Forrester Research Inc (FORR) 2018 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; 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 May 26, 2018. (Operator Instructions)

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 involves 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. Sir, you may begin.

Thanks for listening in on Forrester's 2018 Q1 Conference Call. I will give a short update on our progress, Kelley Hippler will brief on the sales organization and then Mike Doyle will give a financial review for the quarter.

In the fourth quarter of 2017, the company showed good progress as I reported on the February call. Retention rates, enrichment rates and bookings in our user business showed strong growth. In the first quarter of 2018, enrichment rates continue to climb and agreement value increased 4%. That said, the growth we saw in retention rates and bookings in Q4 attenuated in Q1. However, we do not believe this represents a trend and we project to be on track to obtain our 2018 plan.

As I report on the year-end 2017 call, our user business continues to expand. We focused on 9 user industries: financial services, wealth management, life insurance, banking, utilities, government, auto, retail and health insurance. These vertical markets fall into what we call our ideal client profile. Market spaces that are most impacted by Age of the Customer dynamics. Customers in these markets tend to be the most demanding.

Our premier and core channels are progressing to specialize in these markets. Our lead development and lead creation systems focus on generating opportunities in ICP companies. In fact, our data is showing that these verticals have a shorter sales cycle, higher average transaction size and longer lifetime value than are other user clients. In Q1, 77% of our user bookings were in these industries, outpacing growth in the non-ICP client base.

Technology spending in these companies and in the general user market is robust. Forrester just released its worldwide tech spending analysis, which predicts that the global tech market will grow 5.1% in 2018, and that's the highest growth we've seen since 2011.

Total spending on business technology, this is the technology deployed by large companies to win, serve and retaining customers, has now grown to 29% of total worldwide tech spent. BT will constitute 55% of new project spending in 2018. And as you know, Forrester specializes in BT and not in the slower-growing back office segment of the tech market.

We are also seeing increased growth in tech spending by Chief Marketing Officers, a role that Forrester targets for this research. Vice President and Principal Analyst Shar VanBoskirk's team at Forrester predicts that CMO's tech spending will have a compounded annual growth rate of 9.6% through 2022, and that's nearly twice the rate of spending in traditional IT organizations. As spending on technology and marketing expands, collaboration between CMOs and CIOs will become increasingly critical, and this is a space where much of our research and consulting is centered.

Before I hand the call over to Kelley, I wanted to give investors a window into a set of opportunities that we're exploring for future products. As I've alluded to on recent calls, we believe that organizations must now have the ability to measure and improve their experiences in real time.

As examples, a messy restroom in a restaurant or long TSA lines in the airport must be detected and remediated immediately to ensure that high customer experience is maintained. We are exploring services that can sense customer experience quality for companies, analyze that feedback to ascertain relevance and then stream that data back to the company. This real-time customer experience cloud would incorporate a range of inputs from a broad spectrum of customers and sources.

This product set would augment the customer experience index. The analytics that we have built in CXi over the last 6 years provided means for analyzing data in the real-time CX cloud. Again, this work remains exploratory at present. We are currently experimenting with prototype products, testing with clients and surveying potential M&A opportunities, and I'm going to be updating on upcoming calls.

So to conclude, while momentum has slowed in Q1 as compared with Q4 of 2017, we remain on track to achieve our full year 2018 plan. The market for advice and guides in the Age of the Customer remains strong and there are many opportunities in this market that are still to be explored.

Now I'd like to turn the call over to Kelley Hippler, who will update on sales and the client engagement model. Kelley?

Thank you, George. Q1 was a busy quarter for the Forrester sales organization. In addition to hosting 2 energizing kickoffs in Boston for our North American and European sales team, and Hong Kong for our Asia Pacific team, we continue to make progress with our customer engagement model standup. Specifically, we added our Benelux and German teams into the model during Q1. In early Q2, we finished the standup on the user side with the inclusion of the premier user teams in Southern Europe and Asia Pacific.

