share of approximately $1.13 to $1.20, and we have provided guidance on a GAAP basis for the second quarter and full year 2017 in our press release and 8-K filed today.

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

(Operator Instructions) And it looks like we have our first question from Tim McHugh.

Just wanted to follow-up on the retention metrics that you -- what you give us is a trailing 12-month number. So, I guess, at least the client retention number ticked down a little. Is that reflective of trends last year? I guess just kind of rolling into that 12-month number? I guess, can you give us anymore real time sense of how retention was trending here early in 2017?

Tim, it's Mike Doyle. I mean, client -- just absolute client retention did tick down. In terms of the specifics, it was 74.8% to 74.3% to give you a very specific number, so about half a point. And from Q4 to Q1, I guess, there is -- there can be but -- a slight tick down. That said, it's a big focus for us. Our goal, with the new customer engagement model, is to drive that back up. It's been as high as 80%, Tim and that's what we need to march to. Dollar retention, if I get to the specifics, went actually from 86.5% to 87%, so a tick up 0.5 point, the other way. These still aren't the numbers we want, we're looking to be at 80% and 90% and the focus of the customer engagement model is to drive that kind of performance. So as I look at it, there wasn't a spike down, it sort of flattened out for the most part. What we need to see is obviously, a steady movement upwards and to the right on these.

Tim, it's Mike Morhardt. And from the teams that went into the customer engagement model, we saw a 3 to 4-point jump in retention. So this is a mix across all the different teams. User vendor or those teams that are in the model, those teams are not.

Okay. And just -- the agreement value, I guess -- the agreement value includes I believe, to the consulting as well as the research business. And I guess, I was a little surprised by the relative performances of those 2 in terms of revenue. So I guess, when we look at what's coming in the door, are you still seeing that split a little bit where the flat agreement value, is that more weighted to consulting versus research? And is this kind of more of a, I guess, a sustained trend we're seeing in the business shifting?

Agreement value for us does not include consulting, Tim, so that's not factored in. So what you're seeing, essentially, is primarily our research business and again, I think this is -- we talked about last year, with the flat sales headcount actually dipped a bit in the fourth quarter, so this is just a reflection of bookings activity that for us is essentially, low single-digit in that area right now. And again, we've expanded sales headcount in the first quarter and the expectation to the point Mike made, is not going to continue to happen. And the early results in the beta we're getting more productivity out of the -- certainly, the first team and now who are set up for 3 more teams, set up to 4. The expectation is we're going to see that start moving up in a meaningful way and it doesn't capture the consulting activity, which we had a really good fourth quarter for consulting, which translated -- from bookings standpoint translated into good revenue in the first quarter of consulting and now, we -- so we're trying, that could tamper a little bit because the bookings activity was good but not as big as we'd like in the first quarter, but we're -- the focus now to build that back up in Q2, so...

Is that a comment on bookings or is that -- you had a comment in there about performance, probably not being quite as good in Q2? Were you just referring to that bookings level?

Well, I -- well for consulting, it's a function of where we sit with the backlog, and we had a really big backlog at the end of the fourth quarter, and so we went into the first quarter and had really strong consulting performance. And I think now it's -- we're back to building more backlog in Q2, the revenue will probably temper, as consultants are writing more proposals and doing less deliveries, so we are -- it's a little bit of a give and take and ebb and flow that seems to happen in the consulting business. So that's what I mean, I think with temper there it's still going to grow probably, not as high as it did in Q1.

We have a next question from Bill Sutherland.

I wanted to follow-up on Tim's question about AV. So when you have all the teams in place by October, do you feel like the timing there and to the part of the selling season will be about right for realizing most of that increase in the sales force kind of directly reflected in kind of an AV growth number?

