Forrester Research Inc (FORR) 2017 Q3 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; Kelley Hippler, Forrester's Chief Sales Officer; and Mike Doyle, Forrester's Chief Financial Officer. George will open the call. Kelley Hippler will follow George to discuss sales. Mike Doyle will then follow Kelley Hippler to discuss our financials. We'll then open the call to Q&A.

A replay of this call will be available until November 24, 2017, and can be accessed by dialing 1 (888) 843-7419 or internationally, 11 (630) 652-3042. Please reference the passcode 9333442#.

Before we begin, I'd like to remind you that this call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as expects, believes, anticipates, intends, plans, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on the company's current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

Some of the important factors that could cause actual results to differ are discussed in our reports and filings with the Securities and Exchange Commission. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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

Welcome to Forrester's Q3 2017 Investor Call. I have several short updates on the business, and then I'm going to hand the call off to Kelley Hippler, the company's Chief Sales Officer. After Kelley's sales update, Mike Doyle, Forrester's CFO, will give a financial review of the quarter and the 3 of us will then take questions.

In the quarter, the company's revenue was at the upper end of guidance, and its operating margin and earnings per share exceeded the company projections. Strong revenue performance in our connect business, reprints, advisory and events were the primary drivers of the better-than-expected revenue. Expenses were below targeted levels as we leveraged the customer engagement model to drive productivity in our selling organization.

On October 6, we announced that Forrester experienced a cybersecurity incident. The attack resulted in the theft of reports from a research database. Our systems were able to respond to the intrusion. This is now a reality of doing business for all companies. The test is how firms will respond and communicate following an incident. Our security and risk analysts guided us as we followed our research playbook on mitigating the effects of an incident. In addition, we continue to work with leading cybertechnology providers, top forensic firms and law enforcement to strengthen and protect the company assets.

Turning back to the quarter, Kelley Hippler hit the ground running in Q3, and she continues to drive the new selling model forward. Almost all of the premier teams in the U.S. are now stood up, and the core selling team is nearly at full force. We have moved into our permanent Nashville office with expansion room for additional sales and operations personnel to be added over the next 2 years. And Kelley's going to give more details in a few moments.

As you know, we are working to grow our base of user clients. Several signals in the quarter demonstrated progress on that front. The user renewal rate for research was up 10% in the quarter. And year-to-date, user renewal rates are up 4 points. We believe that the premier selling model, which dedicates 3 executives to each account, is the primary driver for these improvements.

In addition, the company is sharpening its research offerings for users. Cliff Condon and the team are now rolling out a fully redesigned portfolio of vendor research artifacts. New Tech analyzes emerging technologies like AI. Now Tech addresses mature technologies like CRM.

We have launched new waves in ranking of emerging tech vendors, guiding users to the best offerings in nascent technology markets. In addition, we are introducing waves that rank the offerings of user companies, and the first to analyze online retail and online banking. And if you're at all interested, Home Depot was ranked as the leader in the U.S. online retail wave. Interesting enough, Amazon was ranked at #7.

These industry waves signal to user companies how their business technology -- the technology systems and processes to win, serve and retain customers -- is being received in the market. The high ranking on a wave indicates better BT.

Staying on the user business, the fastest-growing product for Forrester in 2017 has been our Executive Program, and this is a one-on-one coaching relationship between a Forrester expert and CIOs and CMOs. We are currently sold out of this product for 2017, and we're making plans for expansion in 2018. And this product deepens the relationship between companies and Forrester. It cements our role as a trusted adviser.

Turning to digital. In the fourth quarter, Forrester will roll out digital front ends for the entire line of data products. As part of this effort, version 2 of the digital Customer Experience Index will be released, increasing the analytical capabilities of that product. As an example, the new version includes a return on investment simulator, which estimates the impact of experience improvements on revenue growth. It also includes a holistic view of experience metrics correlating CX Index with Net Promoter scoring and CSAT, customer satisfaction scores.

While I'm on digital, you may have noticed that Forrester launched an app called Tap, that's T-A-P, a few weeks ago. This is an experimental free product for consumers that enables them to give real time continuous feedback on locations like Starbucks and brands like Amazon. We are currently working with a number of clients on delivering real-time customer experience data. The ability for companies to hear and respond to immediate feedback generated from Tap. Forrester believes that as customer empowerment increases and the war for customer experience intensifies, companies must have the ability to improve experience in hours or minutes to show that they have the ability -- that they have the agility, will and obsession to deliver immediate improvements to their experience.