Also, in North America, we realigned our premier user teams to be more vertically focused to better equip our sellers to help our clients with the complex transformations they're tackling around customer experience and digital transformation. This pivot also enabled us to accelerate the ICP work that is being led by our CMO, Victor Milligan. In Q1, we saw our premier user new business efforts accelerate, in part, as a result of focusing on the industries where Forrester is best suited to help businesses in the Age of the Customer.

We continue to be encouraged by the results of the CEM. In Q1, we saw an uptick in our enrichment business over the prior year, specifically on the premier user side, where our client executives and solution partners are beginning to develop a solid cadence. Now that we've completed the standup of our premier user organizations and has built out our core selling motion, we will turn our efforts to operational excellence for the remainder of 2018.

We've made great progress in our efforts to optimize sales territories. Our sales analytics team is transforming the insights that we provide to not just focus on rearview mirror analysis about what happened in the prior period, but also to become more predictive and ultimately more prescriptive to guide our sellers and to ensure that we are maximizing the investment that's been made in both our premier and core selling motions.

With that, I would like to turn the call over to Mike Doyle to review our Q1 financial results.

Thanks very much, Kelley. I will now begin my review of Forrester's financial performance for the first quarter of 2018, including a look at our financial results, the balance sheet at March 31, our first quarter metrics and the outlook for the second quarter of 2017.

Please note that the income statement numbers I'm reporting are pro forma and they exclude the following items: stock-based compensation expense, amortization of intangibles and net gains and losses from investments. For 2018, we're utilizing an effective tax rate of 31% for pro forma purposes.

For the first quarter of 2018, Forrester met revenue guidance, but fell short of pro forma operating margin and earnings per share guidance. Revenue was at the lower end of our guidance driven in part by a larger-than-planned impact from revenue rule changes as well as lower-than-planned growth from our syndicated offerings.

Expenses were in line with expectations on a currency adjusted basis and reflect ongoing investments in the business. The guidance miss on margin and EPS was driven primarily by the larger-than-planned impact of revenue rule changes and the net impact of currency volatility in the quarter. We do not expect this will impact our full year earnings per share.

Now let me turn to a more detailed review of the first quarter results. Forrester's first quarter revenue increased by 1% to $77.7 million from $77.2 million in the first quarter of 2017, as reported, and decreased 1% on a currency adjusted basis. Excluding the impact of new revenue rules, which reduced first quarter revenue by $2.3 million, revenue growth was 4% for the quarter, 2% on a currency-adjusted basis.

First quarter research services revenue was essentially flat to prior year at $51.7 million, as reported, and decreased 2% on a currency-neutral basis. Research services revenue represented 66% of total revenue for the quarter. The impact of the new revenue rules was primarily felt in our research services revenue.

First quarter advisory services and event revenue increased by 2% to $26 million from $25.5 million in the first quarter of 2017 and increased by 1% with constant currency, and represented 34% of total revenue for the quarter. Our international revenue mix was 25%, up 3 points from 22% in the first quarter of 2017 and up 2 points 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 first quarter of 2018, Forrester's Research library included 46 playbooks, the addition of 378 new documents and we hosted 27 webinars for our clients. Research revenue declined by 2% for the first quarter of 2018, driven mainly by revenue rule changes that had a predominant impact on this product.

On to our Forrester Connect offerings, which encompass our Leadership Boards and executive programs. Forrester Connect services 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 organization.

As of March 31, 2018, Forrester Connect had a total of 1,401 members, down 1% compared to last year and down 3% to the fourth quarter of 2017. Connect revenue increased by 8% compared to the first quarter of 2017, driven by growth in our CIO and CMO executive programs as well as optimizing pricing in our Leadership Boards business.

Our analytics products and services are designed to provide fact-based customer insights to our clients. Clients can leverage our analytics products and services or choose to have us conduct custom data analysis on their behalf. As we discussed on previous calls, we are on a path to redefine the value proposition and capabilities of our analytics products.