Yes, that's the plan, Bill. So the way that we're looking at it right now is that we'll have all the teams stood up in North America by October/November. As I mentioned in my comments, we're seeing about a 3- to 4- to 5-month lag kind of as people ramp as they get introduced to be the accounts, as they learn to work together. We are expecting 2 pieces of this -- it was actually 3 pieces: one, we're expecting better retention because of the engagements metrics that we're tracking and holding everyone accountable to. We're expecting better enrichment, having 2 individuals focused on growing the account, and we're expecting more new logos as well, as we deploy our resources, we're targeting these ICP, Ideal Client Profile, clients, that are -- lend themselves to be better clients for Forrester. So we're looking for improvement in metrics in all 3 of those areas. And that would be towards the end of this year as more and more teams stand up, where we'll have 8 stood up shortly of the 13 in North America, but they'll be 10 by the first couple of weeks of Q3.

And what kind of metrics that the inside sales group are expected to drive, mean in all those same categories or is it a little different?

It is a little different. We've seen a nice uptick in the new business on the inside sales front under core teams, both for users and vendors, which has been great. The -- you can -- there's a scalability function to that type of model. But our expectations are still one that, with a reduced product set that they are selling, they're ramping more quickly and they have the ability to engage their clients based on client loads that they have, so we expect improvements in retention. Because a lot of these lines weren't necessarily being called on effectively in the field. They're getting the attention and love that we want them to, and that's going to lead to both, better retention and better enrichment. So again, they are under the same metrics that we're trying to track for the premier team.

And they'll be pretty much in an effect a sort of level by the time the year-end is -- the selling season's really here?

I'm sorry, I didn't catch that, Bill.

So they'll be just like the premier group, they'll be pretty much all set up to be effective into the part of the selling season?

Yes.

Okay.

Yes. As Mike mentioned, or I think, George mentioned, we've signed a lease. In some cases, we're aggressively hiring down there right now in a particular space that we'd love to expand but we're, I think in -- hopefully, in Q4 we'll have our own space, and we can get even more aggressive. But we're ramping more quickly and as George mentioned, we are looking to hire 5 associates per month. And if we see what we are continuing to see, we're going to hopefully, accelerate that as we go into 2018.

What was that count at the end of the quarter -- end of Q1?

20-something...

There's already a lot of people down there Bill.

And then last, while we're focused on all the sales activity, Mike, are you planning to -- what are the plans for Europe with this selling model? Going to take it over to Europe?

We are. As I mentioned, we're running the same play in Europe, and that is the first thing we need to do the segment the clients into core and premier. We started to make those changes now, where clients that are more in the premier selling model, we want to make sure that those are in the premier selling motion and then core moving into the core selling motion. We're looking at the back half of this year to continue working with European team. In fact, some of them are over here this week, talking about how we do that implementation. So in Europe, everything's a little more complicated, so we want to be thoughtful about how we do this, but the plan is to run the same play for both Europe and Asia-Pac.

Beginning in third quarter.

Yes, starting in Q3 and then moving into 2018.

Okay, so kind of just a 1-year lag, essentially?

Yes, exactly.

And we have our next question from Allen Klee.

For your -- can you give us a sense of, as you break out your business from premier and core, how much of the business is in each one of those areas? And kind of how you think about the opportunity for each one?

Yes, so the majority of our clients, I would say, a good 65%, 70% of them from a numbers perspective, are in core. So of the 2,500 or so, 2,400 clients that we have, roughly 600 or so, 600 or 700 are actually in our premier selling motion. These represents our biggest vendor and user clients. The ones, as George mentioned, that are interested in purchasing a whole suite of services from Forrester. The core selling motion, again, some of these clients are large, but they may not necessarily be in our Ideal Client Profile, so they may not be an Age of the Customer journey. They may not be interested in our data products. They may not be interested in Leadership Boards because that's not a focus of their business. And so while they still love our research or they still may want to come to our events, we're more than happy to service them and we do. So we expect both of these groups to grow. The core selling model, we're trying to that through a lower cost servicing and sales model and gaining leverage there. And in the premier model, the idea is, if we put more resources against this, free up the sales organization through solution partners and client executives, to focus on the growth while the customer success manager focuses on retention. We've seen in the beta that, that is actually working very well, and we're seeing those clients, if you spend enough time with them, that they'll grow with us.

Great. And then could you just remind me again for digital of -- how you see that as an -- you mentioned a couple of things that you did last year, but where you can kind of see that you think the growth is going to come in '17?