Now Tap is a foray into developing real-time customer experience data for corporations. And you can download Tap for free on iOS and Android, just search for Forrester Tap on the App Store or on Google Play. If you want to see Tap in action, search on the Marriott Marquis Hotel in San Francisco under locations in the app, and you're going to find a bunch of Taps, several Tap mobs, and one of the mobs that has been responded to by the head of customer experience at Marriott. Again, the app is experimental, and we are still developing the business of Tap. There has been no monetization of this product to date.

And then finally, you may be wondering why are you doing this. Forrester has always been in the forefront of how customer experience changes the destiny of companies. And we believe that real time is the next phase.

So thanks for being on the call, and now I'd like to hand it over to Kelley Hippler, Forrester's Chief Sales Officer. Kelley?

Thank you, George. Q3 was an exciting quarter for the Forrester sales organization. We continued standing up teams in our customer engagement model, which has 2 selling motions: premier and core. As a reminder, core consists of our smaller clients who buy a limited set of the Forrester portfolio and are largely sold to and serviced by our inside sales team based in Nashville. In addition, we are maintaining a hub presence in both Cambridge and San Francisco for local clients. The core segment continues to deliver strong results, and the team is very excited to be in our permanent office space in Nashville.

Premier is comprised of our largest clients, who deploy the more complex solutions that Forrester has to offer. We stood up our final 4 North American premier user teams in the customer engagement model this quarter. Now all North American premier user teams are operating with client executives who are driving the overall account strategy, customer success managers who are responsible for engaging our clients and ensuring that they are receiving value from their existing Forrester relationships and solution partners who work with our client executives to drive enrichment across the Forrester portfolio. These 3 roles are working in concert, and -- which is enabling us to deliver on our vision of helping business and technology leaders develop customer-obsessed strategies that drive growth. We are also seeing synergies across these roles that will lead to greater efficiencies in how we manage our territory.

In addition, we had our first European user team enter the model. And based on the initial results and positive customer feedback, we're also piloting this model with 2 of our U.S.-based premier vendor teams. We continue to be encouraged by the results on the engagement front. When comparing the Q3 performance of the teams in the model as of April 1 versus prior year, we saw an increase in renewal rates of 10.2% and a 3.6% increase in share of wallet.

Underpinning the customer engagement model is the ideal client profile, or ICP, that defines which industries we focus on. We are leveraging this information to optimize territory design and resource deployment. For example, moving forward, our new business teams will only sell to ICP targets as we know that these accounts will bring a higher lifetime value to Forrester than those that fall outside the ICP.

As we work to finish the year out on a strong note, we are fine-tuning key processes and targeted headcount levels that will support our efforts to deliver consistent, predictable results in 2018 and beyond.

With that, I will turn the call over to Mike Doyle to review our Q3 financial results.

Thanks, Kelley. I'll now begin my review of Forrester's financial performance for the third quarter of 2017, including a look at our financial results, the balance sheet at September 30, our third quarter metrics and the outlook for the fourth quarter and full year 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 continue to utilize an effective tax rate of 40% for pro forma purposes.

For the third quarter of 2017, Forrester delivered revenue near the top end of our revenue guidance and exceeded pro forma margin and earnings per share guidance. We experienced solid revenue growth in our content marketing, reprints, events and connect offerings. Our operating margin benefited mainly from lower-than-targeted headcount.

We continue to exceed our targeted financial performance while we're working on significant initiatives within the company. Kelley updated you on the progress of our CEM initiative, which is tracking ahead of our original schedule. We are beginning to see the benefits of our customer engagement model in our client retention rate.

We continue to invest in product innovation, with enhancements to our data products scheduled to roll out in the fourth quarter. In addition, George spoke about our Tap product, and we have a number of digital improvements in the works for other products, which we will have in the market in 2018.

Now let me turn to a more detailed review of third quarter results. Forrester's third quarter revenue increased by 4% to $80.4 million from $77.4 million in the third quarter of 2016, and increased 3% on a currency adjusted basis.

Third quarter research services revenue increased by 3% to $54.2 million from $52.7 million last year. On a constant currency basis, this research revenue increased 2% and represented 67% of total revenue for the quarter.

Third quarter advisory services and events revenue increased by 6% to $26.1 million from $24.7 million in the third quarter of 2016, and by 5% in constant currency and represented 33% of total revenue for the quarter. Our international revenue mix was 24% compared to 23% in the third quarter of 2016 and remain unchanged at 23% on a constant currency basis.