Our focus is on moving to delivering more insights in analytics in real time to our clients via new platforms and new vehicles of content delivery that are based on our client's evolving needs. For the first quarter, revenue decreased by 7%, driven primarily by a decline in our custom data business.

Forrester Consulting, which includes our advisory and consulting services, saw a total revenue for the first quarter increase 5% compared to prior year. Utilization rates improved across the board driven by continued strong backlog development across our portfolio of advisory and consulting offerings.

Forrester Events. We had no events in the first quarter of 2018, but we remain pleased with how ticket and sponsorship bookings are progressing for our 2018 lineup of forms.

I will now highlight the expense and income portions of the income statement. Operating expenses through the first quarter increased by 8%, as reported, and 6% on a currency-adjusted basis and were $77.9 million compared to $71.8 million in prior year. Cost of services and fulfillment increased by 10%, as reported, and 7% with constant currency due to higher headcount, merit and increased professional services.

Selling and marketing expenses increased by 8% and increased by 5% with constant currency, driven by higher headcount and merit increases. And general and administrative costs increased by 6% and increased 4% with constant currency due to merit increases and higher professional services cost. In addition, we previously indicated that we were increasing initiatives spending in 2018. The spending is impacting all categories and is in line with what we targeted.

Overall headcount is flat compared to the first quarter of 2017 and down 1% compared to the fourth quarter of 2017. At the end of the first quarter, we had a total staff of 1,379, including products and advisory services staff of 524 and a total sales force of 519.

Products and advisory services headcount increased by 2% compared to the first quarter of 2017 and increased by 2% sequentially. Total sales force decreased by 3% compared to the first quarter of 2017 and decreased 4% sequentially.

Operating income was a loss of $139,000 compared with income of $5.4 million in the first quarter of 2017. Other income for the quarter was a negative $118,000 compared to $9,000 in the first quarter of 2017.

Net income for the quarter was a loss of $177,000 and earnings per share was a loss of $0.01 on diluted weighted average shares outstanding of 18 million compared with net income of $3.2 million and earnings per share of $0.17 on 18.5 million diluted weighted average shares outstanding in the first quarter of 2017.

Now let's review the 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, 2018, agreement value was $246.4 million, up 4% from the first quarter of 2017 and up 4% on a constant-currency basis. As of March 31, 2018, our total for client companies was 2,349, down 3% compared to last year and down 2% compared to the last quarter.

Client count, unlike our retention and enrichment metrics, is a point in time metric at the end of each quarter. The client count decline is the result of lower retention of our small vendors, which also contributed to the softness in our syndicated bookings during the quarter.

Forrester's retention rate for client companies was 75% as of March 31, 2018, down 1 point compared to the last quarter and up 1 point compared to last year. Our dollar retention rate was 88%, flat compared to last quarter and up 1 point compared to last year.

Our enrichment rate was 98% for the period ending March 31, 2018, up 2 points compared to the last quarter and up 4 points 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 proper trend information.

Now I'd like to look at and review the balance sheet. Our total cash and marketable securities at March 31, 2018, was $136.3 million, which is an increase of $2.2 million from $134.1 million at year-end 2017. Cash from operations was $7.8 million for the quarter as compared to $19.5 million in the first quarter of last year.

The primary reason for the decline versus prior year is a systems change we discussed on the last call that was implemented in the beginning of this year. This delayed billings in the first 6 weeks of the quarter, which resulted in slower cash collections. We expect to be back on track with significant improvement and first half cash from operations in line with targeted levels in prior year.

We received $2.5 million in cash from options exercised and our ESPP program for the quarter as compared to $2.7 million in the first quarter last year. We purchased $4.4 million of our stock during the first quarter, and we paid a dividend of $3.6 million or $0.20 per share during the quarter.