Yes. George here. I think what you're looking at is a gradual transition of all of our products over from -- I mean, they're obviously out there, they are web-based, but over to a more interactive digital form. That's what happened with the Customer Experience Index. That's what happened with our reprints business, and you're going to see now 2 other data products move to be fully digital by the end of this year. We're experimenting with a lot of ideas in our research -- in the research formats as to how they can be more -- how they may be more interactive, how we can split them and offer IP in very -- in a variety of different -- in different packages from the same reports. So there's a lot of creativity going on right now within Forrester. We have something called Forrester labs, we do a lot of this testing. Most of the labs that we run are not successful, but we've had a couple of very good successes there. So it is -- we're spending a lot of money, a lot of investment here. And again, as I said before, as we saw in '16, we saw a very rapid increase in bookings for CXi and also in reprints in Q4, and that was driven through great extent by the digital formats. So watch the size for that.

Okay. And then I think, I heard you say that you've bought back 21.5 million of stock during the quarter. Any view on how that is as a priority of how you allocate your free cash flow going forward?

Yes, at the end of -- in our February call, what we had said was, and what he had talked about with the board was, to be opportunistic with our balance sheet and our cash, in particular. And we were able to -- we thought when the stock dipped a little bit, we were able to take advantage of some good pricing and we bought. And we'll continue to do that. I mean we've said before that we want to be opportunistic with our cash and be in there buying, if we like the pricing dips in at a level we think is not really justified. And at the same time, we continue to evaluate other options for the balance sheet in terms of both internal investments to George's point and...

Acquisitions.

And acquisitions. So it's sort of an ongoing dialogue, and we really don't -- we continue to focus on it, and we don't want the balance sheet to be dormant. So...

Okay. And then just following up on that -- on, I think, last call you said you'd ideally like to do 1 M&A deal a year. Is it -- if you could pick the perfect type of deal or whatever, what type of things would you be excited about?

So Allen, we look across really 3 dynamics, one is globalization. One is global, so buying outside of the U.S. that would be, one. Second would be, to enhance our current products, especially to buy into new roles, as an example, HR might be an example of that, or may be CFO would be an example of that. And then the third, which is really new for us is, to look at certain -- at companies that may have technology that could help us with our digitization but also bringing new digital product to our clients as they look to capture their customers through technology. So it's really technology, geography and then products/role. And I would say that we've been very active over the last 6 months, and we have a very good portfolio and backlog of potential deals. As you know, about M&A, you get all the way down to the finish line and then there is no action but -- so it's hard to predict but we feel good about the amount of -- what we have in the portfolio and also the amount of action we've had on our side, so feeling good here. I'm not guaranteeing 1 this year, but that is certainly our goal.

We have our next question from Vincent Colicchio.

Yes, it's Vince Colicchio, Barrington, Mike Morhardt, you'd mentioned that large users were mixed. I'm just curious if there's any particular or vertical region that stands out? And is there any of that weakness carrying over to April?

Yes. So we saw good performance up in Canada. Well, overall, we saw a good performance for those teams that had entered into the new client engagement model. We saw the good signs that we had hoped, we have seen. So not all the teams have been migrated over. So in general, that's a statement, if you look at sort of the metrics of all the different teams, that is one of the things that we saw. We also saw some good performance specifically, up in Canada, which was great. But those themes that don't necessarily have all of the similar resources, it wasn't bad across the board, there were just -- they were below what some of the expectations of these teams that have gone through the customer engagement model were. So not hair on fire, just they weren't as high as some of the other teams that had done well.

Okay. And Mike Doyle, I'm sorry if I missed it but how did consulting revenue perform in the quarter?

Consulting and advisory revenue was up about 8%, so a good quarter. So it was, from our perspective, we were happy with that performance. Again, we went into the quarter with a good backlog that we had from the fourth quarter. So felt pretty good about things.

Thank you. And it looks like we have no further questions at this time. I will now turn the call over to Mike Doyle, for closing remarks.

Great. Thanks everybody for joining the call. We're looking forward to getting out on the road and seeing a number of you. We expect to be active and busy during the quarter. So thanks, again, and we'll see you soon.

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