I'd now like to take you to the product 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 third quarter of 2017, Forrester's Research library included 57 playbooks, the addition of 341 new documents and we hosted 35 webinars for our clients. As of September 30, 2017, the top 3 research roles were the CIO with 7,339 members; Application Development & Delivery with 4,621 members; and Analyst Relations with 4,326 members.

Onto our Forrester Connect offerings, which encompass our leadership boards and executive programs. The Forrester Connect offerings were 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 September 30, 2017, Forrester Connect had a total of 1,433 members, down 1% compared to last year and flat to the second quarter of 2017. Leadership boards declined slightly for the quarter due to shutting down one council and migrating members to our BT strategy council. As George mentioned, the Executive Programs had strong growth for the quarter, and year-to-date performance is strong as well.

Our data products and services are designed to provide fact-based customer insights to our clients. The clients can leverage our data products and services or choose to have us conduct custom data analysis on their behalf. For the third quarter, revenue increased by 4%, driven by our CX Index and Consumer Technographic offerings.

Forrester Consulting, which includes our advisory and consulting business, saw total revenue for the third quarter increase 2%, driven by content marketing and advisory delivery. We mentioned on our last quarter's call that we anticipated a slowdown in strategy consulting, backlog production, and this resulted in a decline in revenue in that segment of our business in the third quarter. We also expect residual effects in the fourth quarter as we work to fine-tune our sales motion and consulting value proposition line to return growth to this segment.

Forrester had 3 events in the third quarter of 2017. In Asia Pacific, we held our Customer Experience Forum in Singapore. In the U.S., we held 2 events in Washington, D.C.: our Customer Experience Forum and our new forum on privacy and security. Events revenue increased by 158% year-over-year. We're pleased to see balance and consistent improvement in both attendance and sponsorship in this segment.

I will now highlight the expense and income portions of the income statement. Operating expenses for the third quarter increased by 5% as reported and on a currency adjusted basis and were $71.2 million compared to $67.7 million in the prior year. Cost of services and fulfillment increased by 9% as reported and with constant currency due to higher headcount, increased outsource expenses and higher forum expense related to the additional U.S. forum this year.

Selling and marketing expenses increased by 6% and increased by 5% with constant currency, driven by higher headcount and merit increases. General and administrative costs decreased by 3% and decreased by 4% with constant currency due to lower professional services costs.

Overall headcount increased by 3% compared to the third quarter of 2016 and decreased 1% compared to the second quarter of 2017. At the end of the third quarter, we had a total staff of 1,374, including the research and consulting staff of 510 and the total sales force of 530. Research and consulting headcount increased by 5% compared to the third quarter of 2016 and decreased by 2% compared to the second quarter of 2017. Total sales force increased by 3% compared to the third quarter of 2016 and decreased by 1% compared to the second quarter of 2017.

Operating income was $9.1 million or 11.4% of revenue compared with $9.7 million or 12.6% of revenue in the third quarter of 2016. This is a decrease of 6% year-over-year. Other income for the quarter was $146,000 compared to $229,000 in the third quarter of 2016.

Net income for the quarter was $5.6 million and earnings per share was $0.31 on diluted weighted average shares outstanding of 18.1 million compared with net income of $6 million and earnings per share of $0.32 on 18.4 million diluted weighted average shares outstanding in the third quarter of 2016.

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

Agreement value. This represents the total value of all contracts for research and advisory services in place without regard to the amount of revenue that has already been recognized. As of September 30, 2017, agreement value was $237.8 million, down 1% from the third quarter of 2016 and flat on a constant currency basis.

As of September 30, 2017, our total for client companies was 2,393, down 4% compared to last year and down 1% 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 76% as of September 30, up 1 point compared to last quarter and flat compared to last year. Our dollar retention rate was 88%, up 1 point compared to last quarter and flat compared to last year.

Our enrichment rate was 94% for the period ending September 30, 2017, flat compared to last quarter and down 1% 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 captures the appropriate trend information.

Now I'd like to review the balance sheet. Our total cash and marketable securities at September 30, 2017, was $134 million, which is a decrease of $4.1 million from $138.1 million at year-end 2016.

Cash from operations was $10 million for the quarter as compared to $6.9 million in the third quarter of last year. We received $9 million in cash from options exercised for the quarter as compared to $5.8 million in the third quarter of last year.