Accounts receivable at March 31, 2018, was $62.2 million compared to $70 million as of December 31, 2017. Our days sales outstanding at March 31, 2018, was 73 days compared to 65 days at March 31, 2017. And our accounts receivable over 90 days was 8% at March 31, 2018, compared to 7% at March 31, 2017.

Deferred revenue at March 31, 2018, was $155.4 million, a decrease of 1% compared to March 31, 2017, and a decrease of 2% on a constant currency basis. However, adjusting for the effect of the new revenue rule, deferred revenue would have increased approximately 5% on a constant currency basis.

So recap, absent the larger-than-planned impact on the new revenue rules and FX volatility, the first quarter financial results met our expectations. In addition, we continue to make good progress completing the rollout of our customer engagement model and optimizing our selling motion, which is driving improved enrichment spend with our existing clients.

We are investing in further digitization of our products and services to create a better client experience and attract new clients to Forrester. We entered the second quarter with a healthy backlog of business in our consulting and advisory businesses. We remain committed to execute the plan we developed for 2018 and beyond. This will result in delivering our guidance for 2018 and accelerating growth in both top line and bottom line performance for 2019.

Now let me take you through the specifics of our guidance for the second quarter and full year 2018. 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 $700,000 for the full year 2018; stock-based compensation expense of $1.9 million to $2.1 million for the second quarter and $8.3 million to $8.8 million for the full year 2018; and any investment gains and losses.

Forrester is providing second quarter 2018 financial guidance as follows: total revenues of approximately $92 million to $95 million; pro forma operating margin of approximately 9.5% to 11.5%; pro forma effective tax rate of 31%; pro forma diluted earnings per share of approximately $0.37 to $0.41.

Our full year 2018 guidance remains unchanged and is as follows: total revenues of approximately $352 million to $360 million; pro forma operating margin of approximately 10% to 11%; pro forma effective tax rate of 31%; and pro forma diluted earnings per share of approximately $1.38 to $1.45.

We provided guidance on a GAAP basis for the second quarter and full year 2018 in our press release and 8-K filed today.

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

(Operator Instructions) Our first question comes from Tim McHugh from William Blair.

I guess, first, just want to broadly, I guess, ask about, for a lack of better term, the momentum in the business in the first quarter versus kind of the fourth quarter. I recognize there are some noise in the reported metrics because of the accounting, but it also sounded like bookings were softer, I guess. So can you -- new bookings kind of tell us what that was and then talk at all about kind of the broader why, I guess, if momentum was softer what you attribute that to in the first quarter?

Yes. Tim, it's Mike. I'm going to just cover something briefly, and then I'll let Kelley go deeper into the booking side of the equation. I think that as we rolled in, if you remember, our revenue number in the fourth quarter year-over-year, was high. And we talked about, at that point, that we had -- we expected it to be softer in Q1 due to one, an expectation of the changes in the revenue accounting rules, which we underestimated a little bit, and ultimately, we got that back. The -- also the fact that we pulled in some, into the fourth quarter, some activity in consulting and advisory and reprint revenue that we wouldn't see. So that's a piece of the story, and I think I'll let Kelley touch on some bookings momentum and talk about kind of where we're going from there.

Great. Thanks, Mike. Tim, this is Kelley, and I think to the point that Mike raised, we had a strong push at the end of Q4 and drained our pipelines pretty substantially, so we were a little slower getting out of the gates in Q1 than we would have liked. What I can say is, as the quarter progressed, the pipelines got off to a healthy level just not necessarily where they needed to be for March, but we're very optimistic about where we're tracking for Q2. And as Mike mentioned, there is no change in the overall guidance for the year. I think it's more of just a timing issue.

And Tim, George here. George here, just to add a little more color. It was driven, to an extent, by the (inaudible) of some small vendors, which for us was kind of a new one. And we think that may have happened because we're now in the fourth -- it was the fourth year of being in the Age of the Customer strategy, focused on BT versus back office, and we were talking today and we think that some of these vendors -- there's still that transition going on in the -- not in the large vendors. Large vendors are doing great. But in the smaller vendors, that transition still persist. I think we're getting to the end of it at this point, so that's another factor -- it was another factor in Q1. Do you agree?