We repurchased $3.5 million of stock during the third quarter, and we also paid a dividend of $3.4 million or $0.19 per share during the quarter.

Accounts receivable at September 30, 2017, was $39.5 million compared to $36 million as of September 30, 2016. Our days sales outstanding at September 30, 2017 was 45 days compared to 43 days at September 30, 2016. And accounts receivable over 90 days was 6% at September 30, 2017, compared to 8% at September 30, 2016. Deferred revenue at September 30, 2017, was $132.9 million, an increase of 5% compared to September 30, 2016.

In closing, we had a really good quarter, finishing at the upper end of revenue guidance and exceeding operating margin and earnings per share guidance. Our financial performance for the first 9 months of 2017 consistently run ahead of our expectations, which is a credit to the Forrester team for achieving this while executing against a number of significant initiatives.

Kelley provided insight in her first 90 days as CSO, which has been productive. The CEM rollout continues at a good pace, and we're beginning to see tangible benefits in our customer retention metrics. We continue to refine and improve our selling motion as we stand up new sales teams and are confident this will have a meaningful impact on growth in 2018.

We continue to pursue an ambitious agenda to digitize our products and innovate where we see opportunity. We believe the changes we are making and the new products we will be introducing to the marketplace will enable us to grow our business at a faster rate moving forward.

Based on our performance in the first 3 quarters of 2017, we've adjusted our full year revenue and EPS guidance upward.

Now let me take you through the specifics of our guidance for the fourth 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 fourth quarter and approximately $800,000 for the full year 2017; stock-based compensation expense of $2 million to $2.2 million for the fourth quarter and $8.4 million to $8.6 million for the full year 2017; and any investment gains and losses.

Forrester is providing fourth quarter 2017 financial guidance as follows: total revenues of approximately $83 million to $86 million, pro forma operating margin of approximately 9.5% to 11.5%, pro forma effective tax rate of 40% and pro forma diluted earnings per share of approximately $0.27 to $0.31.

Our full year 2017 guidance is as follows: total revenues of approximately $330 million to $333 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 $1.17 to $1.21.

We provided guidance on a GAAP basis for the fourth 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 the call.

(Operator Instructions) And our first question comes from Vincent Colicchio from Barrington Research.

Kelley, I was wondering if you could talk a little bit about the regions you oversee in terms of ones that may have stood out or performed weakly versus expectations.

Sure, Vince. Thank you for the great question. I actually had the pleasure of visiting 5 of our different offices as we stood teams up over the course of Q3. We had several regions that performed very well in the quarter. Our premier vendor and U.S. government teams continues to perform very well; our core team, as I mentioned. And then what I would say is within some of our user teams, we're seeing more sort of a bifurcation, where those teams that have been in the model a little bit longer are outperforming those that have not, which leaves us very encouraged. So while we're not all the way where we want to be with some of our user teams, we are seeing improvement in terms of distribution across those teams.

I think you mentioned that you've got the first team on the new model in Europe, I'm wondering how that performance compares to what you've seen in the U.S.?

Sure. So we just stood up our premier European team at the beginning of September. So we'll have much more information on that on our next call because it is early days there. What I will say is the team was very excited and has embraced the model. And I think one of the things that we've seen as we've done these subsequent rollouts is by the time we get to a team at this point, they've heard about the model, how it's working. And we're finding that teams are making that transition much more quickly. So I do expect to have some positive feedback on that when we get to our call after Q4.

And then, Mike, you mentioned that the consulting business continued to have some weak pieces, and you'll see a residual effect. Are you confident that the areas of weakness of the strategy will get ironed out and we'll see growth -- good growth, say, next year?

Yes, I am, Vince. I think that we saw the backlog that was diminishing, and we've highlighted it on the second quarter call. And it's a function of a couple of things. The -- as we've moved into the new customer engagement model, we have changed the way we sell our products and services; consulting is one of those. So I think we're seeing growing pains there. And we are continuing to refine the consulting value proposition and trying to look at where we best fit. We have strengths in a number of areas, and we have some of our consulting practices that are doing exceptionally well. So I think we're going to continue to refine and improve that. Yes, I do expect we'll see growth in that product next year.

And our next question comes from Allen Klee from Sidoti & Company.

So you talked about that as of April for the premier teams, renewals were up around 10%. Can you give us some perspective? I'm assuming not that many clients are renewing at this time of year. Maybe an idea of how much renews towards the end of the year and the beginning, so how much we can think about, how that could provide an impact to next year. And then on the retention rates, kind of what we can think about to get improvements in renewals and wallet share and enrichment.

Sure. I'm going to -- I'll tackle this first, and then I think that Kelley can add color. So the 10-point improvement of renewal rate was for those deals that were renewing in quarter. So that metric was -- we saw a 10-point improvement in our core research renewals. So that's encouraging. And I think overall -- and Kelley can talk about it and give the color on improvement in retention of the teams in model. And on a year-to-date basis, in our core user research, and user research, which George was referencing, were up 4 points. So that's all good news. Our biggest renewal quarter is still the fourth quarter. So we are coming into sort of the quarter that defines how we roll into next year. That said, we have moved a lot, as we talked about, into Q1. So -- but it still remains our biggest quarter. In terms of -- in tackling -- and so I think to finish the point on retention, we -- our goal is to roll out the customer engagement model to all appropriate teams. And we think that's going to have a really positive effect on retention as we move forward. As we get into enrichment, Allen, I think the bigger burden there falls to the product enhancements we're looking to do. And that -- we're adding some. As George mentioned in data, we're sort of doubling down, and basically all 5 of our data products will see major enhancements in this quarter. And we're on version 2 of enhancements in the CX Index. We're also looking at a number of product digitizations across our research products. So we have a lot moving that way, and I think that's going to help us a lot to enriching the clients that we have. So I think that's going to be, as we progress throughout the year, steady improvement. And as a reminder, those metrics are rolling 12. So even as Kelley makes improvements and we saw good improvement in this quarter, the impact on the retention rates on a rolling basis is modified and tempered a bit because it's a rolling 12-month metric.

Yes. Just to add to that, our customer success management team has some predictive analytics. So they're working on leading indicators of things around engagements, around things like readership increase, webinars and events attendance. And month-over-month, we continue to see those metrics trending in the right direction. And I think as long as those continue to trend positively, we'll continue to see that filter into the renewal retention results as we move forward. So we've been focused on leading indicators with the CSMs, and we'll expect to continue to see that filter into our renewal retention rates, especially in Q4, which is still our biggest quarter.

And then strategies to sell more to your Chief Investment Officer-type customers, could you comment on that?

We -- Allen, we still don't have a formal product to go after that market. That said, we do have some investment banking houses who buy our research. But we haven't designed a product to go after that segment specifically. And we don't have plans to do that (inaudible)

I apologize, I meant chief -- I meant CIO-type customers.

All right. Well, that's different. There, we have products.

So Allen, George here. I talked about this vendor, the new portfolio of vendor artifacts. We were covering what we called -- now called Now Tech extensively. As you know, we have 80 waves. But now we're extending the waves into what we call New Tech, because as you see e-technologies accelerate, companies have to move at very, very fast rates. They're having to take risks on very, very new technologies and technology vendors. And so expanding the waves into the New Tech space, we think is going to be a very, very big benefit for the CIOs. This product was actually designed with CIOs. They actually worked with us on how to actually build that artifact. And the biggest risk for them is these small vendors, are they going to be here 2 years from now? Are they well-funded? Are they well-staffed? Who's behind them? So we think the vendor artifacts are really going to be a -- it's a very good new value for our CIO clients.

Okay. Can you talk about how adding the new board members you think is changing the way you're running your business?

Yes. So we had a board meeting yesterday. I think it's -- look, we had a very good board previously, but we have -- we're hearing new voices, I think new ideas. They are younger. They're Silicon Valley. They're pushing the hell out of us around innovation, around speed. I mean they're just pushing hard on speed. And I will tell you, Allen, that we're not finished on this board changeover. We're considering several other board members as well. So I think it's -- this has been a very, very good move for us, not only in the board meetings, but also in between board meetings, they are buddied up with members of the executive team. So they're -- this is new wisdom and new thinking and it's a new coaching from them. So that's my view. I don't know if you have any views on this, Mike.

I would say that I agree with you. I think that all of the board members, they've been nice additions. I agree that the previous board members were very good. I think this is -- it's just a nice change. It's bringing new and fresh thinking into our discussions. I agree, they push for speed. I think they are challenging us more, and I think we have people with different backgrounds and perspectives that are helping us sort of change our thinking a little bit. So I'm very encouraged by it now.

There are also -- Allen, there are also new connections in the world they're making for us. They're making many more connections back into the West Coast, into startups, into venture. And that's all, I think, very good for us.

And our next question comes from Tim McHugh from William Blair & Company.