Yes. I would agree with that, George. To that point there, we do still have some small -- the smaller vendors that we churned who were coming to us for some of that back-office coverage, but we have met with our folks in research and we know that has dwindled down so that we don't expect that to continue.

To recur, yes.

And when you're saying vendors, are these traditional technology vendors or more on the advertising kind of marketing side of the vendor?

More your traditional technology vendors, yes.

Who would have been on the back-office side, Tim. Yes.

Yes. Okay. And sales force-wise, I thought the broader plan was to be accelerating sales force here. So the comment that it was done sequentially as well as year-over-year is -- can you talk about that? Or is turnover picking up?

Sure. I'd be happy to cover that one. So in terms of the sales force headcount, this gets back to the conversation about territory optimization. So as we build out our analytics team here, we've done a lot of analysis around the territories that we had in place, and what we saw was that a number of our sellers were in territories that were not fully optimized. And our focus has been on driving productivity, as opposed to adding headcount. So as of right now, we're on track with what we planned. And as we continue to move forward, the plan will be to add additional headcount back in. But we thought it was much more important to make sure that the folks we had were set up for success and then we will expand as we go forward. I would also add that with the move into the customer engagement model, because the day-to-day engagement is now being handled by the CSM, we're also seeing that our client executives, who are traditional quota carriers, are able to run and manage a bigger book of business which over time, will help us to bring the cost of sale and service in line with where we want to get it to in the longer term.

Yes. And I think that just to go back to, Tim, in the February call, I did talk about -- because Kelley was in Asia doing this, but I did talk about that we were focused more on rightsizing territories and getting that piece right and that our expectation was, best case probably, very low single-digit headcount growth in 2018. So I don't -- this is never, for the year, expected to be even mid-single-digit growth. It was going to be a low single-digit growth with a focus on productivity.

Our next question comes from Vincent Colicchio.

George, I'm not sure who this is for, but could you share some additional metrics in terms of the progress with the new sales model and in terms of where it's been in place for several months?

Yes. Well, we're rambling here for you, how about that, through some of the metrics. Can you take it first, Kelley?

Sure. Well, I think as Mike spoke to, one of the areas where we've seen the most immediate impact has been on overall AV growth. And you see that that's up year-over-year sequentially, and that's where we've had the most immediate impact on the model. We did see an uptick in enrichments over this past quarter as well. So those are sort of the 2 dimensions that we're really focused on when it comes to the premier organization. And as you -- as we talked about, Mike mentioned, we have 4.1% AV growth year-over-year and then enrichment was also up this past quarter.

Well, one thing to watch pretty closely, Vince, we call it the engagement, but it is -- it's kind of a complex equation around exactly how -- what the clients -- how the clients are working with us. And with the client -- with the customer engagement model, we were able to drive all those metrics up because we found -- and we'll go in great detail, but if the client engages in Forrester-specific activities, they would tend to renew at higher rates. So it's a harbinger for us of higher renewal rates and we're seeing the uptick in all of those metrics that should increase -- well, it will -- we're seeing an increased renewal rates when renewal -- at renewal time. So those metrics are also -- we're heading in the right direction.

And then on the small vendor side, did you start to see that the losses abate as the quarter progressed? What did that look like?

I think, Vince, right now...

I mean, the part of my question, as you know, you said that you expect it to -- the situation to improve, so I'm just wondering, has that occurred?

Yes. I think, first of all, just some backdrop. We always have churn in small vendors, and that's been the case historically.

So our highest beta customer.

And that part is not unusual. I think what was a little bit of a surprise to George's point is that it felt like it was higher than normal. And so the expectation in the game plan is we're doing a deep dive, I think. There's a hypothesis that says, and I think George's view and others, is that this is just the tail end of people who were really in it for something other than AoC research. And that that's migrating away, and I think that's a piece of the story. And then the other piece is, we've also -- it was a busy quarter transitioning, and we've ramped up a new organization in Nashville, so the folks that focused on that, they're still coming up to speed. So we're exploring other things we can do there to maybe enhance the value proposition for small vendors and get that back moving in the right direction. There'll be more discussion about that, certainly, on the next call. It's very much something that we're looking to bring back on track.

And Vince, so last year, we redesigned our vendor portfolio. In other word, in research. This is how we analyze vendors. And we were -- we had very good coverage in what we called Now Tech vendors. In other words, the traditional vendors. We've launched, over the last 6 months, a whole new stream of research what we call New Tech vendors. These are smaller vendors who are coming into the BT space. And this year, we're going to be covering an additional 600 new vendors that we did not cover previously -- previous to this year. So I mean what that -- we think that's going to do is get us more visibility with the vendors that we want and who are matched to our strategy. So we're feeling good with where we're headed here.

And then the only other part that I would add to that as well is that renewal retention metrics that George had mentioned that we'd been using on the premier user side, we're going to be taking and applying that methodology. And we've been working on doing some analysis on the vendors to figure out what's the right amount of engagement that we can drive to proactively drive up those renewal retention rates. So between pivoting who we're targeting to better align with our new research and being a little more methodical in how we're managing those customers through the life cycle, we're confident that we'll get the retention rates back to where they were, if not higher.

Yes. This all links back -- I talked about how BT -- 55% of all tech spending -- of New Tech spending growth, 55% of it is not in back office. It is on the BT space, and those are the 600 vendors. So therefore, you see many more vendors in that BT space entering the market, and that's who we're going to be covering in our vendor portfolio.

On the Connect side, the number of board members declined. I know you had no events in the quarter, but I'm curious, have your expectations changed for the year on that -- in that business?

No. I mean let's separate the 2 things. The Connect business versus the Event business. So the Event business is separate from Connect. So the Event business, no planned events during the first quarter. We've got 7 scheduled in the second quarter. The Connect business, which is composed of both our executive programs and our Leadership Boards; executive program is doing well, good quarter. Leadership Boards, we saw a decline in client count, but better optimization on pricing. And I think there's been an attempt to both rightsize and optimize what we're doing in that business. So revenue, overall, was up 8%. But we're continuing to try and refine and look at the value proposition as it relates to Connect to really try and accelerate growth in that business. So that can -- even though we -- revenues are growing, we'd like to see that grow faster. So that continues to be a work in progress.

(Operator Instructions) And speakers, at this time, I show -- we do have a question from Allen Klee.

You guys have spoken in the past that the plan to reinvest some of the tax savings into new digital and some new products and your people. Could you talk a little about kind of what's going on there and then how you see the return you can get from that?

Allen, George here. I'd say -- I would look at 2 areas. One is, we are spending money and time and thinking in the revision of our research product. That's the reports we've been selling for decades. To be known as a genius to understand that business readers are reading differently, they're consuming differently, they want to connect differently. So there's a lot of -- we're spending money there and doing a lot of work in we call the digital business transformation. So that's -- think of that as just the revision of research, one. The second is this other area that I talked about, this real-time customer experience cloud. We are -- and it's not a lot of dollars. I'd say most of the dollars are coming -- go to DBT. But also spending dollars there to build those experimental -- those experiments -- experimental products of how we would do this, how we would gather the data and to grace it on the analytics of that business. Because you can get feedback, but it is -- I was with Dunkin' Donuts recently and they were saying, "We don't want a new wave of feedback coming at us." And our response with that was, well, throughout the analytics that we have in the customer experience index, we're able to tell them what feedback is important, what feedback can be ignored. So that's really -- that's about gathering our data, but it's also analyzing it. So that's the second area. And the third area is some of our legacy data products. We're spending money there to make them fully digital. We're now -- we've now gone through, I think, 2 integrations for the customer experience in exit digital, but also spending money on that space. So those are the 1, 2, 3 spaces where that money is going.