Just got one question. I guess my other ones were asked. But the contrast I guess, you talked positively about retention. And I think I know it's rolling 12 months, but there are some improvement in that metric, yet client counts were still weak. So is the difference to kind of new sales still lagging? Or can you kind of bridge that gap and talk about the dynamic?

Yes, Tim. I think that what we -- there's an interesting phenomena. I think this is the result of when Kelley came in, and I think she's taken an approach to a number of our smaller clients, where we -- and by small I mean they're dollar value with us, not necessarily the size of client, which I applaud. I think it was the right move. Where we're looking at that business, it's low engagement business and it causes a lot of churn. And we've made a conscious decision there, I'll let Kelley describe what she's done. But it's going to create a little bit of noise in client count over the next couple of quarters. But in terms of the long-term benefit and value to the business, I think it's absolutely the right move. So I'm going to turn it over to Kelley and let her tackle that one.

Thanks, Mike. And just to add to that, this really is where the ICP strategy comes into play. We feel as though that we can add a lot more value to clients that are within those key verticals that we serve and want to focus much more on deepening those relationships. And we're doing that, in some cases, at the expense of some of the smaller relationships we had with companies that weren't a great fit for Forrester. We probably weren't adding a lot of value for them, which was reflected in the low investment rate. So it really is about focusing our sellers time, which is one of the most precious resources we have, on those accounts where Forrester can do the most to help those companies.

Yes. And as we looked at the data, sort of 90 days in, when Kelley made the decision, what we saw, Tim, is that the amount of nonrenewals for clients that were less than $25,000 in terms of their dollar relationships with us, drove a lot of that activity. And we're okay with that going away. And that's a conscious decision on Kelley's part. I think she wants her teams focused on where they can add the greatest value, focusing on those verticals that we think have the greatest benefit to Forrester. So I think it's the right move for us. It's a more targeted and focused move from a sales perspective that I think is going to reap real rewards for us as we go -- as we work out over the next 12 months.

And it looks like we have Allen Klee back on with a question.

Yes. Can you expand on your comment of how you better leveraged expenses during the quarter?

Yes. I mean, it primarily came in headcount versus what we had targeted for the quarter. So while it's up year-over-year, if you look at key headcount in research and in sales, we're down quarter-over-quarter. Some of that is very, very much by design. I think Kelley's been in 90 days, she's taken a hard look at it. And I think her focus around aligning territories and reps to basically enhance rep productivity caused her to hit the pause button appropriately on bringing in new headcount. I'll let her describe a bit more what she's doing, but I think this is a very, very good move for us. So we reap the benefit in terms of expense. I mean, ideally, where we're hoping to go with it and where Kelley wants to go with it, is better alignment and tighter territories for each rep, which will yield greater productivity.

Great, and great question, Allen. And just to build on that, there are sort of 2 aspects to this. One of the things that we have discovered as we've moved into the model, quite frankly, it's how much time our sellers were actually spending servicing accounts. And with more of their time freed up from the day-to-day, because we now have the customer success managers taking care of that, we're finding that we're able to expand their portfolio and still -- and drive productivity at the same time. Another thing we haven't really talked about but it's been essential to this entire migration is we have an ongoing technology track internally here at Forrester. That is designed towards sort of taking the sand out of the gears, identifying those paths and those activities that take a lot of time that aren't value-add. And we've been working to knock those down, increase the automation for our sellers and those folks who engage our clients. So we are expecting that over time, we are going to be able to drive up the productivity of the heads we have here moving forward. And that's where we're going to focus first. And that's why you might not see those numbers at the same rate that you've seen historically.

Okay. And then lastly, so do I imply from this that the original target of 7% to 10% growth in sales force should be thought to be tempered back?

Yes, I think that's a fair assumption. I think that -- and I don't think we -- I think we'll have more color, certainly as it relates to next year on the February call, because Kelly's getting her arms around this right now and figuring out how she wants to best move forward to drive productivity and top line growth. And I think her view is that just continuing to add sales headcount isn't necessarily the best formula for us to drive growth. That's not saying she won't add sales headcount, but I think she's going to be measured in her approach. So yes, for this year, I think it's safe to say that we're not -- you're not going to see a big fourth quarter blitz to add headcount. That's not going to happen for us.

And it looks like we have no further questions.

Okay, great. Thanks, everyone, for joining the call. We look forward to seeing folks when we're out on the road, and looking forward to a very good fourth quarter. Thank you.

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