Okay. Great. And then could you just remind us of what you've said in the past of kind of new versions of products or what new products that you're planning to roll out in '18?

Well, again, just to reiterate, one would be potentially this customer experience -- this real-time customer experience cloud space. So I'm not announcing anything today, but I would say watch this space. And the second is, I don't think you're going to see any new products until the end of the year, but a -- and I'm not sure whether we've talked about this on calls, but we call it the atomization. We take all the research that we've created and to be able to -- be able to parse that out, to give -- to understand exactly what a client is and what they need, and then to figure out exactly what we have in our research and match those up. So we -- the term we used internally is the -- we call it as the atomization of our research. Again, driving the return here is more relevancy, clients can get it faster, therefore, higher satisfaction, therefore, higher renewal rates. If you want to add something...

That's great. And then my last question, you've kind of talked on it. But maybe if I could just hear it in a simple way of -- if the results underperformed a bit in the first quarter, what are the key factors that give you confidence about keeping your guidance for the full year?

In terms of just bridging the first quarter, Allen, I mean if I look at -- I think we, in the fourth quarter, we talked about we estimated the impact of the new revenue rules to be about $1 million in the first quarter, it turns out it was about $2.3 million. So some quick math on that. You can see what it does to top line, which pushes to the sort of the lower end of revenue guidance, and it's about a little over $0.03 in terms of the earnings impact. And then the FX volatility was another $0.01, that's the $0.04. So absent those things, we're sort of midrange on revenue and within our EPS guidance. The revenue recognition rule, this is just a temporal thing, it's a timing thing. It will -- those things come back. We're going to see a meaningful amount in the second quarter and by the end of the year, it will be a wash. It's just that the way that it's accounted for is a little different this year. So you can take that out of the equation, that's going to come back to us. It's difficult to predict FX -- foreign exchange volatility, but we'll do our best to manage that. If it gets more extreme, we'll look at hedging. But right now, I think I'm comfortable that that's not going to be material. So if you take them out of -- and basically, the first quarter is about where we want it to be, from George's standpoint. I'm going to let Kelley talk a little bit more about where she sees momentum and from a booking standpoint and things like that.

Great. Thanks, Mike. Yes, so in terms of -- on the selling side, we're pretty much watching the pipeline on a daily basis, some days multiple times. And the overall health of the pipeline, we're just seeing that some of the pipelines we would have needed in Q1 to get to where we wanted to be was just a little bit delayed. But our conversion rates are actually improving and our cycle times are improving. So those, coupled with the robust pipeline and the number of reps that were hired new to Forrester last year who will be hitting their stride as they hit their anniversary mark, leave us confident that we'll get to the overall plan for the year.

Our pipe is looking very good, Allen.

Okay. Great. And then maybe your number of clients has been going down, is that something that needs to be turned around to -- for everything to work? Or can you make it up another ways?

I'd say, a bit of both. In an ideal world, yes, that would be heading on an upward trend. But what I would say is, and going back to what George was talking about related to the ICP side, we're much more concerned and focused with driving those -- extend within those accounts and the share of wallet within those that map to our ICP, then we are potentially churning some of the lower value accounts that we have. So absolutely, we'd like to see both trending up. But a lot of the accounts that we're losing are lower dollar value not aligned to the ICP, that have us not as concerned as we might otherwise be.

And you also see enrichment going up. You also see enrichment going up, Allen, which is -- which means our legacy clients, as you know, if you look at the top 20 user clients of Forrester, they have an average tenure of 17 years. Those accounts are spending more money with us. And that's being driven by CEM, by the customer engagement model.

And speakers, we have no further questions at this time. And I would like to turn the call back over to Mike Doyle for closing comments.

Thanks. Yes, thanks very much, everyone, for joining us on the call. We plan to be out in the market during the second quarter. I'm looking forward to seeing each of you. So thanks again, and we'll talk soon.

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